Amirbeaggi & Ors v Business In Focus

CATCHWORDS : PROCEDURE - legal firm acts for client joint venturers in litigation over joint venture - termination of firm's retainer in litigation - firm claims lien over client file for unpaid fees - application by firm to strike out clients' cross claim - clients seek to file new cross claim - leave granted to file new cross claim - examination of clients' failure to comply with Court orders in joint venture litigation - possibility that clients' new solicitor may be joined as party to the present action - real possibility of conflict of interest if joinder of new solicitor occurs - directions to resolve issue as to whether new solicitor will be joined and as to the clients' access to files in firm's possession

Civil Procedure Act 2005 (NSW) ss 26, 56 Corporations Act 2001 (Cth) ss 459E (2)(c), 459G Fair Trading Act 1987 (NSW) s 42 LEGISLATION CITED : Legal Profession Act 2004 (NSW), Part 3.2, Division 11 ss 322(5), 327, 372, 728 Trade Practices Act 1974 (Cth) s 52 Uniform Civil Procedure Rules 1999 (QLD), Chapter 7 Uniform Civil Procedure Rules 2005 (NSW) Rule 13.4, Part 21

Amirbeaggi v Business in Focus (Australia) Pty Ltd [2008] NSWSC 421 CASES CITED : Bolster v McCallum [1966] NSWR 660 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125

First Plaintiff/First Cross Defendant: Farshad Amirbeaggi Second Plaintiff/Second Cross Defendant: Brenton Adrian Yates Third Plaintiff: Third Cross Defendant: Yates Beaggi Lawyers Pty Limited First Defendant/Fourth Cross Defendant: Business in Focus (Aust) Pty Limited PARTIES : Second Defendant/First Cross Claimant: Welbon Building and Plumbing Pty Limited Third Defendant/Fifth Cross Defendant: Peter John Begley Fourth Defendant/Second Cross Claimant: Paul Robert Wellard Fifth Defendant/Sixth Cross Defendant: Hall Partners Pty Limited Sixth Defendant/Seventh Cross Defendant: Trevor Hall

COUNSEL : Plaintiffs: Mr M N Owens Defendants: Mr G Burton SC

SOLICITORS : Plaintiffs: Yeldham Price O'Brien Lusk Defendants: Hall Partners Pty Ltd

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

5882/07 AMIRBEAGGI & ORS v BUSINESS IN FOCUS (AUST) PTY LIMITED & ORS JUDGMENT 1 HIS HONOUR: Hard fought commercial litigation is often conducted with a high degree of tactical manoeuvring on both sides. In such cases tactical activity tends to intensify rather than diminish. This case exhibits these features. Introduction

2 Between 24 January and 20 December 2006 the firm of Yates Beaggi Lawyers ("the firm") acted as the solicitors for members of a joint venture engaged in a property development in the State of Queensland. The joint venturers for whom the firm acted were Business in Focus (Australia) Pty Limited ("Business in Focus"), Welbon Building & Plumbing Pty Limited ("Welbon"), Mr Peter John Begley and Mr Paul Robert Wellard ("the clients"). By the end of 2006 the firm and the clients had fallen out over the quantum and payment of professional costs and expenses on the retainer. Upon the failure of this relationship, the parties launched a barrage of litigation against one another. In this application, argued before me on 11 September 2009, the issue was whether the clients should be given leave to file a new cross-claim pleading against the firm or whether leave should be refused and an existing pleading struck out in the present proceedings. More background is required to explain how this application fits into the wider litigation between the parties.

The Joint Venture 3 The joint venture was formed in 2003. The joint venturers were the firm's two corporate clients, Business in Focus and Welbon, together with another party, Begun Property Pty Ltd ("Begun"). The object of the joint venture was the construction of a luxury resort in the Whitsunday Islands region. Under the joint venture agreement Begun was responsible for contributing the land, restructuring existing titles and obtaining necessary design and development approvals for the joint venture. Business in Focus and Welbon were to contribute capital and to make available design and construction skills and resources.

4 The joint venture agreement conferred on Begun the right in certain circumstances to acquire the interests of Business in Focus and Welbon for consideration calculated under an agreed formula. The consideration was 50% of the value of the developed land including the business and all improvements and was labelled in the joint venture agreement as "the Begun Value". The origin of the present legal disputes between the parties was the attempt by Begun to exercise this right to acquire the interests held by Business in Focus and Welbon in the joint venture.

5 In February 2005 Begun took steps to terminate the joint venture agreement. Those steps were resisted by Business in Focus and Welbon. This resistance generated disputes between Begun on the one side and Business in Focus and Welbon on the other, first, as to whether or not Begun had validly exercised a right to acquire the interests of Business in Focus and Welbon and second, as to the amount of the "Begun Value" payable upon the exercise of that right. By a letter of engagement of 24 January 2006 the clients retained the firm to act for them in those disputes with Begun and in related matters.

6 The disputes were arbitrated and the arbitrator found an award in favour of Begun. The arbitrator directed that steps be taken that would lead to the determination of the joint venture agreement and to Begun buying out the interests of Business in Focus and Welbon in the joint venture. Business in Focus and Welbon did not comply with the award. Begun had the award registered as a judgment of the Supreme Court of Queensland.

7 Valuations of the joint venture development were completed by November 2006 in conformity with the steps provided for under the arbitrator's award, thereby fixing amount of the Begun Value payable to Business in Focus and Begun.

8 The disputes between Business in Focus and Welbon on the one hand and Begun on the other were still not resolved. In May 2007 Begun commenced proceedings (No. 3383/2007) in the Supreme Court of Queensland against Business in Focus and Welbon ("the Queensland proceedings") seeking declarations as to its right to acquire the interests of Business in Focus and Welbon in the joint venture and as to the precise amount of the Begun Value. The clients' conduct of the Queensland proceedings is discussed below under the heading "The Course of the Queensland Proceedings". Termination of the Retainer

9 Even before Begun commenced the Queensland proceedings, the firm and the clients had fallen out about an aspect of the firm's conduct of the retainer. The clients were concerned about the size of the firm's fees. The firm was concerned about the clients' failure to pay the firm's fees and disbursements. By November 2006, the firm and the clients were attempting to resolve their differences. They finally did so and entered into a deed dealing with the issue of outstanding fees on 16 November 2006 ("the Deed"). 10 By 16 November 2006 the firm had issued tax invoices for professional fees and disbursements to the clients for $321,091.00 and the clients had paid $120,587.00 leaving a balance of $200,054.00. In the Deed the clients acknowledged that they jointly and severally owed a debt of $200,054.00 to the firm and the firm's practice company, Yeats Beaggi Lawyers Pty Limited. The clients agreed under the Deed to pay this debt upon the payment of the Begun Value to the clients. The Begun Value was at that time being determined by a Court appointed valuer in the Queensland proceedings. The deed also authorised the firm to receive the Begun Value when it was paid. The relevant terms of the Deed are set out later in this judgment.

11 The Deed assumed that the firm would continue to act for the clients in the still escalating dispute with Begun over the joint venture. Although the Deed engineered a short-term resolution of their existing costs dispute, the firm and the clients soon disagreed about the payment of legal costs incurred after the date of the Deed. The relationship between the firm and the clients then broke down entirely. On 20 December 2006 the firm ceased to act for the clients.

