Ethics - Retainer (3) Flashcards
What is a retainer?
The contract between a solicitor and the client is often referred to as a ‘retainer’. As with any other contract, the relationship between the solicitor and the client is governed by the general law. However, in addition to considering the general law, a solicitor must also comply with obligations placed upon them by the requirements of professional conduct.
What must a solicitor ensure when a client is given a retainer?
Many of the terms of the retainer will be implied into the contract either by the law, or by the requirements of professional conduct. However, the solicitor must ensure that the more basic terms of the retainer are understood by the client.
One critical issue is to ensure that the client understands exactly what work the solicitor has agreed to undertake. Although not required by the Code of Conduct for Solicitors, it would be good practice for a solicitor to send a letter to the client at the start of the transaction, confirming to the client exactly what the solicitor understands their instructions to be. This will help to avoid any misunderstandings at a later date.
It is important that a client’s expectations are managed at an early stage of the solicitor client relationship. If the client knows what the solicitor will and will not be doing for the client, there will be less scope for problems to arise.
A solicitor must identify whom they are acting for in relation to any matter (Paragraph 8.1). For example, a solicitor may be instructed by a director of a company concerning the debts of that company. The solicitor will be obliged to clarify whether the solicitor is being instructed by the director in their personal capacity, or by the director on behalf of the company (the company will be the client, not the director personally). A solicitor owes many duties to the client, and the solicitor can only ensure that these duties are met if they know the identity of the client.
However, the primary purpose behind Paragraph 8.1 is to try to prevent solicitors inadvertently becoming involved in fraud. Solicitors are at particular risk of becoming unwittingly caught up in the actions of fraudsters. An area which has seen a significant rise in the number of cases in recent years is property and title fraud where wrongdoers have engaged in such activities as impersonating registered proprietors, creating false conveyancing firms and submitting forged documents. In such cases, solicitors may become innocent victims.
To reduce the risk of inadvertently becoming involved in fraud a solicitor must take steps to establish who they are dealing with at the outset. It is for the solicitor to decide what steps are appropriate, but the SRA suggests that a proportionate approach should be adopted, taking account of such factors as the size of the firm, the number of fee earners, the client profile, the different areas of work the firm does and the particular risks involved in those areas of work.
A solicitor is also under a separate duty to obtain ‘satisfactory evidence’ of the identity of their clients (ie is the client actually the person they claim to be?). This obligation is imposed by the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer)
Regulations 2017 (SI 2017/ 692)
In terms of professional conduct what must a solicitor consider in terms of third party instructions?
A solicitor may receive instructions from a third party on behalf of a client. For example, a client’s daughter may seek to instruct a solicitor on behalf of her elderly mother, as the mother may have mobility problems in attending the solicitor’s office or a director may instruct a solicitor on behalf of a company.
Alternatively, a solicitor may receive instructions from one client purporting to instruct the solicitor on behalf of a number of clients. For example, a solicitor may be instructed by Mr Smith to purchase a property on behalf of Mr Smith and Mr Brown. (When considering whether to accept instructions from or on behalf of a number of clients, the solicitor must also take into account any actual or potential conflicts of interests.
The Code of Conduct for Solicitors provides that a solicitor only acts for clients on instructions from the client, or from someone properly authorised to provide instructions on their behalf (Paragraph 3.1). Therefore, in the examples given above, the solicitor must satisfy themselves that the daughter has the proper authorisation to provide instructions for her mother, that the director is authorised to give instructions on behalf of the client and that Mr Smith has authority to provide instructions on a joint basis for himself and Mr Brown.
A lack of authority has further repercussions in a litigation matter. In taking any positive step in court proceedings (such as issuing proceedings) a solicitor warrants that they have authority to do so. If a solicitor conducts proceedings without that authority, the solicitor will usually be personally liable for the costs incurred.
Should a solicitor act if there is evidence of duress or undue influence and vulnerable clients?
If a solicitor has reason to suspect that the instructions received from a client, or someone authorised on their behalf, do not represent the client’s wishes, the solicitor must not act unless they have satisfied themselves that they do (Paragraph 3.1).
There may be situations where a solicitor has reasonable grounds for believing that the instructions are affected by duress or undue influence. The elderly, those with language or learning difficulties or those with mental health issues are particularly susceptible to undue pressure from others. In circumstances in which a solicitor suspects a client’s instructions are tainted by duress or undue influence, it would be necessary for the solicitor to take appropriate steps to satisfy themselves that the instructions represent the client’s genuine wishes, for example by arranging to interview the client alone, away from any third party such as a relative.
