Reliance Financial Services v Lemery Holdings

Alka Developments P/L v Lemery Holdings P/L [2005] NSWSC 1335 Armstrong v Sheppard & Short Ltd [1959] 2 QB 384 Liggins v Inge (1831) 7 Bing 682; 131 ER 263 CASES CITED : Minister of Health v Bellotti and another [1944] 1 KB 298 Naylor v Canterbury Park Racecourse Co Ltd (1935) 35 SR (NSW) 281 Reliance Financial Services v Lemery Holdings [2005] NSWSC 651 Reliance Financial Services v Lemery Holdings [2006] NSWSC 709 Winter v Brockwell (1807) 8 East 308, 103 ER 359

Lemery Holdings Pty Ltd - First Defendant/Applicant PARTIES : Tzovaras Legal - Respondent Ted Tzovaras - Respondent John Tomaras - Respondent

P Lowe - Applicant COUNSEL : M Maxwell (7/9/06) - Respondents T Hall, solicitor (9/10/06) - Respondents

David Leamey - Applicant SOLICITORS : HAL Lawyers - Respondents Hancocks Solicitors (7/9/06) - Plaintiffs

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST

3696/05 RELIANCE FINANCIAL SERVICES PTY LTD v LEMERY HOLDINGS PTY LTD JUDGMENT 1 HIS HONOUR: I made an order on 13 July 2006, for money to be paid out of court to a solicitor. That order was made to give effect to reasons for judgment delivered on 11 July 2006: Reliance Financial Services v Lemery Holdings [2006] NSWSC 709. This is an application to vary the order, and to undo some of the consequences of the order having been acted on. 2 Unusually, the application is made on behalf of the party who obtained the order. That unusual situation arises because the party who obtained the order has, since then, changed its legal representatives, and now asserts that its legal representatives were acting without instructions in obtaining the order made on 13 July 2006, and in subsequently acting on it. 3 The orders I made on 13 July 2006 were as follows: "1. The Registrar of the Supreme Court of New South Wales pay Tzovaras Legal from funds paid into Court in related proceedings of 4924 of 2004, the amount of $194,264.72, being for the payment of legal costs and disbursements incurred by the First Defendant in relation to Supreme Court proceedings 3923 of 2004, 4638 of 2002 and 3696 of 2005 as referred to in paragraph 28 of the affidavit of John Tomaras sworn 12 April 2006. 2. Costs of the Amended Notice of Motion dated 27 April 2006 be the First Defendants' costs in the cause. 3. These orders are made without prejudice to the right of the plaintiffs to make further application for release of funds if so advised." 4 On 17 July 2006, the third of these orders was corrected, under the slip rule, to substitute the word "defendants" for the word "plaintiffs". 5 Insofar as the Notice of Motion I am now hearing is pressed, it seeks the following orders: "2. Order 1 made in these proceedings on 11 July 2006 by this honourable Court in these proceedings be vacated. 3. The then legal representatives of the First Defendant Tzovaras Legal including Solicitors Ted Tzovaras & John Tomaras, return forthwith to the Registrar of this Court the funds released to them pursuant to the Order 1 of 11th July 2006 in the sum of $194,264.72. 4. Tzovaras Legal, Ted Tzovaras & John Tomaras pay the costs of this motion. 5. Such further or other order as the Court thinks fit."

Even though the Notice of Motion refers to the orders made on 11 July, it is clearly the order made on 13 July that is intended. Factual Background to this Application 6 Lemery Holdings Pty Ltd ("Lemery") is a company controlled by Mr Ghandi Sobbi and his wife Mrs Zakiyeh Sobbi. Reliance Financial Services Pty Ltd ("Reliance") is a company associated with Mr Sam Cassaniti. Lemery, Reliance, and their respective directors, have been engaged in numerous complex pieces of litigation, starting from September 2001. In the course of that litigation Lemery and Mr and Mrs Sobbi have been represented (at least during the time relevant to this application) by Tzovaras Legal. Mr Ted Tzovaras is the principal at that firm. Mr John Tomaras and Ms Rosa Djuricin are solicitors who work in that firm. 7 Mr and Mrs Sobbi have given to Tzovaras Legal a mortgage over their home to secure some of the costs and disbursements associated with these various pieces of litigation. 8 Two of the pieces of litigation were set down for hearing before me last year. One of them, number 3923 of 2004 (which I will refer to as the "Validity of Charge Proceedings") was brought by Lemery and Mr and Mrs Sobbi. It asserted that a particular charge, supposedly given to Reliance and Mr Cassaniti over the assets of Lemery, was void, that a purported appointment of two men as receivers and managers of Lemery was void, and sought damages for each of the plaintiffs. Another of the proceedings was number 4924 of 2004 (which I will call the "Proceeds of Sale Proceedings"). Those proceedings had as plaintiffs Lemery, Mr Cassaniti, and Reliance. (That state of affairs arose because the proceedings were brought on the assumption that Lemery had validly had a receivers appointed to it.) The proceedings sought a declaration that the net proceeds of sale of a property in Macquarie Street, Liverpool was the property of Lemery subject to any interests of Mr Cassaniti and Reliance. 9 The Validity of Charge Proceedings were abandoned when their hearing date arrived. That abandonment also meant that the basis on which the Proceeds of Sale Proceedings had been conducted up to that time was unsustainable. However, virtually immediately, Reliance and Mr Cassaniti began another set of proceedings against Lemery, and Mr and Mrs Sobbi. These were proceedings number 3696 of 2005 (which I will call the "2005 Charge Proceedings"). Those proceedings sought a declaration that Lemery was bound by a charge over its undertaking and assets, or alternatively that Mr and Mrs Sobbi had entered into an agreement that Lemery would grant a charge, and that the Court ought order Mr and Mrs Sobbi to specifically perform that agreement by carrying out whatever corporate acts were necessary for Lemery to grant the charge. 10 The only assets of Lemery of any significance were the net proceeds of sale of the Macquarie Street property, and certain jewellery. The net proceeds of sale of the Macquarie Street property, $628,381.90, were paid into court on 1 June 2004, pursuant to an order made by White J. On 30 June 2005 I made an asset preservation order restraining Lemery and Mr and Mrs Sobbi from dealing with that money paid into court. On 1 July 2005 a similar order was made concerning the jewellery. The reasons for those orders are given in Reliance Financial Services v Lemery Holdings [2005] NSWSC 651. 11 At the time of making the asset preservation orders it appeared that the 2005 Charge Proceedings could be brought on for hearing fairly quickly. That proved not to be the case when Mr Cassaniti was convicted of some criminal offences, which resulted in his incarceration. 12 By October 2005 Lemery owed to Tzovaras Legal an amount which Mr Ghandi Sobbi said in the witness box, in proceedings before Brereton J that were decided on 7 October 2005, amounted to about $200,000: Alka Developments P/L v Lemery Holdings P/L [2005] NSWSC 1335 at [35]. (Brereton J's reasons for judgment in that case were placed before me in evidence, without objection.) 13 Mr Ghandi Sobbi has a very limited comprehension of English. Mrs Zakiyeh Sobbi appears, on the limited evidence before me, to not involve herself in business matters. Their son, Mr Alan Sobbi, is both fluent in English, and adept at using electronic aids to communication. Mr Sobbi Snr and Mrs Sobbi gave much of the task of communicating with Tzovaras Legal concerning the various pieces of litigation to Mr Alan Sobbi. 