Lawyer Exonerated - No Contract of Retainer
/Lam v Mo [2017] NZHC 997
Broadly this case considers a commercial dispute between two families, the Lams (the plaintiffs) and the Mos (the first defendant), over the comparative size of the interest each family (and other interest holders) had in the Sunlink Group of companies.
Pauline Davies, partner at Fee Langstone, represented Mr Lee, a lawyer who had been named as a defendant. The plaintiffs’ claim against Mr Lee was that he was their legal advisor and therefore owed them a fiduciary duty to protect their interests in their dealings with the Mos. The Lams said Mr Lee had not protected their interest in the joint venture between the families and had failed to ensure proper account was given for their true share in the profits of the Sunlink Group.
Mr Lee argued that he had never acted for the Lams and therefore never owed them any duties. Alternatively he said that even if he had breached a duty owed to the Lams, the proceeding had been filed outside the six-year limitation period.
Was there a contract of retainer between Mr Lee and the Lams?
A contract of retainer may be formed either by express agreement or by implication. An express retainer must be proved in the same way as any other contract – there must be offer, acceptance, intention to create legal relations and consideration. An implied retainer can arise “where on an objective consideration of all circumstances an intention to enter into such a contractual relationship ought fairly and properly to be imputed to the parties.” An intention to create legal relations and the other pre-requisites of a contract must still be present if a retainer is going to be implied.
Williams J found that the evidence supporting an express retainer between the Lams and Mr Lee was sparse. The Lams argued that they met with Mr Lee on multiple occasions (although always with Mr Mo also present) where Mr Lee “promised to take care of their interests.” However Williams J commented “Mr Lee may well have said something like “while I am solicitor for the Group, you will be taken care of”, but that cannot … be interpreted as an acceptance of an express retainer even if one was sought.”
Not only would such a retainer have put Mr Lee into a position of conflicted interest – Mr Lee was clearly the solicitor for Mr Mo and the companies in the Sunlink Group – but the usual indices of a retainer were not present. Williams J found there was no written retainer, no files in the name of the Lams, no opinions looking at the position of the Lams in the joint venture and no billing to the Lams for any legal advice.
Williams J then considered the wider circumstances to assess whether a retainer could be implied. Williams J found Mr Lee was unaware of the Lams had invested in the Sunlink group at the time he was alleged to have owed duties in respect of that investment. He also said Mr Mo had been careful to use Mr Lee only as an orthodox commercial property lawyer and had not shared with him details of the governance or partnership issues which involved the Lams. The plaintiffs tried to argue that Mr Lee had been present at a meeting between Mr Lam and Mr Mo where a shareholder agreement was produced and division of roles and the need to protect the interests of both families was discussed. Mr Lee denied being present at this meeting which was said to have taken place at his offices, but on a date where Mr Lee’s evidence established he could not have been there. The Lams produced meeting minutes and photos taken outside the Mr Lees offices to demonstrate it had occured. Williams J labelled the photos, taken outside rather than inside the offices as “strange at best” and the meeting minutes did not mention Mr Lee.
As Mr Mo could not speak good English, Mr Lee had become a go between with other parties with whom Mr Mo would transact but Williams J found “insofar as legal services were concerned, I infer Mr Lee was carefully contained by [Mr Mo] … I find the evidence is very much against the proposition Mr Lee was subject to a retainer either expressed or necessarily implied by the wider factual context, to take care, in broad terms, of the Lams’ interests.”
As there was no retainer found, Mr Lee owed no duty to the Lams and therefore there could be no breach.
Having found there was no duty, the affirmative defence put forward that the limitation period had expired, was not needed. However Williams J found nevertheless that the Limitation Act 1950 would have barred action in respect of any breaches if any had been established.
Comment
Pauline Davies who represented Mr Lee says he has been completely exonerated in this decision which found that he was not at all responsible for the situation in which the Lams found themselves. However, the discussion about the formation of contracts of retainer is a useful reminder that the ordinary rules of contract apply, and that in the absence of a written document good evidence will be required to show a contract was formed.
