How good are you at managing your legal practice retainer agreements?

A significant portion of claims against lawyers are attributable to poor retainer management and client communications.
In Australia disclosure at the onset of a lawyer-client relationship is governed by the Legal Profession Acts.


What lawyers may find odd is that the standard does not cover all matters that a lawyer must disclose under the Legal Profession Act 2008 (WA) (the Act). The editors of the standard have some catching up to do.

How do you ensure that you have disclosed the minimum information required under the your Legal Profession Act and that your cost agreement is kept up to date throughout the life of a legal matter?

Drafting and subsequently maintaining your retainer agreement  is not a formality but a risk reduction opportunity providing you with a platform for better communication with your clients.
To ensure that your practice has a consistent approach in relation to costs agreements a written process covering drafting and post-execution will be needed.
The process will be only valuable if it is communicated to all professional staff and included in the induction program for new lawyers.

Whilst lawyers practicing in Australia are not obliged to enter into costs agreements with their clients costs disclosure is mandatory in all matters in Western Australia where legal costs, excluding disbursements, exceed $1,500.

The effect of failure to disclosure are set out in section 268 of the Act.

There are two aspects to managing risks associated with a retainer agreement:

• ensuring compliance with legislative requirements
• maintaining an up to date retainer throughout the life of the legal matter. 

Legislative compliance

The disclosure requirements under the Legal Profession Act 2008 (WA) include:

• s 260 Disclosure of costs to clients 
• s 261 Disclosure if another law practice to be retained
• s 262 How and when disclosure must be made
• s 263 Exceptions to requirement for disclosure
• s 264 Additional disclosure - settlement of litigious matters
• s 265 Additional disclosure - uplift fees
• s 266 Form of disclosure
• s 267 Ongoing obligation to disclose
• s 270 Disclosure to associated third party payers

Requirements under LAW 9000 - legal best practice standard

Most of the standard's disclosure requirements are covered by the legislation. Here is the list of matters that should be disclosed to a client:

• the scope of the work and services that the practice has agreed to provide
• the services that will not be provided by the practice
• the time that the matter is likely to take to finalisation
• the basis of charging and likely costs, including third party fees and charges, court charges, government charges and costs incurred by the other party
• the likely outcomes 
• dispute resolution procedure
• the practice specifies that it can to fulfill the terms of engagement
• responsible persons for handling the matter 
• substantial changes to disclosure
• any conflicts of interest are identified and a course of action are negotiated with the client 
• the client is advised of any cost recoveries which may arise
• circumstances under which the agreement may be terminated
• retention of client's documents at the end of the matter.

Wha is the client going to do tasks.

Drafting a retainer agreement

The contents of a costs agreement may be an issue, for example failing to set out the scope of legal service, but
There are steps that are to be taken before, during and after the completion of the matter.

Before drafting the retainer:

• you would have taken client's instructions. For an example of a comprehensive fact finding form for family law clients see the embedded form or the online version of the same form.

• you would have ascertained whether the matter is in an area of law in which the firm currently practices extensively. This will be determined by the practice's engagement policy.
• you would have identified your client.
• you would have done a conflict of interest check. An example of a conflict of interest policy and procedure follows.

After executing the retainer:

Do you keep records of your correspondence relative to the establishment of the terms of engagement?
Do you seek a written acknowledgment from your client that he or she understands the terms of engagement?How do you ensure that you get a signed copy of the retainer or that the client has agreed by other means?

What do you do with the signed retainer?

What do you do with evidence confirming agreement by client?

How do you handle variations to the terms of engagement?
Do you communicate with your client in a timely manner any changes in the terms of the retainer?

How do you inform client that if need for variation arises other aspects of the agreement may have to be
reviewed not only those directly affected by the variation.
Exclude financial and accounting advice.

when the retainer is at an end and whether anything has to be done in the future and who will do it.
How do you manage retainer creep?
Unless you are a tax advisor carve-out regarding tax issues (strictly adhered to by the practitioner) to help avoid misunderstandings that the practitioner was retained to give tax advice.

The client should be informed in any covering letter accompanying the disclosure document
that any estimates provided are only estimates and not a quotation and, therefore, subject to
change.

In summary

Most problems with retainers could be avoided through better communication by the lawyer. 

Lawyers who have attended a seminar on risk management of retainer and cost agreements are unlikely to be surprised by the LAW 9000 standard regarding terms of engagement.