14 In early January 2006 Mr Tomaras had discussions with Mr Alan Sobbi concerning outstanding accounts in the various matters. By that time Reliance was in default in various court timetables, concerning various of the matters, and the Sobbis were anxious to have them progressed. Mr Tomaras raised with Mr Alan Sobbi the prospect of putting on a Notice of Motion to strike out the matters, based upon the timetable defaults. He also said, however, that the firm was not going to do any further work in any of the matters unless outstanding fees were paid. 15 After further discussion, Mr Tomaras sent an email to Mr Alan Sobbi on 27 January 2006, which enclosed a draft letter to Mr and Mrs Sobbi Snr and the directors of Lemery. That draft letter itemised a total of nine different legal matters in which Tzovaras Legal was acting for Lemery or the Sobbis or people connected with them, and asserted that fees of in excess of $365,000 were outstanding concerning those matters. It proposed an agreement, "… to settle all outstanding accounts on the following basis: 1. $50,000 is paid to Tzovaras Legal in part payment of the outstanding accounts; 2. Tzovaras Legal will continue working on the current matters; 3. Tzovaras Legal receives payment, in advance, of any disbursements which it may incur in conducting the current matters (including photocopying, interpreters' fees, barristers' fees, experts' fees and Court fees); 4. Tzovaras Legal will make an application on behalf of Lemery to release the funds held in Court in relation to proceedings between Lemery and Reliance (No. 3923 of 2004) for the payment of its outstanding account in that matter. If the application is unsuccessful, then acceptable arrangements will need to be made for the payment of all outstanding accounts and future costs in this matter; and 5. All outstanding accounts in relation to the finalised matters be given to a qualified Costs Assessor for informal assessment of the outstanding account. If agreement cannot be reached, then the outstanding accounts will be submitted to a Costs Assessor for assessment. In either case, the costs of the costs assessor will be shared equally between the parties. All accounts will be due and payable after the agreement or assessment of the amount of costs." 16 From the itemisation of amounts owing in that letter, it appears that the amount of the outstanding account in matter 3923 of 2004 was around $88,500. 17 Mr Alan Sobbi emailed back, at 11:24 am on 1 February 2006, in substance agreeing with the first three propositions, and suggesting in addition: "4. Tzovaras Legal will make an application on behalf of Lemery to release all the funds held in court to Lemery and Lemery pays the costs; 5. Tzovaras Legal to commence proceedings on behalf of Lemery in all costs orders Lemery is entitled to; 6. all paid and outstanding accounts to be given to a Costs Assessor for assessment." 18 In other words, while Mr Tomaras had proposed that an application be made to vary the asset protection order only to a very limited extent, to release enough money to pay Lemery's account in 3923 of 2004, Mr Alan Sobbi was proposing that a much more ambitious application be made, namely that the entirety of the money held in court be released to Lemery, and that Lemery would pay "the costs". In the context, I take "the costs" to refer to the costs and disbursements owing concerning all the outstanding accounts that had been listed in Mr Tomaras' letter of 27 January 2006. While it is clear that Mr Alan Sobbi was proposing that "all paid and outstanding accounts to be given to a costs assessor for assessment", that email does not make clear whether he was contemplating that the assessment take place before, or after, payment. As well, Mr Alan Sobbi was proposing that the costs be submitted to an assessor without there first being any informal assessment. 19 Mr Tomaras replied in an email on 1 February 2006 at 2:04 pm, discouraging the ambitious application which Mr Alan Sobbi wished to make. "4. If we are successful, they will only for the costs of that matter and not all matters. I will need to discuss it with Ted. 5. OK, but Lemery is to pay in advance the costs of the costs assessor. 6. OK." 20 Mr Alan Sobbi was not to be discouraged. He emailed back, at 4:06 pm on 1 February 2006, agreeing in substance with all the propositions except the fourth, to which he said: "We want you to make an application to lift the Mareva injunction." 21 I mention here that the asset preservation order which I made was not a Mareva order. It was made in the exercise of a jurisdiction much older than the jurisdiction to make Mareva orders, whereby, when conflicting claims are made to proprietary rights in a particular item of property, the Court can order that the property be preserved until that conflict is resolved. The jurisdictional basis for a Mareva order does not lie in the protection of claims to have specific property rights - rather, it lies in preventing the risk that a person who has a claim for a personal remedy, such as damages, might find the remedy fruitless if assets which were available, at the time the proceedings were commenced, to satisfy any such judgment were spirited away in the time between commencement of proceedings, and the ultimate giving of judgment in it. Even so, Mr Tzovaras, Mr Tomaras, and Mr Alan Sobbi all referred to the asset preservation order as "the Mareva injunction". 22 On 1 February 2006, at 5:44 pm Mr Tomaras emailed to Mr Alan Sobbi another draft letter, addressed to Mr and Mrs Sobbi Snr and the directors of Lemery, which set out the various outstanding accounts, and continued: "We confirm the agreement between this firm, you and Lemery to settle all outstanding accounts on the following basis: 1. $50,000 is paid to Tzovaras Legal in part payment of the outstanding accounts; 2. Tzovaras Legal will continue working on the current matters until finalisation with the usual professional and ethical constraints; 3. Tzovaras Legal receives payment, in advance, of any disbursements which it may incur in conducting the current matters (including photocopying, interpreters' fees, barristers' fees, experts' fees, costs consultants' fees and Court fees); 4. Tzovaras Legal will make an application on behalf of Lemery to release the funds held in Court in relation to proceedings between Lemery and Reliance (No. 3923 of 2004) for the payment of its outstanding account in that matter. Further, in accordance with your instructions today, Tzovaras Legal will make an application on behalf of Lemery to lift the Mareva Injunction when the circumstances provide an appropriate basis; 5. Tzovaras Legal to commence work on behalf of Lemery to enforce all the costs orders it has in its favour and Lemery to pay the costs of the costs consultant engaged to prepare the bill of costs to be submitted for costs assessment; and 6. all paid and outstanding accounts will be submitted to a Costs Assessor for assessment. 23 It went on to give an estimate of the costs until conclusion of four matters which were current. That estimate totalled $214,000. It also gave some advice about future conduct of the matters. 24 It continued: "Upon receipt of the signed letter together with your payment of $50,000 we will resume working on your matters." 25 It made provision for Mr and Mrs Sobbi Snr, and Mr Sobbi Snr in his role as director of Lemery, to sign and return the letter. Immediately above the space for Mr and Mrs Sobbi Snr to sign, it said: "We acknowledge that we have read and understood the contents of this letter and, on behalf of Lemery Holdings Pty Ltd and ourselves, we confirm our agreement to the payment of all outstanding accounts and future costs payable to Tzovaras Legal as set out in this letter." 26 They did not sign and return that letter. However, at, I would infer, the request of Mr Alan Sobbi, on 2 February 2006 Mr Tomaras prepared another, shorter, letter on the letterhead of Tzovaras Legal, addressed to Mr and Mrs Sobbi Snr and the directors of Lemery. It omitted the listing of outstanding accounts, omitted the estimate of cost of future work, omitted the advice, but included the wording I have quoted in paras [22], [24] and [25] above. 27 Mr and Mrs Sobbi signed the letter dated 2 February 2006 and returned it. The $50,000 was paid soon after 2 February 2006. 28 One of the pieces of litigation in which Lemery was engaged was matter 12224 of 2004 in the Common Law Division of this Court. In it, Reliance sued Mr and Mrs Sobbi, seeking an order for possession of their home, pursuant to a mortgage which they had given. Mr and Mrs Sobbi contended that that mortgage should be set aside. I will refer to those proceedings as the "Possession Proceedings". Reliance was in breach of various court directions concerning the Possession Proceedings. A tactic the Sobbis were considering in both the 2005 Charge Proceedings and the Possession Proceedings was to seek to have the action struck out, on the basis of the non-compliance with directions. 