Lawyers & Legal Ethics — Problems to solve Essay Example

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    Law
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Professional Conduct for Lawyers

Question No. 1

The issue in this problem is whether a lawyer-client relationship arose between George and Katy even though Katy was only forced to give advice to the former because she was forced to.

Some laws and principles that may assist in resolving this issue are the following:

  • The Professional Conduct and Practice Rules 2005 (PCPR 2005 hereafter), particularly s 2.1;

  • Elements of contract law formation, primarily governed by common law.1

The facts of the case show that no lawyer/client relationship was established by George and Kate in the laundry room. Such a relationship is usually established through a retainer – a contract between the parties for the lawyer to give legal services to the client for a fee.2 Other than stating that lawyer must agree to the retainer,3 the PCPR 2005 is silent about any formalities that should be observed to form a lawyer/client relationship. On the other hand, Maxwell v Chittick & Ors and
Apple v Wily4, provides that in determining whether a client/lawyer relationship exists the basic principles of contract law must be applied. Considering that in this case, there was no express retainer, such as a written one, their client/lawyer relationship, if any, may be implied by their conduct.5 The conduct of the two relative to the basic elements of a contract shows that no such relationship was formed.

In line with the Maxwell holding, the issue in this case can be resolved only by looking into the conduct of George and Kate in the laundry room to determine whether there was an implied agreement to enter into a retainer. In Ermogenous v Greek Orthodox Community of SA Inc6, the Court held that intention to create legal relations must not be presumed, but must be subjected to an objective test. It is evident that Kate was not inclined to enter into such an agreement and therefore, the elements of consent and intention to create a legal relation are already absent despite giving George some information about legal matters.

However, the information she provided George did not amount to legal advice, but was merely a suggestion reinforcing the absence of client/lawyer relationship. Katy merely told George the legal options available to him without further expanding on them and weighing in her own take on the matter as a practitioner. This did not constitute legal advice as was held in AWB Ltd v Cole (No 5)7, which defined legal advice as not only constituting information of the law, but also an appraisal of the appropriate legal steps that a client must take within that context including “professional advice given by lawyers to a client as to what evidence and submissions placed before a commission of inquiry.” By refraining to actually give George legal advice, Katy prevented the creation of a client/lawyer relationship because according to Apple v Wily,8 the absence of a legal advice did not establish a lawyer/client relationship although the solicitor discussed strategies with a company liquidator, but such discussion amounted only to suggestion and not legal advice.

In conclusion, it can be said that a lawyer/client relationship did not arise from the conversation for two reasons: one, Katy did not intend to create a legal relations with George as evident from her conduct during the encounter in the laundry area, and; two, the discussion between the two did not amount to a legal advice militating against the establishment of such a relationship.

Question No. 2

The issue here is whether a lawyer/client relationship arose between George and Katy in the gazebo despite the fact that Katy only gave the latter legal advice in view of George’s relentless persistence and if so, whether Katy owes George duties and responsibilities that a lawyer owes a client.

Some of the rules that may come into play when resolving the aforesaid issue is as follows:

  • The PCPR 2005, specifically s 1.1 on dealing with clients in an honest and fair manner with the best interest of the client as the primary concern;

  • The elements of contract rule, in accordance with the dicta of common law;

Unlike the scenario in the laundry room, the gazebo incident between George and Katy gave rise to a lawyer/client relationship because Katy not only consented to give George advice, but also her response was in the nature of a legal advice. In a similar US case, Kurtenbach v Te Kippe,9 the Court enumerated the circumstances of an implied retainer: a person seeking legal advice from a lawyer, the advice being sought was within the expertise of the lawyer, and the lawyer agrees, expressly or impliedly, to give legal advice. Further proof of the implied retainer was that the nature of the advice given by Katy was within the ambit of the definition of legal advice as defined in the case of AWB Ltd case10 that the advice must go beyond the law, and include advice on the appropriate steps that must be taken by the client. This aspect was what differentiated the gazebo scenario from the laundry scenario because in the latter, Kate simply told George what the legal options were, but in the present case Kate told George the legal options, the best option for him and how to go about in doing it. Kate’s conduct qualified was similar to that of the solicitor in McGeoch v Hendriks,11 where the Court held that an express retainer was established when the solicitor responded to the question of the appellant on stamp duty by giving his opinion without qualification, therefore, resulting in a duty of care owed by that solicitor to the appellant.

