3. Fiduciary duty

A fiduciary has a positive obligation to act in good faith for the benefit of another and a negative obligation not to profit from the relationship.

• Riley

Law Society of New South Wales v Harvey (1976) 2 NSWLR 15

Clients lent money to three companies where the solicitor was a director and shareholder of. The court held that the solicitor was guilty of improper conduct as he had mixed his clients’ affairs with his own, had grossly preferred his interests to those of his clients and had failed to advise his clients to seek independent legal advice.

A conflict of interest which is avoidable, and ought to be avoided, is that which arises from a deliberate proposal of the solicitor that his client deal with him. … The price of being a member of an honourable profession, whose duty to his client ought not to be prejudiced in any degree, is that a solicitor is denied the freedom to take the benefit of any opportunity to deal with persons whom he has accepted as clients. Therefore he ought neither to promote, suggest, nor encourage a client to deal with him, but rather should take all reasonable steps positively to avoid dealing directly, or indirectly, with his client.

Law Society of New South Wales v Moulton [1981] 2 NSWLR 736

Case dealing with the misconduct of a solicitor who conducted business dealings with his clients. There, the solicitor borrowed money from his clients at a lower rate than he would otherwise have obtained if he had borrowed from a finance company. The security given by the solicitor was inadequate to justify the loan, and the solicitor failed to give full disclosure of the security given to the clients. 

In cases such as the present one, it is essential to remember, indeed to emphasize, that a solicitor stands in a fiduciary relationship to his clients.

Clark Boyce

Acted for both parties obtaining a loan and third party mortgage, no conflict when informed consent obtained, but must be carefully documented.

4. Solicitors'/advocates' immunity

• Riley

Donellan v Watson (1990) 21 NSWLR 335

The immunity from litigation is not co-extensive between the role of barrister acting as an advocate and solicitor acting as an advocate, for the reasons given –

[a] solicitor enters into a binding contract wíth the client which may either expressly or by necessary implication limit the solicitor's authority as the agent of the client, in the conduct of the litigation .... For example, a solicitor ... is bound to take reasonable care to properly instruct competent counsel ...
[A] solicitor who briefs himself [or herself] may be liable in negligence of briefing an
incompetent advocate although not liable in negligence as advocate.

D’Orta-Ekenaike v Victorian Legal Aid [2005] HCA (12 March 2005)

Affirmed the common law in Australia as stated in Giannarelli v Wraith. The court also held that a solicitor is entitled to common law immunity from suit in respect of acts or omissions which, if done by an advocate, would be within the scope of the advocate’s common law immunity

Giannarelli v Wraith (1988) 165 CLR 543
Confirms rule in Rondell v Worsley using test in Rees

This immunity from suit extends to work done by the advocate outside court which leads to a decision, and includes solicitors acting as advocates

5. The retainer

• Rule 1

Make the retainer in writing or solicitor may be liable.  As when it is a one on one argument the court prefers the version of the client to that of the solicitor.

Whatever is contained in the retainer the solicitor must complete the work.

Express or implied

• Riley

6. Regulation of Solicitors

(a) Law Society's statement of ethics

The true profession of law is based on an ideal of honourable service. Riley, NSW Solicitors Manual

We acknowledge the role of our profession in serving our community in the administration of justice. We recognize that the law should protect the rights and freedoms of members of society. We understand that we are responsible to our community to observe high standards of conduct and behaviour when we perform our duties to the courts, our clients and our fellow practitioners.

Our conduct and behaviour should reflect the character we aspire to have as a profession.

This means that as individuals engaged in the profession and as a profession:

• We primarily serve the interests of justice.
• We act competently and diligently in the service of our clients.
• We advance our clients' interests above our own.
• We act confidentially and in the protection of all client information.
• We act together for the mutual benefit of our profession.
• We avoid any conflict of interest and duties.
• We observe strictly our duty to the Court of which we are officers to ensure the proper and efficient administration of justice.

We seek to maintain the highest standards of integrity, honesty and fairness in all our dealings.

