Nicholson v Knaggs (No 2)
[2009] VSC 187
•8 May 2009
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
IN ITS PROBATE JURISDICTION
No. Prob 19 of 2005
| JULIE ANN NICHOLSON & ORS (As set out in the Schedule) | Plaintiffs |
| v | |
| TIMOTHY PETER KNAGGS & ORS (As set out in the Schedule) | Defendants |
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JUDGE: | VICKERY J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 8 May 2009 | |
DATE OF JUDGMENT: | 8 May 2009 | |
CASE MAY BE CITED AS: | Julie Ann Nicholson & ors v Timothy Peter Knaggs & Ors [No. 2 – application, solicitor’s lien] | |
MEDIUM NEUTRAL CITATION: | [2009] VSC 187 | |
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PRACTICE and PROCEDURE – Solicitor’s lien over clients’ documents – Inherent Jurisdiction of Court to Order Inspection in the Interests of Justice - S. 76 Supreme Court Act 1986 – Supreme Court (General Civil Procedure) Rules 2005 Order 37(1) – Development of Conflict of Interest Among Clients Represented – Order for File to be Delivered for Inspection on Terms
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr A Phillips | Hicks Oakley Chessell Williams |
| For the Defendants | Mr J Tracey | Wisewoulds |
| For Hunt McCulloch Kollias & Co | Mr S Wilson QC and Mr N McAteer | Hunt McCullough Kollias & Co |
HIS HONOUR:
This is an application by the 4th defendant in the proceeding, Robert Lawrence Allen, and the 7th defendant in the proceeding, Sandra Ann Allen (‘the Allens’), for the release to them and the other defendants in the proceeding of the entire file in the possession of Messrs Hunt McCullough Kollias & Co (‘Hunts’), who were the former solicitors for all defendants in the proceeding at trial.
I heard the trial of the proceeding between 27 October and 17 December 2008. Judgment in the proceeding was delivered on 27 February 2009[1]. In delivering judgment I made orders that the matter be further adjourned to enable the question of costs to be considered and final orders ultimately to be made. The question of costs could not be resolved between the relevant parties resulting in the need for a further hearing on the question, which will be conducted shortly.
[1] Julie Ann Nicholson & ors v Timothy Peter Knaggs & ors [2009] VSC 64
In order to prepare for the costs hearing the solicitors now retained by the Allens, Messrs Wisewoulds (‘Wisewoulds’), wrote to Hunts on 20 March 2009 seeking delivery of the file in the proceeding, and did so as a matter of urgency. Subsequently Hunts claimed a lien on the file for unpaid fees and the firm has refused to deliver up the file.
In this application Hunts called evidence from Mr Colin Morris (‘Morris’), a solicitor engaged with Hunts to act as a solicitor in relation to the proceeding. Morris had the conduct of the trial for a substantial part of its hearing. The file described by Morris is extensive. He described it as consisting of something in the order of 45 archive boxes together with 20 to 30 files of correspondence. He said that the files may contain materials which were properly Hunts’ property such as notes, memoranda and the like, and that it would take some six to eight weeks to examine all of the boxes consisting of the file extracting those items which were properly the property of Hunts.
Morris gave further evidence that Hunts’ trust account held in the order of $150,000 deposited by the defendants on account of fees. This was sufficient, he said, to discharge the bills which had been presently rendered to the defendants in the matter. However, by instruction given by the defendants Hunts is not permitted access to those funds and so they remain in trust. Accordingly, the accounts that have been presently rendered by Hunts remain unpaid.
There are further fees of about $500,000 expected to become due from the defendants to Hunts. However, this has not yet been precisely quantified as no account has yet been finalised and rendered to the defendants.
No party in this application questioned the position that Hunts has a valid lien and is in fact entitled to a lien over the file. In these circumstances I accept that Hunts is entitled to the lien which it claims.
Following the letter of 20 March 2009 sent to Hunts by the solicitors acting for the 4th and 7th defendants, Wisewoulds. Wisewoulds pressed the position of its clients in a stream of correspondence which then ensued. Hunts, on the other hand, maintained its position that a lien was held over the relevant documents and refused to release the documents to Wisewoulds.
The three groups of defendants have now each secured representation by three separate firms of solicitors: the Allens securing the representation of Wisewoulds, a second pair of defendants retaining Roberts Beckwith Partners, and the third Nevett Ford. All defendants are in agreement as to a common approach to obtaining and inspecting the file.