12 In the twelve months that the firm had acted for the clients it had undertaken extensive work to familiarise itself with the performance of the joint venture and the rights of the joint venturers. This had resulted in the firm creating a massive file of some 70 lever arch folders of material for the matter. Not surprisingly, when the firm ceased to act for the clients, and the firm's fees remained unpaid, the firm claimed a lien over this file as security for the payment of the firm's outstanding legal costs.

13 Upon termination of the retainer the clients were left temporarily without a legal representative. They turned to Mr Trevor Hall of Hall Partners to act for them. Mr Hall commenced to act for the clients in early 2007 in relation to the dispute with Begun. However, he did not yet have the firm's file in relation to that dispute.

14 Mr Hall's other immediate problem was in attempting to field the still active dispute between the firm and the clients about the quantum of the firm's unpaid fees prior to termination. This dispute rapidly ignited three pieces of litigation between the firm and the clients, including winding up proceedings, costs assessment proceedings and the present proceedings. I will deal each of these in turn.

15 The firm attempted to wind up one of the clients for the unpaid fees. The first step in the winding up proceedings was taken immediately upon the termination of the retainer. On 20 December 2006 the firm's practice company Yeats Beaggi Lawyers Pty Limited issued to Welbon a creditor's statutory demand for the amount of $200,054.00 under s459E (2)(c) Corporations Act 2001 said to be outstanding under the Deed. On 10 January 2007 Welbon filed an application under section 459G Corporations Act 2001 (Cth) in this Court (No 1049/2007) to set aside the statutory demand or to extend the time for compliance with the statutory demand. 16 The winding up proceedings were adjourned on a number of occasions throughout 2007. The allegations in the winding up proceedings started to overlap with the issues between the parties in the costs assessment proceedings and in the present proceedings. The clients claimed that the monies were not due under the Deed until the Begun Value had been paid and that there was a genuine dispute about whether the Begun Value had been paid, at least because of the continuing dispute with the other joint venturers as to its quantum. So the clients submitted that the winding up proceedings should be dismissed. The clients also contended that the firm could not pursue the winding up proceedings without giving the clients access to the files the subject of the firm's claim for a lien. Eventually the firm agreed to the dismissal of the winding up proceedings. The firm paid the clients' costs of those proceedings.

17 Early in 2007 the firm also commenced proceedings for the assessment of costs against the clients under the Legal Profession Act 2004, Part 3.2, Division 11 (No 268/2007). In these costs assessment proceedings the firm pressed for the payment of invoices that it had issued to the clients in the total sum of $355,606.40. The costs assessment was referred to Mr John Hope Gibson, a costs assessor appointed under the Legal Profession Act, Part 3.2. 18 The result of a costs assessment is a final award: s 372 Legal Profession Act. This would normally end the dispute as to costs between the parties. However a final award did not emerge from the costs assessment proceedings until late 2008. Throughout 2007 the parties exchanged frequent correspondence with one another and with Mr Gibson about the course of the costs assessment. More of this correspondence will become relevant later but by the second half of 2007 the costs assessment proceedings had become paralysed by a stand off between the firm and the client about the availability of the firm's file for photocopy access. The clients sought access to the file for photocopying and Mr Gibson ordered it to be made available under s327 Legal Profession Act. The firm disputed the costs assessor's power to make the order. The clients did not seek enforcement of that order through this Court but the firm did not obey the order. 19 Eventually, in September 2008 Mr Gibson gave a determination in the sum of $294,425.50. The clients applied for review of his determination on the grounds that included that the firm had waived its right to a costs assessment by executing the Deed. In November 2008 the review panel declined to review the assessment on the basis that the matters of law the clients had raised were outside the assessment process. The Present Proceedings

20 Finally in November 2007 the firm commenced the present proceedings by summons. The clients were the defendants. Mr Hall and his incorporated legal practice, Hall Partners Pty Ltd ("Hall Partners") were also joined as defendants. In the summons in the present proceedings the firm sought specific performance of the Deed and that the defendants pay the debt from Mr Hall's trust account to the firm.

21 Mr Hall and Hall Partners were necessary parties to the proceedings. One of Mr Hall's functions as the new solicitor for the clients was that the funds comprising the Begun Value, which Begun claimed was payable to the clients (although the clients disputed its quantum and the right for Begun to buy them out), was to be received and held by him. In the continuing dispute between the firm and clients, the amount of the Begun Value held by Mr Hall was a possible source of the firm's future payment. The firm apparently joined Mr Hall so that binding orders could be made dealing with the Begun Value fund that had been paid to him.

22 By mid 2007 Mr Hall was juggling a number of different roles as the new solicitor for the clients. He held the Begun Value. He was defending the clients in the various actions brought by the firm. Soon the defence of the Queensland proceedings was added to these tasks.

The Queensland Proceedings 23 In May 2007 Begun sought declarations in the Queensland proceedings as to its right to acquire the interests of Business in Focus and Welbon in the joint venture and as to the amount of the Begun Value. In June 2007 Begun issued an application for default judgment. In a series of hearings, the detail of which is explained later in this judgment Begun pressed its application for default judgment on the basis that the clients had failed to give discovery in the proceedings. In response the clients claimed to be hampered in giving discovery by the existence of the costs dispute with the firm. This contention underlies one of the disputes before the Court on the present motion, namely to what extent, if at all, were the firm's actions responsible for the result of the Queensland proceedings which were adverse to the clients. 24 In the Queensland proceedings, the clients neither provided discovery nor made an application in proper form for the production of documents from the firm to enable some measure of discovery to occur. As a result the clients' defence was struck out. The Supreme Court of Queensland entered default judgment for Begun on 12 October 2007, with damages to be assessed. In November 2007 damages were assessed in the sum of $390,000. The Application before Brereton J 25 On 2 April 2008 a number of the defendants brought an application before Brereton J in the Equity Division of this Court for summary dismissal of the summons in the present proceedings and for leave to file an amended cross claim. 26 The defendants' summary dismissal claim argued that in Clause 6.1 the Deed purports to provide that the Deed might be pleaded as a full and complete defence to any costs assessment application. In that respect it was argued that the Deed purports to bar proceedings for costs assessment in respect of the costs the subject of the deed. The denial of the right to costs assessment was said to be a contravention of s 322(5) Legal Profession Act. Because of that contravention the Deed was said to be void under Legal Profession Act, s 327. 27 Both those applications before Brereton J succeeded: Amirbeaggi v Business in Focus (Australia) Pty Ltd (2008) NSWSC 421. The summons was dismissed. The firm has not appealed from that decision. The remaining matters in issue in the present proceedings are the issues on the cross claim. The Cross Claim 28 On 2 January 2008 two of the clients Welbon and Mr Wellard cross claimed in these proceedings. They named the firm as the first to third cross defendants. They named the other defendants (the rest of the clients and Mr Hall's practice) as the fourth to seventh cross defendants to the cross claim. The joinder of the fourth to seventh cross defendants appears to have been a precautionary measure to ensure these defendants were bound by any judgment. It is not clear that relief is pressed against them. 29 The cross claim had a complicated procedural history even before the hearing of the present motions. The firm brought a motion to strike out the cross claim before McLaughlin AsJ on 5 February 2009. The firm was successful in having that version of the cross claim struck out. The clients were given leave to file an amended cross claim, which they did on 5 March 2009. The Motions 30 Both the firm and the clients had motions before the Court. The firm sought to strike out the existing cross claim. The clients sought to file a new cross claim. 31 There was preliminary skirmishing in the motions before me about which version of the cross claim the clients were relying upon. Counsel for the clients made clear that it was the second further amended statement of cross claim, which the clients were now propounding. That became the pleading the subject of debate and legal analysis on the present application. In this judgment this final version of the cross claim will be referred to as "the final cross claim". The clients seek to file the final cross claim. The firm resists the filing of the final cross claim and seeks to strike out the cross claim presently on the record. The firm's contention is that they are both incompetent and bound to fail. 32 In order to assess the firm's application to strike out the existing cross claim and to refuse leave to file the final cross claim it is necessary to analyse the various allegations made in the final cross claim. 33 Despite Brereton J's finding that the Deed was void, the clients alleged in the final cross claim that the acts of execution and delivery of the form of the Deed on or about 16 November 2006 containing the terms which that document did nevertheless had subsisting legal effects. The clients pleaded that the three principal consequences of the execution and delivery of the Deed were to inhibit or prevent the firm thereafter from:

