Equuscorp Pty Ltd v Wilmoth Field Warne

8. Equuscorp sought to terminate the agreement contained in the Deed of Costs under Clause 17 which provided a termination procedure for unremedied default. It subsequently terminated the agreement, in the alternative, under Clause 2 which is a provision which provides for termination upon 90 days' notice. Shortly after the purported termination by Equuscorp, Wilmoth Field & Warne itself served notice of default on Equuscorp alleging failures by Equuscorp to comply with other provisions in the deed, particularly those contained in Clause 13 concerning an accounting in respect of fees owing in respect of a matter known as the Beagle matter.

11. On 17 June 2003 Equuscorp issued a writ against Wilmoth Field & Warne, claiming declarations, an injunction and damages for detention of the plaintiff's files by the defendant solicitors. It sought various equitable remedies to have those files delivered up to its new solicitors, Kelly & Chapman.

14. By a summons filed the same day Equuscorp sought interlocutory relief by way of delivery up of its files immediately, so that its litigation to which those files related could continue in the various courts in which it is being conducted. In support of that summons it relied upon an affidavit of one Nicola Russo which set out the background to the matter and explained the circumstances in which Equuscorp sought to terminate the 2002 deed, and its counsel, Ms McMillan of Senior Counsel, filed extensive and extremely helpful submissions on the issue of interlocutory relief by way of delivery up of the documents which the plaintiff seeks.

17. In effect, the plaintiff seeks a mandatory interlocutory injunction requiring the defendant to immediately hand over the documents which it holds in respect of some nine or so matters which are currently before Victorian or Federal Courts. The effect of an order of this nature, if it were granted, would be to destroy such security as Wilmoth Field & Warne had by way of its lien as solicitors over the files which it holds.

20. Ms McMillan's argument is that there is no lien, that the deed which was entered into in 2002 covers all of the relations between the parties and sets out their legal rights to the exclusion of any common law rights that they might have had. Mr Garrett of Senior Counsel disputes this contention and says that the lien still exists notwithstanding the deed. He points to the fact that the deed itself refers to a solicitor's lien existing, at least in some circumstances still.

23. The case gives rise to some extremely difficult issues relating to the construction of the deed, the justification for termination of the relationship by Equuscorp, the very existence of the lien which is relied upon by the defendants and of course, questions of fees which are owing or not owing to the defendants and as to how such fees are to be calculated, whether at what is defined in the deed as a discount rate, or what is the defined in the deed as an ordinary rate, (the former being one sixth of the latter). There are also difficult issues of the actual quantification of Wilmoth Field & Warne's fees, the amount claimed for which on the best possible case being just on $695,000.

26. A lien held by a solicitor over the documents of his client is a serious security which is not to be lightly dissolved. In this instance the plaintiff is prepared to give undertakings if it is granted the interlocutory mandatory injunction which it seeks to return files after its solicitors have finished with them and the solicitors themselves are prepared to give similar undertakings. But these undertakings themselves raise difficulties. They are not necessarily insuperable difficulties but questions of priority as to the lien that the new solicitors might wish to exercise or hold in respect of the documents, and the question of whether there can in fact be successive liens in documents would have to be resolved.

29. If, at this stage, I order that these documents are handed over without any security being put in place of them, and it is later found that a valid lien did exist, then the defendant will have lost the security which it presently has permanently. On the other hand, if as the price of handing over the documents the plaintiff was required to put up security by way of a deposit in an interest-bearing account, apart from the financial inconvenience of having to take that step, the status quo would be the more easily maintained. If a valid lien is later found to exist, the fact that it has been replaced by the money will protect the defendant's position. If it is found that it did not exist, then the money can be returned, or such money as is still owing can be returned to Equuscorp with the interest which has accrued upon it.

32. Ms McMillan relied upon a statement by Drummond, J in the Federal Court in a case called Re Weedman & Ors (Unreported, Federal Court of Australia 17 December 1996). Whilst at the beginning of the statement His Honour appears to support the possibility of injunctive relief such is that sought by her in this case he goes on to say:

"It is difficult to see why the court should disregard the interests of its own officers and leave them without payment for what is justly due to them, because insistence on the lien would deprive the former client of material essential to the conduct of his case".

38. His Honour seems to be conceding that in some cases there would be a situation where the lien could be overridden. However that may be, in the present circumstances I do not propose to accede to the plaintiff's application unless the plaintiff is prepared as the price of obtaining access to its documents, to put up the security which the defendant seeks, that is by paying into an interest-bearing account, on appropriate terms, the sum of $695,197.38, to be held in that interest-bearing account pending the determination of this matter.

41. I turn then to the second summons which was issued by the defendant. This summons which was issued on 19 June seeks payment into an interest-bearing account, (referred to as the Macquarie account) of $1.788 million, being the proceeds of the settlement of one of the pieces of litigation in which the plaintiff was involved.

44. The Deed of Costs provides a complicated procedure for the extraction of the solicitors' fees from the proceeds of settlement where litigation in which the plaintiff has been involved has been settled. The defendant complains, in this instance, that the procedure set out in the Deed of Costs, and in particular in Clause 13 of the deed, has not been followed, so that it is at risk in relation to its costs calculated as it says it is entitled.

47. In the course of the hearing Ms McMillan, for Equuscorp, proffered an undertaking that it would pay into the Macquarie account an amount such that it would have in it almost immediately the sum of $620,000 together with a further sum of some $80,000-odd in respect of counsel's fees which are said to be owing. There is still disputation as to whether those fees are in fact owing, and those matters will still have to be resolved. Mr Garrett seeks an order that an account immediately be taken, in effect to give effect to Clause 13 of the deed to enable the final amount owing to his client to be determined.

50. In the circumstances and having regard to Ms McMillan's concession, I am not prepared to make any order on this summons at this stage. The effluxion of the next week should see the account placed in credit to the amount that Ms McMillan has said it will be. When that is done and when this matter is as I intend it to be referred to the judge in charge of the commercial list, questions of the further investigation of the defendant's claim under Clause 13 in respect of the Beagle matter can then be undertaken.

53. Accordingly, subject to hearing counsel on the form of the orders, I propose to order on the first summons that if the plaintiff is prepared to put up the security suggested it may have its documents. On the second summons I will make no order but simply adjourn the summons to the judge in charge of the commercial list to be dealt with by him as soon as may be convenient and within the next fortnight or so.

[Discussion ensued regarding the form of orders to be made and costs]

57. I will make orders in terms that the defendant deliver to the plaintiff the files in respect of an enumerated number of matters that can be included in the order and then that upon payment that those files should be delivered up to the new solicitors Kelly & Chapman and liberty to apply, reserve costs and refer the matter to the judge in charge of the commercial list. On the second matter I will simply order that the matter be referred to the judge in charge of the commercial list for further determination as he may think fit, and that order is made on the basis of the proffered undertaking, not as an undertaking, but the statement of intention of your client as to what it proposes to do over the next week and reserve the costs on that summons as well.