A further letter dated 17 April 2009 on behalf of all defendants and their respective solicitors was sent by Wisewoulds to Hunts. Omitting formal parts it reads as follows:
We refer to the above matter. We write on behalf of the defendants and their respective (sic) solicitors asking that you release the defendants, including court books, so that it may be reviewed in preparation for the making of submissions as to costs. As we have previously indicated to you, it is our view that it would be possible for you to release the file temporarily to us and preserve your lien. All the parties agree that the file should be returned to you once this matter is concluded. On the basis of respective counsel's available dates we envisage that the file will be returned to you in May, subject of course to the court's availability to hear the matter in May.” (sic) The representatives, Robert Beckwith Partners, Nevett Ford and Wisewoulds, agree that the file should be relocated from the Mornington Peninsula to the city. We are in agreement that the file be stored on a temporary basis at the Wisewoulds offices at 419 Collins Street where there is capacity to securely store such a file.
Each representative can then have access to the file and have an opportunity to examine the file and determine what is required for each to satisfy the needs of their respective clients. As we have advised on previous occasions, we are reluctant to return to court solely for the purpose of seeking, on a temporary basis, access to the file. In the light of the defendants' jointly held position in relation to this matter it would be regrettable if your refusal to temporarily release the file necessitated the defendants seeking a court order to achieve that which should be able to be achieved cooperatively. We suggest that you release the file for three weeks, after which it will be returned to you save for the multiple copies of the court book which will be retained for the use of counsel until the conclusion of the matter, at which time those documents will also be returned. We strongly urge you to reconsider your position and ask for an immediate response.
There was no response to this letter. This caused Wisewoulds to send two further letters to the same effect as the letter of 17 April 2009. Those letters were dated 20 April and 22 April 2009, respectively. However, the position of Hunts in refusing to deliver up the file on the temporary basis which had been proposed by Wisewoulds did not change, resulting in the present application being made orally on relatively short notice before me.
The Court has undoubted power to make orders of the kind proposed by the defendants in this case.
Section 76 of the Supreme Court Act 1986 provides:
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.
This section reflects the position at common law as to the inherent jurisdiction of this Court, which is the second basis upon which orders of the kind sought in this case may be made. In McKenzie v. Director General of Conservation and Natural Resources[2], a decision of Gillard J which was referred to me, His Honour said (at [31]-[32]):
The alternative basis upon which the application was made was pursuant to the inherent jurisdiction of the court. There is no doubt that in an appropriate case the court does have jurisdiction to require a legal practitioner to deliver up documents.
[2][2001] VSC 220.
In my view there is a third power available to the Court to make orders of the kind proposed by the applicants. I refer to Rule 37.01(1) of the Supreme Court (General Civil Procedure Rules) 2005, which provides:
In any proceeding the Court may make an order for the inspection, detention, custody or preservation of any property, whether or not in the possession, custody or power of a party.
‘Property’ in Rule 37.01(1) includes a document. This may be contrasted with Rule 37.02(2) which makes provision for orders for inspection of property from a prospective defendant. However, Rule 37.01(2) specifically excludes from its operation property comprising a document or documents.
In determining whether or not any order for the production of the documents which are the subject of a solicitor’s lien should be made, the nature of a solicitor’s lien calls for consideration. In Darryl Paul Weedman & Ors[3] Drummond J said of the solicitor’s lien:
[3](1996) FCA 1112 (17 December 1996).
In the absence of a special agreement, 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. The principles relevant to the assertion of a solicitor's lien upon a change of solicitor are set out in the judgment of Templeton LJ in Gamlen Chemical at 624, and have been accepted by this Court in CCom Pty Ltd v Jiejing Pty Ltd & Ors (Cooper J, unreported, 24 June 1992) and Cross v National Australia Bank Ltd (Drummond J, unreported, 13 May 1993):
"If before the action is ended, the client determines the retainer, the solicitor may, subject to certain exceptions not here material, exercise a possessory lien over the client's papers until payment of the solicitor's costs and disbursements. Thus, in Hughes v Hughes [1958] P 224, 227-228, Hodson LJ said:
`There is no doubt that a solicitor who is discharged by his client during an action, otherwise than for misconduct, can retain any papers in the cause in his possession until his costs have been paid ... This rule applies, as the authorities show, whether the client's papers are of any intrinsic value or not, ...'
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, i.e. 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 passage cannot be read as limiting the cases in which delivery of the former client's papers will be ordered, the solicitor having terminated the retainer, to those in which the client will suffer a catastrophe, in the sense of irreparable harm in conducting his litigation if denied the papers: Templeton LJ added in Gamlen Chemical that: "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." It has also been said that such an order is made "as of course", where it is the solicitor who discharges the retainer: see Gamlen Chemical at 620. See also Cordery on Solicitors, 9th Ed, para 735.
However, 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 the result that it is to be exercised judicially on the facts of the case": A v B [1984] 1 All ER 265 at 274; Gamlen Chemical at 624-625; Ismail v Richards Butler(a firm) [1996] 3 WLR 129 at 139.
