Castel Electronics Pty Ltd v Wilmoth Field Warne
[2012] VSC 481
•19 October 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
S CI 2011 6083
| CASTEL ELECTRONICS PTY LTD (ACN 074 561 087) | Plaintiff |
| v | |
| WILMOTH FIELD WARNE (a firm) | Defendant |
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JUDGE: | LANSDOWNE AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 16 April 2012 | |
DATE OF REASONS FOR JUDGMENT: | 18 October 2012 | |
DATE OF JUDGMENT: | 19 October 2012 | |
CASE MAY BE CITED AS: | Castel Electronics Pty Ltd v Wilmoth Field Warne | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 481 | |
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SOLICITORS’ POSSESSORY LIEN – Whether to disturb – jurisdiction under s 76 Supreme Court Act 1986 - discretion – application refused.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R. Garrett QC with Mr D.C. Bailey | |
| For the Defendant | Mr D. Masel SC with Mr S. Warne |
HER HONOUR:
This proceeding was commenced by originating motion filed 15 November 2011. The originating motion seeks an order under s 76 of the Supreme Court Act 1986 and in the inherent jurisdiction of the Court that the defendant make available for inspection by the cost consultant retained by the plaintiff files, records and other documents held or maintained by the defendant as solicitor for the plaintiff as applicant in certain Federal Court proceedings.
Applications made under s 76 of the Supreme Court Act fall within the jurisdiction of an Associate Judge to hear and determine.[1] The matter was heard before me on 16 April 2012 by way of affidavit evidence and submissions. Neither party sought to cross examine the witnesses of the other, although the hearing was for final rather than interlocutory relief.
[1]Rule 77.01(2)(x) of the Supreme Court (General Civil Procedure) Rules 2005.
Material relied upon
The applicant relies on three affidavits as follows:
affidavit of Michael Kwong, the Managing Director of the applicant (“Castel”) sworn 14 November 2011;
affidavit of Raymond John De la Rue, Cost Consultant to the applicant, sworn 14 November 2011;
supplementary affidavit of Michael Kwong sworn 5 April 2012.
The respondent relies on five affidavits as follows:
affidavit of Simon O’Hanlon, currently the proprietor of Simon O’Hanlon and Associates Lawyers but formerly the solicitor for Castel at Wilmoth Field Warne sworn 13 December 2011;
affidavit of Roydon Euan Luff, Supervising Partner of Simon O’Hanlon’s work at Wilmoth Field Warne, sworn 13 December 2011;
further affidavit of Roydon Luff sworn 14 December 2011 correcting a matter in the earlier affidavit;
further affidavit of Roydon Luff sworn 19 March 2012;
further affidavit of Roydon Luff sworn 16 April 2012.
Facts
The respondent firm were the solicitors for the plaintiff (“Castel”) in the period 1 July 2008 to 8 October 2009 in respect of proceedings instituted by Castel in the Federal Court. The Federal Court proceedings arose from a dispute between Castel and Toshiba Singapore Pte Ltd (“Toshiba”). The proceedings were issued by Castel in March 2008 for breach of contract in relation to the supply to Castel by Toshiba of electronic products.
Castel as a client and the file concerning these proceedings was brought to Wilmoth Field Warne by Mr Simon O’Hanlon who joined the firm on 1 July 2008. The managing director of Castel, Mr Michael Kwong, and Mr O’Hanlon had known each other for a number of years prior to that time and Mr O’Hanlon had acted as solicitor for Mr Kwong in other matters prior to the dispute with Toshiba, principally in relation to advice in commercial matters.
Mr O’Hanlon acted for Castel in the dispute with Toshiba that led to the Federal Court proceedings in his previous two firms, Monahan + Rowell and FAL Lawyers. On each occasion Mr O’Hanlon moved firms, Castel as a client and the file relating to these proceedings moved with him.
Wilmoth Field Warne acted for Castel in the early stages of the Federal Court trial in June and August 2009. After the termination of their retainer, the trial continued and judgment was given by Ryan J for Castel on 28 September 2010 in the sum of $2,613,127 plus interest. Subsequently, on 9 December 2010, Ryan J gave judgment for Castel against Toshiba in the total sum of $4,660,483.51 for damages and interest. Castel appealed that judgment in respect of quantum and on 11 May 2011 the Full Federal Court, constituted by Keane CJ, Lander and Besanko JJ, gave judgment for Castel as appellant and set aside the order of Ryan J as to quantum, substituting the sum of $9,164,410 including interest. The Full Court ordered Toshiba to pay Castel’s costs of the proceeding and the appeal, dismissed a cross‑appeal by Toshiba and ordered Toshiba to pay Castel’s costs of the cross‑appeal.
During the period Wilmoth Field Warne acted for Castel in the Toshiba proceedings, Wilmoth Field Warne also acted for Castel in relation to a different dispute, which was the subject of an arbitration between Castel and TCL Air Conditioner (Zhongshan) Co Limited (“the TCL/arbitration dispute”). That retainer was terminated by Castel on 18 September 2009.
Castel terminated its retainer of Wilmoth Field Warne in the Toshiba Federal Court matter on 8 October 2009. Castel asserts that the termination was for cause. Wilmoth Field Warne disputes this.
Wilmoth Field Warne claims there are fees outstanding to it by Castel in respect of both the Toshiba/Federal Court proceedings and the TCL/arbitration dispute. In respect of the Toshiba/Federal Court proceedings, Wilmoth Field Warne now claims the sum of $455,954.38 and interest as outstanding.[2] In the TCL/arbitration dispute, Wilmoth Field Warne claims the sum of $64,509 as outstanding.[3] Castel disputes the amount claimed by Wilmoth Field Warne in respect of both matters.