In view of the lawyer/client relationship created between George and Katy in the gazebo, Katy became duty bound to abide by the duties and responsibilities that a lawyer owes to a client. In Maguire v Makaronis,12 the Court identified loyalty as one of the duties of a lawyer to a client when it held “A solicitor’s loyalty to his client must be undivided. He cannot properly discharge his duties to one whose interests are in opposition to those of another client.” In Spector v Ageda,13 the Court held that the lawyer is obligated to serve his client with skill and knowledge; in Vulic v Bilinsky,14 honesty, fairness, competence and diligence in the service of a client were the main duties of a lawyer that the Court emphasised, and; in Commissioner of Taxation v Pratt Holdings Pty Ltd and Another:15 the Court cited client legal privilege as one of the consequences of a client/lawyer relationship. Thus, Katy should act in an honest and fair manner in dealing with George and his legal dilemma making sure that she has his best interest in mind in whatever actions she takes involving him. More importantly, Katy is now bound to abide by the confidentiality principle between lawyer and client, which implies that any communication made by George to her in the course of their lawyer/client relationship must be kept in confidence by her unless any of the circumstances cited as exceptions under s 3.1 of the Professional Conduct and Rules 2005 occur.

In conclusion, a lawyer/client relationship was created between Katy and George in the gazebo because the latter sought legal advice from the former, who freely gave it to him. Most of all, the advice given was not simply to inform George of the law, but the best options he should take from what was available to him and how he should go about it. As a consequence of this, Katy became duty bound to abide by the duties and responsibilities owed by a lawyer to his client.

Question 3.1

In this scenario, the issue is whether or not a lawyer/client relationship has arisen after Katy helped George complete his VCAT form in her office a day after he waylaid her in the laundry room despite the fact that she did this only to get him out of the office.

The following legal rules may help in determining the resolution to the above cited issue:

  • The PCPR 2005, specifically ss 1.2 and 2.1;

  • The basic concept of the elements of contract under common law;

The Muddles & Co office scenario between George and Katy likewise created a lawyer/client relationship because there was tacit consent on the part of Katy to render legal services to George. In Pegrum v Fatharly,16 the issue was also whether a client/lawyer relationship was created between the solicitor and a party where there was no express retainer agreed between the parties. The solicitor, who had an existing retainer with the borrower, drafted and created the documents of loan necessitating the lender’s appearance in his office. He knew beforehand that his client was a bad risk and the securities they were offering were inadequate, but he did not inform the lender this. When the borrower defaulted, the lender brought an action against the solicitor for failing to warn him, but the latter defended his position on the ground that he did not owe him a duty to the lender because he was not a client. The Court held that when “the solicitor accepts responsibility to prepare the documents without any indication that he cannot fully discharge his professional duties to them both there is a strong bias towards finding that the solicitor tacitly agrees to act for both parties and to undertake the usual professional responsibilities to them both.” The relevance of this case to the present one is that when Katy assisted George in completing his forms and did not tell him expressly that she was not acting as his solicitor, the tacit implication was that she had agreed to provide legal services to George under a client/lawyer relationship. The difference between this present scenario and that in the laundry room scenario was that in the latter, the response of Katy did not amount to a legal advice, but in the present case the assistance she gave to George was clearly within the ambit of legal advice or legal services as was provided by the AWB case.17

It can, therefore, be said that unlike in the laundry room scenario, a lawyer/client relationship was formed between Katy and George in her office where she assisted him in completing his VCAT form. One, her conduct and behavior showed that she agreed to provide legal services, and two, the services she provided amounted to legal advice or legal services, effectively establishing a client/lawyer relationship.

Question 3.2

The issue in this problem is whether the money George handed to Katy can be considered trust money and if so, should be handled in accordance with the provisions of relevant laws.

The relevant rules for this problem can be found in the following:

  • Section 3.3.2(1) of The Legal Profession Act 2004, on the handling of trust money received from a client.

  • Section 3.3.8 of The Legal Profession Regulations 2005 on the establishment of a general trust account for trust money received from clients.

