Malouf v Constantinou

Supreme Court of NSW|2017-06-09|Before: Parker J

Woolf v Snipe (1933) 48 CLR 677; [1933] HCA 5 Zamet v Hyman [1961] 1 WLR 1442 Texts Cited: House of Lords Debate (21 June 1864) vol 176 Category: Principal judgment Parties: Anthony Mark Malouf (Plaintiff) Neil Constantinou (First Defendant) Chris Constantinou (Second Defendant) Thora Constantinou (Third Defendant) Representation: Second and Third Defendants in person

Counsel: LT Fermanis (Plaintiff) N Hardy (Solicitor) (First Defendant)

Solicitors: Malouf Solicitors (Plaintiff) Go to Court Lawyers (First Defendant) File Number(s): 2017/143453 Publication restriction: Nil

Judgment

The first defendant in these proceedings, Neil Constantinou ("the Husband"), is engaged in family law proceedings with his estranged wife, Jeanette Constantinou ("the Wife"). The second and third defendants, Chris and Thora Constantinou, are the parents of the Husband.
The plaintiff is a solicitor who is the principal of the firm of solicitors known as "Malouf Solicitors" or "Maloufs" ("the Solicitor"). In these proceedings the Solicitor seeks to establish the validity and enforceability of a charge he has obtained over the defendants' interests in certain properties as security for his fees for acting for the Husband in the family law proceedings. There are three properties in question: (1) a residential house at Clemton Park in Sydney, which is registered to the Husband and Wife as joint tenants and is the former matrimonial home of the Husband and Wife, currently occupied by the Wife and the children of the marriage; (2) a residential unit at Roselands in Sydney, which is registered to the Husband and his parents as tenants in common (60% to the Husband and 40% to the parents, which between them they hold as joint tenants) in which the Husband is currently living; (3) a residential property at Cardiff near Newcastle, which is registered to the Husband's parents as joint tenants and is their matrimonial home.
The Husband and Wife separated and the Husband left the Clemton Park property at the Wife's request in September 2014. The family law proceedings were commenced in the Federal Circuit Court in early 2015. Those proceedings involve disputes both as to access to the children (the Husband has apparently had no access to the children since he separated from the Wife) and as to the division of the matrimonial property.
Initially the Husband was represented in the proceedings by another firm of solicitors, Mason Lawyers ("Masons"). Masons briefed Mr Glenn Gould, of counsel. Disputes arose between the Husband and Masons. Ms Debbie Papadopoulos, a friend of the Husband, made contact with Maloufs in early February 2016 to see if they would be prepared to take over acting for the Husband.
A telephone discussion took place between the Solicitor and the Husband on 4 February 2016. They discussed both the family law proceedings and the basis on which the Solicitor would be prepared to act. This was followed by a conference at the Solicitor's office on 9 February 2016. The conference was attended by the Husband as well as his parents. Further discussion took place at that conference about the proceedings and the terms on which the Solicitor was prepared to act.
On 12 February 2016 Maloufs sent to the Husband a letter summarising the initial instructions which had been received and outlining the basis on which Maloufs would be prepared to act. I will refer to this letter as the "Retainer Letter". A separate letter was sent to the parents requesting them to guarantee the Husband's obligations to pay the Solicitor's fees. I will refer to this letter as the "Guarantee Letter".
The Retainer Letter and the Guarantee Letter each enclosed four other documents for signature. These were:
A form of agreement styled "Costs Agreement/Retainer" between the Solicitor, the Husband as client, and the Husband's parents as guarantors (the "Costs Agreement");
A form of disclosure styled "Costs Disclosure" between the Solicitor, the Husband as client, and the Husband's parents as guarantors (the "Costs Disclosure");
A deed between the Solicitor, the Husband, and the Husband's parents styled "Deed of Charge";
A form of authority in favour of the Solicitor from the Husband and the Husband's parents styled "Authority to Complete and Undertaking regarding Registration" ("the Authority").
The Husband and his parents subsequently signed and returned the documents; the precise sequence of this is discussed in more detail later in this judgment.
Both the Retainer Letter and the Guarantee Letter stated that payment of Maloufs' (and Mr Gould's) fees would be deferred until the end of the family law proceedings. However, regular bills were sent on a "for information" basis.
The family law proceedings were fixed for final hearing in November 2016. But on the day the hearing was due to begin it was instead adjourned until the following February.
Following the adjournment, tensions arose between the Husband and the Solicitor concerning the lack of progress in the proceedings and the increasing level of costs which had been billed. The Husband asserted that it was necessary to sell the Roselands property.
In December 2016, the Solicitor caused the Deed of Charge to be stamped. At the same time, the Solicitor lodged caveats on each of the three properties. The interests claimed in the caveat for each of the properties was stated to be "an estate as equitable Mortgagee" by virtue of the Deed of Charge.
Shortly before the hearing was due to resume in February 2017, the Husband instructed the Solicitor to apply for an adjournment on the ground that, owing to anxiety, he was not fit to proceed with the hearing. The application was successful and the case was fixed for hearing in October and November this year.
After the February 2017 adjournment, the tensions between the Husband and the Solicitor continued. The Solicitor's position was that if the Roselands property were sold, the proceeds had to be used to pay the costs which had been billed. The Solicitor also asserted that interest was accruing on those costs. The Husband and the parents applied for lapsing notices on all of the caveats. The notices were issued on 28 March. The Husband and Ms Papadopoulos delivered the notices to Maloufs' office on 28 April. On 1 May the Solicitor wrote to the Husband purporting to terminate the retainer.
The present proceedings were commenced by the Solicitor by Summons on 12 May. On that day the Solicitor obtained ex parte orders for short service of an application for urgent interlocutory relief extending the caveats. The application came before me in the Duty List on 16 May. The Solicitor was represented by Mr LT Fermanis, of counsel. The Husband and his parents did not enter formal appearances and were not legally represented, but attended in person and attempted to resist the Solicitor's application for interlocutory relief. On 17 May I delivered an ex tempore judgment in which I pointed to some of the potential issues concerning the enforcement of the Deed of Charge but concluded that there was a sufficient case for final relief to require the caveats to be extended.
One of the considerations in granting interlocutory relief to the Solicitor was that I was in a position to proceed to an early final hearing. That hearing was fixed for 8 June. I made directions requiring the parties to file pleadings and to prepare any further evidence in affidavit form. The Solicitor complied with these directions, although slightly outside the timetable I had fixed.
Initially the Summons had sought declaratory relief. In the Amended Statement of Claim, additional relief was sought in the nature of specific performance.
The defendants filed no defences and no affidavits. On 7 June, the day before the hearing was due to commence, an appearance was filed by a solicitor for the Husband (only). When the hearing began on 8 June, the Solicitor was again represented by counsel, the Husband was represented by his solicitor and the Husband's parents were unrepresented and appeared for themselves.
Affidavits were read on behalf of the Solicitor from Mr Malouf himself and two of his employees. Both the Husband's solicitor and the Husband's parents attempted to cross-examine the Solicitor. The other witnesses were not required for cross-examination and the Solicitor's case in chief closed. The Husband was called to give evidence and was cross-examined. The Husband's father was then called to give evidence in the Husband's case and counsel for the Solicitor began to cross-examine him.
When the proceedings resumed on 9 June, I was informed that settlement had been reached between the Solicitor and the Husband. Eventually after a further adjournment, signed terms of settlement between all parties were produced to the Court.
The terms of settlement provide for the Court to make a series of declarations concerning the validity of the Solicitor's security over the defendants' interests in the Clemton Park and Roselands properties. They then provide for the Court to note an agreement between the parties which contemplates an assessment of the bills issued by the Solicitor and the payment of the amounts so assessed from the sale of the "relevant" property, the Solicitor agreeing not to enforce his security until the assessment or the family law proceedings are completed (whichever comes later), and with enforcement against the Clemton Park property to precede enforcement against the Roselands property. The terms also provide that the defendants pay the Solicitor's costs of the proceedings in an agreed sum, to be paid after the conclusion of the family law proceedings, the sale of the Clemton Park property or the sale of the Roselands' property (whichever comes first).
I informed the parties that the Court would not make declarations just because they were consented to by all of the parties. Counsel for the Solicitor accepted that he needed to persuade me that there was a proper legal and factual basis for the declarations sought, quite apart from any other discretionary factors which might intrude.
I then invited counsel for the Solicitor to present any further evidence which he wished to put before me in support of the claim for the declarations as formulated in the terms of settlement. He did not cross-examine the Husband's father further, but some short evidence was given by the Solicitor in reply to earlier evidence given by the Husband's father. The defendants did not seek to lead any further evidence.
Under the terms of settlement, the Solicitor now makes no claim over the Husband's parents' home at Cardiff. Accordingly, at the end of the hearing I discharged the interlocutory order which had extended the caveat over that property.

Issues for decision

The first declaration sought is in the following terms: A declaration that pursuant to Clause L of the Cost Agreement/Retainer and Clause 2 of the Deed of Charge that the First Defendant has charged his interest in the [Clemton Park property] in favour of the Plaintiff to secure the First Defendant's obligations under the cover letter dated 12 February 2016, Costs Agreement/Retainer, Costs Disclosure, Deed of Charge and Authority to Complete and Undertaking regarding Registration (the Agreement).
Declarations in the same terms are sought in relation to each of the Husband's and his parents' interests in the Roselands property.
Of course, the first step is to satisfy myself that the documents signed by the Husband and his parents are actually reflected in the terms of the declarations claimed. In the present case, this is not a straightforward task because, as will be seen, there is significant divergence, and in some respects outright inconsistency, between the Retainer Letter, the Costs Agreement, the Costs Disclosure and the Deed of Charge. My first task, therefore, is to determine what provision the various documents, on their true construction, make as to the Solicitor's entitlement to remuneration and security therefor.
Although agreed orders for specific performance have not been put before the Court and the Solicitor makes no application for any such orders, I must nevertheless determine that the Solicitor is entitled to specific performance if I am to make a declaration that he has equitable interests of the nature claimed. This gives rise to further fields of enquiry.
In my judgment of 17 May, I raised questions as to whether, having regard to the fact that the transactions in question are transactions between solicitor and client, questions of undue influence and breach of fiduciary duty as a result of non-disclosure might come in to play. I also raised the question whether the Legal Profession Uniform Law (NSW) ("Uniform Law"), s 206, which provides that a law practice may take "reasonable" security from a client, could also provide a defence to the Solicitor's claim. I also raised the question whether the Solicitor, having withdrawn from acting, is relevantly in breach of his obligations to his client, or otherwise is disentitled from obtaining specific performance because he is not ready, willing and able to perform his obligations. These points were formally put in issue by the Husband's solicitor at the beginning of the hearing on 8 June, and evidence was led which was relevant to them before agreement was reached to settle the proceedings.
Counsel for the Solicitor accepted that although the defendants had apparently agreed on terms of settlement and did not seek to advance any defence to the Solicitor's claim, I nevertheless needed to satisfy myself that these matters did not provide an obstacle to the Solicitor's entitlement to relief. Counsel addressed the points in question, albeit briefly and in truncated form. Because the submissions at the hearing were limited, I have found it necessary to research some of the points extensively. Given that I have undertaken this extra research, I have, in fairness to the Solicitor, considered independently whether the concessions made by his counsel should be accepted. None of this is any criticism of counsel for the Solicitor, who admirably discharged his obligations to advance his client's case while at the same time assisting the Court in the time available. It was simply a consequence of the declarations which counsel's client wished the Court to make and the loss of time resulting from the negotiations of the settlement.

