Bechara t/as Bechara & Co v Atie & Anor

Court of Appeal (NSW)|2005-07-26|Before: Ipp JA, Tobias JA, McColl JA, McLelland CJ, Coll JA

CITATION: Bechara t/as Bechara & Co v Atie & Anor [2005] NSWCA 268

JUDGMENT OF: Ipp JA at 1; Tobias JA at 2; McColl JA at 3

DECISION: (1) Grant leave to appeal, on condition that the claimant file the Notice of Appeal within 14 days of these orders.; (2) Appeal allowed. (3) Set aside the order for costs made against the claimant by his Honour Judge O'Connor on 6 August 2004. (4) First opponent to pay the claimant's costs of the appeal and the costs below but to have a certificate under the Suitors' Fund Act 1951 if otherwise qualified.

CATCHWORDS: SOLICTOR - COSTS - lien - delivery of former client's papers to new solicitor - Solicitors Rules- whether solicitor's undertaking satisfactorily secured payment of former solicitor's costs and disbursements (D)

District Court Act 1973 District Court Rules 1973 LEGISLATION CITED: Legal Profession Act 1987 Solicitors Rules

Barratt v Gough-Thomas [1951] Ch 242 Bolster v McCallum (1966) 85 WN (Pt 1) (NSW) 281 Caldwell v Sumpters (a firm) [1972] 1 Ch 478 Doyles Construction Lawyers v Harsands Pty Ltd (McLelland CJ in Eq, Supreme Court of New South Wales, unreported, 24 December 1996; BC9700247) Firth v Centrelink (aka the Dept of Social Security (No 2)) [2002] NSWSC 850; (2002) 55 NSWLR 494 Gamlen Chemical Co (UK) Ltd v Rochem Ltd [1980] 1 WLR 614 Hughes v Hughes [1958] P 224 In re Will of Gilbert (decd) (1946) 46 SR (NSW) 318 Jankowski v Mastoris (1995) 7 BPR 14,589 Lemoto v Able Technical Pty Ltd [2005] NSWCA 153 CASES CITED: Major Projects Pty Ltd v Sibmark Pty Ltd [1992] ANZ ConvR 349 McLeish v Palmer (1921) 22 SR (NSW) 53 Newcastle City Council v McShane (No 2) [2005] NSWCA 250 Re Barrister & Solicitor; Re Legal Practitioners Ordinance 1970 (ACT) (1979) 40 FLR 26 Re Bevan & Whitting (1864) 33 Beav 439; (1864) 55 ER 438 Re Castle (1867) 6 SCR (NSW) L 195 Re Galland (1885) 31 Ch D 296 Re Jewitt (No 2) (1864) 34 Beav 22; (1864) 55 ER 539 Richards v Platel (1841) Cr & Ph 79 Robins v Goldingham (1872) LR13Eq 440 White v Bini [2003] FCA 669

Maria Bechara t/as Bechara & Co (Claimant) PARTIES: Badia Atie (First Opponent) The Housing Commission of New South Wales (t/as NSW Land & Housing Commission) (Second Opponent)

S Galitsky (Claimant) COUNSEL: L M Morris QC/G R Travers (First Opponent) Submitting appearance (Second Opponent)

Bechara & Company Solicitors (Claimant) SOLICITORS: Wyatt Attorneys (First Opponent) McCabe Terrill Solicitors (Second Opponent)

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40720/04 DC 7639/02

IPP JA TOBIAS JA McCOLL JA

Monday, 15 August 2005 BECHARA t/as BECHARA & CO v ATIE & ANOR The first opponent retained the claimant as her solicitor in respect of personal injury proceedings she brought against the second opponent in the District Court. The proceedings were listed for hearing on 8 June 2004. Prior to the hearing, the first opponent terminated the claimant's retainer. She then retained Wyatt Attorneys ("Wyatts"). On 5 March 2004, Wyatts wrote to the claimant requesting the first opponent's file and enclosing the first opponent's authority to receive.

Rule 29.3 of the Solicitors Rules made pursuant to s 57B of the Legal Profession Act 1987 entitled the claimant to retain the first opponent's documents until her costs were paid "or their payment … satisfactorily secured". The claimant refused to release the file until she received an irrevocable authority from the first opponent authorising Wyatts to pay her costs and an undertaking from Wyatts to pay her costs in the sum of $67,973.99 as agreed or assessed and to retain an amount from any settlement or verdict in its trust account pending agreement or assessment of her costs. Wyatts proffered, instead, an undertaking to pay the claimant's reasonable costs and disbursements as agreed or assessed at the successful completion of the matter ("Wyatts undertaking"). On 7 June 2004, as a consequence of the claimant not providing the file, the District Court proceedings were adjourned. The first opponent was ordered to pay the costs of the adjournment. On the same day Wyatts provided an irrevocable authority and undertaking to the claimant in substantially the form she had sought. At a show cause hearing to determine whether the claimant should be ordered to pay the costs of the adjournment the first opponent had been ordered to pay, O'Connor DCJ held the claimant had acted unreasonably in not accepting Wyatts' undertaking. He ordered the claimant to pay the costs the first opponent has been ordered to pay as a result of the 8 June 2004 adjournment, the costs of the show cause hearing and other related costs. The claimant sought leave to appeal from these orders.

Held per McColl JA (Ipp JA and Tobias JA agreeing), granting leave to appeal and allowing the appeal.

1 A solicitor, whose retainer has been terminated by a client, may retain the client's property pursuant to a possessory lien until all costs claimed to be owed by the client for the solicitor's services have been paid or their payment satisfactorily secured. Re Galland (1885) 31 Ch D 296; Robins v Goldingham (1872) LR 13 Eq 440 ; Hughes v Hughes [1958] P 224; Bolster v McCallum (1966) 85 WN (Pt 1) 281; Re a Barrister and Solicitor; Re Legal Practitioners Ordinance 1970 (1979) 40 FLR 26; Gamlen Chemical Co v Rochem Limited [1980] WLR 614 referred to.

