general principles relating to retainers at Common Law

This assessment task involves analysis of a Case Study in 2 Parts.

Part 1

Discuss Dick’s conduct with reference to Part 4.3, Division 3 of Schedule 1 – Legal Profession Uniform Law of the Legal Profession Uniform Law Application Act 2014.

Part 2

Discuss the issues with the letter of retainer, with reference to:

(a) general principles relating to retainers at   Common Law 

and

(b) Part 4.3, Division 4 of Schedule 1 – Legal Profession Uniform Law of the Legal Profession Uniform Law Application Act 2014.

You are expected to identify the ethical issues arising from the Facts provided, research the appropriate provisions that may apply, apply the relevant provisions to the facts and formulate appropriate conclusions regarding the ethical issues.

Facts

1. Bruce Wayne is a legal practitioner practising as a solicitor. He runs his own law practice, Batman Legal, practising mainly in criminal law. He also undertakes simple civil claims, property conveyancing and drafting of contracts.

2. Bruce has a junior solicitor working in his practice, Dick Grayson. Dick was recently admitted to practice.  Having joined Batman Legal only recently, Dick is still on probation.  He is eager to secure an ongoing position with Batman Legal and is always looking for ways to demonstrate to Bruce that he can be a valuable asset.

3. Vicki Vale and Dick Grayson are friends with benefits. They went to high school and university together.  One day in mid-week, Vicki drops into the office of Batman Legal to seek Dick’s advice on whether she has a claim against a business associate, Harley Quinn, over a business transaction that has gone wrong.  She provides Dick with a briefcase full of papers.

4. Flipping through the papers, Dick sees that the dispute involves over a quarter of a million dollars.  Dick is thrilled at the opportunity to impress Bruce.  Dick, however, tells Vicki that he does not have any experience in commercial matters and recommends that they meet with his boss when Bruce returns from leave in about a week.

5. Vicki pouts her lips and says petulantly, “Dick, if you can’t help me now, you can kiss goodbye to our little arrangement.”

6. Dick cannot stand the thought of having no more trysts with Vicki so he impulsively agrees to go through the papers thoroughly and undertake research into the matter. Vicki flutters her eyelashes at Dick and coyly invites him to her place that weekend to “explore options”.  She then kisses him passionately and leaves the office.

7. Dick is all fired up and throws himself into the matter.   By the time he meets Vicki on the weekend, Dick has left no stone unturned in his research and has formed a thoroughly considered view of the dispute.  Dick is excited, not just over the evening that lies ahead but also about Vicki’s prospects of success in the dispute.  He tells her,“I think you have a very strong claim for at least $250,000, perhaps up to $300,000 against this Harley guy.  It is all in the documents.”

8. Dick starts to explain his reasoning but Vicki puts a finger to his lips and says,“Darling, all I want to know is whether you can help me and about the legal costs.  It would help me so much to relax, you know.”

9. Dick gets the hint and asks Vicki only a few questions to confirm certain facts but does not dwell on any particular point.  Regarding costs, Dick tells Vicki,  “I think it may cost up to $50,000 to run the case but don’t worry about it.  I am so confident of success that I will recommend to my boss to act for you on a no-win, nopay basis.  That means you only pay our professional fees if you win, I mean, when you win.  Otherwise you only pay for expenses.  And when you win, you can get this Harley to cover your costs.”

10. Dick then remembers that Batman Legal’s policy is to take a deposit so he suggests that Vicki pays a deposit for the expenses.  Dick asks Vicki whether she can provide an initial sum of $2,000.  Vicki simply smiles flirtatiously at Dick.  Wanting to impress Bruce even further, Dick next tells Vicki,“But when you do win, we want a bonus, say 15%?  OK?”

11. Vicki assumes Dick means 15% of his professional fees and that Harley will have to bear that 15% bonus.  She takes Dick’s hand and whispers something in his ear.  They then retire to the bedroom.

12. On the next business day Dick drafts a letter of demand, a writ and a statement of claim in anticipation of commencing proceedings in the County Court of Victoria and the necessary certificates required by the Civil Procedure Act 2010 (CPA).

13. Dick sends off the letter of demand to Harley Quinn by registered post demanding that Harley pay to him as Vicki’s solicitor the sum of $300,000 within 7 days otherwise he would commence court proceedings to recover the amount.  The letter also demands that Harley pay Vicki’s costs of $500 to date.  He emails a copy of the demand letter to Vicki.

14. A few days later, Bruce returns to work from leave.   Dick cannot wait to tell him about the new client and the bonus he has secured.  Bruce is not as impressed as Dick has been expecting. Bruce questions whether Dick should be acting for someone so close to him and asks to see the file.

