Ward v Keet [No 3]
[2010] WASC 71
•9 APRIL 2010
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: WARD -v- KEET [No 3] [2010] WASC 71
CORAM: MURPHY J
HEARD: 1 APRIL 2010
DELIVERED : 9 APRIL 2010
FILE NO/S: CIV 1566 of 2006
BETWEEN: SUSAN ANNE WARD as executrix of the estate of DOROTHY MURIEL LUKIN
First-named First Plaintiff
JULIA MURIEL LAURISSON as executrix of the estate of DOROTHY MURIEL LUKIN
Second-named First PlaintiffSUSAN ANNE WARD as administratrix of the incapable estate of LOUISE LUKIN
First-named Second PlaintiffJULIA MURIEL LAURISSON as administratrix of the incapable estate of LOUISE LUKIN
Second-named Second PlaintiffLAKE WAY STATION PTY LTD (ACN 008 667 169)
Third PlaintiffAND
JOHN FRANCIS DESMOND KEET
First DefendantNATIONAL AUSTRALIA BANK LTD (ACN 004 044 937)
Second DefendantHENDRIK JOHANNES GERHARDUS JOUBERT t/as JOUBERT & BAIN
First Third PartyCLIVE STEWART BAIN
Second Third Party
Catchwords:
Practice and procedure - Springing order - Noncompliance with springing order - Subsequent application to extend time for compliance - Whether an extension of time would be in the interests of justice - Turns on own facts
Legislation:
Nil
Result:
Application for extension of time dismissed
Category: B
Representation:
Counsel:
First-named First Plaintiff : Mr B G Grubb
Second-named First Plaintiff : Mr B G Grubb
First-named Second Plaintiff : Mr B G Grubb
Second-named Second Plaintiff : Mr B G Grubb
Third Plaintiff : Mr B G Grubb
First Defendant : Mr R W Bower
Second Defendant : Mr J Lin
First Third Party : No appearance
Second Third Party : Mr D B Shaw
Solicitors:
First-named First Plaintiff : Metaxas & Hager
Second-named First Plaintiff : Metaxas & Hager
First-named Second Plaintiff : Metaxas & Hager
Second-named Second Plaintiff : Metaxas & Hager
Third Plaintiff : Metaxas & Hager
First Defendant : Corser & Corser
Second Defendant : Jackson McDonald
First Third Party : No appearance
Second Third Party : DLA Phillips Fox
Case(s) referred to in judgment(s):
Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175
Bentley v Gaisford [1997] QB 627
Kokos International Pty Ltd v Libra Motors Pty Ltd [2009] WASC 90
MTQ Holdings Pty Ltd v Lynch [2007] WASC 49
Rafferty v Time 2000 West Pty Ltd (No 3) [2009] FCA 727; (2009) 257 ALR 503
Swansdale Pty Ltd v Whitcrest Pty Ltd [2009] WASC 117
Ward v Keet [No 2] [2009] WASC 369
MURPHY J:
Introduction
The first defendant applied by chamber summons dated 17 March 2010 to extend, until 4 pm 1 April 2010, the time for compliance with certain directions made on 11 December 2009 and orders made on 5 March 2010.
The orders made on 5 March 2010 are springing orders, and required compliance by 12 March 2010. The summons came on for hearing on 1 April 2010, and the first defendant's counsel said, in effect, that even if the relief sought in the summons were granted, the first defendant would still not be able to comply with the outstanding orders by later that day. He asked that the time for compliance be extended to 6 May 2010, ie, that the first defendant receive a further dispensation for in excess of one month. The application is opposed by the plaintiffs.
The application for an extension was supported by two affidavits. One, dated 17 March 2010, was sworn by the first defendant's solicitor and filed and served with the chamber summons. The other, dated 31 March 2010, was sworn by the first defendant. There are objections to the latter affidavit in terms of both its lateness and with respect to particular aspects of its contents.
It is apparent that the chamber summons to extend time for compliance was issued five days after the date stipulated for compliance with the springing orders, and that the first defendant's affidavit in support was served nearly three weeks after that date.
The parties were directed to file and serve submissions in connection with the application prior to the hearing. The plaintiffs' submissions were served on time, but the first defendant's submissions were served late.
