Riabkoff v Abenergy Properties Pty Ltd

Judgment 1This judgment is concerned with the costs of Mr Paul Young Taek Chong ("Mr Chong"), solicitor, and principal of the practice Dahan Lawyers, arising from his Notice of Motion filed 11 May 2012 seeking relief by way of interpleader pursuant to r 43.2 of the Uniform Civil Procedure Rules 2005 ("UCPR"). 2On 23 May 2012, by consent, the Registrar made an order that Mr Chong was, in the circumstances that I will outline below, entitled to interpleader. 3The question of costs was referred to me as Duty Judge on 27 June 2012. 4Mr Chong seeks orders that: - (1)the plaintiff, Mr Michael Riabkoff ("Mr Riabkoff"), and the first defendant, Abenergy Properties Pty Ltd ("ABE"), pay Mr Chong's costs of the proceedings; (2)the Court make a gross sum order pursuant to s 98(4)(c) of the Civil Procedure Act 2005 fixing those costs at $18,842; (3)Mr Chong be paid that sum from the $100,000 held by him in his trust account as stakeholder for Mr Riabkoff and ABE; and (4)Mr Chong pay the balance of $1,158 into court within seven days.

Background 5By an agreement made between Mr Riabkoff and ABE on 29 September 2011, ABE agreed to pay Mr Riabkoff a "facilitation fee" of $100,000 in return for Mr Riabkoff procuring the passage of certain resolutions at an Extraordinary General Meeting ("EGM") of Wintech Group Limited ("Wintech"). 6Pursuant to that agreement, ABE agreed to: - "Re-mit the sum of $100,000 in cleared funds to the Dahan Lawyers Solicitors's Trust account... Dahan Lawyers will act as stakeholders. Any fees payable to Dahan Lawyers shall be met by M Riabkoff." 7The agreement between ABE and Mr Riabkoff provided that if the relevant resolutions were not passed at the EGM of Wintech then Mr Riabkoff undertook: - "To ensure the prompt return to ABE of its entire $100,000". 8A few days earlier, Mr Riabkoff wrote to an employee of Mr Chong as follows: - "We spoke about this matter very briefly some time ago. Party we are dealing with has agreed to our conditions with exception that he wants payment to be made to a solicitor's account until all conditions are met. Party is afraid that I will do a runner with funds before delivering. In order to keep some control I want to nominate you as my solicitor and use your trust account to hold funds until they can be released." 9Mr Chong's employee replied: - "[Mr Chong] is willing to use the Trust Account as stakeholder ..." 10ABE paid into Mr Chong's trust account $100,000, by two $50,000 instalments on 30 September 2011 and 3 October 2011. 11On 30 September 2011, ABE's then solicitor sent Mr Chong a copy of the deed made on 29 September 2011 between Mr Riabkoff and ABE, and stated: - "Please note the explicit conditions within the contained Deed and ensure no funds are released from your trust account unless those condition precedents have been satisfied..." 12The relevant resolutions were not passed at the EGM. 13On 18 October 2011 ABE's then solicitors wrote to Mr Chong informing him that the resolutions had not been passed and requested that the $100,000 be returned to ABE. 14Two days later, on 20 October 2011, Mr Riabkoff's solicitors wrote to Mr Chong stating that Mr Riabkoff was "examining his legal position" and requesting: - "...that the funds in your account remain there pursuant to the Deed until we advise you as to whether this matter will be pursued further." 15On 10 November 2011, and again on 21 November 2011, ABE, through its then solicitors, demanded that Mr Chong return the $100,000 to ABE. 16Mr Chong referred these requests to Mr Riabkoff's solicitors who, on 24 November 2011, replied: - "...the funds held by you as a stakeholder in the above matter are still in dispute... Therefore we are instructed by our client that he does not consent to the release of the funds to ABE...until the dispute is resolved. If, in your role as stakeholder, you release the funds prior to the dispute being resolved we are instructed by our client that he will review all legal options open to him." 17Faced with this dilemma, Mr Chong wrote to ABE's solicitors drawing their attention to this correspondence and stating: - "As the stakeholder we are not in a position to release any funds until we obtain written consent from both parties". 18In the meantime, ABE made a complaint to the Legal Services Commissioner concerning Mr Chong's refusal to release the funds. 