Contractual arrangements between parties

Following preliminaries, the Retainer Letter stated: We note you previously retained Mason Lawyers Newcastle but as a result of several disagreements with them, you have lost confidence in them. They had briefed Mr Glenn Gould, Barrister of Waratah Chambers Sydney. You wish to retain Mr Gould. As discussed at our meeting, we are pleased to work with him and we have contacted him to discus [sic] your matter. He is prepared to continue to act for you subject to several matters, namely:- (a) Payment of his outstanding fees which he told us are $3,850.00. You have probably received details of that amount from Mason Lawyers; (b) Confirmation from us that we have appropriate financial arrangements with you to secure ongoing professional legal costs and disbursements. We advised him that we would only act on the basis that you provided us with an appropriate Charge over real estate and that your parents jointly and severally guarantee your fees and give an appropriate Charge over real estate and that you and/or your parents met significant out-of-pocket expenses and disbursements including, but not limited to, filing fees, process servers fees, setting down/hearing fees, valuers fees [which may be shared with Jeanette], your share of fees payable to the ICL [Independent Children's Lawyer], courier fees and the like and the provision of appropriate Irrevocable Authorities from you and your parents. That is he, like us, subject to the above, will continue to act for you on a conditional 'pay at end' basis. We understand that in your dealings with Mason Lawyers, whom we understand are (or were) previously your parents' lawyers, you met the substantial portion of their costs and disbursements as the matter progressed and/or upon issue of a Tax Invoice although you indicated that a charge of about $40,000.00 remains due but it [sic] contested. You have not offered us that same arrangement of payment as the matter progresses and, accordingly, if we are to act, we must ensure that the costs and disbursements we will incur in acting for you will be reasonably secure in all of the circumstances particularly as we are responsible for fees incurred to Counsel.
The next section was headed "General Background" and recounted the instructions which had been provided. The section after this was headed "Professional Costs and Expenses". Under that heading the following appeared: As we discussed with you both at our meeting on 9 February 2016 and prior to that meeting by telephone on 4 February 2016, it is necessary for lawyers to give some advice in relation to how professional costs and expenses will be incurred and, if possible, to provide an estimate for those costs and expenses. As we also explained, at this time and until we can see how this matter will develop, it is difficult to give any such estimate. We confirm however that we will be undertaking this matter on an hourly rate basis as discussed and in that regard and [sic] enclose the following documents:- 1. Costs Agreement/Retainer; and 2. Costs Disclosure. You will note that these documents refer to your parents as Guarantors. We will also send a copy of the above to them direct. Please sign one copy of these Costs Documents, also have your parents both sign them and return same to us as soon as possible. They can be faxed, mailed, emailed or delivered but we must have them before we can proceed further, accordingly before the proposed conference with Mr Gould on Wednesday next.
The Letter next provided a costs estimate of $50,000 to $70,000 (plus GST) if the matter was to proceed to a final hearing. Under the subheading "Deed of Charge and Mortgage" the following appeared: We note that following discussion with you and your parents we and Counsel will agree to deferred payment of our professional costs and Counsel's fees (as distinct from other disbursements) until conclusion of your Family Law Property Settlement, provided we are afforded reasonable security as to payment by way of guarantees by your parents and charge secured over your interest in the former matrimonial home, the Roselands property and your parents' interest in their own property. As foreshadowed we request that you and your parents to enter into formal documentation evidencing that agreement and accordingly we enclose:- 1. Deed of Charge for you and your parents to sign; 2. Schedule to Deed of Charge and Mortgage; and 3. Authority to Complete and Undertaking regarding Registration. It is our standard procedure in any matter where payment of costs are to be deferred as in your case to appropriate [sic] security for payment of those costs. In this case, the Deed of Charge and Mortgage will entitle us to lodge a Caveat over the properties referred to therein. The Caveat(s) will, of course, be withdrawn upon payment of our outstanding costs and disbursements in one or other of the following circumstances:- 1. Transfer of your interest in the Clemton Park property to Mrs Constantinou and payment of our outstanding costs and disbursements; and/or 2. Sale of the Clemton Park property and/or the Roselands property and/or your parents' property; and/or 3. Receipt by us on your behalf of a cash adjustment from Mrs Constantinou by way of alteration of your property interests ; and/or; 4. You and/or your parents having sufficient funds to pay out the amount due at the time. We request that you sign the documentation enclosed, have it witnessed by an adult person and return it to us as soon as possible. We shall thereafter attend to countersigning, and will return a copy, signed by us to you and your parents. We are entitled to lodge a Caveat on the properties as and when we consider necessary. We may withhold registration of the Caveat as we think fit. Herewith a copy of our letter of today to your parents. Please note you and your parents are at liberty to obtain independent legal advice in relation to any of the documents before entering into the Deed. Should you or they wish to do so, please do so as soon as possible.
Then under the subheading "Payment of significant disbursements required" the Letter stated: We confirm as indicated earlier that we will require pre-payment of significant disbursements, as and when required to be paid as distinct to the deferred payment of our own professional costs and those of Counsel. Disbursements may include but are not limited to such things as filing and hearing fees payable to the Court, conduct money and service fees payable to process servers in relation to Subpoenae, fees incurred to expert witnesses such as valuers, medical practitioners and the like. We shall correspond with you concerning those types of disbursements to be incurred as and when the need arises. Subject to the above we are pleased to represent you in your case.
Following preliminaries, the Guarantee Letter stated: You will recall that you and Neil have asked us to undertake this matter on the basis that we will receive payment of our professional costs and those of Counsel from the settlement yet to be achieved. As discussed at our meeting to the effect that we would be generally disposed to accept your request subject to us speaking with Glenn Gould the barrister both he and we are prepared to undertake this matter on the basis requested provided, as also discussed at our meeting, that you will meet substantial out of pocket expenses e.g. share of valuation expenses, filing fees, hearing fees and the like as set out in the attached documents. Mr Gould also indicated that he has a current outstanding fee due of $3,850.00 which he wants paid. When I first spoke with Neil and as repeated at our meeting on 9 February 2016, we require your guarantee and Deed of Charge and now enclose the following documents:- 1. Cost Agreement/Retainer and Cost Disclosure documentation sent this day to Neil; 2. Deed of Charge and the annexures thereto. Please review the attached documents and, if accepted, please sign in all places where your respective names are printed and have your signatures witnessed where required and then return the signed documents to us as soon as possible. We have arranged an appointment to meet with Mr Gould, Neil and yourselves on Wednesday 17 February 2016 at 4.30pm but will require return of the signed documents before that meeting by no later than 3.00pm on Tuesday, 16 February 2016. Should you consider it necessary to obtain independent legal advice please do so. Otherwise should you have any further queries please do not hesitate to contact us.
Consistently with the terms of the first declaration sought, the case for the Solicitor analysed the legal relationship between the Solicitor and the Husband as being constituted by a single contractual arrangement made up by the five relevant documents (Retainer Letter, Costs Agreement, Costs Disclosure, Deed of Charge and Authority). There was no analysis in terms of more than one contract (collateral or otherwise) and counsel for the Solicitor accepted that the Retainer Letter was itself part of the contractual arrangement. In view of the terms of the Retainer Letter (quoted at [31]-[34] above) I think this is the correct approach.
Where a contract is made up of a number of documents, and especially where one or more of them is in a standard form, it may happen that the terms of the documents cut across each other. In these circumstances, the Court should, if possible, construe each document so that it has some effect. Thus if one document contains a term which is generally expressed, and another document contains a more specific contrary term, it may be possible to read the general term as subject to a specific exception so that both provisions can have some operation: Re Media Entertainment and Arts Alliance; Ex parte Hoyts Corp Pty Ltd (No 1) (1993) 178 CLR 379 at 386-7.
But it may be that the provisions are irreconcilable and in that situation words or even entire clauses in the documents should be rejected by being read out if they are inconsistent with the "main object" of the contract: Glynn v Margetson & Co [1893] AC 351 at 357.
The Costs Agreement and Costs Disclosure documents were in standard form, and were referred to in the Retainer Letter only in the context of the Solicitor "undertaking this matter on an hourly rate basis as discussed". In relation to the deferral of fees, the provision of guarantees and the grant of security, the Retainer Letter was expressed (in the passage quoted at [33] above) as recording what had been agreed between the parties, and the Deed of Charge and Authority are described as merely "evidencing" that agreement. In the present case, the provisions of the Retainer Letter concerning the payment of costs would appear to embody the "main object" of the contract between the Solicitor and the Husband. I put this view to counsel for the Solicitor, who accepted it.
The legal relationship between the Solicitor and the Husband as client was of course separate from the legal relationship between the Solicitor and the Husband's parents as guarantors. Furthermore, the Guarantee Letter was less extensive than the Retainer Letter and was in slightly different terms. The case for the Solicitor did not seek to distinguish between the two contracts. The declarations sought as against the Husband's parents treated them as party to the same "agreement", constituted by the Retainer Letter and the four enclosures, as the Husband. I propose to proceed on the basis that, for the purposes of the contractual relationship between the Solicitor and the Husband's parents, the four enclosures should be construed as if they were part of a single agreement also including the Guarantee Letter.
The recitals to the Deed of Charge contained the following provisions: (1) The Solicitor has been retained by the Client for reward to act as the Client's solicitor in relation to the Client's Family Law proceedings and related matters ("the Family Law proceedings") now current before the Federal Circuit Court of Australia, Sydney Registry ("the Court"); (2) The Client currently has insufficient funds to meet the monies that will be due including substantially by way of work-in-progress and that will become due to the Solicitor with regard preparation for and attendance at the ongoing proceedings at the Court ("the monies") during the course of the proceedings. The Client and the Guarantors have asked the Solicitor to undertake the proceedings on behalf the Client on the basis that the Client will pay the costs and disbursements due to the Solicitor from monies payable to the Client upon settlement or conclusion of the Family Law proceedings upon the presumption that the Client will maintain his claim for a share of matrimonial property in the course of the Family Law proceedings including a payment or payments made by or on behalf of the Client's Wife, Jeanette Dimitra Constantinou and/or upon sale of the former matrimonial home at … Clemton Park; (3) The Client has advised the Solicitor that he will pay the monies referred to in Item 2 upon the earlier of any of the following whether individually occurring or a combination of any of the following:- (a) The Client and/or the Guarantors having sufficient funds to do so with interest; and/or (b) The Client and/or the Guarantors obtaining a loan of funds sufficient to pay the monies (and interest thereon); and/or (c) Sale of the [Clemton Park property]; and/or (d) Sale of the [Roselands property]; and/or (e) Sale of the [Cardiff property]; and/or (f) Provision of monies to the Client in the course of and/or as a result of the proceedings; and/or (g) The date stated in the Schedule : 30 June 2017, … (6) The Parties agree to secure the monies and any interest thereon by these here presents and the Client and the Guarantors agree that the Solicitor is entitled to register the Caveat on the title of the interest of the registered proprietors of the following properties:- (i) [Clemton Park property]; (ii) [Roselands property]; and (iii) [Cardiff property]; ("the Assets charged"). (7) The Client and the Guarantors are aware the Solicitor shall furnish to the Client and the Guarantors, Tax Invoices based on the work-in-progress due at various times and hereafter during the course of the Family Law proceedings; … (9) The Parties document their agreement as follows:
The operative provisions then followed. They included the following: … 2. In pursuance of these here presents and in order to secure the Client's payment of the monies and interest thereon, the Client and the Guarantors hereby charge his, her and their interest in the Assets charged with payment of the monies and interest thereon and covenant with the Solicitor that the Client and the Guarantors will pay the monies together with interest thereon upon the earlier of:- (a) The Client and/or the Guarantors having sufficient funds to do so with interest; and/or (b) The Client and/or the Guarantors obtaining a loan of funds sufficient to pay the monies (and interest thereon); and/or (c) Sale of the [Clemton Park property]; and/or (d) Sale of the [Roselands property]; and/or (e) Sale of the [Cardiff property]; and/or (f) Provision of monies to the Client in the course of and/or as a result of the proceedings; and/or (g) The date stated in the Schedule: 30 June 2017.. 3. The Guarantors jointly, severally and unconditionally guarantee the payment of all monies and interest thereon incurred by the Client to the Solicitor in relation the Client's Family Law proceedings and related matters. 4. The Client and the Guarantors will pay interest on the monies, or so much thereof as is from time to time outstanding to the Solicitor, at the rate per annum set forth in the Schedule beside the words "the interest rate";
The schedule included the following: DEBT DUE AT THE DATE OF THIS DEED: Nil WORK IN PROGRESS TO DATE Approximately $2,000.00 (plus GST): INTEREST RATE: 8% percentum [sic] per annum (simple interest) INTEREST COMMITMENT DATE: As of and from date of each Bill of Costs/Tax Invoices to Client plus one (1) month thereafter. THE ASSETS CHARGED: All the Client's interest in and to the:- 1. [the Clemton Park property]; and/or 2. [the Roselands property]; 3. Client's interest in the proceeds of sale of his interest in the aforesaid properties; and/or 4. Client's interest in any judgment or award in his favour pursuant to and / or as a result of the proceedings before the Family Court of Australia or Federal Circuit Court of Australia The Guarantors' interest in and to the: - 5. [the Roselands property]; and/or 6. [the Cardiff property] THE DUE DATE: 30 June 2017 (if the later dates/events referred to in Condition 2 hereof) ESTIMATE OF FUTURE EXPENSES: $50,000.00 - $80,000.00 (plus GST) plus disbursements and GST plus interest on outstanding Tax Invoices from one month after the delivery of any such Tax Invoice.

When costs were payable

The Retainer Letter (quoted at [31] above) stated expressly that the Solicitor would act on a "conditional 'pay at end' basis". The Guarantee Letter (quoted at [35] above) stated that the matter would be undertaken "on the basis that we will receive payment of our professional costs and those of Counsel from the settlement yet to be achieved". Recital (2) in the Deed of Charge (quoted at [41] above) stated that the Solicitor was acting on the basis that the Husband would pay "from monies payable to the Client upon settlement or conclusion of the Family Law proceedings".
It is not necessary for present purposes to explore the differences in formulation between each of these versions. They all provided that the Solicitor would not be entitled to payment of fees or costs (apart from the out-of-pocket expenses specifically exempted) until the family law proceedings (or at least the property dispute in those proceedings) had been resolved. In my opinion this was part of the "main object" of the contractual arrangements between the parties.
It is, however, necessary to consider whether this deferral of the Solicitor's entitlement to payment is affected by the provisions of cl 2 of the Deed of Charge, which contemplated earlier payment in some circumstances. That clause referred to seven such circumstances, identified in sub-paragraphs (a) to (g).
One of the circumstances in which payment was required was the sale of the Clemton Park property (circumstance (c)). Another was the "[p]rovision of monies to the Client in the course of and/or as a result of the proceedings" (circumstance (f)). I see these as in substance the same as the provisions of the Retainer Letter, the Guarantee Letter and the Deed of Charge which provided for payment on "settlement", or from the proceeds of the Clemton Park property.
Payment was also required in the event of the sale of the Roselands property (circumstance (d)) or the sale of the Cardiff property (circumstance (e)). The properties could of course be sold before the family law proceedings were finalised. However, sale in such circumstances would require the consent and participation of the Husband or his parents, and in my opinion they could take effect without repugnancy as exceptions to the "main object" that monies are only payable at the end.
In taking this view I think it is relevant that the Retainer Letter (quoted at [33] above) expressly referred to the Solicitor releasing his caveat(s) in such circumstances. Provision for some circumstances where monies could be payable before the completion of the proceedings also gives some meaning to the statement in the Retainer Letter that the Solicitor was acting on a "conditional 'pay at end' basis" (emphasis added).
Provision was also made for payment if the Husband or his parents had "sufficient funds to do so with interest" (circumstance (a)). I think the reference to "sufficient funds" must be understood as limited to liquid funds becoming available in the future which were not available to the Husband and his parents at the time the contractual arrangements with the Solicitor were entered into. Any other understanding would upset the careful steps taken to ensure that payment was only required at the end, except in some limited circumstances. It would, however, allow for payment in the event of receiving an inheritance or some other form of windfall. Understood in that limited way, an obligation to pay, limited to a further source of funds, would not prejudice the "main object" of the contractual arrangements and, in my view, could legitimately operate as an exception without repugnancy.
Similarly, provision was made for early payment if the Husband or his parents obtained "a loan of funds sufficient to pay the monies (and interest thereon)" (circumstance (b)). If this is understood as being limited to a special purpose loan voluntarily undertaken by the Husband or his parents, then again I consider it could stand without repugnancy.
The reference to interest in circumstances (a) and (b) does not need to be fully considered at this point; it gives rise to a potential issue of repugnancy as discussed below, but even if it were repugnant it would not bring down the rest of the provisions.
However, the Deed of Charge also purported to require payment in any event on 30 June 2017 (circumstance (g)). An obligation in any event to pay the monies by a fixed date, whether the proceedings were completed or not, was in my view repugnant to the deferral of the fees to the end. It could not sensibly take effect as an exception. Nor was it referred to in the Retainer Letter as a circumstance in which the Solicitor would release his caveat. In my view, this provision must, as a matter of construction, be read out of the Deed of Charge.