15. However, when Bruce sees that the other party to the dispute is Harley Quinn, he immediately forgets his concerns.  Bruce says to Dick,“That Harley Quinn! He’s a real piece of work! I represented him years ago in a criminal matter – if he’s the one who has tried to screw over the client, then we’re going to get him!  Write up a retainer and let’s get this moving!”

16. The following week Vicki’s mum attends at the office of Batman Legal in the late afternoon and hands Dick $2,000 in cash for the deposit.  Bruce is not around.  Dick has never handled money at Batman Legal before, so he locks the cash in his drawer and makes a mental note to ask Bruce’s secretary about deposits.

17. By this time more than 7 days have passed since the letter of demand was sent.  Dick asks Vicki to attend at his office to sign the “overarching obligations” certificate, informing her that it is “merely a formality” for court proceedings.  Vicki signs it without asking any questions.  Dick also asks Vicki to go over the draft statement of claim.  She confirms the facts as pleaded are correct.  Dick signs the “proper basis” certificate required by the CPA.

18. Dick next gives Vicki a letter of retainer and tells her to read it and ask him if she has any questions.  Vicki just glances at it, then folds it and puts it in her purse.

19. Dick files the writ and statement of claim together with the certificates referred to in Paragraph 17.

20. As a matter of law, the Victorian Civil and Administrative Tribunal (VCAT) has jurisdiction to hear disputes between consumers and traders or between traders with no cap on the monetary amount involved.  Proceedings at VCAT are generally simpler, faster and significantly cheaper than litigation in court.  VCAT also generally requires parties to a dispute to attempt mediation before accepting an application to determine the dispute.  The Dispute Settlement Centre of Victoria (DSCV) offers a free mediation service.

21. The contents of the letter of retainer (without the letterhead of Batman Legal) is reproduced below.  It is signed by Bruce.

Dear Ms Vicki Vale,

RETAINER IN CLAIM AGAINST HARLEY QUINN

Thank you for instructing us to pursue a claim against Mr Harley Quinn for up to $300,000.  We confirm our retainer is on the following terms.

Conditional Costs (No-Win, No-Pay) arrangement with Uplift fee of 15%.

1. Our usual charges are $300 per hour.
2. We will only charge our professional fees for acting for you if you win against Mr Harley Quinn.
3. If you win, we will charge you as per paragraph 1 above plus an uplift fee of 15% of what you are awarded for your claim whether by judgment or order of the court or by a negotiated settlement.
4. However, you will bear all disbursements, including barristers’ fees, regardless of the outcome of your claim.

Unless you instruct us otherwise within the next 5 days, we will regard these terms as confirmed by you.

Please note that on confirmation, you irrevocably authorise us to accept any offer at or above $250,000 (excluding costs) to settle your claim without further instructions.

Yours faithfully

(signed)

Batman Legal

22. The day after he files the court documents, Dick organises for copies of the documents to be served on Harley.  The filing and service fees amount to $800. Dick pays this $800 from the cash deposit provided by Vicki’s mother.

23. Dick then asks Bruce’s secretary what he should do with the remaining $1,200 of Vicki’s cash deposit.  She takes it from him and deposits it into the trust account.  She issues a trust account receipt for the amount deposited.  Dick emails Vicki explaining that he has used $800 from the cash deposit for disbursements, leaving $1,200 in trust, and attaches a copy of the trust account receipt.

24. The court documents are served on Harley who engages solicitors.  Harley’s solicitors file a Notice of Appearance on his behalf and serve a copy of the Notice of Appearance on Dick with a cover letter suggesting that the parties undergo private mediation to resolve the dispute.  Harley’s solicitors also request a stay of proceedings until the mediation has been conducted.

25. Dick requests Vicki to attend a client conference to take further instructions.  Bruce joins this conference, keen to help Vicki develop a strong strategy to “take Harley down.”  At this conference Dick and Bruce spend about 3 hours discussing the case in detail with Vicki and advising her of the various options open to her.

26. Bruce waxes lyrical with Vicki and Dick about his experiences representing Harley in previous criminal matters.  Harley associated with unsavoury characters in the underworld, including drug traffickers and “standover men”.  He had been charged with rape.  Even though he was convinced that Harley committed the offence, Bruce had managed to get the prosecution to drop the charge altogether, helped by the complainant changing her story of what happened.  To this day Bruce believes this was brought about by pressure being brought to bear on the complainant by Harley’s criminal associates.

27. On a personal level however, Bruce was outraged that Harley got away with committing such a heinous crime.  So, on one occasion when he overheard Harley on his mobile organising a drug deal, Bruce tipped the police off.  He got the satisfaction of having Harley caught in flagrante delicto, representing him to plead guilty and seeing his client sent to prison.

