LEC 7: DUTY TO THE CLIENT by HC12052302859


									                    LEC 7: DUTY TO THE CLIENT
Client’s Recourses
o Negligence claim (CL)
o Breach of contract claim (CL)
o Cost order against sol
o Officer of Legal Services Commissioner
o Regulatory bodies (eg LS) – disciplinary proceedings for unsatisf prof conduct and prof misconduct
                              Competence and diligence
Duty to keep updated in relevant practice area
Law Society of NSW v Moulton (1981) per Hutley JA
 Basic legal knowledge
 Keep abreast of law in his area – make reasonable efforts to keep up to date
Duty to act with competence and diligence: PR 1.1
o PR 1.1: “a practitioner must act honestly, fairly, and with competence and diligence in the service of a
  client, and should accept instructions, and a retainer to act for a client, only when the practitioner can
  reasonably expect to serve the client in that manner and attend to the work required with reasonable
o Failure  may be prof misconduct or unsatisf prof conduct
Unsatisf Prof Conduct and Prof Misconduct – includes above
 ‘unsatisfactory professional conduct’ includes conduct that falls short of the standard of
  competence and diligence a member of the public is entitled to expect of a reasonably competent
  practitioner: s496 LPA
 ‘professional misconduct’ includes conduct that involves a substantial or consistent failure to reach
  and maintain reasonable standards of competence and diligence: s497(1) LPA
                                  Common law liability
Contractual liability
 LAW: Contractual duty to exercise a reasonable and competent degree of skill.
 Client’s may contract have with Sol OR Bar (both enter into retainer with client): s83(3) LPA
 Thus client may sue and be sued by Sol or Bar.
Standard of Care:
 Judged in light of available evidence and current customs and practices.
 “the common law does not impose on those who practise it any liability for damage resulting from
   errors of judgment, unless the error was such as no reasonably well informed and competent member
   of that profession could have made.” per Lord Diplock, Saif Ali v Sydney Mitchell (1978) 1 WLR 849
   at p861
English Standard of Care
 Test: what would a reasonably competent practitioner do, having regard to the standards normally
   adopted in the profession: Midland Bank Trust Co Ltd v Hett, Stubbs and Kemp (1979) Chancery
   per Oliver J
 Doubted in Kleinwort Benson Australia Ltd v Armitage (1989) (NSW) per Cole J: “evidence of the
   practice of solicitors is not, in my view, determinative of the conduct necessary to discharge a
   solicitor’s obligations under a duty of care, whether tortious or contractual.”
 BUT: MacInidoe v Parbery (1994) (NSW) NSW Court of Appeal: evidence is admissible re “the
   common practice of solicitors of good repute”
 THUS: evidence of accepted practice may be useful BUT not determinative (ultimately Ct decide)
Standard of Care – specialist lawyers
 Accreditation system – lawyers can hold themselves as specialists in particular areas.
 ISSUE: Does a higher SOC apply to specialists?
 Kleinwort Benson Australia Ltd v Armitage (1989) (NSW):
        FACT: incorrect advice re commercial lending trans – expert. P argue: higher SOC for
           specialist lawyer!
        HELD: no
                “in the absence of actual assent to a higher level of responsibility than that ordinarily
                   imposed by the common law”  no such duty/higher SOC.
                Question of construction of retainer (only in contract!)
 Yates Property Corporation Pty Ltd v Boland (1998):
        FFC: since 1980s, larger firms, change in nature of work, become more specialised
        HELD: SOC higher and consistent with the firm’s professed expertise (less focus on retainer)
                When firm develop expertise – difficult to reason why they should be judged to SOC
                   of ordinary practitioner
                Client entitled to expect expertise that firm says they have.
Civil Liability Act 2002 (NSW):
o Stat liability for negligence of ALL professions
o s50          Standard of care for professionals
       1. A person practising a profession is not negligent if the professional acted in a manner that (at
           the time the service was provided) was widely accepted in Australia by peer professional
           opinion as competent professional practice.
