Stephen Warne on professional negligence, regulation and discipline around the world

The Australian Professional Liability Blog random header image

Qld solicitors referred to Legal Services Commissioner for demanding outrageous sum as condition for handing over file on their wrongful termination of no-win no-fee retainer

June 12th, 2011 · No Comments

Ireland v Trilby Misso [2011] QSC 127 is a sorry tale which did not end well for the solicitors who were found to have repudiated their retainer by terminating without good cause, ordered to hand over their file to Mr Ireland’s new solicitors, ordered to pay costs, and referred to the Legal Services Commissioner.  The decision is interesting because it looks at the consequences of terminating a no-win no-fee retainer and also considers the relevance to a civil dispute of the conduct rules governing ownership of files on a change of solicitor.Mr Ireland had an accident, and entered into a no-win no-fee retainer to assist him in recovering damages.  The principal of his first solicitors was struck off.  The retainer was thereby frustrated, and the first solicitors were not entitled to a lien over their file: at [16] citing Appleby v Myers (1867) LR 2 CP 651 and Baker Johnson v. Jorgensen; Baker v. Legal Services Commissioner at [29] (see also Cosgriff v Issac B & Co [2008] VSC 515, which I blogged about here, but which does not appear to have been cited to the Queensland court).  Nevertheless, they managed to ‘sell’ the file to the second solicitors, Trilby Misso for the amount they would have been entitled to had they done the work that they did and obtained damages for Mr Ireland.

Then after a while, Trilby Misso got cold feet and decided they would not act for Mr Ireland after all.  They just changed their mind; there was no cataclysmic evidentiary revelation or defect in the instructions provided by Mr Ireland.  They initially refused to hand over the file unless Mr Ireland paid them more than $123,000 (including a 25% success-based uplift provided for in their costs agreement). But later, they said they would hand over the file for $35,000.  Justice McMeekin held that Trilby Misso had repudiated the retainer agreement: at common law, a retainer to act in relatively uncontroversial personal injuries litigation such as this is an entire contract so that the entitlement to payment attaches to completion of the retainer, and the solicitors had simply refused to continue to perform the entire agreement half way through.  The common law position had been altered by agreement by termination provisions in the retainer, but unsurprisingly the retainer entitled Trilby Misso to payment only in circumstances where they terminated the retainer because of some wrongdoing by the client, and did not permit them to terminate the retainer at will.

So when Trilby Misso repudiated the retainer, the client did not owe them any money: the payment clause in the retainer said ‘We will charge you professional costs only if we are successful in obtaining damages or costs for you in connection with your claim,’ and they were not successful in doing so.  In fact, Trilby Misso exposed themselves to an action for damages. But they pointed to a conduct rule which said:

‘23.4         If the first solicitor has terminated the retainer and the client’s documents are essential to the defence or prosecution of current proceedings which are continuing before a court, the solicitor must surrender possession of the documents to the client, upon receiving satisfactory security for the unpaid costs, or to the second legal practitioner, if so directed by the client, and, provided that the second legal practitioner:

23.4.1 holds the documents subject to the first solicitor’s lien, if that is practicable, and provides reasonable security for the payment of the first solicitor’s costs; or

23.4.2 enters into an agreement with the client and the first solicitor to procure payment of the first solicitor’s costs upon completion of the relevant proceedings.’  (Victoria has an identical rule, with the same numbering.)

Justice McMeekin said it was of little relevance.  His Honour might have said that that was because disciplinary rules are not directly relevant in civil disputes as opposed to disciplinary hearings (Harrison v Lederman [1978] VR 590 at 594; Gino Dal Pont, Lawyers’ Professional Responsibility (4th ed., 2010) p 18, [1.125]).  But his Honour said that the rules presumed an existing entitlement to fees which was not present in this case, and anyway they do not refer to the situation where the solicitors wrongfully terminate their retainer.  And the solicitors already arguably had a security in the form of the costs of litigation lien, which was satisfactory in the circumstances.

His Honour ordered the solicitors to hand over their and the previous solicitors’ file without payment or the provision of security, ordered them to pay costs, and referred them to the Legal Services Commissioner, commenting:

‘The solicitors sought initially to impose a condition on the release of their file that was plainly not maintainable. To insist on immediate payment of monies in circumstances where none were chargeable is dishonest: Baker at [16] per McPherson JA. Nor is it only the fact of the demand that is of concern.  The amount of the bill and certain items within it require some explanation. It may be the solicitors can demonstrate that they had some honest belief that they had the right to charge over $123,000.  Absent some explanation the impression is that an outrageous amount was demanded in an attempt to coerce the applicant into accepting an obligation to pay the lesser amount of costs when offered. I have received no argument on the point. I will refer the matter to the Legal Services Commissioner for further investigation.’

See also:

Tags: Liens · Retainers · Vic Solis' Conduct Rules