Termination

The Retainer Letter, the Guarantee Letter and the Deed of Charge all referred to the Solicitor undertaking the family law proceedings. It was implicit in this that the Solicitor would undertake the family law proceedings until those proceedings were completed, or at least until the property aspect was resolved.
However, the Costs Agreement provided: F. Termination of Agreement F.1 Termination by Us We may cease to act for you or refuse to perform further work, including: (a) while any of our tax invoices remain unpaid; (b) if you do not within 7 days comply with any request to pay an amount in respect of disbursements or future costs; (c) if you fail to provide us with clear and timely instructions to enable us to advance your matter, for example, compromising our ability to comply with Court directions, orders or practice notes; (d) if you refuse to accept our advice; (e) if you indicate to us or we form the view that you have lost confidence in us; (f) if there are any ethical grounds which we consider require us to cease acting for you, for example a conflict of interest; (g) for any other reason outside our control which has the effect of compromising our ability to perform the work required within the required timeframe; or (h) if in our sole discretion we consider it is no longer appropriate to act for you; or (i) for just cause. We will give you reasonable written notice of termination of our services. You will be required to pay our costs and expenses incurred up to the date of termination. F.2 Termination by You You may terminate our services by written notice at any time. However, if you do so you will be required to pay our costs and disbursements incurred up to the date of termination including if the matter is litigious, any cancellation fees including barrister's fees or other fees such as hearing allocation fees for which we remain responsible F.3 Subject to items F.1 and F.2 [sic] if the agreement is terminated either by you or by us, you will be required to pay our professional fees and charges for work done and for expenses and disbursements incurred up to the date of termination. For lump sum fee matters, you must pay the part of our lump sum fee that we reasonably estimate has been incurred in respect of the legal services provided to you up to the date of termination, plus charges, expenses and disbursements, subject to your right to a costs assessment. You will be liable to pay our costs and expenses whether or not the other party to any court proceedings has to pay your costs of the proceedings.
Questions arise as to whether the powers of termination conferred on the Solicitor by cl F.1 (and in particular the power to terminate on the Solicitor's "sole discretion") were repugnant to the "main object" of the contractual arrangements between the parties. Questions also arise as to whether, if those powers were not so repugnant, they were subject to implied limitations that they would be exercised in good faith or reasonably. It is not, however, necessary to resolve those questions. Each of cl F.1, F.2 and F.3 stated that the client was required to pay the costs and expenses incurred up to the date of termination, but none of those clauses specified that the payment was to become due immediately. In the light of the clear stipulation that the fees were deferred to the end as part of the "main object" of the contractual arrangements, no such acceleration arises by implication. The result is that, even if the Solicitor had a right to terminate the retainer under cl F.1, and exercised that right, fees incurred to that point remained deferred until the end of the family law proceedings (or at least until the property dispute was resolved).

Billing and interest

The Costs Disclosure provided: 4. Billing arrangements Our usual policy is to issue a tax invoice on a monthly basis but we may issue tax invoices on a more frequent basis depending on the nature of the work. All tax invoices are due and payable 30 days from the date of the tax invoice. You consent to us sending our tax invoices to you electronically at your usual email address or mobile phone number as specified by you whether or not we also send our Tax Invoice to by mail and/or facsimile. When and if we offer a fee reduction payment is required within the period for which the offer is made and the offer need not be re-offered by us. 5. Interest on unpaid costs Interest at the maximum rate prescribed in Rule 75 of the Legal Profession Uniform General Rules 2015 ("Uniform General Rules") (being the Cash Rate Target set by the Reserve Bank of Australia plus 2%) will be charged on any amounts unpaid after the expiry of 30 days after a tax invoice is given to you. Our tax invoices will specify the interest rate to be charged. 6. Recovery of Costs The Legal Profession Uniform Law (NSW) ("the Uniform Law") provides that we cannot take action for recovery of legal costs until 30 days after a tax invoice (which complies with the Uniform Law) has been given to you.
The provision in cl 4 entitling the issuing of a tax invoice which would then be "due and payable 30 days from the date of the tax invoice" cannot be read literally, given other provisions of the contract of retainer. It would be repugnant to the deferral of the Solicitor's costs if they could be made due by the simple expedient of issuing a tax invoice. The provision must be read down so as to allow the Solicitor to issue a tax invoice having that effect only if the Solicitor was entitled to bill for the costs; for instance, if deferral did not apply as in the case of the specified out-of-pocket expenses. The power of termination while any tax invoices "remain unpaid" in cl F.1(a) of the Costs Agreement (at [55] above) must be read in the same way.
It follows, in my view, that, except to the extent that they covered out-of-pocket expenses which were not deferred, the issue of the tax invoices by the Solicitor in the course of the family law proceeding was of no contractual significance. It is not necessary to determine whether the Solicitor could have referred them for assessment. Even if assessed beforehand, the Husband had no obligation to pay until the end.
Having regard to the provisions of cl 5, a question arises as to whether, even though the costs claimed in a tax invoice were deferred until the end of the family law proceedings, interest would accrue on those costs in the meantime. In my view, cl 5 should not be read in that way. The clause imposes interest on any amounts "unpaid" thirty days after the tax invoice is sent. The natural meaning of the term "unpaid" is that there is something payable. In my view, the interest obligation imposed by cl 5 only started to run thirty days after delivery of a tax invoice if that tax invoice was due for payment (or, perhaps, once a tax invoice earlier issued became due for payment). Otherwise the clause would be quite capricious, in that the Solicitor could impose an interest obligation on the Husband before the principal sum was due, and the more often tax invoices were issued, the more interest would be payable.
The Deed of Charge also contained provisions referring to interest. The Schedule contained an "interest commitment date" which was one month after the date of the issue of each bill, but the term "interest commitment date" does not appear in the body of the Deed. Clause 4 (quoted at [42] above) provided that interest would be paid on "the monies" or "so much thereof as is from time to time outstanding to the Solicitor". Recital (2) (quoted at [41] above) defined "the monies" as "the monies that will be due … and that will become due to the Solicitor". The overall effect of reading that definition into cl 4 is gobbledegook. My view is that these provisions must be read consistently with the interpretation which I have given to cl 5 of the Costs Disclosure, or ignored as meaningless.
Interest is referred to in a number of other provisions of the Deed of Charge (quoted at [41]-[43] above) but in a context which I think clearly means no more than interest due. Interest is also referred to in cl 2(a) and 2(b) which deal with early payment in the event of monies becoming available by loan or otherwise (see [42] above). Considered on their own, these provisions might be thought to presuppose that interest is accruing before payment; however, I think that this would be repugnant to the way in which the other provisions of the contractual arrangements must be interpreted. I am fortified in this view by the fact that cl 2(a) and 2(b) are only some of the circumstances providing for early payment. If they carried the implication that interest was accruing, then I cannot see why all of the circumstances in which early payment was triggered would not contain a reference to interest.
The consequence, in my opinion, is that the tax invoices, except to the extent that they related to specified out-of-pocket expenses, were ineffective to start interest running in accordance with cl 5 of the Costs Disclosure or cl 4 of the Deed of Charge. It is therefore unnecessary to resolve the contractual conflict between the two different interest rates referred to in the two clauses. (I note that even if the clauses had the contractual effect that interest ran, that effect may be overcome by Uniform Law, s 195(1) which allows interest only on "unpaid" legal costs. Section 195(4) would also limit the contractual interest rate chargeable in any event).

Scope of security

The Retainer Letter expressly required the Husband and his parents to grant security over their interests in the Clemton Park, Roselands and Cardiff properties if the Solicitor was to act. This was reflected in the express provisions of the Deed of Charge, in recital (6) and operative clause 2.
However, the Costs Agreement went further. Clause L provided: Charge(s) You and the Guarantors on your behalf hereby charge all property which you and/or they now own or will become the owner of in the future with all sums owing to us pursuant to this Costs Agreement. We are also entitled, where appropriate, to register a charge pursuant to the PPSA legislation as considered reasonably necessary to further secure those sums [my emphasis].
Recital (5) in the Deed of Charge provided: (5) The Client and the Guarantors hereby charge all real property which the Client and the Guarantors now own or will become the owner of in the future with all sums owing to the Solicitor pursuant to this Deed and the Costs Agreement a copy of which is annexed marked "A". The Solicitor is also entitled to register a charge pursuant to the PPSA legislation as considered reasonably necessary to further secure those sums [my emphasis].
Curiously, this recital was not reflected in the operative provisions of the Deed of Charge. Nor was a copy of the Costs Agreement annexed to the Deed of Charge, but the Authority was probably wide enough to authorise the Solicitor to do this.
It is hard to escape the conclusion that the drafting of the documentation focused on the three specified properties and these additional grants of security were standard form provisions which crept into the documentation unnoticed. The difficulty, however, is that they were not, strictly speaking, inconsistent with the specific grants of security over the three properties. They could co-exist with the specific grants. On balance, I do not think that I can treat them as repugnant to the "main object" of the contractual arrangements. The effect of cl L of the Costs Agreement was therefore to charge all of the Husband's and the Husband's parents' property. It is not necessary to determine whether the reference in recital (5) of the Deed of Charge to "all real property" should be read down to the specific items of real property in the Deed. Even if it were so read down, it would not have limited cl L of the Costs Agreement.

Caveats

The Retainer Letter (quoted at [33] above) referred to caveats being lodged, in the Solicitor's discretion, pursuant to the Deed of Charge. Curiously, the Deed of Charge did not itself expressly provide for the lodgement of caveats. Clause 8 of the operative provisions, however, provided: Costs: 8. The Client and the Guarantors further agree to pay the reasonable legal costs and expenses of the Solicitor for and in relation to: a. preparation of this Deed and the Caveat or Caveats that may be lodged on the title of the Assets charged; and b. registration of the Caveat or Caveats referred to in 8(a) and removal of the Caveat or Caveats; such legal costs and expenses to be assessed at the same rate of charge set forth in the Solicitors Costs Disclosure to the Client and the Guarantors. The Authority also extended to the lodgement of caveats.
The Costs Agreement provided: M. Caveat Further to the Charges in Clause L above, you and the Guarantors on your behalf hereby agree that as security for all sums owing to us pursuant to this Costs Agreement we have a caveatable interest in all real property owned by you and the Guarantors and you and the Guarantors also hereby consent to us lodging a caveat on any such real estate pending payment of all sums owing to us.
This provision was ineptly worded. Any entitlement the Solicitor had to lodge a caveat depended on whether he satisfied the requirements of the Real Property Act 1900 (NSW) and in particular whether he had a caveatable interest. Whether he had such an interest was a matter which could not be determined by agreement between the parties. Furthermore, consent of the Husband and his parents as the owners of the properties was not required for a caveat to be lodged. But I think the reference to consent to "lodging a caveat … pending payment" must be understood as meaning that the Husband and his parents agreed to the Solicitor maintaining a caveat while any amounts were owing (even if not due); otherwise the provision would be meaningless in practice. This of course must have been subject to the Solicitor being under an obligation to co-operate with any sale of the properties and for that purpose to withdraw any caveats. However, the details of this are not relevant for present purposes.

