CCom Pty Ltd v Jiejing Pty Ltd

[1992] FCA 450

Re: CCOM PTY. LTD.
And: JIEJING PTY. LTD.; PARAVET INSTRUMENTS PTY. LTD.; RONALD HOWARD THOMAS;
ALLAN GARNHAM; JEFFREY JOHN YATES and ERIC RUSSELL CHAPPELL
No. G124 of 1991
FED No. 450
Solicitor

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Cooper J.(1)

CATCHWORDS

Solicitor - Client - discharge of retainer - change of solicitors - application for delivery up of file - written retainer agreement - entitlement to payment - lien over all the papers while fees remained unpaid - payment of a sum - interim bill - construction of correspondence - distinction between solicitor who discharges self and a solicitor who is discharged by the client - consequences if denied access to file - undertaking and payment into court as security.

Galem Chemical Ltd. v. Rochem Ltd. (1980) 1 WLR 614

Robins v. Goldingham (1872) LR 13 Eq 440.

Hughes v. Hughes (1958) p 224.

A. v. B. (1984) 1 All ER 265

Heslop v. Metcalfe (1837) 3 My and C 183

Connolly v. Standard Telephones and Cables Pty. Ltd. (Pincus J., Unreported, 18 March, 1991, Brisbane, QG110 of 1990)

HEARING

BRISBANE

#DATE 24:6:1992

Counsel for applicant: F. Redmond

Solicitors for applicant: Bennett and Philp

Counsel for respondent: L. Bowden

Solicitors for respondent: Bowdens

ORDER

UPON the undertaking of counsel for and on behalf of the applicants and on behalf of Messrs Bennett and Philp, Solicitors for th e applicants:-

(1) to hold all papers and documents delivered to them under

this order by Messrs Bowdens, Solicitors, subject to the lien of the said Bowdens for costs and outlays;

(2) to afford Messrs Bowdens or any person authorised by them

reasonable access to the said papers and documents for the purpose of preparing their bill of costs;

(3) to prosecute the defence and cross-claim in application G124

of 1991 and the contempt proceedings in an active manner with all due dispatch;

(4) to re-deliver the said papers and documents to the said

Bowdens forthwith after conclusion of the action.

AND UPON the applicant, paying into Court the sum of $30,000.00 as security for the payment of such sum if any as may be adjudged owing by the applicants or any of them to the respondent on the notice of motion for costs and outlays on account of application G 124 of 1991 (including proceedings for contempt brought within the said action)

I DO ORDER THAT :-

The respondent Messrs Bowdens forthwith deliver to Messrs Bennett and Philp, Solicitors, all papers in application G 124 of 1991 (including the contempt proceedings instituted therein) and all other documents in the custody or power of the said Bowdens relating to the said proceedings and belonging to the applicants or any of them.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

The applicants are the first, second, fourth and fifth respondents to the principal application. By notice of motion the applicants seek against Messrs Bowdens, solicitors, an order that they deliver up their file relating to the within proceedings to Messrs Bennett and Philp, Solicitors. Messrs Bowdens were previously the solicitors for the applicants. It is common ground that the retainer of the respondent has been discharged.

1. Within the principal application, proceedings have been instituted for contempt in relation to an alleged failure to comply with orders of the Court concerning discovery of confidential information of the applicants. Those proceedings are listed for hearing before Drummond J. on Monday 29 June, 1992. The principal application is listed before me for further directions on Thursday 24 June, 1992 and the trial of the action is listed for approximately six and a half weeks to commence on 10 August, 1992. There is therefore some urgency in determining the application and in consequence I do not intend to canvas in detail the issues and the submissions canvassed on the hearing.

2. The respondents were appointed as solicitors for the applicants in November, 1991. At that stage the litigation was already on foot. The two corporate applicants entered into a written retainer agreement in November, 1991. By that agreement the respondent was entitled to render interim accounts (clause 4) and entitled to require payment in advance of prospective fees, anticipated outlays and disbursements (including Counsel's fees) (clause 6). The respondent under the agreement was entitled to transfer money from trust account to general account to discharge accounts rendered (clause 8) and to elect not to perform work whilst accounts remained unpaid (clause 10). The agreement specifically provided for the respondent to have and be entitled to exercise a lien over all papers, documents and files relating to the matter while fees remained unpaid (clause 11).

