The Law Society’s Ethics Committee recently released the following Ethics Ruling as guidance for the profession. For your convenience, we’ve listed the ruling below but it can also be found in our Ethics Rulings Database.
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Date: September 13, 2018
Cite as: 2018 SKLSPC 8
Code Chapter: 3.5-5, 3.5-6
Code Heading: Accounting and delivery
Classification: Payment of retainer by third party
Practice Area: Litigation
Lawyer X represented Client A. Members of an organization (the “Third Party”) were present at Lawyer X’s initial meeting with Client A. A few days after the initial meeting, the Third Party paid Client A’s retainer to Lawyer X.
Several days later, the Third Party made a request to Lawyer X to have the retainer returned as Lawyer X’s services were no longer required. After speaking with Client A regarding the Third Party’s request, Lawyer X and Client A determined that the funds would not be returned, and no response would be provided to the Third Party.
Sometime later, the Third Party again requested the return of the retainer from Lawyer X and implied the retainer funds had been improperly provided. Lawyer X again spoke with Client A and subsequently advised the Third Party they would not be returning the retainer. Lawyer X had no reason to believe the Third Party’s retainer funds had been improperly provided.
Lawyer X did not enter into a retainer agreement with Client A or the Third Party, and no discussions were had as to what would happen in the event any funds remained at the end of Lawyer X’s representation of Client A, in the event representation ceased, or how the money would be treated once received. Lawyer X advised that there were no funds remaining in trust at the end of the file.
The Ethics Committee determined that whether the money was properly provided to Lawyer X is a legal issue that needs to be dealt with between Client A and the Third Party. Once the retainer was provided, Client A controlled the retainer, absent any agreement that dictated otherwise. To the Committee’s knowledge, there was no such agreement here.
When a lawyer is aware that a third party is paying the lawyer’s retainer, there is an obligation on the lawyer to have conversations with both the client and the third party regarding the payment of a retainer from the third party; i.e.: who directs the matter, what happens to the money if the lawyer withdraws/is terminated before the funds are exhausted, who can apply for taxation, and what is to happen if the third party demands return of the retainer. These discussions would preferably be reduced to writing, confirmed in the retainer agreement, and agreed to by the client and the third party prior to receipt of the retainer.