2 The primary judge erred in finding that the claimant had not acted reasonably in refusing to accept Wyatts' undertaking. The solicitor's possessory lien cannot be satisfied by a solicitor undertaking, without more, to pay what was due upon agreement or assessment.

ORDERS: (1) Grant leave to appeal, on condition that the claimant files the Notice of Appeal within 14 days of these orders.

(2) Appeal allowed. (3) Set aside the order for costs made against the claimant by his Honour Judge O'Connor on 6 August 2004. (4) First opponent to pay the claimant's costs of the appeal and the costs below, but to have a certificate under the Suitors' Fund Act 1951 if otherwise qualified.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40720/04 DC 7639/02

IPP JA TOBIAS JA McCOLL JA

Monday, 15 August 2005 BECHARA t/as BECHARA & CO v ATIE & ANOR Judgment 1 IPP JA: I agree with McColl JA. 2 TOBIAS JA: I agree with McColl JA.

3 McCOLL JA: Introduction 4 The claimant seeks leave to appeal from a decision of his Honour Judge O'Connor ordering her to pay the costs incurred by the first opponent as a result of an adjournment said to have been caused by the claimant's refusal to deliver to the first opponent's solicitors files over which she claimed a lien.

5 The first opponent sued the second opponent in the District Court for damages for injuries said to have been sustained in a fall at premises she occupied pursuant to a residential tenancy agreement with the second opponent (the "primary proceedings"). Her action was listed for hearing on 8 June 2004. The first opponent originally retained the claimant to represent her in those proceedings however she terminated the retainer. She then retained Wyatt Attorneys ("Wyatts") who, on 5 March 2004, wrote to the claimant requesting the first opponent's file and enclosed the first opponent's authority to receive.

6 As the primary judge recorded, a dispute then ensued between the respective solicitors as to the terms on which the first opponent's file was to be released. The claimant sought an irrevocable authority from the first opponent and an undertaking from Wyatts. Wyatts proffered an undertaking to pay the claimant's reasonable costs as agreed or assessed payable on the successful completion of the matter. This was rejected -the claimant continued to insist upon receiving the irrevocable authority and undertaking. On 7 June 2004 as a consequence of the file being unavailable, the first opponent was not in a position to proceed with the hearing of her substantive claim. The first opponent, with the consent of the second opponent, sought the vacation of the hearing date. His Honour Judge Garling granted the application and ordered the first opponent to pay the second opponent's costs.

7 At the hearing of the adjournment application, counsel for the first opponent sought an order that the claimant show cause as to why she should not pay the costs that the first opponent had been ordered to pay. He contended: "She had two months to produce the file and she has refused to do so. I should put this on record though we were informed apparently on Friday that the file would be produced. That is as far as it has gone."

8 Judge Garling then ordered the claimant to show cause why she should not reimburse the first opponent for the costs thrown away by the adjournment. The show cause notice was heard by the primary judge who made the order under challenge. 9 The second opponent has, properly, taken no part in the leave application.

Legislative framework 10 The Law Society may make "Solicitors Rules" for or with respect to practice as a solicitor: ss 3, 57B, Legal Profession Act 1987. Solicitors Rules are binding on solicitors: s 57D(1) Legal Profession Act. Failure to comply with the Solicitors Rules is capable of being professional misconduct or unsatisfactory professional conduct: s 57D(4). 11 The Law Society has made the Solicitors Rules pursuant to its s 57B power. They relevantly provide: " Relations with clients

8 - Ownership of clients' documents - Termination of retainer 8.1 The following Rules apply subject to any contrary order which may be made in respect of clients' documents by the Supreme Court of New South Wales under section 209C of the Legal Profession Act . 8.2.1 A practitioner must retain, securely and confidentially, documents to which a client is entitled, for the duration of the practitioner's retainer and at least six (6) years thereafter, or until such time as the practitioner gives them to the client or another person authorised by the client to receive them, or the client instructs the practitioner to deal with them in some other manner. 8.2.2 A practitioner is not entitled to recover from the client any costs for storage of documents as required by this Rule and is not entitled to charge any costs from storage as requested by or on behalf of the client unless such costs have been disclosed to the client pursuant to the disclosure requirements set out in Part 11 of the Legal Profession Act or with the informed consent of the client. 8.2.3 "Costs" in this Rule includes fees, charges, disbursements, expenses and remuneration. 8.3 Upon completion or termination of a practitioner's retainer, a practitioner must, when requested so to do by the practitioner's client, give to the client, or another person authorised by the client, any documents related to the retainer to which the client is entitled, unless - 8.3.1 the practitioner has completed the retainer; or 8.3.2 the client has terminated the practitioner's retainer ; or 8.3.3 the practitioner has terminated the retainer for just cause and on reasonable notice; and the practitioner claims a lien over the documents for costs due to the practitioner by the client .

8.4 Despite Rule 8.3, a practitioner who claims to exercise a lien for unpaid costs over a client's documents, which are essential to the client's defence or prosecution of current proceedings, must: 8.4.1 deal with the documents as provided in Rule 29, if another lawyer is acting for the client; or 8.4.2 upon the practitioner's costs being satisfactorily secured, deliver the documents to the client. 8.5 For the purposes of the above Rules - The documents to which a client of a practitioner should be entitled will include: 8.5.1 documents prepared by a practitioner for the client, or predominantly for the purposes of the client, and for which the client has been, or will be, charged costs by the practitioner; and 8.5.2 documents received by a practitioner from a third party in the course of the practitioner's retainer for or on behalf of the client or for the purposes of a client's business and intended for the use or information of the client. Relations with other practitioners 26 - Undertakings

A practitioner who, in the course of the practitioner's practice, communicates with another practitioner orally, or in writing, in terms which expressly, or by necessary implication, constitute an undertaking on the part of the practitioner, to ensure the performance of some action or obligation, in circumstances where it might reasonably be expected that the other practitioner will rely on it, must honour the undertaking so given strictly in accordance with its terms, and within the time promised, or, if no precise time limit is specified, within a reasonable time.

