When is a solicitor not acting as a solicitor?

In Swart v Carr [2006] NSWSC 1302, the NSW Supreme Court’s Justice George Palmer engaged in a fairly earnest survey of cases addressing this question in the course of a decision about whether a solicitor was engaging in legal practice, and whether he was doing so within the definition of his professional indemnity insurance policy. The answer was yes on both counts, so the punters recovered the US$500,000 they thought had been lost.

A suburban solicitor of southern Sydney took US$4 million of other people’s money with him to London and gave it to fraudsters for investment in schemes which he did not understand, but which he believed “guaranteed extremely high profits in a short time, with no risk”. The money was immediately lost, never to be seen again. Though Mr Carr did not have a practising certificate entitling him to practise as a solicitor in England, retained solicitors in England, was himself an investor in the schemes, had never previously been involved in any similar type of transaction (focusing his practice on criminal law and personal injury work), did not make fee disclosures or enter into a fee agreement, did not have a “controlled money account” as required by the Legal Profession Regulations 1994 (NSW), did not open a file, did not keep file notes, and handled other people’s money otherwise than in a trust account, he was found to have been acting as a solicitor. Palmer J’s summary of the law after the detailed analysis was as follows:

“(i) the capacity in which a solicitor has been acting is always a question of fact depending upon the particular circumstances of the case;

(ii) one of the relevant circumstances is the antecedent relationship between the solicitor and the other party, if any, particularly if there is a history of an acknowledged solicitor/client relationship;

(iii) a critical circumstance indicating that a solicitor has been acting in his or her capacity as a solicitor is that:

– the solicitor has been acting pursuant to a contract, express or implied, under which the solicitor is to provide services; and

– the services to be provided under the contract include at least some services which require legal knowledge to perform;

(iv) a material circumstance reinforcing (iii) is that there is an acknowledgement, express or implied, between the parties that the contract of engagement has been entered into wholly or partly because the provider of the services is a solicitor;

(v) if a contract which qualifies under (iii) also requires services to be performed by the solicitor for which legal knowledge is not necessary but which are customarily performed by solicitors, those services too will be performed in the capacity of solicitor.

(vi) if a contract with a solicitor for services requires the performance of duties which:

– require no legal knowledge to perform; and

– are not within the range of services customarily provided by solicitors,

it would be unlikely that the solicitor has been engaged in his or capacity as a solicitor.”

The full text of the relevant discussion (minus the treatment of Solicitors Liability Committee v Gray, which I have made into a separate post) reads:

When is a solicitor not a solicitor

66    The dividing line between a solicitor acting in his or her capacity as a solicitor and a solicitor dealing in some other capacity is sometimes difficult to discern, as many decisions of the Courts attest. The difficulty almost never arises when the solicitor is engaged in contentious business before Courts or Tribunals because that is work immediately recognised as within the exclusive province of lawyers. The difficulty arises in non-contentious work, particularly work of a type which does not necessarily require legal training to perform.

67    With or without justification, lawyers have long been regarded as people not only knowledgeable in the ways of the law but wise also in the ways of the world. Their advice and engagement have been sought in all manner of activities in which worldly wisdom is seen as an advantage. Chaucer’s “Sergeant of the Law” is, by specialisation, a “purchasour”, i.e. a conveyancer, but the words first used to describe him generally are “wys” and “discreet” , and only later is his “science”, i.e. technical knowledge, referred to.

68    Solicitors as such are a comparatively recent breed of lawyer. Attorneys were allowed to represent litigants in courts of law by the Statute of Merton in 1235. But “solicitors” first appeared in the 15th Century in business arising in and supervised by the Equity Courts and even then their function was more in the nature of business agents than lawyers. Because of their experience in non-litigious business they were widely employed in business in which a knowledge and experience of the law might be useful: see generally E.B.V. Christian “A Short History of Solicitors” (1896) pp 70-110; Holdsworth “A History of English Law” Vol VI, pp 448-457; J.H. Baker “The Legal Profession and the Common Law” (1986) p 125ff.

69    So, for example, solicitors have been engaged as stewards of manors: see e.g. Rawes v Rawes (1836) 7 Sim 624 [5 LJ(NS)]; Hughes v Mayre (1789) 3 TR 275 [100 ER 572]; Allen v Aldridge (1843-44) 5 Beav 401 [49 ER 633]. No doubt this was because of their familiarity with matters pertaining to leases and other contracts as well as with matters of financial management generally.