Fiduciary conflict, undue influence, and reasonableness of security

According to the instructions provided to the Solicitor in the initial conferences on 4 and 9 February 2016, the Husband was suffering from high blood pressure, anxiety and depression. He had previously worked as a butcher but was now unable to work. He had not seen his children for eighteen months. On his instructions this was despite having an order for access in his favour from the Family Court and was a result of the Wife poisoning his children against him.
According to the Solicitor's affidavit: During the conference [on 9 February] Neil said "The Court ordered the sale of the Former Matrimonial Home but it has not been sold. At that time I did not know that no such order had been made and that $200,000 is to be repaid to my parents with interest. My parents lent Jeanette and me $200,000 and it has to be repaid with interest. The loan mortgage document was prepared by Mason Lawyers. Jeannette would not sign the mortgage for that loan." I also informed Neil, Chris & Thora that Chris & Thora may need their own lawyer in regard their claim with regard this loan arrangement for the $200,000 amount.
The terms of the retainer and the nature of the security to be provided were discussed both in the initial telephone conference between the Solicitor and the Husband on 4 February and at the conference between the Solicitor and all of the defendants on 9 February. According to the Solicitor, on the latter occasion: Neil said:- "We cannot pay you as this makes progress but we will pay you at the end." Chris and Thora each said "Yes". I said: "I need to think about it. You will need to pay outgoings except barrister's fees if we accept." I described the outgoings as including filing fees for applications and subpoena, service fees, valuer's fees and for the Independent Children's Lawyer. After undertaking some calculations in regard to the property issues I also said "we will need to have sufficient security to meet our ongoing costs and disbursements." I recall saying words to the effect of: "In order to secure payment of our fees I will need a guarantee from each of you [addressing Chris and Thora], on behalf of Neil and I will want to secure that guarantee by formal charge over real estate." "I need to ensure that the barrister's fees are protected otherwise I will be personally liable for them." "From what you have told me, it is difficult to know how much you will need to spend in this case." "We cannot take this case on without this backup."
The calculations to which the Solicitor referred appear in his file note of the conference, which is in evidence. The Solicitor valued the Clemton Park property at $1,300,000. Subtracting the loan from the ANZ yielded a figure of $1,080,000. He allowed $300,000 for the debt to the parents ($200,000 principal plus an allowance for $100,000 in interest). This left net equity of $780,000, or $390,000 each for the Husband and Wife. The Husband owed Masons $40,000.
The Retainer Letter of 12 February, sent following the conference, stated: 10. We note there is a (disputed) loan amount repayable to your parents of $200,000.00 in relation to the former matrimonial home property. We note that Jeanette denies that loan. You will also note that, rather curiously, she has lodged a Caveat on the title.
There appears to have been no discussion about security, as distinct from a guarantee, being provided by the parents. Nor does there appear to have been any discussion about the termination of the retainer before the family law proceedings were completed or the possibility of fees (or interest) being payable at any point before the end of the proceedings.
The next hearing of the proceedings was scheduled for 23 February 2016. The letter to the Husband of 12 February (a Friday) was sent by mail and email with a request that the attached documents be signed and returned before the conference with counsel which was scheduled for the following Wednesday, 17 February.
The email to the Husband's parents was mis-addressed. The Husband's father telephoned Maloufs with the correct address and the documents were re-sent at 4.39pm on 12 February.
On Monday, 15 February, the Husband emailed Maloufs. He said that the emailed letter of 12 February and attachments had gone missing in his junk email box but had now been received. The Husband said he would print and sign the documents and either scan and email the documents back or send them by post.
The following day, 16 February at 11.13am, the Husband's mother telephoned Maloufs. A file note by an administrative assistant at Maloufs reads: Said they are going through our Costs Documents and under "Billing Arrangements" it says we will be issuing monthly Tax Invoice. She asked if this is correct as she thought they were paying at the end. I confirmed we would be issuing indicative Tax Invoices to keep them updated on our fees and that payment would be required at the end (per MP's [Myla Parkinson, senior paralegal at Maloufs] instructions). She said that's fine. … They will sign the documents and return them [t]o us.
On the same day Ms Papadopoulos called Maloufs at 1.38pm. She spoke to the Solicitor. According to the Solicitor: Debbie said: "I understand you want to take security over their three properties." I said: "Yes. That is correct. I will need security over the three properties until I can see more about the case and see how it evolves. We can reassess the situation as we go on." Debbie said: "The documents you sent to Neil's parents refer to monthly billing." I said: "Yes. We are entitled to issue our bills monthly to keep them advised of the costs being incurred in the case. That does not change the arrangement. They need to know what has been incurred as a matter of law as it will be relevant to their decisions in any settlement of the case."
Following this conversation, at 3.52pm, the Husband forwarded copies of the Costs Agreement and Costs Disclosure signed by the Husband as client and by his parents as guarantors to Maloufs.
The conference with Mr Gould went ahead the next morning, 17 February. At that stage the Deed of Charge and Authority had not been signed. According to the Solicitor, towards the end of the conference he said: "I need to confirm again that we will be paid at the end but Neil and his parents are providing security over three properties. We will be entitled to interest with regard our outstanding fees."
The following day, 18 February, the Solicitor wrote a letter to the Husband summarising what had happened at the conference. The letter stated: 1. We generally reviewed your matter and discussed issues to be dealt with at Court on 23 February 2016 summarised as follows:- … (d) We shall act for your parents regarding the amount of $200,000 lent by them. As discussed, if we perceive a conflict of interest we will let them know. At this stage they are witnesses in your case; … Please return the original signed Costs Agreement / Retainer and Deed of Charge or have it with you at Court on 23 February 2016 to give to us.
The following Monday, 22 February, Maloufs sent an email requesting that the original signed Deed of Charge and Costs Agreement be brought to court for the directions hearing the next day. Apparently this did not happen but the hearing went ahead with Mr Gould appearing, instructed by the Solicitor. The final hearing was fixed for three days beginning on 14 November 2016.
On 24 February the Husband's father telephoned the Solicitor at 8.54am. According to the Solicitor the following exchange took place in the course of that telephone call: Chris said words to the effect: "I want you to release the Newcastle property. I will drop in the original Deed of Charge and Costs Agreement today." I said words to the effect: "I will let you know if I need the Newcastle property in the circumstances. But I won't be rushed in regard that consideration, I don't know enough about the case."
Later that morning the Husband and his parents attended Maloufs' office with the signed documents. The File Attendance Record apparently written by a senior paralegal stated: Came into the office with signed doc's. There was an issue with the signing of the Deed of Charge. I advised them that AMM [the Solicitor] would write to them regarding the issue.
The documents were subsequently counter-signed by the Solicitor. On 1 March the Solicitor wrote to the Husband enclosing the signed documents. The letter stated: Herewith a copy of the Costs Agreement / Retainer and Deed of Charge as signed by us. As indicated to your father, we will, as your matter progresses, review the charge over real estate with a view to releasing your parents property [sic] at Newcastle. We will be in further touch in this regard.
At the hearing before me, the Husband questioned the signature which appears above his name on some, but not all, of the pages of the documents sent out under the cover of the Solicitor's letter of 12 February 2016. I am, however, satisfied that each of the documents was duly signed by the Husband and his parents, albeit that the signatures on the Deed of Charge were not witnessed.
The Husband and his parents may have signed the documents, but that does not mean that they understood them. The Deed of Charge is a particular problem in this regard. The passages already quoted are enough to show how clumsily and confusingly it was drafted. In particular, it is hard to know what to make of recitals which were drafted in operative form but were either not reflected in the operative provisions, or which were expressed in different terms from the way in which they were expressed in the operative provisions. More fundamentally, there was the difficulty in reconciling all the disparate, and in some respects, conflicting, provisions of the various documents.
It is clear that both the Husband's mother and Ms Papadopoulos, at least, read the documents sufficiently to appreciate the provisions concerning the issue of tax invoices because they asked about that issue before the documents were signed on 16 February. However, I would not infer that they had any clear understanding of the provisions to which I have referred concerning the scope of the security, exceptions to the deferral of fees, circumstances in which the retainer might be terminated early and the effects of doing so, and obligations to pay interest on tax invoices once issued. There was no cross-examination to suggest that they did have any such understanding.
At the hearing before me, the Husband's father said that he had had a conversation with the Solicitor in the toilets on one of the occasions on which the matter was before the Federal Circuit Court where he had asked for reassurance against losing his home. The Solicitor denied this conversation and I am not satisfied that it took place. It is clear from the evidence which I have summarised above that the Husband's father was aware at the time he signed the Deed of Charge and the Authority that it covered his own home as well as his registered interest in the Roselands property. However, it is equally clear that he signed on the understanding that, at least so far as the documents relating to his own matrimonial property were concerned, that was to be reviewed.

Fiduciary conflict

Counsel for the Solicitor conceded that the fiduciary relationship between the Solicitor and the Husband obliged the Solicitor to provide an explanation of the terms of the various documents to the Husband before he entered into them. He contended, however, that an adequate explanation had been given. He also contended that the Husband's parents were never clients of the Solicitor and that, as non-clients, no fiduciary duty arose.
There is of course no question that a solicitor owes fiduciary duties to his client. However, questions of conflict can only arise in relation to some other transaction or activity of the solicitor if there is a sufficient relationship between that transaction or activity on the one hand and the tasks undertaken by the solicitor for the client under the retainer (that is, as fiduciary) on the other. This is a consequence of the fact that a fiduciary duty only operates within a defined area; outside that area, the solicitor is free to pursue his own interests without regard to those of the client: Blythe v Northwood (2005) 63 NSWLR 531 at 545 [211] per Bryson JA. Nor, within the area of fiduciary duty, does every hope or expectation of remuneration necessarily give rise to a conflict; there must be a sufficient likelihood that that hope or expectation might affect the fiduciary's judgment: Phelan v Middle States Oil Corp (1955) 220 F (2d) 593 at 602-603 per Learned Hand J. It might therefore be asked whether a fiduciary conflict arises where a solicitor seeks security for payment of costs to which he will be entitled, especially if that is a condition imposed by the solicitor when first approached to act for the client.
In MJ Leonard Pty Ltd v Bristrol Custodians Ltd [2013] NSWSC 1734 Windeyer AJ dealt with an application by a solicitor corporation to have caveats over real property owned by its clients extended. The costs agreement in question contained a clause charging in favour of the solicitor all of the clients' "assets, land, realty or otherwise" and also authorising the solicitor to lodge a "charge, mortgage or caveat" over those assets. His Honour considered the potential defences to the claims in the caveats, but ultimately decided, as I did in this case, that the caveats should be extended until the hearing.
Among the possible defences referred to was fiduciary duty. His Honour said: 52. There is a clear conflict of interest here as between the solicitors and their clients. At the very least informed consent of the client to the charges was required. 53. Has the plaintiff breached the fiduciary duties it undoubtedly owes to the defendants? The plaintiff obtained a benefit from the defendants by their agreement to grant equitable charges over all land and personal property owned by them. It was submitted that this was far in excess of anything that was or is necessary to secure the fees alleged to be owing. There is no evidence of the land's value nor the defendants' equity therein, so I cannot evaluate that submission's accuracy. However, the defendants certainly could not have given a more extensive or comprehensive security than that which they did give. This called for explanation. The plaintiff obtained this benefit without explaining to the defendants the consequences such an equitable charge would have. The solicitor's interests are in direct conflict with those of his clients. It is enough to cite the decision of the House of Lords in Boardman v Phipps [1967] 2 AC 46 to show the consequences such a conflict will have and the strictness which equity applies to fiduciary relationships. The solicitor cannot benefit at his client's expense.
This does support the view that a fiduciary conflict arises whenever the solicitor seeks security from the client, even at the inception of the retainer. But his Honour did not need to decide the question and, although he expressed himself in trenchant terms, he did not refer to authority.
In many cases, particularly at the outset of the retainer, a solicitor will not know and will not have occasion to ask for information concerning the client's ability to pay the costs to be charged, or to provide security. Even in cases where the solicitor does ask for that information, it may be obvious to the client that the solicitor is seeking to obtain the information for the solicitor's own commercial purposes in dealing with the client. But the present case is different. Because of the property dispute in the family law proceedings, the Solicitor needed (and in fact obtained) instructions on the Husband's financial position. The information obtained from the Husband and his parents in the initial conferences on 4 and 9 February 2016 (and any information obtained in the initial discussion between the Solicitor and Mr Gould) was obtained before the Solicitor formulated the terms on which he was prepared to act (in his letter to the Husband on 12 February 2016). If the Husband had not accepted the Solicitor's terms and no retainer had resulted, the information would still have been confidential and the Solicitor would have been unable to use it for the advantage of his other clients or for his own advantage.
In my opinion, the financial information provided to the Solicitor fell squarely within the area of the Solicitor's fiduciary responsibility, namely to act for the Husband in the family law proceedings. When the Solicitor stipulated for security to be provided over the properties, and for payment to be made by the client in the event of the properties being sold, the Solicitor was using information which had been provided to him in his capacity as solicitor. If it had not been part of the Solicitor's instructions, the Solicitor might never have even found out about the Roselands property, for instance. Furthermore, the rights of security which the Solicitor was seeking to obtain potentially affected the assets which would be available to the Husband, and hence the Husband's ability to prosecute the family law proceedings, should the Husband wish to retain a different solicitor. The Solicitor was advancing his own commercial interests by seeking to obtain favourable terms from the client as to payment and as to security for undertaking the case, when he was in a position of fiduciary conflict.
For these reasons, I accept the concession made by counsel for the Solicitor concerning the fiduciary duty owed by the Solicitor to the client. In propounding provisions in the contract of retainer dealing with security (at least: I do not need to consider whether other payment terms were also relevant for this purpose), the Solicitor was in a position of conflict between his obligations to the client and his own personal interests, and needed to obtain the Husband's fully informed consent if he was to comply with his fiduciary duties as solicitor.
It is not necessary for present purposes to consider whether a solicitor stipulating for security in other types of proceedings is in a position of fiduciary conflict, nor whether such a conflict may arise in relation to the terms of the solicitor's remuneration generally.
The next question is whether the Solicitor did discharge his duties in this regard. In MJ Leonard, Windeyer AJ said: 54. I would not consider knowing consent could be obtained by sending such an agreement by email or by post and asking the client to read it carefully. This statement refers only to Mr Buckfield [i.e. to an individual] and not to the company. The charge it protected by caveat could prevent any further mortgage loans being obtained. The caveat could be entered whether or not any costs were outstanding as the charge comes into existence upon acceptance of the offer which is embodied in the costs agreements. Unless advised Mr Buckfield would not necessarily know that an application could be made to the Court to enforce the charge by judicial sale of the land, or for that matter of his motor car or trousers, or that if the charge were enforced an application could be made for the appointment of trustees for sale to the prejudice of members of his family.
The Solicitor did go somewhat further than in MJ Leonard in that he expressly referred to the possibility of the Husband obtaining independent legal advice in the documents submitted to him. But I think this makes no real difference. The Solicitor did not actually recommend that the Husband actually obtain independent legal advice; all he did was allow him a short period (only four days) in which to do so. Most importantly, the critical requirement was not just a recommendation to obtain legal advice, but rather an explanation as to why such advice was necessary. Even if the Husband had been able to read and fully take in the documents sent to him by the Solicitor (which I doubt), he would have been left with no idea as to why the Solicitor was conflicted and why he needed to obtain independent advice.
Counsel for the Solicitor argued, as I understood him, that the salient features of the retainer contract, and the security provisions in particular, were adequately disclosed in the documentation. I am not sure that this is an answer where there has been a failure to obtain fully informed consent. Once failure to disclose is established, speculation about what course the Husband would have taken had proper disclosure been made is irrelevant: Brickenden v Lending Loan Savings Co [1934] 3 DLR 465 at 469 [16]; Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 at 91-94 [435]-[447]. However, I will proceed to consider the question nonetheless.
It is true that in the very first meeting between the Solicitor and the Husband, the Solicitor indicated he would not act unless guarantees were provided by the Husband's parents and security was provided. The Retainer Letter made these conditions clear, and clearly identified the properties in question.
However, I do not think this was enough. The deferral of payment of the Solicitor's costs to the end of the proceedings when monies could be expected to be available from the sale of the Clemton Park property was obviously a critical factor in the Husband deciding to retain the Solicitor. It was essential, therefore, that any exception, or potential exception, to this deferral be made totally clear to the Husband.
As has been seen, at the end of a process of construction of the five documents which make up the contractual arrangement it is possible to discern from cl 2 of the Deed of Charge that there were exceptions to the principle in the event of the sale of the properties and in some other circumstances. Although the Retainer Letter referred to this, it did not do so by directly explaining that the circumstances in question (which were not all of those listed in cl 2) were exceptions. Rather it described circumstances in which a caveat, once lodged, might be withdrawn. Although to a lawyer that might carry the implication that there was to be a payment in those circumstances, that could scarcely be adequate for a lay person, especially somebody in the position of the Husband. (In passing, I should note that the terms of recital (3), although they dealt with the same exceptions as in cl 2, were drafted in a more confusing way). In my opinion, nothing less than a clear oral exposition, warning the client about the specific circumstances in which deferral of the fees would cease to apply, was necessary. There was no evidence that any explanation at all was offered orally on this subject.
Similarly, the circumstances in which there could be termination, and the potential for an argument that termination would accelerate the payment of the fees, also needed explanation. It is clear that Ms Papadopoulos did realise the potential inconsistency created by the provision concerning tax invoices. The Solicitor's response (which effectively reflected the conclusion I eventually reached as a matter of construction at [58]-[59] above) was that this exception would not apply. But there was no disclosure or explanation concerning the other circumstances listed in cl F.1 of the Costs Agreement in which the Solicitor might cease work, or of the basis of the Solicitor's apparent belief that termination would make all costs immediately payable.
Furthermore, there was no disclosure of the provisions which gave the Solicitor a charge beyond the three properties in question, nor of the Solicitor's apparent belief that interest would accrue during the period the fees were deferred. These also were material matters which required proper explanation.
It is also true that the Solicitor is not now seeking to enforce any security over the Husband's parents' home and the terms of settlement provide for payment of fees only at the completion of the family law proceedings or the earlier sale of property. But in my opinion, the adequacy of the Solicitor's disclosure needs to be judged by reference to the circumstances which in fact developed in the course of the retainer and following its purported termination.
When these proceedings were commenced, the Husband was facing the contention that he was in breach of the terms of the retainer, that he owed the Solicitor $180,000; and that this amount was immediately payable and was carrying interest. The family law proceedings had not been heard and the further costs of proceeding to hearing were going to be substantial. The Solicitor had caveats registered on all three properties. As I explain in further detail below, a caveat is not a security and in theory it does not sterilise the property caveated. However, in practice it usually does so.
This was a desperate position for the Husband to be in. He was left in the position where he had assets of little or no value available to fund the defence of the proceedings brought by the Solicitor against him, let alone to fund the prosecution of the family law proceedings. There is nothing surprising or unforeseeable about these circumstances; they were the natural, and indeed in a sense the intended, consequence of the provisions inserted into the contractual documentation by the Solicitor.
I acknowledge that, on my analysis, the actual rights of the Solicitor are less far-reaching than this, but in my view that simply illustrates the problem. Meaningful advice about the terms of the retainer should at the very least have drawn attention to, and explained, the provisions later relied upon by the Solicitor. Had the Husband sought independent legal advice, they are the very matters on which it might reasonably be supposed a competent solicitor would have warned him about.
I therefore conclude that the Solicitor was in breach of his fiduciary obligations to the Husband in stipulating for the entitlements of security over the Husband's assets in the Costs Agreement and the Deed of Charge. Those entitlements cannot be enforced and, in particular, specific performance cannot be granted of the Deed of Charge as against the Husband.
So far as the Husband's parents are concerned, they had their own interest in the family law proceedings because of the loan which they (on their account) had made to the Husband and Wife. The first question is whether they too were clients of the Solicitor. The difficulty for the Solicitor is the statement in the letter of 18 February (quoted at [85] above) that he would act for the parents in the family law proceedings. Counsel for the Solicitor contended that the letter should be understood as an intimation of something which might happen in the future, but I do not read it that way. The letter purports to be a record of matters which were agreed at Mr Gould's chambers. The agreement, as recorded in the letter, was expressed in terms of the Solicitor acting from that point forward and the reference to the possibility of some change in the future if a conflict emerged is consistent with this.
Counsel noted that the Solicitor had not provided a disclosure to the parents and had not treated them as clients. This, however, cannot affect the position if in law, as I have held, the Solicitor was retained by the parents in relation to their own interests in the outcome of the family law proceedings. It just means that the Solicitor, no doubt inadvertently, has failed to comply with his obligations under the Uniform Law so far as the retainer with the Husband's parents is concerned.
So far as the question of conflict is concerned, the Husband's parents were in a position similar to that of the Husband. It is clear that before the Guarantee Letter was sent on 12 February, the Solicitor had been provided with information concerning their ownership of the Cardiff property. I infer this was because it was perceived to be relevant to the conduct of the family law proceedings. Again, the Solicitor was in the position of acting for a client (the Husband's parents) and stipulating for security in circumstances where financial information concerning the client had been provided to him in the course of the relationship of confidence associated with the retainer.
No fully informed consent was obtained from the Husband's parents. Like the Husband, they were simply offered an opportunity to obtain independent legal advice in the short period of time between the date of the Guarantee Letter and the date of the first conference. They were provided with no information as to why the advice was necessary. The disclosure to them was similarly flawed and their personal circumstances, although not perhaps so emotionally dire as that of the Husband, were broadly similar.
There was a further important feature of the parents' situation. Simply by acting for the parents in circumstances where the Solicitor was also acting for the Husband created a further conflict which required proper disclosure and fully informed consent. The Solicitor and Mr Gould appear to have considered that there was no conflict at that point, but I cannot agree. The Husband's interests were not the same as those of the Husband's parents. Indeed the parents' interests were opposed to that of the Husband and Wife since it was in their interests to dispute the validity of any loan for the purposes of increasing the property which would be divisible between them. Furthermore, the security the Solicitor was seeking on the Clemton Park property would conflict with recovery by the parents out of that asset.
In my view, just as the security provisions of the contract of retainer are unenforceable against the Husband, the Solicitor is unable to enforce the security provisions of the contract of guarantee against the Husband's parents.