(b) applying for assessment of the firm's costs comprising the Debt as defined in the Deed;

(c) resisting production of the file for any lawful purpose. 34 These claims are founded upon allegations pleaded in paragraphs 8,9 and 10 of the final cross claim. These fundamental allegations are reproduced below: "8. The effect of the Deed was that By their execution and delivery of the Deed containing the terms which it did on about 16 November 2006, and despite the Deed being found to be void about 17 months later, the cross defendants represented to the cross claimants at the time of execution and delivery of the Deed the following ("the representations"):-

(i) that the need to pay the Debt was suspended and that there would be no demand for payment of the Debt until the Begun value was determined and was paid (to the cross claimants) cross defendants had no right after date of the Deed to claim or exercise a lien over documents concerning the relevant services in respect of their claimed professional fees and disbursements of $200,054.00 ("their claimed costs") comprising the Debt;

(ii) that they (the cross defendants), would not file for or seek the cross defendants had no right after date of the Deed to apply for assessment of their claimed costs comprising the Debt;

(iii) that on the basis that the cross claimants agreed and acknowledged the Debt and executed the Deed, the cross defendants would continue to act as the cross claimants' solicitors. (Although not specifically set out in the Deed, the same was made by oral representation and was not inconsistent with the representations as were contained within the Deed).

(iv) that the cross defendants as at date of the Deed waived or gave up their right to apply for assessment of their claimed costs comprising the Debt;

(v) that the cross defendants as at date of the Deed waived or gave up their right (if any) to claim or exercise a lien over documents concerning the relevant services in respect of their claimed costs comprising the Debt;

(vi) that the cross defendants had no right after date of the Deed to resist production for any lawful purpose of documents concerning the relevant services;

(vii) that the cross defendants as at date of the Deed waived or gave up their right (if any) to resist production for any lawful purpose of documents concerning the relevant services;

(viii) that the foregoing were not conditional on the validity of the Deed.

Particulars The representations were implied from the object and effect of the Deed as a whole as described in 4 above, by the terms of the Deed and in particular by recital Defendant and clauses 1, 3 and 6.1 of the Deed.

9. The cross claimants and the cross defendants executed the Deed on or about 16 November 2006. Further and in the alternative to 8, by their execution and delivery of the Deed on about 16 November 2006, and despite the Deed being found to be void about 17 months later, the cross defendants at time of execution and delivery of the Deed waived and/or gave up their rights (if any) in respect of all or any of the following:

(i) to apply for assessment of their claimed costs of $200,054.00 comprising the debt;

(ii) to claim or exercise a lien over documents concerning the relevant services in respect of their claimed costs comprising the Debt;

(iii) to resist production for any lawful purpose of documents concerning the relevant services;

and such waiver and/or giving up of rights (if any) was not conditional on the validity of the Deed.

The waiver and/or giving up of rights (if any) was constituted by the object and effect of the Deed as a whole as described in 4 above, by the terms of the Deed and in particular by recital Defendant and clauses 1, 3 and 6.1 of the Deed.

10. Contrary to the Deed and the representations and also contrary to the waiver and giving up of rights (if any) described in 9 , the cross defendants:-

(i) Applied filed for assessment of their claimed costs comprising the Debt together with other claimed costs in cost assessment proceedings numbered 268 of 2007 and pursued that application, over contest, to obtain determinations issued 2 September 2008 and sent on 15 September 2008 and a contested review determination issued 12 November 2008 and sent 20 February 2009 which included the claimed costs comprising the Debt together with other claimed costs and the costs of the assessment and of the review;

(ii) issued a creditor's statutory demand in which they asserted that the Debt was, as at the date of issue of the demand, a sum due and payable by the cross claimants to the cross defendants

(iii) ceased to act as the solicitor for the cross claimants

(iv) claimed and exercised a lien over documents concerning the relevant services in respect of their claimed costs comprising the Debt;

(v) refused the cross claimants access to their client file to produce documents concerning the relevant services and resisted production of such documents in the knowledge that the cross claimants were seeking access to the client file held by the cross defendants, so as to enable them to defend the 3383 of 2007 proceedings those documents inter alia for the purposes of their defence of proceedings in the Supreme Court of Queensland numbered 3383 of 2007 and filed 29 May 2007 ("the 3387/07").

Particulars of (iv) and (v) In annexure A hereto and in the cross defendants' resistance to an application returnable on 4 October 2007 in the 3383/07 pleadings proceeding in the State of Queensland."

35 The legal basis for the three pleaded consequences of the execution and delivery of the Deed was representations said to be implied from the object and effect of the Deed and from doctrines of waiver. 36 Yet a separate allegation in the final cross claim was advanced assuming the correctness of the client's allegation that the firm could not maintain a lien. The claim was that, in the absence of a valid entitlement to claim a lien over the file, the firm committed the tort of detinue by refusing to release the file in the face of the continued requests by the clients for delivery up of the file and in the face of an offer by the clients to enter into a standard Law Society undertaking only to deal with the file for the purposes of the conduct of the proceedings. The allegations of wrongful detention are contained in paragraphs 18 and 19 of the final cross claim which are as follows: "Wrongful detention by the cross defendants of the cross claimants' property

18. Subsequent to execution of the Deed, the cross claimants on numerous occasions requested and/or demanded that the cross defendants deliver up property ( being the documents concerning the relevant services the cross-claimants' client file in litigation proceedings before the Supreme Court in the State of Queensland ), and the cross defendants wrongfully refused to deliver up the property requested and/or demanded by the cross claimants .

Particulars Particulars of the requests, demands and refusal(s) to deliver up the said documents are set out in the schedule annexed as "A" to the Statement Cross Claim this cross claim and in the cross defendants' resistance to an application returnable on 4 October 2007 in the 3383/07 proceedings for production of those documents.

19. Each of the refusals by the cross defendants particularised in 18 constituted a wrongful detention of the property of the cross claimants.

Particulars (i) The cross defendants had made the representations described in 8(i) and (v)-(viii) and/or had waived and/or given up their rights (if any) to claim or exercise a lien or to resist production as is described in 9(ii) and (iii).

