Phoenician Holdings Pty Ltd t/as Cadmus Lawyers v Rahme

Defendants' notice of motion

1. On 7 April 2015, the defendants filed a notice of motion in which, relevantly, they claimed an order that the sum of $440,000, or such other amount as the Court thinks fit, be paid to the defendants out of the controlled monies account.
2. Because of the urgency of the defendants' application, it was listed to be heard in the Duty List on 30 April 2015. I heard the application, sitting as Duty Judge, on 30 April 2015 and 5 and 7 May 2015. These are the reasons for judgment in determination of the defendants' claim on the notice of motion.
3. The defendants' notice of motion was supported by a comprehensive affidavit by their solicitor, Mr Benjamin Hemsworth, sworn on 2 April 2015, and filed on 7 April 2015. I understand that the notice of motion and affidavit were served on the plaintiff some days after they were filed.
4. The plaintiff relied primarily on the affidavits of Mr Georges Elias affirmed 28 April 2015 and 7 May 2015. The plaintiff also purported to rely on parts of a significant number of earlier affidavits affirmed by Mr Elias, and parts of court books in earlier applications in the proceedings. While, in response to a direction from the Court, the plaintiff provided a list of the parts of the affidavits upon which it wished to rely, and the reasons for that reliance, counsel for the plaintiff did not ultimately read or tender that material, as may have been appropriate according to its nature. That material rose no higher than information to which Mr Elias wished to refer.

Procedural history of notice of motion

1. On 14 April 2015, the Registrar made an order standing the defendants' notice of motion over to 30 April 2015, for referral to the Duty Judge. The Registrar also ordered the plaintiff to serve its evidence by 28 April 2015.
2. On 23 April 2015, the plaintiff was given leave to file in court a notice of motion, which relevantly sought an order that the order by which the defendants' notice of motion would be referred to the Duty Judge on 30 April 2015 be vacated.
3. On 23 April 2015, Lindsay J, sitting as Duty Judge, made a number of orders for the proper case management of the respective notices of motion filed by the parties. Relevantly, his Honour ordered that the orders made by the Registrar on 14 April 2015 that the defendants' notice of motion be stood over to 30 April 2015 for referral to the Duty Judge, and the order requiring the plaintiff to serve its evidence by 28 April 2015 be vacated. Lindsay J made alternative orders and directions. In particular, he ordered that the defendants' notice of motion filed on 7 April 2015 be listed before the Duty Judge on 30 April 2014 for hearing, or directions, as the Duty Judge may determine.
4. Importantly for present purposes, Lindsay J made the following orders: 12. Order, subject to further order, that the plaintiff file and serve, no later than 28 April 2015, so far as it is able, the evidence to be relied upon by it in opposition to the relief claimed in paragraphs 1 and 2 of the defendants' notice of motion filed 7 April 2015. 13. Note that the evidence that the plaintiff files and serves pursuant to Order 12 should, so far as is practical, provide an estimate of the costs and interest claimed by the plaintiff as "enforcement costs" in these proceedings, and interest, under the deed dated 8 June 2012 entitled "Deed of Charge and Acknowledgement of Debt", a copy of which is reproduced at page 1 and following of Exhibit "BH 1" to the affidavit of Benjamin James Hemsworth sworn 2 April 2015.
5. The orders and directions made by Lindsay J expressly left it open to the plaintiff to file evidence in support of an application for an adjournment of the hearing of the defendants' notice of motion on 30 April 2015, and to make such an application. His Honour ordered that the plaintiff's notice of motion filed on 23 April 2015 be otherwise dismissed, without prejudice to such (if any) entitlement the plaintiff might have to apply for an adjournment.

Hearing of notice of motion

1. When the matter was called for hearing on 30 April 2015, Mr Goodman of counsel appeared for the defendants, being the applicants on the motion. Mr Elias, who is a solicitor, and the principal of the plaintiff, appeared for the plaintiff respondent. On 5 and 7 May 2015 Mr Tregenza, of counsel, appeared for the plaintiff.
2. The plaintiff did not, on 30 May 2015, make an application to adjourn the hearing of the defendants' notice of motion. On 5 May 2015, Mr Tregenza made an application for a short adjournment of the further hearing of the notice of motion, until Friday, 8 May 2015. I did not accede to that application. However, both on 30 April 2015 and 5 May 2015, I made a number of directions to accommodate difficulties that the plaintiff experienced in dealing with the application on relatively short notice. In particular, on 5 May 2015, I gave the plaintiff leave to serve further evidence on the defendant by 12 noon on 7 May 2015 concerning the plaintiff's claim for the costs of enforcing its charge, and also the total amount that the defendants and related companies had paid to the plaintiff in respect of the legal costs claimed by the plaintiff.
3. The Court is faced with the need to decide the claim made by the defendants in their notice of motion quickly. I have mentioned above that the defendants supported their notice of motion with a comprehensive affidavit sworn by their solicitor, Mr Hemsworth. Although that affidavit dealt with a number of controversial issues, it also set out in a clear and comprehensive way the relevant history and circumstances of the dispute between the parties. It has been convenient for me to draw heavily on the matters deposed to by Mr Hemsworth in preparing these reasons for judgment. The following statement of the circumstances relevant to the determination of the defendants' claim will contain some repetition of matters that I have touched upon briefly in the introduction above, in order to explain the nature of the dispute.

Outline history

1. The defendants were the owners of a property known as 1 William Street, Double Bay in the State of New South Wales.
2. At all material times, the plaintiff was the defendants' solicitor.
3. Between about 2010 and June 2012, the defendants and their related corporate entities, engaged the plaintiff to represent them in relation to eight separate matters.
4. On 8 June 2012, the defendants and the plaintiff entered into a deed of charge and acknowledgement of debt and an unregistered mortgage which had the effect of securing the plaintiff's professional fees and related entitlements against the property.
5. On 9 July 2012, a caveat was registered over the title of the property by the plaintiff. The caveatable interest relied upon by the plaintiff was the interest created by the deed of charge.
6. On 2 August 2012, the defendants issued a lapsing notice in respect of the caveat.
7. On 31 August 2012, the plaintiff commenced these proceedings by filing a summons. The principal interim relief sought was an order under s 74K of the Real Property Act extending the caveat until further order.
8. On 7 November 2012, the defendants filed a cross summons, by which they sought declarations on various grounds that the deed of charge and the mortgage were void.
9. On 21 December 2012, Rothman J in Phoenician Holdings Pty Ltd t/as Cadmus Lawyers v Rahme [2012] NSWSC 1604, made an order that the caveat lodged by the plaintiff on the property be withdrawn and the sum of $1,700,000.00 be held in a controlled monies account in the names of RM Legal Sydney Pty Limited and Elias Gates & Associates as trustees for the plaintiff. The money was to be held in the controlled monies account as security for the plaintiff's professional fees (up to $1,350,000.00), enforcement costs and interest ($350,000.00 combined) in place of the deed of charge and mortgage.
10. Rothman J further ordered that a total of $83,674.13 that the plaintiff owed to 3 barristers be paid directly from the proceeds of the sale of the property.
11. Upon settlement of the sale of the property, counsel's fees were paid in accordance with Rothman J's orders.
12. On or about 30 January 2013, the sum of $1,700,000.00 was transferred into the controlled monies account.
13. Rothman J said at [23] that "the amount suggested by the respondent [the plaintiff in these proceedings] as being owed to it, leaving aside fees to senior counsel, have not been appropriately supported by evidence". His Honour, therefore, was forced to rely upon an amount that the present plaintiff suggested to the Chief Judge in Equity at a directions hearing was owed to the plaintiff. That was an amount of $1.35 million as an estimate of fees, not including fees payable to senior counsel. Rothman J said that it was necessary to add to that amount the costs of recovery and possible interest. Apart from the separate order that his Honour made that certain fees payable to counsel be paid directly out of the proceeds of sale of the property, he said: "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 million together with the payments to senior counsel".
14. On or about 6 February 2013, 26 February 2013 and 11 September 2013, four costs assessment applications were filed on behalf of the defendants with respect to invoices rendered by the plaintiff to the defendants between 7 April 2010 and 17 February 2013.
15. On 7 February 2013 Gzell J ordered the plaintiff to file a statement of claim by 11 February 2013, and the defendants to file a defence and cross claim by 14 February 2013.
16. The statement of claim filed by the plaintiff on 7 February 2013 contained an assertion in par 9 that the plaintiff had issued tax invoices and bills of costs which, after certain additional claims were included, gave a primary indebtedness in the amount of $2,361,498.59.
17. On 14 February 2013, the defendants file their defence. The defendants made a significant number of claims in their defence that are designed to thwart various aspects of the claims made in the statement of claim that are intended by the plaintiff to enforce its rights under the deed of charge. It will not be convenient to list all of the issues raised by the defence. They include that the defendants denied that any estoppel by deed arose concerning the amount of their indebtedness to the plaintiff under the deed of charge, or that the deed precluded them from exercising their statutory rights of assessment in relation to the plaintiff's claim against them. The defendants claimed in respect of tax invoices served on them by the plaintiff totalling $855,353.56 that the claims must be stayed under s 331 of the Legal Profession Act 2004 (NSW) because the proceedings had been brought less than 30 days after the bill or an itemised bill was given to the defendants. The defendants also claimed that the plaintiff was precluded from pursuing part of its claim by operation of s 355 of the Legal Profession Act, because the plaintiff was proceeding on a lump sum bill for which itemisation had been requested and not provided. The defendants claimed that the plaintiff had failed to disclose matters required to be disclosed under Division 3 of the Legal Profession Act. There is also a claim that the plaintiff's claim cannot be pursued in relation to tax invoices that had not been subject to assessment.
18. The defendants also filed a cross claim on 15 February 2013. By that cross claim, on various grounds, the defendants sought declarations or orders that the deed of charge was void, as well as other relief. The cross claim pleaded the basis of the defendants' earlier cross summons.
19. Bergin CJ in Eq made an order on 27 February 2013, by consent, that the cross claim be struck out, with liberty to re-plead. She ordered the defendants to pay the plaintiff's costs of the application to strike out the cross claim.
20. Also on 27 February 2013, the plaintiff made an application for the sum of $1,362,500.00 to be paid to it from the controlled monies account. The plaintiff's application was heard by Bergin CJ in Eq at various times over the next three days. It appears from the transcript that this application occupied the greater part of her Honour's time.
21. On 28 February 2013, Bergin CJ in Eq confirmed the orders of Rothman J, and dismissed the application: Phoenician Holdings Pty Ltd t/as Cadmus Lawyers v Rahme [2013] NSWSC 174.
22. On 1 March 2013 her Honour ordered the plaintiff to pay the defendants' costs of the application for the payment of the $1,362,500.00 out of the controlled monies account. The plaintiff was therefore ordered to pay the defendants' costs of that aspect of the plaintiff's attempt to enforce its rights under the deed of charge.
23. Her Honour noted at [10] of her judgment that, at a directions hearing before Gzell J held on 7 February 2013, his Honour made an order that the plaintiffs serve all outstanding detailed tax invoices for legal services rendered by 5 PM on 17 February 2013. At that stage, it was contemplated that the Court would decide the issue of the amount of legal fees to which the plaintiff was entitled. However, as I have noted above, the defendants lodged the first of their applications for assessment of costs the day before the directions hearing. Her Honour noted at [11], that the direction concerning the service of the tax invoices had not been complied with.
24. On 1 March 2013, Bergin CJ made a number of further orders in the proceedings. Her Honour extended the time within which the plaintiff was to deliver to the defendants its tax invoices to 5 April 2013. That may be significant, because it would be difficult for the plaintiff to continue to claim that it remained entitled to be paid unbilled costs, not included in earlier tax invoices, if it did not comply with the order.
25. Her Honour made an order by consent that the proceedings were stayed pending the outcome of the costs assessment process.
26. A consequence of this order is that the plaintiff should not have incurred a significant amount of costs in enforcing its deed of charge by reason of prosecuting these court proceedings after 1 March 2015, save in relation to its response to the defendants' notice of motion that is now before the Court.
27. However, the stay will only last until the process of assessment of the bills of costs delivered by the plaintiff has been completed. If the stay is lifted, that would enliven the defendants' right to re-plead their cross claim to attack the validity of the deed of charge and the mortgage.
28. If that possibility remained alive, then the defendants' application for an order that $440,000 of the money in the controlled monies account be paid out to them would have to be dealt with on the basis that the plaintiff would remain at risk of having to incur the costs of defending such a claim as part of the enforcement of its rights under the deed of charge.
29. I put a number of questions to counsel for the defendants on this issue, in order to achieve precision as to what the defendants propose to do after the process of assessing the bills of costs has been completed, and the stay ordered by the Chief Judge is lifted. It is not necessary to relate the course of that discussion. The defendants have advised the Court that they will not re-plead their cross claim, and accordingly will not pursue the cross claim after the stay is lifted. That stance would initially suggest that the defendants would not seek to challenge the validity of the deed of charge. It is now clear that that is not the case. The defendants have advised the Court that the defence that they have filed will require re-drafting. The defendants will pursue their claim, albeit by way of their defence, that the deed of charge is invalid, or should be set aside, under the Contracts Review Act 1980 (NSW), and on the ground that it was procured by misleading and deceptive conduct on the part of the plaintiff. The defendants will separately contest the legality of the plaintiff's claim for interest. The defendants may decide to attack the validity of the deed of charge on other grounds. They will no longer pursue their defences based upon the Legal Profession Act, because, as will be seen below, they have already consented to a substantial part of the legal fees and disbursements claimed by the plaintiff being paid out of the controlled monies account.
30. Relevantly, the position has now been clarified, so that the plaintiff faces the need to pursue the claim in its statement of claim, and to defend claims by the defendants that the deed of charge is invalid, or should be set aside, once the stay is lifted.