The litigation
These proceedings were commenced in 2006. The proceedings involve allegations by the plaintiffs that the first defendant, the family accountant, in effect, agreed to invest money on behalf of the first and second plaintiffs' late mother, and their other sister, and the family company. It is alleged that over a period of years between May 2000 and May 2005, the first defendant, by his employee, misappropriated certain funds invested, and that the first defendant is accordingly liable in equity and/or at law for the funds lost. In the first defendant's defence, it is alleged, in effect, that the alleged former employee entered into arrangements with the plaintiffs regarding the investment of funds which were not authorised by the first defendant and for which the first defendant is not liable, and that the funds were, in any event, lost because the plaintiffs failed to monitor the investments. He has also alleged a limitation defence insofar as the plaintiffs' claim is made in contract. The plaintiffs also sue the second defendant, a bank, for permitting withdrawals to be made without authority on accounts in which the investment moneys were held.
The first defendant has, over the course of the litigation, had a succession of legal advisers and has also acted for himself. Between June 2006 and 28 October 2007, he instructed Jarman McKenna. He acted in person between 29 October 2007 and 3 December 2007. He instructed Brook and Co between 4 December 2007 and 24 July 2008. He then instructed Patrick Legal (the first defendant's former solicitors) in the period 25 July 2008 to 13 May 2009. The first defendant's former solicitors applied by summons dated 5 May 2009 to be removed from the record as his solicitors. The application was supported by an affidavit sworn 5 May 2009 by the first defendant's former solicitors to the effect that they had experienced difficulties since November 2008 in obtaining instructions from the first defendant, that numerous calls and messages had been left unanswered, and that invoices, including for counsel's fees, remained unpaid. On 13 May 2009, the first defendant filed a notice of intention to act in person. (As discussed below, the first defendant's counsel submitted that it was material to the disposition of this application that the first defendant's former solicitors had instigated the cessation of their retainer.)
The first defendant appeared in person between 14 May 2009 and 13 August 2009. On 14 August 2009, the first defendant instructed his current solicitors.
The first defendant's current solicitors came onto the record shortly before there was a trial of a preliminary issue. The plaintiffs had alleged that the action had settled at a mediation in July 2007 and had sought a declaration to that effect by way of a preliminary issue. The preliminary issue was decided adversely to the plaintiffs late last year: Ward v Keet [No 2] [2009] WASC 369. After the determination of the preliminary issue, programming orders were made on 11 December 2009 to bring the action to trial.
Programming orders for trial and the springing order
Directions of the usual kind were made on 11 December 2009. They included the following:
6.The first defendant file and serve a statement of third party claim against the second defendant on or before 18 December 2009.
...
19No later than 19 February 2010 each party will by notice in writing to each other party specify the documents he intends to tender at the trial, and if inspection has not been directed, where the documents may be inspected.
20No later than 26 February 2010 each party will advise each other party in writing which of the specified documents may be tendered by consent, and whether the authenticity of any of the remaining documents (specifying which) is disputed and give reasons in writing as to why consent to tender the remaining documents is withheld.
21.No later than 5 March 2010 each party other than the plaintiffs will deliver to the plaintiffs a copy of each of the documents which that party intends to tender and which were not included in the plaintiffs' notification of the documents he intends to tender at the trial.
On 5 March 2010, without objection from the first defendant's counsel and at a time when the first defendant was in court, orders (springing orders) were made, including:
1.Unless by 12 March 2010 the first defendant:
1.1makes available to the plaintiffs, for inspection, all of his discoverable documents; and
1.2complies with paragraph 19 of the orders of Justice Murphy dated 11 December 2009 (Orders),
his defence be struck out and judgment be awarded to the plaintiffs in the amount of $590,091.75 plus interest with costs to be taxed.
2.Unless 17 March 2010, the first defendant complies with paragraphs 20, 21 ... of the Orders, his defence be struck out and judgment be awarded to the plaintiffs in the amount of $590,091.75 plus interest with costs to be taxed.