[2]Affidavit of Roydon Luff sworn 14 December 2011.
[3]Affidavit of Roydon Luff sworn 19 March 2012.
The party/party costs Toshiba is required to pay Castel arising from the orders of the Full Federal Court are not yet taxed. Mr Kwong says that Mr De la Rue has estimated the party/party costs and disbursements payable to it by Toshiba in the Federal Court proceedings to be in excess of $2 million.[4] Castel says that Toshiba has required of Castel a bill in taxable form. The costs consultant retained for that purpose by Castel, Mr De la Rue, requires access to the Wilmoth Field Warne file relating to the proceeding in order to prepare the bill of costs. Obtaining access for that purpose is the stated purpose of this application. Wilmoth Field Warne has to date refused access to the file, and the files of earlier solicitors held by it, on terms acceptable to Castel. Both parties have put forward proposals to the other in relation to access which have been rejected. I will consider these offers in detail later in this judgment.
[4]Affidavit of Michael Kwong sworn 14 November 2011, paragraph 25.
The parties have been in dispute as to the quantum of any outstanding solicitor/client costs since at least July 2009[5]. They are also in dispute as to whether or not Wilmoth Field Warne have provided bills in itemised or taxable form[6] or was required to, by request made within time[7]. Bills of costs were issued by Wilmoth Field Warne in 2008 and 2009, initially in lump sum form. In July and September 2009 Wilmoth Field Warne provided detailed bills in respect of the same work and time period covered by the earlier lump sum bills.[8] By letter dated 11 February 2011 to the solicitors for Castel, Wilmoth Field Warne issued fresh bills, said by them to be in taxable form, and to total $580,105.99.[9] These bills have subsequently been referred to as the “2011 bills”. Castel does not accept that these bills are in taxable form. Following the issue of the 2011 bills, there have been at least four occasions on which matters concerning the solicitor/client cost dispute between Castel and Wilmoth Field Warne have come before a court- two applications in the Federal Court, one in the Costs Court and this application.
[5]See emails from that date exhibited as MK-5 to Mr Kwong’s affidavit sworn 14 November 2011 and other correspondence said to request bills in taxable form being MK-13 to his second affidavit.
[6]Compare Kwong affidavit of 5 April 2012 at [13] to Luff affidavit of 16 April 2012 at [3].
[7]Luff affidavit of 16 April 2012 at [10] and [11].
[8]Luff affidavit of 16 April 2012 at [9] at which he agrees with Mr Kwong in Mr Kwong’s affidavit sworn in the Costs Court proceedings.
[9]MK-6 to Mr Kwong’s affidavit of 14 November 2011.
The first application was made by third party notice of motion filed by Wilmoth Field Warne in the Castel/Toshiba proceedings on 25 February 2011, following the refusal of Castel to give the undertaking sought by the letter of 11 February 2011 to retain the sum of $580,105.99 claimed in the 2011 bills on the basis that Wilmoth Field Warne had a “fruits of litigation” lien over that sum. The notice of motion sought, amongst other things, a declaration that Wilmoth Field Warne had an equitable lien over the judgment debts ordered by Ryan J in favour of Castel to the extent of $580,105.99. This notice of motion was heard and dismissed by Justice Ryan on 4 March 2011.
The parties have not put his reasons before me but I have read them.[10] His Honour dismissed the declaration sought as to a fruits of judgment lien first because the judgment debt had already been paid by Toshiba to Castel. He held that as a result there was no chose in action, fund in court or fund held by a solicitor to which the lien could attach. He also dismissed the notice of motion, in so far as it sought a declaration as to a lien, on the basis that the entitlement of Wilmoth Field Warne to any further sum for solicitor/client costs depended on taxation. He further declined to grant the alternative relief sought by the notice of motion.
[10]Wilmoth Field Warne v Castel Electronics Pty Ltd [2011] FCA 193
The next court action was taken by Castel. On 19 April 2011 Castel issued a summons for taxation of the Wilmoth Field Warne solicitor/client costs in the Costs Court. The summons was called over on 3 May 2011 and listed for hearing of preliminary issues on 18 August 2011. The reasons of Associate Justice Wood who heard argument on those issues on 18 August 2011[11] state that the issues aired at the callover were whether the applicant, Castel, was a “sophisticated client” under the Legal Profession Act 2004; whether Castel was out of time to seek review of the bills; whether there was a costs agreement in place; whether Wilmoth Field Warne had complied with the disclosure obligations under the Legal Profession Act and whether the bills were in taxable form.[12]
[11]Delivered by Associate Justice Wood 11 November 2011 in S CI 2011 01854.
[12]Ibid, at [2].
On 13 May 2011, after these issues were identified at the Costs Court callover but before the hearing on these preliminary issues, and two days after the decision of the Full Federal Court, Wilmoth Field Warne issued fresh proceedings in the Federal Court against both Toshiba and Castel. Those proceedings sought orders including a declaration that Wilmoth Field Warne had an equitable lien over the judgment debt arising from the judgment of the Full Court to the extent of $580,105.99 and an order restraining Toshiba from disposing of that sum pending the final determination of the proceeding. This application was dismissed by Justice Bromberg on 4 August 2011 without determination on the merits in the circumstances set out below. The reasons of Justice Bromberg are referred to in the supplementary affidavit of Mr Kwong and I have read them.[13] They deal in substance only with the question of costs, but set out a recital of events. I draw the following recital of facts from those reasons.
[13]Wilmoth Field Warne (A Firm) v Toshiba Singapore Pty Ltd and Castel Electronics Pty Ltd [2011] FCA 987.