Costs Assessments

1. As I have noted above, a consequence of the stay of the proceedings ordered by the Chief Judge will be that the plaintiff's entitlement to legal fees and disbursements as claimed in its various tax invoices will be determined by the assessment process, rather than by the Court.
2. On 17 December 2013, 19 December 2013 and 7 April 2014, the costs assessments were determined. An amended certificate was re-issued on 17 February 2014 in relation to costs assessment in matter 2013/60264.
3. A review of the certificates that were issued shows that certificates issued on 7 April 2014 dealt, in part, with 37 tax invoices issued by the plaintiff on 3 July 2013. The certificate issued on 19 July 2013 dealt with 10 tax invoices that were issued on 31 May 2013, which apparently were re-issues of tax invoices issued in 2010 and 2011, as well as a number of tax invoices issued in 2012. The point is that the assessments related to a significant number of tax invoices that were issued, or reissued, after 1 March 2013, when Bergin CJ in Eq made her order that the plaintiff complete the process of issuing all relevant tax invoices.
4. That has the consequence that, if the plaintiff now wishes to claim that it is entitled to legal fees that were not included in the tax invoices that were subject to the assessment, it would have to prove in a relatively clear way why the fees claimed were not included in the tax invoices that were prepared after 1 May 2013.
5. The table below provides a summary of the costs assessment determinations: Matter Total invoiced before assessment (as per Bill of Costs) Certificates of Determination Amounts paid by the defendants as determined by the assessor 2013/275619 $81,050.86 $42,132.98 (less costs of assessment ) $0.00 (Sale of Hornsby Units) 2013/275625 (Sale of Mortlake Units) $66,134.54 $34,590.34 (less costs of assessment) $0.00 2013/37476 $541,067.15 $407,426.00 (less costs of assessment) $222,529.97 (Spincast matter) 2013/60264 $811,902.63 $519,554.67 $145,649.02 (Arab Bank matter) (less costs of assessment) SUB TOTAL $1,500,155.18 $1,003,703.99 (less costs of assessment) $368,178.99

1. The costs assessor deducted the filing fees and the costs applicants' costs of the assessment from the invoices assessed.
2. The assessor's costs of assessment were paid by the costs applicants (the defendants in these proceedings) prior to the four certificates being issued. Following assessment, these costs became the liability of the cost respondent (the plaintiff in these proceedings) and were deducted from the amount payable to the plaintiff.
3. Below is a summary of the deductions made by the costs assessor and the amount owing to the plaintiff: Costs assessment Amount payable to plaintiff by defendants following deductions: $42,132.98 2013/275619 Less costs of assessment ($10,435.51) LESS assessor costs paid by plaintiffs ($4,235.00) = $27,462.47 $34,590.34 2013/275625 Less costs of assessment ($10,286.35) LESS assessor costs paid by plaintiffs ($4,235.00) = $20,068.99 $407,426.00 2013/37476 Less costs of assessment ($15,410.00) Less assessor costs paid by the plaintiffs ($10,972.50) = $381,043.50 $519,554.67 2013/60264 Less costs of assessment (17,277.32) Less assessor costs paid by the plaintiffs ($10,972.50) = $491,304.85 Total payable to the plaintiff after deductions $919,879.81 Less amounts ($368,178.99) already paid by defendants TOTAL PAYABLE $551,700.82

1. A review of the certificates and the reasons given by the assessor clearly suggests that the process of assessment was undertaken with great care and application by the assessor. The assessor considered a significant number of documents, spent a number of days reviewing the plaintiff's files, and gave detailed reasons for his assessment, including by dealing with each item claimed by the plaintiff on an item by item basis. It does not, of course, follow that any process of legal reasoning that looks to have been correctly determined, has been correctly determined. However, a careful perusal of the reasons for the assessment given by the assessor does justify a substantial level of confidence that the process of assessment was implemented in a proper way.
2. It is not feasible for me to analyse the reasons given by the assessor in detail for the purpose of these reasons for judgment. I will, in the circumstances, limit my observations to a number of significant matters, which, while taken from the reasons supporting particular assessments, appear to apply generally to all of the certificates, and the reasons given by the costs assessor.
3. The assessor accepted that Mr Elias did the work that he claimed to have done. Accordingly, he set out in a schedule against each item claimed the time that the assessor determined to be fair and reasonable for the work involved. The assessor also accepted that Mr Elias' hourly rate of $450 was reasonable. The assessor said (referring to the certificate issued on 19 December 2013 at pages 91 to 93 of Exhibit A): At the outset I note that I have had to ignore the obvious animosity frequently demonstrated in the above correspondence between the parties including the Practitioners… The costs were assessed on the basis of the material referred to above, together with my inspection of the Cadmus files which was conducted over 4 days at the Cadmus office in Bankstown. This inspection involved perusal or scanning of the contents of well in excess of 30 volumes of working files and 70 volumes of documents. My purpose in conducting this inspection was to determine the extent to which the items claimed in the bills were fair and reasonable. Because of insufficient detail in the bills, the assessment process in respect of both applications has proved a very time-consuming task, contrary to the intention of the legislation, which is (as I have pointed out to both parties in correspondence) to provide a quick and cheap assessment of costs… It will appear from these Reasons that I have examined each item in the bills and set out each varied or disallowed. However, taking into account the decision in Turner v Pride, I have also looked at the claims made in the bills globally and I have considered whether the amount that I have determined for costs and disbursements in each case is in fact a fair and reasonable amount for the work done. I am satisfied that it is, and if I have made any mathematical error in calculation, it remains my view that the amount of my determination in each case and in total is a fair and reasonable amount… I did not set aside the costs agreements. I allowed as fair and reasonable the hourly rates claimed for the principal ($450)… I did not agree with the [cost applicants'] submission that the work was not of such complexity to justify the expertise and skill of a principal or senior solicitor… I did not agree with the [cost applicants'] submission that the work was not of such complexity as to require the extent of involvement of junior counsel as has been claimed. I considered that the rates claimed by junior counsel were reasonable and I allowed those rates which I considered fair and reasonable for the particular work… General objection 6: Lack of detail in the bill This objection pointed out with considerable justification that the bill (in fact, each bill) is "replete with unidentified items and reference to discussions with no details as to what was discussed. This is unreasonable and unfair on any basis. This also makes the task of assessing the Bill from the Costs Assessor's point of view extremely difficult." The objection submitted that more details should be provided by Cadmus for each item affected by the lack of particularisation. Reference to my schedule of correspondence with the parties will indicate that Cadmus was given more than a reasonable opportunity to make responses to objections, particularly to the lack of sufficient detail in the bills, to which I specifically invited its attention. I indicated more than once in correspondence that significant reductions were likely to be made in relation to this objection. Cadmus response to objections Responses were provided in many of the letters to which I have made reference in the schedule above. Almost invariably they were prolix and unhelpful. Finally, its responses to objections in respect of the 5 bills contained in application CA 2013/60264 were provided on 28 October 2013. The document contains in excess of 100 pages including enclosures. It was of very little assistance to me, containing non-specific responses which were repetitive and often difficult to understand. Any reference to any specific item did not fully or at all meet the objection, and was drowned in a sea of irrelevancy. The constant Cadmus response to general objection 6 (insufficient detail) was, in essence, "the details of almost all the items are within the knowledge and possession of the Costs Applicants". Unfortunately, it is not sufficient for Cadmus to merely submit that the clients are or should be aware of the substantial work undertaken and "the substantial time taken". This is not to the point. The Costs Respondent has an onus to show that the items complained of in its bills are fair and reasonable. It is not sufficient for it to state as it does in paragraph 6.III in its response to the same general objection that it "is prepared to provide further details if required from the learned Cost Assessor." The Cadmus response to this crucial general objection 6 to its bills continued in the same vein. I consider that it has had more than adequate time to provide adequate responses to objections in these matters… I have had to rely heavily on my inspection of the Cadmus files to make my determinations…
4. The assessor also made the following observations concerning the costs of the assessment (taking page 142 of exhibit A as an example): As to the costs of the costs assessment, I considered the submissions of both parties. I prefer the submissions of the [Costs Applicants]. These are cases in which s 369(3)(a) applies with the effect that the law practice that provided the legal services concerned is liable for payment of the costs assessment. The subsection provides no discretion. I note also that I have very significantly reduced the costs claimed on assessment. The reduction is by in excess of 15%. This also points to the fact that Cadmus should pay the costs of the costs assessments (s 369(3)(c)). In the circumstances, I consider that it is fair and reasonable that the Costs Respondent pay [the Costs Applicants'] costs of each costs assessment, which are made up as follows and have been adjusted in each F1 Certificate.
5. On 20 May 2014, the plaintiff filed an application seeking leave to review the four costs assessment determinations, out of time, on the basis that the costs assessor erred in his findings.
6. The grounds for review stated by the plaintiff consist of 38 generally worded complaints about the process adopted by the assessor. I will provide only one example: "2. The Learned Costs Assessor erred in failing to give proper weight to the responses/submissions made by the Review Applicant". There is little point in setting out any other examples of the grounds for review, as they are all, more or less, equally uninformative.
7. Neither in the grounds for review, nor in the evidence and submissions presented by the plaintiff in opposition to the relief sought by the defendants in their notice of motion, does the plaintiff attempt, in any specific way, by reference to issues and the evidence before the assessor to demonstrate that the assessor made any significant errors in reasoning or conclusion. It does not follow that the Court should conclude necessarily that the application for review by the plaintiff will fail in substance.
8. Leave for the review being served out of time was granted, and the matter has been assigned to Mr Stephen Lancken and Mr John Bartos.
9. On 10 December 2014, the defendants' solicitors received correspondence from the cost review panel indicating that the review of the four costs assessment determinations had not yet commenced.
10. On 24 December 2014, the defendants' solicitors received an email from Mr Lancken suggesting a meeting between the parties be held on 11 March 2015.
11. On 11 March 2015, Mr Hemsworth attended a meeting with Mr Lancken and Mr Elias of the plaintiff at which, according to Mr Hemsworth's evidence, Mr Lancken said words to the effect The cost assessment review has not yet commenced and I will endeavour to commence it immediately. I envisage that it will take until September 2015 to complete.
12. The total of invoices rendered by the plaintiff to the defendants and their related entities before the assessment process was undertaken was $1,500,155.18. This amount was reduced by the costs assessor to $919,879.81. After deducting amounts already paid by the defendants ($368,178.99), the plaintiff was owed $551,700.82.
13. On 23 May 2014, by consent, Rein J ordered that the sum of $504,199.36 be paid to the plaintiff from the controlled monies account in relation to fees outstanding on two of the costs assessments (matter numbers 2013/37476 and 2013/60264). (Mr Hemsworth said that he is unable to determine by looking at the defendants' previous solicitor's file why an agreement was not reached to pay the other two costs assessments (matter numbers 2013/275619 and 2013/275625). As such, the amount of $47,531.46 remains unpaid).
14. On or about 2 June 2014 $504,199.36 was paid to the plaintiff from the controlled monies account in accordance with Rein J's orders.
15. The plaintiff claims that the total paid to it in relation to all of the tax invoices issued to the defendants and their related entities that were the subject of the costs assessment is $872,378.35 (being the sum of the amount paid by the defendants prior to assessment of $368,178.99 and the $504,199.36 referred to in the previous paragraph). The defendants claim that they have paid to the plaintiff a substantially greater sum. I will return to this issue below.

