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Most fee disputes are not really about money. They are about a client who expected one thing and got a bill for another. We sat down with a billing practice advisor who has helped Canadian firms rewrite their engagement letters after the fight, and asked what those letters should have said in the first place.
The following conversation has been lightly edited for length. Our advisor works with small and mid-size firms across several provinces, reviewing retainer agreements and coaching partners through law society complaints. We agreed not to attach a name to specific war stories.
Where Fee Disputes Usually Begin
Q: When a client refuses to pay, what is actually going on?
Almost never is it the hourly rate. The client agreed to the rate on day one. What breaks the relationship is surprise. The bill arrives and the number is bigger than the picture in the client's head. That gap between the imagined cost and the real cost is where every dispute lives.
So the engagement letter has one job above all others: to shrink that gap before the work starts. A good letter is not something you produce to defend yourself later at the law society. It is a shared expectation, written down, that both sides read the same way.
The client is not arguing with your invoice. They are arguing with the version of events they built in their own head months ago. Your job is to build that version with them.
The Scope Clause Most Letters Get Wrong
Q: You have said scope is where firms lose the most money. Why?
Because most scope clauses describe the matter, not the work. They say something like "acting for you in your dispute with the landlord." That reads fine until the dispute grows three new limbs. The tenant wants you to also deal with the insurer, then a related human rights complaint, then a settlement that needs a corporate signatory. None of that was in the letter, but the client thinks it was, because to them it is all one problem.
Q: So how do you write it instead?
Two lists. What is included, and what is not. The exclusions matter more than people think. Naming what you are not doing is the single cheapest way to prevent a scope-creep fight.
- Included: the specific steps you will take, phase by phase, with the deliverable at each stage.
- Excluded: the adjacent things a client might assume come along, appeals, enforcement, related proceedings, tax advice.
- A change mechanism: a plain sentence that says new work needs a short written amendment before it starts.
That last clause does the most work. You do not need a new twelve-page retainer every time the matter shifts. You need a one-line email that says "this new piece is outside our letter, here is the estimate, reply to confirm." Most firms already have the file notes. The challenge is making that note the default step rather than the one you keep meaning to take.
Tip. Draft your exclusions list from your own complaint history. The three things clients most often assumed were included last year are exactly the three lines your next letter needs.
Spelling Out Disbursements and Third Party Costs
Q: Disbursements seem small. Are they really worth the ink?
They cause a disproportionate number of fights, because clients feel ambushed by them. Someone budgets for your fee, mentally rounds it, and then sees an extra line for an expert report, a registry search, a process server, courier charges. Individually small. Together, enough to feel like a bait and switch even when it is not.
Tell the client three things about disbursements before they sign. What kinds you expect. Roughly how much. And whether they need to approve anything above a threshold.
| What the letter says | What the client hears |
|---|---|
| "Plus disbursements" | Nothing. They skip it. |
| "Disbursements such as court fees and searches, typically under 500 dollars" | A number I can plan around. |
| "Any single disbursement over 1,000 dollars will be approved by you first" | I stay in control of surprises. |
The approval threshold is underrated. It converts a potential complaint into a routine conversation. When the expert quotes more than expected, you send one message, the client agrees, and the cost is now something they chose rather than something that happened to them.
Q: What about expert or agent invoices the firm passes through?
Say plainly whether you mark them up, whether GST or HST applies on top, and whether the client pays the third party directly or through your account. Pass-through costs that touch your trust account deserve extra care, because that is where a billing question becomes a trust accounting question fast.
Setting Expectations for Flat Fee and Contingency Work
Q: Flat fees are supposed to end fee disputes. Do they?
They shift the dispute. Hourly fights are about how much time you spent. Flat fee fights are about what the fee covered. A client pays a flat 2,500 dollars for an incorporation, then asks you to also review a shareholder agreement, register for payroll, and answer six months of follow-up questions. Where does the flat fee end?
So a flat fee clause needs a fence around it. Define the deliverable precisely. State what triggers additional charges. And name the assumptions, because a flat fee is a price for a normal version of the matter. If the file turns abnormal, the letter should say so up front.
Q: And contingency work?
Contingency arrangements carry their own rules under provincial law society requirements, so I will not wade into the drafting specifics here. The expectation-setting principle is the same. Be explicit about the percentage, whether it changes if the matter settles versus goes to trial, and how disbursements are handled if the case does not succeed. That last point is where clients feel most blindsided.
A flat fee is a price for a normal file. Write down what normal looks like. Billing practice advisor
The One Conversation to Have Before Signing
Q: If a firm changes one habit after reading this, what should it be?
Read the fee terms out loud with the client. Not email the letter. Not slide it across the desk. Actually walk through scope, disbursements, and how billing works, in person or on a call, before anyone signs.
It takes ten minutes and it does two things. It catches the misunderstanding while it is still cheap to fix, and it makes the client a participant in the number rather than a recipient of it. A client who helped shape the estimate almost never disputes it later. A client who was handed a document and told to sign will find every ambiguity in it the day the bill arrives.
Note. Keep a dated file note of that conversation. If a fee ever goes to assessment or a law society inquiry, the record that you explained the terms is worth more than the polished clause itself.
None of this requires expensive drafting. It requires a template you actually use, exclusions written from experience, and a billing setup that makes the follow-up note the path of least resistance rather than the thing you keep meaning to do. Firms running matters and billing in one place, whether that is A1 CMS or something else, tend to catch scope drift earlier simply because the estimate and the running total sit side by side. The best fee agreement is the one you talk through, then bill against faithfully. If you want more on the billing side of the same problem, our piece on bills clients actually pay picks up where the engagement letter leaves off, and the rest of our billing and trust writing covers the month-end habits that keep the whole thing honest.