29 On 5 April 2006 Mr Tomaras wrote to Mr Sobbi Snr, reporting on a directions hearing in the Possession Proceedings, at which Reliance's solicitor had indicated he would file a Notice of Intention to Cease to Act. The Common Law Registrar stood the Possession Proceedings over to 18 April 2006, on the basis that if the Sobbis wished to file a Notice of Motion to dismiss the Statement of Claim and strike out the Defence to Cross-Claim, it could be heard on 18 April 2006. Mr Tomaras requested Mr Sobbi to: "… provide us with your instructions to proceed in making the application to strike out the Plaintiff's claim and obtain costs." 30 While that request related to the Possession Proceedings, it was followed on 7 April 2006, by a lengthy telephone conference between Mr Tomaras and Mr Alan Sobbi. Mr Tomaras gives evidence that the conversation went as follows: SOBBI: "What is happening with the matters? Are you going to file the notice of motion?" TOMARAS: "I have prepared them. They are almost ready and I should file them early next week. I have prepared a notice of motion in both matters [3696/05 Lemery/Reliance matter and 12224/04 Sobbi/Reliance matter] to strike out the Plaintiff's claims because they have not complied with the Court orders and because they [Reliance] have continuously been in default. I think we've got a pretty good chance of having the matter struck out. This will mean that Lemery will get back the monies that have been paid into Court and the mortgage and guarantee will be set aside in the possession list matter." SOBBI: "That sounds good. If we can knock them out without a hearing we get back the money. That would be good." TOMARAS: "If the matters are not struck out, we will be able at least to ask the Court to release funds from the Court to pay Lemery's outstanding costs and get money for future costs in running the matters. I will be filing an affidavit in support that will set out the history of the proceedings showing all the defaults of the Plaintiffs and all of the outstanding fees owed by Lemery to this firm. That way, we will inform the Court that Lemery does not have any money to pay its legal costs and they should be paid from the monies held in Court." SOBBI: "Why do you have to put all of the costs owing? You should only put in the costs of this matter." TOMARAS: "We need to put in all of the costs of all matters to show the true position of the outstanding costs owed by Lemery to date including the future costs that we will incur to run the matters. That way the Court can decide how much it would give us." SOBBI: "We don't want to be saying that we agree with the amount of the costs you've billed us, because they have not yet been assessed." TOMARAS: "You will always be entitled to have the costs for past and present fees paid assessed, so you don't have to worry about that. It is best to make an application to the Court for all the fees including future costs and try and get the most we can , and then if you would like to have the fees assessed, you can do so." SOBBI: "That's fine. I understand that, but I just want to make sure that the costs can be assessed. My father wants this matter finished as soon as possible. He is not happy that it has taken so long. What if the matter is not struck out and they are given more time?" TOMARAS: "There is nothing we can really do about it because Mr Cassinitti is in gaol and they have a good excuse for not complying with the Court Orders. However, the Court will also make very strict orders for the Plaintiffs to comply from now on and if they default again, it would most definitely be struck out." (emphasis added) 31 In his affidavit in reply to this evidence, Mr Alan Sobbi said: "I … refer to paragraphs 20, 21, and 22 of my affidavit sworn 28 July 2006. In early 2006 I told Ted Tzovaras that my father wants all the matters finished as soon as possible, what can we do to make Mr Cassaniti to comply with the Court orders. Ted Tzovaras advised me that we should make an application to strike out both proceeding or to release the funds from Court. I gave Tzovaras Legal instructions to make the application. Had I known the application that Ted Tzovaras made was to release funds to him, I would stop the application and terminated his retainer." 32 Paragraphs 20, 21 and 22 of Mr Alan Sobbi's affidavit sworn 28 July 2006 said: "On or about April 2006 John Tomaras told me words to the effect 'I am preparing the application to strike out proceedings No 3696 of 2005, I am doing an affidavit myself and one for your father to sign.' On 5 May 2006 I received from Tzovaras Legal a draft affidavit for my father to approve and sign. A true copy of document is annexed to Exhibit "AS1" & marked "C". On 8 May 2006 I received by email a copy of John Tomaras's Affidavit. A true copy of document is annexed to Exhibit "AS1" & marked "D". 33 Thus, there was no direct denial by Mr Alan Sobbi of Mr Tomaras' evidence about that conversation. 34 I do not accept the final sentence of Mr Alan Sobbi's evidence quoted in para [31] above. He had been clearly informed of the basis on which the application was to be made. Making an application on that basis was consistent with his own desire to lift the "Mareva injunction", and the obvious need to pay his lawyers. The Sobbis had exhausted all their readily available assets, and their house was subject to two mortgages, so finding other lawyers prepared to take on this complex litigation would not be likely to be easy. As well, I did not find Mr Alan Sobbi a very impressive witness. 35 On 12 April 2006 the Notice of Motion, which initiated the application that I dealt with on 11 July 2006, was filed. The orders it sought were: "1. That pursuant to Rule 12.7 of the Uniform Civil Procedure Rules 2005 , the Amended Statement of Claim dated 3 February 2006 be dismissed. 2. Upon Order 1 being made, the Registrar of the Supreme Court of New South Wales pay to the First Defendant the funds paid into Court in related proceedings number 4924 of 2004 in the sum of $628,381.90. 3. Alternatively to Order 1, the Registrar of the Supreme Court of New South Wales pay Tzovaras Legal from funds paid into Court in related proceedings of 4924 of 2004 for the total sum of $628,381.90, the sum of $282,212.19 or such other amount as the Court thinks fit. 4. The sum paid out pursuant to Order 2, to be held by Tzovaras Legal in its trust account for the First Defendant for the payment of legal costs and disbursements incurred by the First Defendant. 5. Such further or other order as the Court thinks fit. 6. Costs." 36 Mr Tomaras telephoned Mr Alan Sobbi, told him that the Notice of Motion had been given a return date of 28 April 2006, and said he would send him copies of the documents. 37 On 27 April 2006 Mr Tomaras sent an email to Mr Alan Sobbi attaching a draft Amended Notice of Motion. According to Mr Tomaras' affidavit, the orders sought by that draft Amended Notice of Motion were: "1. That pursuant to Rule 12.7 of the Uniform Civil Procedure Rules 2005 , the Amended Statement of Claim dated 3 February 2006 be dismissed. 2. Upon Order 1 being made, the Registrar of the Supreme Court of New South Wales pay to the First Defendant the funds paid into Court in related proceedings number 4924 of 2004 in the sum of $628,381.90. 3. Alternatively to Order 1, the Registrar of the Supreme Court of New South Wales pay Tzovaras Legal from funds paid into Court in related proceedings of 4924 of 2004 for the total sum of $628,381.90, the sum of $282,212.19 or such other amount as the Court thinks fit. 4. The sum paid out pursuant to Order 2, to be held by Tzovaras Legal in its trust account for the First Defendant for the payment of legal costs and disbursements incurred by the First Defendant. 5. An order that the Plaintiffs pay to the Defendants their costs on an indemnity basis pursuant to an order made by Campbell J on 29 June 2005 in proceedings number 4924/2004, as agreed or assessed forthwith. 6. Such further or other order as the Court thinks fit. 7. Costs."

