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Important new case on when retainer by multiple clients will be taken to be several rather than joint

February 22nd, 2012 · No Comments

I have always been a bit dubious about the proposition to be found in the texts that in the absence of specification one way or the other, a multiple retainer is presumed to be a several retainer (so that the clients are severally responsible for their fair share of the costs) rather than a joint retainer (so that the clients are each responsible for the whole of the costs associated with acting for either or both).  The South Australian Supreme Court has gone through the authorities and said that there is no presumption, but the onus of proving a joint retainer falls on the solicitor, and the mere fact that joint instructions are given or that representation advances joint interests is not sufficient to found an inferred agreement to that effect: D A Starke Pty Ltd v Yard [2012] SASC 19.

So: if you’re one of several clients your lawyer has in relation to one matter, and you want to limit your liability to your fair share of the costs, you should stipulate for ‘several liability’, and if you’re a lawyer, and want to be able to recover all of the costs from each client, you should stipulate for ‘joint and several liability’.  And if you’re one of a number of clients against whom a lawyer is seeking to recover fees, wherever the written costs agreement is silent on the question, then so long as you believe that it was not actually agreed between you, albeit by implication rather than express communication, you should not agree to pay anything more than your fair share, which might be 50% if the work benefitted each of the clients equally (as where husband and wife conduct litigation over jointly owned matrimonial property) but which might be quite different from the other client’s/s’ faire share, as in this case.

Two things occur to me.  First, in a joint retainer, one client may well be an associated third party payer vis-a-vis the lawyer in respect of that client’s promise to pay the other client’s fair share of the lawyer’s fees.  I cannot immediately think of how this might affect the solicitor-client relation, but no doubt it might.  Secondly, in a regime such as that under the Legal Profession Acts where costs agreements must be written or evidenced in writing, all the major terms of the agreement are required to fulfil that requirement.  This case was decided by reference to the law of the one state which does not have a Legal Profession Act (South Australia).  A lawyer seeking to rely on an implied term (and therefore one very likely not evidenced in writing) might have difficulty in establishing such a term by virtue of the writing requirements.

What the Supreme Court of South Australia’s Justice Kourakis said on this subject is set out below:

  1. In the resulting trust action, the work of Mr Starke and Mr Stevens was performed for the benefit of Alfred Yard.  The personal interests of Trevor and Gladys Yard were not advanced by those proceedings.  Indeed, the claims made by Alfred Yard were against their interests as shareholders.  It was not in their personal financial interests to accept responsibility for Alfred Yard’s costs either directly or indirectly through Yardoo, which would in turn diminish the value of their shareholdings.  I accept that indirectly, Alfred Yard’s claim might have benefited them but that ultimately depended on how Alfred Yard dealt with the property and, in particular, on how he exercised his testamentary power.  The outcome of the contest between Alfred and Judith Yard, as to the beneficial ownership of the properties, was of no real moment to Yardoo.  Indeed, in one sense Yardoo’s financial interest, like all of the shareholders other than Alfred Yard, lay in the defeat of Alfred’s claim.
  2. Plainly enough, Mr Starke was retained by both Yardoo and Alfred Yard.  Indeed, he was also retained by Trevor and Gladys Yard.  So much can be implied from the very filing of appearances on their behalf.  I also find that the requests of Alfred and Trevor Yard, that Mr Starke take all reasonable steps to exclude the property held by Yardoo from the matrimonial pool, entailed a retainer of Mr Starke by Yardoo, through its directors, to advise on all reasonable steps which Yardoo could take to effect that purpose.  However, the engagement of Mr Starke by both Yardoo and Alfred Yard, in itself, carried with it only an obligation to pay for that part of the work performed to advance their respective interests.  A separate engagement of the same legal practitioner by two parties in the same litigation does not, of itself, make each of them liable for the costs of the other.  It requires the costs to be apportioned between them.
  3. The question is whether it can be inferred that Yardoo not only retained Mr Starke, but also agreed to accept joint and several liability to pay for all of the work performed for itself and for Alfred Yard, and indeed Trevor and Gladys Yard.
  4. A lawyer who acts on instructions for a party on the record is presumed, unless there is express agreement to the contrary, to be entitled to look to that party for the costs of so acting.[1]  However, that presumption does not, of itself, operate to make that party responsible for the costs of other parties who have retained the same legal practitioner in the same matter.