Breach of orders by the first defendant
It is common ground that there have been breaches by the first defendant of the directions made on 11 December 2009 and the springing orders. In this regard, it is common ground that:
(a)Order 6 of the directions of 11 December 2009 has not been complied with, and that this has consequentially held up programming of the third party proceedings;
(b)Order 1.1 of the springing orders has not been complied with;
(c)Order 1.2 of the springing orders has not been fully complied with. In that regard, whilst the first defendant has notified the plaintiffs of the documents he intends to rely on at trial, he has not properly identified where they may be inspected in that notice was given that they could be inspected at the office of the first defendant's former solicitors, when that was not the case by reason of the first defendant's former solicitors claiming a lien over the documents; and
(d)Orders 20 and 21 of the directions made 11 December 2009, and consequently order 2 of the springing orders, have not been complied with.
The evidence in support of the application
The affidavit of the first defendant's solicitor sworn 17 March 2010 is to the following effect. In August 2009, when he was first instructed, he received a number of documents from the first defendant, but not the documents he needs to comply with the outstanding orders. At the time of the making of the springing orders, he knew that there were documents held by the first defendant's former solicitors, and he assumed that he would not encounter any delay in obtaining the documents. He does not say why he held that assumption and his affidavit sheds no light as to when he was first aware that the first defendant's former solicitors were claiming a lien over the documents. He appears to have understood that a lien was being claimed by, at the latest, 10 March 2010, when he wrote to the first defendant's former solicitors (referred to below). I infer that at some stage the first defendant told his solicitor about the claimed lien, because there is no suggestion that the first defendant's solicitor had any contact with the first defendant's former solicitors prior to 10 March 2010. There is no, or no adequate, evidence as to when the first defendant himself became aware that his former solicitors were claiming a lien, or might refuse him access to his discovered documents.
The first defendant's solicitor says that on 10 March 2010, two days before compliance with the springing orders was due, he wrote to the first defendant's former solicitors. The letter contained the following:
We act for Mr Frank Keet, the First Defendant in the above action.
When we accepted our instructions in August 2009 we were not made aware of your firm's previous role in the matter; nor of any fees which may be outstanding and owing to you. We assume that there are fees owed to you, and that on that basis you are correctly and properly exercising a lien over documents relevant to the action, which are the property of Mr Keet.
Springing order against Mr Keet
In recent days the Supreme Court has made a springing order against Mr Keet which expires at 4.00 PM on this coming Friday, 12 March 2010, requiring him to file and serve various items of pleadings and also to file and serve an affidavit of discovery of documents.
Mr Keet believes that your firm possesses documents relevant to the matter; if that is correct, then they need to be dealt with in the discovery of documents which Mr Keet must provide by Friday afternoon if he is to avoid sustaining a default judgment for a sum in the vicinity of $700,000.00.
Access to documents
We anticipate that you will agree that it is not possible for solicitors to maintain their liens in ways which will cause a litigant to breach orders made by the Court; and the more so where the consequence for the client will be judgment against him. We therefore request your urgent advice of whether we can visit your office on Thursday 11 March with a portable dictaphone for the purpose of dictating a list of documents (referring to the documents we understand you are holding) so that we can assist Mr Keet to comply with the springing order in a timely way.
This arrangement would not alter your possession of the documents or your legal position under your lien, in our view.
There was no explanation in the affidavit as to why the first defendant's solicitor told the first defendant's former solicitors that he needed to prepare an affidavit of discovery, when that was not the case. Nor was there an explanation as to how the first defendant's solicitor thought that the first defendant could comply with orders 1.1, 1.2 (in relation to the latter part of order 19 of the directions) or order 2 of the springing orders (in relation to order 21 of the directions) if he thought, as he said, that the former solicitors were properly exercising a lien over the documents: see Bentley v Gaisford [1997] QB 627 at 640 ‑ 641 concerning the rights of a solicitor who validly exercises a possessory lien.
The first defendant's solicitor says that after this letter, he spoke by telephone to the first defendant's former solicitors. They had not said that they would not provide the documents, but they indicated that they wished first to speak to the first defendant directly. I infer that the first defendant's solicitor conveyed that information to the first defendant promptly.
The first defendant's solicitor says that he did not obtain access to the documents held by the first defendant's former solicitors by 12 March 2010, and that he still has no access to them. In his affidavit, he estimated that, in effect, he could obtain access to the documents by about 20 March 2010 and comply with the outstanding orders by about 28 March 2010. As noted above, he no longer adhered to those estimates at the time of the hearing of this application, and said that he thought a further five weeks would be required.