Prior to the issue of the proceedings Wilmoth Field Warne had sought an undertaking from Toshiba to retain the claimed sum from the moneys payable to Castel pursuant to the judgment debt; Castel had disputed the asserted lien; and Toshiba had declined to give the undertaking sought. After the issue of the proceedings and prior to any hearing on the merits, Toshiba and Wilmoth Field Warne reached agreement in relation to an undertaking. The undertaking is exhibited to Mr Kwong’s supplementary affidavit.[14] Toshiba undertook to retain $580,117.30, or the lesser sum agreed or determined on taxation between Wilmoth Field Warne and Castel, from any monies Toshiba is liable to pay Castel by way of costs in relation to the trial or appeal in the Federal Court, and give 14 days notice to Wilmoth Field Warne of its intention to pay it. In return, Wilmoth Field Warne agreed to notify the solicitors for Toshiba of the outcome of any taxation or agreement between them and Castel in relation to solicitor/client costs. The undertaking provided for its release on the happening of certain events.
[14]MK-23
As a consequence of this agreement, Wilmoth Field Warne notified Castel and the Federal Court that there was no need to press for relief, and sought adjournment of the application sine die. Castel objected to the undertaking, indicated that there remained a dispute as to the amount of any costs outstanding and whether a bill of costs in taxable form had been provided, and sought that the proceedings be relisted to contest the arrangement between Wilmoth Field Warne and Castel. The proceedings came back before Bromberg J on 4 August 2011. His Honour said neither course advanced by the parties “had any merit”[15] and dismissed the application.
[15]At [18]
Mr Kwong says that this undertaking remains extant.[16] If so, it provides security for Wilmoth Field Warne’s costs and so, arguably, the security provided by the lien should not be a barrier to this application. Castel did not, however, put this proposition to me. It relied on the open offers I discuss shortly. For that reason I have not considered the effect of the undertaking in relation to the disposition of this application. It also seems to me possible that, by force of the release provisions contained within the undertaking, it has been discharged in any event, as the undertaking was to discharge on the first of a number of events occurring, including the determination of the application before Bromberg J. That application was determined when he dismissed it on 4 August 2011.
[16]Supplementary affidavit sworn 5 April 2012 at [32]
Argument on the preliminary issues in the solicitor/client taxation in the Costs Court took place before Associate Justice Wood on 18 August 2011. Associate Justice Wood gave Reasons for Rulings on those matters by a document dated 11 November 2011. In Mr Kwong’s first affidavit, sworn 14 November 2011, he states judgment had not yet been delivered, and so it may be the document had not yet been received.
In his Reasons, Associate Justice Wood records that the summons for taxation referred to bills issued dated between 29 July 2008 and 27 August 2009. Subsequently, the applicant provided evidence of two further bills dated 30 September 2009 and 22 October 2009, and also eight bills which “were said to have been provided by the respondent to the solicitor for the applicant on 11 February 2011 (“the 2011 bills”)”.[17] Associate Justice Wood states that those eight bills covered the period 16 February 2009 to 8 October 2009. The eight bills in evidence before me as accompanying the letter dated 11 February 2009 are expressed on their face to cover the period 16 February 2009 to 8 September 2009, but the last bill in fact includes solicitor costs to 8 October 2009. I will assume that date on the front of that bill is an error, and that the bills before Associate Justice Wood he described as the “2011 bills” and those before me are one and the same.
[17]Wood AsJ Reasons at [5]
What follows emerges from the Reasons of Associate Justice Wood. He noted that it was conceded that Castel was a sophisticated client. Accordingly, Castel could not seek an extension of time to tax the bills if they were served more than 12 months prior to the filing of the summons.[18] He noted that Castel had sought leave to amend the summons to add the additional ten bills of which evidence was subsequently given, including the eight 2011 bills, and that argument took place on the assumption that amendment was a formality.[19] He states that it was conceded that the 2011 bills “differed from the earlier bills in several respects” and that “(a)rgument centred around whether they were new and different bills and whether they were served within the 12 month period prior to the filing of the summons.”[20]
[18]At[6]-[7]
[19]At [8]-[9].
[20]At [11]
He then records that Wilmoth Field Warne sought to withdraw the 2011 bills, at which point a timetable was set for submissions on this issue and the question of costs. The parties extended the timetable by agreement and sought further time for discussion prior to the reasons being published, eventually advising that the discussions were not fruitful, which then caused him to publish his Reasons.
Associate Justice Wood held that Castel was out of time to review bills rendered by Wilmoth Field Warne in 2009. He also held, however, that this was no longer relevant, as those bills had been impliedly abandoned or withdrawn by Wilmoth Field Warne by virtue of the delivery of the 2011 bills in respect of the same subject matter. He concluded that:
The inescapable conclusion from the respondent’s conduct is that the 2009 bills covering the same work have been replaced, abandoned or withdrawn. By way of analogy, a party cannot adopt inconsistent positions in different Court proceedings, so the reliance on the 2011 bills in the Federal Court must mean there is no longer reliance on the 2009 bills.[21]
[21]At [39].
He held that Wilmoth Field Warne had withdrawn the 2011 bills before him. He noted as follows:
The withdrawal of the 2011 bills in the present proceedings may open an argument that there may be no bills currently in existence which the respondent can rely upon in order to sue upon or maintain an argument for Toshiba to withhold money from the applicant (see paragraphs [7] and [13] of the judgment of Bromberg J in Wilmoth Field Warne (a firm) v Toshiba Singapore Pte Ltd [2011] FCA 987). But these are comments only and these are not matters before this court. At this stage I make no comment about the conduct of a solicitor who at first blush appears to have produced bills and relies on the content to run litigation in one court and then withdraws them to avoid closer scrutiny of their content in another.[22]
[22]Reasons delivered by Associate Justice Wood 11 November 2011 in S CI 2011 01854 at [41].
