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[2011] NSWSC 524
Supreme Court of NSW
2011-05-12
Hoeben J
Original judgment source is linked above.
Judgment 1HIS HONOUR: Nature of proceedings By Notice of Motion the plaintiffs/applicants seek the following: (1) An order pursuant to s728(1)(b) of the Legal Profession Act 2004 (NSW) for the file or files held by the first and second respondents in respect of these proceedings (Matter No 20472/2002) be released to the plaintiffs' solicitors, Berrigan Doube Lawyers, forthwith. (2) That the first respondent pay the plaintiffs' costs in the motion. 2The first respondent is Sarvaas Ciappara Lawyers (SCL) and the second respondent is McLachlan Thorpe Partners (MTP), both of whom were solicitors previously engaged by the plaintiffs. Berrigan Doube Lawyers (BDL) are the plaintiffs' current solicitors. Factual background 3The primary proceedings arise from the death of a schoolboy who drowned while attending a school camp on 23 October 1999. The second and third plaintiffs are the deceased's father and mother. The fourth and fifth plaintiffs ("the company plaintiffs") are family companies operated by the father and mother, who are the directors and sole shareholders. Together they are the applicants on the motion. The sixteen defendants comprise the entity which conducts the School and the members of the School Council at the time. 4The parents claim damages for nervous shock occasioned by the deceased's death. The company plaintiffs claim for loss of the services of the parents as principals, directors and managers of the business as a result of the injuries suffered by the parents. The company plaintiffs claim past and future economic loss by way of a decline in business and the resultant loss of profits. Their claim is for damages per quod servitium amisit . The defendants have admitted liability for the deceased's death, but otherwise challenge the basis for the company plaintiffs' claim. 5The company plaintiffs allege that because of the inability of the two parents as key employees to function effectively, they lost the opportunity to develop and market cleaning products. The company plaintiffs allege that the cleaning products had special characteristics and would have been successful in both the industrial and domestic markets. The company plaintiffs say that by 23 October 1999 they had completed the development of these products and have suffered a loss in excess of $100 million. 6From 3 May 2005 until 26 November 2008 SCL acted for the applicants and Mathew and Jean-Pierre Chaina (who are brothers of the deceased) in proceedings against the defendants. 7On 4 April 2008 Mathew and Jean-Pierre Chaina settled their claims against the defendants. The settlements were confidential and appropriate orders were made by the Court. From April 2008 until 26 November 2008 SCL undertook work on behalf of the applicants in prosecution of their claims against the defendants and on behalf of Mathew and Jean-Pierre Chaina in respect of the finalisation of their settlements with the defendants and the assessment of their costs in these proceedings. 8On 26 November 2008 SCL received a letter from MTP advising that they acted for the applicants, together with Mathew and Jean-Pierre Chaina and that they had been instructed to assume the carriage of all matters conducted by SCL on their behalf. Authorities to release files, signed by these parties, were attached to that letter. 9On 28 November 2008 the applicants sought an order from this Court, pursuant to s728 of the Legal Profession Act 2004 in respect of the files held by SCL in relation to these proceedings. This application was part-heard on 3 December 2008 and during the course of that hearing a settlement was reached between the parties. By consent, the summons dated 28 November 2008 was dismissed with no order as to costs. 10The terms of the settlement of the 2008 s728 application was recorded in a Tripartite Agreement between SCL, MTP and the applicants dated 3 December 2008. Mathew and Jean-Pierre Chaina were not signatories to the Tripartite Agreement. 11In the recitals to the Tripartite Agreement the following was stated: "G. The purpose of this agreement is: (i) To record the Agreement between the parties for the handing over of documents by the Former Solicitors to the Present Solicitors in respect of each of the matters listed in Schedule 2. (ii) To record the Agreement between the parties for the payment of $150,000 by the client to the Former Solicitors on account of the Former Solicitors' costs and disbursements of providing professional services in the matters invoiced in Schedule 2A. (iii) To secure the Former Solicitors' unpaid proper costs and disbursements for providing professional services in the matters invoiced in Schedule 2A. (iv) To record the further terms of the agreement between the parties." 12In the period between late 2008 and early 2009, SCL provided copies of its files and documents in relation to these proceedings and other matters to MTP. 13On 14 April 2009 SCL sent a letter to MTP attaching an itemised Bill of Costs addressed to each of the applicants and Mathew and Jean-Pierre Chaina for work done in the period 30 March 2008 until 26 November 2008 in respect of the proceedings. SCL's letter sought MTP's confirmation as to whether they were also instructed by Mathew Chaina and Jean-Pierre Chaina to accept service of the Bill of Costs on their behalf. 