(ii) The cross defendants had no entitlement to resist production of documents required for the purposes of litigation or costs assessment by claim or exercise of lien or otherwise in the circumstances of termination of their retained in December 2006 and/or in the face of offers of undertakings or provision of security in respect of their claimed lien and claim for payment of their claimed costs including an offer by the cross claimant's solicitors on 27 and 28 August 2007 to undertake to enter into a deed in the form approved by the Law Society of New South Wales that would allow access to the property being the documents concerning the services on a more general basis including in relation to the 3383/07 proceedings (refer pages 42 and 51 of Annexure A), to which the cross defendants did not respond." 37 The pleading was completed by the clients alleging that judgment was entered against the clients in the Queensland proceedings "as a consequence of" the alleged wrongful detention. The clients claim in the final cross claim that the misrepresentation claim, the waiver claim and the wrongful detention claim all resulted in losses to the clients. The final cross claim pleads these various losses as, the costs orders made against the clients in the Queensland proceedings, the adverse assessment of damages in the Queensland proceedings by Martin J on 19 November 2007 in the amount $390, 583.93, and finally the making of orders for specific performance of the joint venture in the Queensland proceedings without the clients being able to set off against those orders either of the Business in Focus or Welbon claims for costs and overruns, contributed by them to the joint venture in the order of $800,000, or the amount of the Begun Value loan of $500,000. Finally, the clients say that they were denied the opportunity to have their defence or any cross claim in the Queensland proceedings heard and determined and the consequent opportunity to achieve a better outcome in those proceedings. 38 The firm's liability to the clients is said to arise from the statutory remedies under s 52 of the Trade Practices Act 1974 (Cth) in respect of the practice corporation and under s 42 of the Fair Trading Act 1987 (NSW) in the case of both cross defendants. A separate allegation is made in respect of the firm's attempts to enforce the determinations in the costs assessment proceedings 268 of 2007. The clients' allegation is that to do so in the circumstances would be unconscionable. The Notices to Produce 39 Both the firm and the client issued notices to produce on the hearing of the motions in the proceedings. The firm's notice to produce sought production of all communications between Mr Burton SC and Mr Hall about the adequacy of the particularisation of the final form of the cross claim. The clients' notice to produce sought production of documents that were used by the firm to answer the clients' exemplary damages case. 40 In the course of the hearing, the parties resolved outstanding issues in respect of the notices to produce. Both sides agreed not to call on the notices to produce to the other. As a result of this judgment there may be no further need to call upon these notices.

The Firm's Strike Out Case 41 The firm advances four arguments that the final cross claim is defective and should be struck out. These arguments are:

(a) the claim in relation to the Queensland proceedings is bound to fail and is an abuse of process;

(b) the claim that the Deed prevents the firm's costs being assessed is an abuse of process;

(c) the Queensland proceedings claim is not properly particularised;

(d) the exemplary damages claim is not properly particularised.

42 The clients confirmed in the course of the hearing that the exemplary damages claim is no longer pursued. The argument relating to that claim therefore does not need to be considered. The Claim in relation to the Queensland proceedings 43 The firm argues that the claim for damages for loss arising out of the Queensland proceedings is hopeless and an abuse of process. The firm's claim is under both branches of Rule 13.4 Uniform Civil Procedure Rules 2005. The firm seeks summary judgment on the grounds that the pleaded case in the final cross claim cannot succeed on its face and is frivolous or vexatious or discloses no reasonable cause of action or alternatively that it is an abuse of process. The firm makes several separate points in support of this argument. 44 The firm's first point is in relation to the second cross claimant, Mr Wellard. The firm submits that he was not a party to the Queensland proceedings. The final cross claim asserts that Mr Wellard was a defendant to the Queensland proceedings. The firm submits that he plainly did not suffer loss as a defendant to the Queensland proceedings. The final cross claim pleading does not plead facts which would show that Mr Wellard suffered loss other than as a party as a result of the striking out of the defences in the Queensland proceedings. 45 The evidence shows that Mr Wellard was a client of the firm but he was not a defendant to the Queensland proceedings. No facts accounting for the alleged loss by Mr Wellard are pleaded. I accept the firm's argument that as pleaded the part of the final cross-claim concerning Mr Wellard is bound to fail in relation to the Queensland proceedings. Therefore the final cross claim must be struck out so far as it concerns Mr Wellard in that respect. 46 The firm's second point is that the available facts in the course of the Queensland proceedings and the reasons for judgment of Martin J show that the reason his Honour struck the defences out and entered judgment in those proceedings was simply because of the failure of Mr Hall to comply with the orders of the Court in those proceedings. 47 The firm submits that the clients' contention that the entry of judgment in the Queensland proceedings was caused by the conduct of the firm is inconsistent with the course of those proceedings and Martin J's findings. I do not agree. 48 As the detailed discussion in the next section of this judgment shows, the clients never advanced in the Queensland proceedings any adequate evidence to explain their difficulties in obtaining documents from the firm. Whether or not the firm contributed to or did not contribute to the clients' non compliance with the Court's orders in the Queensland proceedings was neither argued nor determined in the Queensland proceedings. Martin J's reasons simply do not extend as far as finding that the firm bore no responsibility for the striking out of three defences in those proceedings. Indeed it is difficult to characterise anything he said as covering this subject. As the history of the Queensland proceedings, set out below shows, for quite understandable reasons his Honour had much to say about the defendant's lack of compliance with his orders. This led in turn to his Honour striking out the defences and to the entry of judgment for Begun. But I do not read his judgment, or his comments in the course of argument, as exhausting the attribution of responsibility for the orders that he was making. Thus there is no true inconsistency between his Honour's judgment and anything the clients are alleging in these proceedings. The reasoning to this conclusion requires a deeper analysis of the course of the Queensland proceedings. 49 The history of the Queensland proceedings are also relevant to evaluating Mr Hall's conduct and the argument, now being maintained by the firm, that it is he, Mr Hall, not the firm, that bears such complete responsibility for the striking out of the client's defence in the Queensland proceeding that should this matter proceed he will be joined as a further cross defendant to these proceedings. The Course of the Queensland Proceedings

50 The Queensland proceedings were resolved between May and November 2007. They were finalised by the entry of default judgment against Business in Focus and Welbon as a result of a series of directions and interlocutory hearings conducted by Chief Justice de Jersey, Martin J and Daubney J sitting in the trial division of that Court.

51 On 29 June 2007 Begun applied for default judgment returnable on 30 July 2007 on the basis that Business in Focus and Welbon had failed to file or serve any defence in the Queensland proceedings.

52 On 14 July 2007 Business in Focus and Welbon filed but apparently did not serve their defence. Nevertheless the defence came to the attention of Begun which filed and served a reply on 27 July 2007. Thus the pleadings in the Queensland proceedings closed by the end of July 2007.

53 Begun also completed its discovery in the Queensland proceedings by 27 July 2007. The discovery procedure under Part 21 Uniform Civil Procedure Rules 2005 (NSW) is called "disclosure" under Chapter 7 Uniform Civil Procedure Rules 1999 (QLD) and this term is used in the account.

54 Upon the return of Begun's application for default judgment before Daubney J on 30 July 2007, Business in Focus and Welbon told Daubney J through their attorneys that they were unable to provide disclosure because the firm was holding their files.