The first defendant's affidavit of 31 March 2010 is to the following effect. He said that most of his documents most relevant to this action are held by his former solicitor. He says that on 29 March 2010, he spoke to his former solicitor about the documents and was told that his former solicitor intended to maintain possession of them until he was paid in full. He says that there is an amount of $20,000 claimed for unpaid professional costs, but that he believes 'that the nature and appropriateness of the work [the former solicitors] did does not enable [them] to claim that amount'. He says that he 'intends' to retain a costs consultant to act for him in the dispute with his former solicitors, and that the costs consultant 'only returned to Perth on 30 March 2010'. He says that he intends to pay his former solicitor any amount which the costs consultant advises him he is obliged to pay, and any other amount that may be identified as owing through a dispute resolution process.
He says he is unable to raise $20,000 in the meantime to pay to his former solicitor (or a stakeholder) on a conditional basis and without prejudice to contesting the costs claimed. He says that in that regard, the cash flow from his accounting practice has 'practically dried up' since December 2009 for reasons associated with the way he bills his clients for completing tax returns and the current practice of the Australian Taxation Office in dealing with tax returns. He says that he expects that his cash flow will resume at some point in the future, but he does no know when. I note that there were no financial statements or management accounts annexed to the affidavit in relation to the financial position of the practice and the claimed inability to raise $20,000.
He also says that the real estate which he owns in his personal name or through his business is encumbered such that his secured creditors would not advance him funds to pay the claimed costs on a conditional basis. He has not disclosed in his affidavit the real property which he owns, although I note that, when acting in person, he gave his address for service as City Beach. Nor did he annex certificates of title or mortgages, or other primary documents, showing the number, location or value of the properties involved, or the extent of his liabilities, or his equity in the properties.
He says that his present solicitor wrote to his former solicitors by letter dated 31 March 2010 seeking the release of the documents, and referring to a Federal Court decision in relation to liens, namely, Rafferty v Time 2000 West Pty Ltd (No 3) [2009] FCA 727; (2009) 257 ALR 503. I note that this was the first occasion on which the first defendant's solicitor wrote to obtain the release of the documents from the first defendant's former solicitors. This was nearly three weeks after the expiration of the time for compliance with order 1 of the springing orders.
The first defendant says that he does not know whether his former solicitor will voluntarily release the documents, or whether it will be necessary for his present solicitor to make an application to obtain the documents. He says that based on his present solicitor's advice, he proposes an extension of five weeks to comply with the outstanding orders.
The first defendant's affidavit was objected to by the plaintiffs on two bases. The first was lateness, in that it was filed and served a day before the hearing and was said to address evidentiary gaps which had been the subject of the plaintiffs' written submissions. The second was that it was said to be inadmissible in relation to the secondary evidence given as to the financial position of the first defendant's accounting practice and the nature and extent of his personal assets and liabilities.
In my view, this second objection is well‑founded. The first defendant's evidence as to his inability to raise $20,000 to make a conditional payment to his former solicitors is at a high level of generality and conclusionary in nature. It amounts to no more than mere assertion without provision of the practice's accounts and without details of and primary evidence in relation to the real estate assets and liabilities to which he refers. This evidence (pars 12 to 21) in his affidavit is inadmissible.
As to the first objection, I accept that it will often be inappropriate, in the exercise of the court's discretion, to allow an applicant to rely upon late affidavits served on the date of, or shortly before, the hearing which raise facts and matters requiring consideration and investigation. Swansdale Pty Ltd v Whitcrest Pty Ltd [2009] WASC 117 affords a recent example of a case where very late affidavits of this kind were disallowed. In this case, however, the matters in the affidavit which could well have called for further investigation, namely, the first defendant's ability to raise $20,000, are inadmissible and ought be struck out. The remainder of the affidavit largely concerns statements of belief and intention on the part of the first defendant, the significance of which the plaintiffs' counsel was able to address in submissions without further evidence.
For these reasons, I would not reject the first defendant's affidavit in its entirety, but I would strike out pars 12 to 21 of the affidavit.
The principles
The principles for an extension of time for compliance with a springing order have been set out in MTQ Holdings Pty Ltd v Lynch [2007] WASC 49 and were applied in Kokos International Pty Ltd v Libra Motors Pty Ltd [2009] WASC 90. In the latter case, Beech J referred (at [18]) to the principles set out in MTQ v Lynch, including the following:
It is clear ... that a court at first instance has the power to extend time under a self-executing order which has 'sprung': FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268.
