One of the most important messages from the Court of Appeal’s recent decision in Aina Khan Law Ltd v Legal Ombudsman concerns legal costs and the validity of retainers for vulnerable clients.

 The Ombudsman found that the firm had provided initial estimates and had promised regular reviews. However, costs significantly exceeded the agreed estimates before the client was informed. The Ombudsman concluded that the firm should have updated the client when the original estimate was reached rather than waiting until costs had already exceeded it substantially.

The Court of Appeal left those findings untouched.

 The Ombudsman regarded transparency around costs as a fundamental component of reasonable service. In particular, the Ombudsman criticised the fact that costs rose from the original estimate before any meaningful review was communicated and found that revised estimates should have been provided at the point the existing estimates were reached or exceeded.

 This aligns with broader Legal Ombudsman guidance, which consistently stresses that consumers must understand what they are paying and how costs are developing throughout the retainer.

 The practical lessons for firms are straightforward:

• Estimates are not a one-off compliance exercise.
• Costs should be monitored continuously.
• Clients should be informed before, not after, significant overruns occur
• Revised estimates should be documented clearly.
• Discussions about costs should be recorded carefully.

These obligations become even more important where a client may be vulnerable or experiencing mental health difficulties. A client who struggles to process information or understand the implications of escalating costs may require enhanced explanations and additional support.

The Ombudsman went further in this case. It concluded that the client did not fully understand how costs were mounting and suggested that there were questions about whether the client could lawfully enter into the costs agreement at all.

That observation should give every practitioner pause.

The warning emerging from this decision is stark: failure to manage estimates properly may no longer be viewed solely as a billing issue. In certain circumstances it may become part of a wider challenge to the validity of the retainer itself.

 The safest approach is to treat cost communication as an ongoing dialogue rather than a document issued at the beginning of a matter.

Firms increasingly recognise the value of systems that provide prompts for estimate reviews, record client acknowledgements and maintain an audit trail of communications. The Legal Lexi is one example of a tool that may assist firms in evidencing compliance with these expectations and reducing the risk of future complaints. 

 In a regulatory environment where transparency, vulnerability and informed consent are increasingly interconnected, proactive cost management is becoming essential risk management.

About The Legal Lexi

The Legal Lexi helps law firms deliver clear, compliant cost and retainer explanations to their clients. 

Using intelligent tools to identify vulnerable clients who may need additional support, it presents complex legal information in plain English, with optional audio assistance.  Documents are securely delivered, signed, and returned through the platform – alongside recorded evidence of understanding, documenting their informed consent – helping protect your fees, reduce disputes, and build stronger client trust.

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