Illustrative case study

Getting the records back

A change of adviser, an exit fee and a dispute over working papers: how an engineering group found that its claim file belonged to someone else, and how ownership of records should be agreed.

Illustrative case study. The business, people and figures are invented to show how a situation can unfold. Any resemblance to a real business or adviser is unintended.

Fee type: Hybrid fee
Red flag: Exit fees that lock you in
Company type: Large companies

The situation

An engineering group with about 300 staff decided, after four years, to move its R&D claims to a different adviser. The fee had been a hybrid: $17,500 fixed plus 10% of the benefit, which on a $250,000 claim came to $42,500 a year. The group wanted its new adviser to start from the existing technical case and working papers. Illustrative figures.

What was signed

The engagement letter made the technical reports, calculations and working papers the adviser's property, licensed to the group "for the purpose of the claim", and provided copies "on request and on payment of all sums due". The termination clause said that on ending within a minimum term the balance of the fixed element for the term was payable. Nobody had read either clause since the letter was signed.

What happened

The group gave notice correctly. The adviser invoiced $17,500 for work done on the current year's claim, which was agreed, and a further $35,000 as the balance of the minimum term, which was not. The adviser declined to release the working papers until both invoices were paid. The group took legal advice on the clauses, and the lawyer's view was that the records clause said what it said and that the minimum term was arguable. After a month of correspondence the group paid the agreed invoice and the two sides settled the disputed one; the file was released. The new adviser started six weeks late. Illustrative figures.

What it cost

The settled part of the disputed invoice, the lawyer's fee, six weeks of delay and a claim year that started without its own history. The hybrid fee model had suited the group well for four years and was not the problem; the records and termination clauses were. Illustrative figures.

How it unfolded

Year fourThe group decides to change adviser and gives notice correctly.
Two weeks laterTwo invoices arrive: $17,500 for work done, agreed, and $35,000 as the balance of a minimum term, disputed. The file is withheld pending both.
A month of correspondenceLegal advice on both clauses. The agreed invoice is paid; the disputed one is settled. The file is released.
Six weeks lateThe new adviser starts, with the history. The new letter gives the group a copy of the file after every claim.

Illustrative figures.

The sum

Illustrative

Yearly fee, $17,500 fixed plus 10% of $250,000A hybrid fee that suited the group for four years: $42,500
Invoice for work done on the current claimAgreed: $17,500
Invoice for the balance of the minimum termDisputed, then settled after advice: $35,000
Cost of a records clause that releases the file without chargeWhat the group asked for in the next letter: $0

Illustrative figures. Same claim and assumptions as the rest of the site.

What would have helped

The ownership of records clause page: a complete copy of the claim as filed and the working papers as a matter of course, with nothing withheld for unpaid fees. The termination clause page: an exit fee limited to work actually done. The questions what records will you need from us? and what happens if we end the engagement?, asked before signing. And the habit of taking a copy of the file after every claim, so that leaving never depends on asking. The switching advisers page sets out the order to do things in, with advice taken before any payment is decided.

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