28. Bruce suggests to Vicki and Dick that they should try to settle the matter early, telling them,“I know how he thinks.  I don’t think he will go to trial.  He’s got wads of cash from his drug deals.  $300 grand won’t set him back much.  I’m pretty sure he will settle.”

29. Vicki considers Bruce and Dick’s advice and agrees to stay the proceedings and to attempt mediation.  Emboldened by Bruce’s suggestion that Harley would be unwilling to risk a trial, Vicki instructs Dick to pursue a higher settlement amount of $325,000 inclusive of costs at the mediation.

30. Dick replies to Harley’s solicitors agreeing to the stay and together, Dick and Harley’s solicitors organise a mediation which costs $1000 (including use of facilities) to be shared equally between the parties. Dick pays Vicki’s share ($500) of the mediation fee out of the money in trust, leaving a balance of $700 in the trust account.

31. Ahead of the mediation, Vicki meets Dick again and they discuss the matter for 2 hours this time. She gives him a written mandate to settle for not less than $300,000 with party and party costs to be agreed or taxed, which Harley will have to bear.  Vicki requests Bruce to also attend the mediation so she may take advantage of his inside knowledge about Harley.

32. Vicki and Dick also agree that if the matter is settled on terms equal to or better than the mandate, it will be considered a “win” for Vicki that will trigger Clauses 2 and 3 of the letter of retainer i.e. Dick will be entitled to claim his professional fees, including the uplift fee, from her.

33. Bruce does not participate in the actual mediation, instead keeping himself cooped up in another room at the mediation centre.  Vicki attends the mediation with Dick, which takes 3 hours and is successful.  Bruce’s advice is spot on – Harley caves in and settles Vicki’s claim.  The terms of settlement are:
    1. Harley will pay Vicki a global settlement of $305,000 in settlement of her claim inclusive of costs; and Vicki will discontinue the proceedings.

34. While Vicki is pleased with the outcome, she is disappointed with Bruce’s absence from the actual mediation.  Vicki wonders whether she may have got a better deal with Bruce’s involvement or at least presence in the mediation itself.

35. Vicki expresses her disappointment to Dick over Bruce’s absence from the mediation room.  Dick assures her that it is Bruce’s guidance to him via text messages throughout the mediation that clinches the deal.  Dick also says,“Bruce can’t show his face to Harley!  Harley won’t be happy and will object. Then we won’t be able to keep working for you.  And having come this far, I can’t possibly let anyone else represent you.  They won’t fight for you as hard as I do!”

36. Harley’s solicitors draw up and send to Dick the settlement agreement. Relying on his authority as Vicki’s solicitor, Dick executes the settlement deed without referring to her. He drafts a Notice of Discontinuance and sends it to Harley’s solicitors together with the settlement deed.

37. Dick estimates that he has put in 15 hours’ work altogether into Vicki’s case, comprising:
    • 7 hours on client conferences;
    • 3 hours attending the mediation; and
    • 5 hours on perusing Vicki’s documents, researching the law, drafting court documents, organising the filing and service of documents, organising the mediation, correspondence and other necessary and incidental work.

38. Dick estimates that Bruce has put in 6 hours’ work altogether into Vicki’s case, comprising:
    • 3 hours on client conferences; and
    • 3 hours attending the mediation centre.

39. Pursuant to Clauses 2 and 3 of the letter of retainer, Dick decides to charge Vicki $18,000, comprising $4,500 ($300 x 15 hours) in professional fees for himself and $3,300 ($550 x 6 hours) in professional fees for Bruce. He also charges $45,750 for the uplift fee (15% of the settlement amount of $305,000).

40. Pursuant to Clause 4 of the letter of retainer, Dick decides to pass on to Vicki an additional $700 in further disbursements.

41. The following day he emails to Vicki a copy of the settlement agreement together with a Final Bill of Costs and a note stating that he would recover the balance of his costs from the settlement money that is coming from Harley, so she need not worry about paying the Final Bill.  The note and the bill are unsigned.

42. The Final Bill of Costs is reproduced below.  It contains no other information.

	BATMAN LEGAL FINAL BILL OF COSTS IN THE MATTER OF VICKI VALE v HARLEY QUINN
	• To our usual charges pursuant to the terms of our engagement in acting for you in the above matter including perusing documents, client attendances, taking instructions, undertaking research, providing advice, preparing documents, corresponding with the other party’s solicitors, filing and serving court documents, organising and attending mediation and all other necessary and incidental work to date: $300 x 15 hours • To our usual charges pursuant to the terms of our engagement in acting providing expert strategy and mediation advice from a commercial specialist and attending mediation: $550 x 6 hours • Uplift fee: 15% x $305,000	$4,500         $3,300   $47,750
2.	Disbursements: • Court filing and service fees • Mediation fee • Other disbursements	$800 $500 $700
	Total	$57,550
	Paid to date	$2,000
	Balance outstanding (This amount will be deducted from the settlement money, so you do not have to pay this bill)	$55,550

 

43. The day after Dick emails to Vicki a copy of the settlement deed and the Final Bill of Costs, Dick receives a cheque from Harley’s solicitors for the global settlement of $305,000.  Dick deposits the cheque into his trust account and issues a trust account receipt to Harley’s solicitors.  Dick sends Vicki an email informing her that he has received the settlement money of $305,000.