    [1]    G E Dal Pont,  Law of Costs (LexisNexis Butterworths, 2nd ed, 2009) Ch 2 [2.14]; Hudgson v Endrust (Australia) Pty Ltd (1986) 11 FCR 152; Bolton v Stange [2001] WASCA 34 at [7] – [8].


  5. There is support in the texts Dal Pont “Law of Costs” and “Quick on Costs” for the proposition that there is a presumption that retainers with multiple clients are separate and not joint.[2]  Both texts rely on the authority of Burridge v Bellew[3] (Burridge).  In Burridge, a solicitor brought an action to recover all of his costs against just one of the several parties for whom he had acted in Chancery proceedings.  The solicitor pleaded that he had expressly agreed with the defendant, that the defendant would pay the legal fees of all of his clients.  The defendant argued, quite to the contrary, that he had expressly agreed with the solicitor that he would not be liable at all for any of the fees.  The defendant did not plead, in the alternative, that, if he was liable, he was liable only for his proper proportion of the costs.  A verdict was brought in against the defendant, thereby rejecting his defence that the pleaded, exonerating, agreement had been made.  It was held that it was not open to the defendant, having failed to plead in the alternative that he was obliged to pay only for work done on his behalf, to claim on the subsequent taxation that only the fees attributable to that work should be admitted.  The judgments of the Court of Exchequer emphasise the difference between joint and several retainers but give no indication that one is to be presumed over the other.  The point in Burridge was that the defendant had not challenged the plaintiff’s pleading that the retainer was a joint and several one.  Amphlett B observed:

    …[t]he mere fact that the several defendants appeared by the same solicitor, that they join in putting in the same answer, join in the same affidavits, and attend joint consultations, would not, to my mind, amount to evidence that there was any joint retainer, particularly in cases where the retainers are separate, because it often occurs in Chancery that there are a number of defendants, some having a large interest, some a very small interest, and some, like trustees, having no interest at all in the case.  The expense would be enormous if each of those parties were to appear separately by solicitors and counsel.  Therefore they appear together, join in the same pleadings and in the same affidavits, attend at the same consultations, and so a vast expense is saved; but no person in the position of a trustee would ever dream of doing that if he were to be held jointly liable for the costs of a suit in which he had no personal interest.  Therefore it is that the taxing master looks at the bill and sees with what proportion of the costs the particular defendant ought to be charged.[4]     


    [2]    G E Dal Pont, Law of Costs (LexisNexis Butterworths, 2nd ed, 2009) Ch 2 [2.18]; Thomson Reuters, Quick on Costs (December 2011) Legal Online [3.1040] <http://legalonline.thomson.com.au>.

    [3]    (1875) 32 LT 807.

    [4]    Burridge v Bellew (1875) 32 LT 807 at [813] –[814].


  6. I understand the decision in Burridge, and the above observations, to simply reflect the onus of proof.  Amphlett B did no more than emphasise the evidential point, that circumstances like the filing of joint defences and joint consultations, are not sufficient to prove a joint retainer.  The position is that a solicitor who seeks to recover his fees from one party, on the basis of that party’s contractual liability for to pay the fees of all of the other parties for whom the solicitor has acted, must prove that such an agreement was made.
  7. In Beaumont v Senior & Bull[5]  Lord Alverston CJ explained:

    But in the absence of any agreement between the two defendants as to how the costs of the defence were to be born, it is clear, on the authority of the cases to which we have been referred, that each of the two defendants is liable to their solicitor for half the costs of the defence, and that will be the amount of costs which the plaintiff will have to pay the successful defendant.


    [5]    (1903) 1 KB 282.