A practitioner must not give to another practitioner an undertaking compliance with which requires the co-operation of a third party, who is not a party to the undertaking, and whose co-operation cannot be guaranteed by the practitioner.

29 - Taking over a matter from another practitioner

29.1 Where a practitioner's retainer is terminated before the completion of the client's business to which it relates, and the client instructs another practitioner to take over the conduct of the client's business, the following rules shall apply, subject to any orders which may be made by the Supreme Court in respect of the delivery of documents pursuant to Section 209C of the Legal Profession Act.

29.2 The first practitioner must promptly, on receipt of a direction in writing from the client, deliver to the second practitioner all relevant documents to which the client is entitled and any information which is necessary for the proper conduct of the client's business, unless the first practitioner claims a lien over the documents for unpaid costs . 29.3 If the client has terminated the first practitioner's retainer, the first practitioner may retain possession of the documents until the practitioner's costs are paid, or their payment to the practitioner is satisfactorily secured.

29.4 If the first practitioner has terminated the retainer and the client's documents are essential to the defence or prosecution of proceedings which are continuing before a Court, the practitioner must surrender possession of the documents to the client, upon the terms prescribed in Rule 8.4.2 or to the second practitioner, if so directed by the client, and, provided that the second practitioner - 29.4.1 holds the documents subject to the first practitioner's lien, if that is practicable, and ensures the first practitioner's costs are satisfactorily secured; or 29.4.2 enters into an agreement with the client and the first practitioner to procure payment of the first practitioner's costs upon completion of the relevant proceedings. 29.5 A practitioner who receives a client's documents from another practitioner pursuant to an agreement between the client and both practitioners, providing that the practitioner receiving the documents will pay the first practitioner's costs from money recovered on the client's behalf in respect of the business or proceedings to which the documents relate, must do all things which are reasonably practicable on the practitioner's part to ensure compliance with the agreement." (emphasis added) Statement of the case 12 The primary judge set out the history of events as recorded in the correspondence annexed to the claimant's affidavit. That history, with some additions, is as follows. 13 On receipt of Wyatts' 5 March letter, the claimant, as she was entitled to do, asserted a lien over the first opponent's file. She wrote to Wyatts on 10 March 2004. She pointed out that the matter had been listed for hearing on 8 June 2004. She refused to transfer the file to Wyatts until an irrevocable authority had been signed by the first opponent, in substance, authorising Wyatts to pay her costs as agreed or assessed from any verdict or settlement. She also sought an undertaking from Wyatts to attend to payment of her costs as agreed or assessed from the verdict or settlement monies. This undertaking would have required the retention in Wyatt's trust account of an undisclosed sum pending agreement or assessment of the claimant's costs. It would also have obliged Wyatts not to release the papers the claimant provided to any other solicitor without obtaining the claimant's consent and a written authority from the proposed new solicitor in the same terms as the undertaking. The letter included the forms of authority and undertaking the claimant sought. The space providing for the nomination of the amount of the claimant's fees was left blank. The letter warned that unless the undertakings sought were provided within 7 days, the claimant would, without further notice, apply to the Supreme Court "claiming a 'particular' lien or 'fruits of action' lien over the verdict or settlement monies to be received …". 14 On 11 March 2004 Wyatts wrote to the claimant requesting a copy of the costs agreement between the claimant and the first opponent. An unsigned document purporting to be a conditional costs agreement was provided on 17 March 2004. It provided for the first opponent to pay the claimant's costs if her action against the second opponent was successful. It estimated the first opponent's costs of the proceedings to be $10,000 - $15,000 plus $2,000 for disbursements. It advised that a premium of 25% would be charged on both costs and disbursements.

15 On 23 March 2004 Wyatts wrote to the claimant seeking a signed copy of the costs agreement, confirming the matter was listed for hearing on 8 June 2004 and saying: "We agree to pay your reasonable cost and disbursements as agreed or assessed at the successful completion of your matter. Such an offer is consistent with the Law Society of New South Wales guidelines for the transfer of such matters." 16 The letter advised that an offer of settlement had been made and had expired, that the first opponent wanted to consider the offer and whether it might be extended and also wanted a list of "all costs and disbursements for the sake of early resolution of this matter". 17 Wyatts sent reminder letters to the claimant on 30 March 2004, 2 April 2004 and 6 April 2004. In the letter of 6 April 2004, Wyatts threatened to take proceedings in the Supreme Court to seek to recover the file. They also said: "… as a last attempt to resolve the issue of protecting your fees can we suggest a Law Society of New South Wales tripartite deed? We must have your response to this proposal by 4pm tomorrow."

18 The last letter appeared to prompt a response. On 7 April 2004 the claimant reiterated her requirement for the authority and undertaking sought on 10 March. She enclosed further copies of the undertaking and irrevocable authority. On this occasion, however, the irrevocable authority and undertaking referred to the payment of the claimant's costs claimed to be in the sum of $67,973.99, such costs to be paid as agreed or assessed from any verdict or settlement monies. 19 Wyatts responded the same day saying: "Without a signed costs agreement it is our preliminary view that your costs and disbursements of some $68,000 are unsustainable, however in order to protect our client's position, we have previously provided an undertaking to protect your reasonable costs and disbursements as agreed or assessed payable on successful completion of the matter. We are not prepared to provide a further undertaking or recommend the signing of your irrevocable authority in the absence of your proving a signed costs agreement. We are still prepared to accept however the Law Society's tripartite deed." (emphasis added)

20 There was a further brief flurry of correspondence on 7 - 8 April to which it is unnecessary to refer in any detail, save to note that on 8 April the claimant suggested to Wyatts that in the light of the "offer" she had made concerning the release of the first opponent's papers there was no basis for the first opponent "to make any application to the Supreme Court". On 14 April the claimant advised she was not familiar with the Law Society's tripartite deed and sought a copy from Wyatts. 21 On 22 April 2005 the claimant wrote to Wyatts referring to her letter of 10 March and saying: "… we request your advice by 10am Tuesday 27 April 2004 whether your firm is prepared to give the undertaking therein; failing which we will make the appropriate application to the Supreme Court seeking orders with respect to this firm's lien. We will also report the matter to the Office of the Legal Services Commissioner."