Associate Justice Wood made no formal orders in respect of those reasons but granted the parties liberty to apply after consideration of his reasons. Neither party had availed themselves of that opportunity prior to the hearing before me and neither party has sought to appeal the reasons or rulings. Castel expressly relies on the Reasons, at least in so far as Associate Justice Wood held that the 2011 bills replaced the 2009 bills, and were withdrawn from the taxation. Wilmoth Field Warne relies on the finding that Castel was out of time to tax the 2009 bills, but disputes the other two findings.
Submissions and open offers
Wilmoth Field Warne resists the application on the basis of a claimed solicitors’ lien. It says such a lien allows solicitors to refuse to deliver up documents, and also to prevent inspection and copying. Wilmoth Field Warne claims that the lien is not dependent on delivery of a bill, on entitlement to sue, nor on taxation, and that the lien endures until the payment of costs, unless the client terminated the retainer for misconduct. Wilmoth Field Warne says the onus is on the client, here Castel, to prove misconduct, and it is not proved.
Castel says that there is no extant bill of costs, due to the replacement of the 2009 bills with the 2011 bills, and then the withdrawal of the 2011 bills, in the course of the taxation. Castel says this withdrawal must be taken to be for all purposes. It disputes the amount claimed in the 2009 bills (which included a discount), the 2011 bills and the amount now claimed. It concedes, however, that that it has an exposure to a bill until the expiration of the limitation period and, significantly, that the absence of a bill is no bar to asserting a lien.
Castel disputes that a solicitor’s lien extends to all the documents to which Mr de la Rue seeks access, in particular the files of former solicitors who have been fully paid. Castel in counsel’s written submissions urges the Court to find that the retainer was terminated for misconduct. In oral submissions, although counsel has taken me to the material in support of this contention, he submits that such a finding is not necessary. Castel says that even where there is a lien, and the retainer has not been terminated for misconduct, the Court retains a discretion to order up the delivery of documents the subject of the lien, if the interests of justice so warrant. Castel urges that that discretion be exercised in this case for a number of reasons, including the practical one that the purpose of the application is to facilitate the obtaining of party/party costs from Toshiba, which will in turn provide a fund for payment of any outstanding costs to Wilmoth Field Warne.
Wilmoth Field Warne doubts that such a discretion exists. If it does, it says this case is not an occasion for its exercise. In relation to the question of the bills, Wilmoth Field Warne does not accept the conclusion of Wood AsJ that the 2011 bills overtook the 2009 bills. They agree that they did not press at the taxation the 2011 bills. They rely upon the determination by Associate Justice Wood that Castel is out of time to tax the 2009 bills, and say this is a principal reason why the discretion to order delivery up of documents the subject of a lien should not be ordered. In their last open offer before the hearing they sought payment of the sum of $492, 700.25 for solicitor/client costs in respect of the Toshiba proceeding (being $455,954.38 as set out in a schedule[23] provided to Castel on 13 December 2011 and interest to 12 April 2012) under protest and without admission of liability. Wilmoth Field Warne concede that payment of the full amount sought, although under protest, will not afford a taxation or costs assessment of their claim. They say any prejudice to Castel arising from this is entirely due to the fault of Castel in not seeking taxation of the 2009 bills in time.
[23]MK-12 to the affidavit of Mr Kwong sworn 5 April 2012.
Open offers were exchanged between the parties from 30 March 2012 against the backdrop of threatened proceedings by Castel against Wilmoth Field Warne and Mr O’Hanlon for damages for, amongst other causes of action, breach of retainer, misleading and deceptive conduct in contravention of the Fair Trading Act 1999 and deceit (by way of representations said to be false as to Mr O’Hanlon’s competence to conduct the Federal Court proceedings). It is these claimed false representations that are said by Castel in this application to ground its termination of the retainer for misconduct. Castel through its current solicitors advised Wilmoth Field Warne by letter dated 30 March 2012 that it had instructions to issue those proceedings and made an offer in relation to this application and the outstanding costs claimed for the Toshiba and TCL proceedings. That offer was not accepted. I was not informed as to whether or not the proceedings had issued as a consequence or otherwise.
Castel’s last open offer made before the hearing in relation to all disputes between the parties was made by letter dated 13 April 2012. By that letter Castel proposed that in return for Wilmoth Field Warne providing the required access to the documents (at no cost to Castel), Castel would apply for the taxation of the party/party costs in the Toshiba proceedings, use its best endeavours to secure payment for the taxed costs from Toshiba, and pay $580,000 from those recovered costs into an interest bearing trust account as security for Wilmoth Field Warne’s solicitor/client costs in both the Toshiba and TCL proceedings pending a costs assessment of those solicitor/client costs by an agreed costs expert. The last open offer in relation to this application only was also made by letter dated 13 April 2012, which became Exhibit A. It did not provide for payment of an amount from the Toshiba recovered costs as security for claimed solicitor/client costs nor for a costs assessment of those costs, but proposed access on the same terms as in the other offer of that date.
At the hearing counsel for Castel proffered an undertaking by Castel to preserve the sum of $580,000 from the sum recovered by Castel from Toshiba for party/party costs as security for Wilmoth Field Warne’s solicitor/client costs for both the Toshiba and TCL proceedings on the basis of the assessment of those costs as suggested in the first letter of 13 April 2012.
