New Zealand Law Society - “Protect us for our costs” does not create obligation

“Protect us for our costs” does not create obligation

Published on 29 November 2019

[All names used in this article are fictitious]

The phrase “protect us for our costs” does not create a professional obligation to pay fees, a lawyers standards committee has said.

The committee was considering complaints from two lawyers in relation to payment of an invoice. The complaint arose after one lawyer, Staffordshire, received an urgent request from a firm, on behalf of a client, to execute certain documents.

Staffordshire completed the work and returned the documents to the firm under a cover letter addressed to the other lawyer, Monmouth. That letter stated: “The documents are released on the basis you protect us for our costs.”

Staffordshire’s firm subsequently issued an invoice for the work, addressed to Monmouth’s firm’s client. The fees were not paid.

Staffordshire complained to the Lawyers Complaints Service that Monmouth was in breach of his professional obligations by using the documents without first ensuring Staffordshire’s firm’s fees were paid.

In response, Monmouth also complained about Staffordshire, alleging he had failed to provide adequate information regarding the fees and acted inappropriately when the fees were not paid.

“The essential issue at hand in this matter was [Staffordshire]’s use of the phrase ‘protect us for our costs’,” the committee said.

“[Staffordshire] was strongly of the view that this phrase created a professional obligation on [Monmouth] to ensure that the fees rendered by [Staffordshire’s firm] to [Monmouth]’s client were paid, and that [Monmouth] was obliged to ensure the fees were paid prior to using the documents provided.”

Staffordshire submitted that it was common practice to place conditions on the release of documents, especially when the documents are required urgently, and it was not possible to retain them pending payment. He explained that he had provided documents to other lawyers in similar circumstances before and had never encountered any problems.

However, Monmouth submitted that it was not appropriate to hold him, or his firm, responsible for the payment of fees due by his client in the absence of a lien or an undertaking.

No precedent

The committee began its consideration by noting that there did not appear to be any legal precedent to support Staffordshire’s position.

“While the standards committee did not doubt that [Staffordshire], and other practitioners, had used this practice in the course of their legal career, there was no basis in the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 or in common law to support the proposition that the phrase ‘protect us for our costs’ professionally obliged [Monmouth] to pay [Staffordshire’s firm]’s fees.

“In light of the lack of support for this proposition, the standards committee was not prepared to conclude that the phrase created a professional obligation on the part of [Monmouth]. The words used by [Staffordshire], by their plain meaning, were not sufficient to create a condition on which the documents were to be used.”

The committee was of the view that “it would be extraordinary for a practitioner to be able to unilaterally impose a professional obligation, akin to an undertaking, on a fellow practitioner simply by invoking a particular phrase in a letter.”

Ethical or moral obligation

However, although the phrase ‘protect us for our costs’ did not create a professional obligation akin to an undertaking, the standards committee considered that it could be characterised as creating an ethical or moral obligation.

“The standards committee was of the view that an ideal lawyer, when presented with a situation of the type that [Monmouth] was, would respond promptly and advise whether they accept the terms on which the documents were being released. This would allow the lawyer releasing the documents to take further action to secure the payment of their fees, if they wished to do so.

“Had Monmouth promptly advised Staffordshire that he did not accept any responsibility for [Staffordshire’s firm’s] fees, Staffordshire would not have been under the impression that the fees would be paid and may have been able to take steps to pursue the fees in the usual manner”, the committee said.

However, in the circumstances, having considered the material provided, the committee determined that neither Staffordshire nor Monmouth’s actions met the threshold required for disciplinary action and resolved to take no further action on either complaint.

Clarification on Calderbank offer summary

The Lawyers Complaints Service summaries in the November 2019 issue of LawTalk included an article headed “Inadequate advice about Calderbank offer”. In the second column this made a one-off reference to “Mr Sutherland”. “Sutherland” was one of the fictitious names first chosen for the article. However, because there are practising lawyers with that name, it was changed to “Renfrewshire” except in this instance. None of the lawyers named “Sutherland” were involved in the proceedings or had any connection to them. We regret this error and apologise if it caused embarrassment to anyone.