Reason for the defendants' application

1. In his affidavit Mr Hemsworth explained in some detail why the defendants have made the present application.
2. In short, they need access to $329,000 to pay that sum to Mr Somerville by 15 May 2015 to fund their defence of proceedings instituted by Arab Bank Australia Ltd. The proceedings are fixed to be heard for a period of 15 days commencing on 1 June 2015. The plaintiff did not challenge the reasonableness of the estimate given by Mr Hemsworth concerning the legal costs that the defendants would incur. It is not necessary to consider in detail the makeup of that estimate. I will proceed upon the basis that the amount needed by the defendants is $329,000, although the amount that they want to be paid to them out of the controlled monies account is $440,000.
3. The defendants say that they need to have this amount paid to them out of the controlled monies account, because otherwise they will not be able to fund their defence. The truth of this proposition is a significant issue on the application. The plaintiff strongly challenges the defendants' claim. I will return to this issue in more detail below.
4. It appears that the defendants have asked for the Court to order that $440,000 be paid to them out of the controlled monies account, as that amount was the result of a calculation that they did as to the amount that they could justify be paid out of the controlled monies account, and still leave an appropriate amount of security to cover the entitlement of the plaintiff. The amount that the defendants actually require, however, is $329,000.

Outline of the defendants' case

1. Mr Hemsworth in his affidavit set out in detail the manner in which the defendants sought to justify their claim that the Court could now order that $440,000 of the money in the controlled monies account be paid to them in a manner that provided adequate and fair protection to the plaintiff. That series of propositions has matured into a document prepared by the defendants' counsel, the material parts of which I now set out in full (omitting citations to the evidence): 2. Pursuant to orders of Rothman J made on 21 December 2012, a controlled monies account was established, into which an amount of $1,700,000 of the proceeds of sale of a property belonging to the defendants was placed. 3. The $1,700,000 comprised: (a) $1,350,000, being an estimate of the amount allegedly owed by the defendants to the plaintiffs for legal services; (b) $350,000, being an estimate of the plaintiff's likely costs of recovering the amount allegedly owed to it, together with interest. 4. On 1 March 2013, the proceedings were stayed, pending the assessment of the plaintiff's costs. Assessments have now been made. Of particular note are: (a) the plaintiff's bills of costs were for a total of $1,500,155.18; (b) on assessment, those bills were assessed down to $919,879.81; (c) the assessor determined that the defendants were entitled to a credit of $368,178.99 for amounts already paid to the plaintiff; (d) with the result that the amount owing by the defendants to the plaintiff was $551,700.82 ($919,879.81 less $368,178.99). 5. The Court, unless satisfied that there is likely to be a successful review of the costs determinations, should act on the basis that they are correct. Whilst the plaintiff relies upon the grounds set out in its review applications, there is nothing on the face of the cost determinations or the review application which suggests that a review is likely to succeed. 6. The difference between the amount estimated ($1,350,000) and the amount owing ($551,700.82) is $798,299.18. 7. The defendants seek the release of $440,000 from the account. The Court can be comfortably satisfied that it is appropriate to make an order for the release of $440,000 to the defendants, given that: (a) as noted above, the estimate was excessive by $798,299.18. Subtraction of $440,000 from this amount still leaves $358,299.18; (b) the above calculations do not give credit to the defendants for amounts which the defendants claim they paid, in addition to the $368,178.99 determined by the costs assessor. The defendants say that they have been unable to quantify these amounts because the plaintiff has not been forthcoming with relevant documentation.
2. The defendants therefore begin with the orders made by Rothman J, as if his determination of the amounts of $1,350,000 and $350,000 are a valid starting point. They then seek to make adjustments to those figures, principally in relation to the results of the costs assessment, and the amounts that they have already paid to the plaintiff. They treat the $350,000 as being prima face adequate, notwithstanding that the dispute has not been determined by the hearing in this Court in late February 2013 that was originally fixed. They do not directly deal with the possibility that the plaintiff will incur additional enforcement costs, interest and costs of the costs assessment.

