FMS P/L and 7 Ors v Lewis and 2 Ors t/as Morgan Lewis Alter Lawyers
[2002] NSWSC 932
•10 October 2002
CITATION: FMS P/L & 7 Ors v Lewis & 2 Ors t/as Morgan Lewis Alter Lawyers [2002] NSWSC 932 CURRENT JURISDICTION: Equity FILE NUMBER(S): SC 4387/2002 HEARING DATE(S): 30 September 2002 JUDGMENT DATE: 10 October 2002 PARTIES :
Flexible Manufacturers Systems Pty Ltd
(First Plaintiff)Katingal Pty Ltd
(Second Plaintiff)Paul Boyce Pty Ltd
(Third Plaintiff)Royce Bruce Ritchie
(Fourth Plaintiff)Access-Sria Pty Ltd
(Fifth Plaintiff)Davunda Pty Ltd
(Sixth Plaintiff)WRS Investments Pty Ltd
(Seventh Plaintiff)Royce Ruitchie & Associates
Leslie Lewis, Peter Maurice Alter and Mark Edward James Morgan
(Eighth Plaintiff)
t/as Morgan Lewis Alter Lawyers
(Defendants)JUDGMENT OF: Acting Master Berecry
COUNSEL : Mr J Stevenson
Mr V Gray
(Plaintiffs)
(Defendants)SOLICITORS: Peter Kemp, Solicitors
Morgan Lewis Alter Lawyers
(Plaintiffs)
(defendants)CATCHWORDS: Legal Profession Act 1987 - lien - solicitor/client - termination of service - fee agreement - failure to pay in accordance with agreement - reasonableness of solicitor's actions - new solicitor instructed concerning reasonableness of costs - whether it shows loss of trust by client LEGISLATION CITED: Legal Profession Act 1987 - s 209C CASES CITED: Gamlen Chemical Co (UK) Limited v Rochem Limited [1980] 1 WLR 614
Heslop v Metcalfe (1837) 3 My & Cr 183; (1837) ER 89
Wadsworth v Marshall (1832) 2 Cr & J 665
Robbins v Goldingham (1872) 13 Eq 440
Jankowski & Anor v Mastoris (unreported BC9505502, 19 September 1995)
Re Weedman, unreported Drummond J, BC9606375, 17 December 1996
Huges v Hughes (1958) P 244; [1958] 3 All ER 179DECISION: See para 21
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
ACTING MASTER BERECRY
THURSDAY, 10 OCTOBER 2002
MARK EDWARD JAMES MORGAN t/as MORGAN
LEWIS ALTER LAWYERS
JUDGMENT
1 MASTER: The defendants are a firm of solicitors practising under the name of Morgan Lewis Alter Lawyers. The plaintiffs had engaged the services of Paul Mervyn Fordyce solicitor to act on their behalf in respect of proceedings which were initially commenced in the Federal Court and subsequently transferred to the Supreme Court of New South Wales. Mr Fordyce acted for the plaintiffs between 1991 and 2001. Initially as a partner in the firm of P A Sommerset & Company and then from 1 September 2000 as a partner with the firm Morgan Lewis Alter Lawyers.
2 The plaintiffs have brought the present proceedings seeking an order pursuant to s 209C of the Legal Profession Act 1987 for the delivery of documents in the defendants’ possession relating to proceedings No 2268/2000 and all documents in the defendants’ possession in respect of legal services provided by the defendants to the plaintiffs in respect of those proceedings.
3 The matter in issue in these proceedings is who terminated the retainer. It is asserted by the plaintiffs that the defendants terminated the retainer. Conversely, it is asserted by the defendants that the plaintiffs terminated the retainer, or alternatively, if it is found that the defendants terminated the retainer, there are exceptional circumstances which would permit the Court to exercise its discretion in favour of the defendants and decline the order sought in the summons, or alternatively seek to impose as a condition of the order a requirement that the plaintiffs provide security for the defendants’ costs.
4 Where a solicitor discharges himself in the course of an action it is the practice of the court, unless there are exceptional circumstances which justifies some modification of the practice, in order to save the client’s litigation from catastrophe, to order the solicitor to hand over the client’s papers to the new solicitors upon an undertaking to preserve the original solicitor’s lien and to return the papers to the original solicitor at the end of litigation. – Gamlen Chemical Co (UK) Limited v Rochem Limited [1980] 1 WLR 614 at 624. In footnote 66.7.1 of Ritchie’s, Supreme Court Procedure the following comment is made “A solicitor who improperly purports to terminate such retainer will lose the right to recover any remuneration: Cowdery on Solicitors (1988) 8th ed at 74; and with it, any right to a lien over the clients’ documents: Heslop v Metcalfe (1837) 3 My & Cr 183; (1837) 40 ER 89”. If a solicitor discharges himself without good cause and reasonable notice he will usually deprive himself of the right to recover remuneration for past services as his retainer is an entire contract. Good cause for termination includes failure by the client to provide moneys to cover disbursements: Wadsworth v Marshall (1832) 2 Cr & J 665; Robins v Goldingham (1872) LR 13 Eq 440.