Discussion
Section 76 of the Supreme Court Act 1986 and solicitors’ liens
Section 76 of the Supreme Court Act 1986 provides:
Power of Court to order legal practitioner or law practice to deliver bill of costs etc.
The jurisdiction of the Court to make orders for the delivery by a legal practitioner or law practice of a bill of costs or for the delivery up of any documents in the possession, custody or power of a legal practitioner or law practice or to make any other order in relation to any such documents extends to cases in which the business or part of the business has not been transacted in the Court.
Three single judge decisions of this Court in respect of s 76 or a solicitor’s lien have been relied upon before me. In the earliest, McKenzie v Director General of Conservation & Natural Resources and ors[24] (“McKenzie”) Gillard J held in an application made under s 76 that:
the section does not create a jurisdiction in the court, but recognises it and extends the jurisdiction to cases where the business or part of the business has not been transacted in the court.[25]
[24][2001] VSC 220
[25]At [30].
That is, of course, precisely this case. This statement as to the nature of the jurisdiction was essentially agreed by Vickery J in Nicholson and ors v Knaggs and ors[26] (“Nicholson v Knaggs”) in which Vickery J held that the section “reflects the position at common law as to the inherent jurisdiction of this Court”. In both McKenzie and Nicholson v Knaggs, as here, the inherent jurisdiction of the Court was and is also relied upon.
[26][2009] VSC 187
In McKenzie, Gillard J expressed the nature of a solicitor’s lien relevantly for current purposes in paragraphs 32-34, and 36, 39-41:
There is no doubt that in an appropriate case, the court does have jurisdiction to require a legal practitioner to deliver up documents.
It is equally clear that a solicitor has a lien over documents in respect of unpaid costs, and is not obliged to hand over documents to a client unless the lien is satisfied.
The lien is a right recognised at common law to retain any property, which includes documents in the solicitor's possession until he has been paid costs due with respect to the performance of the retainer.
The lien is a general lien and extends to all costs due to the practitioner.
The right is maintainable until the full amount of the solicitor's costs payable by the client, are in fact paid.
The fact that there is a change of solicitors in the course of a proceeding does not take away the former solicitor's right, but his right to maintain the lien may be affected depending upon whether he discharged himself as the solicitor or was discharged by the client. The general rule is that if he is discharged by the client otherwise than for some breach of contract, he is not obliged to produce or hand over the documents until his costs are in fact paid.
This has been the law for many years and the right has always been upheld.
In that case the defendants sought delivery of the files of their former solicitor to their current solicitors, or access to those files. The Court found that it was the defendants as clients who terminated the retainer and upheld the lien although there was the potential for this to impact on a trial date, in a matter otherwise ready for trial and concerning serious personal injury to the plaintiff. Further, disturbance of the lien was refused despite what might have been thought to be an explanatory factor in the change of representation arising from the collapse of the defendants’ insurer, HIH, who had retained the former solicitors without consulting the defendants.
In Cosgriff v Issac Brott & Co.[27] (“Cosgriff”) Byrne J ordered the defendant solicitor, whose retainer was terminated following an order of the Victorian Civil and Administrative Tribunal cancelling his practising certificate, to deliver up his files to the new solicitors for the plaintiff notwithstanding a claimed lien for outstanding costs. Byrne J described the “well established” law in these terms:
Where a solicitor is discharged by the client otherwise than for some breach of conduct or misconduct, the solicitor is entitled to maintain their lien. Where the retainer is determined by the client for misconduct or breach of contract by the solicitor, the lien comes to an end. Where the solicitor discharges the client for good cause, then the lien becomes a qualified one….The position is otherwise where the discharge by the solicitor is not for good cause, in such a case the lien comes to an end. [28]
[27][2008] VSC 515
[28]Ibid, at [7].
Byrne J decided that the question as to who terminated the retainer in the matter before him should be determined on the basis that the solicitor, by his wrongful conduct, caused himself to be discharged. In other words, the solicitor, not the client, determined the retainer, but not for good cause.
Thus, in both McKenzie and Cosgriff the critical factor was said to be who determined the retainer, and the law was seen to be well established that, if the client, in the absence of misconduct by the solicitor, the solicitor was entitled to the full force of the lien.
In Nicholson v Knaggs, the three sets of defendants had retained common solicitors for the trial, but a conflict arose after delivery of the trial judgment and before the costs hearing from the findings of Vickery J. His Honour recited the general principles relied upon by the respondent to this application as to solicitors liens set out by Drummond J in Darryl Paul Weedman and Ors (No 3)[29] (“Weedman”), to which I will come in a moment, but distinguished that case on the basis that in Nicholson v Knaggs the solicitors’ retainer was inevitably brought to an end by the conflict. He stated that, accordingly, he would determine the matter on the basis of “first principles”. He concluded that in the interests of justice and a fair hearing of the costs application the defendants should have access the file of their former joint solicitors, notwithstanding their concession that a lien over it existed in respect of anticipated bills not yet rendered.
[29][1996] FCA 1112, a single judge decision of the Federal Court 17 December 1996
Weedman is a single judge decision in the Federal Court. In that case, Drummond J found that the clients had terminated the retainer and did not prove that this was for misconduct. The passage referred to by Vickery J in Nicholson v Knaggs, sets out the law in relation to a solicitors’ lien in similar terms to that in McKenzie, recognising as in that case and Cosgriff that:
the right of a solicitor to refuse to hand over his former client’s papers in order to force the client to pay his costs has long been recognised under the general law.[30]
[30]Ibid, at page 5.