Legal Principles

1. The parties did not initially address in their submissions in any detail the legal principles that must guide the Court in deciding the present application. They provided additional submissions on this subject, at my invitation, after I reserved judgment.
2. There are three considerations that in my view must steadily be borne in mind in dealing with the present application. The first is that, in substance, it is an interlocutory application that is likely to have a final effect on the rights of the plaintiff. For reasons that will appear below, there is a high probability that the only fund that will be available to meet whatever entitlements the plaintiff ultimately establishes will be the monies now held in the controlled monies account.
3. The second consideration arises out of the fact that, as a result of the orders made by Rothman J on 21 December 2012, the plaintiff was deprived of the opportunity to enforce the deed of charge and the mortgage in accordance with their terms in relation to the security property. The plaintiff was left with a fund of $1,700,000 to cover all of its entitlement to legal fees and disbursements, enforcement costs, and interest. While the application that his Honour dealt with was an interlocutory Vacation List matter, the orders made had a final effect. While changes in circumstances after the orders were made might justify some variation of the effect of the orders, great care must be taken to ensure that the plaintiff is not unreasonably deprived of the limited alternative security with which it has had to be satisfied after the controlled monies account was established.
4. Thirdly, while the present application may have similarities to one in which an injunction is sought by a mortgagor to restrain the mortgagee exercising a power of sale of the security property, or some other security right, there are significant differences. In that case, although the mortgagee will be prevented from exercising its security rights if the injunction is granted, the mortgage will otherwise remain in place, and the ability of the mortgagee ultimately to have resort to the whole of the security property will continue. The present application, on the other hand, invites the Court to intervene in a way that will finally reduce the value of the security property to the mortgagee (in this case the alternative security represented by the monies deposited into the controlled monies account). This is a materially more onerous application from the perspective of the mortgagee than an application to restrain it from exercising its security rights. A consideration of the authorities that relate to the latter situation must be tempered by an acceptance of the need for the Court to exercise the greatest of care to avoid depriving the mortgagee of its rights.
5. The amount which the plaintiff is entitled to recover under its security has not been determined with certainty, and indeed could not have been determined with certainty at this stage. The plaintiff's application to review the certificates issued by the costs assessor has not been completed. The enforcement costs that the plaintiff will be entitled to recover have not been quantified in any binding way. Indeed, it is inevitable that the plaintiff will incur additional enforcement costs. There is likely to be a significant number of contentious issues of principle in the determination of what enforcement costs are secured by the deed of charge. Interest is secured by the deed of charge, and it is still running. There is a dispute between the parties as to the circumstances in which the plaintiff is entitled to recover interest at the default rate of 16.5% pa under the deed of charge. If the Court orders that any sum be paid out of the controlled monies account to the defendants, and it turns out that the money remaining is insufficient to yield full recovery to the plaintiff, it will be likely, if not inevitable, that the plaintiff will be unable to recover the shortfall from the defendants.
6. It will be convenient to state the principles that govern applications by mortgagors for orders restraining mortgagees exercising their security powers in the terms set out by Ward JA in Goater v Commonwealth Bank of Australia [2014] NSWCA 265 (which I respectfully adopt) as follows: [70] The Bank maintains that, even if interlocutory relief to restrain the exercise of the power of sale might otherwise be available, no such relief should be granted in the present case as the Applicants are not in a position to pay into court the amount of the mortgage debt. Reliance is placed on the principle articulated in Inglis v Commonwealth Trading Bank of Australia [1972] 126 CLR 161 at 164-165, by Walsh J (with whose decision Barwick CJ, Menzies and Gibbs JJ subsequently agreed). [71] In Inglis (at 164), Walsh J confirmed the long established general rule that applications to restrain the exercise by a mortgagee of its power of sale will not generally be granted unless the amount of the mortgage debt, if not disputed, (or, if the amount is disputed, the amount claimed by the mortgagee) is paid into court. His Honour considered that the authorities established that nothing short of actual payment was regarded as sufficient to extinguish a mortgage debt and said (at 164-165): If the debt has not been actually paid, the court will not, at any rate as a general rule, interfere to deprive the mortgagee of the benefit of his security, except upon terms that an equivalent safeguard is provided to him, by means of the plaintiff bringing in an amount sufficient to meet orders claimed by the mortgagee to be due. The benefit of having a security for a debt would be greatly diminished if the fact that a debtor has raised claims for damages against the mortgagee were allowed to prevent any enforcement of the security until after the litigation of those claims had been completed. [72] Barwick CJ, endorsing that view, considered (at 169) that the Inglis case fell fairly within the general rule applicable when it is sought to restrain the exercise by a mortgagee of his rights under the mortgage instrument and that "[f]ailing payment into court of the amount sworn by the mortgagee as due and owing under the mortgage, no restraint should be placed by order upon the exercise of the respondent mortgagee's rights under the mortgage". [73] In Harvey v McWatters (1948) 49 SR NSW 173 at 177, it was said that this rule operates to supplement the ordinary requirement of an undertaking as to damages on an interlocutory application. [74] In E L G Tyler, P W Young, C E Croft, Fisher and Lightwood's Law of Mortgage (3rd Aust ed 2013, LexisNexis Butterworths) at [20.38], the authors note that the requirement for payment into court as a condition of a grant of an injunction to restrain a sale by a mortgagee is an aspect of the general equitable rule that the mortgagor must offer to redeem before he can bring the mortgagee before the court. [75] In Eltran Pty Ltd v Westpac Banking Corporation [1988] FCA 712 ; (1988) 32 FCR 195, the court proceeded on the basis that, where the mortgagor's lack of credit made it impossible to give the usual undertaking as to damages, an injunction might be granted without such undertaking if there was evidence that the mortgaged property is and was likely to remain adequate security for the mortgagee. The availability of such an approach will not assist the Applicants in the present case, having regard to their concession as to the loss to be expected on sale of the properties. [76] However, as noted in Fisher & Lightwood at [20.38], the mortgagor need not offer to redeem, and therefore need not pay into court, where it is alleged that the power of sale is not properly exercisable (see Inglis at 164-165). Examples given by the authors of exceptions to the rule in Inglis are where the validity of the mortgage is in issue, or there is a question whether or not there has been a breach or a question as to whether or not the notice was effective (Allfox Building Pty Ltd v Bank of Melbourne (1992) NSW Conv R 55-634), or where the power of sale is being used for an improper motive (Milton Park Country Club Pty Ltd v Yasuda Trust Australia Ltd (Supreme Court (NSW), Bryson J, 8 March 1991, unrep)). Campbell JA in Bayblu Holdings Pty Ltd v Capital Finance Australia Ltd [2011] NSWCA 39 at [58] confirmed that there is a long recognised exception where the dispute goes to whether the power of sale has arisen at all (referring to Harvey v McWatters and Allfox).
7. In Clarke v Japan Machines (Australia) Pty Ltd (No 2) [1984] 1 Qd R 421 GN Williams AJ said: I am satisfied (though not without some reservations) that the second plaintiff has established that the first and second defendants should be restrained until the trial of the action or further earlier order from exercising the power of sale under the Bill of Encumbrance. Mr. Jackson Q.C. submitted that if I should come to that conclusion I should, following Inglis v. Commonwealth Trading Bank of Australia (1972) 126 C.L.R. 161, require the amount claimed by the mortgagee to be paid into court. Mr. Byrne submitted that such principle did not apply to the situation here and that such a condition should not be a prerequisite of the injunction issuing. The following passage from the judgment of Walsh J. in Inglis v. Commonwealth Trading Bank of Australia is significant: "If the debt has not been actually paid, the Court will not, at any rate as a general rule, interfere to deprive the mortgagee of the benefit of his security, except upon terms that an equivalent safeguard is provided to him, by means of the plaintiff bringing in an amount sufficient to meet what is claimed by the mortgagee to be due." (pp. 164-5). That passage suggests that the rule is a general, but not an inflexible one. I do not read the observations of Barwick C.J. at p. 169 as disputing that proposition; it was sufficient for the Full High Court to say that Walsh J. was correct in holding that the general rule applied to the case before him. The general rule is no more than a particular application of the maxim of equity that "he who seeks equity to equity must do equity". Where the mortgagor is asking a court of equity to deprive the mortgagee of the benefit of his security (because, for example, the mortgagor has some counterclaim against the mortgagee) it is not unreasonable to require the mortgagor to pay into court the amount demanded by the mortgagee, or otherwise provide an "equivalent safeguard". Meagher Gummow and Lehane, Equity Doctrines and Remedies (para. 316) suggest that there are two established exceptions to the general rule: (a) where the amount claimed by the mortgagee is obviously wrong; and (b) when there is a question as to whether the mortgagee's power has become exercisable at all. They rely in support of the first exception on the decision of the Court of Appeal in Hickson v. Darlow (1883) 23 Ch.D. 690. In that case the mortgagee contended that the mortgagor must pay into court the whole amount he claimed. The Court of Appeal (Jessel M.R., Lindley and Bowen L.J.J.) rejected that argument. Jessel M.R. said (p. 694): "the ordinary practice in cases between mortgagor and mortgagee was to be followed, namely, that on an application by a mortgagor to stay a sale, if the mortgagee swears that an amount which, consistently with the terms of the mortgage, may be due to him, is due, that is the amount which the mortgagor must bring into Court." Lindley L.J. said that the court was not bound by the mortgagee's affidavit "if he swears that a sum is due which, according to the terms of his security, cannot be due upon it". (p. 695). In that case the Court of Appeal ordered that a lesser sum than that demanded by the mortgagee be paid into court. It is clear from that decision that the court is entitled to look at all the relevant facts in order to detemine what amount, if any, should be paid into court. In accordance with Hickson v. Darlow I am satisfied that in this case the sum of $331,071.62 is not due in terms of the security; until there has been compliance with clause 11.2 of the lease no specific amount can be established as the sum secured thereby. The second exception noted in that textbook is based on a passage in the judgment of Sugerman J. in Harvey v. McWatters (1949) 49 S.R. (N.S.W.) 173 at 178: "There is a distinction between what I have called the ordinary case and the case in which the existence of the power of sale or the question where it is exercisable at all is in question. The present case is of the second class. What is called the ordinary rule applies to cases of the first class, and to those cases only. This flows from the principles and reasoning on which that rule depends. Cases of the second class are as regards interlocutory applications, governed by a rule of similar type. But it is a rule resting on different principles and reasoning. These permit of a greater flexibility. They do not require that in every case the whole amount claimed or sworn to by the mortgagee or seen from the terms of the instrument to be the greatest amount that could be due should be paid in. The terms may be moulded so as to require payment in of so much only as suffices to give adequate protection to the mortgagee". The pasage was cited with approval by Sheppard J. in a review of the relevant cases in Brutan Investments Pty. Ltd. v. Underwriting and Insurances Ltd. (1981) 39 A.C.T.R. 47. There is also a helpful discussion of the relevant cases by Fox J. in Blundell v. Associated Securities Ltd. (1971) 19 F.L.R. 17 at pp. 44-48. That review appears to have the approval of Walsh J.: Forsyth v. Blundell (1973) 129 C.L.R. 477 at p. 505. I also note the reference by Walsh J. to Bank of New South Wales v. O'Connor (1889) 14 App. Cas. 273 at p. 283; the passage referred to supports the general proposition that, in a dispute between mortgagor and mortgagee, a court of equity has "the power … to do complete justice between the parties". Bearing in mind the peculiar circumstances of this case, it is not appropriate to require the payment into court of $331,071.62 as a prerequisite of granting the injunction. The first and second defendants have the benefit of the repossessed goods, and the Bill of Encumbrance is only a collateral security for any loss determined in accordance with clause 11.2 of the lease. No such loss has yet been established. The defendants are amply protected by the fact that the goods have been repossessed and are now in the possession of the first defendant, and by the fact that the Bill of Encumbrance remains on foot. The repossession of the goods is in itself an "equivalent safeguard".
8. In Bayblu Holdings Pty Ltd v Capital Finance Ltd [2011] NSWCA 39; (2011) 279 ALR 166 Campbell JA said (Tobias and Macfarlan JJA agreeing): [58] An exception to this "general rule" has long been recognised when there is an issue about whether the power of sale has arisen at all: Harvey v McWatters (1948) 49 SR (NSW) 173; Allfox Building Pty Ltd v Bank of Melbourne Ltd (1992) NSW Conv R 55-634 (Allfox). In Allfox Powell J at 59,627 recognised, obiter, another exception when the validity of the mortgage was in issue. Clarke v Japan Machines (Australia) Pty Ltd (No 2) [1984] 1 Qd R 421 at 422-3 (Clarke First Instance) recognised another exception where the amount claimed by the mortgagee is obviously wrong. First instance decisions have also recognised some other exceptions where the plaintiff claims that he can redeem the mortgage within a fairly short time by carrying out a refinancing proposal that is reasonable on its face, or where the plaintiff has a demonstrable capacity to secure or at the least refinance the mortgage debt: Grose v St George Commercial Credit Corporation Ltd (1991) NSW Conv R 55-586 at 59,300-1 per Bryson J; Parist Holdings Pty Ltd v Perpetual Nominees Ltd [2006] NSWSC 599 at [16]-[21] per Hamilton J. I express no view about the correctness of those two last-mentioned decisions, beyond saying that I do not regard the decision of this court in Notaras v Sly and Weigall (2005) 12 BPR 23,765 ; [2005] NSWCA 275 at [133] (Notaras) as necessarily providing support for the last-mentioned exception. In Notarasat [133], Mason P identified four difficulties that stood in the way of a mortgagor succeeding in an action for negligence against its solicitors on the basis that the solicitors had not sought an interlocutory injunction to restrain exercise of a power of sale. Mason P noted that one of these difficulties was "the futility of approaching the court without a demonstrable capacity to tender or secure or at least re-finance the $4m undoubtedly due under the Mortgage". That is not saying that the injunction would definitely have been obtained if the mortgagor had such a demonstrable capacity.
9. It will be relevant in this case whether the amount that the plaintiff claims that it is owed (as sworn to by Mr Elias) is "obviously wrong", and if so, what the consequences should be for the application now made by the defendants.
10. The defendants have now made clear that they will challenge the validity of the deed of charge by prosecuting their defence after the stay of these proceedings is lifted. However, in my view it will not be appropriate in this case to consider the exception to the general rule, which applies when the validity of the mortgage is under challenge. The defendants did not support their application in their notice of motion on the ground that the exception applied. They did not tender evidence on the application to support a claim that the deed of charge is invalid. There is no basis for the Court to form any view at all as to the likelihood that a claim of that nature will succeed.
11. The defendants point to authority that suggests that the general rule does not apply where the mortgage is granted by a client to secure fees owed to a solicitor. In particular, at first instance in Inglis v The Commonwealth Trading Bank of Australia (1972) 126 CLR 161 at 164, Walsh J referred to the general rule, as stated in Halsbury's Laws of England, 3rd ed., vol 27, p. 301 and then stated: "Then there is a reference to a special case where the mortgagee was the mortgagor's solicitor."
12. That special case was considered by the English Court of Appeal in Macleod v Jones (1883) 24 Ch D 289. At 296-297 Brett MR said: … Now if he were simply a mortgagee I do not say he would not have a right to do that, subject to giving an account. So far as I understand the practice of the Court he could not be stopped from selling the estate without the mortgagor paying into Court or otherwise securing to him, not what the Court might think prima facie was due to him as far as they could ascertain, but without paying into Court that which he demanded, subject to a subsequent enquiry. But that is on the theory that he is nothing more than a mortgagee. But is this Defendant nothing but a mortgagee? He is a mortgagee and he has become mortgagee by reason of his being the lady's solicitor, and upon his own advice to her that that was the best manner of settling her estate. That seems to me to make the greatest difference. It brings him within an acknowledged jurisdiction of the Court. He was a solicitor, and she was his client at the time these transfers were made. That gives the Court jurisdiction over him beyond the jurisdiction that it has over a mere mortgagee. It is the jurisdiction which the Court exercises as between solicitor and client, and I take it the real meaning of it is this. That where matters are called in question as between solicitor and client, in as much as the client has thereby lost the advice of the solicitor, the Court steps in and looks for itself, and as far as it can, to a certain extent, acts for the client in the way the solicitor would have done if he had been only solicitor, and expected to give her the advice for which he is paid as solicitor. Therefore where a solicitor is nominally the mortgagee, and when he assumes to exercise his right to sell as mortgagee, it seems to me the Court has jurisdiction to enquire immediately into the circumstances of the case, and will not allow the solicitor to exercise his unqualified rights as mortgagee, but will only allow him to exercise those rights subject to the control of the Court, and to his doing so in an equitable and fair manner as between a solicitor and his client. Under those circumstances the Court I think will consider amongst other things what is the debt for which the solicitor as mortgagee is claiming to sell, and will enquire whether prima face, or so far as the Court can see, his claim in regard to the amount for which he is claiming to sell is a valid one. They will enquire also into the condition of the security which he is threatening to sell, and see whether it is a security which is a hazardous, or a safe one. That might make a great deal of difference as to the terms on which the Court would allow him to sell. The Court will certainly also look at this, whether in this very delicate position in which by his own act and on his own advice he has put himself, he has done that which is fair to the client, namely, given the client all the information he ought to do now that he is going to act adversely to the client to enable that client to take other advice. The Court will consider whether he has given an account, or a fair account, of his claims against his client.
13. Cotton LJ at 300 and Bowen LJ at 300 to 304 adopted similar principles.
14. In Nemeth v Reachcord Pty Ltd (1998) 9 BPR 16,557 at 16,561, Young J (as his Honour then was) said: E. The next problem is whether the plaintiff is debarred from this action because she has not brought into court the amount due to redeem the mortgage. This is what is often called the ordinary rule as to mortgagors' suits; see Harvey v McWatters (1948) 49 SR (NSW) 173 and Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161. However, as I explained in my article "A Mortgagor's Right to Approach the Court" (1992) 1 APLJ 61 the rule is the ordinary rule and is not to be inflexibly applied in each case. Where a client brings in question a mortgage originally granted to her solicitor the court usually does not apply the rule: MacLeod v Jones (1883) 24 Ch D 289. It seems to me that for this reason, and also for the reason that there is a complaint by the plaintiff that no moneys are owing under the mortgage so that the power of sale has not arisen, that the court should entertain the proceedings.
15. As, in the present case, the plaintiff was the solicitor for the defendants at the time the defendants granted the deed of charge, and as the deed of charge was primarily granted to secure payment of legal fees and disbursements due to the plaintiff, it would appear that the principle considered in Macleod v Jones may assist the defendants in the present case. At least it appears to reinforce and add substance to the exception to the general rule that applies in relation to all mortgages that the Court may not require the mortgagor to provide alternative security to the amount claimed by the mortgagee as a condition of restraining the exercise of the mortgagee's security powers.
16. A subsidiary legal issue that arises is whether the plaintiff will be entitled to recover from the defendants under the deed of charge, as costs of enforcing the charge, legal costs that the plaintiff has been ordered to pay to the defendants in these proceedings, or costs which the plaintiff has incurred that the Court does not order the defendants to pay to the plaintiff. The parties only addressed this issue in passing in submissions that I invited them to make, after I had reserved judgment. As will be seen, the resolution of this question is not necessary for the purposes of the determination of this application. I will merely observe that it is probable that, where the plaintiff acts reasonably in incurring costs in an attempt to enforce the deed of charge, it will be entitled to recover those costs under the deed, even if it is not the beneficiary of a costs order from the Court in its favour. It is likely to be otherwise if the plaintiff unreasonably makes a claim, which fails, and is ordered to pay the costs of the defendants. The costs order made by Bergin CJ in Eq against the plaintiff in respect of its failed application in February 2013 for an order that most of the moneys in the controlled moneys account be paid out to it is the only case of which I am aware, where it is unlikely that the plaintiff could recover its costs of the application, or the costs it has been ordered to pay the defendants, under the deed of charge.