That text is identical with that of the Amended Notice of Motion that was ultimately moved on. 38 There is clear sense, from the Sobbis' point of view, in seeking orders structured in this way. If order 1 were granted, the proceedings would be over. In that eventuality, there would be no occasion for the proceeds of sale of the Macquarie Street property to remain in court, and it would be appropriate for the whole of that sum to be paid to Lemery. Further, though, it is understandable that Tzovaras Legal be the recipient of that sum on behalf of Lemery, so that whatever was properly due to Tzovaras Legal for costs and disbursements could be paid from it, and the balance remitted to Lemery. Orders 1, 2 and 4 set out a procedure for that to happen. 39 Order 3 dealt with a different eventuality, namely what was to happen if the proceedings were not dismissed. Order 3 sought, in that eventuality, a partial variation of the asset preservation order, so that whatever amount the Court thought fit would be paid to Tzovaras Legal. One specific amount that was nominated as one the Court might think fit was $282,212.19. 40 When the Validly of Charge Proceedings and the Proceeds of Sale Proceedings were listed before me last year, I made orders on 29 June 2005 for the costs of the Validity of Charge Proceedings, and certain of the costs of the Proceeds of Sale Proceedings, to be paid on an indemnity basis, because the claim had been, in effect, abandoned. However, both of those proceedings were still on foot, though subject to an order that no more documents be filed in them without leave of a judge. They were left in that state deliberately, so as not to risk creating estoppels which might interfere with the running of the 2005 Charge Proceedings. Order 5 in the Notice of Motion sought an order that the costs that I had already ordered be paid, be paid forthwith. 41 According to Mr Alan Sobbi, the text of the Amended Notice of Motion that was enclosed with that e-mail did not include para 3 that I have quoted at para [37] above. It included the text of paras 4-7 of the version quoted at para [37] above, but numbered them as 3-6. 42 In cross-examination, Mr Tomaras accepted that the version of the draft Amended Notice of Motion according to Mr Sobbi was the version which had been sent enclosed with the e-mail. However, that cross-examination was not one which squarely drew his attention to the fact that there was a difference between what he had previously said was the enclosure in the e-mail, and what Mr Alan Sobbi said had been the enclosure in the e-mail. Mr Alan Sobbi was not cross-examined at all about the differences between those two drafts of the Amended Notice of Motion. 43 The version which Mr Alan Sobbi puts forward is, as a matter of drafting, fairly obviously one which inserts into a draft of the Notice of Motion which preceded the Notice of Motion actually filed, the new order for payment forthwith of the indemnity costs already ordered. It seems to me likely that Mr Tomaras was mistaken in his identification of the text of the Amended Notice of Motion which was enclosed with the e-mail (because of it being identical with the Amended Notice of Motion actually moved on, and, as will later appear, the drafting was not complete by 12 April). Also, though, I am not persuaded that Mr Alan Sobbi has correctly identified the text of the enclosure with that e-mail. 44 Also on 27 April 2006, Mr Tomaras had a telephone conversation with Mr Alan Sobbi, in which he said it would be necessary to prepare an affidavit setting out the assets and liabilities of Lemery and Mr and Mrs Sobbi Snr. 45 The Amended Notice of Motion, in the form ultimately moved on, was filed in Court on 28 April 2006. 46 On 2 May 2006 Mr Tomaras wrote to Mr and Mrs Sobbi Snr. He informed them that, "… the hearing of the Notice of Motion to strike out the plaintiff's claim and/or alternatively the release of the funds from court" had been adjourned until 15 May 2006. A copy of the Amended Notice of Motion as filed in Court was enclosed. 47 On 3 May 2006 Mr Alan Sobbi and Mr Ghandi Sobbi were at court in connection with the Possession Proceedings. Mr Tomaras, Mr Tzovaras and Ms Djuricin had a conference with them at court to finalise an affidavit to be sworn by Mr Ghandi Sobbi in support of the Notice of Motion in the 2005 Charge Proceedings. The solicitors brought a draft affidavit with them to that conference, which included a listing of assets and liabilities of Mr and Mrs Sobbi Snr. That draft said, in the liabilities column: "Lemery's present indebtedness to Tzovaras Legal is $282,212.19 as set out in the affidavit of John Tomaras sworn 12 April 2006. My family's present indebtedness to Tzovaras Legal is approximately $100,000." 48 In the course of that conference Mr Tzovaras handwrote the words "(subject to costs assessment)" at the end of each of the items I have just quoted, and Mr Ghandi Sobbi initialled each of those alterations. 49 In fact none of the Sobbis had seen a copy of Mr Tomaras' affidavit of 12 April 2006. Mr Tomaras gives evidence that on 28 April 2006 he recalls: "… taking with me an extra copy of all the documents to court to give to Mr Alan Sobbi, to the best of my recollection, I provided Mr Alan Sobbi with copies of the documents." 50 That evidence contains within it some uncertainty about whether the documents were actually handed over. 51 On 8 May 2006 Mr Alan Sobbi requested, from Mr Tomaras, a copy of the original Notice of Motion which had been filed, and his affidavit. Mr Tomaras' response was: "I thought I had given it to you already. I'll provide you with a copy of my affidavit and Notice of Motion from the computer directory. It is not the signed one because it is from the computer. I'll have to scan it to you or give you copies when I see you tomorrow." 52 While Mr Tomaras arranged for a copy of an affidavit, obtained from the computer directory, to be sent to Mr Sobbi on 8 May 2006, the document obtained from the computer directory was not identical with the affidavit which Mr Tomaras swore on 12 April 2006. 53 The affidavit that was actually sent to Mr Alan Sobbi contained a procedural history of the 2005 Charge Proceedings. The affidavit that Mr Tomaras swore on 12 April 2006 contains much of that same procedural history, but also contained some background to the proceedings (which was uncontentious, and would have been well known to Mr Sobbi) information about the payment into court (which also was uncontentious, and would also have been well known to Mr Sobbi) a statement that the present indebtedness of Lemery to Tzovaras Legal was $230,572.19 (relating to five different matters, each of which was itemised), and that the future anticipated legal costs of conducting the 2005 Charge Proceedings was $51,640 (which was also itemised). It ended by saying "accordingly, in order for Tzovaras Legal to continue to represent the First Defendant in these proceedings we require the sum of [misprint] which comprises of: Tzovaras Legal fees up to 28 March 2006 (past fees) $230,572.19 (incl GST) Tzovaras Legal (anticipated fees) $51,640.00 (incl GST) Total: $282,212.19 (incl GST)"