In this problem, Katy handed the $200 cash she received from George to her secretary and directed the latter to deposit it in the office account and to send a receipt for it to George. In Legal Services Commissioner v Brereton,18called the act of the solicitor in intermingling his personal money with trust money received from the client as “a brazen attitude that the trust monies were part of a common fund that could be borrowed or redirected to other of his business interests from time to time” and suspended him from practice for 5 years and prohibited him from dealing with trust money in the future when he shall be allowed to reapply for certification. This is because under Victorian law, the handling of money from clients is a very delicate matter which can expose the law practitioners to severe penalties. Money received by the law practice from clients should be first determined whether classifiable as trust money or not because specific provisions govern the handling of trust money. According to s 3.3.11, trust money should be deposited only in general trust accounts specifically opened for the purpose of keeping the clients’ trust money and such deposit cannot be withdrawn without abiding by the requirements imposed by the law.

A scrutiny of the $200 handed by George to Katy shows that it was not trust money and therefore, need not be deposited in a general trust account. First, it was not meant to cover anticipated services, but for services already rendered. This was evident when he said, “Thanks, this is for your time. I do not want you to think that just because we are family, I expect to get a free ride.” Second, the $200 was not controlled money. According to s 3.3.15 of the Legal Profession Act 2004, controlled money is money given by the client to the practice with specific written instructions to be deposited in a specific controlled money account. This was not definitely the case with the money handed by George to Katy. He had no written instructions for the deposit of the money to a specific controlled account. Third, the money was not transit money, transit money being defined as money instructed to be paid or delivered in accordance with the instructions of the client as per s 3.3.16 of the Legal Profession Act 2004. Fourth, neither is the money given by the client subject to the power of the practice for the benefit of a third party in accordance with s 3.3.17 of said Act. Since the $200 given by George to Katy was not any of the trust money referred to by the Act, there was no mishandling of the money when it was deposited in the office account.

Question 4.1

The issue in this problem is whether Katy has conducted herself in a professional and ethical manner in accordance with the mandate of the applicable laws by allowing George to overrule her own advice despite the fact that she knew it was the best course of action for him.

The applicable rules that are relevant to this problem are the following:

  • The Professional Conduct and Practice Rules 2005 (Vic), particularly s 1.1 on the conduct of a practitioner in dealing with clients.

In allowing herself to be taken by George’s subtle threats and gave in to his demands although she knew, as a practitioner, that it was not the best course of action to take by George, Katy has violated her duty towards her client. In Heydon v NRMA Ltd,
19 the Court held that lawyers owe a duty of care to the persons they give advice to and such a duty includes the exercise of reasonable care and skill the standard of which is that which can be reasonably expected from a practitioner. Similarly, in May v Mijatovic,20 the Court said that it is the obligation of professionals, such as a solicitor, to practice due care, skill and diligence in dealing with their clients. In the present case, Katy owed it to herself, her profession and her client to be forthright and accurate in giving legal advice to a client. The idea of her mother nagging her for not accepting George’s demand to represent him was not enough for her to violate the duties she owed to her client and profession. Legal practitioners should not be easily swayed from the proper course of action and from serving the client’s best interest by threats, especially those that are not really a danger to her health and safety, but merely, if materialised, will just simply cause discomfiture. Her duty towards her client takes precedence over such discomfiture because the implied duty of care incorporated into all contracts of retainer arises by operation of law as was held in Astley v Austrust.21

Question 4.2

The issue in this problem is whether the document signed by both George and Katy partook of the nature of conditional costs agreement, whereby the legal fees of Katy, as solicitor, is contingent only on the success of the claim of George against Bosse Pty Ltd (Boose).

The possible applicable rules are the following:

  • The Legal Practice Act 1996, particularly s 97 on conditional costs agreements;

  • The Professional Conduct and Practice Rules 2005 under s 2A on conditional costs agreement setting out in detail fees that the client must pay to third parties regardless of the outcome of the case.

The ‘Agreement’ signed by both George and Katy in her office was both a Retainer Agreement and a conditional cost agreement. It was a retainer because it provided for the retainer of Katy to provide legal services for George by acting on his behalf on the matter of his claim against Boose and at the same time it was also a conditional costs agreement because the second part of the document laid down the conditions of legal costs of the services to be offered by Katy, which is partially made contingent on the success of the case as provided for in s 2A of the PCPR 2005. Conditional costs agreement may or may not be totally conditioned upon the success of the case. In Madden v NSW Insurance Ministerial Corp22 the Court held that in conditional costs agreement, all costs are allowed only if they are reasonable or have been incurred reasonably and the determination of whether such costs are reasonable or not will be an factual test that will depend on the facts of each case. Here, Katy was to receive $2000 for her services as base pay, whether or not the case succeeds, but will not be entitled to claim additional fees if George loses his case. In the event of a win, Katy was to get 20% of the money awarded to George, but only if the award amounts to $7,000 or more. However, the 20% contingent fee on top of the $2,000 base fee in this case seems unreasonable because Katy was not able to justify in the agreement what it was for.