Analysis of the plaintiff's claims

1. It is necessary to consider a number of preliminary matters before the plaintiff's response to the defendants' claim is examined.
2. First, the plaintiff had approximately one month to develop its response, and to support that response with evidence. The plaintiff's initial approach was to try to prevent the defendants' application being dealt with. That approach resulted in Lindsay J on 23 April 2015 ordering the plaintiff to file and serve by 28 April 2015 "so far as it [was] able" the evidence to be relied upon by it in opposition to the relief claimed by the defendants. Specifically, the evidence that the plaintiff was directed to file and serve "should, so far as is practical, provide an estimate of the costs and interest claimed by the plaintiff as "enforcement costs" in these proceedings, and interest", under the deed of charge.
3. During the hearing of the defendants' application the plaintiff frequently complained that it had not been given enough time to prepare its case. It becomes immediately apparent, on an examination of the evidence upon which the plaintiff relied, that it consists almost entirely of estimates made by Mr Elias. Mr Elias dealt with this issue in par 39 of his 28 April 2015 affidavit. He claimed as the cost of the present proceedings up to April 2015 (inclusive of counsels' fees and disbursements) $555,500 plus interest to be determined at 16.5% pa. He made more precise claims (although without elaboration) for a number of other Supreme Court proceedings and a proceeding in the Local Court. He claimed that the plaintiff's costs of the costs assessment process up to April 2015 were $300,000, plus interest at 16.5% pa. He added a claim for unbilled work, and fees due to Mr Milanovic, of counsel, of $220,000, again plus interest at the rate of 16.5% pa.
4. I gave the plaintiff an opportunity to file a further affidavit of Mr Elias that explained the composition of these claims by the plaintiff, and also provide specific evidence of all of the amounts received by the plaintiffs from the defendants and related entities in payment of fees claimed by the plaintiff. That led to the filing of Mr Elias' 7 May 2015 affidavit.
5. In support of the plaintiff's estimate of its costs incurred in respect of the various legal proceedings referred to in Mr Elias' 28 April 2015 affidavit, Mr Elias provided a breakup of his legal fees for acting for the plaintiff on a daily basis, whereby he multiplied the time spent by his hourly rate. This evidence consisted of schedules that were obviously prepared for the purpose of being included in Mr Elias' affidavit. The estimates were not supported by any business records of the plaintiff, such as a modern solicitor might be expected to keep, in order to justify his or her claims for fees. There was no evidence as to the work done during the period identified. Indeed, the trust account ledgers that were exhibited to the affidavit appeared to be prepared in Word format. There was one trust account ledger that had been produced in hand written form, and which appeared to be a copy of an original record.
6. The explanation for this state of the evidence was not made entirely clear, but I gleaned from statements made by Mr Elias and Mr Tregenza that Mr Elias had to estimate the costs incurred by the plaintiff by examining the plaintiff's files, including notations made on the documents in the files concerning the amount of time spent working on the relevant matter. I infer that the plaintiff simply does not keep comprehensive and immediately accessible records of the work that it does, in particular, records that identify the work done.
7. The result has been to make it extremely difficult for me to form any objective judgments about the reasonableness of the claims made by the plaintiff in respect of the legal costs that it has incurred. It seems that I have joined the costs assessor in that regard, as the principal reason for the costs assessor's disallowance of substantial parts of the plaintiff's claims for legal fees was the absence of evidence as to the nature of the work that the plaintiff claimed to have done in respect of all of the items in its claims.
8. In addition, the plaintiff is apparently unable to produce any conventional business records produced in the ordinary course of its business that clearly demonstrate all payments of fees that it has received from the defendants and their related entities over the time that the plaintiff has provided legal services to them. This is inexplicable. If the plaintiff has kept proper and efficient records, it should have been a simple matter for the plaintiff to identify all relevant files, and to print out from its general ledger a list of all tax invoices and receipts. Such a list might not necessarily be entirely accurate, but it is the natural starting point from which to make an interlocutory determination of the total amount of legal fees and disbursements claimed by the plaintiff in respect of all files and of the total amount paid by the defendants and their related entities. Absent a record of this nature, it becomes very difficult to consider in any arithmetical way the significance of isolated evidence of payments made to the plaintiff by the defendants and their related entities. If there is no evidence as to the global position, it is difficult to attribute payments made as between the claims made by the plaintiff relevant to these proceedings, and other claims.
9. Secondly, as I have noted above, the approach that the defendants have adopted is to start with the logic upon which the orders made by Rothman J on 21 December 2012 were made; namely, an allowance of $1.35 million was made to cover the plaintiff's legal fees and disbursements, and $350,000 was allowed to cover the costs of recovery and interest. Rothman J required a separate amount of $83,674.13 to be paid out of the proceeds of sale of the security property to meet senior counsels' fees. It appears that Rothman J made his orders on the assumption that this Court would determine the plaintiff's entitlement in a hearing that was expected to occur at the end of February 2013.
10. The defendants invited the Court to assess the amount that is adequate to protect the claim by the plaintiff that is secured by the deed of charge by making appropriate adjustments to the calculations that must be assumed to have underpinned Rothman J's orders, in response to subsequent events, particularly the results of the costs assessment.
11. That is not a straightforward exercise to carry out, as the precise facts that led to the orders made by Rothman J do not emerge from his Honour's judgment, and the evidence that was before the Court on that occasion was not tendered on the present application. It is therefore necessary for the Court to proceed upon broad assumptions concerning the basis for the orders made by Rothman J.
12. The hearing conducted by Rothman J was interlocutory. The parties to the present application should not be bound absolutely by any assumptions of fact made by his Honour. It should be legitimate for the parties to prove, by adequate evidence, that the calculations assumed by Rothman J omitted relevant information. A good example is the defendants' present reliance upon the fact that Rothman J did not allow for the fact that the defendants had already paid to the plaintiff at least $368,178.99 to meet the plaintiff's claim for legal fees.
13. As the manner in which Rothman J derived the two sums of $1,350,000 and $350,000 is not transparent, because of a lack of detail as to the evidence on which is Honour was required to act, it is not practicable to approach the present task by starting with the assumptions upon which the amounts determined by Rothman J were fixed, and then make adjustments by reference to the perceived differences between the circumstances that apply at present and the circumstances that then applied. The most clear and convenient approach is simply to start from the proposition that $1,700,000 was originally placed into the controlled monies account, and then to determine from scratch the amount that must be retained in that account in order adequately to protect the plaintiff in the exercise of its rights under the deed of charge.
14. I will deal first with the plaintiff's claim for the retention in the controlled monies account of an adequate amount to cover its costs of enforcing the deed of charge, and then consider the plaintiff's original claim for its legal fees and disbursements, and finally its claim for interest.
15. Sight must not be lost of the fact that this will be an interlocutory analysis. Its purpose is to test the defendants' logic in their skeleton outline. No other course is available than to embark upon the analysis to see where it leads. It is only in that light that the relevant legal principles can be considered and applied with some objectivity. The process may, however, yield an illusory certainty. Many steps in the process of reasoning will be contentious, and may be found to be wrong at a final hearing. Many steps have not been the subject of full, or indeed in some cases, any, submissions by the parties.

Plaintiff's costs of prosecuting these proceedings

1. The first component of this claim is the amount of $555,500 for the costs of conducting the present proceedings to the end of March 2015.
2. The evidence allows me to make the following observations concerning this claim: 1. As mentioned above, the supplementary evidence provided by the plaintiff consists only of a daily breakup of total hours spent and the total claim per day represented by Mr Elias' fees. 2. The total claim for solicitors' fees is $340,030 plus GST of $34,003, giving a total of $374,033. 3. Of this amount a total of $142,165 plus GST of $14,216.50 was incurred before Rothman J gave judgment on 21 December 2012. That total amount of $156,381.50 may be assumed to be included in Rothman J's allowance of $350,000. That leaves an amount of $193,618.50 from that allowance. 4. The plaintiff did not provide any breakup of counsels' fees. It claimed a global amount of $154,552.50. That makes it impossible for the Court to make an assessment of the amount of the counsels' fees that should be included in the $350,000 allowance. (This is an example of how the way the plaintiff has approached this application has created unnecessary difficulty. It should have been a simple matter for the plaintiff to annex to Mr Elias' affidavit copies of the tax invoices submitted by counsel). 5. The Court has not yet made a final costs order in relation to the proceedings up to the time Rothman J delivered his judgment. (I understand that some interlocutory cost orders have been made). 6. The plaintiff claims solicitor's costs totalling $117,605 plus GST of $11,760.50 for the months of January and February 2013. The total is $129,365.50. That must be the approximate amount of additional solicitor's fees incurred by the plaintiff, before Bergin CJ in Eq stayed the proceedings on 1 March 2013. 7. These costs must include the plaintiff's costs of obtaining the order striking out the defendants' cross claim. Those costs should in principle be relatively minor. 8. The costs also should include the costs of the plaintiff's application to have $1,362,500 of the amount in the controlled monies account paid out to it. The plaintiff was represented by senior and junior counsel on that application. The application was dismissed, and an order was made that the plaintiff pay the defendants' costs of that application. 9. The amount of costs claimed by the plaintiff as legal fees for the period after these proceedings were stayed is $80,000, plus GST of $8000, giving $88,000. 10. I have carried out a basic comparison between a rudimentary analysis of the chronology of the steps taken in these proceedings, derived from the Court's records, and the costs incurred by the plaintiff in these proceedings. I accept that, at a level of fair approximation, the rate at which the plaintiff has incurred costs reflects the apparent level of activity that was necessary in the conduct of the proceedings. By that I mean, in essence, that costs appear to have been incurred when something was happening in the proceedings, and only incurred to a small extent when little was happening, and the quantum of the costs appears to match in an approximate way the significance and complexity of what was happening in the proceedings. 11. It does not follow from this rough comparison that the quantum of the costs incurred are necessarily justifiable. For example, Mr Elias stated that the plaintiff incurred legal costs of $30,195 in May 2014. That is the month in which Rein J by consent ordered $504,199.36 to be paid out of the controlled monies account to the plaintiff. The notice of motion to achieve that result was filed in Court on 16 May 2014. It was filed by the defendants. While the evidence does not throw any light on the subject, it is difficult to see how the plaintiff can justify incurring cost of over $30,000 in taking the steps necessary to consent to its being paid over $500,000. This individual instance exemplifies a concern that the amount of the costs claimed by the plaintiff appears to be excessive, not necessarily because work was not done, but because more work was done than was necessary.
3. I deduce from these considerations that the plaintiff incurred $217,651.50 (inclusive of GST) in solicitors' costs in these proceedings after the date of Rothman J's judgment. Those costs were not allowed for in the $350,000 set aside by his Honour. A substantial portion of the $129,365.50 (inclusive of GST) incurred during January and February 2013 should be apportioned to the plaintiff's failed claim for payment of $1,362,500 out of the funds in the controlled monies account. Further, it will be difficult for the plaintiff to prove an entitlement to all of the solicitors fees that it claims to have incurred, because of the apparent inability of the plaintiff to provide adequate evidence of what the plaintiff's solicitor, Mr Elias, was actually doing at individual times, and how long it took him to do each task. The plaintiff is likely to have the same problem that it experienced on the costs assessments.
4. The plaintiff did not provide any evidence of its estimated costs of defending the present notice of motion filed by the defendants. Those costs will not be insubstantial. Mr Elias said in his 28 April 2015 affidavit that he had estimated the unbilled work as well as the clerical and administrative work to be about $160,000. It appears that that estimate covers a substantial period during which Mr Elias says that he did not always bill the defendants or their related entities for all of the fees to which the plaintiff was entitled. It is entirely unclear whether or not the plaintiff's costs of the present application are included within that estimate, and if so, what the estimate was for the costs of the present application. In my view, in principle, an allowance for those costs would have to be made in favour of the plaintiff. That would be so even if I found in favour of the defendants on the notice of motion. This is not an appropriate situation for costs to follow the event, if the defendants succeed on a contested application for payment of a sum out of the controlled monies account. The reason is that the most the Court can do at the present is make the best estimate reasonably possible of an appropriate amount to provide security to the plaintiff. No matter how careful the Court is, it may be proved wrong at a final hearing to determine the amount of enforcement costs that is secured by the deed of charge. The plaintiff is entitled to an amount reasonably sufficient to cover its costs and disbursements of resisting the present notice of motion to be retained in the controlled monies account.
5. Mr Elias estimated that the plaintiff's costs of prosecuting the proceedings on its statement of claim, and dealing with the issues raised by the defendants' defence, once the stay of proceedings is lifted after the costs assessment has been completed, at $350,000. Mr Elias did not give the basis for his estimation. The defendants submit that, accordingly, the Court should effectively ignore this item of costs. That course would not be warranted. It is true that the amount of $350,000 appears to have been plucked out of the air, so to speak. However, I do not think that it would be realistic for the Court to expect the plaintiff to provide a detailed and reliable estimate of the costs of conducting litigation as contentious as the present proceedings, given that the case has not progressed much further than the filing of pleadings. I do not blink at an estimate of $350,000, and think that it is likely to be an underestimate, if the plaintiff is required to prosecute its claim to finality, including after appeals.
6. As I have explained above, I took a series of steps during submissions, and also by a number of communications to counsel for the defendants after I had reserved judgment, to give the defendants a full opportunity to state their position precisely as to how they would prosecute their defence and the cross claim after the stay of the proceedings was lifted. I did so in part because, once it emerged that the defendants had cooperated in having $504,199.36 paid out of the controlled monies account to the plaintiff on account of its fees; it was not clear whether or not it would remain worthwhile to the defendants to pursue their defence of the plaintiff's claim in this Court. It is now clear that the defendants intend both to resist the plaintiff's claim for a review of the costs assessment, and then to challenge the validity of the deed of charge, including in respect of the amount of interest that they are required to pay to the plaintiff. It is perfectly legitimate for the defendants to maintain their defence of these proceedings, but it has the result that any process of estimating the costs that the plaintiff may incur in prosecuting its claim is open-ended. It is probably unavoidable that the defendants maintain their defence to the extent necessary to challenge the amount of the enforcement costs that the plaintiff has claimed, and also the interest rate that the plaintiff is entitled to charge. However, the defendants will also prosecute their claim that the deed of charge is void or should be set aside. That makes it difficult, if not impossible, for the Court to make an estimate of an amount that will be adequate to be retained in the controlled monies account to protect the plaintiff, and allow recovery of its costs of enforcing the deed of charge, if the deed of charge is upheld.
7. It is not possible to estimate in any precise way the costs that the plaintiff will incur in prosecuting these proceedings that it can require the defendants to pay. Mr Elias has made a bare claim that the costs to the end of March 2015 were $550,000. It is likely that the plaintiff will not be able to sustain the reasonableness of that amount, because (similarly to what occurred with the costs assessments) the plaintiff apparently does not maintain clear and comprehensive records that include adequate descriptions of work done. However, the fact is that the plaintiff's entitlement to enforcement costs has not yet been determined. The claim will not be determined on a costs assessment, and the criteria that are applicable may not be the same as on a costs assessment, as the plaintiff's right arises under the deed of charge and not under its retainer from the defendants. It is likely that a substantial portion of the $129,365.50 incurred by the plaintiff in January and February 2013 will have to be deducted because of the costs order made by Bergin CJ in Eq against the plaintiff, when it failed in its application to have all of the monies in the controlled monies account paid out to it. At present, it is only possible to guess what the amount of the deduction will be, assuming it is made. However, in addition to the portion of the $550,000 that the plaintiff is able to sustain, there must be added the presently unquantified costs of the plaintiff defending the present notice of motion, and the future costs of the plaintiff in prosecuting these proceedings after the stay is lifted, which in my view the plaintiff has conservatively estimated at $350,000.
8. If I were to make an intuitive assessment for no other purpose than to try to achieve some reasonable insight as to what the final position might be, I might assume that the plaintiff's entitlement might be reduced by, say, $80,000 for its failed application, leaving $470,500. The costs assessor reduced the plaintiff's claim in its bills of costs by about 38.7%. If I assume that the plaintiff was likely to fare better in relation to its enforcement costs that are recoverable under the deed of charge, I might reduce the amount of its claim by 20%. The result would be a claim for $376,400. If I then somewhat arbitrarily allowed $40,000 for the plaintiff's cost of the present notice of motion, and $350,000 for the plaintiff's costs of prosecuting these proceedings to final judgment (I have not made a reduction because I think the estimate is conservative) then I would reach a total of $766,400, say $750,000.
9. It is not necessary to acknowledge the dubious logic of this exercise, as it is self-evident. The point is that, if the Court approaches this component of the plaintiff's entitlement fairly, an amount of the order of the total that I have calculated can be justified.
10. I have calculated above that, of the allowance of $350,000 made by Rothman J for enforcement costs and interest, about $156,381.50 had already been incurred as solicitors' costs. I could not apportion the $154,552 in barristers' fees, but if I, arbitrarily, assume $60,000 was incurred in barristers' fees before 21 December 2012, then the total amount of costs incurred before that date was $214,552. The only purpose of this calculation, given its insubstantial foundation, is to gain some idea of the portion of the $350,000 that notionally remained at the end of 2012. I will take that amount to be about $135,000.
11. If the estimate of the total enforcement costs that the plaintiff will incur in these proceedings, in the order of $750,000 proved to be correct, then the controlled monies account would need to contain an additional $615,000 ($715,000 - $135,000). Looked at another way, Rothman J allowed for $350,000 to cover recovery costs and interest. $750,000 would be required for assessment costs (i.e. an extra $400,000), with no allowance being made for interest.
12. The only significance that I will attribute to these imprecise calculations is the light they throw on the defendants' claim that, of the $1,350,000 allowed by Rothman J to cover the plaintiff's entitlement to legal fees and disbursements, it would be safe for the Court to proceed upon the basis that the plaintiff's actual entitlement has been reduced by $950,000 (being the approximate total of the $580,000 reduction made by the costs assessor, and the $370,000 in payments made by the defendants). If the $950,000 is reduced by the $615,000 that I have calculated above, the buffer is only $335,000. Even then, no allowance is made for additional any interest entitlement above the allowance made by Rothman J.
13. Even that process of reasoning is dependent upon Mr Elias' 'ballpark' estimate of the plaintiff's future costs of prosecuting the present proceedings as being $350,000. In truth, if all matters connected to the validity of the deed of charge will be in issue, the assessment of the plaintiff's future costs of these proceedings is open-ended.