Terms of Engagement

The standard terms of engagement or retainer agreement between a law practice and its client should include a written and signed authority from the client to destroy the client's file in accordance with the firm's usual practice.

If a charge is to be made, the client should be informed of the charge in advance and it would be appropriate to include such matters in the retainer agreement or terms of engagement.

Visit www.crystallawyers.com.au or estate planning and deceased estates advice.

How good are you at keeping quality records of your pre-engagement communications?

Pre-engagement communications are important because they eventually form part of your legal matter files and should be managed like any other client communication and are subject to a lawyer-client privilege.

The management of such records can be governed by the same records control procedure that I discussed in one of my previous post.

Pre-engagement communications may take the form of a free first interview, free email legal advice, telephone and email communications, enquiries by friends and the public. These are all communications that the practice may have with potential clients before the client-lawyer relationship is formalised by the retainer agreement.

At the time when you created a pre-engagement record your client may not have been registered in your practice management system. The question arises: what do you do with such records which may include initial interview and phone communications, handwritten notes, email records, letters and faxes etc?

Depending on the type of document management system that you are currently using you may scan all documents and save them with all emails into a pre-engagement communications electronic folder. Alternatively if you rely on a paper based document management system you may be prin all electronic communications such as emails and file them into a pre-engagement communications binder together with all paper based records.

If you have implemented a process which ensures that all pre-engagement communications are identified, stored, protected and later merged with the client's matter file you are on your way to reducing certain risks to your practice and clients.

These are some of the questions that you need to answer before drafting the procedure for managing pre-engagement communication records:

• Have you identified the types of pre-engagement communications?
• How do you record your initial interview with a client?
• Do you provide preliminary advice or opinion to clients before signing a retainer agreement?
• How do you keep a record of all your pre-engagement phone conversations?
• Who reviews the pre-engagement communications to ensure that they are appropriate?
• What is your process for ensuring that all pre-engagement communication are attached to the matter file after retaining the client?

The answers to these questions can be incorporated in the records control procedure. In the alternative a separate procedure can be drafted addressing only the management of all pre-engagement communications. See the example below.

Other procedures that your practice should establish include mail handling, physical file management, archiving and IT.

An example of a mail handling procedure follows:

Next I will discuss the management of the most important document in your legal practice - your retainer agreement.

Visit www.crystallawyers.com.au for crystal clear advice about wills and estate planning.

Are you in control of the matter files used in the delivery of legal services to your clients?

One of the biggest opportunities to reduce malpractice claims lies in the good management of your matter files. Implementing and maintaining a robust file management systems for your particular needs will increase the effectiveness and efficiency of your legal practice and reduce your risks for errors and unhappy clients.

Control, content and supervision of matter files are all part of the management process which should protect the practice and the client's interests and assist you in the delivery of superb legal services.

Under clause 4.2.6.1 of the LAW 9000 standard the matter files used in the delivery of legal services to clients should be controlled.

These controls should include:

• procedure for opening files, including authority to open them
• unique ID for matter files
• controls on who can get access to matter files
• authority to remove records from files
• file tracking
• procedure for closing files, including authority to close them.

File opening procedure

Depending on your legal practice risk assessment profile you may have to start with a preliminary conflict of interest check even before the first interview with your potential client. The standard has a clause for conflict of interest checks (clause 7.1A) to which I will return in a later post.

Here is a sample procedure for conflict of interest checks:

Conflict of Interest Policy and Procedure from Val Antoff

Most legal practices use some form of a file opening sheet which contains enough information about the client to open the file and populate the data into the electronic systems in the office. Before opening the matter file you would normally identify your client and sometimes establish the client's capacity.
For some it may look like an excessive step but diligent lawyers are likely to perform a second conflict of interest check after they have recorded all of the client's additional details during the initial interview.
Below is an example of a file opening procedure which can be modified to suit your needs.

File opening and control of files procedure from Val Antoff

File closing, retention and destruction procedure

How you close and store your matter files and when you destroy them can have serious consequences for your legal practice from a risk management perspective if certain steps have been left out of the process or if your staff don't adhere to the procedures you have in place.
A checklist is the simplest way to verify that the essential steps have been completed. The controls should include:

• client’s instructions were followed
• all legal steps under the retainer were completed
• billing procedures were followed
• costs and disbursements were paid
• a final report was prepared for the client
• property and money was returned to the client
• relevant files were linked
• documents were stored or were returned to the client

I have included a file closing procedure which can be modified to suit your legal practice needs.