54 On 8 May 2006 Mr Ghandi Sobbi swore a version of his affidavit which included the handwritten amendments to the statement of assets and liabilities. It was the affidavit in that form which was read at the hearing of the application on 11 July 2006. As well as verifying the statement of assets and liabilities, that affidavit stated: "My wife and myself are retired and we both receive a pension from Centrelink on a fortnightly basis. The money we receive from the pension is used to meet our daily expenses such as food, petrol, bills and other household and everyday expenses. Neither my wife or I have any other source of income or surplus of existing income in order to meet legal expenses of Lemery or our own legal expenses." 55 As well, the document which was sent on 8 May 2006, as being the original Notice of Motion, was not the Notice of Motion which had originally been filed. It differed from the Notice of Motion as originally filed (the text of which is set out in para [35] above) in that order 4 did not include the words "for the payment of legal costs and disbursements incurred by the First Defendant". 56 At the hearing of the Notice of Motion before me on 11 July 2006 Mr Tzovaras appeared as advocate for Lemery and Mr and Mrs Sobbi Snr. Mr Alan Sobbi was present in court from around 2:00 or 2:30 pm until the matter concluded. He was present throughout the addresses. In the course of the addresses, I had discussion with Mr Tzovaras in which, with perhaps more directness than delicacy, I used language like "the money you say you should get for your fees", in a context concerning payment out of part of the money in court. I find it difficult to believe that anyone could have sat through the addresses and not got the message that what Mr Tzovaras was asking for was for as much money as possible to be paid to him, from the money in court, so that his legal fees could be paid and the proceedings could continue. 57 The judgment was delivered orally. In the course of it I said (Reliance Financial Services v Lemery Holdings [2006] NSWSC 709 at [21]: "The variation which is sought in relation to the order is to seek the release from court of an amount up to $282,212.19. That amount comprises an amount of the order of $230,000, which Tzovaras Legal presently claims to be owed by Lemery, and an amount which is the estimated costs of seeing the present proceedings through to conclusion. The amount which is presently owed is not all in relation to these present proceedings. In all, it relates to five different disputes four of which have at present resulted in proceedings. One of the amounts which is owed relates to the House of Diamonds litigation." 58 While the judgment I gave on 11 July decided the substance of the dispute, the only orders that were made that day were for the parties to bring in Short Minutes of Order, and that the costs of the application be the first defendant's costs in the cause. 59 After the judgment was delivered, Mr Alan Sobbi, Mr Tzovaras and Mr Tomaras walked back to Mr Tzovaras' office. A conversation to the following effect occurred: TZOVARAS: "It's a good result, Alan. The costs have been paid to date in these proceedings and the judge gave us the costs of the House of Diamonds matter." SOBBI: "Yes, that is a good result, Ted." TZOVARAS: "We did not get our future costs to run the matter, but we can get on with the work and have a tight timetable for the preparation of the hearing and press the other side to comply with it. Then we will issue our bill in relation to these proceedings and ask for the payment of same by consent or make a further application to the court for the funds to be released from the court to pay those costs." SOBBI: "That's great. Ted, but we can still have the costs assessed, can't we?" TZOVARAS: "Of course. The payment of our costs from the moneys held in court does not affect your entitlement to have those costs assessed." SOBBI: "That's good. What happens with the matter now." TZOVARAS: "Come up to the office and we can talk about it." 60 Mr Tomaras gives evidence, which I accept that: "Alan Sobbi appeared to be happy about the result and nothing further was discussed in the meeting at the office in relation to the judgment. Certainly he did not express any dissatisfaction or make any complaint about the court orders made for the payment of our costs nor did he express any surprise about being contrary to his understanding of Lemery's instructions."

I prefer Mr Tomaras' evidence on this topic to the evidence which Mr Alan Sobbi gives at paragraph 23 of his affidavit of 28 July 2006. Mr Tzovaras gives evidence of this conversation which does not differ in substance from the version I have accepted at para [59] above. 61 On the morning of 12 July 2006 there was a telephone conversation between Mr Alan Sobbi and Mr Tomaras, to the following effect: SOBBI: "I have not received a copy of the orders." TOMARAS: "I will send them to you. The order is that $194,264.72 be released to Tzovaras Legal for the payment of its fees." SOBBI: "My father wants the money paid to him and then he will pay Tzovaras Legal." TOMARAS: "Lemery cannot have the money, the money was only released on the basis that it pay the legal fees outstanding to Tzovaras Legal." SOBBI: "I don't understand why Lemery cannot have the money." TOMARAS: "Alan you were there when the judge made the orders. The money is to only be released to pay legal fees. If the fees are not released to pay legal fees then it will not be released at all. It will just stay with the court." SOBBI: "I don't want the money released to you." TOMARAS: "You will have to talk to Ted [Tzovaras] about this."

I prefer that version of the conversation to the version given by Mr Alan Sobbi in paragraph 27 of his affidavit of 28 July 2006. 62 At 12:03 pm on 12 July 2006 Mr Alan Sobbi sent an email to Mr Tomaras, as follows: "After I spoke to you this morning I talked my father that the court will release some funds, he want to know the amount and he want's the funds to be paid to Lemery and Lemery will pay Tzovaras Legal as to our agreement of 2 February 2006 (refer to paragraph 4). John please call me ASAP my father asked me to sand a letter to the court to ask the court to release the funds to Lemery, I told him to wait he told me if I don't sand the letter he will ask my sister to sand the letter." 63 I note that this email shows an understanding that the effect of the order was for the money to be paid to Tzovaras Legal, and that there is no allegation of Tzovaras Legal having acted outside its instructions, just that it had acted in a way different to what was contemplated by para 4 of the letter of 2 February 2006. 64 Mr Tomaras accepts that from the time of that email he was aware that Mr Alan Sobbi was disputing the release of the funds. 65 Mr Alan Sobbi sent another email at 1:27 pm on 12 July 2006, saying, "call Alan ASAP please", and another email at 6:00 pm requesting a telephone call. I accept Mr Tomaras' evidence that he tried to contact Mr Alan Sobbi on his mobile telephone, but he did not answer. 66 On 13 July 2006, at 9:26 am, Mr Alan Sobbi sent Mr Tomaras another email, saying "John my father will sand a letter to court by 10 am, call me ASAP." 67 On 13 July 2006, Tzovaras Legal sent a draft order in the following terms to my chambers: "1. The Registrar of the Supreme Court of New South Wales pay Tzovaras Legal from funds paid into Court in related proceedings of 4924 of 2004, the amount of $194,264.72, being for the payment of legal costs and disbursements incurred by the First Defendant in relation to Supreme Court proceedings 3923 of 2004, 4638 of 2002 and 3696 of 2005 as referred to in paragraph 28 of the affidavit of John Tomaras sworn 12 April 2006. 2. The Plaintiffs pay to the Defendants their costs on an indemnity basis pursuant to an order made by Campbell J on 29 June, as agreed or assessed forthwith. 3. Costs of the Amended Notice of Motion dated 27 April 2006 be the Defendants' costs in the cause." 68 The draft orders were sent to my chambers by fax, which shows a transmission time of 12:28 pm. On 13 July 2006 at 10:17 am Mr Tomaras had sent Mr Alan Sobbi a copy of the terms of the draft orders that were sent to my chambers on 13 July 2006. 69 It was after 12:28 pm on 13 July 2006 that I actually made the orders which are set out at para [3] above. I did not make order 2 contained in the draft, because the draft related to orders made in the 2005 Charge Proceedings, and an order like order 2 in the draft needed to be made in different proceedings. However, I made an order to the same effect as order 2 in the draft in the Validity of Charge Proceedings and the Proceeds of Sale Proceedings. I made order 3 set out in para [3] above because that had been discussed at the hearing, but was not contained in the draft. 