Plaintiff's costs of defending Local Court proceedings

1. The defendants, together with another person, as plaintiffs commenced proceedings No 2014/269553 in the Local Court of NSW against the present plaintiff as defendant, in which they claimed an order that the defendant pay to them $82,658.60. That amount comprised monies paid by the present defendants, and the other plaintiff in the Local Court, to the plaintiff to be held on trust to meet the legal fees of certain proceedings. The amount remaining in trust represents the amount that had not been expended on legal fees when the relevant clients terminated the plaintiff's retainer.
2. By its defence in the Local Court the plaintiff pleaded, among other things, that it had a lien over the amount that it held on trust based upon the deed of charge. Putting aside the way that the defence was formulated, it seems clear that, at least by its defence, the plaintiff sought to enforce the deed of charge.
3. However, clause 2.1 of the deed of charge defines the property at 1 William Street Double Bay as the "secured property". The deed of charge also contains, in clause 3, a fixed and floating charge over additional property owned by the third mortgagor, a company apparently associated with the defendants. That aspect of the deed of charge is irrelevant to the present dispute.
4. The deed of charge therefore does not give the plaintiff security over any monies that the plaintiff holds on trust for the defendants. The plaintiff may, or may not, have a proper basis for resisting the defendants' claim in the Local Court, but any costs that it incurs in the process will not be costs incurred in the enforcement of the deed of charge.
5. It is therefore not necessary to investigate further the steps that the plaintiff has taken in the Local Court proceedings. It will be sufficient to note in summary form that, instead of the plaintiff simply defending the Local Court claim on its merits, the plaintiff filed a notice of motion that sought orders that the Local Court proceedings be dismissed or stayed on the ground that the Local Court did not have jurisdiction, apparently because the claim was not a common law claim in debt, but a claim for the return of trust money. It appears that the plaintiff failed after a two-day hearing of that application. The plaintiff has commenced proceedings in the Common Law Division of this Court to appeal from the decision of the Local Court, and for that purpose has sought a stay of the judgment of the Local Court. I mention these matters only because it is doubtful that the steps that the plaintiff has taken in the Local Court, other than the filing of its defence, could reasonably be considered to be steps necessarily undertaken in the enforcement of the deed of charge, even if the money in the trust account was covered by the deed of charge.
6. The plaintiff has claimed that it is entitled to be secured for its costs of the Local Court proceedings of $46,618, and of its appeal to the Supreme Court of $12,602.50. The total is $59,220.50. I conclude that it is improbable that the plaintiff will be able to recover this amount under the deed of charge as reasonable enforcement costs.

Plaintiff's costs of further Supreme Court proceedings

1. The plaintiff has claimed $7106 as its costs of proceedings commenced by the defendants in the Common Law Division of this Court, whereby the defendants sought the Court's leave to submit a claim for legal fees made by a senior counsel retained on the defendants' behalf by the plaintiff to costs assessment out of time. The proceedings were discontinued shortly after they were commenced. The plaintiff has not explained why it incurred the costs that it did, which is important given that it was the senior counsel, not the plaintiff, who had the interest in resisting the defendants' application.
2. In the circumstances there is a very substantial doubt that the plaintiff will succeed in establishing that the expense was a cost of enforcing the deed of charge. However, given the small amount involved, and the extremely high degree of uncertainty in relation to much larger amounts, this claim is relatively immaterial.

Plaintiff's costs of engaging in the costs assessment

1. The next item of enforcement costs claimed by the plaintiff is a round sum of $300,000 for its costs of participating in the costs assessment. Not only is the sum round, it is entirely unsubstantiated in the evidence. Unlike the position in respect of the various court proceedings, where Mr Elias in his 7 May 2015 affidavit provided evidence of the plaintiff's claim for legal costs per day, calculated as the number of hours spent by Mr Elias, multiplied by his hourly rate, the plaintiff has provided no elaboration or substantiation in relation to the $300,000 claim.
2. Apart from the total absence of elaboration and substantiation, there is a question as to whether in principle any costs incurred by the plaintiff in relation to the costs assessment should be regarded as being costs of enforcing the deed of charge. Clause 2.1 of the deed of charge charged the secured property "to secure the payment of the debts, work in progress and further legal work carried and to be carried out at the request of the [defendants…] by way of legal work".
3. Clause 13 of the deed of charge relevantly provides: [The defendants] indemnify [the plaintiff] against any…costs or expenses including without limitation…and any expenses caused or contributed by any failure on the part of the [defendants].
4. This provision is unclearly worded, but it is reasonably clear that it was intended that the clause be read as if the words "to comply with the terms of this deed" were added at the end. The combined effect of clauses 2.1 and 13 is that the most that can be said in favour of the plaintiff is that the deed of charge secured the plaintiff's costs of enforcing the obligation of the defendant to pay debts for legal work done by the plaintiff at the request of the defendants.
5. The plaintiff's claim that it is entitled to be secured for an amount of $300,000 does not distinguish between the costs, if any, incurred and claimed by the plaintiff in the preparation of itemised bills of costs, and the plaintiff's costs incurred in responding to the assessment process. If any part of the claim fell into the former category, the effect of s 332A of the Legal Profession Act would be to disentitle the plaintiff from charging the defendants with any amount for the preparation of the itemised bills. The Legal Profession Act has the effect that the cost to a solicitor of responding to a request by a client for an itemised bill is an overhead of the business.
6. That leaves the question whether, assuming any part of the $300,000 is claimed to represent the plaintiff's costs of conducting the costs assessments, those costs are secured by the deed of charge. First, the deed of charge would not secure any part of the costs that represented costs that were ordered to be paid by the plaintiff as the costs of the costs assessment under s 369 of the Legal Profession Act. In fact, the reasons given by the costs assessor in each case indicate that he ordered the plaintiff to pay the costs of the assessment under s 369(3)(a), which means that the plaintiff had failed to comply with its disclosure obligations under the Act. The plaintiff's evidence is silent as to whether any part of the $300,000 is represented by the costs of the costs assessment that it was ordered to pay.
7. The effect of s 317(1) of the Legal Profession Act is that, as the plaintiff did not comply with its disclosure obligations, the defendants "need not pay the legal costs unless they have been assessed under Division 11". That means that the legal fees claimed by the plaintiff would not have been payable at all by the defendants until the completion of the assessment process.
8. Furthermore, in each case the costs assessor did not assess the costs claimed by the plaintiff under s 361 on the basis that the plaintiff's costs agreements were compliant with the requirements of the Legal Profession Act. Instead, the costs assessor determined a reasonable amount of the costs payable by the defendants under s 363 of the Act.
9. It is arguable that, if the plaintiff delivered to the defendants itemised bills of costs that conformed to the requirements of the Legal Profession Act, the defendants then required that the costs be assessed, and the costs assessor upheld the plaintiff's claim for costs, the plaintiff's costs of participating in the costs assessment process would be included within the costs of enforcing the deed of charge.
10. That does not, however, appear to be the present case. This is not a case where the plaintiff delivered bills of costs for its legal fees and disbursements to the defendants, and after the process of assessment was found to be entitled to the amounts that it claimed under proper costs agreements in circumstances where the plaintiff complied with its obligations under the Act. The plaintiff was not entitled to be paid any amount until the assessments were completed, and then it was not found to be entitled to be paid the amount that it claimed in its original tax invoices, but it was found to be entitled to an entirely different amount calculated on the basis of what was a fair and reasonable amount. There is a good argument that the costs of the plaintiff in participating in the assessment were not the costs of its enforcing the deed of charge in relation to fees and disbursements to which it was entitled under proper tax invoices. Rather, the costs were costs that it was necessary for the plaintiff to incur because of its own delinquency in failing to comply with the requirements of the Legal Profession Act, and were necessary before it could establish that it was entitled to any payment from the defendants at all.
11. The plaintiff has not established that there is a high probability that it will be entitled to recover any part of the $300,000 claimed for assessment costs in the enforcement of the deed of charge. In summary, it is a round claim, which is unexplained and unsubstantiated. It may include amounts, such as the cost of preparing itemised bills of costs, to which the plaintiff is not entitled at all, at law, to recover from the defendants. It may include the costs payable for the assessment process, which were ordered to be paid by the plaintiff. Even such part of the amount as represents the costs incurred by the plaintiff in participating in the assessment process were incurred in a process made necessary by the plaintiff's failure to comply with the requirements of the Act, and even then it only established an entitlement to a fair and reasonable amount for costs, and not the amount that it claimed in its tax invoices.
12. The Court cannot, however, act upon the basis that it is clear and certain that the plaintiff will not be entitled to recover any part of the costs of the costs assessment process, as enforcement costs under its deed of charge. The considerations that I have explored above, which may diminish the plaintiff's prospects of recovering under this head of claim, are not plainly correct. It is possible that, when the plaintiff has an opportunity of presenting evidence in detail concerning how it incurred costs in the costs assessment process, some of those costs will be proper costs of enforcing the deed of charge.