       2. The fact there are different peer opinions widely accepted in Australia concerning a matter
           does not prevent any one or more (or all) of those opinions being relied on for the purposes of
           this section.
       3. Peer professional opinion does not have to be universally accepted to be considered widely

Tortious liability
 Lawyer may be concurrently liable in negligence (+contract): Brickhill v Cook (1984) (NSW) COA
Standard of care in negligence actions
Algar v Gall Standfield & Tile (a firm ) (2000) Qld Sup Ct
o FACT: 6yo boy hit by car – settle with insurance re transient injuries. Later, 20yo claim brain damage
   – sue sols. Hospital reports re boy unconscious, mum say he did worse at school. Expert PI lawyer.
o HELD: sol neg – should have gotten more medical and school reports.
       o BUT not liable: no medical evi to say he would get more damages, even if claim more
       o “The standard by which one judges whether a solicitor has breached his duty to a client is not
           that of the particular meticulous and conscientious practitioner. The test is what the
           reasonable competent practitioner would do having regard to the standards normally adopted
           in his profession.”
Heydon v NRMA Ltd (2001) (NSW) Court of Appeal:
o FACT: Sol and bar neg? – fail to advise client re pending HC decision (which then changed law re
   demutualisation of NRMA). NRMA claim didn’t advise re likelihood of law changing.
o HELD: not liable
       o Although “leader” in field – does not mean judged by higher SOC than “ordinary skilled
       o Duty is to apply “relevant degree of skill and exercise reasonable care”
       o No implied undertaking that advice is correct – only that req prof skill and care taken
Unclear instructions
 ISSUE: How far must a lawyer advise a client re other issues?
Vulic v Bilinsky (1983) 2 NSWLR 472:
 FACT: WC injury – sol advised. Sol didn’t advise re CL action – expired. Sol argue – not specifically
   instructed to bring CL action, inexperienced at litigation.
 HELD: neg
           o Duty to advise re alternative COA and get further instructions
           o Even competent non-specialist would know 3yr limit on CL actions
           o Did not inform client that he was inexperienced at litigation
Mere negligence and disciplinary proceedings
 Distinction between CL negligence and breach of prof standards
 Not all mistakes = prof misconduct (that’s why we have indemnity insurance)
 In the Matter of Ian Gordon Dunn No. 3 (1994)
        Prof misconduct  neg
        Neg (if gross) MIGHT  misconduct

 Trad: Barristers immune from neg action – re work in conducting litigation
      Immunity extends from drawing pleadings to close of case.
 Hedley Byrne & Co v Heller (1964) – speculation that immunity in UK abolish.
 Rondel v Worsely (1969) immunity reconfirmed by HOL (based on public policy and long usage)
      Administration of justice requires barristers to be fearless and independent.
      Problem of retrying original action - prolong
      Barrister must accept all clients – cab rank principle.
 Giannarelli v Wraith (1988): HC endorsed it in Aus  GOOD LAW!
      Extended immunity to solicitor advocates.
      Mason CJ “difficult to draw line at court room door.” – extend to out of Ct work? Or going
         too far?
 Rees v Sinclair (1974) (NZ) – discuss above. Affirmed in Yates Property Corporation v Boland (1998)
      FACT: SOC not drafted properly
      Immunity: only work ‘so intimately connected’ with Ct work – can fairly be said to be prelim
         decision affecting the way cause is conducted at hearing.
 Immunity does not extend to:
      Breach of fiduciary duty.
      Contempt
      Disciplinary proceedings
      Preventing CO against barrister whose conduct unjustifiable – Ridehalgh v Horsefield (1994)
         (CA) per Sir Thomas Bingham MR)
UK: abolished immunity
Arthur JS Hall & Co v Simons (2000) HOL majority:
 Majority: public interest which underpinned immunity can no longer apply.
 Unanimous – it no longer applied in civil proceedings.
 Bare majority – no longer applied in criminal proceedings.
D’Orta-Ekenaike v Vic Legal Aid (2005)
 FACT: P want to plead not guilty. Sol and bar convince him to plead guilty. P plead guilty in
   committal, but then change – go to trial. At trial, prosc raise his prev “guilty” plea as evidence. P
   claim sol/bar forced him to plead guilty (to get lighter sentence).