Undue influence

Counsel for the Solicitor accepted that a relationship of influence existed presumptively over the Husband as client and that it was for the Solicitor to rebut this presumption. He contended that sufficient disclosure had been provided to rebut the presumption. On the basis of his submission that there was no solicitor-client relationship with the Husband's parents, counsel contended that the issue of undue influence did not arise so far as they were concerned.
As Barrett J pointed out in Multi-Span Constructions No 1 Pty Ltd v 14 Portland Street Pty Ltd (2001) 10 BPR 19,253 at [66], the cases usually cited concerning undue influence of a solicitor over the solicitor's client are nearly all old ones. Most, if not all, of them concern benefits conferred on solicitors who had acted for some period of time. It might be asked whether the principles of undue influence apply so as to allow the impeachment of a security for which the solicitor has stipulated as a condition of taking on the client.
In MJ Leonard another possible defence was undue influence. Windeyer AJ said: 51. It is presumed that a solicitor is in such a position of ascendancy over his client that there will be undue influence exerted by the former over the latter. That presumption, of course, may be rebutted by the solicitor. It is easier to rebut when a corporate client is involved. It is apparent that there may be a defence based on this claim to the February 2011 caveats [which were granted at the time of the initial costs agreement].
Windeyer AJ expressed the view that principles of undue influence applied, but, as with fiduciary conflict, did not give full reasons or cite authority for that proposition. Nevertheless, and essentially because the relationship of confidence began even before the Solicitor's letter of 12 February 2016 was formulated (see at [99] above), I am satisfied that I should accept the concession by counsel for the Solicitor that a relationship of influence existed in this case. It follows that the grant of security must be shown to have been the product of the Husband's free will, fully informed, and uninfluenced by the presumed taint of abuse of confidence.
The present case is far removed from Multi-Span. In that case, the client was a corporate entity with directors who were experienced in business transactions. In the present case the Husband is an unsophisticated man of limited education with no apparent experience in legal matters. The break-up of his marriage and the loss of his relationship with his children have left him in a pitiable state. Without meaning any disrespect, it is quite apparent from the evidence he gave before me, as well as from the way he conducted the case when appearing for himself, that he was quite incapable of protecting his own interests. That would have been apparent to the Solicitor from the outset.
I have already concluded, in connection with the fiduciary conflict issue, that the Solicitor's disclosure was inadequate (at [104]-[121] above). In my opinion, the same analysis means that the Solicitor has failed to show that the Husband's grant of security over his assets was an independent and voluntary decision based on proper consideration of his own interests. I conclude that the Solicitor has failed to rebut the presumption of undue influence. In such circumstances it is not open to the Court to substitute some lesser security: Zamet v Hyman [1961] 1 WLR 1442 at 1451. The security stipulations are therefore entirely unenforceable in equity against the Husband on the ground of undue influence.
It is not necessary to consider whether there was a direct relationship of influence between the Solicitor and the Husband's parents as guarantors. I have concluded, in connection with the fiduciary conflict issue, that the Husband's parents were clients of the Solicitor at the time they granted security interests over their properties, and that the disclosures to them were inadequate. It follows that the security stipulations are invalid as against them also on the ground of undue influence.

Unconscionable transaction and misrepresentation

Whether a particular agreement is being procured by undue influence often overlaps with the question of whether the party obtaining the benefit of the agreement has acted unconscionably. However, the doctrines are distinct (Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 474 (Deane J)): The equitable principles relating to relief against unconscionable dealing and the principles relating to undue influence are closely related. The two doctrines are, however, distinct. Undue influence, like common law duress, looks to the quality of the consent or assent of the weaker party … Unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so.
An additional distinguishing feature is that the doctrine of unconscionable transaction applies at the point of enforcement, so that even if the agreement when entered into did not involve taking an unconscionable advantage, the party with the benefit of the agreement may still be seen to have acted unconscionably in all the circumstances, including the actual performance of the agreement, when coming to enforce the agreement. Once the agreement is shown to be unconscionable, the onus then shifts to the party having the benefit of it to demonstrate that the agreement was "reasonable", which I understand to mean objectively reasonable rather than just fairly obtained.
Had I not found against the Solicitor on the issues of fiduciary conflict and undue influence, it would have been necessary to consider the application of this separate doctrine and the statutory version of the doctrine found in the Contracts Review Act 1980 (NSW). It would also have been necessary to consider the question from the point of view of the Solicitor's conduct in the course of the contractual arrangement, which is explored in further detail (at [181]-[209] below) in connection with the issue of termination. Had the contractual arrangements been found to be unconscionable, it would have been necessary to consider the question of reasonableness (an issue which at [173]-[179] below I address in considering whether the arrangements were, when made, objectively reasonable).
As a result of my findings it is also not necessary to consider whether the description given in the Retainer and Guarantee Letters to the documents was misleading so as itself to give rise to a defence of misrepresentation to the claim for specific performance.

