If solicitors fail to carry out adequate due diligence on clients, costs could be wasted in many ways, says Murray Heining.

Do you know your client? The answer to this question seems a bit obvious – the identity of the client is obvious in most cases, but the capacity of the client is an equally important consideration.

From time to time and more often than it should happen, solicitors fail to give adequate consideration to the capacity of the client and to continue to do so through the life of the retainer. This can have expensive costs consequences and can potentially lead to a negligence claim. It is not enough for a solicitor to simply require a client to produce his or her passport and other papers to show his identity, further enquiries are necessary.

This issue is nothing new. Over 100 years ago, a solicitor was retained in anticipation of an action for libel. The client was subsequently certified as insane. The solicitor was unaware of this, accepted service of the writ, entered appearance and delivered a defence. Even though he had acted in good faith, he was held personally liable for the costs of the plaintiff (Young v Toynbee [1910] 1 KB 215).

The following year a solicitor who conducted the defence of an action on behalf of a company that was found to be non-existent was held personally liable for the costs of the plaintiff (Simmons v Liberal Opinion Ltd [1911] 1 KB 966). Where there is want of authority to bring an action, in most instances the claim should be struck out.

The above two cases should not be disregarded as being of historic interest only. Capacity considerations remain as important now as they were a century ago. To illustrate this there follows some more recent situations.

We all know that, save in exceptional cases, a child should have a litigation friend and when a child attains his or her majority, the litigation friend’s appointment comes to an end. However, how much attention is given to CPR 21.9(6)?

This says: ‘The liability of a litigation friend for costs continues until -

(a) the person in respect of whom his appointment to act has ceased serves the notice referred to in paragraph (4); or

(b) the litigation friend serves notice on the parties that his appointment to act has ceased.’

Three issues immediately merit consideration:

1. Is the litigation friend always advised of the ongoing costs liability and is the required notice always promptly served?

2. Is a new retainer entered into immediately with the child after he attains his majority?

3. Is after-the-event insurance checked to ensure cover continues?

If the answer to question 1 is ‘no’, then there is a strong case for a wasted costs against the solicitor. Equally important is the lack of entitlement to costs recovery from the client.

The death of a client brings the retainer to an end. In personal injury cases a conditional fee agreement (CFA) automatically ends if a client dies before his claim for damages is concluded. If the claim is to be continued, a new agreement with the personal representatives of the deceased is required.

How often is this overlooked and how often is there delay between the death and the new retainer? Quite often. In the absence of a new retainer, there is no entitlement to charge. Where there is a gap between the retainers there, again, is no right to charge.

Bankruptcy of a client is another area of concern. Most solicitors will routinely at the outset make diligent enquiries as to this, but what if the client becomes bankrupt during the retainer? If the solicitor continues to act and fails to secure the consent of his trustee in bankruptcy to the continuation of the claim, he is at risk of a wasted costs order for an opponent’s costs, as was made in Thomas Chambers v Miah [2013] EWHC 1245 (QB), and will be unable to recover his own fees as well.

In some instances, particularly where the retainer is a CFA, problems may be cured by a retrospective CFA. But if rather than being a truly retrospective CFA, and instead is a backdated agreement attempting to cure an error or carelessness by the solicitor, it is unlikely to assist.

I expect that most those reading this article have procedures in place to ensure that the potential problems that I have highlighted do not occur, but my own experience is that not all do.

Murray Heining is chairman of the Association of Costs Lawyers