Retained or not retained: the NSWCA wants specifics
BY DANIELA FAGGIONATO AND STEPHANIE BARCLAY – NOV 08, 2024 8:40 am AEDT
Snapshot
- A solicitor’s retainer is a contract subject to proof in accordance with usual contractual principles.
- An ongoing, general retainer does not mean a solicitor is retained for all time. The question is whether the solicitor was retained on the particular transaction.
- Best practice requires the terms (and limits) of the retainer to be in writing.
The solicitor’s retainer is the foundation of the relationship between solicitor and client, and is the contract from which the solicitor’s obligations to the client are established.
To avoid future disagreement, it is important the solicitor and client have a common understanding about what the solicitor will and will not do for the client.
It is in both parties’ interests that the solicitor properly inform the client about the limits of their retainer.
From a risk management perspective, confirmation in writing is preferred. This will assist with proof if it becomes necessary.
From a client perspective, written confirmation may help foster a better rapport and working relationship with the client because both parties understand the tasks being completed.
The principles and best practice
A retainer is a contract between solicitor and client. It is to be interpreted in accordance with general contractual principles. Its existence depends on the intention of the parties and the onus of establishing its existence falls on the party so asserting.
Factors relevant to determining the existence and ambit of a retainer include: whether there was a request made by the client to undertake the task; whether the solicitor took steps that might be expected if a retainer existed; and whether the solicitor took steps that were inconsistent with a retainer being in place.
Post-contractual conduct can also be considered when determining the limits of a retainer.
Of course, setting out the terms of any retainer in writing will greatly assist when determining its terms and is considered best practice.
In Richtoll Pty Ltd v WW Lawyers (in liq) Pty Ltd[201C] NSWSC 43 (‘Richtoll’) it was held that a solicitor who seeks to limit their retainer ought to do so ‘clearly and usually in writing as a matter of prudent practice’ (at [163]).
Richtoll cited an earlier case of Minkin v Landsberg[201C] 1 WLR 1489., which stood for a similar proposition, namely that: ‘As a matter of good practice the solicitor should confirm such agreement in writing. If the solicitor does not do so, the court may not accept that any such restriction was agreed’ (at [38]).
Ongoing retainers are not applicable in perpetuity
In Gerrard Toltz v City Garden Australia fly Ltd (in liq) (No 2) [2024] NSWCA 232  (‘Toltz’), the solicitor acted for a financier who was lending money to an existing client of the solicitor – the solicitor was therefore on the opposing side of the transaction to the client. The client alleged the solicitor was in a position of conflict because the solicitor and client had an ongoing general retainer.
The court, at first instance and on appeal, was required to determine whether the existence of an ongoing, general retainer meant the solicitor owed a fiduciary duty to the client for that loan transaction, such that the solicitor was in a position of conflict by acting for the financier. The loan transaction was entered into years after the solicitor was first retained by the client and the loan transaction was not expressly contemplated under the initial retainer.
At first instance, the Supreme Court of NSW held the solicitor was retained by virtue of the ongoing, general retainer. On appeal, the Court of Appeal of NSW overturned that decision after analysing what was required to retain a solicitor for a specific transaction.
The Court of Appeal held the proper way to approach that question was not to consider whether the solicitor was retained by reason of the existence of an ongoing, general retainer but to consider ‘whether the client can establish that the solicitor was retained on the particular transaction, a matter to which an ongoing, general retainer may be relevant’ (at [34]).
The Court of Appeal further held there was no basis to start from the premise that the work fell within the retainer and then ask whether the solicitor had clearly communicated that the work had been carved out (at [73]).
In other words, the existence of an ongoing, general retainer is not proof that a solicitor is engaged by a client to act in a particular transaction. An ongoing, general retainer may set out the basis upon which the solicitor will act for the client if requested (for example, the rate for the solicitor to perform future work) but something more is required to show the solicitor was retained to act for a specific piece of work.
Whether or not a solicitor is retained is a question of fact. After considering the indicia of facts in Toltz, and despite nothing determinative in writing, the Court of Appeal held the solicitor was not retained for the particular loan transaction. It was also satisfied the solicitor had sufficiently communicated to the client that it did not act for the client in that transaction (at [92]). Accordingly, the solicitor did not owe the client any fiduciary duties for that transaction and was not in a position of conflict when acting for the other side of the transaction (at [95]).
Lessons for the profession
Although the Court of Appeal found in favour of the solicitor, the solicitor endured years oflitigation about the terms of the retainer as the client had not been clearly informed in writing about the limits of the retainer. This case reinforces that, although not legally necessary, best practice favours recording the terms and limits of any retainer in writing to ensure both solicitor and client are on the same page.
This article originally appeared on lsj.com.au