After discussing cases where the retainer is terminated by the solicitor, Drummond J said this in relation to cases where the retainer was terminated by the client, as here:
Where it is the client who discharges the solicitor, other than for the latter’s misconduct, a different position obtains: in such cases the general rule is that the solicitor is entitled to keep his lien and the court has no power to interfere with the exercise of it…
In Ismail v Richards Butler, Moore-Bick J said, at 143, that the cases show that where the client has discharged the solicitor, the court has not been willing to interfere with the exercise of the lien, even where the papers concerned are required for pending litigation.
Where it is the client who has terminated the retainer otherwise than for the solicitor’s misconduct, I doubt whether there is any residual discretion in the court to order that the former client shall have access to the documents, in the face of the lien, even where the denial of access to the documents may leave the client facing what can truly be regarded as catastrophic disruption to his litigation. Such a discretion could, in my opinion, only be justified on the basis that the interests of justice may require such an order to be made in some cases. But it is difficult to see why the court should disregard the interests of its own officers and leave them without payment for what is justly due to them because insistence on the lien would deprive the former client of material essential to the conduct of his case, where that situation has been brought about by the client discharging the solicitor without any good reason. However, it is unnecessary for me to reach a concluded view on whether such a discretion exists since even if the court does have that power, I would not regard this as a proper case to exercise it in favour of the applicants, for reasons which later appear.[31]
[31]Ibid, at pages 6-7.
In Weedman, the discretionary factors relied upon to disturb the lien were that in the absence of the file the client was in default of directions to file an expert report and would be at a disadvantage in an impending mediation. Drummond J refused to disturb the lien generally on the basis that, if the discretion existed, these factors were insufficient. He referred to cases showing that the lien can be used to “embarrass the client in order to force him to pay”, or to “hamper” the client in the presentation of his case, and described the factors relied on before him as showing no more than that the client needs the documents to get on with progressing his action. In contrast to this strong statement of principle, he did, however, order the solicitors to deliver up the expert report in question, on payment of the expert. Drummond J also noted that the failure to file the report in time had not resulted in any strike out action.[32]
[32]Ibid, at pages 18-19.
The respondent relies on Weedman to doubt the existence of a residual discretion, and also as to the strong statements of principle. It might be said, however, that the actual result supports an argument that the interests of justice may require impinging on a lien at least to the extent of documents required to be filed by court order, in that case the expert report.
The respondent has also drawn my attention to three decisions from other jurisdictions. In each of these, the general principles as to a solicitor’s lien are set out, in terms similar to that in McKenzie, but in each of these for the reasons there described the lien was disturbed to some extent. In Bolster and McCallum,[33] the New South Wales Court of Appeal allowed a production of documents the subject of a solicitor’s lien, but in that case production was sought by subpoena in the very action for recovery on the bills. Further, the Court emphasised that production was being required to the Court, not to the former client. The facts are clearly distinguishable from those in this case.
[33][1966] 2 NSWLR 660.
In Stark v Dennett,[34] the Queensland Court of Appeal disturbed a solicitor’s lien but on the basis that the solicitor had terminated the retainer. The disturbance was limited, in that the solicitor’s interests were protected by an equitable lien over the fruits of the litigation. The facts in that case were also distinguishable on the basis that the solicitor there had undertaken the proceedings for his former client in the knowledge that he would only be paid if the proceedings were successful. There is no evidence that that was the situation here and indeed all the evidence as to payment of bills until relations broke down is to the contrary.
[34][2008] QCA 50.
In Re Jalmoon Pty Ltd, a single judge decision of the Queensland Supreme Court,[35] the lien was over monies deposited as security for costs and held, prior to a bill being rendered, in a solicitor’s trust account. The Court allowed the fund to be severed on the application of the liquidator for the client so as to return to the liquidator monies in excess of the amount to be claimed once a bill was rendered. The Court held that the failure to render a bill, as here, or the absence of taxation or agreement as to the amount of costs does not stand in the way of a lien. The solicitor’s right to retain the balance representing the legal work done was upheld.
[35](1986) 2 Qd R 264.
Lien
As stated, Castel does not dispute that a solicitor’s possessory lien may exist in respect of outstanding solicitor/client costs in accordance with the general principles identified above. In counsel’s written submissions, Castel sets out the amounts of costs already paid for legal costs to Wilmoth Field Warne and earlier solicitors and “disputes that any further amount is payable”[36]. It further says that any possessory lien has been lost, but does not identify how, and says there are currently no bills of costs in respect of the Toshiba proceeding. In oral submissions, I did not apprehend the case to be put affirmatively that there are no such costs. If it was so put, I am not able, on the material before me, to determine that issue. Castel does say, however, in both the written and oral submissions that the lien would only apply to documents that belong to Castel, not to Wilmoth Field Warne, such as file notes, time keeping records, notes of attendances and other internal documents. Further, it asserts that as it has paid in full the professional costs sought by the former solicitors handling the dispute with Toshiba, for whom Mr O’Hanlon worked at that time, Wilmoth Field Warne has no basis for preventing access to the files created by those solicitors. Wilmoth Field Warne says in response that these files are now the property of Castel, and so fall within the classic class of documents to be the subject of a lien for solicitors’ costs.
[36]Written submissions dated 16 April 2012 at [14].
I am not persuaded at face value by the submission of Wilmoth Field Warne that the files of the former solicitors are now Castel’s. I also consider the applicant’s submission that some of the documents created by Wilmoth Field Warne to which access is sought could not be the subject of a lien is plausible. I am not persuaded, however, that either of these matters advance Castel’s case. If the documents are not Castel’s, they belong to Wilmoth Field Warne, or the former solicitors, and Castel has no right to them in any event. Further, Castel has not taken me to any authority in relation to the documents that can be subject to a solicitor’s lien, nor proposed any mechanism by which the documents held by Wilmoth Field Warne could be divided into those that can be the subject of the lien, and those that cannot. In Nicholson v Knaggs, by contrast, there was evidence as to the volume of material in question and the time required to separate out the documents properly the subject of a lien.