If, having taken such steps, the solicitor is not satisfied, the solicitor should decline to act for that client. Alternatively, in circumstances in which the solicitor has concerns that the client is under duress, the solicitor may seek assistance from the High Court to provide its protection under its inherent jurisdiction.
In circumstances where the solicitor has legal authority to act for a client notwithstanding that it is not possible to obtain or ascertain the instructions of the client, then the solicitor is subject to the overriding obligation to protect the client’s best interests (Paragraph 3.1). This would include, for example, where a solicitor has been authorised by the Court of Protection to act for a client who lacks mental capacity under the Mental Capacity Act 2005.
Where there is no actual evidence of undue influence but the client insists on acting in a way which appears to be to their disadvantage, it would be advisable to explain the consequences of the instructions and ask the client whether he or she wishes to proceed, and for this advice and consent to be documented.
When should a solicitor decline to act with regards to the duty to act in the client’s best interests?
A solicitor must act in the best interests of each client (Principle 7). Accordingly, a solicitor must not accept instructions in circumstances where the solicitor will be unable to meet this fundamental requirement. This might occur where there is an own interest conflict or a conflict of interest or where the solicitor holds ‘material’ confidential information for an existing or former client which would be relevant to a new instruction.
A solicitor must ensure that the service provided to clients is competent and delivered in a timely manner and must consider and take account of the client’s attributes, needs and circumstances (Paragraphs 3.2 and 3.4). Accordingly, a solicitor must consider the level and quality of service the solicitor will be able to provide to the client. If the solicitor lacks the time, resources or expertise to deal with the client’s matter then it would not be in that client’s best interests for the solicitor to accept the instruction.
Can solicitors accept gifts from clients?
The Law Society has issued a practice note which offers some guidance.
It advises that a solicitor should carefully consider any gift worth more than £500 to determine whether it may be considered significant in the particular circumstances, and that it can be assumed that it would be significant if:
(a) it is worth more than 1% of the client’s current estimated net estate;
(b) it might become valuable at some point, especially after the death of the client;
(c) it provides a benefit to an individual which is more valuable than his relationship to the deceased reasonably justifies.
Drafting a will which includes a significant gift to the solicitor gives rise to the potential
for an own interest conflict. The SRA says that usually the effect will be to prevent the solicitor acting unless the client agrees to take independent legal advice on making the
gift.
However, each case must be considered on its own facts. The Guidance goes on to give
an example of a situation where it may be still appropriate to draft the will even if the client has not received independent legal advice. This is where the solicitor is drafting wills for the solicitor’s own parents and the survivor of them wishes to leave the residuary estate to the solicitor and their siblings in equal shares.
What must a solicitor consider when deciding whether to act for a client?
In deciding whether to act, a solicitor must act in a way that upholds the constitutional principle of the rule of law, and the proper administration of justice (Principle 1).
For example, a solicitor instructed on the sale of a property might be instructed to tamper with a surveyor’s report and send it to the buyer in order to hide some defects in the structure of the property.
If the solicitor agreed, they would be participating in fraud against the buyer. Clearly, instructions must be refused here.
If the acceptance of the instructions would place the solicitor in breach of the Code of Conduct for Solicitors, the solicitor must refuse to act.
Examples of instructions which would not comply with the Code are where:
(a) there is, or is likely to be, a conflict of interest between the solicitor and the client, or between two or more clients;
(b) the solicitor holds material confidential information for an existing or former client which would be relevant to a new instruction (see Chapter 6);
(c) the client instructs the solicitor to mislead or deceive the court.
A solicitor must also be able to justify their decisions and actions in order to demonstrate compliance with the solicitor’s obligations under the SRA’s regulatory arrangements (Paragraph 7.2).
What duties does a solicitor owe a client throughout the retainer?
A solicitor will owe the client a number of duties throughout the retainer. These duties are prescribed by the common law and the requirements of professional conduct.
Some of these duties (such as the duty of confidentiality (see Chapter 6)) will continue even after the retainer has been terminated.
a) Duty of reasonable care and skill
In addition to the solicitor’s duty of care in common law, s 13 Supply of Goods and Services Act 1982 provides that a supplier of services will carry out those services with reasonable care and skill.
This term is implied into the retainer between a solicitor and the client, and therefore the solicitor may be sued for a breach of contract if the term is breached. However, this implied term does not apply to advocacy services provided before a court, tribunal, inquiry or arbitrator (Supply of Services (Exclusion of Implied Terms) Order 1982 (SI 1982/ 1771), art 2).