19On 9 January 2012, the Legal Services Commissioner wrote to ABE as follows: - "Dahan Lawyers maintain that there is an ongoing dispute between the parties and they are not in a position to release the funds without that dispute being resolved. In effect, they are saying that were they to release the funds now they may well be open to criticism. You could expect that [Mr Riabkoff's solicitors] would now object to the release of the funds. Unfortunately, you will need to obtain legal advice about your options. As it stands at present there is nothing this office can do to assist you." 20There the matter rested until 2 April 2012, when ABE's present solicitors, Slater & Gordon, wrote to Mr Chong enclosing a draft statement of claim (in which Mr Chong was named as second defendant) and stating: - "We are now instructed to request that you either return the funds to our client or that you provide our client with an undertaking to pay the $100,000 into Court within seven days pending resolution by the Court of our client's entitlement to the $100,000. If the funds are returned to our client, the [proposed statement of claim] will not proceed. If the funds are not returned to our client but you agree to pay the monies into Court, then it will unnecessary for you to be a party to the claim and our client proceed solely against Mr Riabkoff and amend its relief to seek a payment of the funds out of Court." 21As it happened, on that very day, Mr Riabkoff commenced these proceedings. Mr Chong was joined as second defendant and orders were sought against Mr Chong that he be restrained from releasing the $100,00 to ABE and that he release that sum to Mr Riabkoff. 22On 4 April 2012, Mr Chong wrote to the solicitors for both Mr Riabkoff and ABE: - "Unfortunately we are now in a position where we have, and seemingly will continue to have incurred, legal costs as a party to the proceedings. We note, if we are put to the test of having to make an Application in respect of our position by way of Notice of Motion, we will have to engage Solicitors and Counsel, causing further unnecessary (in our view) costs. We submit the costs to date and continuing will be paid by the unsuccessful party, [Mr Riabkoff] or [ABE]. We are prepared to pay or transfer the said Trust sum to the Registrar of the Supreme Court of NSW provided our legal costs incurred to that date, are paid. To prevent incurring further costs on our part, we request either [Mr Riabkoff] or [ABE] obtain the necessary Court Orders (to be consented to by us) to enable the suggested transfer of the said Trust fund." 23On 11 April 2012, ABE's solicitors wrote to Mr Chong stating that ABE would not consent to paying his costs, that Mr Riabkoff should pay any costs that Mr Chong had incurred, and stating that ABE would consent to: - "You being discontinued as a party to the proceedings on the basis that you pay the amount of $100,000 into Court pending resolution of the proceedings between [Mr Riabkoff] and [ABE]." 24Mr Riabkoff made no reply Mr Chong's letter of 4 April 2012. 25On 17 April 2012, Mr Chong wrote to Mr Riabkoff's solicitors: - "As is quite evident, we are attempting to minimise legal costs in this matter. In the circumstances of your lack of response, we are left no alternative but to incur legal costs by having to make an Application, etc., as detailed in our said letter to you dated 4 April 2012. [ABE] is amenable to our submission and we are at a loss as to why Mr Riabkoff does not consent to discontinuance of his claim against us." 26On 24 April 2012, Mr Chong wrote to Mr Riabkoff's solicitors: - "Again we request the usual professional courtesy of a reply to our letters of 4 April 2011 [sic], and 17 April 2012 and our numerous attempted telephone calls to your office... We give you hereby...notice, as a result of your lack of response, [Mr Riabkoff] is further exposed to increasing legal costs and we are left no alternative but to file a Defence to [Mr Riabkoff's] claim against us and make an urgent Application as previously detailed to you in writing." 27On 20 April 2012, Mr Chong filed a Defence, disclaiming any interest in the $100,000 and foreshadowing of the making of an application for relief by way of interpleader. 28On 30 April 2012, Slater & Gordon wrote to Mr Riabkoff's solicitors: - "As a consequence of your failure to consent to Dahan being discontinued as a party to the proceedings, our client has no choice other than to join Dahan Lawyers as a party to a cross claim which it intends to file and incur the associated costs of doing so. We put you on notice that regardless of the outcome of the proceedings, this letter ... will be tendered to the Court in support of an application that you pay our client's costs associated with the claim against Dahan on an indemnity basis." 29On 11 May 2012, Mr Chong made the application, to which I have referred, for relief by way of interpleader. As I have mentioned, on 23 May 2012 Mr Riabkoff and ABE consented to the making of the orders sought by Mr Chong. 30Although Mr Riabkoff appeared by counsel before me, no evidence was adduced from Mr Riabkoff about the matter, and no explanation was proffered as to his solicitor's failure to respond to the correspondence set out above.