70 On 14 July 2006 there was a meeting between Mr Alan Sobbi, Mr Ghandi Sobbi, Mr Tzovaras and Ms Djuricin, in which a conversation to the following effect took place: A. SOBBI: "Ted, my father is not happy that you will be getting paid all the legal fees. He wants the money that is being released to go to Lemery and then he will pay you your legal fees." TZOVARAS: "Alan and Ghandi, let me explain to you, as you know we did make an application to strike out the proceedings and have all the money released to Lemery as our first and second position. The third position was for funds to be released for Lemery's legal fees. The judge was not prepared to allow any money to go into the hands of Lemery due to the history of the matter. As I said to you on the day of the hearing, the release of the funds is a win for Lemery." G. SOBBI: "Look, I want the money to go to Lemery and then I will pay your legal fees." TZOVARAS: "Ghandi, the orders that were made was for the money to go to Tzovaras Legal and not Lemery. All the money is to be used in payment of costs incurred by Tzovaras Legal in relation to the various matters involving Lemery." G. SOBBI: "I have already paid you $50,000, what more do you want." TZOVARAS: "Ghandi, the $50,000 was just to see us through until we were able to get money out of the court. You owe this firm hundreds of thousands of dollars. I have let it go because we have known each other for a long period of time and I was willing to wait until we got some of the funds out of court. As you know, the court has allowed the fees outstanding for the proceedings against Reliance in relation to the challenge of the appointment of receiver, fees for the House of Diamonds matter and the present proceedings. The Court did not release any money on account of future costs." A. SOBBI: "What about the letter of 2 February [2006]?" TZOVARAS: "Like we said, all our costs can be assessed by an independent party. If there needs to be a refund for any reason due to a finding by the cost assessor we can set off that amount from the future fees that are incurred on behalf of Lemery. You instructed us to file the Motion, you signed the affidavit which set out the amounts required by us to pay our fees, you have always been given copies of the documents." G. SOBBI: "I want the money to go to Lemery." TZOVARAS: "Ghandi, please listen to me, the judge would not release the funds to Lemery, he had before him the previous decisions made by the Court in particular the judgment of Justice Nicholas, you must understand that a factor that the court takes into account when assessing applications to release funds is whether there is a real risk of the funds being dissipated. The judge would have read the judgment of Justice Nicholas and it is likely that he would have been of the view that if the funds go to Lemery the money would disappear or that there was a real risk of that. The Court refused to pay any money to Lemery." G SOBBI: "I am very angry, I don't want any money to go to you [Tzovaras Legal]." TZOVARAS: "The orders have been made and entered in favour of Tzovaras Legal and not Lemery. There is approximately $630,000 in court. If Lemery was to win these proceedings, Lemery would receive all the money paid into court. But suppose Reliance wins, they would take the money from court and you would still need to pay Tzovaras Legal fees, and the other side's fees. So, if you lose, then Tzovaras Legal would have been paid in part and so it is that much less money that you won't need to pay us." G. SOBBI: "I don't want the money to go to you. I want the money from the court and then I will pay you." 71 That account of the conversation is based upon contemporaneous notes which Ms Djuricin made. 72 Ms Djuricin was not cross-examined. Her contemporaneous notes contain an entry "relation to Agreement he says he went beyond the agreement." I infer from this note, and its position within Ms Djuricin's notes, that at the meeting one of the Sobbis made the allegation that Mr Tzovaras had gone beyond what he was permitted by the agreement made on 2 February 2006. 73 On 14 July 2006 a letter signed by Mr Ghandi Sobbi was faxed to me. It included: "There is an agreement between Tzovaras Legal and myself and on behalf of Lemery Holdings dated 2 February 2006 (copy attached) that Tzovaras Legal will make an application on behalf of Lemery to release the funds held in Court in relation to proceedings between Lemery and Reliance (No 3923 of 2004) for the payment of its outstanding account $75,981.71) in that matter. My instructions to Tzovaras Legal is that any amount above $75,981.71 if released by the Court should be paid to Lemery, if the Court will not allow the balance to be paid to Lemery, then Tzovaras Legal should only ask the Court to release $75,981.71 and willing continue working on the current matters. Lemery had borrowed from family members to pay Legal fees; I am under pressure to pay back. I ask the Honour Justice Campbell that any other funds that his Honour is willing to release to be release to Lemery".

The evidence gives no basis for deciding whether that letter was faxed before or after the meeting referred to in para [70] above. 74 On 17 July 2006 at 9:56 am, Alan Sobbi sent an email to Mr Tzovaras, saying: "We refer to the Court hearing on 11 July 2006 and the orders which were made. We were not told by any one in your firm of all the orders that you asked the Court, we never agreed with you about the orders that were made. To continue acting on our matters you must amend the orders made on 11 July 2006 to what we have agreed on the 2 February 2006. Would you kindly reply ASAP." 75 On searching the court file on 18 July 2006, Mr Alan Sobbi found, for the first time, the affidavit of Mr Tomaras of 12 April 2006. 76 On 18 July 2006 at 11:43 am Mr Alan Sobbi sent an email to Mr Tomaras, saying: "I refer to our telephone conversation earlier today. I confirm that the orders made in these proceedings providing for the release of funds to your firm were contrary to my instructions. I am concerned that you have mislead both myself and the Court as regards this matter. I look forward to receiving to your written confirmation that you will not seek to deal with any of the monies." 77 At some stage on 18 July 2006 - the evidence does not enable one to be more precise - the money which had been ordered to be paid out of court was deposited into the general account of Tzovaras Legal. 78 Thereafter, Lemery and Mr and Mrs Sobbi changed solicitors, and the Notice of Motion which I am now considering was filed. The Role of the Legal Profession Act 1987 79 Lemery and the Sobbis engaged Tzovaras Legal to act in all the various matters in which Tzovaras Legal acted prior to 1 October 2005. It was on 1 October 2005 that the Legal Profession Act 2004 came into operation. Thus, any statutory controls on Tzovaras Legal charging or recovering costs and disbursements arise under the Legal Profession Act 1987. Section 175 of that Act provides: "(1) A barrister or solicitor must disclose to a client in accordance with this Division the basis of the costs of legal services to be provided to the client by the barrister or solicitor. (2) The following matters are to be disclosed to the client: (a) the amount of the costs, if known, (b) if the amount of the costs is not known, the basis of calculating the costs, (c) the billing arrangements, (d) the client's rights under Division 6 in relation to a review of costs, (e) the client's rights under Division 4 to receive a bill of costs, (f) any other matter required to be disclosed by the regulations." 80 The solicitor must also disclose an estimate of the likely amount of the costs of legal services, as soon as it is reasonably practicable to do so (section 177, 178). That disclosure must be in writing, and in clear plain language (section 179). 81 Section 182 provides: "(1) If a barrister or solicitor fails to make a disclosure to a client in accordance with this Division of the matters required to be disclosed by section 175 in relation to costs, the client need not pay the costs of the legal services unless the costs have been assessed under Division 6. (2) A barrister or solicitor who fails to make a disclosure in accordance with this Division of the matters required to be disclosed by section 175 or 176 in relation to costs may not maintain proceedings for the recovery of the costs unless the costs have been assessed under Division 6." 82 Section 184 enables costs agreements to be made. While a costs agreement must be in writing or evidenced in writing, it may consist of a written offer that is accepted in writing, or by other conduct (section 184). 