44. Vicki responds to the email immediately and asks whether she can collect the money from him after work.  Dick advises Vicki that the cheque has only just been deposited.  Vicki tells Dick that she has made an offer on a property and needs access to $50,000 for the deposit otherwise the property would be relisted.  With a great deal of petulance that comes across clearly over the telephone, she further says,“I don’t think we can continue to see each other if you can’t give me just $50,000 now, do you?  After all, I’m not asking for the whole lot, you know.”

45. Not willing to give up his benefits, Dick organises an electronic transfer of $50,000 from the trust account to Vicki’s account that same day and promises to release the balance of the settlement money once the cheque from Harley’s solicitors had cleared in a few days.

46. The following day Dick receives the Notice of Discontinuance back from Harley’s solicitors duly signed. He files it in court.

47. On the same day Dick transfers $55,550 into the office account and issues a trust account cheque for $199,450 payable to Vicki (after deducting the legal fees and $50,000 advance from the settlement amount).

48. Bruce sits on the Board of Directors (BOD) of the League of Justice Investment Charity (LOJIC), a company limited by guarantee established for charitable purposes.  He does not receive any fees for his position as a director.  Bruce was approached for this role by the Chairperson of the BOD, who is his buddy from university.  On occasion, he also provides legal services, usually pro bono, to LOJIC.

49. LOJIC sponsors a charitable program administered by Relief Initiatives Program of Friends (RIPOF) by donating $500,000 annually. The BOD is considering whether there are grounds to sue RIPOF for mismanaging LOJIC’s donation last year. LOJIC’s Finance Department has identified grave irregularities in RIPOF’s statements of account regarding the use of the sponsorship money and documented its concerns in an internal report to the BOD. Despite several requests from LOJIC, RIPOF has not provided a satisfactory explanation for the irregularities.

50. The BOD requests Bruce to provide a written opinion on a possible claim against RIPOF. Concerned about the public reputation of LOJIC, Bruce requests the BOD to provide him with an external auditor’s report urgently to assist him in formulating his opinion to give to LOJIC.

51. The BOD commissions a confidential expert report from Champion Auditors & Chartered Accountants (CHACHA), a reputable auditing and accounting firm, to audit RIPOF’s statements of account. Since it is getting external auditors to scrutinise RIPOF’s accounts, the BOD decides to also ask CHACHA to examine its own financial governance procedures and make recommendations, if feasible, for tighter control over sponsorship money it gives out. The BOD directs CHACHA to send its original report to itself and a copy to Bruce directly.

52. CHACHA carries out an audit and duly delivers its expert report (the CHACHA Report) to LOJIC and Bruce. The CHACHA Report makes certain findings on RIPOF’s statements of account and recommends certain measures be put in place in LOJIC’s Finance Department to improve its financial governance.

53. After going through the CHACHA Report and undertaking relevant research, Bruce provides a written opinion to LOJIC. Bruce’s view is that a claim against RIPOF has reasonable prospects of success but warns that legal costs may be prohibitive. Bruce advises that LOJIC may suffer “collateral” reputational damage. Bruce also provides a four-page strategy document to LOJIC outlining the potential branding risks their legal options pose and highlighting the need to insulate potential donors from these financial irregularities.

54. At the BOD’s request, Bruce drafts a letter for LOJIC’s company secretary to send to RIPOF. The letter demands that RIPOF provide proper accounts or refund the sponsorship money otherwise proceedings will be commenced. In its response, RIPOF has the audacity to ask to be provided with the information on which LOJIC relies for its demand.

55. In response to disquiet among LOJIC members and potential donors over the dispute with RIPOF and the prospect of costly litigation and possible reputational damage, the BOD circulates a statement of assurance to prospective donors and LOJIC members. The statement reads: “The Board of Directors wishes to reassure members and potential donors of LOJIC that it will always act in the best interests of the Foundation and our important mission. The Board has sought and taken into account expert opinion from legal, accounting and marketing experts. It is the Board’s considered view that litigation may be unavoidable if RIPOF does not provide a satisfactory explanation or refund the $500,000 sponsorship money that LOJIC provided last year.