It is axiomatic, however, that peremptory orders are made to be obeyed ... an 'unless order' is by its nature intended to mark the end of the line for a party who has failed to comply with it and any previous orders of the Court.
It is, moreover, plainly important to the administration of justice that orders of the Court are complied with ... obedience to orders of the Court is the foundation on which its authority is founded. It follows that any approach which tends to encourage the development of a culture of non-compliance, where orders, even peremptory orders, of the Court are not given the attention and priority they require, must inevitably tend to undermine that foundation.
Accordingly, the power to extend time when a springing order has not been complied with is a power to be exercised cautiously and with due regard to the necessity for maintaining the principle that orders are made to be complied with and not to be ignored: Samuels v Linzi Dresses Ltd[1981] QB 115, per Roskill LJ at 126 - 127.
…
I do not, however, understand Re Jokai Tea Holdings Ltd (above) to be laying down a principle that a party who fails to comply with a peremptory order is entitled to an extension of time unless the failure was intentional and contumelious. The Vice-Chancellor's judgment makes it clear that he considered a party seeking to avoid a springing order must establish both that there was no intention to ignore or flout the order and that the failure to comply with it was due to circumstances outside the party's control.
…
In Hytec Information Systems Ltd v Coventry City Council (above), having considered a number of authorities, including Re Jokai Tea Holdings Ltd (above) and Caribbean General Insurance Ltd v Frizzell Insurance Brokers Ltd (above), Ward LJ (with whom Auld LJ and Lord Woolf MR agreed) concluded (at 1675) that where there has been non-compliance with a peremptory order 'a sufficient exoneration will almost inevitably require that [the defaulting party] satisfies the court that something beyond his control has caused his failure to comply with the order.'
Of course, on an application of this nature the exercise of the discretion must in the end depend upon all the circumstances of the case, without being limited by conditions or guidelines articulated in other cases, and there must always remain sufficient flexibility to make reasonable allowance for human error. And whilst it is important that 'legal business be conducted efficiently': Bomanite Pty Ltd v Slatex Corporation Australia Pty Ltd (1991) 32 FCR 379 at 387, that is not an end in itself. The ultimate objective must be to do justice: State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 at 155.
But given the nature of a springing order, the starting point must be that it is for the defaulting party to establish why it should be permitted to continue with the litigation despite its non-compliance. In my view, it will generally not be sufficient simply to show that the non-compliance was not intentional and contumelious. The authority of the Court will equally be undermined, and the quality of justice for the innocent party eroded, if the ultimate sanction effected by the operation of a springing order can be avoided by showing that non-compliance with the springing order came about by the same sort of inattention or laxity that caused the order to be made in the first place.
Whether the consequences of non-compliance should be visited upon the litigant when the fault lies wholly with its solicitor will depend upon the particular circumstances. But I do not consider that the fact the litigant did not contribute to the default, or even that it was unaware of the springing order, is necessarily sufficient to enable it to avoid the consequences of non-compliance.
...
The failure to comply with a springing order is an egregious breach. A springing order is intended to be the last opportunity offered to the party to put its case in order. The proper administration of justice, and the quality of justice for the other party, generally requires that it be just that, its last opportunity. That will generally mean that the litigant must bear the consequences of a failure to comply with a springing order, whether the failure was due to the litigant or its solicitor.
The matters to which I have referred above provide the backdrop, in my view, against which the specific matters to which, in any particular case, the Court is to have regard in the exercise of its discretion are to be considered. And while no hard and fast rules can be laid down as to the matters to which the Court should have regard, in my view in the exercise of its discretion the Court will normally have regard to at least the following matters:
(1)the circumstances in which the springing order came to be made;
(2)the reason for non-compliance with the springing order;
(3)the prejudice to the defaulting party if the time were not extended; and
(4)the prejudice to the other party if the time were extended.
It will also normally be a relevant consideration whether or not the defaulting party has a reasonably arguable case on the merits - there being no point in resuscitating a case that is devoid of merit - but, on the other hand, the fact that a party has an apparently meritorious case cannot be permitted effectively to act to insulate it from the consequences of a failure to comply with a peremptory order of the Court.