Reasonableness of security

It is convenient to begin by summarising, for context and for comparison, the restrictions which the law imposed on solicitors in making agreements with their clients relating to their remuneration.
A retainer contract has, of course, always been subject to legal and equitable doctrines which apply to the enforceability of contracts generally, and these include fiduciary conflict, undue influence and unconscionable transaction. Thus, if a solicitor embarks on a retainer on a particular agreed basis of remuneration, and then later obtains the client's agreement to more favourable remuneration arrangements, the subsequent agreement can be attacked on these grounds. There was a comprehensive review of the authorities to this effect by the Supreme Court of South Dakota in Egan v Burnight (1914) 34 SD 473; 149 NW 176. The Victorian Full Court in Westmelton (Vic) Pty Ltd v Archer & Shulman [1982] VR 305 proceeded on the basis that the variation of a retainer agreement so as to provide for the solicitor to have a profit share in lieu of a payment of fees gives rise to a question of undue influence, although none was established on the facts. The later decision of the Victorian Court of Appeal in Weston v Connor (Supreme Court of Appeal (Vic), 9 February 1998, unrep) is to a similar effect although the client again failed on the facts.
There were additional bases upon which a client could ask the courts to restrict the exercise of rights to remuneration created by the retainer contract. In Woolf v Snipe (1933) 48 CLR 677 Dixon J said at 678-9 (citations omitted): … a jurisdiction exists founded upon the relation to the Court of attorneys and solicitors considered as its officers. This jurisdiction, commonly called the general jurisdiction of the Court, enables it to regulate the charges made for work done by attorneys and solicitors of the Court in that capacity, and to prevent exorbitant demands. That such a jurisdiction was exercised by the Court of Chancery was never doubted. The Courts of law appear to have exercised a like jurisdiction, but the existence of the authority was disputed by the Court of King's Bench in Dagley v Kentish, and for a few years it fell into disuse: see the argument of Jervis in Williams v Griffith, in which case the decision in Dagley v Kentish was questioned by Alderson B., and compare Cowdell v Neale. After the Judicature Act the existence of the Court's general jurisdiction was completely established.
There is an overlap between the Court's general jurisdiction to review solicitors' remuneration and the doctrines of undue influence, unconscionable transaction and fiduciary conflict as they apply to solicitors and clients. In Clare v Joseph [1907] 2 KB 369 the English Court of Appeal discussed the provisions of the 1870 UK Act (described at [139] below) by reference to the pre-1870 law. Fletcher Moulton LJ said at 376: At that date agreements between a solicitor and his client as to the terms on which the solicitor's business was to be done were not necessarily unenforceable. They were, however, viewed with great jealousy by the Courts, because they were agreements between a man and his legal adviser as to the terms of the latter's remuneration, and there was so great an opportunity for the exercise of undue influence, that the Courts were very slow to enforce such agreements where they were favourable to the solicitor unless they were satisfied that they were made under circumstances that precluded any suspicion of an improper attempt on the solicitor's part to benefit himself at his client's expense. But when it appeared that the agreement was favourable to the client, the Courts often held the solicitor to his bargain, for there was no ground in equity why they should be suspicious of a bargain of that kind.
This is the language of equitable doctrine, and Buckley LJ spoke to the same effect. But as Lord Alverstone CJ pointed out, the pre-1870 jurisdiction had been exercised on the basis of what was "fair and reasonable" (at 372). And as the passage from Dixon J which I have quoted makes clear, the doctrine was not confined to the courts of Equity but applied to Common Law courts as well. The general jurisdiction thus imposed disabilities on the solicitor which went beyond those which existed by reason of the equitable doctrines of fiduciary conflict, undue influence and unconscionable transaction. Relevant considerations included "fairness" generally in entering into the contract (which included the doctrines in question but potentially extended further) and also the objective reasonableness of the terms.
There is also a statutory jurisdiction limiting a solicitor's ability to enforce his retainer contract with his client in accordance with its terms. The jurisdiction can be traced back to a statute of 1729 (2 George II c 23) which provided that no action could be brought by the solicitor until one month had elapsed after delivery of the solicitor's bill and which gave the client a right to have the bill taxed. This was carried forward by a statute of 1843: Solicitors Act 1843 (UK) (6 & 7 Vict c 73).
The Attorneys' and Solicitors' Act 1870 (UK) (33 & 34 Vict c 28) created a system whereby a solicitor was entitled to make an agreement with the client (which had to be in writing) allowing the solicitor to charge at rates higher than those that would be allowed on taxation. However, the enforcement of such an agreement was under court control, and they could only be enforced if the court (through the taxing officer or, on reference, a Judge) considered that they were "fair and reasonable": ss 4, 8, 9.
The Solicitors' Remuneration Act 1881 (UK) (44 & 45 Vict c 44) made provision for remuneration of solicitors in non-contentious matters. It established a system of delegated legislation in the form of "General Orders" made by a committee chaired by the Lord Chancellor. The committee was empowered by General Order to fix scale rates for solicitors' remuneration in non-contentious transactions. It also contained provisions in essentially the same terms as the 1870 UK Act, allowing a solicitor to agree (in writing) with his client to charge for non-contentious business in such manner as they saw fit, but subject to the client's right to have the agreement cancelled or the amount payable under it reduced, if the court considered that it was "unfair or unreasonable": s 8.
In New South Wales, the Legal Profession Act 1898 (NSW) consolidated the existing statute law and did not incorporate the provisions of the 1870 UK Act. Nor did it incorporate the provisions of the 1881 UK Act, but these were copied in essentially the same terms in the Conveyancing Act 1919 (NSW), with the power of review for unfairness or unreasonableness conferred on this Court: s 212.
The Conveyancing Act provisions were repealed in 1984 and replaced by amended provisions inserted into the 1898 Act: Conveyancing (Solicitors' Remuneration) Amendment Act 1984 (NSW), s 3; Legal Practitioners (Solicitors' Remuneration) Amendment Act 1984 (NSW), Sch 1. A board known as the Legal Fees and Costs Board was created and given the power to fix costs in both contentious and non-contentious matters. It remained open for the solicitor to agree with his client, in non-contentious matters, to be remunerated at a higher rate than the prescribed fees, but subject to review by this Court in the course of taxation if the Court considered the agreement to be unfair or unreasonable: Legal Practitioners Act 1898 (NSW), ss 20T, 20U.
The present system whereby costs are assessed by costs assessors, who have powers to review the fairness and reasonableness of costs agreements for this purpose, was introduced in 1993 and commenced in 1994: Legal Profession Reform Act 1993 (NSW), Sch 3.
So far as security is concerned, it appears to have been accepted before 1870 that there was a rule at general law that a solicitor had no right to take a mortgage for future legal costs. The rule was stated by Lord Eldon LC in Jones v Tripp (1821) Jac 322 at 323 as follows: The Court would not permit an attorney to take from his client a mortgage for costs to be incurred; the inducement for Lewis [the client] to execute the deed was, that Tripp [the solicitor] should proceed in his business for him; such a security cannot be allowed.
Lord Eldon said nothing more to explain the basis for the rule. Lord St Leonards explained it in a parliamentary debate in 1864 on the ground that "by allowing a solicitor to take such a security expensive litigation might be incurred, over which the client might have no control": House of Lords Debate (21 June 1864) vol 176 cols 5-18. However, in the form stated by Lord Eldon, the rule was an absolute one and could not, apparently, be rebutted if the facts of the particular case showed that the client was not in fact being exploited.
The rigour of the rule was somewhat mitigated by the fact that equity recognised that a solicitor who was instrumental in recovering money for a client was entitled to an equitable charge (misleadingly described as an equitable lien) over the monies in question: see, generally, Firth v Centrelink (2002) 55 NSWLR 451.
The rule against a solicitor taking security for costs appears to have been understood as applying only to future costs. It did not prevent a solicitor from taking security for costs already incurred, but such an arrangement would obviously give rise to questions of undue influence or fiduciary conflict such as those that I have addressed above.
The rule that a solicitor was unable to take security for future costs was abrogated by the 1870 UK Act. Section 16 provided: An attorney or solicitor may take security from his client for his future fees, charges, and disbursements, to be ascertained by taxation or otherwise.
The 1881 UK Act also made specific provision for security for non-contentious business. Section 5 provided: Any General Order under this Act may authorise and regulate the taking by a solicitor from his client of security for future remuneration in accordance with any such Order, to be ascertained by taxation or otherwise, and the allowance of interest.
This power was exercised by the General Order made pursuant to the Act, effective from 31 December 1882. Clause 7 relevantly provided: A solicitor may accept from his client, and a client may give to his solicitor, security for the amount to become due to the solicitor for business to be transacted by him, and for interest on such amount, but so that interest is not to commence till the amount due is ascertained, either by agreement or taxation. A solicitor may charge interest at four per cent per annum on his disbursements and costs, whether by scale or otherwise, from the expiration of one month from demand from the client.
This Order authorised a solicitor to take security for future costs but it did not attempt to regulate the terms on which security could be taken.
Neither s 16 of the 1870 UK Act nor s 5 of the 1881 UK Act were adopted in the 1898 NSW Act. Section 5 of the 1881 UK Act was, however, later enacted as the Conveyancing Act 1919 (NSW), s 209 and a General Order commencing 1 October 1920 was made containing cl 7 of the General Order made under the 1881 UK Act. However, the rule against a solicitor taking a mortgage for future costs, as it applied to contentious business, appears to have been left unaffected.
In 1984, s 209 of the Conveyancing Act was repealed and, in its place, s 20V was inserted into the Legal Practitioners Act 1898 (NSW): Conveyancing (Solicitors' Remuneration) Amendment Act 1984 (NSW), s 3; Legal Practitioners (Solicitors' Remuneration) Amendment Act 1984 (NSW), Sch 1. Section 20V provided: A solicitor may take from his or her client security for the payment of any costs, to be ascertained by taxation or otherwise, for any business to be done by the solicitor.
The effect of this provision was that, apparently, for the first time in New South Wales, a solicitor was authorised to take security for future costs in contentious as well as non-contentious matters. The provision was replaced in the Legal Profession Act 1987 (NSW), which repealed the entirety of the 1898 Act, in s 207. Section 207 provided: A solicitor may take from a client security for the costs of any business to be transacted by the solicitor.
Section 207 was renumbered as s 191 and amended as a result of the 1993 amendments to the 1987 Act: Legal Profession Reform Act 1993 (NSW), Sch 3. Section 191 was in the following terms: A barrister or solicitor may take from a client security for the costs of providing legal services to the client.
This provision was not limited to future costs and in its terms permitted a solicitor to take security for past costs as well as future costs.
When the 1987 Act was replaced by the Legal Profession Act 2004 (NSW), the provision was enacted in amended form as s 320: A law practice may take reasonable security from a client for legal costs (including security for the payment of interest on unpaid legal costs).
This provision qualified the previous provisions by permitting a solicitor to take "reasonable" security.
Most recently, the provision was re-enacted in s 206 of the Uniform Law in the following form: A law practice may take reasonable security from a client for legal costs (including security for the payment of interest on unpaid legal costs) and may refuse or cease to act for a client who does not provide reasonable security.
The question arises as to what extent the current legislative provisions allow a client to challenge security taken by a solicitor on the grounds that it is not "reasonable"; or conversely, the extent to which, provided that the security is "reasonable", the solicitor is protected from claims which the client would otherwise have.
For this purpose, I have reviewed the second reading speeches relating to the 1984, 1987, 1993, and 2004 enactments, as well as the 2014 enactment applying the Uniform Law. None of these are of any assistance. In the time available I have not attempted to research whether there are any committee reports or other materials produced in the course of the consultation and drafting process which would cast light on the reasons for the amendments to the provision dealing with security.
In Jones v Baker (2002) 10 BPR 19,115, Young CJ in Eq was considering a challenge by a client to an agreement he had made to provide a caveat to his solicitor over land which was the subject of the proceedings. His Honour said at 19,123-19,124: [81] It is necessary to delve briefly into the history of equity's attitude to solicitors taking security from their clients to secure costs. [82] Prior to 1881, courts scrutinised very carefully any agreement between a solicitor and client whereby the solicitor took mortgage security for his costs. Unless the court was satisfied that the solicitor had fully explained the transaction to the client and that he or she understood it, the security would not be enforced: see eg Lyddon v Moss (1859) 4 De G & J 104; 45 ER 41. The approach was not, however, always uniform: cf Johnson v Fesenmeyer (1858) 25 Beav 88 ; 53 ER 569 , where a solicitor had put pressure on a client shortly before the latter's bankruptcy and obtained a mortgage which survived examination. [83] The English Act 44 & 45 Vic Ch 44 s 8 intervened by setting out a procedure whereby such a charge could be ethically granted. The legislation was taken up in s 212 of the Conveyancing Act 1919 (NSW), later repealed and replaced by what is now s 191 of the Legal Profession Act 1987 (NSW) which section does not include any safeguards for the client. [84] The law must now be taken to be that it is permissible for the solicitor to take security for costs from a client. However, the old law has not entirely disappeared. Solicitors are still in a position of influence over clients and the courts of equity will take care to see that unconscionable advantage is not taken over clients. [85] The question here is whether the solicitor who asserts an equitable charge over his client's property needs to give some evidence that he or she explained the transaction to the client who appeared to understand it, or, whether the transaction stands unless the client raises the question of probity.
In the end it was not necessary for his Honour to decide the question.
His Honour's observations are open to the interpretation that the effect of the nineteenth century English legislation (strictly speaking, the reference to the 1881 Act should really be a reference to the 1870 legislation, which came first and applied to contentious as well as non-contentious business) and its successors down to s 191 of the 1987 Act had been to reduce the degree to which courts would scrutinise an agreement between a solicitor and his client granting security to the solicitor. On the other hand, his Honour seems to have accepted that this did not affect the application of the doctrine of undue influence.
It has not been possible for me to undertake comprehensive research on the parliamentary proceedings which led to the enactment of s 16. However, on the information available, it appears that the purpose was to assimilate the treatment of a security for future fees to the existing equitable rules covering the grant of security for past fees. Given that security for future fees had been absolutely prohibited before the enactment of s 16, it can hardly have been intended that such a security would be in a more favourable position after the enactment than a security for past fees.
It therefore seems clear enough that the statutory provisions authorising a solicitor to take security do not affect the application of the equitable doctrine of undue influence (and also unconscionable transaction and fiduciary conflict) which continue in full force. But there is a further possible basis for the Court's intervention which needs to be separately considered.
Before 1870, it would have been a purely academic question to ask whether the Court's "general jurisdiction" extended beyond remuneration to the grant of security. However, with the abrogation of the old rule, that possibility was opened up. In my view, there is much to be said for it as a matter of principle. For practical purposes, remuneration and security are closely related. The Court's jurisdiction to control solicitor's remuneration depends ultimately on their status as officers of the Court and there is no reason why, if the Court is prepared to scrutinise the fairness and reasonableness of provisions dealing with remuneration, it should not likewise be prepared to scrutinise provisions relating to the grant of security.
If, as I have suggested, the purpose of the enactment of s 16 of the 1870 UK Act was to abrogate the old absolute rule, then there would be room for the Court to exercise its "general jurisdiction" with respect to security.
It is not necessary to consider to what extent the Court's general jurisdiction, as it applies to provisions relating to remuneration, has been affected by the establishment of the system of costs assessment and the conferral of costs assessors' powers to consider the fairness and reasonableness of costs agreements. The grant of security has always stood, and continues to stand, outside these provisions. Relief in relation to security is exclusively a matter for this Court.
The effect of the 2004 amendments was to cut back the protection, if any, which had originally been afforded by s 16 of 1870 UK Act. Henceforth, that protection only applied where the solicitor took "reasonable" security. Technically, it might be argued that this left the absolute rule against mortgaged security for future costs, as enunciated by Lord Eldon, in place for grants of security which were not "reasonable". In practical terms, the outcome would be very similar to a conclusion that the Court's "general jurisdiction" to review agreements made by solicitors with their clients on the grounds of fairness and reasonableness extended to grants of security. In either case, it is open to argue that the client may obtain relief from the Court against the grant of a security on the grounds that the security is not "reasonable".
In MJ Leonard (decided under the 2004 Legislation) Windeyer AJ said: 61. Lastly, as this will probably be the last, but one, judgment I will have the privilege of delivering I state that unless there are exceptional circumstances, agreements of this type should not be standard. The Legal Profession Act 2004 provides in s 320 that a "law practice may take reasonable security from a client for legal costs". While that is a provision which cannot be enforced security over all one's assets is unlikely to be reasonable. Security, if taken, should be by separate document making the position quite clear. The purpose of costs agreements is to set out the work to be done and the basis of charging. In most cases no more should be required. If it is, and there are clearly cases where more is required, then a separate document is desirable.
Having regard to my analysis of the legislative history, the only real effect of s 320 may have been (and the only real effect of its replacement, Uniform Law s 206, may be) to remove the previous disability of general law on a solicitor taking security, and to do so only where the security is "reasonable". It seems clear enough that the removal of the disability does not affect the operation of other equitable doctrines such as fiduciary conflict and undue influence; and it may be that, if the "general jurisdiction" applies, it does not affect that either. Therefore, while s 320 was (and Uniform Law s 206 is) in a sense a provision which "cannot be enforced" against the solicitor, it is only a very limited protection against other bases for challenge to the grant of security which can be so enforced.
Having regard to my findings on fiduciary conflict and undue influence, it is not necessary to determine whether the grant of security was otherwise unfair or unreasonable so as to fall foul of the Court's inherent jurisdiction, if such exists with respect to security. However, in case I am wrong about the continued operation of the equitable doctrines of undue influence and fiduciary conflict in the light of Uniform Law s 206, I will consider whether the grant of security was objectively "reasonable". For this purpose, I think the analysis needs to be carried out by reference to the actual obligations I have found which the documentation imposed on the client, and which were less extensive than those which the Solicitor believed were being imposed.
For this purpose, Windeyer AJ's observations concerning desirable practice have considerable weight owing to his Honour's distinguished career as a solicitor and then as a Judge of this Court.
I respectfully share the concerns expressed by Windeyer AJ about the possibility that agreements of this sort could become widely used or even standard practice. While I see nothing wrong with a solicitor deferring payment of fees until the proceedings in question have been completed, and I see nothing wrong in principle with the idea of a solicitor securing a client's obligations on property, or even taking a guarantee in an appropriate case, security provisions of this sort must be very carefully handled if they are not to have the potential for being oppressive to clients, particularly clients lacking business skills or experience.
In my opinion, the fundamental difficulty about arrangements of the type in this case is that the solicitor in effect becomes the client's financier. A client who lacks other financial resources is in the position of in effect being advanced the cost of the litigation on credit, secured on the client's property. The client is locked into a dependent position with little or no control over the conduct of the proceedings, and often a diminishing interest in their outcome.
I respectfully agree with his Honour that it is inappropriate for a solicitor to take security by means of a clause in a costs agreement and that if security is to be taken it should be by separate document, so that the client has a clear opportunity to understand the separate nature of the security obligations. In the present case there was, of course, a separate Deed of Charge which expressly charged the three properties. But there was also an "all property" charging clause in the Costs Agreement, and an "all real property" charge in one of the recitals to the Deed of Charge, which made an already clumsily drafted document even more confusing. His Honour's comments apply, in my opinion, with even greater force to such a situation.
I also respectfully agree with his Honour that an "all assets" security is unlikely to be reasonable. In this case, on the Solicitor's calculations, the Husband had $390,000 in equity in the Clemton Park property. Subtracting the $40,000 owed to Mason Lawyers, that still left $350,000 available to meet the Solicitor's costs. The Solicitor's estimate of costs was $55,000 to $77,000. I appreciate that this was based on the assumption of an equal division of the Clemton Park property, and accept that when the retainer began the Solicitor was only embarking on the matter and could legitimately point to some uncertainty about the eventual costs. But in my view, the Clemton Park property should have been sufficient on its own to cover the Solicitor's costs in any reasonable eventuality. It is hard to see what legitimate interest the Solicitor had in taking additional security over the Roselands property and the Cardiff property, let alone (in Windeyer AJ's phrase) the Husband's motor car and trousers.
In these circumstances, I would, if it had been necessary to consider to make a decision on the question of reasonableness, have concluded it was not reasonable for the Solicitor to have taken security over the Roselands property, the Cardiff property, or any of the other assets of the Husband apart from his interest in the Clemton Park property.