- Serve competently
- Communicate clearly
- Treat with respect
- Act fairly, honestly and diligently
- Pursue ideal service that transcends self interest
- Work with colleagues to uphold professional standards
- Develop excellent professional skills
- Act frankly and fairly in court
- Be trustworthy
- Keep clients affairs confidential as required by law
- Maintain and defend the rights of the individual
- Avoid any conflict of interest

(b) Control of unqualified persons

LPA s 14 Prohibition on engaging in legal practice when not entitled: A person must not engage in legal practice in this jurisdiction unless the person is an Australian legal practitioner. This does not apply to:
 
- legal practice engaged in under the authority of a law of this jurisdiction or of the Commonwealth, 
- Incorporated legal practices and multi-disciplinary partnerships
- the practice of foreign law by an Australian-registered foreign lawyer 
- legal practice engaged in by a complying community legal centre, 
- conveyancing work carried out in accordance with a licence 
- work performed by a land agent 
- the drawing of instruments by an officer or employee in the service of the Crown 
- legal practice of a kind prescribed by the regulations. 
- a person who as an employee provides legal services to his or her employer

LPA s 15 Prohibition on representing or advertising entitlement to engage in legal practice when not entitled

LPA s 16 Presumptions about taking or using certain names, titles or descriptions specified in regulations.  If you use the following tack ons:

lawyer, legal practitioner, barrister, solicitor, attorney, counsel, Queen’s Counsel, King’s Counsel, Her Majesty’s Counsel, His Majesty’s Counsel, Senior Counsel

- it gives rise to the rebuttable presumption that the person represented that they are entitled to engage in legal practice

(c) Trust accounts

Trust Money means money entrusted to a law practice in the course of or in connection with the provision of legal services by the practice, and includes:
(a)  money received by the practice on account of legal costs in advance of providing the services, and
(b)  controlled money received by the practice, and
(c)  transit money received by the practice, and
(d)  money received by the practice, that is the subject of a power, exercisable by the practice or an associate of the practice, to deal with the money for or on behalf of another person.

The term legal services is defined in section 4 of the Act to mean work done, or business transacted, in the ordinary course of legal practice. The last part of the definition, “in the ordinary course of legal practice”, is intended to invoke the common law meaning on what defines the practice of a legal practitioner. The definition does not render a service a legal service simply because it is provided by a legal practitioner or by a law practice. The service must also be provided in “the ordinary course of legal practice”.  In other words, if the law practice is not providing a legal service, the money received should not be deposited into the general trust account.

There are five types of trust money, they are as follows:

1. Controlled money is money received or held by the law practice in respect of which the practice has a written direction to deposit the money in an account (other than a general trust account) over which the practice has or will have exclusive control.

2. Transit money – money received (other than cash) by a law practice subject to instructions to pay or deliver it to a third party, other than an associate of the practice.

3. Power money – money received (other than cash) by a law practice subject of a power, exercisable by the practice or an associate of the practice, to deal with the money for or on behalf of another person. The power to the practice or associate may be exercisable by:
(a) the practice alone, or
(b) an associate of the practice alone (otherwise than in a private and personal capacity), or
(c) the practice or an associate of the practice jointly or severally, or jointly and severally, with either or both of the following:
(i) one or more associates of the practice,
(ii) the person, or one or more nominees of the person, for whom or on whose behalf the money may or is to be dealt with under the power.

4. Written direction money – money received (other than cash) by a law practice in respect of which the practice has a written direction by an appropriate person to deal with it otherwise than by depositing it in the account.

5. General trust money – any trust money received by the law practice that does not satisfy the above definitions

A further subset of trust money is referred to as the “Investment of Trust Money”.  The requirements for the investment of trust money are as follows:
• the money must first be entrusted to or held by the law practice (in the above five types of trust money) in the ordinary course of legal practice, and primarily in connection with the provision of legal services to or at the direction of the client, and
• the investment is or is to be made in the ordinary course of legal practice and for the ancillary purpose of maintaining or enhancing the value of the money or property pending completion of the matter or further stages of the matter or pending payment or delivery of the money or property to or
• at the direction of the client,
• a written direction is obtained from the client directing the investment to be made.

When a law practice receives cash in a transaction valued at AUD $10,000 or more, it is required by the Financial Transactions Reports Act 1988 to report the transaction.