Phoenician Holdings Pty Limited t/as Cadmus Lawyers v George Maroun Rahme

EX TEMPORE Judgment 1This case was listed before me for three days commencing on 27 February 2013. It had previously been managed by other judges but, more particularly, it had been recently case managed by Gzell J. 2On the first day of the hearing, the plaintiff, Phoenician Holdings Pty Limited t/as Cadmus Lawyers, represented by Mr RJ Burbidge QC and Mr DE Baran, of counsel, and the defendants, George Maroun Rahme and Nouha Rahme, represented by Mr GA Elliott, of counsel, indicated that there were some procedural difficulties (to use a neutral term). 3The plaintiff was granted leave to file in Court a Notice of Motion. That was returnable instanter. Consent orders were made in respect of some of the pleading matters with which that Motion dealt. It was not in issue that the Cross-Claim needs to be repleaded and an order was made striking out the Cross-Claim, with leave to replead. 4The real issue that arose on the Notice of Motion was the plaintiff's application for an order that the sum of $1,362,500 be paid out to it from the controlled moneys account jointly held by RM Legal Sydney Pty Limited and Elias Gates & Associates Pty Limited, in trust for the plaintiff. 5The history of the matter is that in August 2012, the plaintiff, who had acted as the defendants' solicitor, filed a Summons before the Duty Judge returnable at 10am on 4 September 2012 in which an order was sought pursuant to section 74K of the Real Property Act 1900 that the Caveat on the defendants' property in Double Bay (the Property) be extended until further order. 6The final relief sought in the Summons is a Declaration as to the ranking of the Caveat and an order that the defendants withdraw a lapsing notice that has been served. There is an alternative Order sought that the Caveat be removed forthwith and an Order that the defendants produce to the plaintiff the Certificate of Title to enable the plaintiff to register a Mortgage that it had obtained from the defendants as security for its fees. The plaintiff also sought an order for the appointment of a receiver to the Property for the sale of the Property and the payment "of all fees and costs of the plaintiff into court". There is also a claim for an order for indemnity costs. 7The matter proceeded on an interlocutory basis for the removal of the Caveat because the defendants wished to sell the Property. The plaintiff's Caveat was an impediment to that sale. The matter came before a number of judges of this Division sitting in the Duty List, including myself, at which time the difficulty in identifying the quantum of the plaintiff's fees was exposed. The plaintiff had issued a bill dated 30 August 2012. That bill has been effectively reissued on 4 October 2012 and 26 February 2013. However, it is not in issue that the plaintiff was wishing to charge more than the amount contained in that bill. The bill that was served on 26 February 2013 seeks payment in the amount of $386,180.21, it having previously been a different figure. It is not necessary to detail the differences but to note simply that the plaintiff seeks the payment of its costs. 8Although the Summons includes an order that the defendants pay the plaintiff's costs into Court, that claim was not particularised until much later. The question in respect of the sale of the property and what was to happen in respect of the proceeds of sale, came before Rothman J, as vacation judge, in the first week of the vacation in 2012: Phoenician Holdings Pty Ltd v Rahme [2012] NSWSC 1604. Rothman J dealt with the matter on an interlocutory basis and identified the issues as follows: 9 Notwithstanding that on this interlocutory hearing the parties have tendered four volumes of documents, various affidavits and other exhibits, the issues between the parties are within very short compass. It may be appropriate first to state some of the matters that are not in dispute, at least for these interlocutory purposes. 10 There is no dispute that legal services were provided by the respondent to the applicants. There is also no dispute that counsel were briefed and provided services for which payment is due. There is no dispute that the charge and mortgage were executed in order to secure legal fees (including costs of recovery thereof and interest) and that the Caveat was lodged to protect the interests created or purportedly created by that charge and mortgage. The parties also accept that the charge and mortgage, if valid, give rise to a "Caveatable" interest. 11 Further, there is no dispute between the parties that, as a matter of the proper exercise of the discretion of the Court, and, subject to appropriate security being provided, orders should be made the effect of which would be to allow the above-mentioned sale to proceed. 12 The issues between the parties are, as a consequence of the foregoing, confined to the form that any security should take, the method by which the security should be effected, the amount of any such security and whether, in obtaining that security, the respondent should give the usual undertaking as to damages. 9His Honour then said: 17 Given that there is no dispute that the applicants executed the charge and mortgage, it is difficult to see how the applicants could submit that the respondent does not have a sufficiently arguable case for a Caveatable interest. 18 The applicants do not, in these interlocutory proceedings, seek to establish their claim for relief under the Contracts Review Act or Australian Consumer Law. Nor do the applicants seek to establish an arguable case for relief under any such provisions. As a consequence, the charge and mortgage are extant and create an interest in the property that may be protected by the lodging of a Caveat. 19 I turn to the balance of convenience. It is accepted by all of the parties, and the Court, that the balance of convenience favours a course that would allow the applicants to complete the contract for sale. However, the balance of convenience overwhelmingly favours the protection of the respondent by appropriate security. 20 Some of the factors that have brought the Court to that view are that the final hearing will occur within a month or so of any substituted security; the lack of any real challenge in these interlocutory proceedings to the efficaciousness of the charge and mortgage; the acceptance that legal services have been rendered and that moneys are owed to senior counsel and should be paid out; and the existence of current security in the form of the charge and mortgage, which is sought to be replaced. ... 23 Nevertheless, the amounts suggested by the respondent as being owed to it, leaving aside fees to senior counsel, have not been appropriately supported by evidence. During the course of directions hearing before the Chief Judge in Equity, the respondent suggested that the amount owing was $1.35 M. It seems, from a proper analysis of the discussion with the Chief Judge, that $1.35 M was an estimate of fees, not including fees to senior counsel. To that amount must be added the costs of recovery and possible interest. 24 I do not intend to be precise. In accordance with the agreement between the parties, the Court will order that payment be made to senior counsel. Further, the Court will order security of a further amount to cover the estimated fees to the respondent and the fees to junior counsel, plus a buffer of $350,000 to cover the costs of recovery and interest. In other words, the Court will order security in the sum of $1.7 M together with the payments to senior counsel. 25 The trial judge will have the capacity, at the conclusion of the hearing in February, to alter significantly the terms of any interlocutory order. As a consequence, these interlocutory orders will be in place for approximately one month or slightly more. At the moment, there is no undertaking by the respondent as to damages. In my view, for the short period for which these orders are likely to operate, there should be no requirement on the respondent to give any such undertaking and, in so doing, put themselves in a worse position than would be the case if the Caveat continued. In those circumstances, I will not order or require that the respondent give an undertaking as to damages, except in the unlikely event that the respondent causes the contract for sale not to complete by reason of its non-attendance at the notified completion appointment. 10There was an order for the payment of senior counsel's fees that were itemised in the orders of the Court, leaving the costs of the solicitor and junior counsel outstanding. The matter was, as I say, listed for hearing before Gzell J who held a directions hearing for the preparation of the case on 7 February 2013. His Honour made the following orders: 1. The orders in the short minutes of order initialled, amended and dated by Gzell J are made, as follows: