|
COLUMN Ethics in Parctice |
Client's Termination of Retainer and Transfer of Documents: Ethical Considerations
This article discusses the ethical considerations arising upon the transfer of documents pursuant to a client’s termination of the retainer under r 41 of the Legal Profession (Professional Conduct) Rules.
The Ethics Committee, a committee of the Council of the Law Society, is tasked with providing guidance to members on their ethical obligations. The Committee responds to written questions from Law Society members by rendering a written opinion through a private and confidential letter. Members can submit a written inquiry to the Committee through the Representation and Law Reform Department at represent@lawsoc.org.sg. For detailed guidelines for inquiries to the Committee, please refer to the Council’s Practice Direction 2 of 2009 which can be found on the Legal Ethics section of the Law Society’s website at www.lawsociety.org.sg.
When reading this article, members should bear in mind that the Committee has omitted facts which it does not consider crucial to the ethical obligations of the lawyer in question or to the guidance given. Members are advised to write to the Committee for a specific opinion on their query in order to receive the Committee’s specific guidance on their particular situation with full knowledge of all the facts. If members wish to guide themselves based solely on the Committee’s opinion without writing in for a specific opinion, they must accept that they run the risk that there could be crucial differences of fact or in the applicable rules of ethics which could affect their position and render them subject to discipline. Neither the Committee nor the Law Society assumes any responsibility or liability in rendering the Committee’s opinions or for anything a member does or omits based on the Committee’s opinion and without seeking a formal opinion on the facts of their case from the Committee.
The Ethics Committee has provided guidance to members on various queries concerning r 41 of the Legal Profession (Professional Conduct) Rules (“PCR”), in the context of a change of solicitors occasioned by the termination of the outgoing solicitor’s retainer by the client, and where the outgoing solicitor’s fees remain unpaid. This article summarises and consolidates the key aspects of the Committee’s opinions; it is hoped that the following will be of benefit to members when encountering the not uncommon situation envisaged under r41.
This article addresses the following issues:
1. The legislative framework – rr 41 and 50 PCR;
2. The common law position;
3. The scope of the outgoing solicitor’s lien under r 41(b) PCR;
4. The scope of the incoming solicitor’s undertaking under r 41(b) PCR;
5. The applicability of r 41 PCR to completed matters.and
6. Practical matters arising from a change of solicitors.
Before we proceed, let us consider the legislative framework governing the ethical obligations of a solicitor taking over a matter from another solicitor, in the case where it is the client who terminates the outgoing solicitor’s retainer. In this case, the relevant rules of professional conduct are rr 41 and 50 PCR.
Rule 41 PCR provides that an advocate and solicitor shall:
1. permit a client to change his legal adviser at any time; and
2. in the case where the outstanding fees are not agreed or paid, release all documents and offer any such assistance as may be necessary to enable any other advocate and solicitor instructed to take over the matter upon receiving an undertaking to protect his lien upon such documents.
Rule 50 PCR further provides:
An advocate and solicitor who finds, on receiving instructions, that acceptance of the instructions would amount to his replacing another advocate and solicitor who has previously been instructed in the same matter, shall inform the other advocate and solicitor that instructions have been given to him and advise the client to pay the outstanding costs, if any, of the other advocate and solicitor before accepting the brief.
The respective obligations of the outgoing solicitors and the incoming solicitors under rr 41 and 50 may be summarised in the following diagram:
Incoming Solicitor’s Obligations |
Outgoing Solicitor’s Obligations |
• Inform outgoing solicitor of client’s instructions to take over conduct of matter (r 50) |
• Accept the termination of his retainer by the client (r 41(a)) |
• Advise the client to pay the outgoing solicitor’s outstanding costs, if any (r 50) |
• Release all documents and offer any assistance necessary to enable the incoming solicitor to take over the matter where the outstanding fees are not agreed or paid (r 41(b)) |
• Give undertaking to protect outgoing solicitor’s lien upon documents |
|
The outgoing solicitor has no choice but to accept the termination of his retainer by the client. Notwithstanding that his fees remain unpaid, he is nevertheless obliged to release all documents and offer assistance necessary to enable the incoming solicitors to take over the matter, against the incoming solicitor’s undertaking to protect his lien. This seems to place the outgoing solicitor whose fees remain unpaid in a somewhat vulnerable position. As the concept of a solicitor’s right to a lien in the event of the client’s termination of the retainer is derived from the common law, it is necessary to examine the common law position.
At common law, a solicitor has the unrestricted right to “retain all his client’s documents, deeds and other personal property in his possession until payment of all costs owing to him”, otherwise known as a retaining lien.1 In equity, however, there is jurisdiction notwithstanding the common law retaining lien “to order delivery up where the property is needed for the purpose of litigation” in cases where it is the solicitor who discharges himself.2
This equitable jurisdiction exists because a solicitor is not allowed to exert his lien so as to interfere with the course of justice as he only has a qualified lien: see Gamlen Chemical Ltd v Rochem Ltd3 (“Gamlen”) and Ismail v Richard Butler4 (“Ismail”). This equitable jurisdiction can also be exercised to order delivery up on terms, such as requiring an undertaking from the incoming solicitors to preserve the outgoing solicitors’ lien and to redeliver the papers to him at the end of the litigation.5 But the equitable jurisdiction itself does not incorporate those terms which are left to the Court to impose on a case by case basis.
The equitable jurisdiction is said not to be available where it is the client who discharges the solicitor.6 In other words, at common law, the solicitor is entitled to hold on to all the client’s documents until all his fees have been paid where it is the client who terminates the retainer. This creates problems for the client and the incoming solicitor who would find it difficult to take over the matter without the documents. To address the unavailability of the equitable jurisdiction in cases where the client discharges the solicitor, the Law Society of England and Wales used to recommend that “the solicitor’s papers should be released to the successor solicitor subject to a satisfactory undertaking as to the outstanding costs being given in lieu of the lien”.7 There was however no duty on the former solicitor to accept the undertaking.8
The Committee’s view is that the purpose of r 41 is to overcome the unavailability of this equitable jurisdiction to a client who discharges his solicitor. Without this equitable jurisdiction, or a statutory equivalent, a solicitor in Singapore would have no obligation to release the client’s papers until his fees have been paid.9 Rule 41 therefore effectively encapsulates, in a situation where the client discharges the solicitor, the “non-interference” principle in English law.
The underlying purpose of r 41 is to prevent a solicitor’s lien from interfering with the course of justice in virtually all cases by making the obligation turn on necessity rather than on who terminated the retainer. Thus, r 41 assumes that, subject to the low threshold of the “necessity” requirement, the potential hardship to the client in being unable to proceed with his litigation will always outweigh the potential hardship to the outgoing solicitor in being put at risk of being unable to recover his fees when the incoming solicitor takes over the matter.
Having established that the outgoing solicitor is not entitled to assert his lien in a way which interferes with the course of justice, let us consider the types of property that are subject to the lien and how the lien may be lost.
The retaining lien under r 41(b) PCR encompasses only documents, not choses in action, and even then only if the documents were actually in the possession of the outgoing solicitors at the time the client discharged them. The retaining lien does not extend over intangibles or documents which were never in the outgoing solicitors’ possession and which only subsequently came into the possession of the incoming solicitors subsequent to taking over the conduct of the matter. Thus, the retaining lien would not extend over the proceeds of any action nor a cheque embodying such proceeds.
Although the term “documents” is not defined in the Legal Profession Act (Chapter 161)(“the Act”), such documents would include electronic messages exchanged between the law practice and the client or third parties in the course of the retainer in the light of the Council’s 2006 Guidance Note on Storage of Documents in Electronic Form (“2006 Guidance Note”). The “non-interference” principle underlying r 41 is to facilitate the release of all documents belonging to the client to the incoming solicitor regardless of the medium for the recording of such documents.
