The Supreme Court will consider the case of lawyers who were deprived of their fees from the firm, which then went bankrupt

The company hired lawyers to help its employees fight off criminal complaints from the authorities. But several years later they were forced to return the fees. Courts in the bankruptcy case concluded that legal services were not actually rendered, and accused one of the defenders of knowing the financial situation of the company. In November, the Supreme Court will decide the dispute. In the meantime, experts told Pravo.ru, how to prove to the court the fact of legal services and what documents would not drag out the dispute until the fourth instance.

Insufficient evidence

In 2014, Hochtiv Development Russland (HDR) engaged lawyer Sergei Volzhenkin to protect employees, including the general director of the company, in a criminal fraud case. In August 2015, another lawyer, Yuri Pugach, was invited to assist him. Volzhenkin received almost 5.5 million rubles for his services, while Pugach received about 2.5 million rubles.

On January 10, 2018, the bankruptcy proceedings began at KDR. Payments to lawyers fell within the three-year period of suspicion, the company’s creditors challenged them, claiming that no legal services were actually rendered by the lawyers (case No. A56-116888/2017).

Three courts pointed out that the very conclusion of the agreement with the lawyers does not indicate the desire of the client and the executor to harm creditors. At the same time, the courts invalidated payment for part of the services for Volzhenkin: they excluded from the amount payment for consultation with the client, discussion and development of the legal position, including telephone conversations, participation in joint meetings with other lawyers. The courts decided that such services need to be confirmed by minutes of the relevant meetings. The lawyer’s fee was thus “reduced” by 2.2 million rubles.

Pugach, on the other hand, was stripped of his fee in full because he failed to provide the courts with primary documents confirming the provision of legal services to the CDR or its employees. The district court did not accept as evidence the appeal ruling of the St. Petersburg City Court, in which Pugach was listed as a representative of the company, because there was also another lawyer in the case, who filed a complaint. The courts also recognized that Pugach was aware of KHD’s financial condition because he had provided legal services to this company as early as 2009.

Violation of attorney-client privilege

Pugach, Volzhenkin and St Petersburg City Bar appealed to the Supreme Court. The plaintiffs insisted that the minutes of the meetings with the clients are the attorney-client privilege and cannot be used as evidence in a fee dispute in bankruptcy.

In addition, the courts have violated the rule of guarantees of independence of counsel (paragraph 3 of Art. 18 of the Law “On Advocacy”), which prohibits requesting from defenders information relating to the provision of legal assistance in specific cases. In addition, the Arbitration Court of the North-Western district applied in the case the norms of compensation of court costs and the relevant explanations of the Supreme Court. But these rules are not applicable in the dispute about the validity of payment, the applicants are sure.

The economical board will consider the complaint of lawyers on November 3. The Supreme Court in early 2022 has already dealt with a separate dispute on attorneys’ fees HDR. Then the judges concluded that the hired lawyer should not find out the financial situation of the client.

How to prove legal services

In usual lawyer practice, the act of services rendered (or acceptance of services rendered), signed by the client and the attorney is enough to confirm the consultations with the client, says Khas-Magomed Toldiev, consultant of bankruptcy practice of Lemchik, Krupsky & Partners.

The law “On Advocacy” and the acts of explanatory nature of the LPA do not oblige the lawyers to compose any extraordinary and specific documents within the legal aid agreement, which could be “definitely reliable” for the courts, the expert emphasizes.

But the district court concluded: the acts of acceptance of services rendered cannot confirm the fact that the lawyer [Volzhenkin] rendered those services,
which necessarily precede the drafting of the main procedural documents and are an integral part of the lawyer’s proceedings.

If the Supreme Court finds this conclusion to be valid, the legal community will have to find ways out of the situation by inventing other types of documents and presenting other evidence that will be able to convince the courts otherwise, warns Toldiev.

Elena Rodionova, a partner and head of practice at the law firm Olevinsky, Buyukyan and Partners, believes that lawyers Pugach and Volzhenkin were inattentive to the drafting of primary papers: “I believe that without direct evidence it is difficult to confirm that a service was rendered.

Such evidence could be orders for official meetings and negotiations, indicating the purpose, program of the negotiations, number of invitees, date, place and time of the event and other additional information. And as final evidence it would be correct to use documents that would confirm the fact of negotiations, such as a report on the conduct of the event. In the act on the provision of services or the report of the executor should have listed in detail what services were rendered. Such evidence would have satisfied the court, says Rodionova.

However, the expert thinks that the applicants’ argument about violation of attorney-client privilege deservedly attracted the attention of Judge Ivan Razumov, who referred the case to him.

Toldiev also draws attention to another error of the lower courts which dismissed the reference of lawyer Pugach to the act of the court of appeal where he is named as a representative of the company. According to the logic of the district court, only the lawyer who signed the appeal can refer to the fact of rendering services to the principal in the appeal proceedings, the expert explains.

“Such approach is obviously unreasonable because very often several lawyers act on behalf of one principal and the role of each of them cannot be reduced on formal grounds”, – assures Toldiev.

Source: https://pravo.ru/news/243301/?utm_source=telegram&utm_medium=smm&utm_campaign=tg_channel