55 Daubney J gave Business in Focus and Welbon an opportunity to sort out their differences and ordered them to give disclosure in the Queensland proceedings by 27 August 2007. Everyone appeared to anticipate that Business in Focus and Welbon and the other joint venture defendants would be able to comply with the disclosure orders within the four week period allowed.

56 The matter returned before de Jersey CJ in the trial division on 31 August 2007. By this time Business in Focus and Welbon had still not given disclosure in accordance with Daubney J's orders. Through their counsel Business in Focus and Welbon explained that they were having difficulties in producing the documents because of disputes with the firm. There was however no evidence to support this explanation to the Court, which was merely offered a series of statements from the bar table. To overcome that deficiency Business in Focus and Welbon undertook to file and serve an affidavit within seven days, explaining the reasons why they needed until 24 September 2007 to complete disclosure. De Jersey CJ ordered that the time for compliance with Daubney J's order be extended until 24 September 2007.

57 Thus the clients, through their solicitor Mr Hall, had gained just over three weeks grace to prepare an affidavit of not very great complexity to explain the nature of the issues between the firm and the clients in the assessment proceedings and either to foreshadow or present an application for access to the documents in the Queensland proceedings themselves. Nothing was done by 24 September 2007. The affidavit was not filed in conformity with de Jersey CJ's orders. Nor was disclosure given within the time permitted by the extension of Daubney J's orders.

58 The proceedings were re-listed before Martin J on 4 October 2007 when Business in Focus and Welbon were represented by Mr McCrudden of counsel. Quite understandably his Honour questioned counsel as to why the clients had not complied with the Court's orders. Counsel for the clients seemed to be seized of the risk of adverse orders being made due to the existing non-compliance with the Court's orders. Counsel foreshadowed to Martin J the making of an application to seek production of the file held by the firm. The problem for counsel was that this is just the kind of application that should have been made before 24 September 2007.

59 In response to Martin J's questions Mr McCrudden said the following to the Court: "I am instructed that my clients will, assuming that they have the right to do so, lodge an application in this Court seeking production of all documents held by the solicitors to this Court and photocopy access be given to them. I am instructed, your Honour, that that in so far as it can be done, will be done by a lodgement of the application tomorrow.

In the shortness of time I'm unable to say how that would be done, your Honour, but supported by affidavit which I have been requested to settle whether that could be filed with it I am unable to say because I don't know the full extent of the material which would be in it, giving rise to reasons why there has been no compliance and supported by all evidence of all acts taken by either the solicitors or the clients to support the application."

60 With a degree of understandable disquiet due to the persistent non compliance with the Court's orders up to that time, Martin J granted the further indulgence being sought. But his Honour did so, on the basis that on the next occasion he expected to have a full explanation on affidavit of the reasons for the non compliance with the Court's orders and directions. A short further time was given for this to occur. The matter was adjourned part heard until 12 October 2007. 61 The orders Martin J made on the adjourned date of 12 October are best understood in light of the clear warning that his Honour gave to Mr McCrudden on 4 October 2007. He said the following in his judgment allowing the adjournment on 4 October 2007: "It might be thought by a reasonable person that the defendants, having had two months to make appropriate application in an appropriate Court, had sufficient time. Apparently it has not. The attitude of the defendants is one of disdain for the orders that have been made and the evidence for that is the failure by them to take any meaningful step which would allow them to comply with the order.

The defence which has been filed and which was not, I note, served in accordance with the rules on the plaintiff, is in a form which might be struck out also as not complying with the rules and also for not disclosing a defence.

Bearing in mind the nature of the relief sought, I am marginally - and the margin is extremely thin - marginally inclined to allow the defendants some extra time. What I propose to do is this.

I direct the defendants to file an affidavit no later than 5.00 pm Wednesday the 10th of October and to serve that affidavit by 5.00 pm on Wednesday the 10th of October on the plaintiff's solicitors. I direct that that affidavit contain full details of all steps taken by the defendants to comply with the orders of Justice Daubney and the Chief Justice to which I have earlier referred. I direct that that affidavit have exhibited to it the application which was foreshadowed by [counsel for BIF and Welbon] which would allow them to recover documents from their former solicitors, together with all supported material.

I am going to set this down for hearing on Friday 12th October at 9.00am before me. You may tell your instructors…that they should expect that unless the affidavit is satisfactory and demonstrates that they are going to comply with their obligations under the rules of this Court and to proceed in a expeditious fashion then their defence is most likely to be struck out with judgment against them."

62 Remarkable as it may seem, when the matter came before Martin J on 12 October 2007 no application had yet been filed seeking orders for the production of documents over which the firm claimed a lien. Nor had an affidavit of explanation been filed. His Honour therefore had to deal with three matters, the lack of an application for production of documents, the lack of an affidavit, and Begun's application for the entry of judgment. Martin J resolved those matters the following way.

63 As to the lack of any application for production of documents, counsel for the clients briefed on that day (not Mr McCrudden) correctly anticipated that the position of Business in Focus and Welbon had become very difficult, as perhaps did Mr Hall himself. Counsel for the clients sought leave to file an application in Court but acknowledged that the application could not be heard that day. The application sought to be filed was not supported by an affidavit. Counsel for the client candidly informed the Court that the application proposed to be filed "doesn't appear to be in correct form in that it doesn't seem to name the firm Yates Beaggi as a party to the application". Martin J found that the application proffered to him in Court was incompetent and refused the leave to file it. Notwithstanding that this draft application failed to join the firm, Mr Hall had given notice to the firm who had attended on this occasion through counsel. When Martin J refused leave to allow the application to be filed he also excused the firm from further attendance.

64 There was undoubted jurisdiction either in the Supreme Court of Queensland or in this Court to seek production of the documents the subject of the firm's claim for a lien. Production could be ordered under Legal Profession Act, s 728. The Court also has inherent jurisdiction to make such orders so that justice can be done despite the claim for a lien: Bolster v McCallum [1966] NSWR 660, at 665.

65 As to the affidavit of explanation, although it had not been previously filed in accordance with the Court's orders, counsel for the clients handed a copy of the affidavit up to Martin J. The affidavit recorded something of the ongoing disputes between the firm and the clients about document production. It then exposed the reasoning behind a tactical decision which Mr Hall and counsel had taken which had apparently led to non production of the documents. "12. On 7 September 2007, receive correspondence from Yates Beaggi Lawyers inviting inspection of discoverable documents to take place at their offices and responding by email to advise that we seek to conduct inspections on Thursday 13 September 2007 at Yates Beaggi Lawyers' offices in Brisbane.

15. On 10 September 2007, conferred with counsel with a view to not call on a notice to produce the client file in the statutory demand action on the basis that non-production of the file may assist in drawing an inference that the charges levied in respect to the file are subject of a genuine dispute where the party asserting the fees are refusing production of the file."

66 Upon this material counsel for Begun pressed for the orders sought in the motion for the striking out of the defence and the entry of judgment. Martin J set aside the defence filed by Business in Focus and Welbon. His Honour entered default judgment in an amount to be assessed in Begun's favour. An appeal was brought by Business in Focus or Welbon from Martin J's decision on 12 October 2007 but the appeal proceedings were settled. 67 A full examination of Martin J's reasons for judgment is not necessary. His Honour adverted to the debate which had occurred on 4 October 2007 and the directions he had made about what he required in the matter. His Honour noted that the clients had not done their best to obtain the documents and had not yet made an application either in the Supreme Court of Queensland or in any other Court seeking recovery of the documents. His Honour also noted the tactical decision referred to in paragraph 15 of the affidavit above that the non production of the file was a course being taken to deliberately assist in the drawing of an inference that the charges levied in respect of the file were the subject of a genuine dispute.

