Leonard v Bristrol Custodians [2013] NSWSC 1734

A solicitor included the following general charging clause in his costs agreement:

.. upon acceptance of our offer, you hereby charge in favour of us all your right, title and interest over your assets, land, realty or otherwise, and hereby authorise us to lodge a mortgage or caveat over those assets to secure payment of our legal costs and disbursements. You agree to execute any additional documents which are required to perfect the security granted herein.

The cost agreement was not signed by the client. The Statue of Frauds prohibits dealings in land except in writing. However an exception is part performance which was found to be arguable because the retainer acted on by both sides.

It is presumed that a solicitor is in such a position of ascendancy over his client that there will be undue influence exerted. That presumption may be rebutted by the solicitor and is easier to rebut when a corporate client is involved. This was found to be arguable.

The judge was bellicose on the issue of breach of fiduciary duty:

Has the solicitor breached the fiduciary duties it undoubtedly owes to the client? The clients certainly could not have given a more extensive or comprehensive security than that which they did give. This called for explanation. The solcitor obtained this benefit without explaining to the defendants the consequences such an equitable charge would have. The solicitor’s interests are in direct conflict with those of his clients. It is enough to cite the decision of the House of Lords in Boardman v Phipps [1966] UKHL 2; [1967] 2 AC 46 to show the consequences such a conflict will have and the strictness which equity applies to fiduciary relationships. The solicitor cannot benefit at his client’s expense.

In the event however the caveats were allowed to remain in place until trial.

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