Client Engagement Agreements – Retainers – Costs Disclosure
It is good practice management for your practice to put in place a comprehensive and comprehensible Client Engagement Agreement (CEA) for each matter for all clients.
Where the estimated costs of the matter exceed $3000 and the client does not fall within the definition of a “commercial or government client”, as they are defined in section 170(2) of the Legal Profession Uniform Law (the LPUL), you must comply with costs disclosure obligations in sections 174 to 177 of the LPUL.
If you fail to comply with the obligations, then any costs agreement is void and the client is not required to pay costs until they have been assessed or determined (section 178 of the LPUL).
To assist practitioners, the Law Society and Law Mutual have drafted generic templates for CEAs, in the form of a client engagement letter, for litigated and transactional matters that represent good practice management and should also comply with costs disclosure obligations provided they are properly completed, and the practice satisfies itself that the client understands the services it will provide and at what cost.*
Each of the templates is accompanied by Guidelines that assist in their proper completion.
Links to the templates and the Guidelines can be found below. Each of the CEAs and Guidelines has a Date of Publication. You should ensure that you are utilising the latest publication. The latest date of publication is currently 19/07/2022.
* Please note that the question of actual compliance for any particular matter is to be determined by the relevant regulatory authority or judicially.
The Client Engagement Process
A signed CEA is only part of the client engagement process that is recommended as good practice. The process should include the following:
- Obtain sufficient information from the potential client to enable the preparation of a CEA.
- Forward the CEA to the potential client for perusal.
- Meet with the potential client to discuss the CEA and ensure all items on a client engagement checklist are covered.
- Make any necessary amendments to the CEA and repeat steps 2 and 3.
- Once you are satisfied that the client understands the CEA, send correspondence to the client confirming that fact and request the signed CEA be returned.
- If changes to the terms of the CEA are required at any time, repeat the above steps covering the changes.
Ensure the CEA, a record of the discussions and the completed checklist are placed on file.
A link to the recommended Process including a suggested client engagement checklist is below:
The Law Society and Law Mutual has provided training on the Process, CEAs and Guidelines. You can view the video of that training session here. (Please note that viewing of the video does not provide CPD points or Risk Management training hours.)
The Slides used for the training session and the relevant speaker notes can be found here.
Please note that Cost Kits will no longer be valid or available after 30 June 2022 due to the commencement of the Legal Profession Uniform Law on 1 July 2022.
Frequently Asked Questions
Please note the FAQs are only targeted to further explain the documentation we have provided. They do not seek to offer a legal opinion and no reliance should be placed on them in that regard.
The Regulator has indicated it does not have an issue with the single figure estimate being preceded by a word such as ‘about’ recognising that it helps clarify that the amount is an estimate and not a quote.
The potential client must be informed that they should seek independent legal advice on the agreement before signing. Further, given you must be satisfied that the potential client understands and has given their consent to the proposed services and costs, then, if you are in any doubt that they have understood, you should ensure the potential client obtains independent legal advice before signing the agreement.
The Regulator has indicated it would not be minded to allow the law practice to charge the client costs of drafting a retainer agreement.
The answer depends on the nature of the ‘change’. In general, if the change is still within the scope of the original retainer, you should provide an update detailing the nature of the change of instructions and you must update your costs estimate. If the change is not within that scope, you should complete a new CEA.
No, the existing agreement will be sufficient (assuming it meets all of the then-current requirements) in relation to a matter on which instructions were received on or before 30 June 2022. If you receive instructions on a new matter (i.e., a new piece of litigation, a new lease, a new contract or transaction) on and from 1 July 2022 then a new agreement is necessary.
While that may be legally permissible, depending on the circumstances, we strongly recommend that you ensure the client signs the CEA once you have satisfied yourself that the client understands and has given their consent to the services they will receive, the proposed course of action for the conduct of the matter and the proposed costs involved.