The second-to-last nail in the coffin

Law is a profession.  Professions like to think their shared history and traditions give them a unique collegiality when really what it mainly gives them is silly clothes.  But one of the traditions of law, informed by that shared history, is the idea that barristers cannot sue clients for their fees.  Now, the foundations for that proposition have never looked shakier, and a new Court of Appeal decision has put the idea on life support.

 

The Rules and Atkinson v Pengelly

First, some background.  Barristers are not instructed directly by clients.  Instead, the client instructs a solicitor (a contractual relationship) and then the solicitor instructs a barrister.  The client pays the solicitor money for the services of the solicitor and for the barrister.  As a matter of professional ethics, the solicitor must pay the barrister’s fee (see r 10.7 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (the Rules).

(Initial disclaimer here: what I’ve just described is the traditional understanding of a rule called the intervention rule whereby a client cannot instruct a barrister directly.  The intervention rule has been relaxed in recent years in some but not all areas of law.  It involves direct billing or escrow accounts.  I’ll return to the position under the intervention rule later but for now assume the traditional model above holds true, because it is still widespread.)

If the client doesn’t pay a bill, then the solicitor can sue for the solicitor’s fee – that’s simple, there is an agreement.  The barrister can’t.  The barrister is reliant on the solicitor suing in the solicitor’s name, to recover the barrister’s fee.  And the Rules let the solicitor do that.  Rule 10.7.2 says:

10.7.2 A lawyer with a practising certificate as a barrister and solicitor may sue for and recover from the party chargeable any fees paid or payable by the lawyer to a barrister sole for work done or to be done on the instructions of the lawyer in relation to a client’s affairs, if those fees are shown as a disbursement in a bill of costs rendered by the lawyer to the party chargeable.

Then, a footnote to r 10.7.2 says this:

This rule is necessary because a barrister sole is not entitled to sue for his or her fees: Atkinson v Pengelly [1995] 3 NZLR 104.

It’s that case – Atkinson v Pengelly (PDF)- that articulated the basis for why a barrister cannot sue for their fee.  It’s been incorporated into the Rules.  I’ve always thought that’s a little strange because what happens to the Rules if Atkinson v Pengelly is overruled?  There may yet be a day…

But for now Atkinson v Pengelly says a barrister can’t sue for their fee.  It’s a mid-1990s High Court decision by Tipping J.  That’s a pedigree that is normally Rock Solid.  In my view, though, the decision’s showing it’s age.

In Atkinson, Tipping J gave four reasons why a barrister can’t sue for their fee.

The first reason was that, “[t]he starting point must be that in England a barrister has no right to sue his fees” (at 110).  That was relevant because s 61 of the Law Practitioners Act 1982 stated:

Subject to this Act, barristers of the Court shall have all the powers, privileges, duties, and responsibilities that barristers have in England.

But that reason can’t apply today, because the Law Practitioners Act 1982 is no longer in force.  It’s been replaced by the Lawyers and Conveyancers Act 2006 and the new Act doesn’t contain a provision like the old s 61.

So park that reason, what next?

The second reason was that allowing barristers to sue for their fees “might undermine the general rule allowing barristers immunity from suit for litigation…” (at 111).

But that reason can’t apply today either.  The Supreme Court did away with immunity from suit for barristers in Chamberlains v Lai [2006] NZSC 70, [2007] 2 NZLR 7.  Not only that but Tipping J was one of the Supreme Court judges who voted to get rid of it!

For completeness, I note that in Chamberlains the Supreme Court wrote:

[98] In medieval times, barristers, as we now know them, were liable for negligence and, so it seems, were able to take action to recover their fees. During the sixteenth century there was a revival of interest in many facets of life in ancient Greece and Rome. Included in this renaissance was the study of Roman law. It was a well-established tenet of Roman law that advocates had no contractual right to sue for their fees. In that respect they had no contract with their clients and what they received for their services was in the nature of an honorarium.

