The Fixed Fee That Ate the File
A three-partner litigation firm agreed a fixed fee of KES 180,000 for a commercial claim it estimated at 60 billable hours. The engagement letter set the fee, stated it was 'all-inclusive' and said nothing about scope changes or disbursements. At month four the file has consumed 140 hours, court filing fees of KES 22,000 have been paid from the client account, and the client has asked for a second defendant to be added - a step requiring fresh pleadings and an expanded witness list. The partner handling the matter wants to send a supplementary invoice for KES 150,000 without amending the engagement letter, arguing the client 'must have known' the work had grown. The firm's WIP report shows this single file now represents 31% of unbilled time and the associate assigned to it is behind on two other matters.
1. Can the firm lawfully issue the supplementary invoice on the current engagement terms? Analyse the contractual and professional-conduct position.
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On the written terms, no. The engagement letter fixes the fee, labels it all-inclusive, and is silent on scope variation and disbursements. A court construing the retainer would likely read ambiguity against the drafter - the firm - and the client's subjective awareness of extra work does not create a contractual right to charge for it.
The professional-conduct overlay is stronger still. A lawyer must charge a fee that is fair and reasonable and must keep the client informed of the basis of charging. Issuing a unilateral invoice for work never agreed is a fee dispute waiting to happen, invites a complaint, and may be treated as conduct unbefitting. The KES 22,000 filing fees are a separate point: disbursements incurred for the client are ordinarily recoverable, but only if the retainer says so or the client authorised them. Silence is the firm's problem, not the client's.
The correct route is a written variation signed before the extra work proceeds: define the added defendant as a scope change, price it, confirm disbursements are recoverable at cost, and get the client's written agreement. If the client refuses, the firm must decide whether to absorb the loss or seek to negotiate a termination - it cannot retro-fit a fee.
2. The firm is now exposed on this file. What management actions should follow, and what does the 31% WIP concentration tell you?
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Three actions.
First, stop the bleeding: freeze non-essential work on the file until the variation is agreed, and have the supervising partner take over client communication.
Second, value the loss honestly. 140 hours against a KES 180,000 fee is roughly KES 1,286 per hour before costs - almost certainly below the firm's cost per hour once associate time, overhead and partner supervision are loaded. The file is loss-making and will stay so.
Third, fix the system failure, not just the file. The root causes are: no scope-variation clause, no disbursement clause, no WIP-to-fee monitoring trigger, and no escalation when a fixed-fee file passes its hour estimate. A simple rule - any fixed-fee matter exceeding its estimate by 25% goes to the managing partner - would have caught this at 75 hours, not 140.
The 31% concentration is the more alarming number. One file holding nearly a third of unbilled time means a single client dispute, bad debt or fee write-off materially hits cash flow. That is a risk-management issue, not a billing issue: it argues for WIP ageing review, client credit limits, and a portfolio rule capping any one matter's share of unbilled WIP. The associate's backlog on two other matters is a capacity symptom of the same problem - unpriced work consumes resources the firm has already committed elsewhere.