The ethical duty of the outgoing solicitor to release to the incoming solicitor electronic messages belonging to the client under r 41(b) is not affected by the fact that the client may have a copy of such electronic messages on his computer. Otherwise, the ethical obligation under r 41 would be rendered otiose as the client would ordinarily be given a copy of all documents exchanged between the law practice and the client or third parties.
Rule 41(b) does not require the outgoing solicitors to print hard copies of the messages at their own costs for the purpose of handing over the documents to the incoming solicitors. The ethical obligation stipulated in r 41(b) to “release all documents” may thus be satisfied by the outgoing solicitors saving the electronically stored documents in a suitable storage device such as a thumb drive and making the device available to the incoming solicitors to copy the electronic documents for their own records. Moreover, these electronic messages are not required to be printed in hard copy format as the Council’s Guidance Note 1 of 2001 on Ethics and Information Technology states that “a record of all outgoing and incoming e-mails sent under a client’s file [may] be kept whether as a paper record on file or stored by electronic means” [emphasis added].
The Council’s 1999 Practice Direction on Storage and Destruction of Documents (“1999 Practice Direction”) states, inter alia, that the client is not entitled to the whole file once the retainer is terminated. Documents coming into existence during the retainer fall into four broad categories, not all of which belong to the client. However, the 1999 Practice Direction, which is supplemented by the 2006 Guidance Note, must be read subject to r 41. The 1999 Practice Direction and the 2006 Guidance Note are concerned with a pure termination of the client’s retainer and the arrangements to be made regarding the client’s documents at the end of the matter, while r 41 is concerned with facilitating the course of justice for the client upon the termination of the client’s retainer while the matter is still ongoing.
Hence, the scope of documents that the outgoing solicitor is required to release to the incoming solicitor under r 41(b) is wider than the scope of documents that the client is entitled to retain at the conclusion of the matter. Rule 41(b) does not merely require the release of documents prepared by a solicitor for the benefit of the client and which therefore belong to the client, but the release of all documents that may be necessary to enable an incoming solicitor to take over the matter, including documents prepared by a solicitor for his own benefit. For example, although copies of letters written to the client are prepared for the solicitor’s own benefit or protection and therefore belong to the solicitor, r 41(b) would require a solicitor to release these documents to the incoming solicitor as they would ordinarily be necessary to enable the incoming solicitor to take over the matter.
As the solicitor’s retaining lien is a possessory right, the outgoing solicitor’s lien is “lost upon parting with possession” of the documents to the incoming solicitors.10 Thus, it would be imperative for an outgoing solicitor to extract the relevant undertaking from the incoming solicitors before handing over the documents. If no such undertaking was obtained on releasing the papers to the new solicitors, the former solicitors may well have lost their retaining lien over the documents permanently.
Having considered the types of property which are subject to the outgoing solicitor’s retaining lien, we will now turn our attention to the scope of the undertaking to be given by the incoming solicitor.
The undertaking is to protect the outgoing solicitor’s lien over the documents. It should be distinguished from an undertaking to procure payment of the outstanding fees by the client. Care should be taken by the incoming solicitor when drafting the undertaking to avoid inadvertently undertaking the payment of the fees instead. For example, a promise to “undertake the payment of your costs” upon transfer of the files is an undertaking to procure payment by the client, and not merely protect the former solicitor’s lien on the documents. As a solicitor’s undertaking is “a solemn promise”11 given in the solicitor’s professional capacity, the solicitor is subject to the summary jurisdiction of the court to compel him to implement the undertaking or to pay compensation if performance of the undertaking is impossible.12
Does the incoming solicitor’s undertaking require him to return the files upon the former solicitor’s request made several months after he had taken over the matter, and while the matter is ongoing? Such an inquiry necessarily involves questions of law as r 41 refers to the concept of a solicitor’s right to a lien in the event of the client’s termination of the retainer, which is derived from common law. In the Committee’s view, r 41 does not directly assist in determining the issue in such a situation which concerns a solicitor’s ethical obligations arising at some point in time well after he has taken over a matter. The Court is the final arbiter on this question of mixed law and ethics, and the only definitive way of determining this issue is therefore by making the relevant application to court for their decision on the matter. In the absence of a decision from the Courts, the Committee’s views are set out below.
