Retainers – Dealing with the Financial Aspects

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What to Include in a Retainer Agreement or Retainer Letter

Although this Toolkit is focused on the financial aspects of the lawyer-client relationship, retainer agreements and letters are about more than fees and disbursements; they should cover the essential aspects of the relationship, including how the lawyer and client will communicate, legal strategy, the scope of services, authorization to act, and the respective roles of lawyer and client. A good retainer agreement or letter can serve as a road map for lawyers and clients alike.

There are excellent resources on retainer agreements and letters available on the websites of most provincial law societies. Links are provided below.

While the specific content of the retainer agreement or letter will vary depending on the nature of the retainer, they should generally address the following:

  • The retainer does not begin until the letter or agreement is executed, returned to the lawyer, and any required monetary retainer is paid (but lawyers must remember their obligation to act to preserve a client's interests).
  • Who is authorized to provide instructions on behalf of the client.
  • The authority to the lawyer to engage agents, experts and other parties where required.
  • The scope of services to be performed, or not performed, as applicable.
  • An explanation for how fees are calculated, what disbursements will be charged, any filing or transaction levy applicable in the relevant province, and that taxes will be added to fees and disbursements.
  • Confirmation of the lawyer’s billing rate and the rates of others reasonably expected to work on the file, and information about anticipated rate increases (e.g., if the firm has a practice of making annual rate increases, the retainer letter should clearly state that rates may increase over the course of the file).
  • Requirements for an initial retainer deposit and replenishment of that retainer from time to time.
  • Timelines for when bills will be sent and the lawyer’s expectation for payment.
  • Where appropriate, timelines for when events will occur or are likely to occur.
  • The method and frequency of communication with the client (e.g., the lawyer will strive to return phone calls in a timely manner but the nature of their practice means they will not necessarily be able to return calls the same day, etc.).
  • If interest is charged on overdue bills, explain how it is calculated. (Interest provisions must not trigger the criminal rate of interest section of the Criminal Code; and any interest charged should be expressed as an annualized rate to comply with the Canada Interest Act.)
  • Confirm critical directions given to the client at the initial meeting as well as crucial steps that need to be taken and by whom (i.e., a lawyer should be sure not to let a client think the lawyer is going to take certain steps if they are not).
  • Terms under which the entire retainer will be terminated. Note the rules regarding withdrawal of services in the Model Code (or the relevant provincial or territorial code of professional conduct).
  • Any client identification requirements as specified by the lawyer’s law society.
  • Clarification as to what happens to any remaining funds when the matter is concluded or if the retainer is terminated before the matter is concluded.
  • If there is a joint retainer or a third party is paying the legal fees, clarification as to what happens to any money left in the lawyer’s trust account at the end of the retainer and what happens if the retainer is terminated before the matter is concluded.1,2

As a matter of best practice, lawyers should also consider addressing in their retainer agreement or letter how any disputes about fees will be handled. Lawyers should identify any right the client may have to external assessment or mediation of fees.

While lawyers should develop and use templates when drafting retainer agreements and letters, it is important to remember that there is not a one-size-fits-all approach, and each retainer agreement or letter should be appropriate to the client and the matter at hand. Lawyers should consider developing different templates for different practice areas, and even multiple templates within certain practice areas (e.g., for real estate, it may be helpful to have a different template retainer letter depending on whether a file involves a sale, purchase or refinancing). Each retainer agreement or letter should ultimately be tuned to the individual client and matter.

Special considerations apply when drafting a retainer agreement or letter for a contingency fee agreement, a limited scope retainer, or other alternative arrangements between a lawyer and client (e.g., there may be specific requirements contained within provincial or territorial statutes that govern the legal profession3 or within applicable codes of professional conduct).

Lawyers should also be aware of any restrictions on what can or should be included in a retainer letter or agreement under relevant provincial legislation. For example, under Rule 10.6 of the Alberta Rules of Court, “[i]n a retainer agreement or otherwise, a provision is void if the provision (a) purports to relieve a lawyer from liability for negligence or any other liability to which the lawyer might be subject as a lawyer, or (b) purports to provide that an action, application or proceeding cannot be abandoned, discontinued or settled without a lawyer’s consent.”

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Managing Expectations

From the outset of the lawyer-client relationship, lawyers should ensure their clients understand the scope of the professional relationship, including what the lawyer will and will not do for the client.

Managing a client’s expectations starts with the first meeting and continues throughout the lawyer-client relationship. “A lawyer should be wary of providing unreasonable or over-confident assurances to the client, especially when the lawyer’s employment or retainer may depend upon advising in a particular way.”4 While lawyers should accurately describe relevant experience in similar matters to prospective clients, subject to the comments below with respect to the requirement to provide competent service, lawyers with limited experience are not precluded from providing legal services in new areas.  Where they do so, they may wish to highlight the resources available to them (e.g., mentorship from more experienced colleagues) that will enable them to do the work.