Nevertheless, the solicitor may be sued for negligence in both contentious and non- contentious proceedings. The House of Lords removed an advocate’s protection from negligence claims in Arthur JS Hall & Co v Simons [2002] 1 AC 615. Accordingly, a solicitor who acts as an advocate may be sued in the tort of negligence if the solicitor breaches their duty of care to the client within court proceedings.
b) Duty to act in the client’s best interests
As a matter of professional conduct, a solicitor must act in the best interests of the client (Principle 7. However, this is also a duty placed on a solicitor at common law.
The solicitor– client relationship is said to be a ‘fiduciary relationship’. Under the common law, a fiduciary relationship is one where one party must act in the best interests of the other party.
This means that the solicitor must put the interests of the client before their own. Where such a relationship exists, one party may not make a secret profit at the expense of the other party. For example, a solicitor may be paid commission, say £50, when referring a client to a third party such as an accountant. As the solicitor owes a fiduciary duty to the client, this £50 must be accounted for to the client. This duty to account is also mirrored by Paragraph 4.1. A solicitor is also under more general obligations to safeguard money and assets entrusted to the solicitor by clients (and others) (Paragraph 4.2) and not to hold client money unless working in an authorised body (Paragraph 4.3).
Equally, there is a presumption of undue influence where a fiduciary duty exists.
This means that in any dealings between a solicitor and the client, there will be a rebuttable presumption that the solicitor has exercised undue influence in persuading the client to enter into that dealing.
In order to rebut this presumption, the solicitor would need to show that such influence had not been exercised, for example by making a full disclosure of all relevant facts, ensuring that the client took independent legal advice and understood the transaction, and ensuring that all dealings were fair and at arm’s length.
c) Duty not to take advantage of the client
As a result of the fiduciary relationship between the solicitor and client, the solicitor must not take advantage of the client. This is reflected in Principle 5, which provides that a solicitor must act with integrity, and in Paragraph 1.2: ‘You [must] not abuse your position by taking unfair advantage of clients or others.’
d) Confidentiality
A solicitor has a duty to keep the affairs of the client confidential. This duty
continues even after the retainer has been terminated.
e) Disclosure
A solicitor owes the client a duty to disclose all relevant information to the client, regardless of the source of this information.
f) Client care and costs
A solicitor is obliged to provide information on costs (at the time of engagement and, when appropriate, as the client’s matter progresses) and other information to enable the client to make informed decisions. A solicitor must also deal with the client’s matter in a competent and timely manner and taking account of the client’s attributes, needs and circumstances.
Does the retainer give the solicitor a right to enter into contracts?
A solicitor may derive authority from the retainer to bind the client in certain circumstances.
This authority can be limited expressly by the client in the terms of the retainer. However, the solicitor should never seek to rely on this implied authority to bind the client.
Express instructions should always be taken from the client prior to the solicitor taking any step in the proceedings or matter.
How can a retainer be terminated?
a) Termination by the client
A client may terminate the retainer at any time for any reason. However, the client is likely to be liable to pay the solicitor’s fees for work done up until the point of termination.
A solicitor may require their costs to be paid prior to forwarding the file to the client.
b) Termination by the solicitor
(1) A solicitor can only terminate under SRA’s regulatory arrangements (including the Principles and the Code of Conduct for Solicitors).
Examples:
- complying with the client’s instructions would involve the solicitor in a breach of the law or the requirements of professional conduct;
- the solicitor cannot obtain proper instructions from the client;
- there has been a breakdown in confidence within the relationship between the solicitor and client (eg the client is not willing to accept the advice of the solicitor).
(2) The client must be provided with reasonable notice of the termination. ‘Reasonable notice’ will depend on the circumstances. For example, it is unlikely to be acceptable to stop acting for the client immediately before a court hearing, where it would be impossible for the client to find other representation at the hearing.
**c) Termination by law **
These include where the solicitor is declared bankrupt or either party loses mental capacity after the retainer has commenced.
Where the solicitor does not practise as a sole practitioner, being declared bankrupt or losing mental capacity will have little practical effect, as one of the solicitor’s partners or other colleagues will take over the client’s matter.
Where the client loses mental capacity, the solicitor should have regard to the Mental Capacity Act 2005 and its accompanying Code.
What are the solicitor’s responsibilities on termination?
(1) Confirm to the client in writing that the retainer has been terminated.
(2) Explain, where appropriate, the client’s possible options for pursuing the matter and take steps to deal with any property of the client which may be held by the solicitor.
For example, the solicitor may be holding client monies which, subject to the position
on costs, should be returned to the client as soon as possible, together with any interest.
(3) Deal with the client’s paperwork. Where the client’s matter is ongoing and the client has instructed another firm of solicitors, it may be advisable to retain a copy of the file.