70    So, also, solicitors were frequently engaged as “parliamentary agents” – “lobbyists” in today’s parlance – to promote a Bill through Parliament: see e.g. In re Sudlow and Kingdom (1849) 11 Beav 400 [50 ER 871]; In re Baker, Lees & Co [1903] 1 KB 189. Likewise, they were retained as “election agents”, i.e., to organise the election campaigns of candidates for Parliament, to canvass for votes and conduct voters to polling booths: see e.g. In re Osborne (1858) 25 Beav 353 [53 ER 671]; In re Oliver (1867) 36 L.J.(Ch) 261.

71    More pertinently, solicitors have for a long time advised clients on investments generally, as well as transacting the legal business for placing clients’ money into investments chosen by the clients. In Dooby v Watson (1888) 39 Ch D 178, at 182-3, Kekewich J gave a useful description of the scope of work done by solicitors in relation to investment:

I apprehend, then, that the cases in which a solicitor acts in his proper character may be divided into three classes, all of common occurrence. In the first case a solicitor receives a certain sum of money in order to invest it in a particular mortgage. His client, either on his own selection, or on the advice of the solicitor, has determined to invest a particular sum on a particular mortgage, and all the solicitor does is the legal business, receiving the money and seeing, when the proper time arrives, that the deeds are executed and the money handed over to the mortgagor. His duty in that case is simple but important, and large sums very often pass in that way. In the second case the solicitor receives money in order that he may himself find mortgages to be approved by the client. He retains the money in the meantime. He from time to time reports to his client what mortgages he has found. I use the word ‘mortgages’ only, but of course it is applicable to other investments. He does whatever business is necessary – advises his client as to the precautions to be taken, and ultimately sees the money handed over either as a whole or in parts to the mortgagee or mortgagees. Beyond that there is a third case, equally common but distinct from the others, where the solicitor does far more than he does even in the second class – that is to say where the client, for some reason, takes little part, perhaps no part at all, in the investment. He may be abroad, as one of the cases cited here shews, the solicitor acting under a power of attorney. All the client then requires is to know that the money has been invested, and that the interest will be payable and be paid. In that case the solicitor has an onerous duty to perform, because, beyond providing the mortgages, beyond doing the mere legal business, he really undertakes the responsibility to his client of seeing that they are good mortgages, on which the money may be safely invested. That is within the ordinary duty of solicitors according to the practice of the profession, and is a more onerous duty, and one which some solicitors, I believe, decline to take.”

72    So wide was the range of affairs upon which solicitors were consulted that, by 1896, it could be said:

“The first duty [of a solicitor] is to advise his clients upon all questions of law or business on which he may be consulted, instilling some worldly wisdom into the simple, and stimulating the lethargic consciences of the children of the world; to prepare some classes of commercial contracts; and generally to keep his clients out of trouble, so far as he can, and get them out of it as cheaply as possible when they incur the consequence of disregarding his counsels.”:

“A Short History of Solicitors” E.B.V. Christian (1896).

What was true as a general observation in 1896 was equally true as a general observation in 1997: see the remarks of Lockhart J in Solicitors’ Liability Committee v Gray & Winter (1997) 77 FCR 1, at 14F ff.

73    There have been very many cases which have considered the question whether a person is “acting as a solicitor”. Those which are concerned with whether an unqualified person has acted as a solicitor contrary to a statutory prohibition are of no real assistance in the present case as the question usually posed in such cases is whether the person has done something that only a solicitor having a current practising certificate can do, or usually does: see e.g. Piper Double Glazing Ltd v DC Contracts (1992) Ltd [1994] 1 All ER 177; cf. Cornall v Nagle [1995] 2 VR 188.

74    Of much greater assistance for present purposes are the solicitors’ taxation of costs cases, i.e., those cases in which a qualified solicitor has been retained to provide services and the question is: has the solicitor been retained in his capacity as solicitor, so that his fees are to be taxed as a solicitor’s bill of costs, or has he been retained in some other capacity so that his remuneration is not subject to taxation.

75    A useful starting point is Allen v Aldridge (supra). One William Ward was employed as the steward of the manor of Cookham. He was also a practising solicitor. He rendered a bill for his fees as a steward. The parties to the proceedings claimed that the fees were excessive and petitioned the Chancery Court that his bill of fees might be taxed under the statute regulating solicitors’ fees.

76    Lord Langdale MR said, at pp 405-406:

“The question is, whether the charges of the steward of a manor who happens to be a solicitor, but was not employed as such, and who acted only as steward of the manor on the occasion in question, are taxable under the statute, and I am of opinion, that they are not.

The statute does not authorise the taxation of every pecuniary demand or bill which may be made or delivered by a person who is a solicitor, for every species of employment in which he may happen to be engaged.

