Reminder: you need very clear instructions before commencing proceedings on a person’s behalf

Updated, 23 June 2015: See Doulman v ACT Electronic Solutions Pty Limited (No 2) [2015] FCCA 1664

Updated, 16 July 2014: Brereton J summarised the authorities on this question in In the matter of HIH Insurance Limited (in liquidation); Smith v McGrath [2014] NSWSC 922 at [17], as follows:

‘Fundamentally, the extent of a lawyer’s authority depends on the construction of the retainer, in which terms can be implied as well as express [Hawkins Hill Gold Mining Co v Briscoe]. However, generally speaking, clear and specific words are required to authorise the institution of court proceedings Atkinson v Abbott; Wray v Kemp; Hawkins Hill Gold Mining Co v Briscoe]. This is because of the serious consequences, including in particular exposure to the possibility of adverse costs orders [City of Glenorchy v Addison]; and also because a solicitor ought not readily be implied to be authorised to decide whether or not to institute proceedings [Hawkins Hill Gold Mining Co v Briscoe; Atkinson v Abbott]. Where words to the effect of authorising “such further steps as may be necessary” follow the main object of the retainer, those words are not sufficient to authorise institution of proceedings where the specific words would not do so, the general words being restricted to what is necessary for the proper performance of the particular acts [Kemp v Wray; Knox Street Apartments v Flexman]. While authority to institute proceedings once given extends to final judgment and execution, it does not authorise institution of an appeal without further express instructions [James v Ricknell; In re Joseph Woolf; City of Glenorchy v Addison].’

Original post: Bray v Dye (No 2) [2010] VSC 152, a decision of Justice Judd, is a salutary reminder of the importance of solicitors getting very clear instructions from anyone on whose behalf they intend to commence or defend legal proceedings, and checking that they have capacity to engage in litigation (i.e. that they are of sound mind, and are not minors). In relation to this fundamental instruction in a retainer, it is more dangerous to rely on instructions through agents than it is to take instructions from agents in relation to steps in the litigation.  Get it wrong, and the lawyer will be ordered personally to pay adverse costs ordered against the phantom litigant, once the truth is ascertained, generally following an attempt at execution. That is what happened in this case: the solicitor and the barrister were substituted for the person on whose behalf they instituted proceedings, unbeknown to her, which failed and resulted in adverse costs orders.  According to the lawyers’ version of events, they did so on the basis of the second plaintiff’s oral instructions that he was authorised by the first plaintiff to instruct them to commence proceedings. Continue reading “Reminder: you need very clear instructions before commencing proceedings on a person’s behalf”

Solicitor’s ostensible authority to contract on behalf of client

In Zhang v VP302 SPV [2009] NSWSC 73, a solicitor negotiated a contract for the purchase of property by his clients. The vendor’s solicitor sent a draft contract.  The purchasers’ solicitor went through it with his clients.  They specified changes they required.  The purchasers’ solicitor put the changes to the vendor’s solicitor.  The vendor’s solicitor substantially accepted the changes, but in purporting to document them fiddled around the edges so that what was sent back was in effect a counter-offer. The purchaser’s solicitor already had a signed contract from his clients.  They had signed the execution page.  The solicitor played around with the contents of the previous pages so as to accept the vendor’s counter-offer, and sent off to the vendor’s solicitor the part signed by his clients.  It is not suggested that he was not acting in what he considered to be his clients’ interests.  But he did not take his clients’ instructions before agreeing to the counter-offer by sending off the part signed by them, amended in accordance with the counter-offer.

The purchasers desired to get out of the contract.  They said that they had never agreed to some of its terms.  The vendor’s position, not surprisingly was —

Too bad! your solicitor agreed to the terms we proposed on your behalf, we had no reason to believe he did not do so with your authority, we were entitled to rely on his ostensible authority, and you’re stuck with it.  If you’ve got a problem go sue him.

Sounded like a lay down misere for the vendors to me, but this decision unearthed a panoply of authorities for the proposition that a solicitor has no ostensible authority to bind his client to an ordinary contract.  (I say ‘ordinary’ because some kinds of contracts lawyers clearly do have ostensible authority to bind their clients to, for example contracts for the out of court settlement of litigation.)  Justice White of the NSW Supreme Court found for the vendor on this question in the end, but had to get over a  lot of hurdles along the way.  This was his Honour’s review of the authorities, and analysis of this issue: Continue reading “Solicitor’s ostensible authority to contract on behalf of client”