68 Finally, in his judgment Martin J assessed the inadequacies of the case presented to him in the following way, in a summary with which it is difficult to disagree. "The defendants have now had three opportunities to either provide a list of documents in accordance with the rules, or to explain to the Court why they are unable to do so. The material which has been provided today demonstrates to me that they have avoided opportunities which they might have had, and they have not sought to bring an application in a timely fashion to seek the documents from their former solicitors.

The material relied upon by the defendants is woefully inadequate, and a plaintiff is entitled to have the rules of Court complied with. I see no reason that has [been] put forward on behalf of the defendants for an order not to be made in the form sought by the plaintiffs." 69 It is certainly hard to understand Mr Hall's failure to file process in time to comply with the orders of de Jersey CJ, Daubney J and Martin J in the Queensland proceedings. On the face of the material presented to the Supreme Court of Queensland there is much to be said for the view that either the legal representative of Business in Focus and Welbon or those defendants themselves may bear some responsibility for the striking out of the defence and the burden of cost and damages thereby suffered by the clients in the Queensland proceedings. The strength of the firm's argument is that all that Mr Hall really had to do was in a timely way to explain to the Supreme Court of Queensland the lien problems that he was having with the firm and to take up the Court's invitation to him to use its compulsory processes to overcome them. He did not have to solve these problems before 24 September 2007. All he had to do is to explain how they had arisen, the difficulties they were causing him, and to file a competently formulated attempt to solve the problems by applying to obtain the documents. 70 Whilst it is difficult to see how Mr Hall's conduct might be justified, attempts to justify it are not beyond the possibility of argument. The firm bears a heavy onus in saying that it could not on the case pleaded and the evidence presented ever be found responsible for the outcome of the Queensland proceedings. If there is a real question to be determined, whether of fact or of law and the rights of the parties depend on it, then it is not competent for the Court to dismiss the action as frivolous and vexatious and an abuse of process: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 130 per Barwick CJ. 71 The evidence shows that in the costs assessment proceedings Mr Hall was applying intense energy requesting the costs assessor to make orders for delivery of the file to the clients. The costs assessor made several orders for the production of the file for copying. The firm disputed its obligation to comply with the cost assessor's orders. It continued to refuse to make the file available. The clients, through Mr Hall, seem to have taken the view that the place to conduct their dispute about access to the file was in the costs assessment proceedings. This approach may indeed have been misguided. Without leave of the Court any documents obtained in the costs assessment proceedings could not have been used for disclosure in the Queensland proceedings. The clients' instructions may have moulded this course. Only more detailed evidence at trial will reveal this.

72 However, upon the materials available for this application I am of the view that it is certainly not beyond the possibility of reasonable argument for the clients to say that their non compliance with the orders of the Supreme Court of Queensland was in part the result of the firm's conduct. There is evidence of an immense diversion of Mr Hall's energy and his clients' financial resources in contest with the firm in the costs assessment proceedings due to the position of the firm being taken in those proceedings. A detailed history of the course of correspondence in the costs assessment proceedings is set out in annexure A to the final cross-claim. That correspondence is also in evidence. At the very time that Martin J was considering striking out the defences in the Queensland proceedings the firm was not complying with the cost assessor's orders for production of the file.

73 The clients' argument is that if the firm was not wrongfully claiming the lien then the client would have had the documents in the file and compliance with the orders made in the Queensland proceedings would have been straightforward. That appears to me to be at least arguable on the materials in evidence. If it emerges that the firm was wrongfully maintaining a lien and had no right to detain the file then the firm's wrongful conduct may arguably have contributed to the result in the Queensland proceedings. Whatever it merits this argument is a real question for trial and therefore not one that can be dismissed without a hearing. 74 Accordingly, I decline to strike out the final cross claim on the basis that the claim in relation to the Queensland proceedings is bound to fail.

75 It should be observed that the other issues for trial will be the validity of the firm's claim of a lien over the file and in turn the circumstances of the termination of the firm's retainer, together with damages issues.

76 The firm also argues that the client's pleading in the final cross-claim is an abuse of process because it is inconsistent with the judgment of Martin J. For the reasons I have already given, the precise plea in the final cross-claim is not the subject of and therefore is not inconsistent with the judgment of Martin J in the Queensland proceedings. This alternative argument also fails. 77 My decision not to strike out the final cross claim in relation to the Queensland proceedings also has the consequence that the continuing role of Mr Hall in these proceedings must be clarified. I will make the directions provided below for that purpose. The Deed Claim is an Abuse of Process 78 The firm's next argument is based on the position taken by the clients before Brereton J. Before his Honour the clients successfully argued that the Deed, because it purported to exclude the right of the clients to have the legal costs subject to it to be assessed, was invalid pursuant to s 327 Legal Profession Act 2004 (NSW): Amirbeaggi v Business in Focus (Australia) Pty Limited [2008] NSWSC 421 at [19]-[33]. The clients had argued before Brereton J that these proceedings were an abuse of process because there was a costs assessment on foot at that time, the firm having commenced assessment proceedings: Amirbeaggi v Business in Focus (Australia) Pty Limited [2008] NSWSC 421 at [34 ]-[43]. 79 In order to understand the firm's argument that the Deed claim is an abuse of process and should not be permitted, it is necessary to examine the relevant terms of the Deed. The Deed was made between the firm and the firm's practice company Yates Beaggi Lawyers Pty Limited and Business in Focus, Welbon, Mr Begley and Mr Wellard (Begley, Wellard, Welbon and BIF are jointly referred to as the "Client"). Its relevant terms were: " RECITALS

A. YBL agreed to provide certain legal services to the Client on terms as set out in YBL's letter of engagement dated 24 January 2006 ("Engagement Letter") and concerning the following matters:

(i) the dispute arising out of the Joint Venture Agreement between Michael Steven Begun, Begun Property Pty Ltd, BIF, Welbon and Gloucester Point (Aust) Pty Ltd, and encompassing the following:-

a. Consideration of the Arbitration Award of Arbitrator Bain dated 8 February 2006;

b. Consideration of an appeal from the Arbitration Award including the proceedings commenced in the Supreme Court of Queensland, Brisbane Registry bearing plaint number 443 of 2006.

c. Determination of the Begun Value, including all attendances associated with obtaining a valuation and any subsequent dispute relating thereto;

d. Proceedings commenced in the Supreme Court of Queensland, Brisbane Registry bearing plaint No BS 895 of 2005.

(ii) the proceedings commenced in the Federal Court of Australia, Queensland Registry bearing plaint no QUD 229 of 2005;

(iii) the caveat proceedings commenced in the Supreme Court of Queensland, Brisbane Registry bearing plaint no BS 2213 of 2005;

(iv) the costs assessment proceedings commenced in the Supreme Court of Queensland, Brisbane Registry bearing plaint no 305 of 2006;

(v) the costs assessment proceedings against Aubrey Crawley & Co Solicitors commenced in the Supreme Court of New South Wales bearing plaint number 278 of 2006.