Contractual entitlement to specific performance

In order to address the issues concerning the Solicitor's contractual entitlement to specific performance, it is necessary to consider the developments that took place between the execution of the contractual documentation and the final breakdown in relations between the parties.
On 22 April 2016 the Husband sent an email to Maloufs concerning the proceedings. One of the points made in the email was as follows: In discussions with Mr Malouf, Mr Gould, my parents & i at Waratah Chambers, this year and after the court we were advised that my fathers property at Cardiff would be getting removed from the contract and that at the our next appointment together in April- May 2016 , my parents property at Roselands where I currently reside at would also be removed.
On 28 April the Solicitor responded: Concerning the caveat issue please note that :- (a) We have not, as yet, lodged a caveat on any property. If we do so we will let you and your parents know as may be relevant to the property; (b) We have not as yet agreed to remove any property from the charge granted by you or your parents. We have spoken only of giving consideration to doing so in due course and have not yet made a decision.
At a conference on 5 May, according to the Solicitor, the issue was raised and he said words to the effect: "I'm not dealing with that matter. There is no way I will make any decision."
The Solicitor's subsequent letter stated: 7. Caveats either on your and/or your parent's property:- 7.1 As indicated we have not yet either formed a clear opinion as to all relevant issues, likely overall costs and disbursements nor have we lodged any Caveats, as yet. 7.2 We can reconsider this issue in due course.
This represented a subtle but important shift in the Solicitor's position. The Solicitor was saying that he would only give consideration to releasing property from the charge "in due course". But the Solicitor's earlier letter (quoted at [89] above) had spoken about reviewing the charge "with a view to releasing your parents property [sic] at Newcastle". It was an overstatement for the Husband to say that the Solicitor had agreed to release the property, but at the same time the Solicitor's wording implied a predisposition to releasing it. Given that at the time the estimate for fees to complete the matter was $55,000 to $77,000 and given the value of the Husband's equity in the former matrimonial property at Clemton Park, it would not have been unreasonable for the Husband and his parents to have assumed that the properties would be released.
As already noted, the proceedings were due to be heard in November 2016, but were instead adjourned to the following February. This apparently happened on the first day which had been fixed for hearing, 14 November 2016.
By the time the proceedings were adjourned, the Solicitor had sent bills totalling $96,000 to the Husband. The Solicitor had also provided a revised estimate, in which he estimated that the further costs to completion would be approximately $45,000 to $55,000. The total cost was thus estimated to be $141,000 to $151,000, compared with the initial estimate of $55,000 to $77,000.
On 18 November the Husband sent an email to his legal team, including the Solicitor. After recounting his frustrations with the Wife's conduct and the lack of progress in the family law proceedings, he said: Once again, I kindly advise that I will be moving back into my matrimonial home and nobody has listened to me, but I have no other choice unless my house sells very soon. As you know the Roselands house is going to be sold at auction tomorrow because my parents cannot afford the repayments, all the bills and to support me.
On 23 November the Solicitor replied: (I) We were not aware, until receipt of your letter of 18 November 2016, that the Roselands property was for sale let alone that it was listed for auction on Saturday, 19 November 2016. You and your parents stated at Court on 14 November 2016 words to the effect that you and they "may have to sell the Roselands property as you could no longer afford to keep it." No one indicated to Mr Gould or to me that it had already been listed for sale or that it was going to auction.
It is not clear whether in fact the Roselands property was actually listed for auction on 19 November. Certainly if it was, the property did not sell. The Solicitor sought to present the supposed steps to sell the property as having been some sort of underhand conduct on the part of the Husband and his parents. In my view, this fails to pay adequate regard to the expectations which are likely to have been created by what the Solicitor told the Husband's father before the Deed of Charge was signed in February 2016, coupled with the Solicitor's abstention from lodging a caveat. A lawyer might understand that, even in the absence of caveat, it was a breach of a chargor's obligations to seek to dispose of property subject to a charge. However, so far as the evidence goes, the Solicitor never advised the Husband or his parents of this beforehand, nor did he do so in his letter of 23 November.
As already noted, in December the Solicitor stamped the Deed of Charge and then lodged caveats on all three properties. It appears that, contrary to the undertaking given in the Solicitor's letter of 28 April, the Solicitor did not inform the Husband or his parents about this.
On 22 December Maloufs wrote to the Husband with a further bill of costs. The total amount outstanding was now said to be approximately $131,000. The letter invited the Husband to deposit payment to Maloufs' trust account and stated that tax invoices were normally payable in full within fourteen days "in the absence of other agreement which we have with you". Later that evening the Husband replied. Among other things he said: In addition, as per your Invoice you know that I don't have any money at all let alone over $130,000.00 to pay you. Our contract is based on a "no win no fee" agreement so I don't know why you would be sending me your direct debit account details and asking me to direct deposit the funds into your account within 14 days if I have the money, when you are well aware I don't have any savings and live off minimal income from Centrelink. It's all very frustrating and i feel abit [sic] intimidated by your bill to be honest Mr Malouf. I also don't understand how the bill is getting higher and higher, ($30k) in a few weeks, when nothing has been done for me since I saw you at Court.
On 30 January 2017 the Solicitor wrote in reply. He said: 11. Concerning our costs and disbursements in this matter:- a. We agreed, subject to certain conditions, to payment of the greater portion of our professional costs and those of Counsel at the end from monies you are to receive and subject to certain out of pocket expenses being met by you or your parents in the meantime; b. Our Bill of Costs/Tax Invoice of 22 December 2016 is in conformity with our Costs Agreement/Retainer documentation and prior costs estimates. We do not expect payment from you until we receive it, with interest, from "settlement" monies payable to you;
The Solicitor acknowledged that the fees for the matter would not be payable until the end. He appears however, to have been asserting, apparently for the first time, that interest was running on the tax invoices that had been issued even though payment of the principal was deferred. For reasons I have given above, I consider that this was wrong because the provisions in question were repugnant to other aspects of that arrangement which prevailed over them.
On 8 February Maloufs sent a further bill to the Husband for "out of pocket expenses". Although not referred to in the letter, the bill included approximately $660 for registration fees on the caveats and stamp duty. It appears that this was the first occasion on which the Solicitor provided any information to the Husband about the registration of the caveats, which had happened on 20 December.
On 24 February the Solicitor wrote to the Husband following the adjournment of the hearing which had been scheduled for 20 February. The letter stated: 8. Sale of the Roselands property: We note that you and your parents are giving further consideration to sale of that property. Please keep us informed in that regard. You are aware of our Caveat in regard that property, your interest [in] the former matrimonial home and your parents' property. … 12. Advice of Mr Ramsay your accountants with regard the Roselands property: … (b) We note that if the Roselands property is sold your parents stated they intend to receive all of the proceeds of sale except for agent's commission, legal costs of sale and the amount required to discharge of the mortgage; (c) We note that Mr Gould and I both requested that in view of the inordinate time this case is taking that there be agreement by your parents that they loan you the amount required to cover the legal costs and disbursements incurred by us. While we understand that your parents will seek independent advice in these regards, the payment of your legal fees by way of loan from them to you should, as discussed at Court, be undertaken by way of formal, written loan agreement.
On 7 March the Husband replied complaining about severe anxiety and depression and continuing: …and also the severe stress from the Caveats that you placed on my parents property in Cardiff; the property in Roselands where I reside and my matrimonial home. My parents have a buyer for the Roselands but are unable to sell it because of your caveat. Would you please kindly at least remove the caveats from Cardiff and Roselands at your very earliest convenience. There was no reason for you to take this action in the first place and secondly take it behind all of our backs and then charge me in a separate bill $1240 for the caveats that you placed at your choice.
On 15 March the Solicitor replied as follows: 8. Our Caveats: 8.1 We have addressed this issue on several prior occasions including in discussion with you and your parents at Court on 20 February 2017 and do not intend to address it further save to say that:- a. Your parents kindly agreed to guarantee your obligations to us in regard payment of our costs and disbursements in relation to your Family Law matter; b. You agreed to pay our costs and disbursements in regard the matter; c. In order to further support your parents' guarantee with regard our costs and disbursements they agreed to charge their interest in real estate in which they held an interest and also to us lodging a Caveat on title of those properties; d. You likewise agreed to us lodging a Caveat in regard your interest in properties in which you held an interest to further secure payment of our costs and disbursements; e. We are also entitled to charge fees in regard preparation andlodgement of the Caveats; f. We are entitled to rely on the above charges and the Caveats lodged on title of the properties to guarantee and achieve payment of our costs and disbursements; 8.2 So that it is entirely clear to you and to your parents:- a. It is a matter solely for you and your parents to decide whether you will sell the Roselands property or, for that matter, any other property in which you and/or they hold an interest; b. We will prepare a Withdrawal of Caveat in regard the Roselands property if it is sold and will attend settlement of the sale to hand that document over in return for payment of our professional costs and disbursements to the extent of available funds; c. You should be aware we are charging interest on our outstanding costs and disbursements per the Deed of Charge and Mortgage you and your parents have entered into with us; …
A letter in the same terms was sent directly to the Husband's parents.
The Solicitor (and Mr Gould) were apparently now taking the position, in their own interest, that if the Roselands property was sold, the whole of the proceeds would be applied first to their costs and fees. On the view that I have taken of the interpretation of the contractual arrangement between the parties (see [48] above), the sale of the Roselands property would trigger an exception to the deferral of their fees. The Husband and his parents, however, had no obligation to sell. Nor, on my analysis, was interest accruing on the fees in the meantime.
This illustrates the fundamental problem with the Solicitor's conduct. The Husband and his parents were not to appreciate that what they were being told was a statement of their lawyer's position which was opposed to their own interests. Proper advice to them in their own interests would have emphasised that the deferral of fees was binding on both the Solicitor and Mr Gould no matter how frustrated they might be about the "inordinate time" the proceedings were taking, and that the last thing the Husband and parents should be doing was to take voluntary steps such as selling the Roselands property which would trigger an exception to that deferral. They should also have been advised that the issue of the tax invoices was of no contractual significance and did not cause any interest obligation to start to run, or at least that there was debate about that matter.
It was in these circumstances that the Husband apparently applied for lapsing notices on the caveats. As noted above, those notices were issued on 28 March but were not at that stage served. On 30 March the solicitor issued a further bill of costs. The total shown as outstanding was now approximately $180,000. The covering letter stated: 4. Our Tax Invoices are otherwise payable in full, without discount, after fourteen (14) days of the date of issue if not paid within seven (7) days (with discount) as indicated above. 5. We continue to claim interest on our already outstanding costs and disbursements and as permitted by law in regard the enclosed Tax Invoice.
On 31 March the Husband replied: 8. I request that you kindly review your entire costs as they are astronomical and don't justify the work that has been done. 9. With relation to the Caveats and your accusation of my parents agreeing to sign contracts allowing for you to place caveats is not true or correct. We have ample proof of your threats and intimidation that unless they signed your agreement that you wouldn't appear for me on 23.02.2016. We also have Debbie as a witness of this intimidation, threats and quite a few emails and notes supporting you agreeing to removing the contracts off each house. It is unjust that you have placed caveats on my parents home in Cardiff as that has absolutely nothing to do with you or your business and for that matter neither does the Roseland's Property. Like I previously mentioned if my matter was over and I had delayed in paying you for whatever reason then yes, I would understand and agree that you place a caveat ON ONLY MY MATRIMONIAL HOME. … I can only hope and trust that you take the above information into severe consideration and make the changes necessary for us to be able to have a successful Lawyer / Client relationship and I await your urgent reply on the changes needing to take place.
The Solicitor replied by letter dated 7 April 2017: 8. Our costs and disbursements have been forwarded to you in itemised and detailed format and have already been reviewed and considered by us. We consider no further review is necessary. While the amount now due may be significant, all attendances were necessary and are clearly identified. If you have specific objections and without prejudice to our rights to accept or to reject them if appropriate, please advise them to us and we will consider and respond; 9. Your allegation is a ridiculous, unfounded nonsense and is unsupported in fact or in law. You and only you are to blame for your predicament. You should be aware we have, as is our custom, kept precise records of all attendances upon you and/or your parents in regard your matter including the so called "caveat" issue. What you allege is totally untrue and we suggest is no more than some form of improper threat or intimidation. We will not respond further on this issue and will not remove any Caveat unless we are paid our outstanding costs and disbursements in full with interest; … As a resolution of your involvement with us you may wish to terminate our further involvement upon payment to us of our costs and disbursements and interest. We will provide a final Tax Invoice. Upon payment we will provide you with our files and Withdrawals of the three (3) Caveats without delay. Please note that the choice in this regard is solely your decision. To be clear we are not, as yet at least, serving Notice of Termination of our retainer on you.
