Law Grad in Pink is a blog written by a law graduate in Adelaide for law graduates everywhere.

Tuesday, 26 May 2015

Giving legal advice in social situations – beware the oral and implied retainer

Lawyers are natural problem solvers and often hand out legal advice in social situations to friends, family members and strangers. Junior lawyers are often even more enthusiastic to dispense their view on how the legal problem could be solved. While the advice may be dispensed in a casual environment such as at a party, BBQ or function, lawyers should be aware of the possibility of unintentionally creating an oral or implied retainer in these situations.

How is an oral retainer formed?
A “retainer” is a contract for the provision of legal services that underpins the lawyer-client relationship. After the retainer comes into existence, a number of lawyer duties to the client arise including the duty of care. Usually the retainer is in written form. However, a retainer can be formed orally, for example, in a discussion where client and lawyer outline an agreement.

If there was no discussion of costs or payment, this is not necessarily fatal to an oral retainer. Courts strive to uphold agreements such as retainers, especially in a commercial context, and have assumed a lawyer would be renumerated according to their standard fee structure (QCoal Pty Ltd v Cliffs Australia Coal Pty Ltd [2010] QSC 479 at [22]).

Example: You are at a family gathering and your Uncle comes to talk to you about his 4 year old son Johnny, who slipped on some steps at kindergarten and injured his head near his ear. Johnny had to have stitches and an ENT specialist advised that although there was no immediate damage to Johnny’s ear, there is the risk that balance and hearing issues could arise as Johnny grows up. You tell your uncle that he should commence action on behalf of his son in the NSW Supreme Court to put the kindergarten’s insurer on notice. This would enable action later if anything adverse arose from Johnny’s injuries. You know you shouldn’t do legal work for family members, but given the simplicity of the task, you offer to prepare and file the court documents. Your Uncle accepts your offer.

An oral retainer may be found to exist in this situation, despite having no discussion about costs or payment, as a court may imply that you would be paid according to your normal rate or according to the rate you normally charge family members.

How could an implied retainer be formed?
In the absence of express words, a retainer can be formed from the implied or inferred conduct of the parties in the circumstances. The existence of the retainer will be implied from the conduct of the parties. The actual terms of the retainer will somehow then have to be proved by the party relying on the retainer. The court will examine the objective facts to determine if an implied retainer exists. The lawyer’s belief as to whether the person is a client will not be too persuasive (Burke v LFOT Pty Ltd (2000) 178 ALR 161 at [81]), but the reasonable expectations of the alleged client is often given significant weight.

Proving the existence of the retainer
The retainer must be proved by the party seeking to rely on the contract, with courts focusing on consensus ad idem (agreement). Agreement does not have to be evidenced in writing, and can be formed orally or by the conduct of the parties.

You may have already identified consideration may be an issue when the alleged retainer was formed in a social situation. However, consideration is not vital for the formation of a retainer. It has been suggested that consideration flowing from the client is not essential for the creation of a retainer.

There are a few evidentiary difficulties that may arise in proving the existence of an oral or implied retainer:
1.       The party attempting to establish the retainer will have to ensure the relationship is not characterised as “prospective lawyer” and “prospective client”. Where the parties understood the relationship to be potential, as opposed to actual or implied, no retainer can be found to exist.

2.       If it is the lawyer’s word against the client’s courts are more likely to accept the client’s version of events. This principle is taken from Griffith v Evans [1953] 1 WLR 1424 where Denning LJ stated “the words of the client is to be preferred to the word of the solicitor”, as “the client is ignorant and the solicitor is, or should be, learned”.

3.       The passage of time can make it difficult for parties to recall events in detail.

What are the consequences if an oral/implied retainer is found to exist?
If a retainer is found to exist, you will be expected to have undertaken the relevant work and discharged all of your lawyer-client duties. The client will also be able to commence action for professional negligence against you.

If there is no retainer, are there any consequences of giving legal opinions in these situations?
In the case of Legal Practitioners Complaints Committee v Trowell [2009] WASAT 42 at [157] it was held that prospective clients are owed a duty of confidentiality. If a person is telling you about their legal problem at a party, asks about your rates, and decides to go elsewhere, you must keep the details of their legal problem and the fact they approached you confidential.

It is also possible that behaviour towards potential clients could constitute unsatisfactory professional misconduct under section 496 of the Legal Profession Act 2004 (NSW), as there is no requirement for a retainer to exist. For a lawyer to come under the definition of “unsatisfactory professional conduct”, the lawyer’s conduct  must have occurred “in connection with the practice of law” and must 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”.

But I was doing the work/providing the advice pro-bono...
Consideration flowing from the client is not essential for a retainer to form. The principles discussed above therefore apply equally to pro-bono work (see Legal Practitioners Complaints Committee v Trowell [2009] WASAT 42). An important point to note is that if you are taking on the work “pro-bono”, you must afford your client the same level of skill and knowledge you would provide a paying client. McCallum J succinctly made this point in Moss v Eagleston [2014] NSWSC 6 at [81]:

"The degree of care and skill required in the performance of a professional task cannot logically be informed by the extent of remuneration which the lawyer agrees to accept for the agreed task. The task is the same in any case. No lawyer is obliged to undertake work on a pro bono basis, but those who choose to do so must in my view be held to the same standard of care as those who request payment for their services."

Conclusion

Lawyers should not undertake any work for a client without a written retainer. While it is difficult evidentially for an alleged client to establish an implied or oral retainer exists, it is not impossible, and courts tend to favour the client’s version of events where all else is equal (Griffith v Evans [1953] 1 WLR 1424 at 1428). If you think your casual discussion is getting detailed to the point an oral retainer may be arguable, make it clear to the person you are talking to that you have not come to an agreement about providing legal services at that point. As a lawyer, you must correct any mistaken beliefs. In the case of Stringer v Flehr & Walker (2003) Aust Tort Reports 81-718, Philippides J highlighted that a lawyer should take steps to dissuade a person from the belief that the lawyer acts for the person. If you are in a social situation, and feel you must give your opinion on a legal problem, make sure the person you are talking to is not mislead about your relationship.  

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