(4) The solicitor should also consider the client’s rights and the solicitor’s obligations under the Data Protection Act 2018. The Act requires that any personal data in those files are retained only for the purpose for which they were collected, although this will not prevent the solicitor from retaining a copy of the file in order to defend themselves from any future claims of negligence.
How may liens be used by a solicitor?
A lien is a legal right that allows a creditor to retain a debtor’s property until payment.
Accordingly, a solicitor may hold on to property already in their possession, such as a client’s papers, until the solicitor’s proper fees are paid. Although a solicitor may accept an undertaking to pay the costs instead of the solicitor retaining the client’s papers under a lien.
The court has the power to order the solicitor to deliver up any papers to the client. The SRA also has a similar power where it has intervened in a solicitor’s practice.
Alternatively, a solicitor may apply to court for a charging order over any personal property of the client recovered or preserved by the solicitor within litigation proceedings.
The charging order may cover the solicitor’s taxed costs for those proceedings.
What is a retainer?
The contract between a solicitor and the client is often referred to as a ‘retainer’. As with any other contract, the relationship between the solicitor and the client is governed by the general law. However, in addition to considering the general law, a solicitor must also comply with obligations placed upon them by the requirements of professional conduct.
What must a solicitor ensure when a client is given a retainer?
Many of the terms of the retainer will be implied into the contract either by the law, or by the requirements of professional conduct. However, the solicitor must ensure that the more basic terms of the retainer are understood by the client.
One critical issue is to ensure that the client understands exactly what work the solicitor has agreed to undertake. Although not required by the Code of Conduct for Solicitors, it would be good practice for a solicitor to send a letter to the client at the start of the transaction, confirming to the client exactly what the solicitor understands their instructions to be. This will help to avoid any misunderstandings at a later date.
It is important that a client’s expectations are managed at an early stage of the solicitor client relationship. If the client knows what the solicitor will and will not be doing for the client, there will be less scope for problems to arise.
A solicitor must identify whom they are acting for in relation to any matter (Paragraph 8.1). For example, a solicitor may be instructed by a director of a company concerning the debts of that company. The solicitor will be obliged to clarify whether the solicitor is being instructed by the director in their personal capacity, or by the director on behalf of the company (the company will be the client, not the director personally). A solicitor owes many duties to the client, and the solicitor can only ensure that these duties are met if they know the identity of the client.
However, the primary purpose behind Paragraph 8.1 is to try to prevent solicitors inadvertently becoming involved in fraud. Solicitors are at particular risk of becoming unwittingly caught up in the actions of fraudsters. An area which has seen a significant rise in the number of cases in recent years is property and title fraud where wrongdoers have engaged in such activities as impersonating registered proprietors, creating false conveyancing firms and submitting forged documents. In such cases, solicitors may become innocent victims.
To reduce the risk of inadvertently becoming involved in fraud a solicitor must take steps to establish who they are dealing with at the outset. It is for the solicitor to decide what steps are appropriate, but the SRA suggests that a proportionate approach should be adopted, taking account of such factors as the size of the firm, the number of fee earners, the client profile, the different areas of work the firm does and the particular risks involved in those areas of work.
A solicitor is also under a separate duty to obtain ‘satisfactory evidence’ of the identity of their clients (ie is the client actually the person they claim to be?). This obligation is imposed by the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer)
Regulations 2017 (SI 2017/ 692)
In terms of professional conduct what must a solicitor consider in terms of third party instructions?
A solicitor may receive instructions from a third party on behalf of a client. For example, a client’s daughter may seek to instruct a solicitor on behalf of her elderly mother, as the mother may have mobility problems in attending the solicitor’s office or a director may instruct a solicitor on behalf of a company.
Alternatively, a solicitor may receive instructions from one client purporting to instruct the solicitor on behalf of a number of clients. For example, a solicitor may be instructed by Mr Smith to purchase a property on behalf of Mr Smith and Mr Brown. (When considering whether to accept instructions from or on behalf of a number of clients, the solicitor must also take into account any actual or potential conflicts of interests.
The Code of Conduct for Solicitors provides that a solicitor only acts for clients on instructions from the client, or from someone properly authorised to provide instructions on their behalf (Paragraph 3.1). Therefore, in the examples given above, the solicitor must satisfy themselves that the daughter has the proper authorisation to provide instructions for her mother, that the director is authorised to give instructions on behalf of the client and that Mr Smith has authority to provide instructions on a joint basis for himself and Mr Brown.
A lack of authority has further repercussions in a litigation matter. In taking any positive step in court proceedings (such as issuing proceedings) a solicitor warrants that they have authority to do so. If a solicitor conducts proceedings without that authority, the solicitor will usually be personally liable for the costs incurred.