[99] The importation of this Roman law approach into the English common law resulted in the medieval view being overtaken by the view that as there was no contract between barrister and lay client, or between barrister and instructing solicitor for that matter, there was no basis for any action for breach of any duty to take care. Until the twentieth century there was no recognised general cause of action for negligence, outside contract, in relation to services rendered by a professional person. The absence of any contractual basis for a claim against a barrister, and the corresponding inability of a barrister to sue for outstanding fees, was generally seen as the basis upon which barristers’ so-called immunity was based.

So not the whole immunity from suit argument either.  What next?

The third reason was that the wording of ss 139 and 140 of the Law Practitioners Act 1982 seemed to suggest obliquely that the Act was enacted on the understanding that barristers could not sue for their fees (at 111).  Tipping J was a little apologetic about this one and recognised it “does not clinch the matter” but it was one plank of the argument (at 111).

Time has made this argument weaker still, I think.  Atkinson says a barrister cannot sue for fees because the Law Practitioners Act 1982 says you can’t.  The Law Practitioners Act 1982 gets abolished.  And its replacement says that a barrister cannot sue for fees because Atkinson says you can’t.  But the reason Atkinson says you can’t is no longer there.  That’s like building a Jenga tower: the building blocks get removed and placed on top.  The argument becomes self-referential, rather than being grounded in good policy reasons.

The fourth reason was that this is the way it’s always been done.  Or, as Tipping J put it (at 111):

Throughout my time in the profession I have never heard it seriously suggested that barrister sole either have or should have the right to sue their instructing solicitors or their lay clients for their fees.

I’m generally sympathetic to arguments of tradition.  But this is simply a recourse to history that no longer has policy underpinning it (such as the immunity from suit point), and which cannot account for modern day changes to the intervention rule which has made inroads into traditional understanding of barristers’ obligations.

It might be thought, then, that the time for a challenge to Atkinson v Pengelly is inevitable.  That’s not to say that some more up to date reasons couldn’t be magicked up.  At a guess I suppose you’d have to back the “no contractual relationship” horse.  But there’s a difficulty, I think, in that lawyers are obliged to provide terms of engagement including information about their fee (and that includes barristers at least under direct instructions).  That looks like a contract and quacks like one too…

For completeness, all of the arguments for why barristers should be able to sue for their fees can be found in this piece: GE Dal Pont “The Recovery of Counsel’s Fees” (2004) 28 UQLawJl 381, most of which apply in New Zealand.

Anyway, that takes the legal position up to this month, when the Court of Appeal released Keene v Legal Complaints Review Officer [2019] NZCA 559.

 

Keene – the second-to-last nail in the coffin

Mr Keene was a barrister.  Mr Cutting was his instructing solicitor.  A client owed them money.  Broadly speaking, the client disputed the quality of the work by Mr Keene and refused to pay.  Mr Cutting sued the client to recover the money owed to Mr Keene (because, remember, the Rules said Mr Keene could not sue).

Mr Cutting was the plaintiff and, in his capacity as a solicitor, he instructed a barrister to act on the proceeding aimed at getting Mr Keene’s money.  The barrister he instructed?  Well, that was Mr Keene.

By the time matters reached the Court of Appeal, Mr Keene had against his name a disciplinary finding for breach of r 13.5.3 of the Rules.  Rule 13.5.3 said:

13.5.3 A lawyer must not act in a proceeding if the conduct or advice of the lawyer or of another member of the lawyer’s practice is in issue in the matter before the court. This rule does not apply where the lawyer is acting for himself or herself, or for the member of the practice whose actions are in issue.

The issue was on the facts of the case (which I’m not going into here), was Mr Keene’s conduct “in issue” in the debt recovery proceeding.  After all, the client was saying that Mr Keene did a bad job.

Now, you can see how this whole situation could have been avoided if it wasn’t for Atkinson v Pengelly.  Mr Keene could have acted for himself and sued the client to recover his fee.  In that case, even if Mr Keene’s conduct was “in issue”, Mr Keene would be representing himself so he wouldn’t be “acting”.  Rule 13.5.3 wouldn’t apply.

But the Court of Appeal was clear it wasn’t being asked about Atkinson v Pengelly.  That was “not an issue we are concerned with on this appeal” (at [18]).