But as I have said, in the end the matters that are to be weighed in the balance, and the weight to be given to each, cannot be stated definitively but must depend upon the circumstances of the particular case [46] - [57].
In assessing the prejudice to the plaintiffs in this case, it is appropriate to have regard to the strain which litigation imposes upon litigants, particularly, but by no means exclusively, personal litigants: Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 [100] ‑ [101].
Disposition of the application
The springing orders were made on 5 March 2010 in circumstances where:
(a)the proceedings had been on foot for nearly four years and the alleged defalcations had occurred over a lengthy time going back to 2000. Although not insignificant delay arose in connection with the trial of the preliminary issue, it was obvious that the nature and subject matter of the proceedings called for a trial as soon as possible after the disposition of the preliminary issue;
(b)programming orders had been made in December 2009 in respect of which the first defendant was in default in a number of respects;
(c)there is no evidence of what steps, if any, the first defendant or his solicitor took with a view to complying with the directions made on 11 December 2009 in respect of which he was in default;
(d)there had been a process of consultation prior to the hearing and no objection made at the hearing by the first defendant's counsel, at a time when the first defendant was in court himself;
(e)the first defendant could have been in no doubt about the scope and effect of the springing order;
(f)the springing orders related to the use of discovery documents for trial. The first defendant must have known from at least May 2009 (when he notified the court of his intention to act in person) that his documents were in the possession of his former solicitors. The first defendant's solicitor deposes that he also knew that to be the fact by at least 5 March 2010, but there is no evidence that he did not know that to be the fact prior to then, including when directions were made on 11 December 2009;
(g)there is no evidence that the first defendant did anything between 11 December 2009 and 19 February 2010 (when order 19 of the directions was to be complied with) or between 20 February 2010 and 5 March 2010 (when the springing orders were made), to retrieve the documents or ensure that he and his current solicitors had access to the documents for the purposes of being in a position to comply with the programming orders toward trial made on 11 December 2009; and
(h)the action was in the CMC list, the general objective of which is to have cases resolved at trial (or mediation) in the quickest and most cost‑effective way: Supreme Court Practice direction 4.1.2 par 7.
The reason for non‑compliance which is given is that the first defendant and his present solicitors could not obtain access to the documents required to comply with the orders because a lien was being claimed over the documents by the first defendant's former solicitors. Counsel for the first defendant submitted, in effect, that extra time is required to compel the former solicitors to provide access to the documents in accordance with the principles in Rafferty v Time 2000. He emphasised the fact that the first defendant's former solicitors had instigated the cessation of their retainer. In Rafferty v Time 2000, Besanko J said at [34] ‑ [36], [39], [40], [42], [44] and [48]:
A solicitor's lien over the papers of his client secures the payment of his outstanding fees. It is a possessory lien. In other words, the lien exists only for so long as a solicitor has possession of the papers. The lien is a general lien in that it enables a solicitor to retain the papers in a matter, even though the outstanding fees it secures have arisen in relation to another matter. The papers must have come into the solicitor's possession in his capacity as a solicitor.
Difficulties arise where a solicitor's retainer is terminated during the course of an existing proceeding. A client is likely to need the papers in order to conduct the proceeding. A failure to obtain the papers may have grave consequences in terms of the result of the proceeding. Solicitors are officers of the court and, in order to avoid the grave consequences of a client being unable to obtain his papers, the courts have exercised a jurisdiction of an equitable nature to make an order which effectively qualifies the lien, namely, an order that the papers be handed over to the client or his new solicitor upon an undertaking to return them at the conclusion of the proceeding.
The exercise of the jurisdiction depends on a number of considerations. The principal one appears to be whether it was the client who terminated the retainer or the solicitor who terminated his retainer. In Robins v Goldingham (1872) 13 LR Eq 440, Malins V-C said (at 442):
Now it is well settled that where a solicitor is discharged by the client he has a lien for his costs upon the papers in his hands, and can retain them till he is satisfied; but it is different where the discharge is by the solicitor. ... it is clear that a solicitor is not entitled to stop litigation, because he cannot obtain funds to enable him to carry it on. There is no injustice in this view, because when the papers are in the hands of the new solicitor, [the prior solicitor] will retain any lien to which he is entitled.
...