3. The applicants have paid to the respondents, or caused to be paid on their behalf since November, 1991, the sum of approximately $164,000.00. Of this sum $104,824.91 has been applied to the respondent's professional costs and the balance has been paid or is held on account of outlays, disbursements and expenses. The last payment on account of an interim billing was made by the applicants in March, 1992.

4. On 8 May, 1992 the respondents rendered an interim bill for $98,672.35 claimed as then due and owing for professional services and outlays, including counsel's fees to that date. The sum presently claimed as due is $139,047.79. On 1 June, 1992 the respondent sought the payment of a significant amount to place it in funds in respect of the anticipated costs of the contempt proceedings. On 1 June, 1992 the respondent wrote to the first named applicant a letter which said, inter alia :-
   

"In the circumstances and given that we have during the month of May continued to perform substantial amounts of work in this matter and to incur accounts to third parties, including Counsel, we must regrettably invoke clause 10 of the agreement and advise that we will not be undertaking any further work until the question of outstanding accounts has been addressed".

1. Discussions took place between the parties and correspondence was exchanged relating to the question of costs. However, nothing was resolved and no further work was performed by the respondent.

2. The applicants in the discussions with the respondent, in correspondence and on this application made a number of allegations against the respondent which they submit have the consequence that the respondent is not entitled to the fees and disbursements claimed. Those allegations are strongly contested and involve contested questions of fact. In part they involve allegations as to the respondent's conduct on discovery and the circumstances giving rise to and the maintenance of the application for contempt. Having regard to the time constraints imposed by the pending Court appearance, it is not possible to resolve those disputed matters today.

3. In a letter of 16 June, 1992 the respondent responded to the various complaints of the applicants and concluded :-
   

"As we said in our meeting of 2 June, 1992, if you consider that you have rights against the firm, then you should seek independent advice. However it seems to us that the alternatives are :-

1. For us to withdraw as your solicitors in favour of another firm. Your documents would be made available to that firm on payment of outstanding costs and outlays.

2. That you consider proposals which we have discussed and which were set out in our letter of 1 June. We have advised that we are prepared to be flexible in relation to any such proposals.

3. We would be happy to refer the issues which you have raised to an independent mediator appointed by the Queensland Law Society in an effort to achieve some resolution of those issues.

We do not think it fruitful for further correspondence to be exchanged in the matter. As we are unable to accept the proposal offered in your facsimile of 8 June, 1992 and as no alternative to the proposal has been offered (other than that this firm fund the matter), we must confirm our position that we are unable to perform further work on any of this litigation but, in the circumstances, we advise that we propose to withdraw from all proceedings unless matters can be resolved by 5.00 pm on 17 June. In the event of our withdrawing, then proceedings will be issued for recovery of all outstanding fees and disbursements".

1. The applicants responded to this communication by fax on 17 June, 1992 at 8.02 a.m. In the fax the applicants said, inter alia :-
   

"We do not believe that the alleged outstanding costs and outlays have been properly billed and request the return of our files forthwith. If, by your firms failure to return these files, Jiejing suffers further losses we would have no alternative but to hold your firm responsible for such losses".

1. The respondent's response to the applicant's fax on 17 June, 1992 was prepared on 18 June, 1992. However it was not dispatched until 8.48 a.m. on 19 June, 1992. The letter dated 18 June, 1992 said :-
   

"Given the attitude adopted which effectively suggests that we should carry all arrears to date, fund Counsel's fees in respect of the forthcoming appearances and carry the costs of the trial in the future, we must regrettably formally invoke Clause 10 of the costs agreement and advise that we have no option but to terminate our retainer in relation to all matters including in addition to the Federal Court proceedings, Magistrates Court Plaint No. 9793 of 1992 in each instance on the basis of refusal to pay outstanding costs and outlays. We enclose a Notice of Intention to file and serve a Notice of Change under the Federal Court rules. We formally give notice of our intention to make application to have ourselves removed as solicitors on the record in respect of all matters."

