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Case:
BGHZ 15, 315 I. Civil Senate (I ZR 147/53)
Date:
30 November 1954
Judges:
Professor B.S. Markesinis
Copyright:
K. Lipstein

The plaintiff is a registered association founded in 1946. According to § 1 of its statutes its purpose is to protect and to further the professional and economic interests of the Hamburg Bar.

The third defendant is an association founded in 1890 as a legal entity. According to § 2 of its statutes its purpose is to better the ‘tenancy and housing conditions’ of the population and, especially, to protect the legitimate interests of its members. According to § 2(d) and (e) of its statutes this goal is to be achieved by providing free oral advice as well as written advice for a fee for all members of the association; in addition it offers to represent them for a fee in dealings with public authorities, civil and administrative courts. The fees payable to the association are the same as those charged by legal counsellors.

The first and the second defendants are the legal advisors of the third defendant who are entitled, according to § 8(6) of the statutes, to represent the members before public authorities and courts. Until 1 October 1952 they were paid their own expenses and 80 per cent of the fees after deducting the expenses incurred by the association. The parties disagree as to what fees are paid to them after 1 October 1952.

The plaintiff contends that the first and the second defendants have contravened the Act against Abuses in the Field of Legal Advice and the Unfair Competition Act (UWG) and that the third defendant had enabled them to carry on their illegal activity, and had assisted them.

The plaintiff has asked that the first and second defendants be ordered to desist from advising the members of the third defendants gratuitously or against a fee and from representing them in court and to order the third defendant to desist from according to the first and second defendants the right to give free advice or advice for a fee and to represent it in court.

The defendants have denied that the plaintiff has a legal interest calling for protection. They argue that the first and second defendants do not give legal advice on a commercial or professional basis. Nor did their conduct constitute unfair competition.

The District Court rejected the claim. On appeal, the plaintiff has asked as an alternative to prohibit the third defendant from handling legal matters professionally, especially by charging fees similar to those of procedural representatives or the like, and to prohibit the first and second defendants from collaborating with the third defendant in handling legal matters. The Court of Appeal of Hamburg rejected the entire claim. The plaintiff’s appeal was successful in most respects for the following

Reasons

The plaintiff has based his claim for orders to desist primarily on § 823 II BGB in conjunction with § 1 I of the Act concerning Legal Counsellors. Since this act aims at protecting the citizen against the dangers arising from the employment of unqualified and unreliable persons, but also seeks to protect the Bar against competition by such persons who engage in legal advice who are not subject to the constraints relating to professional etiquette, fees, and the like created in the interest of the administration of justice, it cannot be doubted that it bears the character of a protective act . . .

The appellant is wrong in contending that the third defendant must not demand any ‘consideration’, for his legal services, not even to reimburse him for his expenses.

The claims of the members of the association to receive assistance in legal matters follows from their membership. The expenses incurred by the association in satisfying this claim must naturally be covered somehow, be it by contributions by all members, or by special payments to those members who ask the association for assistance in legal matters. It is an internal matter to be decided as such by the association as it sees fit. The question as to whether in so doing it exceeds the limits set by § 7 I of the Act concerning Legal Counsellors is not necessarily identical with that as to whether the association may only provide ‘gratuitous’ assistance in legal matters or whether it can do so also for ‘remuneration’. For, as will be shown later on, even to claim actual expenses only, i.e. to provide assistance in legal proceedings gratuitously in the strict meaning of the word, may be illegal in certain circumstances; e.g. if the association grants the persons who act for it in assisting in legal proceedings a remuneration in accordance with the scale of fees for lawyers or for legal counsellors and then seeks to recover it from the members as actual expenses. The plaintiff contends, in agreement with the literature and practice, that ‘remuneration’ in the meaning of § 7 I of the above-mentioned law consists of any money payment by a member of the association, even if it only represents a reimbursement of expenses and not a genuine remuneration. However, this Division cannot accept his view that the assistance in legal proceedings by the association must be ‘gratuitous’ in this sense.

Contrary to the view of the appellant the wording of § 7 I of the Act concerning Legal Counsellors . . . does not indicate that this exceptional provision is to apply only if the assistance in legal matters is ‘gratuitous’. In so far as § 1 VII of the Act concerning Legal Counsellors permits the association concerned acting within the limits of their established task to ‘provide’ advice and assistance in legal matters for their members, the word ‘provide’ does compel the conclusion that the legislature only wished to allow a gratuitous activity . . . The Court of Appeal was therefore correct in holding that a comparison of § 7 I and § 1 I does not lead to the conclusion that the advice and assistance must only be gratuitous. . . .