Plaintiff's claim for unbilled costs

1. The next component of the plaintiff's claim is another round figure, being $220,000, described as "Estimate of Unbilled work as referred to in tax invoices and previous affidavits for both [the plaintiff] and counsel Mr Milanovic". As I understand it, in various tax invoices that the plaintiff issued to the defendants and related entities from time to time, the plaintiff purported to reserve the right to claim additional costs for such matters as administrative expenses. On the evidence, the plaintiff has not to this time, actually issued tax invoices for these claims to the defendants.
2. In failing to issue any further tax invoices the plaintiff has failed to comply with the orders made by Gzell J and Bergin CJ in Eq referred to above. Consequently, the defendants have not had an opportunity to require the plaintiff to deliver itemised bills of costs, and to have those bills of costs assessed.
3. The plaintiff did not try to substantiate this claim, save as follows. In par 36 of his 28 April 2015 affidavit, Mr Elias said that exhibit GE6 to his affidavit contained a copy of a tax invoice totalling $38,243.86 due to Mr Milanovic which remained unpaid, and a bill of costs sent by the plaintiff on 8 September 2010 for $60,191 that remained unpaid in the sum of $49,153. The exhibit appears to contain an application for assessment of party/party costs in which the cost applicant was the first defendant and the amount claimed was $60,191. What is said to be a bill of costs appears to be part of the application for the assessment. There are also three tax invoices issued by Mr Milanovic to the plaintiff in the total sum of $39,036.25.
4. Clause 2.1 of the deed of charge identifies the legal work whose fees were intended to be covered by the deed in the following terms: "("hereinafter referred to as the "secured money" and referred to as per item 1 of schedule 2 herein)".
5. It appears that Mr Milanovic's tax invoices relate to Family Court (including Full Court) proceedings that are listed in Item 1 Schedule 2. As is unsurprising, the case file numbers for the Family Court proceedings do not match any of the numbers in the certificates issued by the cost assessor. The defendants did not provide evidence in opposition to this aspect of the plaintiff's claim. I conclude that the plaintiff has established that it is entitled to be secured in respect of the $39,036.25 that it owes to Mr Milanovic.
6. The bill of costs issued by the plaintiff arose in Supreme Court proceedings No 5487/05. Those proceedings do not appear to be listed in Item 1 Schedule 2. The plaintiff has not established that it is entitled to be secured in respect of the $49,153 claimed in respect of this item.

Plaintiff's entitlement under original bills of costs

1. The plaintiff maintains that it is entitled to the full amount of the $1,500,155.18 that it claimed in the bills of costs that have been the subject of the costs assessment.
2. As I have explained in some detail above, at the level that can be gleaned from a review of the costs certificates issued by the costs assessor, and his reasons, the Court can place considerable confidence in the process adopted by the costs assessor in reaching the conclusions that he did.
3. Perhaps the primary submission made by the defendants, and their justification for the order that they ask the Court to make, is that the costs assessment having been completed, the Court should act upon the basis that it is correct, in the absence of any persuasive arguments put by the plaintiff, based upon a rational process of analysis that engages with the costs assessor's reasoning that sustains a conclusion of a likelihood that the costs assessor fell into error.
4. It is true that the plaintiff has done very little more than to rely upon its application for a review of the costs assessments, which is singularly unenlightening in respect of identifying any errors made by the costs assessor, or demonstrating the likely amount of costs that will be allowed if those errors are corrected during the course of the review.
5. What principles should govern the significance that the Court should attribute to the substantial reduction in the costs allowed by the costs assessor, in comparison to the amount claimed in the bills of costs, and to the bare fact that the plaintiff has lodged an application for a review of the costs assessment? The principles that are applicable on an application for a stay of proceedings pending an appeal provide only dubious assistance. The defendants asked the Court to act on the general principle that, pending an appeal, the judgment below should be presumed to be correct and is appropriate to be enforced. However, one exception is where money paid to a successful plaintiff to satisfy the judgment may be irrecoverable if the appeal is successful, then a stay of proceedings may be justified. In the context of an appeal these two principles work in favour of the judgment below being enforced unless the enforcement of the judgment will not be able to be reversed if the appeal is successful.
6. If the Court were to borrow those principles for the purpose of applying them in the present case, they would support the Court not ordering that any part of the monies in the controlled monies account be paid out to the defendants at this stage. The reason is, as will be considered below, that the evidence requires a conclusion that, if any money is paid to the defendants at this stage, and the amount remaining in the controlled monies account is ultimately established as being insufficient to meet the entitlement of the plaintiff, the plaintiff will not be able to recover the shortfall from other assets of the defendants that will be reasonably available for enforcement remedies in Australia.
7. The Court cannot safely proceed upon the basis that the plaintiff will wholly be unsuccessful in its review of the costs assessments. There must be a possibility that the review panel will take a different view to the costs assessor. It is not, however, possible to estimate the likelihood of the plaintiff's succeeding on the review, or the final amount of the costs that will be assessed as being payable by the defendants.

Interest claimed by plaintiff

1. The plaintiff claimed that its entitlement to have the funds in the controlled monies account should be calculated on the basis that it is entitled to recover from the defendants interest at 16.5% pa on all money owed to it by the defendant, being the default rate of interest under the deed of charge. In his 28 April 2015 affidavit Mr Elias calculated the amount of interest payable on this basis in respect of the full amount of legal fees and disbursements claimed (before they were reduced on assessment) at $343,995.40. The plaintiff also claimed interest at 16.5% pa on all enforcement costs, but it did not provide a calculation.
2. It is necessary to consider the plaintiff's entitlement to interest on unpaid legal fees and disbursements separately to the plaintiff's costs of enforcing the deed of charge.
3. As to the first of these matters, the plaintiff claims that the terms of the deed of charge entitle it to charge interest at 16.5% pa on the legal fees and disbursements owing to it.
4. Section 320 of the Legal Profession Act entitles a law practice to "take reasonable security from a client for legal costs (including security for the payment of interest on unpaid legal costs".
5. Section 321 deals with the entitlement of a law practice to claim interest from its clients: 321 Interest on unpaid legal costs (1) A law practice may charge interest on unpaid legal costs if the costs are unpaid 30 days or more after the practice has given a bill for the costs in accordance with this Part. (2) A law practice may also charge interest on unpaid legal costs in accordance with a costs agreement. (3) A law practice must not charge interest under subsection (1) or (2) on unpaid legal costs unless the bill for those costs contains a statement that interest is payable and of the rate of interest. (4) A law practice may not charge interest under this section or under a costs agreement at a rate that exceeds the rate prescribed by the regulations. (5) Subsection (1) applies in relation to a bill of costs given in the form of a lump sum bill even if the client afterwards requests or is afterwards given an itemised bill.
6. Regulation 110A of the Legal Profession Regulation 2005 has the effect that the prescribed rate is 2% above the Cash Rate Target, which means the maximum percentage specified by the Reserve Bank of Australia as the Cash Rate Target. It is clear that the prescribed rate is substantially less than 16.5% pa.
7. Section 321(4) directly prohibits the plaintiff charging the default rate of interest under the deed of charge. Furthermore, when s 320 permits a law practice to take reasonable security, including security for the payment of interest on unpaid legal costs, that must in the statutory context mean the interest permitted by s 321.
8. Other provisions of the Legal Profession Act throw doubt on the plaintiff's entitlement to be paid interest on its claims for legal fees and disbursements. As I understand the effect of the certificates and reasons issued by the costs assessor, the effect of failures of disclosure by the plaintiff was that the plaintiff only became entitled to recover its fees and disbursements from the defendants from the dates the certificates were issued by the cost assessor: s 317(2). The costs assessor issued certificates on 4 dates between 17 December 2013 and 7 April 2014. The total amount allowed was $919,879.81, of which $368,178.99 had been paid. Of the net amount of $551,700.82, $504,199.36 was paid to the plaintiff out of the controlled monies account following the order made by Rein J on 23 May 2014. The amount of interest payable by the defendants must be relatively small. Even that statement assumes that the plaintiff has satisfied the other requirements of s 321 of the Legal Profession Act that must be satisfied before interest is payable.
9. The plaintiff put a submission that the provisions of the Legal Profession Act that govern the circumstances in which a legal practice is entitled to charge interest to its clients do not exclude the right of the plaintiff in this case to charge interest at the default rate of 16.5% pa because the deed of charge is a funding agreement. The plaintiff did not explain why the statutory provisions are excluded in a case where a legal practice provides legal services to a client under an agreement that falls within the rubric of a funding agreement. The plaintiff did not explain what be indicia of a funding agreement was in this context. It is at least a dubious proposition that a legal practice may escape the restrictions of the Legal Profession Act by entering into an agreement with a client that in some way constitutes a funding agreement. It is not necessary to explore that question in this case. Whatever the attributes of a funding agreement may be, it is plain that the deed of charge is, and only is, that which it appears to be. It is a deed of charge, which was primarily intended to secure existing and outstanding legal fees and disbursements. It did not impose any obligation on the plaintiff to provide any future legal services at all, let alone on credit. The deed of charge did not involve the plaintiff taking any risk in relation to the recovery of its legal fees and disbursements in return for some share of the fruits of any legal proceedings.
10. Next, it is necessary to consider the plaintiff's entitlement to interest at 16.5% pa under the deed of charge in relation to any enforcement costs to which it is entitled.
11. Let it be assumed that the default rate may legitimately be applied by the plaintiff to its costs of enforcing the deed of charge. The only significant enforcement cost is what the plaintiff claims to be its legal costs of prosecuting the present proceedings. The amount claimed by the plaintiff, including its own legal fees, barristers' fees, disbursements and GST is $555,500.50. As I have noted above, the plaintiff has claimed interest on this amount at 16.5% pa, but has not provided a calculation. When one contemplates why a calculation has not been provided, it becomes apparent that a calculation of an interest entitlement requires a determination as to the date from which the calculation must be made. The plaintiff would be entitled to the interest on any counsel's fees and disbursements that were paid from the date of payment. There is no evidence as to whether the plaintiff has actually paid any of these amounts, although it is likely that it may have paid some. There is no evidence as to when payments were made. More significantly, the plaintiff has entirely ignored the question of how it can establish the date from which interest should run on its own legal costs. All the plaintiff has done is to give a list of the accumulated amounts by date, hours worked, and hourly rate. I infer that the hours worked were worked by Mr Elias. There is no evidence that Mr Elias submitted tax invoices to the plaintiff, or that the plaintiff paid Mr Elias the amount claimed, or when such payments were made. It appears that in reality the amount claimed by the plaintiff is for work in progress. There is no evidence that the plaintiff has been out of pocket.
12. This leads to a consideration of clause 5 of the deed of charge, which provides for the payment of interest. Clause 5.2 permits the plaintiff to charge interest at the rate of 8.25% pa "on any part of the secured money, which is from time to time owing". "Secured money" is defined in clause 2.1 as "the payment of the debts, work in progress and further legal work carried out and to be carried out… ("hereinafter referred to as the "secured money" and referred to as per item 1 of schedule 2 herein)". Relevantly, item 1 Schedule 2 repeats this definition. In substance, the secured money consists of debts for legal work carried out. Clause 5.3 provides that, in default of timely payment, "interest will be charged on the whole of the amount outstanding and accruing at the further/additional rate of 8.25% pa, if the monthly repayments are not made by the due date". The plaintiff's entitlement to be paid its enforcement costs arises under clause 13, which obliges the defendants to "indemnify the [plaintiff] against any liability, loss, costs or expenses… and any expenses caused or contributed by any failure on the part of the [defendants]". It is arguable that this indemnity extends to require the defendants to indemnify the plaintiff against internal costs (i.e., as in the present case the time value of legal work performed). It does not appear how the entitlement of the plaintiff to claim the default rate provided for in clause 5.3 would entitle the plaintiff to charge interest on unbilled, work in progress, as that does not appear to fall within the definition of the "secured money" in the deed of charge.
13. In the final analysis, the position is that the plaintiff has sought to make good a claim that it is entitled to be paid interest at 16.5% pa on all monies owed to it by the defendants. The plaintiff has run its case on an all or nothing basis. It has not addressed any of the significant, but difficult, issues that I have considered above. Most importantly, it has not put forward a credible case that it is entitled to any particular amount of interest, on the basis that can reasonably be quantified. It is likely that the plaintiff will be entitled to be paid interest, possibly in some respects at the default rate under the deed of charge, but the way the plaintiff has presented its case defeats the Court's ability to calculate a proper allowance for interest.
14. Notwithstanding these observations, it is almost certain that the plaintiff has incurred and paid many costs in the attempt to enforce its deed of charge, and will have to pay more such costs in the future. It is most likely that there will be enforcement costs, in an amount that is not insignificant, that will attract interest at 16.5%.