  8. Much of the early correspondence of Mr Starke is directed to Alfred Yard.  From at least October 2003 some correspondence was addressed to Alfred Yard and Yardoo.  In particular, on 22 October 2003 a letter addressed to both Alfred Yard and Yardoo, set out the likely future trial costs and requested payments of outstanding accounts.  On 14 June 2004, a letter addressed to Alfred Yard, Trevor Yard and Yardoo responded to concerns expressed by Trevor Yard about the escalating legal costs.  However, Mr Starke’s accounts were generally directed to Alfred Yard alone.  Mr Starke testified that he did not pay any particular attention to the addressee of the accounts.  I accept that the accounts were probably directed to Alfred Yard as a matter of administrative convenience and do not show, and could not reasonably have been regarded as showing, that Alfred Yard had undertaken the sole responsibility to pay the fees of Mr Starke for all of the work which he performed for the Yardoo Parties.
  9. The mere fact that Yardoo engaged the same solicitor whom Alfred Yard had engaged, is not reason enough to find that it had accepted joint and several liability for all of the fees charged by the solicitor, Mr Starke.  Plainly enough, it was the object of Alfred and Trevor Yard to take all steps which could properly be taken to limit the extent of Judith Yard’s corporate, partnership and matrimonial entitlements.  As Alfred and Trevor Yard were the directing minds of Yardoo at the time, it can be taken that it was also Yardoo’s purpose.  However, that circumstance does not provide a sufficient objective basis on which to conclude that Yardoo contractually bound itself to pay all of the costs incurred in achieving that purpose.  It is equally open to conclude that each of the parties undertook a liability to pay a proportionate share of the costs of pursuing their, admittedly common, purpose.
  10. There were good reasons for Yardoo not to undertake a joint liability to pay all of Mr Starke’s fees while the oppression action was on foot.  It was after all not in the interest of Judith Yard, who was still a shareholder, that Yardoo burden itself with that liability.  Moreover, Trevor and Gladys Yard were also shareholders and directors.  In the absence of any express discussion about the extent to which Yardoo would be liable for the costs incurred for the benefit of Alfred Yard in the resulting trust action, it is difficult to infer Trevor and Gladys Yard’s assent to Yardoo undertaking that liability.  After all, if Alfred Yard failed, as he ultimately did, to make good his claim to a resulting trust, such an agreement would reduce the value of their equity in Yardoo.  Trevor and Gladys Yard were also Mr Starke’s clients.  Mr Starke was probably duty bound not to make an agreement with Yardoo which bound it to pay all of Alfred Yard’s costs, without first explaining the consequences of that agreement to his clients Trevor and Gladys Yard.  The legal relationships to which I have just referred form the context in which the conduct of the parties must be examined to determine whether, viewed objectively, the agreement alleged by Mr Starke was made.
  11. The circumstances on which Mr Starke relies are, by and large, similar circumstances to those which Amphlett B, in Burridge, considered were not enough to prove a joint retainer.
  12. I am not satisfied that there is a sufficient basis upon which to find an agreement that Yardoo would pay Alfred Yard’s costs.  Alfred Yard remains liable for his proportion of Mr Starke’s fees.  The quantification of the liability of the only defendants to this action, Alfred Yard and Yardoo, will require an apportionment between all of Mr Starke’s clients.  I expect that very few, if any, costs will be allocated to Gladys Yard but a significant proportion may fall on Trevor Yard.
  13. There is an element of unreality about the point taken as to Yardoo’s limited liability for Mr Starke’s fees.  To the extent that Alfred Yard remains a shareholder of Yardoo, the assets of Yardoo will at least indirectly remain available to satisfy the costs payable by him.  Hopefully, an arrangement will be reached consensually between Mr Starke and the Yards which will avoid the pain staking and costly exercise of apportioning costs between the parties.  The apportionment exercise is likely to be expensive in itself, and will be a cost which will ultimately be borne by the defendants.

     

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Tags: Costs agreements · Professional fees and disbursements · Retainers · The suit for fees