83 A client who is given a bill of costs may apply for those costs to be assessed, even if the costs have been wholly or partly paid (section 199). Unless a costs assessor decides that the rate specified in the agreement for calculating the costs is unjust, the assessor must apply the rate contained in the costs assessment (section 208C). In applying that rate, it is still open to the assessor to consider, under section 208A, " (a) whether or not it was reasonable to carry out the work to which the costs relate, and (b) whether or not the work was carried out in a reasonable manner, and (c) the fairness and reasonableness of the amount of the costs in relation to that work." 84 The applicants submit that no costs agreements applied to work done by Tzovaras Legal, other than the letter of 2 February 2006. Concerning the 2005 Charge Proceedings, an unsigned file copy of a disclosure statement and offer for costs agreement addressed to Mr Ghandi Sobbi and dated 5 July 2005 is on Tzovaras Legal's file. It sets out a basis of hourly rates for carrying out the work, sets out the basis on which disbursements would be charged, and provided when payment was due, namely that a tax invoice would be sent, "… when our fees and expenses exceed $1,000.00 or on completion of the work or at our discretion or at your request; and you agree that a Tax Invoice will be due and payable immediately upon receipt." 85 It informed Mr Sobbi of the right to have the charges assessed. It provided "You may accept this offer orally or in writing, or by instructing us to undertake the work". While Mr Ghandi Sobbi did not sign that document (either in his personal capacity, or on behalf of Lemery) he clearly instructed that work be done. 86 Mr Tomaras has given evidence that: "… Tzovaras Legal has provided costs agreements and disclosure statements to the Defendants in relation to all matters in which it acted. In relation to these proceedings, a costs agreement and disclosure statement was sent to the defendants on 5 July 2006, shortly after the matter commenced in the Supreme Court on 1 July 2006. A copy of the letter enclosing the costs agreement is document 43." 87 Cross-examination of Mr Tomaras established, however, that he was not in a position to know whether there were costs agreement forms sent in matters other than the 2005 Charge Proceedings. Further, while he had on his file a file copy of the letter of 5 July 2005, the oral evidence he was able to give about it was that "it may have been signed and sent to Lemery". Tzovaras Legal maintains a postage book, which records outgoing mail. It has no entry on 5 July 2005, or in the days immediately following 5 July 2005, for any letter being sent to Lemery or Mr Sobbi. There is an entry on 4 July 2005 concerning a letter being sent to Mr Sobbi, but the postage book records that letter as being sent in connection with a different matter to the 2005 Charge Proceedings. While Mr Tomaras says, and I accept, that sometimes the staff who filled out the postage book had difficulties in identifying the right matter number for matters involving Lemery, if it were necessary to do so for the purpose of this application I would not be satisfied that a costs agreement and disclosure form had been sent to Lemery or Mr Sobbi concerning any matter. It is only fair to say, however, that the question of whether costs agreements had been entered was not part of the case that Tzovaras Legal made on this application, and the exploration of that topic was not complete. Authority to Seek the Order? 88 The applicant contend that the agreement reached on 2 February 2006 constitutes the sole mechanism for Tzovaras Legal to pursue the payment of the outstanding costs covered by the agreement. 89 The applicant submits (and I accept) that the "outstanding accounts" are those which had been identified in the letter from Tzovaras Legal dated 27 January 2006 (para [15] above). It submits that the agreement of 2 February 2006 was the compromise of a dispute about the manner in which the outstanding accounts would be paid. The essence of that compromise was that $50,000 would be paid immediately, Tzovaras Legal would continue working to see the matters through to completion, attempts would be made to recover costs which had been ordered to be paid to Lemery, and no further amounts would be payable until all accounts had been submitted for assessment. 90 The applicant accepts that it was part of the agreement of 2 February 2006 that Tzovaras Legal was authorised to apply on behalf of Lemery to release funds for the payment of the outstanding account in matter 3923 of 2004. To that extent, the relief which the applicant claims in its submissions is not as extensive as the relief claimed in its Notice of Motion. 91 The applicant relies upon its prompt complaint, after the hearing on 11 July 2006, as supportive of what the authority of Mr Tzovaras really was. I accept that, by 14 July 2006, the Sobbis had articulated a complaint that Mr Tzovaras had gone beyond the authority conferred by the agreement of 2 February 2006. Indeed, the email of 12:03 pm on 12 July 2006 (para [62] above) comes close to formulating such a complaint. However, when Mr Alan Sobbi sat through the addresses and oral judgment in court on 11 July 2006, and had the conversation he had with Mr Tomaras and Mr Tzovaras afterwards, it is surprising that he did not make prompter complaint about the result of the proceedings, as explained to him immediately after court on 11 July 2006, if he felt that it went beyond what had been authorised. He does not strike me as a man who is slow on the uptake, or who would be reluctant to complain if he felt he had been wronged. 92 In my view, whether there were costs agreements of the type required by the Act is of little relevance to whether Tzovaras Legal was authorised to obtain the orders they actually obtained on 11 July 2006. In my view, they were so authorised. 93 A solicitor who makes an application in legal proceedings is the agent of his client. While the authority of the solicitor to act usually arises pursuant to a contract, it is not necessary that it arise pursuant to a contract. There can be an ad hoc authorisation of a solicitor to make a particular application, regardless of whether that authorisation is tied to, or part of, any overall agreement for the payment of fees. 94 I do not accept that the letter of 2 February 2006 is the only thing which is relevant to whether Tzovaras Legal was so authorised to seek and obtain the orders made on 13 July 2006. The letter of 2 February 2006 needs to be understood in its context, where a significant amount of work had been done, on numerous matters, and not been paid for. That letter did not involve acceptance of $50,000 in full discharge of the outstanding accounts - it expressly said that that $50,000 was in part payment of the outstanding accounts. One manifest purpose of the agreement to submit all paid and outstanding accounts to a costs assessor for assessment was so that the costs assessor could work out what amount, if any, beyond the $50,000 was payable to Tzovaras Legal. As well, the agreement contemplated three further means being used to deal with outstanding accounts - enforcing the costs orders Lemery already had in its favour, applying to the Court for release of funds to enable payment of the outstanding account in 3923 of 2004, and as well making an application to "lift the Mareva injunction". The Amended Notice of Motion that was argued on 11 July 2006 sought to advance each of those means. 95 In the conversation between Mr Tomaras and Mr Alan Sobbi on 7 April 2006, it was squarely put to Mr Alan Sobbi that the application proposed to be made was one for the Court's approval to release funds from the amount held in court to pay Lemery's outstanding costs and get money for future costs for running the matter. Mr Sobbi understood that that was so. His only concern was that he would still be able to have the costs assessed. 96 The text of the Notice of Motion which was moved on was provided to Mr and Mrs Sobbi Snr on 2 May 2002. Even though the actual text of Mr Tomaras' affidavit of 12 April 2006 was not provided to the Sobbis, they knew, from the correspondence which had passed in January 2006, what Tzovaras Legal asserted was owing for fees, and estimated would be payable in fees in future, as at January 2006. Mr Ghandi Sobbi specifically initialled the parts of the statement of assets and liabilities, which were to be annexed to his affidavit, which identified the amounts which Tzovaras Legal asserted were owing as at April 2006. 97 I do not accept that the failure to provide Mr Alan Sobbi with a copy of Mr Tomaras' affidavit of 12 April 2006 is of any particular significance. The total amount said to be owing to Tzovaras Legal in Mr Tomaras' affidavit of 12 April 2006 was less than the total amount said to be owing in the letter of 27 January 2006 because the affidavit of 12 April 2006 listed only amounts which were owing by Lemery. A comparison between the amounts that were said to be owing by Lemery in the letter of 27 January 2006, and Mr Tomaras' affidavit of 12 April 2006, is Matter 27 January 2006 12 April 2006 amount affidavit amount Lemery ats House of Diamonds - statutory demand 4,296.00 9,789.70 3923 of 2004 88,523.78 87,043.38 4638 of 2002 131,658.50 82,445.56 3696 of 2005 14,476.00 24,775.78 Lemery ats Alka Developments 24,031.52 26,517.77 Total 262,985.80 230,572.19