File closing, retention and destruction procedure for law firms from Val Antoff

Having the processes of opening and closing matter files documented is an essential step in the management of risk for every legal practice. It is however equally important that these procedures are included in the induction program for new lawyers and are reviewed regularly as part of the quality management system annual review process.

In the next post I will cover the requirements under the LAW 9000 standard for the matter file contents.

Visit www.crystallawyers.com.au for advice about probate and letters of administration.

Do you expect the new recruits in your legal practice to perform and be productive without adequate induction?

In the extreme scenario, a new recruit turns up on their first day and is left waiting in reception because no one remembered that they were coming or the practice manager forgot to assign them a desk and they had to work out of the tea room for a few days.

More commonly you would have shown the new recruits their desk, the coffee machine, introduced them to the person who can help them with any queries and handed them their first clients' files.

The expectation of the LAW 9000 standard is that a structured induction and training program will be provided to all new recruits. It is the responsibility of the principal/management to ensure that all staff are properly trained and qualified for the duties they were employed to perform.

The induction process is a good opportunity to engage and motivate your recruits from the start so they can help your business succeed. So why not make a memorable first impression?

Induction shouldn't be confused with career long training and development. Induction is introducing new recruits to your legal practice and the way you do things. The process doesn't apply only for recent law graduates but to professional and support staff with any number of years of experience. Making assumptions of the new recruit's knowledge and skills in the following areas is probably taking the wrong approach to induction:

• your quality management system policies and procedures
• your computer and accounting systems
• your precedents library
• your business culture and strategic objectives
• client and matter management
• your organisation structure
• your human resources policies and procedures
• your OHS/WHS manual 
• your quality management system and the meaning of quality service
• your appraisal process
• your way of managing risk
• your key performance indicators
• corrective action requirements
• communication, presentation and delegation skills.

The principal/management should use induction time to identify the training needs of the new recruits and tailor an individual development program. In contrast to a week-long induction a career long training and development program, as the name suggests, is a program for every stage of the career of your recruit.

Don't let your new recruits to "work it out". Show them you are a legal practice that properly supports new employees from the beginning by:

• allocating the required resources for the induction process
• setting out the key performance objectives from the start
• communicating the recruit's accountabilities, relationships and objectives of the role
• tailoring a mentoring program according to their needs
• seeking their feedback during induction and improving the process.

A structured induction program and subsequent training program is likely to:

• be highly valued by your new recruits
• result in the new recruits performing their role more effectively
• increase your return on recruitment investment.

The following 1 minute presentation is an example of an induction program for legal recruits.

For financial settlement and consent orders visit www.crystallawyers.com.au.

What are the rules of engagement at your legal practice?

If you are in the management team of your legal practice it would be usually your responsibility to establish an engagement policy. This policy sets out the matters in which your practice will accept instructions.

Why do you need an engagement policy?

Because this policy is a risk management tools that will help you eliminate potential sources of failure to achieve your objectives. For example you will only accept instructions in areas of law in which either you or other lawyers in the practice have the expertise and experience to provide a service that will match the practice's quality objectives.

The policy will also filter out services which you cannot provide effectively, efficiently or economically. For example you may decide not to provide Legal Aid funded services or services to clients in another state.

The negative effect of uncertainty on your objectives will be minimised by establishing the rules of engagement.

This is an example of an engagement policy.

Engagement Policy

The engagement policy of [name of firm] is to accept legal work in the following areas of practice:

• wills & administration of deceased estate 
• commercial law 
• commercial litigation 
• property settlements & purchases of business 
• liquor licensing 
• migration advice 
• franchises 
• patents, copyrights & trademarks 
• personal injuries 
• family law matters 
• police charges, traffic offences, and criminal offences.

[Practice Name] does not accept Legal Aid and does not represent clients residing outside of Western Australia. An engagement document is prepared at the start of an engagement or whenever a change in the service has been agreed to.

Our engagement policy is in harmony with all relevant legal profession statutory requirements.

The policy follows our practice's business plan and risk management policy.

The engagement policy is reviewed for continuing suitability once a year as part of the quality management system review.

The policy is included in our induction program and is communicated to all staff and clients on our website.

Terms of Engagement

Such terms often referred to as retainer or service agreement define the narrower perimeter of the services you have agreed to provide to a client in a legal matter. Amongst other things they determine the scope of services you have agreed to provide to your clients.

