How a Solicitor Can Recover Unpaid Fees

The purpose of this article is to discuss the ways a solicitor can recover any unpaid fees that they might be owing to them.

'Debt' can be defined as 'an amount of money that is owed by one entity to another'.

However, if a debt is a fixed amount and is not in dispute, it is known as a 'Liquidated Debt'. An example of this is when an invoice is unpaid.

Solicitors, however, work differently in that they don't usually charge a fixed price. Typically, solicitors work on a retainer and an hourly rate. Sometimes they will have a contingency fee agreement with their clients in that they will receive a percentage of the damages received. Also, solicitor costs can be disputed and accessed within twelve months of being received. If fees are unpaid, this type of debt is known as 'Unliquidated Debt'.

One of the ways a creditor can exert pressure on a debtor to pay is by issuing a Statutory Demand, which is a formal, written demand for the payment of a debt. If the debtor then fails to pay the debt within three weeks, the creditor may commence insolvency proceedings against the debtor. However, the Insolvency Act of 1986 states that a bankruptcy petition cannot be based on unliquidated debt.

Generally, a solicitor's standard retainer gives the solicitor the right to receive a reasonable fee for his services, if that fee is unpaid then there are various ways that it can be turned into a liquidated debt.

• A court assessment of the fees under the Solicitors Act 1974
• A binding agreement by the client that he owes the costs, non-contesting the payment is not sufficient.
• The concept of 'Estoppel', which prevents an entity from adopting a stance, action or attitude inconsistent with an earlier position if it would result in the detriment to another entity. i.e., the client represented that he was happy with the fees, and the solicitor relied on that representation to his disadvantage.

As we can see, it's not an easy process for Solicitors to collect unpaid fees by going down the litigation route.

Another way that is open to a solicitor is to use a 'Lien'. A Lien is a right which a solicitor can exercise to keep a client's papers, files, documents or deeds that the solicitor has received while representing the client until the fees are paid.

Whatever the ways, at some point there must be communication between solicitor and client and some acknowledgement of the debt. However, the whole process takes time and is cost-prohibitive at a typical solicitor's hourly rate, and because of this, many solicitors are turning to specialist debt collecting firms.

The advantage of external debt collection to a solicitor firm is:

• Amicable Mediation, using third-party psychology to resolve issues between parties and come to an agreement on fees without going through the court process. We find that information is divulged in the mediation process that would not have been revealed to our clients, and that helps bring resolution to the matter.
• Debt collection, collecting fees more economically then in-house collection, typically at rates of around 15%
• Tracing and credit checking, finding missing clients and gaining information as to the viability of continued action

At Town and Country Legal Services, we act for a number of solicitors practises and appreciate the sensitive nature of the debt collection process. We understand that it is not easy for partners of those firms to trust third-parties with their clients, and we know that it is only through communication and solid debt collection practises that trust is earnt.