Accordingly, I will approach the matter on the basis that the documents to which access is sought include documents that are the proper subject of a solicitor’s lien, and the documents are not capable of division into those which are the proper subject of the lien, and those that are not, without that access.
Misconduct
Although Mr Kwong has deposed to the matters he says constituted grounds for termination of the retainer for misconduct,[37] and counsel for the applicant has taken me to some of this material, counsel for the applicant concedes that, given the anticipated proceedings referred to earlier in this judgment, this application is not the appropriate forum for determination of the misconduct claims. Mr O’Hanlon has denied the claimed misrepresentations as to his ability to conduct litigation and the other matters relied upon by Mr Kwong as constituting misconduct[38] and counsel for Wilmoth Field Warne agree that these matters should be proved in the other proceedings and not these. I strongly agree. The matters are asserted and disputed oath against oath, yet there has been no oral evidence and no cross examination, and so, even in the absence of proceedings specifically concerned with those matters, I do not consider they could be properly determined in this application.
[37]Kwong affidavit of 14 November 2011 at [8] and [9].
[38]O’Hanlon affidavit of 13 December 2011
Accordingly, I proceed on the basis that misconduct as justification for the termination of the retainer is not proved.
Is there a discretion to order delivery of documents subject to a solicitor’s lien?
As the lien exists and misconduct is not proved, the only basis on which the applicant may succeed is if there is a discretion to order delivery of documents notwithstanding the lien and that discretion should be exercised in this case. The respondent relies on Weedman and the doubt there expressed by Drummond J as to the existence of a discretion. As I have identified, however, notwithstanding these doubts Drummond J did in fact order delivery of a document in that case, which could only have been by exercise of such a discretion.
In my view, as a matter of principle, the better view is that the Court does have the discretion to disturb a solicitor’s lien over documents in the interests of justice in the particular case, even where the retainer was terminated by the client and without misconduct on the part of the solicitor. This is because the origin of the power is in the inherent jurisdiction of the Court, notwithstanding the extension that appears in s 76 of the Supreme Court Act and, the power is an equitable one. This was emphasised by Byrne J in Cosgriff in his comments that:
It is clear from the judgments n the Court of Appeal in the Gamlen[39] case, that the power which I am asked to exercise is an equitable one and must have regard to discretionary factors which come into play having regard to all the circumstances of the case.
[39]Gamlen Chemical Co (UK) Ltd v Rochem Ltd [1980] 1 WLR 614.
In McKenzie, notwithstanding his strong endorsement of the protection afforded by the lien, Gillard J. qualified the “rule”, that a solicitor discharged by the client without misconduct is not obliged to hand over documents until costs are paid, as the “general rule”, rather than the inflexible one. A discretionary power was also exercised by Vickery J in Nicholson v Knaggs, who adopted the comments of Byrne J from Cosgriff just quoted.
Should the discretion here be exercised?
I have considered the following matters in relation to the exercise of this discretion in this case. I have had regard as a guide to instances where the discretion has been utilised, for the light that may cast on the operation of the discretion. Next, I have considered the respective proposals put by the parties, and the submission that access will ultimately be of benefit to both by creating a fund from which solicitor/client costs can be paid; the role each party has played in creating the current impasse; and the prejudice to the applicant if the discretion is not exercised as compared to the prejudice to the respondent if it is.
In relation to the first of these, I accept the respondent’s submission that a solicitor’s possessory lien is not generally disturbed. The only instances in the cases before me in which a solicitor’s lien over documents has been disturbed on the application of the client, where the retainer was terminated by the client and misconduct on the part of the solicitor is not proved, are Nicholson v Knaggs, Weedman and Bolster v McCallum. In my view, Nicholson v Knaggs is distinguishable on its facts. There the retainer was terminated as a consequence of the findings of the Court i.e. it was frustrated, and also the documents were there required to continue the proceedings before the trial judge (as to the liability for costs) and not just for taxation. Arguably, in those circumstances the interests of justice, being the desirability of concluding the substantive proceedings, spoke more strongly in favour of disturbance to the lien than in the instant case, where the substantive proceedings are concluded.
In Weedman, the Court required production of one document only, which was clearly identifiable. Here the whole file, and the files of previous solicitors, are sought. Paradoxically, given the strong statements as to the importance of upholding a lien in that case, this expert report was the very document the client required to prosecute the litigation, and so, arguably, its supply critically undermined the effectiveness of the lien. By comparison with this case, the document was required by the former client to comply with a court order.
Similarly in Bolster v McCallum, the documents were required to be produced to the Court, and in the very action in which the solicitor was seeking to recover on the bills. These are not recovery proceedings, and nor is this a solicitor/client taxation on a solicitor’s bill, in which, on the same basis, arguably the documents could be required. Here the documents are required by the client, and not the Court, to prepare a different bill of costs, the party/party bill, and in the first instance at least for the benefit of the applicant solely. Even on the applicant’s proposal, there is no guarantee that recovery of the party/party costs will necessarily lead to resolution of the solicitor/client dispute.
That brings me to the parties’ respective open proposals to resolve the application, and also those put in relation to the whole of the disputes between them. Castel’s last offer in relation to this application was set out in Exhibit A as modified by the undertakings proffered at the hearing. The proposal thus became similar to that in relation to the whole of the disputes: that in return for access to the documents it will preserve the sum of $580,000 from party/party costs recovered from Toshiba as security for solicitor/client costs in both matters, pending an assessment of those costs. The proposal is superficially attractive, on the basis that it provides security for the disputed solicitor/client costs, while resolving the current impasse in relation to access to the files and so allowing the party/party taxation to proceed and a fund from which the solicitor/client costs can be paid to be created.
