NSW Supreme Court warning on the need for express instructions to institute legal proceedings or an appeal

By 16/07/2014Solicitors
client instructions

The NSW Supreme Court has sounded a warning to litigators to ensure that they have express instructions to commence proceedings or an appeal, or run the risk of having such proceedings dismissed with personal cost consequences for the solicitors concerned.  The case is In the matter of HIH Insurance Limited (in liquidation); Smith & Ors v McGrath & Ors; Baldock & Ors v McGrath & Ors [2014] NSWSC 922, per Brereton J.


Proceedings were commenced in October 2013 (the Smith proceeding) by Thomas Booler & Co solicitors in the name of approximately 117 plaintiffs who were shareholders in HIH, claiming reversal or modification pursuant to s 1321 Corporations Act 2001, of the decision of the defendant liquidators not to admit, or not to adjudicate on, proofs of debt and/ or claims made by the plaintiffs.

Similar relief was claimed in a separate proceeding commenced in November 2013  (the Baldock proceeding) brought by DC Legal in the name of approximately 2,860 plaintiffs.  Of these plaintiffs approximately 1,525 plaintiffs provided signed costs agreements.

Leaving to one side 75 plaintiffs who did not wish to proceed, and another 28 who had settled earlier proceedings, that left approximately 1,260 plaintiffs who had not provided a signed cost agreement.

The defendants challenged the retainer of the plaintiffs’ solicitors, save that the defendants conceded that:

  • in the Smith proceeding fresh authorities signed in 2014 by most of the plaintiffs to “appeal the rejection by [the defendants] of the proofs of debts or claims” were sufficient to authorise or ratify the institution of proceedings by those plaintiffs;
  • in the Baldock proceeding the costs agreements signed by approximately 1,525 plaintiffs had the effect of ratifying DC Legal’s retainer.

Legal principles

Brereton J distilled the following from a review of the authorities (at [17]):

  1. Fundamentally, the extent of a lawyer’s authority depends on the construction of the retainer, in which terms can be implied as well as express.”
  1. However, generally speaking, clear and specific words are required to authorise the institution of court proceedings.”
  1. This is because of the serious consequences, including in particular exposure to the possibility of adverse costs orders; also because a solicitor ought not readily be implied to be authorised to decide whether or not to institute proceedings.”
  1. Where words to the effect of authorising ‘such further steps as may be necessary’ follow the main object of the retainer, those words are not sufficient to authorise institution of proceedings where the specific words would not do so, the general words being restricted to what is necessary for the proper performance of the particular acts.”
  1. While authority to institute proceedings once given extends to final judgment and execution, it does not authorise institution of an appeal without further express instructions.”

Further (at [23]):

  • generally a solicitor who takes unauthorised steps in litigation is required to personally pay the costs they have caused other parties to incur;
  • where a solicitor is not validly retained the appropriate order is that the names of the relevant plaintiffs be struck out, and the solicitor pay so much of the defendant’s costs of the proceedings as are attributable to the defendant having been made a party.

Findings and conclusions 

The Court held that none of the following retainers expressly referred to the institution of curial proceedings (at [18]):

  • an authority “to act on my behalf in regard to my claims against the above companies and in particular to prove my claims or debt against the above companies and take any further action in relation to this matter which might be necessary“;
  • an authority “to act on my behalf in regard to my claims against the above companies, sign a Formal Proof of Debt (Form 535), in particular to prove my claims or debt against the above companies, to act as proxy at any meeting of Creditors and to take such further action as may be necessary in relation to this matter“;
  • an authority “to complete, execute and sign any Formal Proof of Debt or Claim on my/our behalf against any or all of the abovementioned Companies …” and also “if necessary to follow the procedure referred to in the Schemes of Arrangement in relation to the agreement and acceptance of my/our claims with the Liquidators or Administrators of the abovementioned Companies“. 

The Court held that the main object of the above retainers was to authorise the proof of a claim up to and including adjudication by the liquidators.  In the absence of evidence of surrounding circumstances or other communications with the plaintiffs, those retainers did not authorise the institution of any curial proceedings (at [19]).

As retainers in the above terms were inadequate to authorise the institution and maintenance of the proceedings, the claims of those plaintiffs whose only authority was in those terms were dismissed (at [22]).

DC Legal was ordered to pay the defendants’ costs of the motion in the Baldock proceeding. Fortunately for DC Legal Brereton J considered that in this case the existence of the dismissed claims had not materially increased the costs of the proceedings, apart from the motions of dismissal (at [24]).  No order as to costs was made in the Smith proceeding.


As Brereton J said “a litigant who disputes a solicitor’s retainer runs the risk that any apparent want of authority may be cured by supplementary evidence, or ratified” (at [24]).

Obviously, however, no litigator should rely on a client’s ratification or supplementary evidence to cure any lack of authority to institute proceedings or an appeal.

Far safer to ensure that express instructions are obtained up front.