The Husband's comments about the caveat issue were an exaggeration. But the Solicitor's response was an over-reaction, and with far less justification. Unlike a lay client, a solicitor is supposed to know the law. The Solicitor had changed his position on releasing the other properties from the charge and had failed to give the Husband and his parents adequate advice on their rights. Even if he was entitled to take the position that the removal of caveats was a matter for his discretion, the discretion still had to be exercised in good faith and having regard to the amount of security actually required. It was not open to the Solicitor to take the position that in no circumstances would the caveats be released unless the Solicitor was paid early, something he was not entitled to.
Moreover, it is clear from the last paragraph quoted above that the Solicitor now wished to be rid of the client (on the assumption that he would then be entitled to be paid immediately for the work he had so far done). It appears that the Solicitor was playing a careful tactical game of not himself terminating the contractual arrangement but seeking to engineer a termination in some other way. In these circumstances, the client's interests demanded that he be advised on circumstances in which the retainer could be terminated, and the effect of such termination. Such advice would not be easily or briefly provided, given the issues to which I have referred concerning repugnancy, good faith and reasonableness. No information at all was provided on these matters, and the Husband was not even advised to seek independent legal advice on them.
As already noted, on 28 April the Husband and Ms Papadopoulos delivered the lapsing notices to Maloufs' offices. That was a Friday. This provoked the Solicitor's letter of termination which is dated the following Monday, 1 May. The letter stated: Given this development we advise:- 1. We consider that you have acted in a manner that entitles us to immediately cease acting in the Family Law matter and thereupon cease to represent Mr Neil Constantinou. Our retainer is and was dependent upon you continuing to provide security for our costs and disbursements; 2. We attach Notice of Intention to Withdraw as Lawyer; 3. We shall apply to the Court to seek extension of our Caveats by Order of the Court; 4. Please also note that we will see a Costs Order against you in relation to the action we will take to extend and preserve the Caveats as awarded by the Court; 5. We shall also render our up to date Tax Invoice in relation to the Family Law matter after we receive a final Tax Invoice from Mr Gould, Barrister. Neither he nor this firm now represents Mr Neil Constantinou. … 8. In the meantime please take note that the amount due to us per Tax Invoices issued to you is $179,597.76. Interest on that amount assessed to 28 April 2017 is $4,791.63. The amount of $179,597.76 does not include that interest or further costs and disbursements incurred since the date of our last Tax Invoice.
On 6 May the Husband replied: You know very well that I am unemployed due to medical illnesses restricting me from working and I do not have any funds whatsoever and yet you send me one astronomical bill after another with different totals each time might I add, and yesterday make demands that I pay you $179,497.76 plus interest amount til 28 April 2017 of $4820.24 within 7 days. I kindly request that you refrain from continuing to intimidate and harass us because we are physically unable to deal with anmore [sic] of your stress. Your agreement was that you get paid on settlement of my matrimonial home and as you are well aware that my matter isn't listed for Final Hearing until 26th & 27th October, and 24th November 2017. As per your statements in the last paragraph of your letter dated 5th May 2017, if your wish to tender your letter to the court regarding the regarding your costs, please go ahead and do as you please. There is no need for you to try and threaten us about it in the process. Should you choose to do this, we also have ample evidence in response that will in turn also be considered by the court. In addition, with regards to Mr Gould, "you" do not have the right to terminate my contract with him as you said that you did in your advice of termination to me on 2nd May 2017. He was already my acting Barrister from commencement of my Family Law Proceedings and I introduced him to you when you took over representation of me so I ask that you do not get involved with my relationship with Mr Gould. I trust that you will take all of my instructions into consideration and seriously and refrain from making any contact with my parents at all again.
However, the Solicitor proceeded to lodge his notice of withdrawal with the Federal Circuit Court of Australia. As already noted, on 12 May he commenced these proceedings.
The Solicitor's letter of 1 May does not make clear whether he was purporting to exercise a right of termination at common law on the basis of a repudiatory breach on the part of the Husband, or purporting to exercise a contractual right of termination under the terms of the Costs Agreement, or both.
So far as a common law right of termination is concerned, I am prepared to accept, based on the analysis at [71] above, that the action of the Husband and his parents in issuing lapsing notices against the caveats was a breach of their obligations under cl M of the Costs Agreement. The question therefore is whether such a breach was sufficiently serious to justify the termination of the contract ("failure of performance") or if it evinced a repudiatory intention ("renunciation"): Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at 135-6 [44].
In answering this question, it is important to bear in mind that a caveat is not itself a security. It is only a means under which the holder of an alleged security may notify his interest on the register. If challenged, the onus remains on the claimant to justify the interest. The practical effect of the caveat is (or should be) nothing more than a convenient way for a person claiming the interest to ensure that he or she is given sufficient opportunity to justify it.
A caveat does not prohibit any further dealings with a property, although many people seem to proceed on the basis that it does. It only prohibits the registration of dealings which are inconsistent with the interest claimed. Leaving a caveat in place is therefore not an undertaking not to enter into dealings which might affect the property.
It is also possible to challenge a caveat (for instance, on the basis that it does not satisfy the appropriate formal requirements, or because it does not disclose an interest in land) without impugning the validity of the underlying transaction to which the caveat relates. Furthermore, there may be another reason why the underlying transaction is unenforceable or is liable to be set aside.
In the present case, on my findings, the security provisions were unenforceable in equity and were liable to be set aside. I would be very reluctant to accept that the proper and legitimate exercise of the client's rights to challenge the security interest claimed by the Solicitor amounted either to failure of performance or renunciation. It is also relevant that the Solicitor had twenty-one days from the service of the lapsing notice before the caveat would lapse. Yet he acted on the very next business day, without any attempt to remonstrate with the client and without having previously given the client adequate advice on the client's position. In my opinion, the client's conduct did not deprive the Solicitor of a substantial enough benefit that it should amount to failure of performance. Nor should that conduct be seen as evincing an intention not to abide by his obligations irrespective of what the Court might find those obligations to be: see DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 431-2.
So far as a possible contractual right of termination is concerned, similar questions arise. However, it is not necessary to go into detail as to the precise content of the various rights of termination and whether they were hedged about with implied obligations of reasonableness or good faith. The Costs Agreement expressly provided that the Solicitor would give "reasonable notice" of termination. No notice whatever was given, let alone reasonable notice. In my opinion, the failure to do so disentitles the Solicitor from relying on any of the contractual provisions. It may also disentitle the Solicitor from relying on common law rights of termination, especially having regard to the contractual provision which picked up any lawful right of termination (cl F.1(i)), but it is not necessary to go into that for present purposes.
In my opinion, the Solicitor was wrong in thinking that he had a right of termination as a result of the service of the lapsing notices. His purported termination was invalid and was itself a repudiatory breach of his obligations under the retainer contract.
If I had not concluded that the clients' service of lapsing notices was non-repudiatory, it would have been necessary to consider whether there was some other contractual justification for repudiation by the Husband as at 28 April. This would have required consideration of whether the Solicitor's failure to give adequate advice on the contractual arrangements was sufficiently serious to justify termination by the client.
It might also be necessary to consider other potential breaches. One of the other items of complaint made by the Husband in the period leading up to termination (not quoted in the material I have set out above) was the position so far as the claims by Masons were concerned. Initially, it appears that Masons were prepared to co-operate with the transfer of the matter to Maloufs on the basis that they would be paid at the end of the family law proceedings. A proposed tripartite deed between the Husband as client, Masons and Maloufs was proposed by Masons to Maloufs, and the Solicitor apparently gave some advice to the Husband about it. But, by the following year, Masons were taking the position that they were entitled to be paid, they had apparently assessed their costs (after unsuccessful objections by the Husband), and they had proceeded to obtain a judgment and commence bankruptcy proceedings. By March 2017 the Solicitor was asserting that the dealings with Masons formed no part of his retainer and if he was to act the client would need to pay separately. The question was not argued before me and the evidence is incomplete. However, the apparent failure to take up the initial proposal on the tripartite deed is troubling. One particular area of concern is that Masons were apparently seeking some form of caveat to protect their interest and the question of priority as between Masons and Maloufs might have fallen into the area of fiduciary conflict between the Solicitor's interests as security-holder and the Husband's interests as litigant. However, in the light of my earlier findings, I do not need to go into this further for the purpose of this judgment.
Despite my conclusion that the Solicitor repudiated his contractual obligations by purporting to terminate, there remain two matters to be considered before it would be possible to conclude that the Solicitor's repudiatory conduct had disqualified him from being otherwise entitled to specific performance.
The first is that, although I have found the Solicitor has repudiated his obligations under the retainer contract, it is not clear to me that the Husband has accepted that repudiation. The Husband, of course, did not formally need to write electing to terminate. However, in the absence of a written election, it will be necessary for the Husband to have taken some step which was inconsistent with the continuation of the Solicitor's retainer. One such step might be to appoint a new solicitor to conduct the family law proceedings. However, there is no evidence about this. Until and unless the repudiation is accepted, it is open to the Solicitor to resile from it and in that event the Solicitor might still be entitled contractually to insist on specific performance.
The second issue is that even if repudiation has been accepted, there is a question about whether the Solicitor's breach is such as to debar him from any form of specific performance either against the Husband or the Husband's parents. It is often said that a party in breach is not entitled to specific performance, but this statement is too broad. One qualification to it is that not every breach, no matter how trivial, deprives a party of entitlement to specific performance. There may be other situations in which a party who has substantially performed an agreement may obtain specific performance. One instance recognised in the authorities are the cases in which specific performance has been decreed of a lease even after the expiry of the lease term. In such a situation, of course, there has not necessarily been a breach, but the party in question has performed and presumably can obtain specific performance because, by performing, that party has qualified for specific performance despite the fact that no further action is required under the contract in question. In the present case, the Solicitor of course was required to continue to act and in that sense some of the consideration remained executory. But some work had been done giving rise to an executed consideration. It might be possible for the Solicitor to argue that this executed consideration was sufficient to qualify the Solicitor for specific performance of the security arrangements. This argument is of particular significance in the case of the contract of guarantee between the Solicitor and the Husband's parents.
In the light of my other findings, I do not need to go into these questions.

Conclusion and orders

I have concluded that the security provisions in the contract of retainer between the Solicitor and the Husband and in the contract of guarantee between the Solicitor and the Husband's parents are unenforceable in equity because of fiduciary conflict and undue influence. The Solicitor's claims in these proceedings must therefore fail. It is not necessary to consider other potential bases on which those provisions might be unenforceable.
I have also concluded that: (1) Except to the extent that they relate to out-of-pocket expenses specifically exempted in the Retainer Letter, the costs billed to the Husband by the Solicitor in the course of the retainer are not contractually payable until the completion of the family law proceedings (or at least the property aspect of the dispute), and do not contractually carry interest until payable; (2) The Solicitor was not justified in purporting to terminate the retainer, and in doing so has himself repudiated his obligations under the retainer contract.
I will hear the parties should any party wish to seek further relief arising out of these findings.
A question will arise as to the effect of my conclusions on the enforceability of the settlement agreement embodied in the terms of settlement provided to the Court in the course of the hearing. The terms of settlement, at least in so far as they provide for costs, may be severable and enforceable despite my refusal to grant the relief sought by the Solicitor. If that part of the agreement is not severable then it will be necessary to consider what costs orders ought to be made in the exercise of the Court's discretion, having regard to the result of the proceedings. I will grant liberty to the parties to apply with respect to both of these questions once they have considered the terms of my judgment.
The orders of the Court are as follows:
Order that the plaintiff's claim be dismissed.
Discharge, to the extent not already discharged, orders 1 and 2 of 17 May 2017.
Grant liberty to the parties to apply with respect to: (a) any further relief arising out of the conclusion reached in the judgment; (b) the enforceability, in whole or in part, of the settlement agreement reached between the parties in the course of the proceedings; (c) appropriate orders as to costs (if not the subject of an enforceable agreement). DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 July 2017

Conveyancing (Solicitors' Remuneration) Amendment Act 1984(NSW)

Legal Practitioners Act 1898(NSW)

Legal Profession Act 1987(NSW)

Legal Profession Act 2004(NSW)

Legal Profession Reform Act 1993(NSW)

Legal Practitioners (Solicitors' Remuneration) Amendment Act 1984(NSW)

New South Wales, the Legal Profession Act 1898(NSW)

At a glance

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Judgment (18 paragraphs)

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Legislation Cited (10)

Cases Cited (19)

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