On both a literal and purposive interpretation, r 41 is concerned only with the ethical obligations of both the incoming and outgoing solicitors at the time when the client terminates the retainer of the outgoing solicitors and makes arrangements for incoming solicitors to take over the matter. This is seen from the phrase in r 41: “release all documents and offer any such assistance as may be necessary to enable any other advocate and solicitor instructed to take over the matter …” (emphasis added). As such, r 41 does not directly address a solicitor’s ethical obligations arising some time after he had taken over a matter.
Even if r 41 does apply in such a context, r 41 expressly requires the solicitor only to give an undertaking to protect the outgoing solicitor’s lien upon all the documents released. It does not go further and impose an obligation on the incoming solicitor to return the documents when they are no longer “necessary”. There are good reasons why this further ethical obligation should not be implied in r 41. First, imposing such an implied ethical obligation would create much uncertainty for the incoming solicitors as to when precisely it ceases being “necessary” to retain the documents. Second, such an implied obligation is inconsistent with the usual English court practice where the return of the client’s documents is mandated only at the end of litigation.13 Third, at the time of handing over the matter, the outgoing solicitor is at liberty to ask the incoming solicitor to provide an additional undertaking to return the client’s documents under specified conditions. As the terms of such an undertaking may vary from case to case, depending on the needs of the outgoing solicitor and the consent of the incoming solicitor, it would not be possible to imply a workable ethical obligation in r 41 for the incoming solicitor to return the client’s documents which takes into account all the possible permutations. Thus, it should be left to the solicitors involved to decide how best to frame this obligation and express it in an undertaking, if one is to be given at all.
Notwithstanding the above and in the absence of any relevant express or implied undertaking, the Committee is of the view that a solicitor still has an ethical obligation to faciliate access to justice which is an important consideration in responding to the former solicitor’s request for the return of the client’s documents.
Rule 47 PCR imposes an ethical obligation on a solicitor to “treat his professional colleagues with courtesy and fairness”. In interpreting r 47, Rule 2(2)(d) PCR provides that “regard shall be had to the principle that an advocate and solicitor shall not in the conduct of his practice do any act which would compromise or hinder … obligation[s] … (d) to facilitate access to justice by members of the public.”
In order to facilitate access to justice by members of the public, a solicitor should not be “improperly obstructing or impeding another advocate and solicitor in his work”.14 There is no reason why the same principle should not apply where a solicitor receives a request from a former solicitor who is legally entitled to pursue a claim for unpaid fees against his former client. The rendering of assistance to the former solicitor, which would facilitate access to justice, is also consistent with a solicitor’s “duty to maintain a spirit of co-operation” under r 47.15
Accordingly, even in the absence of any specific express or implied undertaking, a solicitor has a positive ethical obligation under the PCR to meet the former solicitor’s request for the return of the documents, which was made with a view to pursuing its legal entitlement against the client for unpaid fees, so long as it does not hinder his own ability to conduct the client’s case. Such an obligation may be discharged by making reasonable arrangements with the former solicitor to access the client’s files by making copies of the same at the former solicitor’s costs, making the files available to the former solicitor for a limited period, or a combination of the two.
Complications arise when there are successive changes in the solicitors handling the matter. Suppose that Lawyer B, who took over the matter from Lawyer A, now has to hand over the matter to Lawyer C, against C’s undertaking to protect his lien. Is C obliged to extend the same undertaking to A? What about B’s undertaking to A – does that survive after the documents have been released to C?
It is clear from r 41 PCR that B has to release the documents to C on C’s undertaking to protect his lien. The undertaking given by C will, however, not release B from its undertaking to A, unless A consents to releasing B from its undertaking to A. The effect of C’s undertaking is that C only undertakes to protect B’s lien upon the documents for any unpaid costs due to B, and not for unpaid costs due to A. Therefore, B remains bound by its undertaking to A and A can only look to B’s undertaking for the protection of A’s lien.