14On 19 May 2009 SCL filed an Application by Practitioner for Assessment of Costs with the Supreme Court seeking that the Bill of Costs be referred to a Costs Assessor. Shortly after the application was filed in the Supreme Court, it was assigned to Mr Peter Scammell, Costs Assessor, for assessment. On 13 August 2009 MTP lodged a Notice of Objection in respect of the costs application. On 17 September 2009 SCL served their response to the costs objection. 15On 27 November 2009 Mr Scammell determined the costs application and issued a Certificate as to Determination of Costs. The certificate determined that a fair and reasonable amount of costs to be paid by the applicants to SCL was $271,818.14. 16On 24 December 2009 MTP filed an Application for Review of Determination of the Certificate. On 23 September 2010 a Costs Review Panel issued a Certificate of Determination of Costs by Costs Review Panel that affirmed the original certificate. At about this time, SCL also received a Review Certificate from a Costs Review Panel in respect of an assessment of costs owing by the second and third plaintiffs (George and Rita Chaina) in respect of other proceedings ($85,983.83). On 24 September 2010 SCL sent a letter to MTP enclosing by way of service a copy of the Review Certificate and demanded payment of the amount of $271,818.14. 17On 21 October 2010 the District Court of New South Wales entered judgment in favour of SCL against the applicants and Mathew and Jean-Pierre Chaina for the sum of $271,818.14 based on the Review Certificate (the first judgment). On the same date, the District Court also entered in favour of SCL against George and Rita Chaina in different proceedings (matter no 349413/2010) in the sum of $85,983.83 (the second judgment). On 1 November 2010 the District Court issued certified copies of the judgments in each matter. 18The costs and disbursements that make up the first judgment are as follows: (a) Sarvaas Ciappara professional fees and disbursements $ 116,211.64 (b) Andrew Kostopolous of counsel $ 42,158.00 (c) Jamie Stephenson of counsel $ 49,263.50 (d) Dr Wever, medical expert $ 33,000.00 (e) Costacomp Costs Assessors $ 22,000.00 (f) Q Brand Experts $ 7,260.00 (g) Moore Stephens Accounting Expert $ 1,925.00 Total $ 271,818.14
19Agreement has apparently been reached between the applicants and Andrew Kostopolous of counsel and Dr Wever whereby those persons have agreed to hold the applicants directly responsible for their outstanding fees and to wait until settlement or finalisation of the proceedings to be paid. 20At the time this matter came before the Court, an amount of $3,10.78 had been recovered from Jean-Pierre Chaina and $106.20 had been received from Mathew Chaina. Allowing for a deduction of the fees of Andrew Kostopolous and Dr Wever, an amount of $193,543.16 of the first judgment remained unpaid. 21As of the date of the hearing of the motion, no leave to appeal from the Review Certificates had been sought by the applicants, although such an appeal had been foreshadowed. No application had been made to stay or set aside the District Court Default Judgments, although again such an application was foreshadowed. Proceedings have, however, been commenced against CPL by the applicants in negligence in the District Court. Mathew and Jean-Pierre Chaina have sought an extension of time and leave to appeal in respect of the Review Certificate and the first judgment. 22SCL has received at least two payments from MTP pursuant to clause 6(c) of the Tripartite Agreement in the amount of $47,658.22 which was allocated against the second judgment. It was submitted by the applicants that further monies have been paid under the Tripartite Agreement but there appears to be some dispute on that issue. Clause 6(c) of the Tripartite Agreement required MTP to pay to MCL any monies held by them in their trust account once an assessment of MCL's costs and disbursements had been finally determined. The monies held by MTP in their trust account were the proceeds of successful litigation by George and Rita Chaina as a result of which $125,000 was being paid off by monthly instalments of $4,000. 23On 29 September 2010 SCL received a letter from MTP which advised that their instructions to act on behalf of the applicants had been terminated. In late 2010 SCL was advised that BDL were now acting for the applicants. 24SCL have conducted four property title searches and have identified the following properties as owned by one or other of the applicants: (i) Property at Lithgow - owned by Deluxe Chemicals Pty Limited. (ii) Property at Vaucluse - owned by George and Rita Chaina. (iii) Property at Glenquarry, Wingecarribee - owned by George and Rita Chaina. (iv) Property at Ultimo, Sydney - owned by Rita Chaina. There is also a property at Muswellbrook owned by Mathew Chaina. 25The proposal put forward by the applicants is that Rita and George Chaina will sell a property at Broadway, Sydney (the property) from which it is expected that $80,000 will be available after payment of the mortgage over that property. (It is not known whether the property is the same as the Ultimo property referred to in [24] hereof.) MTP will continue to make payments from its trust account of approximately $4,000 per month up to $58,000 being payments to which George and Rita Chaina are entitled to which reference has already been made. All further outstanding costs and disbursements and interest will be payable upon final settlement or judgment in the primary proceedings. The applicants agree to enter into a further standard Tripartite Agreement in the Law Society format to record the above arrangement. SCL has refused to accept that proposal. 