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Blurred lines1 June, 2015
Inadvertent retainer scenarios can occur easily and practitioners should beware the unintended client.
The LPLC often sees claims where a practitioner is alleged to have owed duties to someone the practitioner never regarded as a client.
Practitioners should be particularly careful whenever an unrepresented party is involved in a matter and take proactive steps to make it clear they are not protecting that person’s interests.
Some common inadvertent retainer scenarios occur where practitioners:
- document an intra-family transfer at the request of one of the parties, especially the party deriving the benefit, and the other party has not received independent advice;
- act for a business or joint venture partner where the other partner(s) is unrepresented;
- act for a partnership, business or joint venture vehicle but communicate with different stakeholders rather than a stipulated client contact;
- provide advice that is subsequently shown by the client to a third party, who later alleges the practitioner knew they would rely on the advice;
- fail to give prompt confirmation they decline to accept instructions from the person (non-client) who incorrectly assumes they are a client.
A factor in many of these situations is the existence of a party directly affected by the transaction or situation on which the practitioner is advising and who is unrepresented but has some contact with the practitioner during the matter. Practitioners should always be alert to unrepresented parties, both at the start of a matter and throughout its course.
In some claims, the practitioner had provided a small amount of advice to the non-client – often in a position of potential conflict – in an attempt to be obliging or to facilitate a smoother transaction for the real client. The practitioner can be in a difficult position, especially when dealing with families or parties well known to the practitioner, or when a non-client seemingly does not require extensive advice.
Websites and social media
Practitioners should also be careful, when using their website and social media, not to create inadvertent retainers. While practitioners should feel free to engage in general discussion of legal topics and debate on social media, they should be wary about responding to specific queries posted on sites such as Facebook and Twitter or on blogs. The best course of action is to invite the person to visit, phone or email the practitioner’s office so full instructions can be given and a retainer properly established.
Where contact pages on practitioners’ websites allow people to submit inquiries and information, practitioners should have clear disclaimers and respond promptly to dispel any belief they are retained to act for the person who made the enquiry.
One of the best risk management tools is to send an engagement letter to the client at the start of every matter. The letter should stipulate
the client and the scope of work as well as specifying work that will not be undertaken in order to avoid any misunderstanding.
While engagement letters are useful in managing client expectations, they are not addressed to non-clients. Therefore, it is often prudent to send a non-engagement letter to a non-client to also manage their expectations.
There are a number of situations where a non-engagement letter could be used.
When declining to take a matter on, the letter should acknowledge the approach to act but state in clear terms you will not be representing the party. Any documents provided should also be returned with the letter.
If the matter potentially involves litigation, the letter should provide general information about the existence of limitation periods and should be accompanied by an appropriate disclaimer that the practitioner is not providing advice or expressing an opinion on the party’s position.
When a matter involves an unrepresented party, especially when the parties are related or business partners, the letter should confirm who the practitioner is acting for, clearly state the practitioner is not acting for the non-client and recommend they obtain their own advice.
Another type of inadvertent retainer can arise where a practitioner thinks they have completed the work for a client but fails to communicate this to the client.
There are a number of important steps practitioners generally take when closing a file such as issuing a final invoice and checking trust monies have been disbursed. Practitioners should consider sending a disengagement letter at this stage. The letter could thank the client for their instructions, confirm the retainer is at the end with nothing further to be done by the practitioner, and return outstanding documents to the client.
Non-engagement and disengagement letters, as well as engagement letters, serve two main purposes. They are a key tool in managing the expectations of non-clients and clients alike. Second, they can be critical documentary evidence in the event of a dispute about whether the practitioner owed a duty of care to a party.