Issues:

• Can “without prejudice” be a shield of substance? 
• What are its applications?
• How far can a lawyer protect his rights against clients’ property or money under his control?
• How will you protect yourself in practice against the creeping power of “proximity” and the wide range of persons affected by your actions?

Desired Outcomes:

• The ability to make offers and conduct negotiations to your clients’ advantage whilst protecting their rights.
• An understanding of the way in which a lien and other avenues can protect your right to reward from action for clients.
• An awareness of the breadth of potential claimants outside the retainer waiting to pounce on your failure causing loss.

1. Without prejudice communications

To enable parties engaged in an attempt to compromise litigation to communicate with one another freely and without the embarrassment which the liability of their communications to be put in evidence subsequently might impose on them… It is concerned with the use of the negotiations or what is said in the course of them as evidence by way of admission.

Cutts v Head

Parties encouraged to settle not litigate therefore negotiations are not admissible

Field v Commissioner for Railways for New South Wales (1957) 99 CLR 285*

Documents will only be capable of attracting privilege if they can be said to be reasonably connected with or incidental to settlement negotiations.  The privilege does not extend to the protection of objective facts not connected with settlement

The genesis of Calderbank offers is the English decision of Calderbank v Calderbank which decided whether a party could in a ‘without prejudice’ communication in which an offer of settlement had been made, reserve that party’s right to waive the confidential (that is, the ‘without prejudice’) nature of the offer in order to rely upon it for the purposes of making an application for indemnity costs.  It is usually “Without Prejudice Save as to Costs”.  Once making the offer, if a more favourable result is not achieved by the opposing party, the Calderbank offer can be produced to the Court in support of an application for an order of indemnity costs in favour of the offeror from the date that the offer was made.

Amev-U D C Finance v Artes Studios Thoroughbreds (1988) 13 NSWLR 486*

That merely marking the letter of offer as “without prejudice” should not permit it to be admitted on the costs issue

2. Loans and liens

Retainer money is not trust money.

Re Taylor, Stileman, & Underwood

Lindley LJ held that a solicitor has a lien for all taxable costs, charges, and expenses incurred by him as solicitor for his client, such as money payments which he makes for his client in the course of his business, and upon all his client's papers, but not for ordinary advances or loans.

Stewart v Strevens (1976) 2 NSWLR 321*

Helsham J held that s41 of the Legal Practitioners Act 1898 (now s255 Legal Profession Act 2004) prevented the solicitor, without the client’s authority, from withdrawing monies from his client’s trust account in repayment of a loan from the solicitor to his client.

Courts will protect solicitors to maintain a lien over trust monies

Akki v Martin Hall Pty Ltd v Anor (1994) 35 NSWLR 470

Solicitors are entitled to the assistance of the court to protect their claim for costs where property has been recovered as a result of their exertions and that property extends to an order for costs”. This right, it was held, is an equitable right and enforceable as such.

3. Duties and liabilities to third parties

Although the general rule is that lawyers are not liable to those who are not their clients, and this is especially so to a client’s opponent in litigious matters, there are circumstances where liability will result.  The idea that a lawyer could be liable to others, apart from their clients with whom they have a contractual relationship, is particularly important in matters involving wills and deceased estates. This liability is extended to non-client beneficiaries in negligent drafting and execution of the will.

Hill v Van Erp High Court decision (1997) 142 ALR 687

It is with wills and deceased estates that the courts have been more likely to find liability to “strangers”.

Summerville v Walsh (1998)

It also extends to beneficiaries in cases where a practitioner fails to carry out the testators instructions when they fell unconscious being able to sign the will (ie. Where the legal requirements were not met, but probate is likely anyway).

Ross v Caunters (1979) 3 All ER 580*

Holds that lawyers can owe a duty of care both to their clients and to third parties who suffer loss or damage. In this case, the solicitors failed to prevent a beneficiary from attesting the will

Hawkins v Clayton (1988) 164 CLR 539*

Here the court ruled a solicitor owes a duty to take reasonable steps in locating and notifying the executor of a will in his charge. It was surmised that the executor 'relies' on the solicitor to advise of the situation, and that there is an 'assumption of responsibility' to so advise when the solicitor takes on a client

Hilton v Noss (1995)

This liability can result in litigious matters where a lawyer gives an undertaking either to the Court or to the opposing party.

When giving an undertaking or saying that you will do something and the other side (ie. it is a litigious matter) will rely on what you said you will do (and you don’t) can result in liability. 

For example, if a non-client deposits a cheque with a lawyer for the purchase of a clients land, and then the solicitor releases the cheque to the client for a reason other than that purchase, this will result in liability to the non-client.