1. Introduction
1.1. Who should read this Guidance Statement?
This Guidance Statement is for solicitors and law practices.
1.2. What is the issue?
Law practices have a right to take reasonable security for costs,1 but there is no statutory definition of what ‘reasonable security’ may entail. One practice of which the Society is aware is the taking of mortgages by solicitors over the homes or other real estate owned by clients who are individuals.
While this practice is not prohibited (as opposed to mortgage financing, which may be prohibited by practice rules),2 it should be approached with extreme caution, as it involves a clear inherent conflict. It may not be possible to appropriately address such a conflict if fees are secured in this way and a recent case has highlighted some of the challenges.3 Balancing the interests of the client and the practitioner in these circumstances is a difficult exercise and a step not to be taken lightly, particularly where alternative approaches may be available.
1.3. Status of this Guidance Statement
This Guidance Statement is issued by the Queensland Law Society (‘QLS’) Ethics and Practice Centre for the use and benefit of solicitors.
This Guidance Statement does not have any legislative or statutory effect. By having regard to the content of this Guidance Statement, it may be easier for you to account for your actions if a complaint is later made to the Legal Services Commission.
This Guidance Statement is not legal advice, nor will it necessarily provide a defence to complaints of unsatisfactory professional conduct or professional misconduct.
This Guidance Statement represents a standard of good practice and is endorsed by the QLS Ethics Advisory Committee.
2. Ethical principles
ASCR
Rules 4, 8 and 12 of the Australian Solicitors' Conduct Rules 2023 (ASCR) apply to this Guidance Statement.
These Rules impose a professional obligation on all solicitors in Queensland.
3. Scope
This Guidance Statement is concerned with mortgages taken over the real property of clients in order to obtain security in relation to legal costs.
This guidance does not cover securities taken for other purposes, those taken in the context of litigation funding, over the assets of a business or over the property of a third party. However, the cautions in this Guidance Statement apply to other funding models where a conflict of interest can arise and which can be fraught with professional risk for the solicitor.
4. Issues
Where clients do not have funds to place into trust to secure legal fees, and do not have funds to pay for fees as they are incurred, a solicitor may agree to provide services on a deferred payment basis. A solicitor in this position may take reasonable security as a condition of their retainer, including a charge over client assets. This is not in itself unreasonable, but care must be taken to ensure terms are fairly negotiated and the result is not onerous to the client.
Given the inherent conflict involved in such an arrangement, it is imperative that prior to entering into it the solicitor has ensured that:
- the client fully understands the implications of the arrangement, especially that the home may be sold to pay the solicitor’s fees;
- the client is not entering into the agreement under duress;
- the solicitor is not involved in the client’s decision; and
- that the client is not making a decision under the impression that the solicitor’s legal advice is that the client should enter into the arrangement.
Solicitors are reminded of their fiduciary duties to a client which includes a duty of loyalty and a duty to avoid conflicts of interest. While the duty to avoid conflicts of interest will mean that the solicitor should not provide advice to the client about the mortgage and should recommend independent advice (see clause 4.4), the duty of loyalty may require the solicitor to warn the client about the consequences of granting the mortgage (including that granting a second mortgage may put the client in breach of their obligations to their existing mortgagee).
Fiduciary relationships are characterised by an imbalance of power, with the solicitor having a duty to act in the best interests of the client.4 The High Court has confirmed that the relationship between a solicitor and a client is inherently fiduciary. Fully informed consent is mandatory, but may not save the solicitor from a finding that they have breached their fiduciary duties to the client. Breach of a fiduciary duty gives the client a range of equitable remedies, including potential recission of the mortgage.5
4.1. Retainer
If a solicitor does choose to seek security for costs as a condition of engagement, this should be included in the retainer itself. Any such clause – whether allowing a practitioner to demand funds in advance, taking security over a client’s property, or taking a charge must be clear and unambiguous.
It must also be specifically drawn to the client’s attention in such a way that the client understands and appreciates its effect. It is recommended that the client initial the clause in question or provide some other overt acknowledgement.
4.2. Documenting process
Taking a mortgage or other charge over client property to secure fees is an unusual and complicated endeavour, and the process must be rigorously documented. This should include a detailed file note or correspondence confirming that the client has had the implications of the charge explained to them, has obtained independent legal advice and provided informed written consent.
It is advisable that signed written instructions from the client to proceed be obtained prior to taking steps to establish the charge. Those instructions should attach the proposed charging documents and include confirmation that the client has read and accepts the documents.
Failure to adequately document the process may lead to disciplinary action being taken,6 as well as failure of the security.
