Fees, Legal Aid – and everything you need to know about "Sears Tooth" agreements
January 7, 2008 2 comments
“Supposing you can’t pay your solicitors’ fees – what then?”
One of the first issues that any solicitor addresses with a client should be the costs of a case. It is a delicate subject, but needs to be addressed at the outset because the general rule in financial divorce disputes and children cases is that each side pays their own costs. Many clients think the richer party will be paying the costs – but the rules changed last year and this is no longer the case.
At Stowe Family Law, we don’t operate a “no win no fee” system, which would be illegal. Neither can we offer a “percentage of the value of the case at the end of the case” system for charging which too is illegal. We charge by the hour. Our solicitors provide full details of their charging structure in advance, with a retainer letter for the client to accept and sign.
During a first meeting, it isn’t possible to tell a client exactly how much a case is going to cost. However, it should be possible for an experienced solicitor to provide a rough estimate. I don’t think that is unreasonable, because a client needs to budget. It is important to note that a case may end up costing more than originally expected: unforeseen circumstances can and do arise, and even seemingly straightforward circumstances can become complicated.
Although costs can sometimes escalate suddenly and swiftly, I believe a client needs to know from the beginning that a case which might cost £150k is not going to cost only £5k. I actually saw this happen in one case: I was engaged by a client whose previous solicitor had informed him that his hotly contested £30 million divorce case would cost no more than £5k in legal fees. The solicitor had even put this in writing. Fortunately, the client had suspected that something was amiss. It was a crazy figure – and one that no experienced lawyer would hope to defend.
Supposing you can’t pay your solicitors’ fees – what then?
There are various options.
The first is legal aid. A good solicitor can advise if you are financially eligible. You may still be eligible if your case is being dealt with in England but you are living abroad,
If not, a bank may help you out. It is possible to negotiate a bank loan so your solicitor is paid as usual during the case. Some banks will fund your costs coupled with an irrevocable undertaking to be repaid out of the settlement. They may also agree to “roll up” the interest payments into the final payment, so that no repayment is made before the case is over. This is not an unusual procedure, and there are a few banks that specialise in providing this type of funding.
It is also possible to apply to the court for an order for funds to be made available either out of the spouse’s income, or by some sort of capital distribution to the parties to enable them to meet their costs. There are ingenious ways of doing this – but the capital has to be available in the first place.
The court will not make an order for payment of legal costs out of the other party’s income unless there is absolutely no other way of having the costs paid. That must include the solicitors of the applicant party refusing to enter into a “Sears Tooth” agreement.
What is a “Sears Tooth” agreement?
I’d like to go into detail here; there is little about Sears Tooth agreements online, and I have noticed that a number of readers have found this blog while searching for information about them.
A Sears Tooth agreement is a deed that assigns the client’s settlement to the solicitor, to enable them to cover their costs incurred in acting for the client and out of which they will be paid first and in full, when the case is over.
If such an agreement is signed by the client and witnessed – after full legal advice – by an independent solicitor, it will be upheld by a court if a dispute about it arises in the future. A lump sum settlement awarded in a divorce can be legally assigned in this way.
Once signed, the Sears Tooth agreement must be disclosed to the court and to the other party in the case.
How many solicitors will accept a Sears Tooth agreement?
Not too many. It is quite a risk for the solicitors, especially if the case itself poses a risk.
Furthermore, based on the agreement, the solicitors must fund the disbursements in the case. These include court fees, surveyors’ fees and barristers’ fees. If anything goes wrong, then the solicitors will be left out of pocket.
But there are times when it is the only way forward. If the client has no choice, the solicitors may feel they have no choice. I’ve been there – and sometimes, I’ve done it.
It is pointless for a solicitor or client to duck the question of costs just because neither of them wants to know the answer. My advice is the same every time: face it, deal with it and then get on with the case, to achieve your desired result. Don’t ever as a client prefer to remain uninformed like an ostrich! It would be a great mistake. You need to understand from your solicitor when you will be billed and how you are going to pay the bill. Don’t wait until the bill drops on your mat and then panic. Remember: you and your solicitor are working together in a commercial partnership.