The importance of the lawyer and client contract when preparing a Will

The contract between the lawyer and client is everything.  It covers the scope of legal services and cost.  The contract may have implied terms.  It may change as circumstances change.  The contract and the context in which it is performed will determine risk and liability to the client and others.

The High Court in Badenach v Calvert [2016] HCA 18 held a lawyer was not negligent in drafting a Will for a client.  The particular lawyer and client contract was an important factor in the decision.  Many lawyers claim it is a common sense decision and are relieved.  We are still cautious.

The facts

The lawyer Mr Badenach received instructions from his client to prepare a Will.  The client was 77 years old and was terminally ill when he gave instructions to the lawyer.  The client died later the same year after he signed his Will.  Surprisingly, the age and terminal illness of the client has not received any real coverage in reports about the case.

The Will gifted the client’s estate to Mr Calvert.  The client treated Mr Calvert as his son (even though he was not).  The client’s main assets included an interest in two properties he owned as tenants in common with Mr Calvert.

The client had previously been married.  There was an estranged daughter from that marriage.  Following his death, the daughter made a successful family provision type challenge to the Will under the relevant law in Tasmania.  Her successful claim significantly depleted the estate.

The Will beneficiary Mr Calvert (the intended beneficiary) sued Mr Badenach (and his firm) claiming negligence in failing to advise the willmaker client that:

• a family provision type challenge to the Will could be made by eligible family members after his death that could affect the gift to the intended beneficiary; and

• there were options available to the willmaker to prevent or defeat such a challenge to the Will (such as lifetime gifts or converting co-ownership of property to joint tenancy).

It would be difficult to make a successful negligence claim in New South Wales based on the same facts as the available options may not be effective in NSW.  This is because the notional estate concept in NSW family provision law can, in appropriate circumstances, allow the Court to claw back property into an estate that was transferred or dealt with prior to death with the intention of defeating or limiting a likely future family provision claim.

As a result of decisions in the Tasmanian courts, the lawyer Mr Badenach appealed to the High Court against the finding that he was negligent.  He claimed he was not negligent because his contract with his client was to prepare the Will.  The contract did not extend to advising the client about how to defeat or limit a challenge to his Will so as to prevent a claim against his estate.  It is worth noting that Mr Badenach charged his client a modest $440.

The High Court decision

When preparing a will for a client, a lawyer is required to exercise reasonable care and skill in giving effect to the client’s instructions.  The important issue in this case was whether, in the circumstances of the case, Mr Badenach’s legal duty of care extended to Mr Calvert (the intended beneficiary). 

The High Court held that it did not.  The contract between Mr Badenach and his client determined the scope of his duty of care.  The contract to prepare the Will did not extend the duty of care to the intended beneficiary.  The majority of the Court also found that, in any event, the intended beneficiary had not established that Mr Badenach’s failure to advise caused the loss suffered by the intended beneficiary.

Managing risk

Lawyer and client contracts are not standard.  Contracts will vary with different clients and in different circumstances.  Some clients will want limited legal services because of cost or time constraints.  Some lawyers will not want to provide legal services outside their usual areas of practice (tax advice being a good example). Issues such as urgency, illness, old age or language obstacles may impact on contract terms and performance.

When entering into the contract, it is important for both the lawyer and the client to pause and give careful thought to what legal services may be required and the context in which they will be provided.  It is only fair and reasonable for this to be clear to both parties.  A contract to prepare a Will is different to a contract to provide estate planning legal services and the cost will be significantly different.  A contract to prepare a Will for an elderly person with a terminal illness will be different to a contract to provide estate planning legal services to a young business owner with assets in multiple jurisdictions.

If in the course of performance of the contract an additional fact becomes known that changes the scope of the legal services required, prudent risk management dictates that a written variation to the contract should be provided that either includes or excludes the provision of those further legal services.

Finally, Mr Badenach could have avoided his uncomfortable legal journey by taking some simple steps.  He could have asked the client to complete a precedent fact finder or he could have worked through the fact finder at the initial meeting that directed the client’s attention to other family members that were not to be provided for in the Will.  Once the issue had been identified, Mr Badenach and the client could have agreed in writing as to whether further legal services were required.

Author: Gerard Basha