22 On 23 April Wyatts responded observing they had previously provided an undertaking to meet the claimant's costs and disbursements and suggesting that any application to the Supreme Court would be redundant. The firm said it would provide a copy of the tripartite deed which, it noted, was available to the claimant from the Law Society. The letter also stated: "The interests of Mrs Atie must have first priority. The hearing of her matter is set down for 8 June next. We again invite you to transfer the file on the basis of our previous undertaking." 23 On 27 April 2004 Wyatts forwarded a pro forma copy of the Law Society's tripartite deed and enquired as to whether or not the claimant was prepared to accept that document in relation to her costs and disbursement and transfer the file. 24 On 30 April the claimant responded reiterating her previous position but also saying she would be prepared to consider the tripartite deed once "a properly completed" deed was received. The letter noted, "the deed contains many variables which would require your client's specific instructions". Other matters were raised to which it is unnecessary to refer, save that the letter again threatened to proceed with an application to the Supreme Court. It does not appear that Wyatts ever provided a copy of the tripartite deed, suitably amended, to reflect the form in which they sought its execution. 25 On 12 May, apparently after discussions with the Law Society, Wyatts wrote advising they were prepared to "agree to protect your costs for ultimate payment as agreed or assessed". They also said they were prepared to advise the first opponent "to retain settlement monies in our trust account until the issues of costs and disbursements is [sic; as in original] is resolved, again by agreement or assessment". On 17 May the claimant responded advising she "looked forward to receiving the form of irrevocable authority and undertaking which we previously forwarded to your office". On 28 May, not having heard from Wyatts, the claimant wrote advising if their response was not received by 31 May she would serve a summons on the first opponent.

26 On 28 May Wyatts wrote to the claimant advising they had discussed her "demands" with the Law Society and as a result had proposed some alterations to her undertaking. They enclosed a copy of what they said was the amended undertaking. They advised: "If you are prepared to accept our agreement to protecting your costs and disbursements, as agreed or assessed, and payable upon successful completion of the matter, then we will recommend our client also provide you with the irrevocable authority. In the meantime, we can advise that your reluctance to arrange for the transfer of the file has forced our client to seek adjournment of the forthcoming hearing date. Furthermore, we have been unable to enter into settlement negotiations." 27 After some prompting, the claimant responded to Wyatts letter on 3 June 2004. In essence, the claimant observed (correctly in my view) that she could not see any substantive differences between the undertaking she had sought and what Wyatts was proposing. She advised that the undertaking Wyatts was proposing was acceptable. She asked that the undertaking be forwarded together with the client's signed irrevocable authority and that, subject to receiving those documents in satisfactory form, arrangements would be made to have the first opponent's papers ready for completion. The letter also advised: "Our reluctance as you term it to transfer the file has been caused by your firm's unreasonable and persistent conduct in refusing to provide satisfactory security to protect this firm's costs. You now agree to provide our office with an Undertaking and Irrevocable Authority which almost mirror the form of Undertaking and Irrevocable Authority requested by our office on 7 April 2004. Accordingly, we cannot be blamed for any delay or adjournments which you suggest have been occasioned to your client's matter. We appreciate the Law Society of NSW's assistance in apparently clarifying the issues for you to assist you in finally agreeing to provide security to protect this firm's claim to costs and disbursements." 28 On 7 June Wyatts wrote to the claimant confirming that the hearing had been vacated, that the first opponent had been ordered to pay the costs thrown away and advising that the claimant had been ordered to show cause as to why she should not reimburse the first opponent for those costs. On the same day Wyatts wrote to the claimant enclosing the first opponent's irrevocable authority, which was dated 3 June 2004, and their undertaking, which was dated 7 June 2004. 29 Thereafter the provision of the first opponent's papers became further delayed by the claimant's concern that she may be required to have access to those papers in order to deal with the show cause hearing. On 5 July the claimant advised Wyatts that she was prepared to release the first opponent's papers on the basis that Wyatts undertake to make available on request any documents the claimant considered relevant to the show cause hearing. It appears that Wyatts ultimately obtained the papers on or about 17 July 2004. Reasons of primary judge 30 Before the primary judge counsel for the claimant accepted that the question to be determined was "whether it was reasonable for [the claimant] to retain the [first opponent's] file". He argued, in essence, that the claimant had been entitled to retain the file until her request for the undertaking and irrevocable authority made in her letter of 10 March 2004 was satisfied. He pointed out that these documents had finally been received after Judge Garling's costs and show cause orders - a matter of which Judge Garling had not been informed. He drew the primary judge's attention to rules 8 and 29 of the Solicitors Rules and contended that Wyatts' undertaking did not satisfactorily secure the claimant within the meaning of those rules.