98 While I say nothing about the correctness of particular monetary amounts, that there should be differences of the general type shown by this table is, subject to one exception, unsurprising -- the payment of $50,000 made soon after 2 February 2006 was appropriated to matter 4638 of 2002, and the other matters were current matters where work was ongoing. The exception is that there is no explanation for how the amount owing in connection with 3923 of 2004 came to reduce. In broad outline, the Sobbis knew the approximate size of the amounts Tzovaras Legal claimed were owing to it. 99 Nor do I accept that any failure there might have been to provide to Mr Alan Sobbi on 27 April 2006 the correct text of the then draft of the Amended Notice of Motion, or the slight error in providing to Mr and Mrs Sobbi on 8 May 2006 the text of the Notice of Motion as originally filed, is of significance. The Amended Notice of Motion actually filed was sent to Mr and Mrs Sobbi on 2 May 2006, and the orders it sought were in keeping with the oral instructions provided by Alan Sobbi on 7 April 2006. 100 It was apparent, both from Mr Tomaras' communication with Mr Sobbi on 7 April 2006, from the text of Mr Ghandi Sobbi's affidavit, and from the nature of the submissions made on 11 July 2006, that the thrust of the application was that Mr and Mrs Sobbi and Lemery had no realisable assets of any size other than the assets which were frozen by the asset preservation order, and that they needed access to funds to pay past legal bills, and to run the litigation in which they were involved. Mr Alan Sobbi was the agent of his parents and Lemery for the purpose of running this litigation. He understood, and approved, that the application was being made on that basis. 101 Nothing that has happened has prevented Lemery and Mr and Mrs Sobbi from having the right to have bills of costs assessed. If that assessment finds that Tzovaras Legal has received more money than it is entitled to, Tzovaras Legal will have to refund the difference. 102 In all these circumstances, I find that Tzovaras Legal was authorised to make application for, and obtain, the orders that were decided on in principle on 11 July 2006. Authority to act on the orders 103 Authority to obtain the orders, and authority to act on them, are not the same thing. At least by the end of the meeting on 14 July 2006, the Sobbis had purported to withdraw the authority of Tzovaras Legal to act on the orders, by receiving any money at all from the money that had been paid into court. 104 Sometimes, an authority, once given, can be irrevocable. That can sometimes happen if the authority has been acted on in a way which is impossible of recall (e.g. when a licence has been acted upon - Minister of Health v Bellotti and another [1944] 1 KB 298 at 304; Winter v Brockwell (1807) 8 East 308; 103 ER 359 at 310 of East, 360 of ER; Liggins v Inge (1831) 7 Bing 682; 131 ER 263 at 692 of Bing, 267 of ER; Naylor v Canterbury Park Racecourse Co Ltd (1935) 35 SR (NSW) 281 at 285; Armstrong v Sheppard & Short Ltd [1959] 2 QB 384 at 399-401), or if there is some contractual relationship in place which prevents the authority from being withdrawn. In the present case, however, it seems to me that the authority which Tzovaras Legal once had to seek and act on the orders is revocable, and had been revoked before the money was actually received on 18 July 2006. 105 In my view, it remained necessary for Tzovaras Legal to have its client's authority to take the money out of court. In taking the money out of court it would have been acting as agent for its client. If the client's authority had continued, and Tzovaras Legal had then paid the money into its own bank account, the payment of the money into the bank account would also have been done on behalf of the client. Then, in receiving the money and appropriating it to payment of outstanding accounts, Tzovaras Legal would have been acting on its own behalf. The situation is similar to the situation that exists when a solicitor holds money on trust for a client and then, with the client's authority, appropriates some of the money held on trust to payment of an outstanding account. 106 If the authority had continued, the payment of the money into the general account would have had the effect of dispensing with any right the client might have had, under section 182 Legal Profession Act 1987, to not pay a legal bill until it had been assessed. It would not, of course, dispense with the right of the client under section 184 Legal Profession Act to request that the bill be assessed after payment. 107 The Sobbis have now had third thoughts, and have confirmed that Tzovaras Legal has authority to act on the orders, insofar as it involves receiving the amount owing in connection with the Validity of Charge Proceedings. It is not clear, on the evidence, what amount this is. Mr Alan Sobbi is of the view that it is $75,981.71. The evidence of Mr Tomaras, in his affidavit of 12 April 2006, is that it is $87,043.38. Because Tzovaras Legal had ceased to have authority to receive it, Tzovaras Legal must refund the money it received, minus the amount owing in connection with the Validity of Charge Proceedings. 108 Insofar as the order for payment out was obtained with authority, there is no occasion to set it aside. Particularly is that so when it has been acted upon. If, following the delivery of these reasons for judgment, there remains any dispute about what course should now be followed concerning a payment back into court of part of the money paid out, or if any party wishes to appeal against any part of my decision, it might suffice to make a declaration of right, consistent with the findings I have made in this judgment. 109 In my view the preferable course is to make no orders at present, but to direct the parties to bring in short minutes which will resolve, in accordance with these reasons for judgment, any dispute which remains. 110 I should record that when this Notice of Motion was heard on 7 September 2006 Mr Nikolaidis, solicitor, came to court. He had acted for the invalidly appointed receivers and managers of Lemery. That soi-disant receivers and managers had taken proceedings, which Mr Nikolaidis informed me had resulted in recovery of the fund which had been paid into court. He asserted that his client had an equitable lien over that fund to cover the receivers and managers' costs and expenses. He disclaimed, however, any submission that that meant that the Notice of Motion which I had heard on 11 July 2006 was not properly constituted. He elected not to make any formal application for joinder in the Motion I was hearing on 7 September 2006, and did so after it was pointed out to him that one of the consequences of the order of 11 July staying on foot might be that the receivers lost their claim to any money which Mr Tzovaras retained. Orders 111 I direct that the parties make an appointment, within 14 days of the date of delivery of these reasons for judgment, with my Associate for allocation of a date on which short minutes of order are to be brought in and argument can occur concerning any remaining matter of dispute, and concerning costs. **********

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