 HELD: retrial allowed – acquitted
 THEN: sue lawyer for negligence
 HC (6:1): sol.bar protected by immunity!
       o Main reason: controversies (once resolved) should not reopened unless in narrow circ (flood
          gates concern!)
       o Reconfirmed Giannarelli v Wraith (1988)

Duty of confidentiality
 Implied term in retainer – lawyer will preserve confidentiality of all communications with client.
 Also arises from fiduciary relationship with client
Duty of non-disclosure: PR
   PR2 – L must NOT during/after retainer disclose to ANY person (not partner/employee) any
    confidential information (acquired during retainer) UNLESS:
        Client authorises.
        Permitted or compelled by law.
      Circ where law would probably require – and for sole purpose of avoiding probable
         commission/concealment of felony
 Note: not limited to info protected by legal professional privilege – duty inherent in fid rel
 Court orders disclosure:
       May be required by law/Ct order to disclose: R2.1.2
       Must disclose even if legal prof priv, priv against self incrimination etc BUT – can object 
          will be inadmissible in any future proceedings (except offence under LPA, re trust accting,
          receipt of trust money or offence re falsity of an answer): s724 LPA
 Disclosure required to defend disciplinary proceedings:
       L must defend crim charge or prof misconduct claim.
       Limited to matters re relevant matter: Lillicrap v Nader and Son (1993) (CA)
 Client has waived confidentiality
       If client lodges complaint re L – LPP and confidentiality waived: LPA s604
       Goldberg v Ng (1995) HC:
               FACT: complaint to LS. Lawyer give LPP docs to LS. In later civil proceedings, P
                  could use LPP docs.
               Example of client waiver AND disclosure to defend disci (above exception)
       Mann v Carnell (1999) (HC)
               FACT: D disclose to 3rd party – waived?
               HC: LPP not waived
                        Only waived if D disclosed to 3rd party on basis that 3rd party could disclose
                           again (inconsistent with priv)
                        BUT here, disclose to 3rd party to consider what to do (NOT inconsistent with
 Information is already publicly available
 Information re commission of a criminal or quasi-criminal offence
       R v Cox and Railton (1884): CR conspire to defraud. CR consult sol re how to defeat civil
          claim. Sol called as Wit in trial.
       Duty of confidentiality must not be injurious to interest/admin of justice!
       Australian Federal Police v Propend Finance (1997) HC: docs re taxation offences seized
          from law firm. Affirmed exception.
 S603 LPA: complaint/disciplinary investigation:
       L must answer questions or produce info despite duty
Legal professional privilege
Baker v Campbell (1983) (HC)
 LPP applies to communications made for purpose of:
          o Giving/receiving advice or conduct of existing/anticipating litigation
          o Only applies to docs
Evidence Act 1995 (NSW) ‘dominant purpose test’
 LPP applies to communications/docs – DOMINANT PURPOSE of providing legal advice of services
   in proceedings
 S118: cannot adduce evidence, if adducing would disclose:
          o Confidential communication between client/lawyer OR
          o Confidential communication between 2+ lawyers acting for client; AND
          o Contents of confidential doc prepared by client or lawyer for DOMINANT purpose of
              lawyer providing legal advice to client.
 S119: cannot adduce evidence, if adducing would disclose:
          o Confidential communication between client/3rd party or lawyer/3rd party; AND
          o Contents of doc prepared for DOMINANT purpose of providing legal services re
              Aus/overseas proceeding where client is/was/might be party
 S120: unrep parties – cannot adduce evidence, if adducing would disclose;
          o Confidential communication between party/3rd party AND
          o Contents prepared by party or at request of 3rd party for DOMINANT purpose of
              conducting/preparing for proceeding
 S121-126: re loss of client legal privilege
Common Law - ‘Dominant purpose’ test
Grant v Downs (1976) HCA “sole purpose test”
 FACT: Reports for 3 purposes of report – determine any breaches of discipline by staff, any faults in
   security/system, give to legal dept to get legal advice. Claim LPP.