A or B may in the future require access to their former client’s documents in order to pursue any legal entitlement against the client for unpaid costs. As such documents would have been transferred to C, the Committee recommends that at the time of transfer of the files from B to C, B and C should agree on an arrangement which would facilitate the access by A and B to the documents. An example of such an undertaking is as follows:
C confirms that it will deliver to B the documents for [name of matter] within [x] days of receipt of B’s written request that B requires possession of the documents either to:
1. comply with the undertaking B has provided to A to protect A’s lien for costs; or
2. assist B with any claim for unpaid costs that B may have against the [name of B’s former client],
unless such delivery will hinder C’s ablility to conduct the client’s case. In which case, C confirms that it will use its best endeavours to make a reasonable alternative arrangement with B to access the client’s files, in full compliance with the letter and the spirit of rr 2(2)(d) and 47 of the Legal Profession (Professional Conduct) Rules.
Solicitors should be extremely careful in phrasing the undertaking to be given under r 41(b) PCR when they take over a matter. The undertaking required under r 41(b) is only to protect the outgoing solicitor’s lien upon the client’s documents. A broadly worded undertaking may lead to the incoming solicitor being held in breach of the undertaking. For example, in Bentley v Gaisford16 the outgoing solicitors made the client’s documents available on the incoming solicitors’ undertaking “to hold the documents/our file to our order in respect of outstanding fees/disbursements” but the use the incoming solicitors might make of them was not expressly restricted. The new solicitors, acting in good faith and believing that they were properly discharging their duty to the client, copied all the documents and sent them to their client, thereby effectively rendering the outgoing solicitors’ lien for unpaid fees useless. The English Court of Appeal held that “when a solicitor transferred a client’s documents over which he possessed a lien for unpaid fees to another solicitor, the use the second solicitor could make of them was impliedly limited so as to preserve to the first solicitor the maximum security which was not inconsistent with the progress of the client’s litigation”.17 In that case, the new solicitors had breached their undertaking to protect the former solicitor’s lien over the documents, since the wholesale copying of the papers effectively destroyed the value of the former solicitor’s security.
In Singapore, a failure to honour a professional undertaking is a disciplinary offence under r 51 PCR and may amount to professional misconduct under s 83 of the Act. It is also possible that the court may enforce the undertaking against the solicitor personally rather than against the firm.
At first glance, it appears that r 41 PCR only applies to ongoing, and not completed, matters. If the former solicitor commences an action against the client for outstanding fees in a matter that has been settled or closed and the client engages another solicitor to act for him, does the former solicitor have a duty under r 41 PCR to release all documents and offer any necessary assistance to the newly-instructed solicitor?
The Committee’s view is that r 41 PCR still applies in this situation. As the client has terminated the retainer with the former solicitor by engaging another solicitor to act for him in the suit for outstanding fees, the former solicitor is required to accept the termination under r 41(a). The retainer was not terminated earlier by the conclusion of the substantive aspects of the matter, because the client had yet to settle the outstanding fees.
Rule 41(b) requires the outgoing solicitor to “release all documents and offer any such assistance as may be necessary to enable the incoming solicitor to take over the matter upon receiving an undertaking to protect his lien upon such documents”. The word “matter” under r 41(b) extends to the former solicitor’s claim against the client. A clear policy underlying r 41 is that even after a solicitor’s retainer is terminated by the client, the client still has a legitimate interest in the documents in the former solicitor’s file which are essential to his claim or defence in legal proceedings. Such a legitimate interest extends beyond the ongoing matter between the client and another party to a dispute between the lawyer and the client on the fees payable for the work done in the matter.
Moreover, r 41(b) does not expressly restrict the newly-instructed solicitor to representing the client on the substantive aspects of the matter, but allows the solicitor to “take over” the matter in accordance with his client’s instructions. Such instructions may include reviewing the documents in the former solicitor’s file to determine whether there is anything which can assist the client’s claim or defence. Therefore, the former solicitor has an ethical obligation under r 41(b) to release all the client’s documents and offer any necessary assistance upon the securing of his lien by an undertaking from the newly-instructed solicitor.