5 In determining who discharged whom Hodgson J (as he then was) in Jankowski & Anor v Mastoris (unreported BC9505502, 19 September 1995) made the following comment:
- “However, the cases to which I have referred do confirm that the Court should not take an overly technical approach to the question as to whether it is the client who has discharged the solicitor or the solicitor who has discharged himself, but rather look at the question as a matter of real substance.”
6 It would appear that in 2001 the two proceedings in which the defendants represented the plaintiffs had reached the critical stage. The opponents in those proceedings were pressing for complete discovery. The plaintiffs had taken a piecemeal approach to the way in which they were preparing their case. Correspondence in evidence on this application from the defendants suggests that the plaintiffs through lack of attention and allocation of proper time to their litigation caused, on a consistent basis, timetables to fall into arrears. By 2001 their opponents had become impatient with the way in which they were progressing. There were threats made by the other side that an application to strike out proceedings for want of prosecution would be made if timetables were not complied with. Directions were made by the Court which required the plaintiffs to give proper discovery. Although directions were not complied with in a timely fashion there was generated a great deal of activity and costs as a result of those directions. There were also a number of interlocutory applications which arose during this period. By October 2001 the plaintiffs, through their principal Mr Royce Ritchie, engaged a firm of Victorian solicitors to review the bills that had been presented to the plaintiffs by the defendants. It is arguable that by this action the plaintiffs had to some extent lost confidence and trust in the defendants.
7 Correspondence was then entered into, between the Victorian solicitors and the defendants, in respect of the work that was subject to the various accounts rendered by the defendants. On 14 December 2001 the defendants sent a statement of outstanding accounts to the plaintiffs. These accounts covered four periods from September 2001 to December 2001. The request was that the accounts be paid immediately, however, that did not occur. On 8 February 2002 a letter was sent to the plaintiffs’ Victorian solicitor informing them that the defendants were still awaiting payment of their accounts. Further they indicated that no further work would be undertaken other than work of an extremely urgent nature. On 25 February 2002 a letter was sent to Mr Royce Ritchie raising the question of the outstanding costs. The defendants informed Mr Ritchie that as a result of the very substantial outstanding costs that matters were now going unattended. The defendants also advised Mr Ritchie that there had been no response to their correspondence in relation to the unpaid accounts and that the matter of the unpaid accounts needed to be addressed before they could resume acting on the plaintiffs’ matter.
8 On 27 February 2002 the defendants again wrote to Mr Ritchie in an attempt to resolve some of the outstanding issues. They also reminded him, in this correspondence, that accounts were still outstanding six months after they had been rendered. On 13 March 2002 the defendants received a letter from counsel who was briefed in one of the matters, but because of the non-payment of his fees he was referring the matter to the Bar Association. On 18 March 2002 the defendants sent a copy of this letter to Mr Ritchie and his Victorian solicitors asking them to treat this as a matter of priority. Further correspondence of 21 March 2002, to both Mr Ritchie and the Victorian solicitors, the defendants informed the plaintiffs that there was no issue in their mind in withdrawing their services to the plaintiffs. It was indicated in the letter that the defendants wished to continue to act but they desired to have their outstanding fees paid. In the concluding paragraph of the letter the defendants state: “We remain ready, willing and able to assist you but we can’t do this unless we can talk to you about specifics”.
9 It seems that very little happened over the next six weeks. On 10 May 2002 the defendants serviced a Notice of Ceasing to Act on the plaintiffs. Meanwhile, the various proceedings before the Court were still subject to directions and timetables.
10 It does not seem to be in issue that the original costs agreement between the plaintiffs and the defendants was entered into on 29 June 1994. Paragraph 4 of the agreement is in the following terms:
- “We will send you a bill for out charge and expenses -
- (a) during the course of each month, while the Work is in progress or less frequently; and/or
- (b) when the Work is completed.
- We may ask you to pay to us an amount to enable payment of expenses, or to provide security for them and our charges. In that case, we will assume, upon receipt of your payment, your authority to draw on the money paid for our charges and expenses, as they become due.”
11 Costs in paragraph 2 are defined as charges and expenses.
12 Upon the dissolution of P A Sommerset & Company, Mr Fordyce commenced as a partner of the defendants on 1 September 2000. On 4 September 2000 he wrote to Mr Ritchie informing him of the change and enclosed a letter setting out the basis he would be charged with the services. That document encloses a Disclosure Statement and Costs Agreement required by the Legal Profession Act. The document sets out, inter alia, the hourly rates to be charged and then there is found in the following paragraph of that document:
- “We issue bills of costs and disbursements on a monthly basis. Payment is required within 7 days after the bill is given and upon receipt we will assume your authority to settle any expenses paid on you behalf together with our own costs. The Legal Profession Act does not allow us to take action for recovery of legal costs until 30 days after a bill of costs has been given, but allows interest to be charged on unpaid amounts in the manner and at the rates specified in the Act.”
