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Sir Terence O'Rort
7 January, 2010  
Chesty says nyet to Nyst

Struggle over legal fees paid by alleged drug dealers produces some intriguing arguments over who owns the loot … Sizzling retainer agreement in contention


imageChris Nyst’s Gold Coast law shop suffered a bit of a setback just before Christmas in the Brisvegas Supremo when Richard Chesterman failed to swallow ingenious arguments as to why it should keep a pile of fees paid in advance by a couple of suspect drug dealers.

The DPP applied for the fees paid under a retainer agreement to be restrained by the proceeds of crime legislation.

Nyst is the principal of Nyst Lawyers and Advisors.

The website tells us that the shop has “positioned itself as one of Australia’s leading and most dynamic law firms [with a] hand-picked group of hard-hitting litigators specialising in criminal, commercial, family and planning and environmental disputes”.

Nyst was the author of the Australian screenplays Gettin Square (2003) and Crooked Business (2008).

According to Chesterman’s judgment the sorry saga started on October 29 when the firm was approached to act on behalf of Mark Masman and Kylie McGuiggan, who had been charged with drug trafficking.

Five days later the punters entered into a client agreement with Nyst Lawyers. A covering letter from the firm made the following reassuring noises:

“We are pleased that you want to retain our services to act on your behalf. We have agreed to accept your instructions on a RETAINER BASIS. This means that you will provide us with money and in exchange … we will agree to provide you with legal services to the extent set out … in the … client retainer agreement.

[snip]

We will not become a creditor of you and we will not be put into a position where you might owe this firm money. Once we have provided legal services to the extent … set out in the … retainer agreement, no further work would be performed until a new contract … is entered into…

Retainer agreements are different to usual solicitor/client fee agreements.

Generally in solicitor/client agreements, your original solicitor or firm may charge to cover fees and costs from you … before notice is given that your instructions are to be withdrawn. Under the usual client fee agreement, once notice is given and fees and costs are recovered … the balance of trust moneys are held … on the client’s behalf. However, because you are entering into a retainer agreement with this firm, no moneys will be returned to you if you elect to change solicitor or firm because the only obligation of this firm is to provide you with legal services to the extent of moneys paid by you under this retainer agreement.”

There was also a disclosure notice, which showed that the firm “will provide a number of hours of legal services” at an hourly rate.

The firm estimated that the “total of all retainer sums required to complete the work on this matter will be between $15,000 to $95,000”.

November 3 (the same day as the retainer agreement was entered into) the firm delivered a Tax Invoice for $95,000 and the punters delivered a bank cheque to the firm.

imageThe cheque was paid into the firm’s general account on that date.

Pic: lawyer and screenwriter Chris Nyst

Plod from the Crime and Misconduct Commission had secretly obtained a freezing order from Applegarth J on October 29, but the order was not served upon the clients until November 4.

The CMC was miffed at the $95,000 going to Nyst Lawyers and it obtained an ex parte possession order under the Criminal Proceeds Confiscation Act 2002 (Qld) from Philippides J on November 12.

On November 19 the law firm wrote to the DPP:

“Nyst Lawyers does not know whether or not the balance of the proceeds of … bank cheque drawn 3 November in the amount of $95,000 is held in our general account. As you would appreciate, a pooling of funds has occurred since depositing … the … cheque … Following the depositing of the cheque such funds ceased being the property of Mr Masman or Ms McGuigan and were not, are not, never have been held for their benefit.”

The struggle for the loot ended up before Chesty who joined Nyst Lawyers as a party to the possession application brought by plod.

The firm imported a heavy gun from Sydney, B.W. Walker, who put an ingenious argument to Chesty – that what the clients were paying for was not $95,000 worth of legal work but the firm’s promise to perform $95,000 worth of legal work.

imageWalker submitted that when the cheque was paid into the general account it became the property of Nyst Lawyers and even if the firm did not provide $95,000 worth of legal services it was entitled to keep all the money.

Pic: Mr Nyst looking suitably hard-hitting in a recent snap

Chesty said the issue turned on whether the money was subject to a trust for the benefit of the two clients or whether it was purely to the paid to the lawyers in their own right as consideration for contractual promises.

After analysis of the “quite poorly drafted” retainer agreement the judge was not swayed by Walker’s ingenuity.

He singled out clause 6 for particular attention.

“If this agreement is terminated, the firm is entitled to retain all moneys that have been paid by you under this agreement and the firm is not required to perform further services.”

Chesty was unimpressed. What is meant by “all moneys”? He thought the clause must mean “moneys paid or appropriated from the retainer sum for legal services actually performed”.

“The other construction is too outrageous to be acceptable. It would mean, for example, that if on the first occasion that the client attended to give instructions the solicitor was drunk and obnoxious and the client politely declined to entrust his affairs to the solicitor for want of confidence in the latter’s professionalism the whole of the sum (in this case) $95,000 would be the solicitors’. One imagines such a clause would be unenforceable as a penalty, notwithstanding the sum was payable otherwise than for a breach of contract.”

He went on to find that the $95,000 was trust money and should have been paid into the firm’s trust account and held there as security for the payment of fees when rendered in accordance with the terms of the Legal Profession Act.

“That fact that the money was not so dealt with is not relevant to this application though it may have other ramifications.”

Oh dear. What could that mean?

Chesty ordered Nyst Lawyers to pay $95,000 from its general account to the Public Trustee.

There could be a racy film script out of all this.

Sir Terence O’Rort reporting