26At no time in the application was it submitted by the applicants that they were unable to pay the costs claimed by SCL. The $150,000 referred to in the Tripartite Agreement has not been paid by the applicants. The current position is that MTP holds the files and documents but will not pass them on to BDL without the consent of SCL. SCL has refused to give their consent. Consideration 27Section 728 of the Legal Profession Act 2004 (NSW) relevantly provides: "728(1) On the application of a client of a law practice, the Supreme Court may order the law practice: (a) to give to the client a bill of costs in respect of any legal services provided by the law practice, and (b) to give to the client, on such conditions as the Supreme Court may determine, such of the client's documents as are held by the law practice in relation to those services. ..." 28The applicants submit that the proposal which they have put forward is more favourable to SCL than their rights under the Tripartite Agreement and in the circumstances it is unreasonable for SCL to refuse the proposal. 29They submit that they need access to the files currently being held by MTP so that they can comply with the orders of the Court in the primary proceedings. BDL is unable to provide proper advice to the applicants concerning these and other proceedings because they do not have access to those documents. There remain significant discovery issues between the applicants and the defendants which cannot be resolved until BDL obtain access to the documents currently held by MTP. 30The applicants submit that the Court should also take into account their action in negligence against SCL and that they intend to seek extensions of time within which to challenge the Review Certificate and the default judgments entered in the District Court. 31MTP did not play any active part in the motion. They did, however, request that the Court defer making final orders in relation to the motion until they had a chance to provide some input into those orders. This was a reasonable request since MTP currently hold the documents. Neither the applicants nor SCL made any submissions to the contrary. 32The Court is not in a position to assess the merits or otherwise of the applicants' action in negligence against SCL. Accordingly, the fact that such proceedings have been commenced is noted but it can, at this stage, carry little weight. It is, of course, not without significance that the applicants have also sued other solicitors in negligence who acted on their behalf before SCL in the primary proceedings. 33In relation to the applicants' intentions with respect to the Review Certificate and the District Court default judgments, the Court is not in a position to assess the strength or otherwise of the applicants' position. What is important, however, is that the costs determination process has been through two levels of assessment, an appeal against the Review Certificate was not brought within time, and that as of 12 May the applicants had not sought to set aside or otherwise stay the default judgments. Accordingly, the Court should regard the first and second judgments as representing monies properly payable by the applicants to SCL until some basis has been put forward as to why that is not so. Other than submissions from the bar table, no such material was placed before the Court. 34The applicants' claim is brought under s728 of the Legal Profession Act 2004. That provision gives rise to the exercise of a discretion to be effected by the imposition of such conditions as the Court determines. While that discretion is a broad one, it has to be applied in a principled fashion. 35A number of matters are relevant to that exercise of discretion. One such relates to the primary proceedings themselves. I accept, and it was never really disputed, that the applicants need access to the documents relating to the primary proceedings held by MTP so as to enable their solicitors BDL to both properly advise them and progress the matter. In that regard, the proceedings are now over eight years old and it is important not only from the applicants' point of view but also from that of the Court and the public, that these proceedings be readied for hearing and be heard as soon as possible. 36Accordingly, I propose to order production of the documents to the applicants. The issue is what conditions, if any, should be imposed. 37The solicitors' rules (i.e. the revised Professional Conduct and Practice Rules 1995 made by the Council of the Law Society of New South Wales pursuant to s57B of the Legal Profession Act 1987 and deemed to have been made under that Act by virtue of clause 23 of schedule 9 to that Act) provide that in circumstances, such as I have set out above, possession of the documents should be provided to the client by the solicitors provided that the costs be "satisfactorily secured". 38As Pembroke J pointed out in Tyneside Property Management Pty Limited & Ors v Hammersmith Management Pty Limited & Ors [2011] NSWSC 22 an exercise of discretion under s728 of the Legal profession Act may follow the solicitors' rules but it need not do so. The solicitors' rules, however, provide a useful framework against which the Court should consider applications such as these. I see no reason why they should not be given significant weight in this application. 39Another relevant matter is the prospect of success in the proceedings. The defendants have admitted liability. Accordingly, damages will be recovered by some or all of the applicants. What is not clear is the amount of those damages. The company plaintiffs have formulated a very large claim. Unfortunately, the original basis upon which that claim was based has been shown to be misconceived. It has been necessary for the company plaintiffs to substantially recast their case. The final form of that recast case is not yet known. What is known is that a very severe costs order was made against the company plaintiffs, which has been estimated in one of the affidavits to be in excess of $2.6 million. The Court does not know what offers of compromise have passed between the parties during the preceding eight years. 