Problems abound when one spouse’s solicitor conveys matrimonial property by order of the Court

Update, 6 June 2011: A reader has helpfully pointed out that the decision digested below has been overturned by a unanimous Court of Appeal, the principal judgment having been given by Justice McMurdo.  See Legal Services Commissioner v Wright [2010] QCA 321.

Original post: The Family Court likes to order that one spouse’s solicitor act for both spouses in the conveyance of matrimonial property which it orders be sold.  That this may occur exemplifies the principle that it is not enough that clients’ interests conflict for a conflict of duties to proscribe a multiple client retainer; what is necessary is that they conflict materially in relation to the matter which is the subject of the retainer.  But I have acted in three matters where such an order has resulted in problems, and that suggests to me that there are many more such matters which have run into problems.  Generally, the problems arise from the solicitor ignoring in some way the interests of the spouse for whom he or she had previously been acting exclusively, or at least the perception that that is so.

Legal Services Commissioner v Wright [2010] QSC 168 is a variation on the theme.  It arose out of a de facto property adjustment case in Queensland’s District Court.  The Court ordered that the de facto husband’s solicitor ‘will act on [his] behalf in the conveyance of the sale of the property’, which was in the de facto husband’s name.  The de facto husband and wife were then ordered to cooperate in paying out costs of the sale (including the legal fees) and creditors before the balance was to be divided 75% to the de facto wife and 25% to the de facto husband.  The Chief Justice of Queensland wasted little ink in concluding that the wife was neither the solicitor’s client nor a third party payer, and so was not even entitled to an itemised bill when the husband’s solicitor charged over $7,000 for the conveyance, directly diminishing the amount reaching her pocket by three-quarters of $7,000.

Where one spouse agrees on the other spouse’s solicitor conducting a conveyance otherwise than expressly for both of them, this case suggests that they would be well advised either to provide for an obligation to pay the solicitor’s fees of a kind which brings them within the definition of ‘third party payer’, or fix the fee payable for the conveyance, or contract for an entitlement to an itemised bill, and thereafter to be deemed by agreement to be a third party payer.

The husband’s solicitor charged more than $7,000 for the conveyance.  The wife sought an itemized bill of costs.  The solicitor declined on the basis that she was neither a client nor a third party payer.  The wife complained to Queensland’s Legal Services Commissioner.  The Commissioner commenced proceedings by originating motion for a declaration that the wife was a client, or a third party payer, or otherwise entitled to apply for taxation of the solicitor’s bill.  Obviously, this was not a disciplinary proceeding, and I have not heard of a Commissioner commencing such a proceeding before.  Why not? though, I say.

‘Client’ was defined in the Qld Act, for the purposes of Division 7 of Part 3.4 of the Legal Profession Act, 2007 as ‘meaning’ ‘a person to whom or for whom legal services have been provided’. (Victoria’s Act specifies that clients ‘include’ such persons, as does Queensland’s for all purposes other than Division 7.) The entitlement to ‘costs assessment’, a new version of taxation, was found in Division 7, while the entitlement to an interim bill was not, though this is not a point noted in the Chief Justice’s reasons.

The Chief Justice found that the wife was not the solicitor’s client because:

1. she had her own solicitor acting for her throughout the conveyance (though not, it seems, in relation to the conveyance);

2. the order specified that the husband’s solicitor would act for the husband, and the distribution of proceeds of the sale was work within the conveyance;

3. there was ‘the prospect of a conflict of interest were the [solicitor’s] firm to be acting for both parties’ (why this prospect was in this case any greater than in any retainer to act for more than one client with interests in a single property was not articulated);

4. there were other avenues available to the wife to challenge the bill: she could commence a proceeding seeking an accounting from the husband for the difference between the bill and the ‘reasonable legal costs’ to which the order was implicitly limited.

All this was analysed within the context of an inquiry whether an implied retainer arose, a question which was governed by the husband’s and the wife’s implied intentions, rather than by reference to any attempt to construe the orders of the Court, though it should be said that the order was a consent order.

Clients and third party payers alike are entitled to seek costs assessment of a bill. The Chief Justice concluded that the wife was not a third party payer either because ‘by force of the court order, Ms Anderson undertook no legal obligation vis-a-vis the [solicitor], and that is I believe the sort of obligation which section 301 has in mind’.  That section provides the Queensland’s Act’s definition of ‘third party payer’.  One species of third party payers is the ‘non-associated third party payer’.  They owe an obligation to pay at least some of the costs for legal services provided to another, but they owe it to ‘the client or another person but not the law practice’.  It is possible that this limb of the definition of third party payer was not brought to the Chief Justice’s attention.  If it was, it is not clear on what basis the Chief Justice said what he said.

From the time of the order, the wife was entitled to three-quarters of the nett proceeds of sale. To the extent that those proceeds were diminished directly by the fees of the solicitor, who was one of the external creditors to be paid out under the order in priority to the interests of the husband and the wife, it might be said that the wife owed an obligation, pursuant to the order, to pay three quarters of the solicitor’s costs of acting for the husband.  But there is no record of any such argument having been made.


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