Fees — Alleged Fault: Be Aware of the Risks!
What does “Fees — Alleged Fault” mean?
This refers to the cause of a malpractice claim, where the client alleges a fault on the part of the lawyer after receiving an action on account from the lawyer for unpaid fees.
More than 7% of the claims submitted annually to the Professional Liability Insurance Fund are directly related to lawyers’ attempts to collect their fees.
Clients often deny owing anything whatsoever by arguing, rightly or wrongly, that the services were poorly rendered or that a professional fault was committed.
Worse yet, they may file a counterclaim alleging that the services caused them even greater harm.
Where a client only seeks the reimbursement of fees, if the court finds in favour of the client, such a claim will be excluded from the insurance coverage, as it is a specific exclusion under article 2.04 (i) of the policy.
“2.04 – EXCLUSIONS : Le présent contrat ne s’applique pas à une Réclamation ou partie d’une Réclamation :
i) pour le remboursement des honoraires professionnels de l’Assuré, ou de la Société dont il est ou il a été membre ou qui l’emploie ou l’a employé;”
Where the client seeks reimbursement of fees, but also claims compensatory damages, only the compensatory damages which may be awarded against the lawyer will be compensated by the Insurance Fund, subject to the other terms of the policy. The Insurance Fund will mandate a lawyer to represent you on the counterclaim.
Actions on Account and Professional Secrecy: A Difficult Balance
The other danger in the event of an action on account for unpaid fees—a danger that is less obvious, but just as real—is the risk of disclosing information that goes beyond what is relevant for purposes of the disputed account.
Solicitor-client privilege belongs to the client and only the client can waive it, whether expressly or tacitly. Clients waive professional secrecy if they testify about what they discussed with their lawyer or if they sue their lawyer for malpractice. Lawyers who have been sued must defend themselves and cannot do so if they cannot explain their actions.
Disclosure may be justified where lawyers seek to collect their unpaid fees before a court or where they need to defend themselves in the event of proceedings or allegations calling their professional competence or conduct into question (ss. 65 (3) and (4) of the Code of Professional Conduct of Lawyers), but only to the extent necessary for that purpose and only within the limits of what is relevant for purposes of allowing the judge to assess the evidence.
Some Preventive Measures
- Learn to identify and refuse potential clients who do not have the means to pay for your professional services;
- Provide clients with a realistic estimate of the approximate and foreseeable costs of those services;
- Before and during a mandate, make sure the client has all the necessary information regarding the nature of the services you will provide and the financial terms under which they will be provided;
- Define the mandate in writing;
- Have the client sign a fee agreement and ask for an appropriate retainer based on your estimate of the costs;
- Immediately notify the client in the event of a significant difference between the initial estimate and the actual cost of the services;
- Communicate with the client on a regular basis, ideally in writing;
- Bill regularly;
- If an account is unpaid, promptly contact the client to discuss the reasons why they are refusing or failing to make a payment;
- Offer payment terms and try to settle out of court;
- After having contacted the client, take action! If the client is dissatisfied with the services rendered or does not have the means to pay, consider ceasing to represent the client, but ensure that you comply with the applicable requirements for doing so set out in the Code of Civil Procedure and the Code of Professional Conduct of Lawyers.
Knowing that there is a risk of a counterclaim being made against you, before choosing to sue to collect your fees—which should be the option of last resort—ask yourself whether the amount at stake is worth the risk. Furthermore, even if you do institute proceedings and win, you may have to take measures to enforce the judgment in order to get paid.
 CQLR, c. B-1, r. 3.1.