The position is different where it is the solicitor who brings his retainer to an end. In that case, it is said in the authorities that the general rule is that the solicitor will be required to produce the client's papers upon an undertaking that they be returned to the solicitor upon the completion of the proceeding. The rationale for the general rule was explained by Lord Cottenham LC in Heslop v Metcalfe (1837) 3 My & Cr 183 at 188–9 ; 40 ER 894 at 896‑897:
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 cause by withholding the papers in his hands. That would be a 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. Now, a solicitor, if he knows that he must trust to the result of the cause for his remuneration will, of course, be disposed to proceed with it in such a way as, while it promotes the interest of his client, is most likely to render his lien available. I have no doubt, therefore, that the existence of the lien, while it is a great protection to the solicitor against his client, is also a great benefit to the client; but the benefit would be entirely lost, if the solicitor might stop short in the middle of the suit, and insist upon retaining the papers, because then no other solicitor could take up and carry on the cause.
This general rule is subject to an exception, but the precise boundaries of the exception have not been clearly identified in the authorities.
...
Templeman LJ referred to the general rule and the exception to it in the following passages [in Gamlen Chemical Co (UK) Ltd v Rochem Ltd [1980] 1 All ER 1049 at 1058 ‑ 1059; [1980] 1 WLR 614 at 624 ‑ 525]:
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.
…
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.
...
In A v B [1984] 1 All ER 265, Leggatt J applied the exception to the general rule and refused to order production of the client's papers. In refusing the order, Leggatt J relied on the following matters:
(1)the solicitors had a default judgment for their legal fees against the client;
(2)the solicitors had performed a 'massive' amount of work against a payment of no more than $10,000;
(3)the possibility of considerable hardship to the client if the order for production was not made had passed;
(4)the solicitors had behaved impeccably and their conduct could not be criticised; and
(5)by contrast, the client had not advanced any reason for not paying the solicitors' fees, nor had it produced any evidence to show that it could not do so.
...
It seems to me that the effect of the authorities is that the general rule is that, where the solicitor terminates the retainer, an order for production will be made. There may be exceptional circumstances which lead to a modification of the general rule. The modification of the general rule will, generally speaking, involve the imposition of terms, such as part payment or payment into court or the provision of security. In an extreme case like [A v B], where the factors identified in [44] are present, that may lead to a refusal of an order for production. However, generally speaking, the presence of exceptional circumstances will lead to the imposition of terms. That to my mind is the effect of the decision in Gamlen and, I think the decision of Moore-Bick J in [Ismail v Richards Butler (a firm) [1996] QB 711] is consistent with that conclusion. In Ismail, Moore‑Bick J said (at 731) that he could see no basis for criticising the conduct of the solicitors and that there was evidence to suggest that the client's attitude owed more to negotiating tactics than a real sense of grievance.
In my view, the reason advanced for non‑compliance is unsatisfactory in the context of this application for the following reasons.
First, there is no evidence that at least the prospect of the first defendant's solicitors claiming a lien over the documents was not known to the first defendant, or his solicitors, on 11 December 2009 when programming orders were made for the purposes of bringing the matter to trial, or shortly thereafter. The first defendant's solicitor has not deposed to when he first knew of the claimed lien. As I have said, there is no evidence of what the first defendant did, if anything, in relation to any attempt to comply with the directions of 11 December 2009. There is no evidence explaining why any obstacle with respect to access to the documents could not have been identified (if not already known) by or shortly after 11 December 2009. Nor is there evidence that any obstacle could not at least have been sought to be overcome by application to the court, or negotiation, by 5 March 2010.
Secondly, there is no, or at least no adequate, explanation as to why any application to compel production of the documents was not taken by 12 March 2010. The first defendant's solicitor knew of the claimed lien by at least 10 March 2010. Indeed, his letter of 10 March 2010 suggested that the lien was properly claimed. It is not apparent on the evidence why first contact was left to a date two days before the orders would spring. The first defendant's solicitor also knew that the first defendant's former solicitors wished to speak to the first defendant directly before there was any potential release of the documents. I have also found that the first defendant's solicitor must have reported that communication to the first defendant promptly. Yet, the first occasion that the first defendant spoke to his former solicitors in that regard was on 29 March 2010, over two weeks after the date for compliance with order 1 of the springing orders. There was not only no application on foot by 12 March 2010, but the first defendant evidently decided to let another couple of weeks pass before even making contact with his former solicitors about the matter.
