Australia: Lawyers should stay within the scope of the retainer to avoid professional indemnity claims

In brief – Importance of written retainer for legal work and high standards in pro bono work

Lawyers should have a written retainer and any changes to it should be documented in writing. Pro bono legal work needs to be done to the same high standard as paid work.

Moss v Eagleston decision handed down by NSW Supreme Court

The decision in Moss v Eagleston [2014] NSWSC 6 was recently handed down in the NSW Supreme Court. In these proceedings a solicitor, Mr Eagleston, was sued by his former client, Mr Moss, in an action for damages for professional negligence, where it was alleged that in preparing his client's statement of claim, the solicitor had failed to include claims for misleading and deceptive conduct or unconscionable conduct, and an action in defamation.

Allegation that newspaper offered to pay for information

These proceedings arose in connection with Schapelle Corby's original arrest.

Mr Moss alleged that he provided information about the case to a journalist from The Daily Telegraph on the basis that he would be paid $250,000 should a story containing his information be published, but that after the publication of two articles utilising his information, the paper refused to pay him.

Mr Moss sought to retain a law firm at which Mr Eagleston was an employed solicitor, with a view to commencing legal proceedings.

Mr Moss paid $200 to the firm to draft and send a letter of demand for payment in accordance with the alleged agreement between Mr Moss and The Daily Telegraph. The claim was rejected outright by the paper and Mr Moss was unable to retain the firm to pursue the claim any further due to his financial constraints.

Conflicting versions of agreement between solicitor and client

Mr Eagleston, however, had further dealings with Mr Moss outside of Mr Moss' retainer with the firm. He said that Mr Moss had called him on a daily basis asking him what could be done about his claim. Mr Eagleston said that he began to feel sorry for him and ultimately agreed to assist him in drafting a statement of claim on a pro bono basis, but that Mr Moss would have to run the proceedings himself.

However, Mr Moss alleged that he and Mr Eagleston had entered into an agreement whereby Mr Eagleston would receive a percentage of any amount recovered by Mr Moss, and that the drafting of the statement of claim was done in connection with this agreement.

Ultimately, Mr Moss ran the proceedings himself and lost.

Was there a duty to consider other causes of action?

An issue for the court to consider was whether – following Fleeton v Fitzgerald and Ors Matter No Ca 40685/96 [1998] NSWSC 696 – a solicitor's duty is confined to the retainer.

Her Honour noted that although it was important to consider the subject matter of the retainer, "the duty of care can transcend that contained in the express or implied terms of the retainer, according to the circumstances of the case" [82]. Conversely, her Honour also stated that "the terms of the retainer are an important and often determinative consideration" [82].

The court found that during the period of the retainer, the solicitor was not aware of any further instructions from the client beyond those confirmed in a letter to the client which confirmed that the solicitor would proceed on the basis of an alleged breach of contract. It was then queried by the court whether the solicitor had assumed a broader responsibility when later agreeing to draft the statement of claim.

Her Honour ultimately found, based on the evidence before her, that all the solicitor had agreed to do was prepare a statement of claim, and was not convinced:

...on the balance of probabilities that Mr Eagleston assumed responsibility or otherwise fell under a duty of care to advise Mr Moss as to the cause of action in defamation or to include any other causes of action in the statement of claim drafted by him. [109]

Obligations of solicitor drafting Statement of Claim on pro bono basis

Of further interest in these proceedings were her Honour's comments on the obligations of a solicitor who agrees to draft a Statement of Claim on a pro bono basis.

It was submitted for the solicitor, that as the statement of claim was prepared on a pro bono basis, there was a lesser standard of care owed than if the work had been paid for by the client.

Her Honour was of the view that the proposition of there being a lower standard of care owed to the client when providing services on a pro bono basis should be rejected. Her Honour stated:

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 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 services. [81]

It can be taken from the above that every lawyer should and must adhere to the same standard of service when undertaking agreed work for their clients – pro bono or full fee paying.

Assessment of damages on a "loss of chance" basis

The judge stated that if she had made a finding that there was a breach of duty, which she had not, then it would be necessary for her to determine the value of the lost chance. In her view she would have determined that Mr Moss would have instructed Mr Eagleston to pursue other claims.

In considering the specific claims available to the plaintiff, the judge was of the view that Mr Moss had no "enthusiasm for a claim in unconscionable conduct" when the matter came up for hearing. However, she said that in relation to the claim for misleading and deceptive conduct Mr Moss "plainly would have pursued such a claim if so advised".

Chance of success in an action in defamation

The judge indicated that the question of loss of chance for an action in defamation was more difficult to determine. She noted that there was some prospect of obtaining an extension of the limitation period which would have allowed Mr Moss to pursue an action for damages for defamation, but there was a risk that such an application would be unsuccessful. She concluded that Mr Moss had about a 30% chance of obtaining an extension of the limitation period.

In determining the loss of chance for a subsequent action in defamation, it would have been necessary to determine the likelihood that the newspaper would have succeeded in proving the defence of truth, but that task was never undertaken.

The judge found that the defence of justification may have turned on an assessment of Mr Moss' credibility, which she was in a position to assess, and found that his assertions in relation to the Corby case were implausible. The court found that Mr Moss' prospects of succeeding in a claim in defamation was around 30%. The judge found it likely that there would have been a verdict of between $100,000 and $150,000 and so Mr Moss' loss of chance was to be valued as 30% of 30% of that range - up to $13,500.

In relation to a claim for misleading and deceptive conduct, the court found that Mr Moss had provided no persuasive evidence that such a claim would have succeeded, specifically, that the journalist had ever promised to pay him. She ultimately said that the loss of chance to pursue that aspect of the claim was of little value.

Make sure you do not act outside the scope of your retainer

Lawyers should not undertake work for clients without a written retainer. They should make their clients aware of how the work they do relates to that retainer and further ensure that they do not act outside its scope. If the scope of a retainer requires altering, ensure that it is well documented in writing and both you and your client understand and agree on its parameters.

Finally, lawyers performing legal work on a pro bono basis must provide their clients with the same level of knowledge and skill afforded to a paying client.

Peter Moran Amy Malaquin
Professional indemnity
CBP Lawyers

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