31 He submitted that the intermediate offers Wyatts had made before finally acceding, in substance to the claimant's 10 March request, would not have led to the claimant's costs being "satisfactorily secured." He submitted that Wyatts' letter of 7 April did not lead to that result because, although it was expressed in the form of a solicitors' undertaking, it did not identify the solicitors' capacity to meet the liability for the first opponent's costs. 32 The primary judge held: "It seems to me that the issue that needs to be resolved in this particular application is whether or not the offer of Wyatt and Co was sufficient to meet the description of Bechara and Co's costs being satisfactorily secured. In my opinion the offer contained in the letter of 23 March 2004 that Wyatt and Co agreed to pay reasonable costs and disbursements as agreed or assessed following the successful completion of the matter, ought have been sufficient to satisfactorily secure Bechara's outstanding costs. The offer was reiterated in a letter of 7 April 2004. The offer was elevated by Wyatt and Co to an undertaking by such solicitors to protect Bechara and Co in respect of their reasonable costs and disbursements as agreed or assessed on the successful completion of the matter. If such arrangement was unsatisfactory to Bechara and Co it would seem that the matter in terms of security was put beyond doubt by the offer on 27 April 2004 to participate in a tripartite deed between the plaintiff and both firms of attorneys so as to secure the costs of Bechara and Co. It seems to me to have been inevitable Bechara and Co being aware of the impending hearing date that an adjournment of those proceedings would necessarily follow with consequential cost orders unless this file was produced to the current attorneys. In those circumstances the cause of the adjournment and the incurring of costs thrown away occasioned by the adjournment were the direct result of the failure of Bechara and Co to produce the file in circumstances where, in my view satisfactory security was provided in respect of their costs. An undertaking by a solicitor of the Supreme Court to protect another solicitor in respect of those costs would seem to me to be a more valuable security in lots of circumstances than an irrevocable authority for a client. " (emphasis added) 33 The primary judge considered that even if such arrangement was unsatisfactory to the claimant the matter was put beyond doubt by the offer on 27 April 2004 to participate in a tripartite deed between the first opponent, the claimant and Wyatt Attorneys. In these circumstances the primary judge considered that the claimant, aware of the impending hearing date, would also be aware that an adjournment of these proceeding would necessarily follow with a consequential cost order unless this file was produced to Wyatt Attorneys. His Honour considered that the adjournment and the incurring of associated costs were the direct result of the failure of the claimant to produce the file in circumstances where, in his Honour's views satisfactory security was provided. 34 The primary judge ordered the claimant pay the costs that the first opponent was ordered to pay as a result of the adjournment of the proceedings on 8 June 2004, the costs incurred before his Honour on 6 August 2004 in addition to the costs incurred before her Honour Judge Sidis on 16 July 2004 - an occasion when the show cause proceedings had been adjourned. Arguments on appeal 35 Mr S Galitsky, who appeared for the clamant on the leave application but not below, submitted that the primary judge erred in concluding that Wyatts' undertaking "satisfactorily secured" her within the meaning of the Solicitors Rules. 36 He contended that the undertaking was inadequate in the absence of Wyatts also undertaking, in the event of a verdict or settlement, to retain sufficient moneys in their trust account to meet the claimant's costs as agreed or assessed and an irrevocable undertaking from the first opponent that those moneys would be made available. 37 He argued that the Solicitors Rules required Wyatts to give something which substituted for the claimant's possessory lien and did the work of that lien. He contended that Wyatts was offering less security than the claimant would have had, had she been able to retain the first opponent's papers. 38 Mr L Morris QC, who appeared with Mr Travers on the leave application but not below, submitted that the primary judge had not erred in concluding that Wyatts' undertaking in its letter of 7 April constituted satisfactory security. He argued that the primary judge was entitled to conclude that the claimant unreasonably refused that offer thus attracting the jurisdiction to subject her to a costs order pursuant to either s 148(1)(b) of the District Court Act 1973 or District Court Rules 1973, Pt 39A r 14.

39 Mr Morris also submitted that the claimant was seeking to overturn a discretionary interlocutory judgment on a matter of practice and procedure and that the Court would not interfere with such a decision save in the circumstances laid down in In re the Will of F B Gilbert (decd) (1946) 46 SR (NSW) 318.

Decision 40 The primary judge did not identify the jurisdictional basis of his orders, however it is apparent that he was exercising the power under s 148B(1)(b) of the District Court Act 1973 which gives a discretion as to the costs relating to any proceedings, including "full power to determine by whom, to whom and to what extent costs are to be paid in or in relation to any proceedings". In my view Pt 39A r 14 of the District Court Rules 1973 most probably did not apply as that rule assumes that the solicitor who can be subjected to an exercise of the power will have a solicitor-client relationship in the proceedings in which the jurisdiction is exercised. At the time the order was made in this case the claimant did not have any such relationship with any party to the primary proceedings. It is not necessary to express a final view on this issue as s 148B(1)(b) conferred ample power to impose a costs order upon a third party to the proceedings, including a solicitor. It should be noted, however, that the jurisdiction to make costs orders against legal practitioners, as well as against non-parties, is sparingly exercised: see Lemoto v Able Technical Pty Ltd [2005] NSWCA 153 at [92] - [93]. 41 The Solicitors Rules are statutory rules, or delegated legislation made, as I earlier indicated, pursuant to s 57B of the Legal Profession Act. As such they are to be interpreted in accordance with principles of statutory interpretation. Of particular relevance, in the present context, is a consideration of the nature of the right, asserted by the claimant, to protect the lien she was entitled to exercise over the first opponent's papers. 42 There was no issue between the parties that the claimant had the benefit of such a lien. The first opponent did not assert that the claimant did not have the benefit of a lien because her claim to recover costs was, apparently, founded on a conditional costs agreement, recovery under which depended on the success of the first opponent's action against the second opponent. I shall assume, therefore, without finally deciding that that stance was correct. Accordingly the only controversy was whether the claimant acted reasonably in refusing to accept Wyatts undertaking. 43 A solicitor may have the benefit of two types of liens: a possessory lien, pursuant to which the solicitor may retain a client's personal property in the solicitor's possession until all costs owed by the client for the provision of legal services have been paid and a "fruits of action" lien, pursuant to which a solicitor whose efforts result in the recovery of money for his client [can] have his proper costs and disbursements paid from the money so recovered. It is the possessory lien which finds expression in rules 8 and 29 of the Solicitors Rules. 44 The principles concerning the "fruits of the action" lien were comprehensively reviewed by Campbell J in Firth v Centrelink (aka The Dept of Social Security (No 2)) [2002] NSWSC 564; (2002) 55 NSWLR 451 where (at [33]) his Honour described it as the equitable right of a solicitor "whose efforts result in the recovery of money for his client … to have his proper costs and disbursements paid from the money so recovered". The solicitor need not still be acting for the client at the time that the money was recovered in order to enforce the "fruits of the action" lien: ibid (at [35] (d)). 45 The "fruits of the action" lien does not directly arise in this case save, as I understand the correspondence, to the extent that the claimant sought to ensure, by reason of the irrevocable authority and undertaking referred to in her letter of 10 March 2004, that her costs and disbursements were paid from any amount the first opponent received by way of a verdict or settlement moneys. 46 The nature of the possessory lien was explained by Asprey JA (with whom Walsh JA agreed on this point) in Bolster v McCallum (1966) 85 WN (Pt 1) 281 at 286. His Honour said: "At common law a solicitor has a lien upon any documents which come into his possession in the course of his employment and in his capacity as a solicitor with the sanction of his clients and which are the property of his clients (see Halsbury's Laws of England 3rd ed. vol. 36 par. 238). The lien only extends to the solicitor's taxable costs, charges and expenses incurred on the instructions of the clients against whom the lien is claimed and for which those clients are personally liable; and the lien is a general lien extending to all costs due to the solicitor and is not limited to the costs incurred in relation to the particular documents in question or upon the particular instructions in consequence of which the documents come into the possession of the solicitor (see Halsbury's , par. 239). A solicitor having a retaining lien over the documents in this possession is entitled to retain the documents against the clients until the full amount of the solicitor's taxed costs payable by the clients is paid; and the clients have no right to inspect the documents or to take copies of them (see Halsbury's par. 240)." (emphasis added)