 HC: rejected LPP
        LPP confined to docs created for SOLE PURPOSE of legal advice/proceedings
 Barwick CJ (dissent): favoured ‘dominant purpose’  adopted in EA
Sparnon v Apand P/L (1996) FCA
 S119 EA LPP limited to evidence adduced in litigation, NOT discovery/production
 If evidence for discovery/production  LPP only apply if “sole purpose” (apply Grant v Downs test)
Esso Aust Resources v The Commissioner of Tax (1999)
 FACT: discovery of various amended assessments of income tax (legal purpose not sole purpose)
 Trial J: NO LPP - correct test for discovery is SOLE purpose (Grant v Downs)
 FFC: upheld
 HC: dominant purpose test is correct at common law! (overrule Grant v Downs)
        Strike balance between priv v admin/investigation of justice
        Convenience argument
 McHugh J (dissent): Extend priv – parties have less access to material
 Kirby J (dissent): frustrates Ct’s ability to determine with accuracy/efficiency
                               Duty to act in good faith
 Lawyer/client fiduciary relationship
 Breach of fiduciary duty may result in:
        Civil proceedings against solicitor – damages, acct of profits, order setting aside trans
        Professional misconduct
Law Society of NSW v Harvey (1976):
 FACT: L (Dir and Sh) in 3 prop investment comps. Disclosed to clients that he had interest, but not
   extent. To some, no disclosure at all. Did not advise clients to get independent advice before investing.
 HELD: struck off – prof misconduct.
Elements of duty to act in good faith:
 Duty to client over lawyer’s interests  is paramount
 Full disclosure of lawyer’s interest:
               Where COI – must fully disclose all material circ
               Eg. cannot disclose interest, and not identify interest
 COI  advise client to get independent advice or withdraw
 Avoidable COI  avoid!
               Should not propose, invite, encourage client to deal with L in trans (as the other party)
               Even if advise client to get independent advice
 Promoting lawyers’ interest is potentially misuse of position:
               Sol must not promote, suggest, encourage client to deal (trans) with Sol
               Sol must take all reasonable steps positively to avoid dealing directly/indirectly with
               Exceptions for special cases (special interest of partic client) – isolated incidents ok
Practice Rules
PR 10 – Conflict of duty
 L must NOT:
       Allow client and lawyer’s/associate’s interests to conflict
       Exercise undue influence intended to dispose client to benefit L in excess of fair remuneration
       Act or continue to act for client in proceeding/trans affecting/relating to any
          right/entitlement/interest  conflict with L/associate’s interest
 ‘associate’: partner, employee, agent, corp/partnership that L has sig beneficial interest in, sub corp,
   immediate family
 ‘immediate family’: spouse (incl defacto and SS), child, grandchild, sibling, parent, grandparent
PR12 – Borrowing transactions
 Gen: L cannot borrow (or permit/assist associate to borrow) money from:
       A current client
       A former client, who has shown continued reliance on L for advice re investment of money
       Person who sought advice re investment of money or management of financial affairs
 Some exceptions (if client is corp or institution in schedule): must make full/frank disclosure re sol’s
  financial circ
PR15 – Register of financial interests
 L must maintain register – recording name/identifying partics of:
       any companies, partnerships, other entities that L or associate has financial/other interest;
       which has involved financial/other dealings with clients, L or L’s firm
                                     Conflict of interest
 What is a conflict of interest - acting for more than one party
 Lawyer regulated re representing multiple parties in non-contentious matter.
 If L act for 1+ party of proceeding/trans, must be satisfied:
       Parties aware that L intent to act for other (knowledge)
       Parties consent to L acting, knowing that L may:
                Not be able to fully disclose to party all information rel to proceeding/trans
                Give advice to 1 party that is bad for other party
                L must cease acting if L is obliged to act contrary to interest of 1+ parties
ISSUE: Does the rule apply to all members of a firm - Chinese wall cases
Gagliano v Gagliano (1989)
 FACT: FL matter. H’s brother act for H/W prev. W injunction against H’s bro acting for H. Same
   firm, but diff lawyer.