The business contained in a taxable bill may be business of which no part was transacted in any Court of law or Equity; but I am of opinion that it must be business connected with the profession of an attorney or solicitorbusiness in which the attorney or solicitor was employed, because he was an attorney or solicitor, or in which he would not have been employed, if he had not been an attorney or solicitor, or if the relation of attorney or solicitor and client had not subsisted between him and his employer.

It may perhaps, on some occasions, be questionable, whether the business contained in a solicitor’s bill be or be not such as to make the bill taxable under the Act; but in the present case I do not see any reason to doubt. The relation of solicitor and client did not subsist between Mr. Ward and the Petitioners, or any of them, or between Mr. Ward and any other person in relation to this matter. He was not employed by the Petitioners because he was a solicitor, but because he was steward of the manor, and he might have been steward of the manor, without being a solicitor. His bill is not as to any part of it a solicitor’s bill; it is the bill of charges claimed to be payable to the steward of a manor, and nothing else; and I am of opinion that the statute gives me no jurisdiction over it.” (Emphasis added)

77    An instructive contrasting case is In re Osborne (supra). There, three candidates for election to Parliament wrote to a firm of solicitors and engaged them as electioneering agents. The solicitors accepted the retainer and thereafter performed it by attending at the committee rooms for meetings as well as canvassing for votes, acting as booth agents, and bringing in voters to vote. They rendered a memorandum of fees for their services which the candidates then sought to have taxed as a solicitor’s bill. The solicitors said that their services had been retained, not as solicitors, but as electioneering agents so that the bill was not taxable.

78    Sir John Romilly MR, holding that the bill was taxable as a solicitor’s bill, referred with approval to Allen v Aldridge and said at p.359:

“A solicitor may have a legal claim against another person, but it by no means follows that it is in respect to his character of solicitor; there must be established between them, in respect to the business done, the relation of solicitor and client. In the present case there is no question that Messrs. King, Blakemore and Hanbury did employ Edwards & Osborne to act for them in the matter of the county election, in respect of which these two bills were sent in. Therefore, the employment is established. The question is, in what character were they employed? Mr Giffard argued that they were to be considered as acting as mere electioneering agents, in the ordinary way, and not in the character of solicitors. I cannot so treat it. It is not clear that any other person than a solicitor could have performed the duties which the candidates to represent the county required to be performed. These duties required the attendance of these gentlemen at the committee rooms, to see, amongst other things, that nothing should be done contrary to law, or which would infringe any of the provisions in the numerous statues relative to elections; to secure that everything should be done in a legal and proper manner, and to detect the defects of the opposite party. It was therefore necessary for Messrs. Edwards & Osborne to exercise their legal knowledge in the best manner they could for the gentlemen by whom they were employed. I do not, therefore, consider that this was an employment in the same manner as ordinary unprofessional agents, but I think that they were bound to give legal advice and assistance, and which I have no doubt they did. … I cannot consider this otherwise than as an employment in the character of solicitors, and the fact that they acted as agents in other matters does not make their claim less a claim in their character of solicitors.” (Emphasis added)

79    It will be seen that In re Osborne there was an express contract made between the parties. It was made by a letter addressed to the firm of solicitors and the work to be performed included, but was by no means limited to, work which required legal knowledge. Because the contract was with the firm and required legal knowledge, it was held that the work was carried out by the solicitors in their capacity as solicitors, even though much of the work could have been done by a non-lawyer.

80    On the other hand, in Allen v Aldridge, as Lord Langdale said, the steward happened to be a solicitor “but was not employed as such” and as far as the work done was concerned “he might have been a steward of the manor without being a solicitor”, i.e., all of the work done could have been done by a non-lawyer. To the same effect is the reasoning of the Court of Appeal in Re Baker, Lees & Co (supra).

81    The factual distinction between Allen v Aldridge and In re Osborne, as I have explained it, was the foundation of the decision in In re Oliver (supra). Mr Oliver, a solicitor, was employed by the solicitors of a candidate for election to act as electioneering sub-agent. He sent in a bill claiming to have acted in his capacity as a solicitor and charging a higher rate of remuneration than could have been allowed had he been acting merely as an electioneering agent. Lord Romilly MR held that Mr Oliver had not been acting in his capacity as a solicitor. At p 261 his Lordship said:

“The difference between this case and the case of In re Osborne is considerable. In the first place, in the case of In re Osborne, no other person seems to have been employed as solicitor or attorney than Osborne and his partner, and they were expressly retained for the purpose. In the second place, a letter was written to request the solicitor’s firm to accept a retainer for their professional services, which does not exist here, and expressly stating that it was to be for their professional services. In the third place, the duties which were done in the present case do not appear to me to have required any professional knowledge of an attorney or the like, but could be performed perfectly by persons who are called lay persons, and accordingly an auctioneer was one of the persons employed.” (Emphasis added)

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