4.3. Consent
It is imperative that solicitors seeking to take a charge over any client assets to secure costs only do so with the informed written consent of the client. The onus is on the solicitor to ensure that this is obtained.7 Whether or not any consent obtained is sufficiently informed will depend on the circumstances, and clearly having the client obtain independent legal advice will go some way to establishing this.
Given the complexity of most mortgages, it is also highly recommended that the solicitor suggest the client seek independent financial advice to ensure they understand the financial implications of the mortgage. This is especially important if the client has other mortgages or charges over their assets.
4.4. Independent Legal Advice
Prior to a solicitor taking a charge over client assets, the client must be offered the opportunity to obtain independent legal advice.8
Of particular importance to this guidance is Rule 12, which prohibits a solicitor from acting in circumstances where their own interests are in conflict with the client’s best interests. As securing legal fees with a mortgage over a client’s assets gives the solicitor priority to other creditors, and may lead to the solicitor selling the client’s assets to recover fees, it is clear that independent advice is appropriate. Any advice provided by the solicitor taking the security to the client about the documentation and operation of the security cannot be independent. Although it is open to the client to refuse this opportunity, it is highly recommended that a solicitor in this situation insist that independent legal advice is obtained.9
If the client refuses, the solicitor should give serious consideration to terminating the retainer, removing the security requirement, or proposing another approach. It should be kept in mind that a client offering assets as security for legal fees, when the alternative is that they will not be able to obtain legal representation, places the client in an inherently vulnerable position. Should a dispute arise in relation to the securing of fees, it is likely that the circumstances in which consent to the charge was obtained will be thoroughly examined by the court.
It follows that the above steps should be fully documented in written form, and the client should provide written acknowledgement that the opportunity to obtain independent legal advice has been offered. If the client refuses the opportunity, and the solicitor decides to continue to act, further written acknowledgment of this should be obtained, which includes confirmation that the opportunity was refused against the advice of the solicitor.
The decision to continue to act when the client has refused independent legal advice should not be taken lightly, and it would be prudent for solicitors in this position to document their reasons for continuing to act.
4.5. Title check
If a solicitor is contemplating taking a charge over client’s home to secure fees, it is imperative that the solicitor establish that the client holds title to the asset in question and can offer it as security.
4.6. Witnessing
Any document establishing a charge over client assets in order to secure legal fees should not be witnessed by the solicitor or anyone associated with the law practice that has the benefit of the charge. Given the inherent conflict involved, having an independent person witness the document provides an extra level of independence. It also confirms that the solicitor has turned their mind to this issue, a question which will likely be the subject of consideration by a court in any subsequent dispute.10
4.7. Disclosure
Depending on the type of matter the solicitor is handling for the client, it may be that the charge on the client’s assets must be disclosed to the other parties and the court. The solicitor taking the charge should turn their mind to this question and disclose if appropriate. Failure to do so can amount to unsatisfactory professional conduct or professional misconduct.11
4.8. Enforcement
Should a solicitor need to enforce the mortgage in order to recover legal fees, they will be in a fundamental conflict and must terminate the retainer (and any other retainers with the subject client).
5. More Information
See Can a solicitor take reasonable security for their fees?
See Michelle Castle and Andrew Bailey, ‘Taking security for legal costs: lessons from Malouf v Constantinou’, Law Society Journal, 48 (September 2018).
Solicitors are also referred to the Queensland Law Society, The Australian Solicitors’ Conduct Rules: A Commentary for Legal Practitioners in Queensland, Queensland Law Society (June 2026).
For further assistance, including difficulties you may be experiencing as either a supervisor or as a practitioner who is being supervised, please contact an Ethics Solicitor in the QLS Ethics and Practice Centre on 07 3842 5843 or ethics@qls.com.au or a QLS Senior Counsellor.12
1 Legal Profession Act 2007 (Qld) s 320.
2 Legal Profession Act 2007 (Qld) s 228.
3 Legal Services Commissioner v Hallam [2024] QCAT 386.
4 Baker v Legal Services Commissioner [2006] 2 Qd R 249.
5 Maguire & Tansey v Makaronis (1997) 188 CLR 449.
6 Legal Services Commissioner v Hallam [2024] QCAT 386, [30]–[35].
7 Maguire v Makaronis (1997) 188 CLR 449, 466–467 (Brennan CJ, Gaudron, McHugh and Gummow JJ).
8 Ibid.
9 Country Law Services v Duff [2007] NSWSC 1509, [33]; JKB Holdings Pty Limited v de la Vega [2013] NSWSC 501.
10 Legal Services Commissioner v Hallam [2024] QCAT 386, [41]–[43].
11 Ibid [62]–[66].
12 ‘QLS Senior Counsellors’, Queensland Law Society (Web Page) <https://www.qls.com.au/qls-membership/services-and-benefits/professional-services/qls-senior-counsellors>.