See also Hughes v Hughes [1958] P 224; Gamlen Chemical Co Ltd v Rochem Ltd [1980] 1 WLR 614 at 624 per Templeman LJ. 47 The solicitor's possessory lien is "purely a protective right - a right to refuse to transfer to a claimant property for which the claimant would be entitled to a transfer were it not for the existence of a claim by the lienor which the latter is entitled to protect by means of the lien … [it] exists for the protection of the solicitor's claim for costs and disbursements, and for no other purpose …": Re a Barrister and Solicitor; Re Legal Practitioners Ordinance 1970 (ACT) (1979) 40 FLR 26 at 39. It operates "till [the solicitor] is satisfied": Robins v Goldingham (1872) LR13Eq 440 at 442 per Malins VC. 48 Because the solicitor has only a right to retain the documents, the lien has been described as "merely passive and possessory": see Barratt v Gough-Thomas [1951] Ch 242 at 250 per Evershed MR. It is lost if the solicitor parts with possession of the documents without making any reservation as to the lien: Caldwell v Sumpters (a firm) [1972] 1 Ch 478 at 482 per Megarry J; at 496 per Salmon LJ; at 497 per Stamp LJ; see also White v Bini [2003] FCA 669 at [3] per Finkelstein J. 49 In Richards v Platel (1841) Cr & Ph 79; 10 L.J. Ch 375 at 376 Lord Cottenham LC said there was no distinction between the possessory lien and the case of "a factor, creditor, or other person holding a security for a debt". He said such liens were "equivalent to contracts", a proposition with which Street CJ in Eq agreed in McLeish v Palmer (1921) 22 SR (NSW) 53 at 59. 50 In Bolster v McCallum Asprey JA observed (at 287) that "the solicitor's claim for a lien will be protected by the court until it is shown that the claim is unfounded". This proposition is true of the court's attitude to the possessory lien in circumstances where the client has, as in this case, terminated the solicitor's retainer. It should be recognised that where a solicitor discharges him or herself in the course of an action, the solicitor's possessory lien over documents becomes subject to the practice of the Court which would order the documents to be handed over to new solicitors subject to the lien, unless exceptional circumstances exist in which the Court might impose terms: Gamlen (at 624) per Templeman LJ. This distinction is also recognised in rr 29.3 and 29.4 of the Solicitors Rules. 51 In Hughes v Hughes (at 228), Hodgson LJ, who delivered the judgment of the Court of Appeal, explained the practical rationale of the possessory lien as follows: "The litigant need not change his solicitor without good cause. It would be odd if he were in effect able to get solicitors' work done for nothing by the simple expedient of changing his solicitor as often as he chose, leaving a trail of unpaid costs in his wake and demanding the papers without payment when he had no just cause to complain of the conduct of the solicitors instructed and discarded." 52 The importance attached to the solicitor's lien was such that a solicitor could enforce the lien even though the client was "hampered in the presentation of his case to his own disadvantage by having changed its solicitors without good cause": Hughes v Hughes (at 228). 53 The solicitor's lien extends to the full amount claimed as is apparent from Re Galland (1885) 31 Ch D 296 in which Chitty J considered the circumstances in which a solicitor entitled to exercise a lien over a former client's papers, might nevertheless be ordered to give access to those papers in order to prevent hardship. He reviewed two decisions of Lord Romilly, who he described (at 302) as being "conversant with these matters, because from the course of practice during the time that he was Master of the Rolls nearly all the taxation cases came before him". The first decision was Re Bevan & Whitting (1864) 33 Beav 439; (1864) 55 ER 438 in which Lord Romilly said: "Where a solicitor sends in his bill, and claims a stated balance to be due to him, the client is entitled as a matter almost of course, to have his papers delivered over to him on payment of the amount claimed into Court ." (emphasis added) 54 The second decision was Re Jewitt (No 2) (1864) 34 Beav 22; (1864) 55 ER 539 in which an order was made for solicitors, pending taxation of their bill, to deliver over the client's papers on the client's undertaking to produce them, and give security. Lord Romilly stated: "The course that I adopt in all these cases is this . Where a sum is claimed by a solicitor to be due to him, and some delay occurs in the taxation, imputable to the fault of no one, I order the papers to be delivered over on the amount being secured and on an undertaking to produce them as required in the course of the taxation." (emphasis added) 55 Chitty J concluded (at 303) that the principle upon which Lord Romilly was acting was: "… that it is considered and held by him that the Court has jurisdiction not to take away the solicitor's lien, but to prevent injury to the client, on giving the solicitor such a security as covers the whole of his demand in the shape of money brought into Court, which affords him complete security , and of course the solicitor is to have all access to the papers, which may be of importance to him to make out his bill of costs, or, if he has already made out the bill, to justify some of the charges which are found in it … No doubt Lord Romilly expressed in Re Bevan and Whitting his astonishment that the solicitor should resist, but I am not in a position to say that a solicitor is not entitled to make the best he can of the lien which the law gives him for the purpose of compelling payment. The Court in the exercise of its discretion says that if the solicitor is completely secured, and it takes care not to enter upon a matter of controversy as to the amount, but to give him the amount which he claims and a sum to answer the costs of the taxation, it is inequitable that he should be allowed to embarrass the clients further by holding the papers ." (emphasis added) 56 Re Galland was a case in which a solicitor's former client sought an order for delivery of its papers upon payment into court of such sum as the court might think fit in respect of any amount the client owed the solicitor. The summons also sought an order that the solicitor deliver his bill of fees and disbursements and for taxation of the bill when delivered. It was apparent (see 301) that the taxation of the solicitor's bill of costs would take a considerable time and that the former client's interests would be seriously affected if it could not obtain access to its papers. The solicitor was ordered to make an affidavit setting out his demand against the former client. After that was done, Chitty J ordered (at 304) the former client to pay into Court the amount claimed as well as an amount for the costs of taxation and for the costs of the proceedings on the summons, on satisfaction of which the solicitor was ordered to release the papers. 57 Re Galland emphasises that the underlying purpose of the possessory lien is to enable the solicitor to ensure payment of the outstanding costs and disbursements. Where a bill has not been prepared, or taxed, one of the reasons the solicitor needed to retain the papers was in order to prepare a bill of costs or, as Chitty J pointed out in Re Galland, to justify charges if they were challenged upon taxation. Even when those steps had been undertaken, retaining the client's papers was seen as the only way of ensuring payment. 58 Consistent with this approach, in Re Castle (1867) 6 SCR (NSW) L 195 the Full Court held that an undertaking by a substituted solicitor that a client's former solicitor would be paid what was due upon taxation, or to return the papers after the disposal of the action, did not constitute security for the former solicitor's costs. Although he was critical of the former solicitor's refusal to accept the undertaking, Stephen CJ said (at 199): "But the question is whether an attorney is bound to take an undertaking of another attorney, that his costs shall be paid. The rule is that an attorney is not bound to take such an undertaking …. [The solicitor] is entitled to rely on his right, and we are not entitled to deprive him of any right he possesses." (emphasis added) 59 It should also be noted that in Re Castle, the solicitor, who was insisting he needed the former client's papers to prepare his bill had been extremely tardy in undertaking that exercise. Stephen CJ also held (at 200) that the solicitor "was not compellable to deliver the papers, although he might have shown more alacrity in making out his bill". 60 While Re Castle remains good law it must be understood now in the light of the Solicitors Rules and s 209(1) of the Legal Profession Act 1987. 61 The Solicitors Rules reflect the authorities dealing with possessory liens. They are expressed to be subject to s 209C the Legal Profession Act 1987. They provide a framework for the steps solicitors must observe where a former client seeks access to their documents. They direct a practitioner who claims to exercise a lien for unpaid costs over a client's documents, which are essential to the client's defence or prosecution of current proceedings, to deal with the documents in accordance with r 29 (which applies where the client has instructed another solicitor) or, if the client has not retained a new solicitor, to deliver the documents to the client "upon the practitioner's costs being satisfactorily secured": r 8.4. 62 There is an unhappy discontinuity between r 8.4 and rr 29.3 and 29.4. Rule 8.4 (which applies whenever the practitioner's retainer has been completed or terminated and a lien is claimed: r 8.3) purports to make r 29 operate as a general proposition whenever a practitioner claims to exercise a lien for unpaid costs over a client's documents which are essential to the client's defence or prosecution of current proceedings and the former client is represented by another practitioner. Within r 29, however, only r 29.4 (which deals with the circumstances where the first practitioner terminated the retainer) expressly directs how the situation is to be handled where the "client's documents are essential to the defence or prosecution of [current] proceedings". 63 It is unnecessary to determine whether that discontinuity is a drafting slip or whether it is of any greater significance. This case was approached on the basis that the first opponent's documents were essential for the prosecution of the primary proceedings and that r 29.3 governed the circumstances in which the claimant could retain them. 64 The expression "satisfactorily secured" should be understood, both by reference to the authorities dealing with possessory liens, and in its textual context, to refer to the provision, in lieu of payment, of something of monetary value which would ensure the satisfaction of the possessory lien. Like should be replaced with like. This is reinforced by r 29.5 which requires a practitioner "who receives a client's documents from another practitioner pursuant to an agreement between the client and both practitioners, providing that the practitioner receiving the documents will pay the first practitioner's costs from money recovered on the client's behalf in respect of the business or proceedings to which the documents relate, [to] do all things which are reasonably practicable on the practitioner's part to ensure compliance with the agreement". 65 Accordingly, in the case of litigation, as here, undertaken on payment only in the event of a successful outcome, that security would commonly, in my view, take the form of an agreement, to which both the former client and the substituted solicitor are parties, that the verdict or settlement monies would be retained by the substituted solicitors to the extent necessary to meet the former solicitor's costs. While the test of what constitutes satisfactory security is clearly objective, it might be accepted that a solicitor whose services had been terminated would be entitled to feel uncomfortable with anything less: cf Hughes v Hughes (at 228). 66 There may, of course, be cases where, having regard to the circumstances, a former solicitor may be regarded as being satisfactorily secured by a different assurance. In the present case, for example, Wyatts suggested the tripartite deed - a document apparently devised by the Law Society to deal with impasses such as arose here and, no doubt, reflecting r 29.5. The primary judge held that the matter "in terms of security was put beyond doubt by [Wyatts] offer … to participate in a tripartite deed …". His Honour does not appear to have appreciated that the claimant invited Wyatts to submit a "properly completed" deed, but Wyatts did not pursue that course. 67 The claimant asked Wyatts to undertake that they would retain any verdict or settlement monies to the extent necessary to meet her costs as well as obtain an irrevocable authority from the first opponent agreeing to that course. Wyatts, however, was only prepared to offer the general undertaking to which I have earlier referred. His Honour regarded the undertaking as satisfactorily securing the claimant's fees. I do not agree. That undertaking did not, in my view satisfactorily secure the claimant's possessory lien in the manner to which she was entitled. It did not, on its face, provide an equivalent in monetary value to the claimant's claim for costs and disbursements. Contrary to the primary judge's view, the claimant's refusal to accept Wyatts' undertaking in lieu of her possessory lien was a reasonable course. She could only be obliged to relinquish the first opponent's papers if her costs, as claimed, were either satisfied or their payment secured.