Question 5

The issue in this problem is whether Katy has acted appropriately and has not breached her duties and responsibilities as a practitioner when communicating with third parties.

The following rules are relevant to the issue at hand:

  • Section 28 of the Professional Conduct and Practice Rules on four prohibited forms of conduct : misrepresentation of falsity as truth, misleading or intimidating statements exaggerating the client’s rights, legal threats against client’s debtors, and subjecting client’s debtor to a personal interview and similar acts without advising the latter to seek independent legal advice.

In writing the letter addressed to Bosse on behalf of George, Kay has violated the duties and responsibilities imposed on her by the Professional Conduct and Practice Rules in dealing with third parties. In McGeoch V Hendriks and Ors,23 the Court held that even in the absence of an express or implied retainer, a lawyer still may still owe a duty of care, which is independent of such retainer. The implication of this is that Katy, as a solicitor acting on behalf of George was not free to treat Bosse any way she wanted to especially if it does not conform to her status as a practitioner and would amount to unsatisfactory professional conduct. The case of Legal Services Commissioner v McNamara24 defined unsatisfactory professional conduct as “conduct of an Australian legal practitioner occurring in connection with the practice of law that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent Australian legal practitioner.” Katy exhibited unprofessional conduct when she made demands on Bosse in intimidating manner without allowing the latter to offer any explanation or opportunity to make amends. In addition, Katy has intentionally misrepresented George’s legitimate rights and entitlement by immediately declaring rescission of the sale and for Bosse to immediately reimburse the price without giving the latter the opportunity to correct its error or mistake. Considering that the demands were disadvantageous to Bosse, Katy should have counseled Bosse to seek the legal advice from a lawyer before acting on the letter.

Kay clearly violated the code of conduct with respect to dealing with third parties as set forth by s 28 of the Professional Code and Practice Rules 2005. She had not deliberated well on how she should have written the letter to Bosse and instead, allowed George, who did not go to law school to call the shots and in effect, ruined her career even before it burgeoned.

Question 6.1

The issue here is similar to that of Question 3.2 in that this problem is also concerned with the nature of the money paid by George to the law practice. Thus, the question to be resolved here is whether the money or part of it paid by George is in the nature of trust money, in which case it should have been deposited to a trust account set up by the practice for that specific purpose.

The relevant rules for this problem can be found in the following:

  • Section 3.3.2(1) of The Legal Profession Act 2004, on trust money;

  • Section 3.3.8 of The Legal Profession Regulations 2005 on the establishment of a general trust account for trust money received from clients.

There was no mishandling of the money paid by George to Kate in this case. An accounting of the money paid by George to the practice and their respective purposes revealed that they are of two types: money paid for work done, and; money paid for work to be done. As earlier discussed, a trust account is specifically opened only for the deposit of money that are categorised as trust money and trust money are of four types, to wit: money advanced for work to be done, controlled money, transit money and, money under power by the practice to be applied for the interest of a third party. Two cases illustrated the obligation of lawyers in handling trust money: in Re Todd (No 2), 25 it was held that it is an obligation of a lawyer at common law not to combine trust money with his or her own whilst in John’s v Law Society NSW,26 the Court held that a lawyer must establish a general trust account where trust is to be deposited apart from other types of moneys. This dictum was not breached in the present case because except for the $1,500, which was meant to cover work expected to be done for George in the near future, the balance of the entire amount was not within the ambit of the term trust money. Thus, it was only proper that the money covering the disbursed amount and the fees for legal services already rendered be deposited to the office account, whilst the $1500, which represented the amount of fees for the legal services yet to be rendered, was deposited in the general trust account. The bottom line is that there was no mishandling of the money paid by George to the practice.

Question 6.2

The issue here is how Katy should go about in acting on behalf of her client George during the settlement of the claim against Bosse.

The applicable rules are the following:

  • The PCPR 2005, particularly s 29.2 on debt collection on behalf of clients.