13 There is no evidence that the agreement has been signed by either party. However, as the defendants continued to act for the plaintiffs for at least 12 months after the agreement was sent to the plaintiffs, it can be implied that there was an agreement in accordance with the terms of the written document.
14 There is no evidence before me which would allow me to make a finding that the plaintiffs terminated the services of the defendants. Reference has been made to Re Weedman, Drummond J, BC9606375, 17 December 1996 unreported, in which his Honour made the following comments:
- “The relationship between solicitor and client is one based on trust and confidence: once the client indicates that he no longer has that confidence, a solicitor cannot continue to force himself upon an unwilling client but is entitled to treat himself as having been discharged by the client.”
15 The defendants rely on the plaintiffs’ action in engaging a Victorian solicitor to consider and give advice in relation to the work done and the costs and disbursements charged by the defendants. The defendants continued to act for the plaintiffs in the various proceedings in the Supreme Court. In my view there is a distinction the current proceedings and Re Weedman. In the current proceedings the defendants continued to act for the plaintiffs in their various proceedings, notwithstanding there was now an issue in relation to the nature of the work done and the charges. Instructions were still given by the plaintiffs to the defendants, and the defendants, to the best of those instructions, continued to act accordingly. The only area of dispute was in relation to the costs charged by the defendants. It would appear that both parties continued the relationship up until May 2002. It is unclear on the material before me who in fact terminated. There is no evidence before me when the current solicitors Peter Kemp commenced acting in the Supreme Court proceedings for the plaintiffs. The only document before me is the Notice of Ceasing to Act by the defendants on the plaintiffs. Therefore, on the material before me I am unable to say that the plaintiffs terminated the defendants’ services. In my opinion it would appear that the defendants terminated their services.
16 It is clear from the correspondence and the history of the various Supreme Court matters, that it has now become critical for the plaintiffs to be able to give proper discovery. Hanging over the heads of the plaintiffs is the possibility that their proceedings will be dismissed for want of prosecution should they fail to comply with current timetables. However, in order for them to be able to comply with those timetables they require their documents that are held by the defendants to be transferred to their current solicitors.
17 The question is whether or not the solicitor is able to maintain the lien or some security in respect of his costs if the documents in his possession are ordered to be delivered to the plaintiffs’ current solicitor. In Hughes v Hughes (1958) P 244 at 277-288 Hodgson LJ, [1958] 3 All ER 179 at 181 said:
- “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, 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.”
18 In Weedman, supra his Honour said:
- “The modern rule is that, while it is the usual practice for such an order to be made where it is the solicitor who has terminated the retainer, the Court does not do this automatically. Whether it grants the order is an equitable matter, and therefore one of discretion, with a result it is to be exercised judicially on the facts in the case: A v B [1984 1 All ER 265 at 274; Gamlen Chemical (UK) Limited v Rochem Limited supra; Ismail v Richards Butler (a firm) [1996] 3 WLR 129 at 139.”
19 In exercising the discretion the court needs to weigh the balance of hardship which might result from the order the court is asked to make. If the discretion is exercised in favour of the client one needs to consider whether or not the return of the documents, at the completion of litigation, will leave the solicitor in the position where he has valueless papers and, therefore, is unable to maintain the effect of his lien. The English authorities also state that in weighing up matters in the exercise of the discretion, that the litigation should be conducted with due regard to the interest of the court’s own officers, who should not be left without payment for what is justly due to them
20 The current position is that the plaintiffs have incurred substantial costs in the various proceedings in the Supreme Court. These proceedings started in the Federal Court 10 years ago. There have been no fees paid since mid 2001 despite monthly billings by the defendants and requests from the defendants for payment of fees. In my view it is reasonable that having attempted to negotiate payment of the fees over a period of nine months without resolution that the defendants should terminate their services with the plaintiffs. There has been no evidence put on by the plaintiffs that they are impecunious and therefore, unable to meet the costs claimed by the defendants. Indeed, the costs are now the subject of the assessment process a bill having been lodge and a notice of objection having been filed. There is an amount of $20,243.03 which is not in dispute. There has been no offer made by the plaintiffs to pay this sum.
21 In my opinion justice requires that the defendants be put in a position where part of their costs are paid and the balance is secured. Whilst it is likely that the full amount claim will not survive the rigors of a costs assessor, it nevertheless seem to me, having regard to the authorities, the plaintiffs should provide some security for the balance of the outstanding costs. The orders that I make therefore are:
(1) An order in accordance with paragraph 1 of the summons.
Order (1) is conditional upon the plaintiffs:-
(2) Paying to the defendants the sum of $20,243.03 on account of costs.
(3) The plaintiffs providing security by way of cash or bank guarantee in the sum of $111,338.29. Such sum to be paid into Court and to be paid out either pursuant to an agreement between the parties or pursuant to further order of the Court.
(5) Each party to pay their own costs.(4) Alternatively to order (3) that the plaintiffs pay the sum in paragraph (3) to their solicitors and Peter Kemp at the time of receipt of the money give an undertaking to the Court in accordance with the draft undertaking prepared by counsel for the defendants.
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