B. Since 24 January 2006, YBL has provided the legal services to the Client and rendered tax invoices totalling $321,091.00 concerning professional fees and disbursements. As at the date of this deed, the Client has paid the sum of $120,587.00, leaving a balance of $200,054.00. Copies of the relevant invoices and trust account ledgers of YBL are attached Annexed [sic] B.

C. The Client wishes to acknowledge the outstanding amount of $200,054.00 (the " debt "), as a debt owed to YBL.

D. The parties have agreed to enter into this deed to secure the payment obligations of the Client of terms contained herein.

1.1 The Client acknowledges that they are all jointly and severally liable and indebted to YBL for the debt.

1.2 The Client has agreed to pay YBL the debt (or any part of the debt which as that time remains outstanding) upon payment of the Begun Value to the Client by Michael Begun and Begun Property Limited (" Begun "). The Begun Value is defined in clause 12.2 of the Venture Agreement entered into between BIF, Welbon and other on or around August 2003 (" the Begun Value ").

1.3 The parties acknowledge that the Begun Value is in the process of being determined by a Court appointed valuer.

1.4 The Client authorises YBL to receive, and must do all things and sign all documents necessary to ensure that YBL receives, the Begun Value when paid by Begun and in this regard, the Client provides YBL with an irrevocable authority in the form of Annexure A, to deduct from the Begun Value the debt (or any part of the debt which at that time remains outstanding) prior to the balance of Begun Value being released to the Client.

1.5 The Client further authorises YBL to distribute the Begun Value in the following order:

(i) the debt (or any part of the debt which at that time remains outstanding) to YBL; and

(ii) the balance of the Begun Value to be held on trust by YBL pending further direction from the Client.

4.1 The Clients acknowledges that YBL has agreed to enter into this deed based upon the following representations and warranties:-

(a) The Client's financial affairs, including all assets and liabilities, have been accurately described to YBL prior to entering into this deed;

(b) YBL has not made any promise, representation or inducement or been party to any conduct material to the entry into of this deed other than as set out in this deed; and

(c) The Client is aware that YBL is relying upon the representations and warranties in this clause in entering into this deed.

4.2 The Client otherwise acknowledges that it has been provided with adequate opportunity to obtain independent legal advice as to their obligations pursuant to this deed.

6. BAR TO FURTHER PROCEEDINGS & CONSENT TO JUDGMENT

6.1 This deed may be pleaded as a full and complete defence by any party to any actions, suits, costs assessment applications or proceedings commenced, continued or taken by another party or no its behalf in connections with any of the matters referred to in this deed.

(i) they will not defend or dispute any proceedings commenced by YBL for a breach of this deed or non-payment of the debt for whatever reason;

(ii) they will immediately consent to default of other judgment being ordered against them, jointly and severally, in favour of YBL in the aggregate amount of:-

A. the debt, or that part of the debt which remains unpaid,

B. YBL's legal costs on any such proceedings, on an indemnity basis;

(iii) YBL can rely on the provisions of this deed to evidence the indebtedness of the client to YBL.

6.3 Notwithstanding any termination of this deed, the provisions in this deed relating to payment of the debt and right of YBL to enforce such payment and to rely on this deed to do not merge on completion.

This deed contains the entire agreement between the parties with respect to its subject matter. It sets out the only conduct relied on by the parties and supersedes all earlier conduct made by or existing between the parties with respect to its subject matter.

No failure to exercise and no delay in exercising any right, power or remedy under this deed will operate as a waiver. Nor will any single or partial exercise of any right, power or remedy preclude any other or further exercise of that or any other right, power or remedy.

Any provision of this deed which is prohibited or unenforceable in any jurisdiction will be ineffective as to that jurisdiction, to the extent of the prohibition on unenforceability of that provision in any other jurisdiction." 80 The firm submitted on these motions that in substance the argument the clients had put to Brereton J was plainly that the clients were not obliged to pay the amount agreed pursuant to the Deed but rather were entitled to have their legal costs assessed and that no steps to recover those costs could be taken until the completion of the assessment process. 81 The firm argues that the clients now present a claim that the firm is not entitled to apply for assessment of the costs the subject of the Deed and are not entitled to be paid in accordance with the determination of any costs assessment and are not entitled to be paid any of the costs subject to the Deed. In other words the claimants, so the firm says, now seek to take advantage of the judgment of Brereton J that the Deed was invalid but to rely upon the Deed to say that the firm has no entitlement to have their costs assessed. The firm says this is an inconsistency. 82 I do not agree that this is an inconsistency. The clients' case before Brereton J was narrower than the way that the firm presently characterises it. The clients were there arguing that the deed was void by reason of the operation of the Legal Profession Act. Upholding this argument was the fundamental ground of his Honour's decision. Here the clients are prepared to accept Brereton J's decision and are putting that the proffering of even a void Deed could amount to a misleading conduct or a waiver of rights said to exist outside the Deed. The clients do not need to assert the validity of the Deed to put their argument on the final cross claim. A true inconsistency would arise if the clients were now contending the opposite to which they were contending before Brereton J that, for example, the Deed was valid. Otherwise it does not. I therefore also reject this argument. Particularisation of the claim 83 The firm lastly says that the final cross claim was not adequately particularised, because it does not plead facts which underlie the allegation of causation in relation to the Queensland proceedings claim. 84 I do not agree with the firm's contentions about the alleged inadequacy of particulars. The way that the firm's alleged conduct led to the clients' loss is adequately pleaded. I will make directions for the clients to file their evidence so that the extent of everything relied upon by them in support of this allegation will be available to the firm for the firm's appraisal. Mr Trevor Hall's Continuing Role as the Solicitor for the Clients

85 The firm has foreshadowed the possibility that it will join Mr Hall as a party to these proceedings if the Court allows the cross claim to proceed. The firm's contention is that it was Mr Hall's own negligence that resulted in the termination of the Queensland proceedings adversely to the clients. The firm says that whatever the merits of the firm's claim for a lien over the file, Mr Hall should have taken a number of obvious steps to protect the clients' interests. He did not take these steps, which led to the Supreme Court of Queensland striking out the clients' defence. It is necessary to analyse whether this contention has any substance to consider what directions should be given for the future management of these proceedings. 86 On the materials presently available to the Court, the firm can reasonably maintain that there were steps that Mr Hall could have taken which he did not take, which may have altered the outcome of the Queensland proceedings.

87 If the lien the solicitors claimed was invalid Mr Hall could readily have subpoenaed the file in the Queensland proceedings. Business in Focus and Welbon claim in the final cross claim that the lien is invalid. The firm may well have challenged the subpoena on the basis of the lien. If the lien was found to be invalid upon return of the subpoena, then the firm could be expected to have complied with its obligations and produced the file, thereby enabling the clients to comply with the orders of the Supreme Court of Queensland.

88 If on the other hand, contrary to Mr Hall's principal contention, the lien was held to be valid, then on behalf of the clients Mr Hall still had the right to invoke the coercive procedures of the Supreme Court of Queensland to produce to that Court any documents from the file which were necessary to enable justice to be done in the proceedings.

89 The firm submits that unless Mr Hall can identify some good reason why he did not take either of these steps then "it is an inescapable fact that Mr Hall is the author of the clients' misfortune". The firm says that Mr Hall should take responsibility for the consequences of his conduct. It foreshadows that it will raise a proportionate liability defence and will argue that Mr Hall is 100% responsible for the loss suffered by the clients. The solicitors will also seek contribution from Mr Hall in the amount of 100% of any verdict against the solicitors as a joint tortfeasor.