Section 209C(1) of the Legal Profession Act 1987 68 The proposition that the court has no power to interfere with the exercise of the possessory lien has been ameliorated by the legislature. Section 209C(1) of the Legal Profession Act 1987, which overrides the Solicitors Rules (see rr 8.1, 29.1), gives the Supreme Court power, on application by a "client", to order a solicitor to give the client a bill of costs in respect of any legal services provided by the solicitor (s 209C(1)(a)) and, on such conditions as the Court may determine, such of the client's documents as are held by the solicitor in relation to services provided by the solicitor: (s 209C(1)(b). 69 The Court will, in the ordinary case, only exercise the s 209C(1)(b) power in favour of a former client where such a course is required in the interest of justice and on conditions designed to protect the interests of the solicitor so far as possible: Doyles Construction Lawyers v Harsands Pty Ltd & Ors (McLelland CJ in Eq, Supreme Court of New South Wales, unreported, 24 December 1996; BC9606389 at 5). 70 Consistently with this approach, in a case where the client was engaged in litigation, it was said that the former solicitor's security would be interfered with only so far as is necessary for the progress of the litigation: Major Projects Pty Limited v Sibmark Pty Limited [1992] ANZ ConvR 349 at 351 - 352 per McLelland J (as his Honour then was). Accordingly, in order "to save the client's litigation from catastrophe", the court ordered the former solicitors to deliver the documents to the client's new solicitors, subject to an undertaking being given by the new solicitors to preserve the former solicitor's lien and to return the documents to the original solicitor at the conclusion of the litigation. In addition it has been customary to require the client to pay into court, or otherwise secure to the solicitors, the costs claimed to be due: Major Projects Pty Limited v Sibmark Pty Limited; see also Jankowski v Mastoris (1995) 7 BPR 14,589 per Hodgson J (as his Honour then was). 71 The claimant submitted to the primary judge that the first opponent could have taken advantage of s 209C(1)(b) to seek access to her papers. His Honour did not refer to that submission. 72 However, in my view once it became clear (as, in my view it did by at least the start of May) that a stalemate had been reached, an application pursuant to s 209C(1)(b) was a course clearly open to the first opponent. It was not a provision to which the claimant could have recourse. The availability to the first opponent of a judicial remedy, which might have afforded her access to her papers, was a matter the primary judge ought also to have taken into account in determining whether the exceptional power to make a costs order adversely to a non-party ought be exercised.