Once a lawyer agrees to act, the lawyer must provide services to the standard of a competent lawyer.5 The commentary in the Model Code states “the client is entitled to assume that the lawyer has the ability and capacity to deal adequately with all legal matters to be undertaken on the client’s behalf.”6 Accordingly, “[a] lawyer should not undertake a matter without honestly feeling competent to handle it, or being able to become competent without undue delay, risk or expense to the client.”7

To the extent possible, a lawyer should advise the client in realistic and clear terms of potential outcomes and the costs associated with the legal services the lawyer is agreeing to provide.8 While it can be very challenging to provide a fee estimate in some cases, communicating effectively with clients about fees and disbursements can help prevent disagreements as matters progress. When providing a fee estimate, a lawyer should consider the level of difficulty of the matter, how much time and effort they expect to spend on it, whether it requires any special skills, the expected results, and any special circumstances such as the urgency of the matter. A lawyer should also consider their own experience and ability.9 Further, a lawyer should frame any fee estimate in the context of the facts and the services the client is seeking, and should inform the client if issues arise that may change their initial estimate.

More broadly, when assumptions or strategies need to be adjusted in response to changing circumstances, lawyers should take the time necessary to explain this to their clients. One helpful practice is to provide clients with a timeline of events (i.e., anticipated litigation steps) and keep it current. At every stage, lawyers should let their clients know what to expect from the lawyer and what is expected from the client.

There are various ways a lawyer can keep their client informed throughout the legal process, one of which is to send interim accounts that clearly reflect the lawyer’s progress on the file. However, lawyers invite conflict by sending an account without having previously informed the client of the lawyer’s progress on the file, or by sending a large account at the end of the matter.

Lawyers should also be careful to manage their client’s expectations around communication between lawyer and client. A client should have a clear understanding of when they will hear from their lawyer, and when they will hear from other lawyers, students-at-law or staff at the lawyer’s office.10  Lawyers who charge hourly should be prepared to remind clients that the lawyer “charge[s] for [their] time, that these communications distract from [the lawyer’s] ability to move matters along expeditiously, and that frequent contacts will result in increased cost to the client.”11 Such communications should be documented.

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Financial Considerations Before Starting Work on a Client’s File

Not only does the word “retainer” refer to “the act, by a client, of engaging a lawyer to provide professional services” or “the document that sets out the terms of engagement between the lawyer and the client for professional services”, it can also refer to “funds paid by the client to the lawyer in trust in order to secure the lawyer's professional services.”12

A “specific money retainer” is money provided by a client for the purposes of retaining a lawyer to perform a specific task. It is paid into a trust account and may only be applied to fees in accordance with governing legislation. The handling of trust money is generally governed by the rules of the law society in each province or territory.13 Trust funds cannot be used for any purposes other than the purpose for which they were provided.14

One of the purposes of a specific money retainer or a retainer deposit is to give the lawyer some assurance that at least some payment will be received for the services the lawyer performs. As such, it is good practice to require the client to provide the money retainer before starting work on the file. Such a requirement must be confirmed in writing with the client, and a payment date must be specified.15

In all cases, lawyers must carefully adhere to client identification and verification requirements within their jurisdiction, which safeguard against money laundering and fraud.

End notes

1 This list is adapted from Law Society of Alberta, Law Practice Essentials, Part 8 – Retainers, 8.3 What Terms Should They Contain?; see also Law Society of British Columbia, Practice Management Course, Part 7 – Retainers Learning Module, 3. What Content Should They Contain?

2 Lawyers should also consult the rules of their provincial law society, which may address the situation of a lawyer receiving money from another person to be held in trust for the benefit of a client. See for example, The Rules of the Law Society of Alberta, January 1, 2022, Rule 119.21(2).

3 For example, The Legal Profession Act, SM 2002, c 44, s. 55(3) (“Manitoba Act”) requires a lawyer to provide the client with a copy of a contingency contract as well as a copy of sections of the Manitoba Act that provide judicial oversight over the fairness of the contract.

4 Rule 3.1-2[9], Model Code p. 18

5 Rule 3.1-2, Model Code p. 16

6 Rule 3.1-2[1], Model Code p. 16

7 Rule 3.1-2[5], emphasis added, Model Code p. 17

8 Law Society of British Columbia, Communication Toolkit, Communication Skills

9 Rule 3.6-1[1], Model Code p. 61

10 Law Society of Alberta, Law Practice Essentials, Part 12 – Dealing with Challenging Clients, 12.11 Effective Communication Part II – Setting Expectations and Boundaries

11 Law Society of Alberta, Law Practice Essentials, Part 12 – Dealing with Challenging Clients, 12.12 Effective Communication Part II – Managing and Documenting the File

12 Law Society of Alberta, Law Practice Essentials, Part 8 – Retainers, 8.2 Retainer Agreements

13 Rule 3.6-10[1], Model Code p. 65. Lawyer should also be aware of any regulatory requirements within their jurisdiction relating to circumstances when client trust fund should be removed from the law firm’s pooled trust account and deposited in a specific trust investment account on behalf of a particular client.

14 In contrast to a specific money retainer, a “general retainer” is “a sum of money paid to the lawyer by a client, but not for the purposes of performing specific work.” General retainers are extremely rare and should be approached with great caution, as they can give rise to money laundering or fraud. See Law Society of Alberta, Law Practice Essentials, Part 8 – Retainers, 8.2 Retainer Agreements

15 Rule 3.6-9, Model Code p. 65