 HELD: injunction granted – disqualification extends to other lawyers in firm!
McMillan and McMillan (2000)
 FACT: Law clerk for H  secretary for W’s lawyers.
 HELD: W’s lawyers disqualified – disqualification extends to non-legally qualified employees!
Chinese wall cases
D and J Constructions v Head (1987) (NSW)
 REJECT chinese wall argument
 Building information walls, undertakings, injunctions re who involved in matter, limited
   communication  enforcement would be extremely difficult
 Cannot rely on arrangements – given daily contact, wordless communication
Mallesons v KPMG (1990)
 FACT: M advise KPMG. Afterwards, WA Commission for Corporate affairs use M to prosecute
   KPMG. M undertake that its partners/employees not disclose directly/indirectly. Also M lawyers now
   were in separate building to old M lawyers (who acted for KPMG)
 HELD: disqualified
        Despite undertaking, integrity/standing of M lawyers, physical separation  still real and
           sensible possibility M in COI
Unioil Int P/L v Deloitte Touche Tohmatsu (1997)
 Presumption that knowledge of 1 partner is knowledge of all  rebuttable!
 Whether every partner of firm (practise in other cities, ignorant of clients/interest) owes fid duty to
   other clients  questionable!
Prince Jefri Bokiah v KPMG (1999)
 FACT: KPMG provide lit support to client. Then new client with adverse interest.
 HELD: injunction – disqualified
        To maintain Chinese Walls:
                Physical separation of various deps (extends to dining arrangements)
                Educational programme (recurring) to emphasise impt of not improperly/inadvertently
                  divulging confidential info
                Strict procedures for dealing with situations where wall should be crossed, maintaining
                Compliance officers to monitor effectiveness of wall
                Disciplinary sanctions for breaches
        Onus in on Defendant firm to show that there is NO risk that info will come into possession of
           those acting for new client  effective measures to prevent disclosure
Newman v Phillips Fox (1999)
 FACT: P’s lawyer joint D’s lawyers after law firm dissolve. D firm undertake Sols would not be
 HELD: disqualified – Chinese Wall inadequate.
Photocure ASA v Queen’s University of Kingston (2002) (Fed)
 FACT: Prev, P’s firm get advice from Freehill affiliate firm. Separate firms, but common partners
   (incl those who gave advice to P prev). Now, Freehill act for D against P.
 HELD: not disqualified – no “real risk of future disclosure of any confidential info”
 THREE stages to consider:
           o Whether firm possess any confidential info re former client
           o Whether information relevant to matter that firm is acting in (whose client adverse to
               former client)
           o Whether any risk that info will come into possession of firm ppl working for new client
 Client must prove 1 and 2, but firm must prove 3.
Wagdy Hanna & Associates v National Library of Australia (2004) (ACT)
 FACT: Prev, firm1 act for P. Sol from firm1 now employed by D’s firm.
 HELD: NOT disqualified
           o “no credible risk of confidential information being revealed to D or firm
           o Restraints and knowledge of restraints – remove any likelihood that reasonable person
               would consider Sol’s position in D firm as compromising duty of loyalty
Test – conflict of interest
 No single test!:
   Newman v Phillips Fox (1999): ‘real risk of inadvertent disclosure’
   Prince Jefri Bokiah v KPMG (1999) - ‘clear and convincing evidence that convincing measures
     have been taken to ensure that no disclosure will occur’
   Spincode P/L v Look Software (2001) – ‘real risk of misuse of information’
Receiving a gift from a client
 If trans set aside  may be prof misconduct: PR10.1.2
Allcard v Skinner (1887)
 Rebuttable presumption of undue influence
 Onus on L to show did NOT abuse position/red and gift not come from undue influence
Johnson v Buttress (1936)
 If sol takes benefit in excess of fees  must prove trans was independent and well understood by
    person giving benefit (able to exercise free judgment)
Receiving a benefit under a will
 When L draft Will + receive substantial benefit  may allegation of undue influence
PR11 – general prohibition re drafting a will or document under which one would receive a substantial
 Sol draft Will appointing as Exec – MUST inform client in writing: PR11.1
         Any entitlement to claim commission
         That if entitled, client could appoint 3rd party who won’t claim fees
         Any prov in Will re charging prof fees for admin Estate
         as executor – must inform client in writing before drawing will
 Sol draw Will/doc where Sol (or associate) gets substantial benefit: PR 11.2
         other than proper entitlement to commission or reasonable prof fees
         MUST decline to act  refer to another Sol (not associate of Sol)
         UNLESS client is Sol’s immediate family, firm partner, employee/employee)
         “sub benefit” – substantial value relative to client’s financial resources/assets
Lawyer acting as executor
S86 Probate & Administration Act 1898 (NSW)
 Executor, administrator or trustee may apply to Ct for commission
 Does NOT apply to L to charge estate for prof fees
PR11.1 – L drafting will
 MUST make written disclosure to client re any entitlement L has to commission/prof fees.