Summary concerning the plaintiff's claim

1. I have embarked above upon an attempt to assess the amount that should be retained in the controlled monies account to give a proper and adequate level of protection to the plaintiff. I have attempted to analyse the various components of the plaintiff's claim in some detail, in order to do justice to the argument put by the defendants in their skeleton outline. I have made that attempt, even though the foundation for undertaking that analysis in an arithmetical way is extremely tenuous.
2. The most significant thing to emerge from this exercise is the consequence of the defendants' decision to attempt to sustain an argument that $440,000 can safely be paid to them out of the controlled monies account without putting the plaintiff's entitlement to security at risk, while at the same time they have announced that they will attack the validity of the deed of charge in these proceedings. Even upon an imprecise analysis, that step substantially undermines the defendants' argument. A mortgagee is entitled to defend the mortgagor's claim that the mortgage is invalid, and if the mortgagee succeeds, the term of the mortgage that includes enforcement costs in the monies secured will cover the mortgagee's costs of establishing the validity of the mortgage. In the present case, in reality, the estimation of the costs that the plaintiff might incur in defending the deed of charge cannot be calculated, or estimated, with confidence, but rather they are open-ended. Even the estimate that has been made above substantially undermines the arithmetic that supports the defendants' argument.
3. Once this point is reached, the justification for the whole exercise of engaging in a detailed attempt to estimate a proper allowance for each component of the plaintiff's claim, on a case-by-case basis, loses force. In relation to almost all of the components, the arguments are contentious, the estimates are uncertain, and there is some real likelihood that some part at least of the plaintiff's claim will be valid. The consequences are cumulative.
4. I am not satisfied that the Court could order that $440,000 be paid out of the controlled monies account to the defendants, without putting the plaintiff's right to its security in the deed of charge in jeopardy.

Additional payments made by the defendants and related entities

1. The defendants initially put their claim that the amount of $440,000 should be paid to them out of the controlled monies account on a basis that allowed only for the fact that they had been found by the costs assessor to have paid $368,178.99 to the plaintiff in respect of the bills of costs that were subject to the costs assessment. The defendants in fact claimed that they had made additional payments to the plaintiff, and that the total amount paid was $1,012,549.76. The defendants provided a schedule, which included amounts paid by the defendants and related entities, and some details concerning the amount and the purpose for the payment. Evidently, the defendants did not seek in any positive way to have the Court take any additional payments into account, because the evidence available to the defendants was not sufficient to establish that the payments were in respect of any part of the claim for legal fees and disbursements made by the plaintiff in these proceedings (and which were subject to the costs assessment process).
2. Ultimately, the defendants pursued a submission that the Court should accept that the plaintiff had received from the defendants, and related entities, an additional amount of $644,370.77 above the $368,178.99 that was accepted as having been received by the plaintiff ($1,012,549.76 - $368,178.99 = $644,370.77). In substance, the defendants submitted that, even though their evidence of payment was not comprehensive, it had not been met by the plaintiff, when the plaintiff should have been in a position to do so, as it was at relevant times the solicitor for the parties who had made the payments.
3. It is true that the plaintiff was given an opportunity to put before the Court records of a conventional type to prove all of the amounts that it had charged to the defendants and related entities for legal work done, and all of the payments that have been made by the clients. Ordinarily, it might be thought that a properly run solicitor's office would have to hand comprehensive records which would readily demonstrate all amounts charged and paid in respect of work done. The plaintiff did not provide such records, and did not explain why there was any difficulty in doing so.
4. Accordingly, it has not been possible for the Court to determine in any comprehensive way how much has been paid by the defendants and related entities to the plaintiff.
5. Although that is true, it does not avail the defendants in the present case. A review of the matters listed in Item 1 Schedule 2 to the deed of charge, as being matters in respect of whose fees and disbursements the plaintiff was entitled to enforce the deed of charge, establishes that there were many more matters than the proceedings the subject of the bills of costs relevant to these proceedings, and indeed a significant number of matters were conveyancing matters and not legal proceedings. Even if the Court accepts the limited evidence provided by the defendants as to payments made to the plaintiff, it is not possible to determine whether those payments were made in respect of the relevant bills of costs, or whether (as seems likely) many, if not all, of the additional payments were made in respect of other matters, which are now not relevant because no claim is made by the plaintiff in respect of them.
6. There is some evidence to suggest that the costs assessor made enquiries from the defendants as to the amounts that had been paid against the bills of costs that were the subject of assessment, and that at least in part the defendants accepted that the amount paid was as found by the costs assessor. The evidence that is now before the Court does not permit it, for the purposes of the present application, to go beyond the allowance made by the costs assessor.
7. That is unfortunately so, even though there is some truth in the defendants' claim that they have made frequent demand of the plaintiff that it provide to them proper records in order to enable the defendants to carry out a full reconciliation of what has been charged, and what has been paid, over the full period in which the plaintiff has acted for the defendants and their related entities. For whatever reason, the plaintiff has avoided providing those records. The result is that it has proved to be that the initial decision of the defendants to exclude reliance upon any additional payments was appropriate.

The defendants' need for the $440,000

1. As I have noted above, the defendants say they have an immediate need to access $329,000 of the moneys standing in the controlled monies account in order to fund the defence of the Arab Bank proceedings.
2. They say that the moneys in the controlled monies account are the only source of their capacity to defend the Arab Bank claim, with the implication that they will be unable to defend themselves if the Court does not make the order sought in the notice of motion, at least in the amount of $329,000.
3. It is not immediately obvious why the impecuniosity of the defendants should be a material factor in the Court's determination of whether it should order any payment to the defendants out of the controlled monies account. At one level, the defendants' need for the money may be material, because if the defendants had no need, there would be little justification in the Court making any order that an amount be paid out of the controlled monies account, which may place the plaintiff at any risk at all of being unable to enforce the deed of charge to recover all money ultimately found to be secured by that charge. But, assuming that the defendants can show that they do have a need for the money in that sense, it is not easy to see why the impecunious circumstances of the defendants should be a reason for the Court to impose any risk on the plaintiff. In the present case, the need for the defendants to defend the Arab Bank claim is entirely collateral to circumstances in which the plaintiff seeks to recover the amounts due to it under the deed of charge. Moreover, there is no suggestion that the plaintiff is in any way responsible for the defendants' financial circumstances. In particular, there is no allegation that any misconduct by the plaintiff as the solicitor for the defendants, and their related entities, was responsible in any way for their present inability to fund their defence from other sources. In so far as the plaintiff's former role as the solicitor for the defendants might be the source of an exceptional preparedness in the Court to contemplate making an order that reduces the value of the security to the plaintiff, there is no connection suggested in the present case between the plaintiff's conduct as solicitor, and the need of the defendants for an order that reduces that value.
4. Nevertheless, I will deal with the evidence concerning the defendants' financial circumstances and their need to access the moneys in the controlled monies account to defend the Arab Bank claim.
5. The evidence upon which the defendants rely is given by their solicitor, Mr Hemsworth, on information and belief. The explanation for this approach is, apparently, that the defendants now live full-time in Lebanon. Given the seriousness of the present application to the defendants, I do not think that the absence of direct evidence from the defendants has been sufficiently explained.
6. Mr Hemsworth says that for the year ending 30 June 2012 the first defendant had a taxable income of $71,678, and the second defendant had a taxable income of $21,791. The defendants undertook business in partnership, and in the year ending 30 June 2012, the partnership had a net income of $125,743. All of the properties that the defendants formerly owned in Australia have been sold by the Arab Bank under various securities. The defendants no longer conduct any works in Australia.
7. Mr Hemsworth has apparently not been told anything by the defendants that enables him to give evidence on information and belief as to the defendants' financial circumstances in respect of any assets that they may hold in Lebanon. This is a glaring omission. The Court can only conclude that the defendants' failure to give any evidence on this issue was calculated. There is no basis for the Court to imply from the evidence that has been given that the defendants do not have sufficient assets in Lebanon to fund their defence. This is such an obvious lacuna in the defendants' evidence that the Court could not make a finding that the defendants are absolutely unable to fund their defence of the Arab Bank claim, unless the order that they seek in their notice of motion is made by the Court.
8. Unsurprisingly, the plaintiff has not been able to prove in a positive sense that the defendants do have access to the funds necessary to fund their defence. It is not an issue within the knowledge of the plaintiff. The plaintiff has, however, been able to point to some evidence that suggests that within recent years the defendants have had assets in Australia measured in the millions of dollars, which is significant in so far as the defendants have not taken any steps to explain where the money went.
9. The security property at 1 William Street, Double Bay was sold in 2013 for $5,305,000. Following settlement, $1,700,000 of that money was paid into the controlled monies account. A further small sum was paid to senior counsel in compliance with the orders of Rothman J. The defendants have not explained what happened to the balance. The plaintiff has been able to establish that $1,480,729.34 from the proceeds of sale was applied to the purchase of 1003/170 Ocean Street, Edgecliff, for which the total purchase price was $1,500,000. The title to that property was placed as to 4/100th in the name of the defendants and 96/100th in the name of Nathan George Rahme.
10. The evidence that the defendants have tendered in support of their need for the order claimed in their notice of motion is sufficient to establish that they will require an amount of some $329,000 to fund their defence at the imminent hearing, but it is not sufficient to establish that they will not have sufficient assets from other sources to fund their defence, if the order they seek is not made by the Court.
11. In fact, the evidence that the defendants have tendered on this issue has had the counter-productive effect that it has satisfied me that there is a very high probability that the Arab Bank has already realised all of the defendants' assets that are accessible in Australia, other than any proportion of the moneys in the controlled monies account to which the defendants may ultimately be entitled, and that if the Arab Bank's claim succeeds, the moneys in the controlled monies account will be the only realistic source of funds from which the plaintiff will ever recover whatever monies it can ultimately establish are owed to it.

Conclusion

1. I have reached the conclusion that the order that the Court must make is to dismiss the defendants' notice of motion with costs.
2. That conclusion is founded on a number of broad considerations. First, the effect of the orders sought by the defendants would not be to delay the exercise by the plaintiff of its security rights under the deed of charge, but would be to diminish the value of the security.
3. Secondly, although in appropriate cases it might be proper for the Court to make a judgment that reduces the value of the security available to the plaintiff this is not such a case. In so far as the Court may have a proper basis for intervening when the amount of the claim is obviously wrong, although there is a high probability that the plaintiff in the present case will not be able to sustain the whole of the amount that it claims, I cannot with sufficient confidence exclude the possibility that it will be able to substantiate a claim equal to all, or substantially all, of the moneys in the controlled monies account. In so far as the Court may have a proper basis for intervening when the amount claimed is by a solicitor who acted for and advised the defendants at the time they granted the deed of charge, there is no suggestion in the present case that any misconduct by the plaintiff in respect of its duties to its former clients justifies the Court in reducing the value of the security, in a manner that is ultimately arbitrary, thereby placing the plaintiff at risk of a shortfall in recovery.
4. Thirdly, although the defendants have established a need for payment of at least $329,000 of the amount claimed, they have not sufficiently established that they are unable to fund their defence from any other source.
5. I have considered above in some small detail the authorities that may, in some circumstances, justify the Court in making orders that have the effect, not merely of delaying the exercise by a mortgagee of the mortgagee's security powers, but of actually reducing finally the value of the security. I accept that there may be cases where that course is justified, but I hesitate to think that the Court would ever, at an interlocutory stage in proceedings, reduce the value of the security to the mortgagee, except upon the clearest of evidence that the reduction would not deprive the mortgagee ultimately of the benefit of the security that the mortgagor was pleased to grant to it. That is particularly so where the basis for intervention is that the mortgagee has apparently claimed an amount that is obviously wrong. Perhaps cases may be imagined were the mortgagee was the solicitor for the mortgagor at the time of the grant of the mortgage, and where the conduct of the solicitor might have consequences for the client that may justify the Court making an order that has the effect of reducing the value of the security. This is not such a case, and accordingly it is not necessary for me to come to any final view on how these principles should operate.

Orders

1. I make the following orders: 1. I order that the defendants' notice of motion filed on 7 April 2015 is dismissed. 2. I order the defendants to pay the plaintiff's costs of the notice of motion. 3. I order that the exhibits may be returned forthwith in accordance with the Rules.

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: 19 May 2015