New Zealand Law Society - Failure by instructing lawyer to pay barrister’s invoice

Failure by instructing lawyer to pay barrister’s invoice

Published on 29 November 2019

In dismissing an action for judicial review, the High Court has confirmed that Rule 10.7 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 “represents what has always been the commonly understood position in this country. Instructing solicitors cannot simply wash their hands of their obligation to a barrister because the client refuses to pay” [at 61].

This case related to a finding by a lawyers standards committee that r 10.7 is breached when an instructing lawyer fails to pay the invoice of a barrister that the lawyer has engaged on behalf of a client. In McGuire v New Zealand Law Society [2019] NZHC 2748, lawyer Jeremy McGuire sought judicial review of the standards committee determination decision which resulted in him being censured.

Mr McGuire represented a client (Mr W) on a relationship property matter. Mr W wanted a second opinion and so Mr McGuire asked Mr A, a barrister, to provide that opinion.

Mr A provided Mr McGuire with an estimate and via a series of emails made it clear that he wanted payment on the day the opinion would be rendered. He also clarified that he would start that opinion once he was assured the money for payment was put into Mr McGuire’s trust account.

The opinion was delivered on 22 December 2017 via email along with an attached invoice.

Mr McGuire replied saying: “I look forward to your views. Your opinion needs to address these other issues.” Mr McGuire did not pay the invoice, instead saying that he was disappointed with the lack of reasoning and legal sophistication and that: “Once and after all of the issues have been carefully and thoroughly considered then an opinion can be said to have been given”.

Mr A wrote back that he did not accept Mr McGuire’s view and asked for a yes or no answer regarding whether he would be paid or not.

Numerous emails were exchanged with a final email on 12 February 2018 by Mr A setting out the facts. Mr McGuire made a brief reply indicating that he disagreed.

On 11 April 2018, Mr A complained to the Lawyers Complaints Service that Mr McGuire had breached r 10.7 of the Rules by failing to pay the invoice and the balance of another disbursements invoice.

Standards committee decision

The standards committee upheld the complaint and determined Mr McGuire’s breach amounted to unsatisfactory conduct pursuant to s 12(b) and (c) of the Lawyers and Conveyancers Act 2006. Mr McGuire was censured and ordered to pay a fine of $5,000, costs of $2,000 and to pay Mr A’s fee immediately.

The standards committee accepted Mr McGuire’s contention he could not release funds held on trust without authority from his client. However, the committee considered that, having instructed Mr A on behalf of his client, Mr McGuire was personally responsible for the payment of Mr A’s fee in accordance with the Rules.

If Mr McGuire was unhappy with the opinion, he should have disputed the fees through the “proper professional channels”. The committee said that it was unacceptable to simply refuse to pay – especially so because a barrister is unable to sue for his fees. There was no agreement between the parties that Mr McGuire’s client was to be solely responsible for paying Mr A’s account.

Mr McGuire sought review on the grounds that the committee erred in finding there was no agreement between the parties that Mr W would be solely responsible for paying Mr A’s fee and in holding that Mr A was entitled to be paid his fee despite Mr McGuire’s dissatisfaction with the opinion. He also said that the committee’s determination was “bad for bias” in breach of natural justice and resulted in a miscarriage of justice.

Long-established obligation

Clark J said rule 10.7 reflects a long-established obligation. “…the importance of the obligation arises from the nature of the relationship between solicitor and barrister, namely that a barrister cannot sue for her or his fees and must rely on the instructing solicitor for payment,” (at [54]).

“The case law suggests that it will be particularly egregious for a solicitor to receive funds into a trust account for the purpose of paying a barrister or third party but fail to do so,” she said (at [58]).

After examining the evidence of the arrangement between the parties, Clark J concluded that there was no explicit arrangement reached that the client would be solely responsible for the fee. Mr A was very deliberate about his fee and that he would begin the opinion once the fee was deposited into the trust account. Mr McGuire’s insistence that his client’s authority constituted an agreement between his client and Mr McGuire and absolved Mr McGuire from his obligation to pay Mr A under r 10.7 was misplaced. Rule 10.7 regulates the conduct of lawyers.

Rule 10.7 is clear that if a solicitor disputes a barrister’s fee the solicitor must advance that through “proper professional channels”. A judicial review of a standards committee decision is not the proper professional channel.

The application for judicial review was dismissed.