 If L claim commission  client MUST be informed in writing that 3rd party could be Exec and FREE
Broughton v Broughton (1885) 5 DeG, M and G 160 per Lord Cranworth at p164:
 LAW: “…no person in whom fiduciary duties are vested shall make a profit of them by employing
    himself, because in doing this, he cannot perform one part of his trust, namely that of seeing that no
    improper charges are made.”
          Fid should NOT make profit  L (Exec or Trustee) is not entitled to charge prof fees
          UNLESS clause in Will to charge
In the Will of Shannon (1997)
 Discusses: unless stat auth or written clause – L cannot charge more than out of pocket expenses
 Can include clause for commission ONLY if client expressly instructs Sol
 Sol has DUTY to explain clause to client – charged more than if client chose 3rd party or left it to Ct
    to fix remuneration
Referral fees and commissions
 GEN: L can receive some benefit by referring clients to 3rd party etc – BUT prohibited from soliciting
   prospective clients in manner than brings profession into disrepute.
Tyrell v Bank of London (1862) 10 HLC 26 per Lord Westbury at p44:
 Solicitor shall not make gain at the expense of the client beyond just and fair professional
   remuneration to which they are entitled.
 If 3rd party refers client to Sol (Sol pays 3rd party referral fee):
         Sol must disclose client re fee, benefit, reward
         BEFORE accepting client
 L must NOT get instructions in way:
         Likely to oppress/harass client, who is disadv in dealing with L (bcos of trauma, injury or
           other circ)
         Eg. harassing new client right after they’ve been in accident
 If Sol refers client to 3rd party (3rd party pays Sol commission fee):
         Sol must not take benefit or act for client UNLESS:
                Sol able to advise client free of any constraint/influence of 3rd party
                Sol’s advice is fair/free of bias caused by rel with 3rd party
                Nature/value of benefit is fair/reasonable AND fully disclosed in writing to client
Conducting another business
 If L runs other business, must ensure that it won’t impair/conflict with proper conduct of firm:
        Maintain separate files, records, acct
        Disclose to any firm client (who deals with other business) re L’s interest in that business
        Cease to act – if L’s service of interest is reasonably likely to be affected by L’s interest in that
           other business
 “engaged in other business” if:
        Entitled to sig or relatively substantial interest in assets of business
        Exercises material control over conduct/operation of business
        Entitled to substantial share in income of business
O’Reilly v Law Society of NSW (1988)
 FACT: L own finance comp with wife. Finance comp on same floor as law firm. Instances: client’s
   referred to finance comp (have to pay premium/guarantee fees). L act for finance comp in loan trans
   and act for borrowers.
 HELD (disciplinary committee): prof misconduct!
 COA:
 Disciplinary committee wrong to assume that sol borrow/lend to client  prof misconduct
       Committee should enquire re – did client get independent advice and full disclosure of
 Obligation: should have advised client to avoid premium/guarantee fees.
 Clarke JA: “..whenever a solicitor, either personally or through his company, seeks to deal
  with his own client, then the potential for conflict is so great that it will only be in rare cases
  that such a dealing could be acceptable…”

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