The Court of Appeal exonerated Mr Keene.  This is what Goddard J said for the Court (footnotes omitted):

[74] On the orthodox approach, as noted above, Mr Keene could not sue for his own fee. Rather, the only way that his fee could be recovered from the second respondents was for his instructing solicitor, Mr Cutting, to bring proceedings seeking to recover that fee. That approach was adopted in this case. So Mr Keene had an instructing solicitor, Mr Cutting. But in substance the proceedings were being brought for the benefit of Mr Keene.

[75] In the normal scenario where a client instructs a solicitor, and that solicitor instructs a barrister to act for the client, the obligations of the barrister to “the client” under the Rules are owed to the person who has instructed the solicitor, and through the solicitor, the barrister. They are not owed to the instructing solicitor. As a matter of form, Mr Cutting was Mr Keene’s client in the fee recovery proceedings as well as being his instructing solicitor because the fee recovery proceedings were brought with Mr Cutting named as plaintiff. But in this case the arrangements between Mr Cutting and Mr Keene meant that Mr Cutting’s interests were not directly engaged. Rather, the benefit of the proceedings would accrue to Mr Keene, and the cost burden of the proceedings also fell on him.

[76] We recognise the theoretical possibility of Mr Cutting being exposed to a costs award, or criticism, in relation to the conduct of the proceedings. But this risk seems remote, and one that Mr Cutting was well placed to understand and manage.

[77] Our approach to the interpretation of r 13.5.3 must be informed by the nature of the Rules, which as noted above are ethical rules that require a focus on substance rather than form, and by the purpose of r 13.5.3 read in context. We do not consider that the mischief at which r 13.5.3 is directed was present here, in circumstances where:

(a) There was no client who was looking to Mr Keene to act independently of his own interests, whose reasonable expectations of independence were disappointed because Mr Keene’s conduct was in issue. Mr Keene was the “in-substance” client. Mr Cutting was the client as a matter of form, but he knew that the proceedings were brought for Mr Keene’s personal benefit in circumstances where their mutual former client had raised concerns about the fees. There is no suggestion that his interests were compromised by Mr Keene acting in these circumstances.

(b) The position vis-á-vis the Court was also transparent. The Court knew Mr Keene was acting as counsel in order to recover his own fee, and he could not be expected to be completely independent in those circumstances. The Court was able to adjust its expectation of independence in this context in precisely the same way that it would if he were a barrister and solicitor suing a former client for payment of outstanding fees.

[78] Adopting a purposive and contextual approach to the interpretation of r 13.5.3, we consider that the better view is that on the facts of this case Mr Keene was “acting for himself”. Form should not distract from substance.

[79] It follows that there was no breach of r 13.5.3 in this case, as the rule did not apply.

This is the Court of Appeal saying that there is no ethical impediment to a barrister acting in a proceeding to recover their own fee.

True, it says nothing about the ability of a barrister to sue a client in the barrister’s own name.  But the decision gives the tick of approval at least to the idea of a barrister acting in that fee recovery process.  And the Court is clear: the reason there is no ethical impediment is because really this was a case of the barrister acting for themselves.  Forget the labels: in substance this was Mr Keene suing for his own fee.  And what’s wrong with that, the Court asks.

When the day comes that Atkinson v Pengelly is challenged you can see how this decision is going to be used:  if there is no ethical issue with a barrister “in substance” suing for their own fee, why can’t we make the form match the substance and do away with Atkinson v Pengelly?  I don’t know what the answer to that question is.

Between this decision, and the new intervention rule, there are structural changes that mean we should think carefully about accepted wisdom in this area.  There will come a day where simply invoking the name of Atkinson v Pengelly will not be enough to explain why barristers cannot sue for fees.  If, as the Court of Appeal says in Keene, form should not distract from substance, then that day might come sooner than we thinkAfter all, we’ve done away with plenty of our silly clothes.  

 

 

[[Disclosure: I had a degree of involvement in the Keene case.  This post has intentionally avoided the merits of the judgment but looks at what I think is a really interesting question of where to from here on an aspect unconnected with the merits.]]

[[Thanks to Judi of NZLII for digging out an unreported copy of Atkinson v Pengelly and uploading it to NZLII so I could link to it in this post.  NZLII needs support and you can do that through its Donation Form.]]

 

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