Legal Basis of the Lawyer-Client Relationship

The lawyer and client relationship is often compared with different kinds of legal relationship. The main comparisons are with agency, contract and trusts.⁷ All of these legal concepts resemble the legal relationship between lawyers and clients in some degree.

A. Three Prospective Legal Bases for the Lawyer and

Client Relationship

i. Agency

An agent is someone who agrees to act on behalf of another, the principal, in relation to a specific business transaction with a third party. The agent usually has some spe­cial skill or experience in relation to the proposed transaction. The agency agreement defines the scope of the agent’s authority. The agent has broad authority in conducting the task, but is held to a high standard of accountability. Third parties can assume that agents are acting within the scope of their authority. The agent can be liable to the principal for exceeding instructions or causing loss.

The lawyer and client relationship is similar to agency in structure, but different in detail.⁸ The similarity is that the client directs the professional as to the broad remit

⁴ James V Ricknell (1887) 20 QBD 164.

⁵ Wright V Pepin [1954] 2 All ER 52.

⁶ See Locke V Camberwell Health Authority [1991] 2 Med LR 249; Davy-Chiesman v Davy-Chiesman [1984] 1 All ER 321; and Matrix Securities Ltd. v Theodore Goddard [1997] 147 NLJR 1847. See also on wasted costs, Tolstoy v Aldington [1996] 2 All ER 556.

⁷ See further M Bayles, Professional Ethics (Belmont, CA, Wadsworth Publishing, 1981).

⁸ DA DeMott, ‘The Lawyer as Agent’ (1998) 67 Fordham Law Review 301.

The first problem with basing the lawyer and client relationship on agency is that it is inconsistent with the way the relationship operates in practice, both in relation to clients and third parties. This is because the agency relationship permits a relatively wide implied authority to the agent. If it applied, lawyers could undertake actions or bind the client in ways that are incompatible with the role. Agency cannot easily be reconciled with the requirements of both the law and professional conduct codes. In particular, it is inconsistent with obligations to take into account the interests of justice and the duty to the court.

The second problem with the agency model is connected with this idea that law­yers should not merely follow instructions. The view that lawyers are simply agents encourages or reinforces an unethical view of legal practice. This is because an agent cannot presume to question the task given to them. The agency model would therefore require that lawyers abandon any evaluation of the client’s objectives or the methods of achieving them. In the context of legal practice, the agency model is consistent with visions of the lawyer as a ‘hired gun’ or the client’s mouthpiece.

ii. Contract

Under a contractual basis for the lawyer and client relationship, the parties would agree upon their respective rights and duties. This is arguably more flexible than agency in being able to accommodate ethical limits to the lawyer’s conduct. These duties have to be implied into any contractual arrangement, because they are imposed by the law or by professional codes.

A contract for legal assistance is unusual in that not all of the details are capable of being agreed in advance. Therefore, a lawyer must frequently return to the client for information or instructions on how to proceed. These deviations in the path of the relationship could change the original basis of agreement. It is also debatable whether what typically happens when a client instructs a lawyer is consistent with contract. There is often no negotiation of terms, nor issue of a standard term con­tract. Typically, the lawyer sends the client a letter confirming that they have received instructions. These are often referred to in very broad terms.

A contractual model of the lawyer and client relationship must accommodate the fact that different ethical obligations apply in different situations. The client may be vulnerable, ignorant or poor. This places them at a disadvantage in agreeing terms. Alternatively, a rich and powerful corporate client may dominate a lawyer by the threat of withdrawing their business. An ethic based on the contract therefore needs to anticipate either a high degree of client dependency or, alternatively, a high degree of client autonomy. Different ethical considerations may apply in each case.

iii. Trusts

A fiduciary relationship is one in which a person, the fiduciary, has been placed in a position of trust and confidence to manage and protect the property or money of another. In the law of trusts, trustees, persons holding or managing assets for others, are held to exacting standards. They must account for all assets and profits produced by trust property. There is a presumption that any profit made by the trustee from dealings arising from the trust, or from opportunities that are presented to the trustee through the trust, accrue as trust property. This responsibility can be seen as a price of the extremely broad scope of their power and autonomy.

Trustees and agents are often subject to fiduciary obligations. This is usually because they are in the position of holding property, but also because of the scope of their powers. Trusts typically vest far more power over property in the fiduciaries than does agency, hence trustees’ onerous obligations. The beneficiary or principal is expected to trust the fiduciary and the fiduciary is expected to justify that trust.

Lawyers could be subject to fiduciary duties, most obviously when they hold client money or property. Such duties may also derive from a duty of loyalty, and the duty of care. A fiduciary basis to the lawyer and client relationship would derive from the fact that, like trustees and agents, lawyers have broad discretion to act in clients’ inter­ests in a way that is not controlled by clients.

B. Unique Legal Basis of Lawyer and Client Relationship

The courts tend to treat the lawyer and client relationship as a contractual relation­ship carrying fiduciary responsibilities. This is illustrated by the decision of the House of Lords in Hilton v Barker Booth & Eastwood.^[1396] In that case a solicitor acted where there was a conflict of interest. The solicitor argued that an implied term of his contract with the client enabled him to modify his duty to disclose all relevant infor­mation to the client. This argument had in fact succeeded in the Court of Appeal but was rejected firmly by the Lords.

In the House of Lords, Lord Walker considered the solicitor’s duty to the client was ‘primarily contractual’ but it was also a fiduciary relationship. The fiduciary relationship could be ‘moulded and informed’ by the terms of the contract but its fundamental basis could not be modified. This suggests that the lawyer and client relationship is legally unique. Courts may draw on similar legal concepts depending on the circumstances presented. They may also seek consistency with decisions in similar cases in other fields.

The SRA Handbook states that a solicitor’s relationship with clients ‘is a contrac­tual one which carries with it legal, as well as conduct, obligations’.^[1397] It is, however, a unique legal construct.^[1398] While it is primarily based on contract, other legal concepts, such as trusts, are imported into the relationship. Treatment by the courts also recog­nises the distinctive obligations that lawyers owe to clients and to the wider adminis­tration of justice.

A fiduciary basis places the lawyer under a duty to take special care to ensure that no advantage is taken of the client. This includes ensuring that there is no undue influence of the client.¹² In this way, lawyers are often placed under disadvantages by courts in relation to their agreements with clients than are other contracting parties. The fact that the lawyer and client relationship may have a fiduciary basis perhaps suggests an expectation of a higher level of consultation with clients than is suggested in the other bases. If the lawyer must act in the client’s best interests, clearly the client has to be consulted. Therefore, as fiduciaries, lawyers would need to make every rea­sonable effort to inform clients and obtain authority to act. The day-to-day conduct of transactions is, however, a matter for the lawyer. All kinds of decision, which may or may not affect the client, including ethical decisions, may be taken on their behalf by the professional.

V.