As a consequence of the client/lawyer relationship between George and Katy, the latter must act on behalf of the former only in his best interest in accordance with the fiduciary nature of the relationship. In Hospital Products Ltd v United States Surgical Corporation,27 the Court said that the solicitor and client relationship is one of those characterised by fiduciary nature. As a fiduciary, the duty of the solicitor is authorised to act on behalf of the client placing him/her in a position to exercise power or discretion that may potentially harm the latter. This authority, however, does not include authority to benefit personally without express grant from the client from any of the transactions that the solicitor conducts on behalf of the client, according to Pilmer v Duke Group.28 Katy must act in the best interest of George during the settlement informing the latter of all the implications of the settlement at the same time adhere to the laws in dealing with the other party. She must conduct herself with honesty, fairness and courtesy at all times during the settlement without losing control of the proceeding as well as facilitate effective communication between George and Bosse, in accordance with the provisions of PCPR 2005.

Bbliography

  1. Articles

Australian Contract Law 2013, Contract Topics. Web. <http://www.australiancontractlaw.com/law/formation-intention.html>

Apple v Wily [2002] NSWSC 855

AWB Ltd v Cole (No 5) (2006) 155 FCR 30.

Astley v Austrust (1999) 197 CLR 1

Commissioner of Taxation v Pratt Holdings Pty Ltd and Another:
[2005] FCA 1247.

Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95

Heydon v NRMA Ltd (2000) 51 NSWLR 1

Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41

John’s v Law Society NSW 2 NSWLR 1

Kurtenbach v Te Kippe (1977) 260 NW 2d 53

Legal Services Commissioner v Brereton (Legal Practice) [2008] VCAT 2073

Legal Services Commissioner v McNamara (Legal Practice) [2011] VCAT 1228 (1 July 2011)

Madden v NSW Insurance Ministerial Corp (1999) NSWSC 196

Maguire v Makaronis (1997) 188 CLR 449

Maxwell v Chittick & Ors and Apple v Wily (unreported, NSWCA, 23/8/1994)

May v Mijatovic [2002] WASC 151

McGeoch
V Hendriks and Ors (2007) NSWSC 311

Pegrum v Fatharly (1996) 14 WAR 92

Pilmer v Duke Group (2001) 207 CLR 165

Re Todd (No 2)

Shaw v Yarranova Pty Ltd [2011] VSCA 55

Spector v Ageda (1973] 1 Ch 30

Vulic v Bilinsky (1983) 2 NSWLR 427

  1. Legislations

Evidence Act 1995 (Cth)

Professional Conduct and Rules 2005.

The Legal Profession Act 2004 (Vic).

The Legal Profession Regulations 2005.

The Legal Profession (Admission) Rules 2008.

The Professional Conduct and Practice Rules 2005.

The Victorian Bar Rules of Conduct.

1 Australian Contract Law, Contract Topics, 2013. Web. <http://www.australiancontractlaw.com/law/formation-intention.html>

2
Shaw v Yarranova Pty Ltd [2011] VSCA 55.

3 Section 2.1, Professional Conduct and Practices Rules 2005.

4
Maxwell v Chittick & Ors and Apple v Wily unreported, (NSWCA, 23/8/1994).

Shaw v Yarranova Pty Ltd , supra

6 Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95

7AWB Ltd v Cole (No 5 (2006) 152 FCR 382

8
Apple v Wiley [2002] NSWSC 855

Kurtenbach v Te Kippe (1977) 260 NW 2d 53

AWB Ltd v Cole (No 5), supra.

11
McGeoch v Hendriks & Ors [2007] NSWSC 311

12
Maguire v Makaronis (1997) 188 CLR 449

13
Spector v Ageda (1973] 1 Ch 30

Vulic v Bilinsky (1983) 2 NSWLR 427

15
Commissioner of Taxation v Pratt Holdings Pty Ltd and Another [2005] FCA 1247.

Pegrum v Fatharly (1996) 14 WAR 92

AWB Ltd v Cole (No 5), supra.

Legal Services Commissioner v Brereton (Legal Practice) [2008] VCAT 2073

Heydon v NRMA Ltd (2000) 51 NSWLR 1

May v Mijatovic [2002] WASC 151.

21
Astley v Austrust (1999) 197 CLR 1

Madden v NSW Insurance Ministerial Corp (1999) NSWSC 196

McGeoch V Hendricks and Ors, supra.

24
Legal Services Commissioner v McNamara (Legal Practice) [2011] VCAT 1228 (1 July 2011)

25 Re Todd (No 2)

26
John’s v Law Society NSW 2 NSWLR 1

27
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41.

28
Pilmer v Duke Group (2001) 207 CLR 165

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