1. On 18 June, 1992 Messrs Bennetts and Philp solicitors wrote to the respondents advising that it had been retained by the applicants and enclosing an authority from the applicants authorising delivery of all files in this litigation to the new solicitors. The communication was received by fax transmission at 4 p.m. on 18 June, 1992.

2. The respondent contends that the applicants determined the retainer by their fax of 17 June, 1992 or alternatively by the letter of Messrs Bennett and Philp dated 18 June, 1992.

3. The applicants contend that the respondent determined the retainer when it wrongfully purported to exercise its rights under clause 10 of the retainer agreement on 1 June, 1992 and thereafter to refuse to perform necessary work required by the retainer. In consequence it was submitted the applicants were entitled to accept the repudiation and have possession of the files the respondent having disentitled itself to exercise the lien. The respondent contends that it was justified in suspending work under clause 10 in the circumstances which existed and that the matters were in a state of negotiation seeking some agreement facilitating the resumption of work when the applicants terminated the retainer.

4. Where the question arises as to the client's right to the sale where the retainer is terminated, there is a distinction between a solicitor who discharges himself and a solicitor who is discharged by the client (Gamlen Chemical Ltd. v. Rochem Ltd. (1980) 1 WLR 614 at 622). Where a client discharges a solicitor other than for misconduct the solicitor's lien endures until payment of costs (Robins v. Goldingham (1872) LR 13 Eq 440; Hughes v. Hughes (1958) P 224, 227 - 228; Gamlen at 624; A v. B. (1984) 1 All ER 265, 269).

5. In Gamlen Chemical Ltd., Templeman L.J. said at 624 - 625:-
   

"The solicitor himself may determine his retainer during an action for reasonable cause, such as the failure of the client to keep the solicitor in funds to meet his costs and disbursements; but in that case the solicitor's possessory lien, ie. his right to retain the client's papers of any intrinsic value or not, is subject to the practice of the court which, in order to save the client's litigation from catastrophe, orders the solicitor to hand over the client's papers to the client's new solicitors, provided the new solicitors undertake to preserve the original solicitor's lien and to return the papers to the original solicitor, for what they are worth, after the end of the litigation. This practice was settled many years ago, and as Goff L.J. has shown, from the citation which he gave of Heslop v. Metcalfe, 3 My. and C. 183, 188, there are convincing reasons why the practice should be followed, and it has been followed, at least in the cases of Goff L.J. has cited, Webster v. Le Hunt (1861) 9 WR 804; Robins v. Goldingham, LR 13 Eq 440, and is to be found also in the argument of counsel in Hughes v. Hughes (1958) P 224. Where the solicitor has himself discharged his retainer, the court then will normally make a mandatory order obliging the original solicitor to hand over the client's papers to the new solicitor against an undertaking by the new solicitor to preserve the lien of the original solicitor. I wish to guard myself against possible exceptions to this general rule. The court in fact is asked to make a mandatory order obliging the original solicitor to hand over the papers to the new solicitor. An automatic order is inconsistent with the inherent, albeit judicial, discretion of the court to grant or withhold a remedy which is equitable in character. It may be, therefore, that in exceptional cases the court might impose terms where justice so required. For example, if the papers are valueless after the litigation is ended and if the client accepts that he is indebted to the original solicitor for an agreed sum and has no counterclaim, or accepts that the solicitor has admittedly paid out reasonable and proper disbursements, which must be repaid, the court might make an order which would only compel the original solicitor to hand over the papers to the new solicitor providing that in the first place the client pays to the original solicitor a sum, fixed by the court, representing the whole or part of the moneys admittedly due from the client to the original solicitor. Much would depend on the nature of the case, the stage which the litigation had reached, the conduct of the solicitor and the client respectively, and the balance of hardship which might result from the order the court is asked to make".