The law societies of the states and territories offer compliant cost kits and agreements.  

In the next post I will cover the basic requirements of the LAW 9000 standard about the terms of engagement. 

Have you communicated the principles relating to undertakings to all professional staff in your legal practice?

From the perspective of good risk management all legal practices should maintain a register of professional undertakings.
Controlling undertakings is usually achieved by establishing the relevant policy and procedure.

These are questions to consider before drafting your undertakings policy and procedure:

• Do you maintain a central register of undertakings?
• Do you record all outstanding undertakings on the register? This will define the scope of your procedure.
• Are all your undertakings signed by the principal/partner in your practice? Undertakings must be approved before being given.
• Do you have defined responsibilities and authorities within your practice which include the names of personnel authorised to sign undertakings? This is a requirement under clause 5.5.1 of the LAW 9000 standard.
• If you have a register how often and by whom is the register reviewed? You need a review process in place to ensure compliance.

Here is an example of an undertakings policy and procedure.

Undertakings Policy for Law Firms from Val Antoff

Maintaining an up to date and a good format risk register will help you:

• evaluate your practice's risk exposure 
• provide evidence to your insurers about your practice's risk exposure
• track and monitor the status of all undertakings
• prioritise the high risk undertakings 
• with the matter supervision process.

Computerised client management system usually provide an undertakings register. For a paper based register consider including the following column headings:

• file reference
• name of client
• name of fee earner
• date of prior approval by principal/managing partner
• value of financial liability (if financial undertaking)
• date of undertaking
• summary of undertaking
• date for compliance
• to whom the undertaking was given
• review date
• date of final review and discharge by principal/partner.

The implications of providing undertakings must be communicated to all professional staff. The policy and procedure should be included in the practice's induction training program.

In the next post I will discuss the engagement policy that a legal practice should develop and maintain under the LAW 9000 standard.

For cost effective financial agreements - prenups and postnups - visit www.crystallawyers.com.au.

Are you the master or the slave of your legal practice document management system?

Have you ever spent more time than you thought you should have searching for the right information to complete a task? Have you ever looked for a document which was labelled incorrectly or filed in the wrong client's file?

Searching for information which should have been within an easy reach is frustrating, inefficient and a waste of time.

Mastering the information chaos of your paper based or computerised document management system is not rocket science. It is actually achievable through the design and implementation of document and record control procedures.

I already discussed the document control procedure in my previous post. Now I turn to the LAW 9000 requirement for a records control procedure.

Definitions

Records - in the context of a legal practice include client communications, feedback, purchasing, corrective action reports, staff training, audits, meeting minutes, trust account, insurance, computer system backups and other internal and external records.

Compliance requirements

Besides being a good business practice records control is a mandatory requirement under your legal profession legislation.

For example under the Western Australian Legal Profession Act 2008 trust records must be kept in permanent form which means printed or capable of being printed. Where a legal practice maintains a computerised accounting system it will be necessary to ensure that a backup copy of all records is kept in a separate location.

The Regulations prescribe time frames:

• within 15 working days after the end of the month trust records are to be printed

• backup copies of trust records are to be made not less frequently than once a month

• trust account receipts must be recorded within 5 working days

• trust account payments must be recorded within 5 working days

• trust account receipts payments or transfers must be recorded in the trust ledger accounts within 5 working days

• reconciliation of trust records must be prepared within 15 working days after the end of the month

• written notification to the Legal Practice Board of the establishment or closure of a trust account must be within 14 days.

Your legal practice should also comply with the identification, storage and retention requirements for your trust account and other records.

Unless you have a records control procedure communicated to all, is reinforced and records are audited regularly it would be hard to imagine that you are the master of your practice's information chaos.

Hints on drafting a records control procedure

You may find it useful having the answers to the following questions handy before drafting a document control procedure:

• Have you identified your quality records? These are the records you need to control. See examples in the enclosed procedure.
• Do you have a method for collecting, indexing, accessing, filing, storing, maintaining, and disposing of your internal and external quality records?
• Who ensures that records are maintained in your practice?
• How do you ensure that records can be traced and located quickly?
• If you are storing records externally do you have a written process about controlling and accessing those records?

For an example of a document control procedure see the embedded procedure below.

Document control procedure for legal practices from Val Antoff

In the next post I will discuss further the requirements for records control under the LAW 9000 standard with emphasis on pre-engagement communication records.