Nevertheless, the objections of the appellant must succeed in so far as they are directed against the assessment of the remuneration in accordance with the official scale of fees. The appellant is right in stating that to allow remuneration to be charged on the scale of charges fixed for legal counsellors (§ 2(e) of the statutes) is incompatible with the provision of § 7 I of the Act concerning Legal Counsellors and therefore illegal.

§ 7 I of the above-mentioned Act is based on the consideration that voluntary legal assistance is to be judged by different standards than those activities which, in looking after the legal affairs of others, serve a gainful purpose [reference]. An association is only exempt from the need to have a licence if advice and assistance is provided within the framework of its professional duties. Its activity must be strictly limited to these tasks; it becomes illegal if the association, in exceeding the limits set to it, e.g. by the way in which it regulates the remuneration payable by its members, participates in the pursuit of economic gain, which in the case of legal advice is only permitted by the law in strictly fixed circumstances.

According to § 1 I of the above-mentioned Act, not only physical persons but also legal entities and other associations which intend to act for others in legal matters require a licence. In this connection the legislature has established special protective measures for entities which appear in the form of corporations, especially private companies and similar associations of persons. The grant of the licence depends not only on the consideration that the circumstances of the individual case justify the desired legal form for the operation [reference] but it presupposes also that the exercise of the profession is limited to the persons who are designated by name in the licence [reference]. Moreover, like individuals these associations are subject to the supervision by the President of the District Court and are controlled as to the proper conduct of their operations [reference]. The intention of the legislature expressed in these provisions to protect the community against damage and to protect the Bar which is subject to extensive restrictions against competition by an immeasurable number of persons must not be evaded or frustrated. § 7 I of the Act concerning Legal Counsellors must be interpreted in accordance with this purpose of the law. The meaning and the purpose of this Act would be reversed if the associations which have a professional basis were allowed to exercise an activity which, in the main, distinguishes them no longer from the circle of persons who require a licence. If an association with a professional or similar basis looks after the legal affairs of others in a manner which comes near to the activity of an individual or association requiring a licence to such an extent that a member of the association occupies a position in relation to the association which does not differ essentially from that towards a person covered by § 1 I of the above-mentioned Act, that association can no longer claim that its activity is permitted by § 7 I. Such is the case, in particular, if the professional association which looks after the affairs of a member demands a fee which is assessed on the scale of fees for advocates and legal counsellors. Only advocates and, to a certain extent [reference], legal counsellors [reference] may claim fees on this scale. The reason is that this profession, which is required for the administration of justice, must be guaranteed an adequate remuneration for its service and thus a dignified position in life [reference]. This consideration does not apply, however, to an association formed in accordance with § 7 I of the above-mentioned Act. It is true that such an association cannot be prohibited from seeking reimbursement for those expenses and costs incurred in the course of safeguarding the legal interests of their members. The association must therefore remain entitled to bill its members—either all of them or only those requiring legal assistance—for the salaries actually paid to its employees and for the compensation paid to an agent as well as for other general office expenses by apportioning them in its discretion without undue need for restrictions. However, the association exceeds the legal limits set for its operations if it provides assistance and support for its members on the basis of a scale of fees which is only permitted in entirely different circumstances to a circle of persons to which admission is by registration or by a licence according to § 1 of the above-mentioned Act. It is irrelevant in this connection whether in the end by using this scale of fees the association in fact made a profit by rendering assistance in legal proceedings. It is common experience that a scale of fees of this kind at least encourages the tendency to make a business out of looking after the legal affairs of others. If so, all the dangers facing those seeking advice would be allowed to materialize which persuaded the legislature to require a licence for gainfully engaging in looking after the legal affairs of others. If the professional associations were given dispensation by § 7 I of the above-mentioned Act from the need to apply for a licence the reason was because, and to the extent that, a genuine activity of assistance appeared to exclude these dangers from the outset. This privilege is, however, no longer justified if as a result of the method of determining the remuneration for its activities the association creates the same dangerous situation which the requirement of a licence sought to meet in the case of non-privileged individuals and associations.

By providing in its statutes that its fees are to be those applicable to legal counsellors, the third defendant has therefore contravened § 1 I of the above-mentioned law in conjunction with § 823 II BGB. He is therefore obliged to refrain from doing so in so far as he allows his members to be advised or to be represented in court by the first and second defendant in consideration of fees as they are established for legal counsellors . . . Since it may be assumed without hesitation that the first and second defendants were familiar with the statutes of the third defendant, they are equally liable for having contravened § 823 II as accomplices or accessories and are therefore equally under the obligation to desist.

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