On analysis, however, the proposal affords, in my view, the access the applicant seeks with very little in return for the respondent. The proposal for security is from recovered costs, and so must await the preparation of a bill, the taxation and payment. No evidence is before me to suggest Castel would not have the funds to deposit security immediately, and indeed the evidence as to payment of large sums to other solicitors, and to the respondent previously, and the recovery of a large judgment would suggest to the contrary. In my view, sufficient security could only be given immediately, rather than proferred contingently on recovery of the party/party costs.
In this regard I compare the applicant’s proposal to that put forward by an applicant seeking similar relief, against, interestingly, the same respondent as in these proceedings, in Equuscorp Pty Ltd v Wilmoth Field Warne[40]. This case was not referred to directly by either party, but is referred to in the extracts from Dal Pont, Law of Costs[41] relied upon by the respondent. Mr Garrett QC, who is counsel for the current applicant, was counsel for the respondent in that case. In that application, Bongiorno J. disturbed a solicitors’ possessory lien over documents conditional on the applicant immediately putting up the amount claimed for outstanding costs into an interest bearing account. Castel’s offer, by contrast, is for such security, but only after taxation and from recovered costs.
[40][2003] VSC 268
[41]2nd edn Lexis Nexus Butterworths, 2009 at [26.46]
In my view, what has manifestly been a way forward in this case, apparent from at least the judgment of Ryan J. on the first application by Wilmoth Field Warne for a fruits of judgment lien, is a third party assessment of the claimed solicitor/client costs. Castel’s proposal serves that end, by requiring an assessment of the solicitor/costs. Wilmoth Field Warne say that Castel has lost the right to this assessment, due to the failure to tax the 2009 bills in time. I consider that correct, but in relation to the 2009 bills only. On the findings of Associate Justice Wood, Wilmoth Field Warne has also contributed to the absence of a taxation by the replacement of the 2009 bills with the 2011 bills, and then withdrawal of those bills from the taxation.
Wilmoth Field Warne accepts the first and last of Associate Justice Wood’s conclusions, but not that the 2011 bills replaced the 2009 bills. In my view, they cannot have it both ways in this application. If Associate Justice Wood is incorrect, then the party that asserts that can take steps to obtain appellable orders from him to give effect to his orders, and appeal them. The question as to whether or not the issue of the 2011 bills, and reliance on those bills in the Federal Court application, means the 2011 bills replaced the 2009 bills was the subject only of glancing assertion before me – it was, properly in my view, not argued afresh before me. I not consider it appropriate for me to reconsider matters the subject of findings by Associate Justice Wood, nor for the respondent to seek to cherry pick from those findings those that they rely upon in this application. I proceed on the basis of all of the findings of Associate Justice Wood. I conclude that both parties to this application are responsible for the absence of a taxed solicitor/client bill- Castel by failing to tax the 2009 bills in time, Wilmoth Field Warne by withdrawing the 2011 bills.
It is for that reason that I consider Wilmoth Field Warne’s proposal, that Castel pay it the disputed sum “under protest”, preserving all its rights, also to be an imperfect solution to the current application. It gives inadequate recognition to the role Wilmoth Field Warne has played in preventing taxation of its bills.
Accordingly, I do not consider either party’s proposal to be an appropriate resolution. I have taken into account that the prejudice to the applicant if access is not granted may be inability to prosecute its entitlement to party/party costs against Toshiba. I am not persuaded that this will inevitably be, or for all time be, the case- there may be other remedies or commercial solutions available- but I accept that it may be, at least for a period. As against this prejudice, the prejudice to Wilmoth Field Warne if the lien is disturbed may also be substantial, particularly given the delay by Castel to date in either payment or taxing of its costs. I accept that Wilmoth Field Warne will lose the benefit of the leverage the lien is intended to give if access is afforded to the documents, and the law is clear that this leverage is to be protected unless the interests of justice require otherwise.
I do not consider that the applicant has shown that the interests of justice do so require here. Production of the documents is sought to a party, not to a court by court order or court process. The security offered by Castel is inappropriate because it is conditional on recovery from Toshiba and requires Wilmoth Field Warne to agree to a taxation process previously foregone by Castel in relation to the 2009 bills. There is prejudice to Castel if access is not afforded, but no evidence of any prejudice to Toshiba or the Federal Court, or any other person or body other than Castel, arising from delay in the taxation of the Castel/Toshiba party/party costs. Had Castel paid or taxed the disputed solicitor/client costs in a timely way, the prejudice would not have arisen. As noted, I do not consider Wilmoth Field Warne to be blameless in relation to the current regrettable state of affairs, but they do not bear the onus on this application.
For these reasons, I will refuse the application. I have been troubled that this may leave the parties in an impasse, but the necessity to avoid an impasse was not a factor urged upon me by either party. Further, it is not for the Court to devise solutions, but only to rule on the application brought before it. I consider both parties well equipped to consider other options available to it or them, including commercial solutions.
I will hear the parties as to costs if required. I am conscious that both parties in their open letters of offer have indicated that they would rely on such offers if required in relation to costs and the scale of any costs order, and there may be other matters now to be put. Having regard, however, to my view that both parties are responsible for the absence of a taxed solicitor/client bill, which I regard as being at the heart of this dispute, the parties should give consideration to whether any order other than the usual order that costs follow the event on a party/party basis should here apply.
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