Implications of Unpaid Counsel Fees

By Sujal Kesharwani 12 Minutes Read

Introduction

• The word “Counsel” comes from the old French counsel which means to consult.
• “Counsel” refers to a lawyer or group of lawyers who represent a party in a legal case. So, “counsel in brief” could simply be referring to the lawyer who is mentioned or discussed in a legal brief. A legal brief is a document that summarizes the facts and legal arguments of a case for the court.
• It is essential to underscore the importance of counsel in legal services in India; in the dynamic legal landscape of India securing competent legal representatives is crucial for navigating the complexities of the justice system. However, the issue of unpaid counsel fees has been a major concern and casts a long shadow, threatening the well-being of both counsel and their clients.

Implications of unpaid counsel

• Unpaid counsel fees have significant implications for both legal professionals and clients. For counsel, the failure to receive payment for services rendered can lead to financial instability, affecting their ability to manage operational costs, pay staff, and invest in resources necessary to provide high-quality legal services.
• This financial strain can impact the lawyer’s ability to take on new cases or offer pro bono work, ultimately limiting access to justice for those in need.
• On the other hand for clients, the issue of unpaid counsel fees can result in strained relationships with their legal representatives. Non-payment can lead to counsel withdrawing from cases, which can disrupt legal proceedings and adversely affect the outcome for the client.
• Additionally, clients may face legal actions from their counsel seeking to recover unpaid fees, leading to further legal and financial complications.
• Legal practice in India is no different from any other profession – it requires financial sustenance. Unpaid fees create a significant financial burden for advocates. Law firms incur expenses like office space, staff salaries, and legal research resources. Unpaid dues can cripple a firm’s financial stability, potentially forcing them to reduce client intake or even shut down.
• This not only impacts the lawyers involved but also contributes to a shortage of legal representation, especially for those who cannot afford hefty retainers. Thus it is essential to underscore the implications of unpaid counsel fees and their severe consequences to the legal system.
• Moreover, the counsel-client relationship thrives on trust and mutual respect. Unpaid fees can severely damage this bond.

Avoid unprofessional conduct by counsel

• Non-appearance by counsel in court for non-payment of fees etc. amounts to misconduct. Where the counsel abstained from appearing in the court for the party on the ground of non-payment of fees etc. and consequently the case was dismissed in default.
• The Allahabad High Court has held that failure to pay fees or other costs cannot be a justification for a counsel representing a party to fail to appear in court when that counsel withheld representation on the grounds of non-payment, and the case was dismissed for default.
• As soon as a client files his Vakalatnama with the court, the counsel is required to represent him in court; failing to do so would be significant misbehavior against the court.
• A similar contention was held in the case of Narendra Kumar v. ADJ (2007) in the Allahabad High Court[1].

Obligations of counsel in nonpayment of fees

• Even if the fee is not paid, the counsel is obligated to return the documents to the client.
• In any event, if the case is still pending, the client has the right to obtain the documents from the former counsel so that he can adequately brief the case to the new counsel.
• It is not permitted for the former counsel to hold onto the case bundle in either scenario because fees are still outstanding.
• This litigant’s right should be interpreted as the advocate’s professional obligation. Accordingly, it would be considered misconduct by the advocate under section 35 of the Advocates Act, 1961[2], if the file was not returned to the client when he requested it.
• Even if the counsel feels that he has any genuine claim or grievance against his client, the appropriate course is to return the brief with endorsement of no objection and agitate for such right in an appropriate forum by law (New India Assurance Co.Ltd. v. A.K. Saxena[3]).
• In the case of R.D Saxena v. Balram Prasad Sharma (2000),[4] after a well-envisaged decision was taken into consideration, the bench thought that not returning the case files to the client was professional misconduct and held that advocates have no lien over the papers of their clients and that most of the advocates may resort to legal remedies for unpaid remuneration.\

Changing Counsel and Fee payment to former Counsel

• After the change of counsel, the prior counsel cannot demand payment until the case is over if the client switches counsel.
• However, in cases where the prior counsel worked up to the point of issue settlement and partial testimony on behalf of the client, the suit trial had thus partially concluded.
• As a result, the court ordered that the party pay the counsel one-fourth of the scheduled fee, and the counsel was required to give unconditional consent to engage another advocate.
• A similar contention was passed in the case of C.S. Venkatasubramanian v. State Bank of India (1997)[5], in which the honorable court held that the counsel is not entitled to payment of the fees from the client until the proceedings are concluded.
• Moreover, in the case of Govt. of Tamil Naidu v. R.Thillaibillalan[6], the honorable court stated that even after the completion of the proceedings the client doesn’t pay the fees to the counsel then the counsel may file a writ petition under Article 226 of the Constitution to recoup the outstanding fees.
• In the case of Dr. Hari Nandan Singh v. UP Higher Education Services Commission[7], the High Court may hear and evaluate a writ petition filed by a counsel seeking payment of fees, and it should also review a counsel’s request for instructions in a case involving counsel fees. Also, the counsel is entitled to the payment for the work he has done but the counsel cannot claim any fees if he withdraws from the case.

Preventive measures to safeguard client-counsel relationships

To mitigate the negative impacts of unpaid fees, both counsel and clients can take proactive steps:

1. Clear Fee Agreements: A well-defined fee agreement is the cornerstone of a healthy attorney-client relationship. This document should clearly outline the scope of work, fee structure (hourly rate, retainer, or fixed fee), billing procedures, and payment terms. Both parties should have a signed copy of the agreement to avoid future misunderstandings.

2. Open Communication: Maintaining open communication is crucial. Counsel should keep clients informed about legal fees, provide regular billing statements, and address any client concerns promptly. Clients should be upfront about their budget constraints and discuss potential payment plans or alternative fee structures if necessary.

3. Exploring Alternatives: Traditional hourly billing might not be the most suitable option in every situation. Clients and advocates can explore alternative fee arrangements, such as fixed fees for specific legal tasks or retainer agreements with staggered payments. These options can provide more predictability and streamline the billing process.

4. Prompt Payment: Clients should prioritize timely payment of legal fees. Open communication about any financial difficulties is essential.

Thus these measures are essential to safeguard the relationship and prevent further disagreements.

The Supreme Court recommends a new statute to control advocate fees

• Regarding the issue of lawyers’ fees impeding access to justice, the Law Commission of India has noted that it is the responsibility of Parliament to establish a fee schedule for services provided by attorneys.
• It is best to start by establishing a floor and ceiling for fees. The Supreme Court hopes that the relevant government authorities will recognize the need to introduce the necessary legislative changes for an efficient regulatory mechanism to prevent professional ethics from being violated and to guarantee access to legal services, which is a crucial part of the right to justice guaranteed by Article 39-A of the Constitution.

Conclusion

In essence, the implications of unpaid counsel fees extend beyond the immediate financial impact, affecting the relationship between counsel and client. Thus, establishing clear fee agreements, maintaining open communication, and exploring alternative fee structures work as a strong foundation for a successful client-counsel relationship. Addressing these issues is crucial for maintaining the integrity and functionality of the legal profession.

[1]2007 (67) ALR 530 (All).

[2]The Advocates Act, 1961, s. 35.

[3]AIR 2004 SC 311.

[4]AIR 2000 SC 2912.

[5]AIR 1997 SC 2329.

[6]AIR 1991 SC 1231.

[7]1992 ESC 311 (AII)(DB).

Sujal Kesharwani