Thirdly, even at the hearing on 1 April 2010, there was still no application to retrieve the documents from the first defendant's former solicitors.
Fourthly, the reason for non‑compliance derives in significant measure from the costs dispute to which the first defendant has referred. However, the first defendant has said no more than, in effect, he has a belief that the 'nature and appropriateness of the work' carried out by his former solicitors does not enable them to charge for it. The evidence lacks cogency in circumstances where the accounts rendered are not in evidence, the nature of the work done and why it was allegedly not appropriate are not sketched out even in a cursory way, and where the affidavit otherwise provides no objective bases upon which the costs are challenged. It appears, from the first defendant's recent intention to consult a costs consultant, that he has not had the bills taxed. There is no evidence, in my view, to demonstrate the prima facie reasonableness of the belief said to be held by the first defendant that his former solicitors are not entitled to charge for the work allegedly done. Nor is there evidence which would give colour to the genuineness of the asserted belief. Mere assertion of the kind provided by the first defendant in his affidavit is insufficient, in my view, where peremptory orders of the court have been disobeyed.
Fifthly, even absent such evidence, it might, nevertheless, be relevant to consider whether the first defendant's failure to pay his former solicitors arose simply from impecuniosity, irrespective of any question about whether the costs were genuinely in dispute. In this regard, there is no satisfactory evidence that the first defendant could not raise the sum of $20,000 to make a conditional payment. Even if I had not struck out those parts of his affidavit to which I have referred, and that evidence remained, it is evidence which is so vague that it lacks cogency and no weight could be accorded to it.
In all these circumstances, the first defendant could not be characterised as an innocent party against whom events conspired to produce a default of the springing orders through no fault of his own. The inference is open that the first defendant has no proper conception of, and has been indifferent to, his duty to comply with the orders and procedures of the court, including the springing orders. That inference derives further support from the fact that he served a substantive affidavit in support of the application to extend time on the day before the matter came on for hearing, and by virtue of the fact that his submissions in support of the application were filed out of time.
Next, I turn to the question of prejudice. The prejudice to the first defendant, if the extension is not granted, is that he will have lost the opportunity to defend the case on the merits. I am told that the amount claimed by the plaintiff with interest is now around $700,000. The lost opportunity is, itself, a source of prejudice in circumstances where there is no suggestion that the first defendant's defence is not arguable. Whilst it is to be accepted that the first defendant has an arguable defence, this is not a case where the first defendant's counsel pressed upon the court that there was good contemporaneous evidence, or admissions by the plaintiffs, which would indicate that the first defendant had good or strong prospects of success.
As to the prejudice to the plaintiffs, the following matters are relevant. The first and second plaintiffs, who I observed at the trial of the preliminary issue, appeared to be of advanced years. They seek to recover funds invested with the first defendant as the family accountant. The events in question occurred some considerable time ago, over the period May 2000 to May 2005. The litigation has been on foot for nearly four years. I infer that both the fact and the nature of the litigation place a considerable strain on the plaintiffs.
The following further considerations are relevant to the exercise of my discretion. The initial estimate by the first defendant's solicitors as to the time required to comply with the springing orders has proved to be incorrect. There is nothing in the evidence which suggests any sense of urgency in relation to the seeking of access to the documents from his former solicitors. It appears that yesterday he caused to be issued a writ against his former solicitors, although this belated step has only been taken after the expiration of nearly a month after the time for compliance with the springing orders. Even if this lack of urgency were ignored, there is insufficient evidence before me to form a reasonable view as to the scope of the evidentiary issues that may be involved in the application to obtain the documents, and the likelihood of it being resolved within the next five or so weeks. Further, whilst the first defendant would appear to fall within the 'general rule' within the meaning of the authorities referred to by Besanko J, it is not possible, on the evidence in this application, to form even a preliminary assessment of whether there are 'exceptional circumstances' in the case of the first defendant which could affect the nature and scope of any relief granted in the application to obtain access to the documents.
Conclusion
Taking everything into account, the first defendant has not persuaded me that it would be in the interests of justice to grant an extension of time in respect of his failure to comply with the springing orders. I would accordingly dismiss the application.
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