90 Examination of the course of the Queensland proceedings above shows that there is a proper basis for the firm's allegations. It is a realistic scenario that the firm will take the course that it now foreshadows of joining Mr Hall. Thus the legal representative for Business in Focus and Welbon may therefore be required to defend his own conduct of the Queensland proceedings in the course of these proceedings. 91 The conduct of the Queensland proceedings is critical to the issue of causation pleaded in the final cross claim. The precise evidence that explains what happened in the Business in Focus and Welbon camp to produce the adverse result in the Queensland proceedings is yet to be fully revealed. When it is, it can be anticipated that it will demonstrate the real possibility of a conflict between Mr Hall's interests and those of Business in Focus and Welbon. If Mr Hall is joined as a cross defendant he will have to give close consideration to whether or not he must retire from the role of solicitor for the clients.

92 The overriding purpose of the rules of this Court is to ensure the just quick and cheap resolution of proceedings before the court: s 56 Civil Procedure Act 2005 (NSW). According to the firm, liability issues in these proceedings include Mr Hall's possible liability for the clients' loss. If that issue is to be raised it is highly desirable that it be determined along with all other liability and causation issues in the one proceeding. Unless the issue is left as it is now, merely an inchoate allegation, Mr Hall will be left in an ambiguous position in these proceedings and the clients' interests may foreseeably be disadvantaged. Settlement of the proceedings is unlikely to advance whilst it is unclear whether or not there will be proceedings against Mr Hall.

93 The firm should be required to decide whether or not it will take proceedings against Mr Hall. The firm must do this within 14 days of filing a defence to the final cross claim. Mr Hall and the clients will know therefore within six weeks whether or not other legal representatives will need to be retained to represent the interests of the clients. The parties may need liberty to apply in respect of this direction.

Mediation 94 The clients' further amended notice of motion seeks an order that these proceedings be referred to mediation in accordance with s 26 of the Civil Procedure Act 2005 (NSW). Section 26 of the Civil Procedure Act confers discretion on the court whether or not to order a referral to mediation. If such an order is to be made, the court has discretion to decide when any referral will take place. 95 The clients press for referral to mediation. The solicitors resist a referral. The firm's arguments are persuasive especially in the short term. In the longer term however the mediation of this matter before hearing may be desirable.

96 On 23 June 2009 Nicholas J ordered that the parties file position papers in anticipation of a mediation taking place. Both the clients and the firm filed position papers in accordance with His Honour's directions. The firm's position paper dated 1 July 2009 and its subsequent written and oral submissions on this motion make clear that the prospects of settlement of this matter are low until a number of uncertainties are removed from the issues between the parties. 97 I agree with the firm's submissions that it is desirable that these uncertainties be removed as a precondition to this matter being referred to mediation. Once those uncertainties are removed though it may still be desirable that a last opportunity be taken by the parties to resolve these proceedings by mediation rather than by hearing.

98 The firm identifies several uncertainties. First, the solicitors need to know which pleading they are to face. That uncertainty has now been resolved. The court has given leave for the clients to file and rely upon the final cross claim.

99 Secondly, the firm submits there is uncertainty about the identity of the parties to these proceedings at hearing. The firm submits that if the cross claim proceeds that the firm will put in issue the conduct of the clients' current solicitor Mr Trevor Hall. They contended Mr Hall himself is an essential party to any mediation, if he is to be joined as a party to the proceedings. I agree that whilst that uncertainty exists mediation is unlikely to be productive. But the directions I have proposed in the previous section of this judgment should also cure that problem. The firm will be required within 28 days to decide whether or not it will join Mr Hall as a party on the basis of the pleading now permitted to be filed. If he is joined as a party, it is likely the clients will have to change solicitors. If he has not joined as a party then the action can proceed with him acting for the clients. The Future Course of these Proceedings 100 In the result I have declined to strike out the existing cross claim and have granted leave to the clients to file the final cross claim. The question arises as to what should now be done in order to resolve these proceedings as rapidly as possible. Arguments about pleadings and particulars and other procedural skirmishes need to be brought to an end as rapidly as possible. 101 The parties should quickly be put in a position to assess the evidence that each will face at a final hearing. The nature of the allegations in the final cross claim are such that the clients should be able to put on all the evidence in their possession whether or not they have access to the file in the possession of the firm. I propose to direct that within a reasonable period after the firm files its defence to the final cross claim that the clients be required to put on all their evidence. This should be able to be done within 14 to 28 days after the filing of the firm's defence. If the parties cannot agree upon a suitable direction then I will make orders setting an appropriate time period. 102 If and when the clients obtain access to the file in the firm's possession the clients may wish to put on other evidence that arises out of the file. No doubt leave to do that can be obtained at a future time. The contents of the file would probably be of most relevance to issues of damages rather than to the firm's potential liability on the principal causes of action pleaded in the final cross claim of contravention of the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (NSW), for wrongful detention and for the firm's alleged unconscionable conduct. 103 I will not require the firm to put on its evidence in response to the client's evidence just yet. Meanwhile, there is another step which should be taken. 104 The issue of the clients' access to the file in the firm's possession for the purposes of these proceedings should also not remain unresolved for much longer. Whether such access will be claimed, whether it will be resisted and if so on what basis, are yet to be contested. It is not necessary for the Court to impose detailed directions on the parties for the resolution of this issue. The parties should be able to agree upon a plan for its resolution. The elements of that plan should be that the parties allow a period of time for negotiations to take place to see if that issue can be resolved. If not a motion for its resolution should be filed in the proceedings for determination by the Court. It the parties cannot agree upon suitable directions to this effect within seven days the Court will impose its own directions. The Court expects parties of the experience and competence of the counsel and solicitors in this case to be able to put aside their differences and at least to agreeably resolve the way that this issue should be managed. Costs 105 The clients have succeeded in resisting the firm's application to strike out most of the cross claim. But the firm has partially succeeded in striking out the claim. I wish to hear short submissions about appropriate costs orders. This is a case where some order other than for costs to follow the event may well be justified. 106 The logic that led to this result really emerged from Mr Burton SC's oral and written submissions which only emerged close to the date fixed for the hearing of the strike out motion, 2 September 2009. Prior to that the communications issued on behalf of the clients had not clearly articulated the client's best case and showed a tendency to prefer allegations of professional misconduct to consideration of matters in issue. A review of the course of correspondence in the matter gives cause to understand a degree of well grounded frustration on the part of the firm that these proceedings had gone off the rails. The proper order in the circumstances may be that each party bear its own costs. Nevertheless, unless it can be agreed, the issue still needs to be decided after both parties have had an opportunity to persuade the Court. Orders and Directions

107 For the reasons explained above the court will make following orders and directions.

1. I grant leave to file a cross claim in the form of the second further amended cross claim but excluding any claim by Mr Wellard in relation to the Queensland proceedings.

2. I direct the parties to bring in short minutes of order within seven days to give effect to these reasons.

17/02/2010 - Amendment to judgment - Paragraph(s) 45, 107 10/05/2010 - Corrections - Paragraph(s) 45 & 107 10/05/2010 - Correction - Paragraph(s) Catchwords

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