Conclusion 73 In my view, the primary judge misdirected himself as to what amounted to the claimant being "satisfactorily secured" within the meaning of the Solicitors' Rules. This error tainted his conclusion that the claimant had acted unreasonably in not accepting Wyatts' undertaking. 74 There may be a question whether the order that the claimant pay the first opponent's costs was, as the first opponent submits, an interlocutory order as it affects the claimant's substantive rights in a final manner. Nevertheless it was clearly an exercise of discretion in an area of practice and procedure which would ordinarily only be reviewed in the exceptional circumstances laid down: In Re the Will of F B Gilbert (decd). In my view, for the reasons I have given, the primary judge was in error in a matter which led to substantial injustice warranting the intervention of the Court.

Costs 75 There is one other matter to which reference should be made. Mr Morris informed the court that the first opponent's claim was settled for $69,000. Section 198D(1)(a) of the Legal Profession Act provides that if the amount recovered on a claim for personal injury damages does not exceed $100,000, the maximum costs for legal services provided to a plaintiff are fixed at 20% of the amount recovered or $10,000, whichever is greater. Section 198D does not apply to legal services provided on a claim for personal injury damages before 7 May 2002 but does apply to such proceedings on or after that date even if the legal services were provided in connection with a claim that arose before that date or where the claim "straddles" that date: see Legal Profession Act, Schedule 8 - Savings, transitional and other provisions, Pt 19. 76 The first opponent's District Court proceedings have a 2002 file number. However the claimant's costs agreement was forwarded to her in February 2000. The legal services provided by the claimant were most probably provided before and after 7 May 2002 so that, prima facie, s 198D would limit the costs she would be entitled to recover to the extent contemplated by Schedule 8. 77 Section 198D does not apply to the extent that recovery of a solicitor's costs is provided for by a costs agreement that complies with Division 3, Part 11 of the Legal Profession Act: s 198E. A costs agreement under Division 3 "may consist of a written offer that is accepted in writing or by other conduct": s 184(6). As I have earlier noted, the first opponent does not appear to have signed the conditional costs agreement. Certainly, despite Wyatts' request, no signed copy was ever provided. Accordingly, unless the first opponent can be said to have accepted that agreement by conduct (which may be inferred from her continuing to instruct the claimant after February 2000 - as to which I express no concluded view) s 198D appears to limit the costs to which the first opponent is exposed. 78 The other matter to which I should refer is to note that in Newcastle City Council v McShane (No 2) [2005] NSWCA 250 Mason P and Giles JA have called for submissions concerning the extent to which, if at all, the s 198D cap applies in relation to the costs of an appeal in a personal injury damages claim. It may be this issue does not arise in this appeal which, of course, concerns an order ancillary to the primary proceedings, but I raise it for the parties' consideration.

(1) Grant leave to appeal, on condition that the claimant file the Notice of Appeal within 14 days of these orders.

(3) Set aside the order for costs made against the claimant by his Honour Judge O'Connor on 6 August 2004.

(4) First opponent to pay the claimant's costs of the appeal and the costs below but to have a certificate under the Suitors' Fund Act 1951 if otherwise qualified.

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Re Legal Practitioners Ordinance 1970(ACT)

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