We will briefly discuss some of the practical matters arising in the context of a change of solicitors.
Oftentimes, an outgoing solicitor would decide to make a copy of the documents before handing over the matter to the incoming solicitors. In this case, who should bear the photocopying charges? In para 19(b) of the Law Society’s Practice Directions and Rulings 1989 titled “Property over a file”, it was stated that if the outgoing solicitor “requires to retain a set of documents in anticipation of further complications arising over that matter with his client, he may take copies but he must bear the copying expenses”. Although some aspects of para 19(b) have been superseded by r 41 of the PRC and the 1999 Practice Direction, the Council’s ruling that the outgoing solicitor must bear the costs of making copies of his client’s documents in anticipation of future complications arising from that matter with his client has not been superseded. The Law Society’s Practice Directions and Rulings 1989 (and any additions or amendments thereto) would continue to apply and be binding on members if they are not inconsistent with the PRC.18
Is it necessary for the incoming solicitors to produce their Warrant to Act for verification to the outgoing solicitors? This does not appear to be necessary based on Council’s 1992 Practice Direction for Written Warrants to Act (“1992 Practice Direction”), which states that a law firm should as a general rule accept another law firm’s written representation that the latter is authorised to act for a particular client on the face value of the representation made, unless there are good reasons for suspecting that the representation has been falsely made. Moreover, r 41(a) requires an advocate and solicitor to permit a client to change his legal adviser at any time.
Nevertheless, the High Court in Tung Hui Mannequin Industries v Tenet Insurance Co Ltd,19 while accepting the position set out in the 1992 Practice Direction, observed that lawyers should not interpret the Practice Direction as meaning they cannot ask to inspect a warrant to act or that a request from another lawyer to inspect their warrants to act casts aspersions on their professionalism and intergrity. While a request to inspect a warrant to act will make the handing over of a matter more difficult, it should not amount to a breach of professional conduct between solicitors per se. Accordingly, the position set out in the 1992 Practice Direction is merely a general rule of practical efficacy.
The ethical obligations under r 41 PCR arising in the context of a change of solicitors and the transfer of documents to the incoming solicitors are varied and numerous. However, most of the usual pitfalls can be avoided by having the solicitors involved consider and agree on, at the time of transfer, the arrangements for the inspection or return of the client’s documents. That, coupled with an attitude of cooperation in the spirit of professional courtesy and fairness would, hopefully, help to reduce conflicts amongst members in this area.
Ethics Committee
The Law Society of Singapore
1 Tan Yock Lin, The Law of Advocates and Solicitors in Singapore and West Malaysia (Second Edition, 1998), p 739 [Tan Yock Lin].
2 Ibid, p 746.
3 [1980] 1 WLR 614 at 623H.
4 [1996] 3 WLR 711 at 721E.
5 Supra, note 1, pp 747-749 and Ismail, pp 720-721.
6 Supra, note 1, pp 746 and 749.
7 The Guide to the Professional Conduct of Solicitors (Eighth Edition, 1999), para 12.14, p 252; Tan Yock Lin, p 749.
8 Ibid.
9 Supra, note 1, pp 749-751; Ismail, pp 720-721.
10 Tan Yock Lin, p 749.
11 Jeffrey Pinsler SC, Ethics and Professional Responsibility, ch 22, p 357.
12 Udall v Capri Lighting [1988] 1 QB 907, pp 916-7.
13 Gamlen, p 624 per Lord Templeman; Tan Yock Lin, p 747.
14 Supra, note 11, ch 20, p 324, para 20-001.
15 Supra, note 11, ch 21, p 341, para 21-003.
16 [1997] 1 QB 627.
17 Ibid.
18 Rule 2(3) PCR.
19 [2005] 3 SLR 184, p 200, para 44.