1. The reasoning underlying the practice referred to appears from the judgment of Lord Cottenham L.C. in Heslop v. Metcalfe (1837) 3 My and C 183 at 188 - 190 cited with approval in Gamlen Chemical Ltd:-
   

""Undoubtedly, that doctrine may expose a solicitor to very great inconvenience and hardship, if, after embarking in a cause, he finds that he cannot get the necessary funds wherewith to carry it on. But, on the other hand, extreme hardship might arise to the client, if, - to take the case which is not uncommon in the smaller practice in the country, - a solicitor, who finds a poor man having a good claim, and having but a small sum of money at his command, may go on until that fund is exhausted, and then, refusing to proceed further, may hang up the case by withholding the papers in his hands that would be great grievance and means of oppression to a poor client who, with the clearest right in the world, might still be without the means of employing another solicitor. The rule of the court must be adapted to every case that may occur, and be calculated to protect suitors against such conduct...I then take the law as laid down by Lord Eldon, and, adopting that law, must hold that Mr Blunt is not to be permitted to impose upon the plaintiff the necessity of carrying on his cause in an expensive, inconvenient and disadvantageous manner. I think the principle should be, that the solicitor claiming the lien, should have every security not inconsistent with the progress of the cause"".

See the reasons for Pincus J. in Connolly v. Standard Telephones and Cables Pty. Ltd. (Unreported, 18 March, 1991, Brisbane, QG 110 of 1990).

1. In the instant case the applicants need access to the files to prosecute their defence and cross-claim on the substantive application. The results to them in terms of the litigation will be catastrophic if they are denied access to them. The consequences may not be as great in relation to the contempt application, but the files in my view are reasonably necessary for the application. The applicants on the hearing offered the undertakings in the usual form and offered to lodge the sum of $30,000.00 as security against such sum as may be owing on the taxation of the respondent's costs and determination of their entitlement to be paid. It will be some weeks before taxation and entitlement can be determined. The respondent in an open offer in Court said it would accept the undertaking with security in the sum of $70,000.00 being provided.

2. The respondents from 1 June, 1992 adopted the position that it would do no further work on the matter and unless some arrangement was put in place to pay the sums claimed and provide money on account of anticipated costs and outlays by 5.00 p.m. on 17 June, 1992, the respondent would withdraw from all proceedings and institute proceedings for recovery of all outstanding fees and disbursements. Faced with that ultimatum, the applicants were left with no option but to engage other solicitors if the applicants maintained their denial of liability to pay the sum claimed. In those circumstances the matter is not to be determined by nice questions as to who acted first in anticipation of or immediately after expiry of the deadline at 5.00 p.m. on 17 June, 1992. (See Gamlen Chemicals Ltd. at 621). The position was clear that from that time whether it was entitled to or not the respondent proposed to determine th retainer if not paid or arrangements satisfactory to it agreed. In those circumstances the applicants were entitled to regard the retainer as having discharged by the respondent.

3. Applying the principles laid down in the cases I have referred to above, I am satisfied that the applicants are entitled to the files upon giving the usual undertakings, and that provision of security in the sum of $30,000.00 by the applicants provides sufficient protection to the respondent when balancing the hardship which the respondent may suffer in being denied a full and effective exercise of its lien against the hardship the applicants will suffer if denied access to the files until the respondent's entitlement to the monies claimed is established and the bills taxed.

4. I therefore make the following order:-
   

UPON the undertaking of counsel for and on behalf of the applicants and on behalf of Messrs Bennett and Philp, Solicitors for the applicants:-

(1) to hold all papers and documents delivered to them under this order by Messrs Bowdens, Solicitors, subject to the lien of the said Bowdens for costs and outlays;

(2) to afford Messrs Bowdens or any person authorised by them reasonable access to the said papers and documents for the purpose of preparing their bill of costs;

(3) to prosecute the defence and cross-claim in application G124 of 1991 and the contempt proceedings in an active manner with all due dispatch;

(4) to re-deliver the said papers and documents to the said Bowdens forthwith after conclusion of the action.

AND UPON the applicant, paying into Court the sum of $30,000.00 as security for the payment of such sum if any as may be adjudged owing by the applicants or any of them to the respondent on the notice of motion for costs and outlays on account of application G 124 of 1991 (including proceedings for contempt brought within the said action)

1. I DO ORDER THAT:-
   The respondent Messrs Bowdens forthwith deliver to Messrs Bennett and Philp, Solicitors, all papers in application G 124 of 1991 (including the contempt proceedings instituted therein) and all other documents in the custody or power of the said Bowdens relating to the said proceedings and belonging to the applicants or any of them.