November 16, 2021
In a matter of pure law, Justice Jones developed a new test for voiding a retainer agreement for incapacity. Guardian Law Group v LS, which is featured in the JSS Rules Database and the October 2021 Issue of the JSS Rules Newsletter, describes a very unique circumstance that explores what happens when a client is deemed to lack capacity to enter into a retainer agreement ahead of said capacity hearing. Justice Jones made no findings of fact, nor did he apply the relevant tests to the facts.
This situation was brought to the court after a client had retained the Applicant law firm to represent him ahead of a capacity hearing.
Competing expert reports cast doubt on the client’s capacity to manage his own financial and legal affairs and, ultimately, the Court ordered that a litigation representative (the “Respondent”) be appointed for the client pursuant to Rule 2.11. The matter was settled resulting in the Respondent having guardianship and trusteeship over the client.
The Applicant brought a claim against the Respondent in its capacity as guardian and trustee for the payment of legal fees incurred amounting to more than $90,000.00. The Respondent opposed it on the grounds that the client lacked capacity to retain the Applicant and thus the retainer agreement was null and void. The sole issue before the Court was what requirement must be met by counsel to be validly retained to represent an individual in that context of that individual’s own capacity hearing?
Justice Jones noted that a retainer agreement is a contract for legal services between a lawyer and a client and contract law principles applied to retainer agreements, subject to Part 10 of the Rules. However, His Lordship found Part 10 of the Rules concerned independent review of retainer agreements and that was not at issue in this Application. A decision of a review officer under Part 10 of the Rules centered on the reasonableness of fees, they did not interpret retainer agreements — that authority lay with the Court alone.
His Lordship proposed the following test for voiding a retainer agreement for incapacity:
- Did the client, at the time of entering into the retainer agreement, have the capacity to understand its terms and form a rational judgment of its effect on his or her interests?
- Did the lawyer know that the client lacked capacity, and more specifically
(a) Were there sufficient indicia of incapacity known to the lawyer to establish a suspicion that the client lacked the requisite capacity?
(b) If yes, did the lawyer take sufficient steps to rebut a finding of actual or constructive knowledge of incapacity?
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