Expenses: a bone of contention
Disputes continue to arise over the recovery of judicial expenses where there has been a change of agent during litigation. The Professional Practice team advises dealing with the issue at the outset
After a number of recent enquiries to the Professional Practice team on the topic of judicial expenses on a change of agent, it seems sensible to remind members about the practical steps to take to avoid problems when agency changes during litigation.
In the increasingly competitive world in which solicitors operate these days, for a number of very good reasons a change of agency during a case seems to be a regular event. This trend has increased the number of enquiries to the Society whenever a dispute arises about allocating recovered expenses at the end of the case. Experience suggests to us that this can be a very emotive issue for both sets of solicitors and needs carefully handled.
As a starting point, there seems to be a misunderstanding among some members of the profession about the basic principle for recovery of expenses. It is important to bear in mind that the judicial account of expenses in any case technically belongs to the client rather than either firm of solicitors who have represented the client. At the same time it is clear that the solicitors have a vested interest in it being dealt with properly!
When the case is finished, the agent instructed at that stage is responsible for trying to recover the expenses that follow from success. Knowing of the earlier involvement of the previous agent, that solicitor is bound to either (1) include details of the earlier work done by the previous solicitor in a single judicial account covering the whole case, or (2) tell the previous agent that they are not doing that and are only preparing an account of expenses covering the work they have done. In this latter scenario, it is then down to that previous agent to intimate their own judicial account within the time period allowed in the rules to make sure recovery is made for the work they did when they were acting.
In either of those situations, common sense demands that as a matter of professional courtesy between agents, the firms co-operate with the process so that they are both able to make a full and appropriate recovery.
If a joint judicial account is submitted covering the recoverable expenses of both firms, the incumbent firm should exhibit to the previous agent that part of the judicial account which evidences what was claimed for the work done when the previous agent was acting. By doing that, an opportunity is provided to the previous agent to check if they are happy with what has gone in and to take any action they consider appropriate if not. A firm can choose to exhibit the whole account but is certainly not bound to do so, and should not be challenged if it only exhibits the relevant part of the judicial account.
Recent disputes have highlighted to us that the biggest single problem is the failure by the firms involved to discuss the issue of expenses at the time the mandate is implemented. Due to pressure of business and the awkwardness that often arises when a mandate is received, our experience is that this “slips through the net” and nothing is agreed. That is the real problem. Although what we are suggesting is not prescribed by any rule or guidance, the purpose of this note is strongly to encourage firms to have a frank and honest discussion about exactly what will happen with recovery of judicial expenses at the end of the case, and commit that to writing. Agreeing terms should be a simple task. By avoiding a dispute at a later stage, it will undoubtedly save a lot of time and make life simpler for everyone involved.
For completeness, it is worth clarifying the position as to what happens when, as seems often to be the case, the original firm issues a fee note to the client when they receive a mandate. The extent of any further recovery by that original firm from the client for any shortfall between that fee note and the recovered judicial expenses is a matter of contract law based on the letter of engagement issued and is not something which Professional Practice are able to comment on. Generally, any shortfall is recoverable from the client if the contract allows that and the firm can pursue their former client to get what they believe is due. What the original firm cannot do is try to recover the money directly from the new agent simply because any settlement sum and any agreed judicial expenses are passing through their hands.
If any dispute like those mentioned does come up, Professional Practice would always prefer that members are able to try to reach a practical settlement, and encourage them to do that quickly to avoid any further delay.
Russell Eadie is a senior solicitor in the Law Society of Scotland’s Professional Practice team, email: firstname.lastname@example.org