There is never a good time, and it is never easy, to deliver bad news to clients. Unless you have a 100% success rate, at some point you will be the bearer of bad news.
Form good client rapports
If you focus on client service, you should have a good rapport with your client. One way to establish a good rapport off the bat is to be honest and create realistic expectations. Never guarantee success or a certain outcome. Be sure to describe the potential outcomes and what you think a realistic outcome is. Even then, I always reiterate that I cannot guarantee any particular outcome.
Put things in perspective
Obviously, if you just lost a case, there is not much of a silver lining (except an appeal). If you lost a motion, or made a mistake in negotiations, all is not lost. Make the client understand that they have not lost the case. Explain why the setback happened. If you screwed up, tell your client. Clients can tell when lawyers try and pass the buck, so take responsibility for your mistakes.
If the bad turn of events was something out of your control, do your best to explain that to the client. You also need to explain how this setback may or may not change the way you proceed going forward.
Have a plan
Before you meet with your client to deliver the bad news, have options for moving forward. One way to regain your client’s confidence is to present options for moving forward. You may have temporarily gotten knocked off course, but at least you still know what your destination is.