First and foremost, let’s get something straight – claims against your legal practice over a dispute solely on legal fees (in most general situations) are excluded under the Malaysian Bar Professional Indemnity Insurance ("PII") Scheme.  The said exclusion is expressly provided under Clause 32 (n) of the 2020 Certificate of Insurance[1] ("COI") or such other similar wordings in the COI of a particular year under the PII Scheme.
 
With that said, we stress on why it is imperative for a legal firm to cover its bases in relation to solicitor-client cost, ie your professional legal fees.  Many disputes between lawyers and clients are over money. There is certainly a common experience amongst lawyers when it comes to the collection of fees and how tedious it may be at times. A worse scenario however would be a lawsuit against the firm by a disgruntled client for the return of legal fees paid.
 
We set out below examples of disputes on legal fees which have occurred between a lawyer and their client:-
 

1. Lawyer X acted for a buyer in regard to a sale of property.  The buyer paid a sale deposit to the seller but the sale agreement later fell through.  The deposit was refunded by the seller to Lawyer X for onward transmission to the buyer.  Lawyer X deducted their legal fees from the deposit amount before refunding the balance to the buyer.  The buyer now sues Lawyer X for the return of the deducted deposit amount, ie their legal fees.

 

2. A client appointed Lawyer Y to represent them in an appeal matter.  Lawyer Y thereafter appointed a senior counsel to conduct the hearing of the appeal, unbeknownst to the client.  Upon conclusion of the appeal, the client refused to pay the legal fees as it included the senior counsel’s fees.  Lawyer Y was subsequently sued by the senior counsel for unpaid legal fees.

 
In both of the above scenarios, Lawyers X and Y made a claim under their professional indemnity insurance but their claims were denied pursuant to the legal fees exclusion clause mentioned above.
 
What steps may a lawyer take to reduce the risk of legal fees disputes/claims, and in any event, safeguard their position? 
 
It goes back to basics – communication regarding legal fees with the client should be clear and ought to be reduced to writing, eg a written fee agreement.  A written fee agreement should generally include whether a retainer is required (and its amount, if so), the hourly fees of lawyers/support staffs who may work on the case, and payment terms.  It is also good practice for a lawyer to provide their client, at a preliminary stage, with a general range of legal fees applicable to the case so as to avoid any surprises later.  Similarly, a breakdown of fees and disbursements involved as the case progresses would be helpful for the client.
 
Although discussions on fees may be verbal or over text messages, a lawyer should make a point of confirming the agreed terms in an email or letter to the client.  The same applies to any fee amendments agreed upon subsequently.  Lest we forget, a written contract/document takes precedence over a verbal statement.  With such practice management, a lawyer will have in hand a record for reference which may be used to avoid or resolve any fee dispute with the client.
 
Best Practice Tips:

• Itemise your billable time – use a billing system which keeps a detailed record of each item of work done.
• Have an honest and realistic conversation with your client about the potential cost of their case.
• Be careful with multi-billing – adjust your time cost accordingly if a case is delegated amongst multiple lawyers/paralegals.
• Keep the communication flowing – any change in strategy or circumstances which may increase fees should be highlighted to the client sooner than later.