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The lawyer by implication

The lawyer by implication

By Gino Dal Pont

Ethics 


Being clear about client identity is critical in fulfilling ethical responsibilities. SNAPSHOT Contract law forms the foundation for the lawyer-client relationship. In line with contract law generally, that relationship can be constituted by implication, independent of the lawyer’s intention. Being clear as to client identity is accordingly critical not just in managing risk but in fulfilling ethical responsibilities. A basic understanding of the law of contract is clearly part of the core legal knowledge expected of a lawyer. There are, after all, few crevices of the civil law that have not been in some way invaded by contractual notions. There is, moreover, a reason closer to home for lawyers to maintain contractual knowledge: the lawyer-client relationship is inherently contractual, described by the specific term “retainer”. The latter is, from the lawyer’s perspective, the source of obligation, authority and entitlement. To this end, lawyers cannot ordinarily seek fees from persons who have not retained them, or exercise a lien as security for fees. Nor, aside from contract, do they possess authority to represent a person in a legal capacity. And retainer by a client attracts not only contractual obligations, but weighty tortious and fiduciary duties, among others. It stands to reason that lawyers, as well as (putative) clients, should be clear as to when a lawyer-client (contractual) relationship has come into being. In most instances there will be little or no scope for misunderstanding in this regard. And this can remain so even if not every aspect of the retainer is reduced to writing. At the same time, documenting the retainer in writing is strongly advisable, not only for proof as to its existence, but its scope. Instances may nonetheless arise where the law recognises a retainer between a lawyer and a person with whom the lawyer may not have intended to contract for this purpose. In these instances, despite the absence of a written retainer, a court may give effect to that person’s reasonable expectations of being represented in the matter, via what is termed an “implied retainer”. A well-known and instructive case illustration is Pegrum v Fatharly.¹ There W wished to borrow money from the appellants and, to contain costs, proposed that the respondent solicitor, who was on retainer for W’s group of companies, prepare all the documents, to which the appellants agreed. The loan deed provided for W to pay the appellants’ costs pertaining to the instructions for and preparation of the deed. The respondent gave the appellants no warning that, to his knowledge by virtue of the existing retainer, W and his companies were a bad risk and the securities given by them were inadequate to secure the loan. When W could not repay the loan and the securities proved inadequate, the appellants succeeded in establishing that the respondent had acted as solicitor for them under an implied retainer. That no other solicitor was engaged in the transaction, regarding which each party contemporaneously attended on the respondent, created in the appellants a reasonable expectation that the respondent acted for all parties. That the appellants were not liable for the respondent’s fee was no impediment to the retainer. By failing to disclose relevant knowledge, the respondent had breached his duty of care to the appellants triggered by the implied retainer, and was thus liable for the appellants’ loss. The spectre of an implied retainer, while concerning where the parties’ interests do not align (as for lender and borrower in Pegrum), can raise its head in instances of ostensibly compatible interests, such as partners, joint venturers and spouses. On each occasion it is appropriate for the lawyer, and each such person, to be clear who is the client and, just as importantly, who is not. A failure to be explicit in this regard can open the door to an expansive interpretation of the retainer, and potential liability not only in tort, but in the fiduciary sphere (by reason of conflicting client interests). A scenario may even arise, as it did in a relatively recent Singaporean case, where an implied retainer was utilised as the foundation for the presumption of undue influence.² That the foregoing can be viewed from the perspective of risk management does not preclude an ethical dimension. In giving effect to the reasonable expectations of a party in the circumstances, the law is, after all, making an ethical judgment as to where the trajectory of responsibility should lie. And the disciplinary case law, to this end, reveals multiple instances of lawyers disciplined out of assuming conflicting responsibilities in retainers.³ Contract law, accordingly, cannot be overlooked closest to home. Gino Dal Pont is Professor, Faculty of Law, University of Tasmania. 1. (1996) 14 WAR 92. 2. BOK v BOL [2017] SGHC 316. 3. A recent illustration is found in Law Society of New South Wales v Ferry [2018] NSWCATOD 74.

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