40The end result is that although the defendants have admitted liability, it is by no means clear that the damages ultimately recovered by the applicants will necessarily exceed the various costs orders which have been made and what the effect any offers of compromise might have on the damages ultimately recovered, if in fact such offers of compromise have been made. Accordingly, I am not satisfied that this is one of those cases where it is clear that the applicants will be successful in these proceedings and that either by way of settlement or judgment, there will be ample monies available to pay outstanding legal costs plus interest on those costs. 41In any event, this is not one of those cases where SCL agreed to wait until the conclusion of the proceedings to be paid. In their fees agreement with the applicants, clear parameters and time limits were set out pursuant to which their fees were to be paid. One of the problems with the applicants' proposal is that a substantial part of the fees owing to SCL will remain unpaid until the conclusion of the proceedings. For the reasons indicated, even then it is not at all clear whether there will be sufficient funds available to pay those fees. Moreover, despite the efforts of the Court it is by no means clear that this matter will be resolved either by settlement or hearing in the near future. 42Another matter of concern in relation to the applicants' proposal is that the $150,000 which was to be paid on account of fees under the Tripartite Agreement was not paid. This is despite the fact that the transfer of documents from SCL to MTP took place at the end of 2008 and into early 2009. SCL were obliged to proceed through all levels of costs assessment in order to obtain a Costs Certificate and then subsequently a Review Certificate. 43I agree with the submissions made on behalf of SCL that the proposal by the applicants does not constitute "satisfactory security" for the purposes of the solicitors' rules or the general law. As was set out in Bechara t/as Bechara & Co v Atie & Anor [2005] NSWCA 268 at [64]: "64 The expression "satisfactorily secured" should be understood, both by reference to the authorities dealing with possessory liens, and in its textual context [in the solicitors' rules], to refer to the provision, in lieu of payment, of something of monetary value which would ensure the satisfaction of the possessory lien." [Emphasis added] 44Even on the applicants' own submissions, an amount in excess of $100,000 would not be "satisfactorily secured" if their proposal was accepted. 45Because of the initial fees agreement, because of the Tripartite Agreement, because of the various steps which SCL have taken to have their costs assessed and because the applicants have not submitted that they are unable to pay the fees, I am satisfied that they are entitled to "satisfactory security" in respect of those costs as a condition of them providing their consent to MTP placing the applicants in possession of the documents which they currently hold. 46In relation to "satisfactory security" Pembroke J said in Tyneside Property Management Pty Limited at [16]: "Ordinarily, satisfactory security will mean something of monetary value which will ensure the satisfaction of the possessory lien: Bechara v Atie (supra) at [64]. However what amounts to satisfactory security will vary depending on the parties' agreement and the relevant facts. Where the parties have agreed that the costs will only be paid after the verdict, judgment or settlement, if any, then satisfactory security will be less than if, as in this case, the parties' agreement provides for payment of costs as and when incurred and invoiced. In the former category of case, the solicitor is prepared to take a chance; in the latter he is not. What is satisfactory security will be conditioned by matters such as these. Thus the option of entering into a Tripartite Agreement as contemplated by rule 29.4.2 and rule 8.4.2 will sometimes result in a satisfactory outcome. And sometimes it will not. It does not do so in this case." 47Since the documents which are urgently required relate to the primary proceedings, it seems to me that in this case satisfactory security should be in respect of the $193,543.16 which remains outstanding under the first judgment. 48In accordance with the submission by MTP, I will not make any final orders so as to enable the parties to draft their own conditions. For the assistance of the parties, however, I should indicate the sort of order which I have in mind. I propose to order SCL and MTP to provide BDL with such of the applicants' documents as are held by them in relation to the primary proceedings within 7 days of either the balance of the first judgment of $193,543.16 being paid in whole or the amount of $193,543.16 being paid into Court or the applicants providing security to SCL by way of mortgage over such of their properties as are sufficient to adequately secure payment to SCL of the amount of $193,543.16. 49Subject to the applicants' right to make submissions to the contrary, I have in mind to order that the applicants pay SCL's of this application.
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: 28 June 2011
Mathew CHAINA & Ors
THE PRESBYTERIAN CHURCH