This case is unusual in that by virtue of the findings made by this Court in my judgment of 27 February 2009 a conflict between the defendants has arisen as to the question of costs in the proceeding. In my view, whether or not it was the defendants who first advised Hunts that its retainer was determined, or whether it was Hunts that first took that step, it was inevitable that the retainer be brought to an end. Hunts could not properly have continued to act for all three groups of defendants in the costs hearing in the circumstances of the conflict which had arisen. In this case, it so happens that each of the defendants progressively took the step of determining the Hunts retainer. However, taking that step did not arise from any conduct on the part of the defendants which could be said to have been initiated by them other than by reason of the fact of the conflict. Still less did it arise because of the conduct of Hunts.
In these circumstances the principles alluded to by Drummond J in Weedman are clearly distinguishable. The matter therefore calls to be determined by reference to first principles.
It is a primary duty of a Court to ensure that the proceedings before it are conducted in the interests of justice. In this case, although the defendants did not say that proceeding with the costs hearing would be catastrophic for them without access to the documents in the possession of Hunts, I accept from the affidavit evidence given in support of the application, being the affidavit of Mr Joorsten filed 6 May 2009, that their further conduct of the proceeding would be prejudiced and potentially, in my view, significantly prejudiced, depending on what the documents, which are yet to be examined, disclose.
In this regard I refer to the observations of Byrne J in Cosgriff v. Issac Brott& Co[4], where His Honour observed (at [8]):
Whether it is the client or the solicitor which terminates the relationship is to be resolved in a practical way. Furthermore, it is clear from the judgments in the Court of Appeal in the Gamlen 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.
I adopt and apply this approach.
[4](2008) VSC 515.
In my view, in the interests of justice and a fair hearing of the costs application demand that the full file be inspected by the defendants under the conditions they advance in this application. I accept that the effect of making such an order by this Court may well lessen the value of the lien maintained by Hunts over the documents in question in a practical sense. However, this consideration, in my view, is outweighed by the factors to which I have referred.
I accept too what Morris said in his evidence as to the file in this proceeding being substantial. He gave evidence that it would take six to eight weeks to go through the boxes to remove any property of Hunts in the nature of notes, memoranda and the like. However, given that the files are to be released to the solicitors Wisewoulds and maintained under their custody and then returned to Hunts by the end of this month, in my view any property of Hunt's in the documents to which Mr Morris referred would not be lost or destroyed and in all likelihood would be returned in good condition to Hunts at the end of the exercise. This is not a sufficient reason to deny the relief sought by the defendants.
Accordingly, I make orders that:
1)Hunt McCullough Kollias & Co make their file for the Defendants in this proceeding (“the file”) available for collection today (8 May 2009) by the fourth and seventh defendants solicitors (“Wisewoulds”) or their agents from the offices of Hunt McCullough Kollias & Co situated at 210 Main Street, Mornington in the State of Victoria;
2)Wisewoulds, having collected the file, shall secure the file at its offices situated at 419 Collins Street, Melbourne in the State of Victoria;
3)While the file remains at Wisewoulds' offices, the solicitors and counsel representing each defendant in the proceeding may inspect the file and make copies of documents at Wisewoulds' offices for the purposes of making submissions to the Court;
4)While the file remains at Wisewoulds' offices no original document shall be removed from the file, save for the purpose of copying it and after copying the original document shall be returned to the file;
5)As soon as practicable after the conclusion of the costs hearing, and in any event on or before 29 May 2009, Wisewoulds shall return the file to Hunt McCullough Kollias & Co;
6) There be liberty to apply;
7) This order be drawn up by the solicitors for the applicants;
(8)The costs of collection, transportation and return of the file are to be borne by the defendants on an indemnity basis;
(9)Any documents copied as a result of inspection, but not tendered in evidence at the costs hearing, shall be returned at the conclusion of the costs hearing.
(10)The costs of and incidental to this application be paid by Hunt, McCullough Kollias & Co.
(11)This order be signed by a Judge pursuant to Rule 60.04 of the Supreme Court (General Civil Procedure Rules) 2005.
At approximately 5 pm on the day of the application, and after I had pronounced these orders, Mr S Wilson QC appeared ex parte before me to make an application on behalf of Hunts to have my orders stayed pending a proposed appeal. I was informed that a courier truck was present at the premises of Hunts ready to take delivery of the file.
I refused the application for the stay on the ground that, in my opinion, the decision which I had made was not attended with sufficient doubt to warrant a stay of the orders pending an appeal. Furthermore, because of the likelihood of delay being caused in the delivery of the file to Wisewoulds by the making of the application for the stay, I made the following further order by way of a variation to the original order:
The time in which Hunt McCullough Kollias & Co have to comply with the order be extended to 6.00 pm 8 May 2009 or such further time as is required to complete the loading of the boxes onto the truck.
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