Robert Ho v Paul Mervyn Fordyce t/as PMF Legal Trading

Supreme Court of NSW|2015-10-30|Before: Rein J, Mr P

ndant) Representation: Counsel: Mr D. Kelly (Plaintiffs) Mr P. Fordyce (Solicitor) (Defendants)

Solicitors: Mills Oakley Lawyers (Plaintiffs) PMF Legal Trading (Defendants) File Number(s): 2014/288128 Publication restriction: nil

JUDGMENT

These proceedings relate to a solicitor client relationship that existed between the plaintiffs and the defendants. Mr Kelly of counsel appears for Mr Ho and the corporate plaintiffs controlled by him. Mr Fordyce represents himself and the other defendants. Nothing at present turns on the distinction between Mr Fordyce and the other defendants and I shall refer to them collectively as "Mr Fordyce" in the balance of these reasons for ease of reference and for the same reason I shall refer to the plaintiffs collectively as "Mr Ho", save where some point of distinction arises.

The costs motion

The basis for the cost orders (other than interest) sought in the costs motion is Mr Fordyce's conduct regarding his motion to set aside the October orders. Critically, Mr Ho draws attention to the fact that shortly after I handed down the May judgment, Mr Fordyce in an affidavit of 18 May 2015 at para 16 deposed: "The engagement letters in this matter that were created in June 2014 were reproduced by me from photocopies of the engagement letters that had been sent out. I did this when I found that the original engagement letters were not where they should be."
Mr Kelly submits that what is set out in [10] above demonstrates what Mr Ho had believed to be the case, namely that examination of Mr Fordyce's computer would establish that the fee agreements on his computer had been created in June 2014 and not the date which the fee agreements as provided with Mr Fordyce's costs response bear. I should make it clear that Mr Fordyce by his affidavit of 18 October 2015 does not admit that the agreement letters were placed on the computer for the first time in June 2014 and he does not admit that the fee agreements in question were not created until June 2014. However, the admission that he put the copies of three fee agreements found on the computer in June 2014 is a step in Mr Ho's case that in fact Mr Fordyce did not create the contested fee agreements until June 2014 and hence that he never sent them out in 2012 and 2013 and provides some support for the contention that Mr Fordyce had backdated the documents which he annexed to his costs response to make it look like he had sent them out on or about the date they bear. Another fee agreement also dated 3 April 2012 but relating to the Guardianship Tribunal was, according to the Klein & Co report, created on 10 September 2013 but that mismatch seems to have assumed less importance.
Also and importantly, says Mr Kelly, the conclusion in the draft report of Klein & Co that three contested fee agreements were created only in June 2014 was demonstrated to be correct and known by Mr Fordyce to be correct at all times during the course of this litigation. Against that background there are the following acts and omissions of Mr Fordyce: 1. he did not on 2 October 2014 inform the independent solicitor Mr Burke who conducted the search of Mr Fordyce's computer that: 1. he had searched the computer in June 2014 and not been able to find the fee agreements that (on his evidence) he expected to find there 2. as a result he had placed the contested fee agreements on his computer in 2014 1. he did not make reference to either (1)(a) or (b) in his affidavit of 20 October 2014 which he provided in purported compliance with the October orders 2. he attacked, inter alia, the central conclusion of the Klein & Co report (ie that three contested fee agreement letters were created in June 2014) in his oral and written submissions. Mr Kelly draws attention in particular to what Mr Fordyce said at para 41 of his submissions of 2 March 2015: "41. The Klein Letter shows all sorts of wrong, inconsistent and nonsensical things - not material that would conclusively establish whether there were grounds for making the order…… k. It is submitted that in contrast to the WEA proceedings, the order in the present case is not "spent" or executed, in that the Klein Letter does not "conclusively" show anything, and is not consistent with known and undisputed facts. In fact the findings in the Klein Letter are plainly wrong. Can the Klein Report get any better than this, to establish what the plaintiffs contend for? Who knows?" 1. Mr Fordyce answered a question of Bergin CJ in Eq on 11 December in the following exchange at T29.14- T30.33: "KELLY: There is an affidavit, if you want it, from the independent computer expert. The copying of the material has been completed. HER HONOUR: Has a report been provided? KELLY: No, it hasn't. The view formed by those on my side of the camp, I'm not sure why, but they thought when there was clearly a dispute that they shouldn't complete the process whilst there was a pending application. HER HONOUR: Wouldn't it be helpful to have it concluded so that the Court could see whether there was a scintilla of evidence about this? KELLY: If my friend is correct, it's a costly exercise already for my client and it'll be even more costly. I only came into this matter fairly recently. One of the first things I asked is: Is it ready to go? The affidavit by Mr Ardvan Ghorbini suggests that the analysis can be completed within 2 weeks. HER HONOUR: Has Mr Ghorbini looked at the Metadata in relation to the costs agreements that are on the computer? KELLY: Can I hand your Honour this affidavit (handed up). It was served yesterday in accordance with Court orders. HER HONOUR: Where do I see the things that he analysed? Mr Fordyce, do you know whether the computer expert analysed your copies of any costs agreement in this matter? DEFENDANT: No, I don't. HER HONOUR: Is it in issue as to whether you had costs agreements on the computer? DEFENDANT: I don't believe so. HER HONOUR: You mean they are on the computer and there's no issue about it? DEFENDANT: They're certainly on the computer, yes. HER HONOUR: The computer has, as you understand it, the copy of the one dated 3 April 2012? DEFENDANT: Yes. HER HONOUR: Would you be in agreement for me to look at the Metadata for that to tell me when it was created? DEFENDANT: The point that has been addressed today is the fact that the document was sent well before the alleged creation. The purpose of this application is really to set aside the orders that have been made and get us back to the position that we were at. Someone had told Rein J that the process of extracting these records was a short simple exercise. HER HONOUR: I have got that point. DEFENDANT: So I have no idea in reality ‑ I mean they took five to six days to put‑‑ HER HONOUR: Just pause. I know you're deeply and personally involved but just let me see if I can introduce some efficiency, to use a neutral term. The expert has all the material from your computer. The expert presumably has looked at the costs agreements that are on your computer. Why is it not appropriate for the computer expert to produce to me the costs agreements that he has seen? DEFENDANT: Because the whole purpose of our application is to set aside the orders and the fruits of the orders, so I'm not terribly excited about that prospect." (Emphasis added) Mr Kelly submits that Mr Fordyce's answer "No, I don't" set out at T29.41 and in bold was a false answer. There appeared to be no dispute before me on 30 October that Mr Fordyce in fact received the Klein & Co report on or about 24 October 2014. Mr Fordyce was sent the report under cover letter from the independent solicitor: see Exh A tab 4
I think it is also pertinent that Mr Fordyce filed two affidavits in November 2014, one of 11 November and one of 18 November in which he deposed to matters relevant to the creation of fee agreements. In his affidavit of 11 November Mr Fordyce said: "7. It is the invariable practice of Pmf Legal (both when I operated through that business as my trading name and when Pmf Legal Limited commenced to practice using that name), that costs agreements were created as part of a process. 8. The process of creating a new file involved the following steps invariably being taken: "a. I gave instructions to my personal assistant to create a new file both on the firm's "X" drive - where all electronic copies of documents are kept and on the electronic time billing/costing system used by Pmf Legal. Although I am capable of creating the file on the X drive - but never do - I have no knowledge of how the electronic file is created on Pmf Legal's time costing/billing software. b. The parameters for the creation of the file on the electronic timecosting/billing software that I informed her of are: i. the nature of the matter, which is to be inserted into the file maintained for the recording of times and activities on the matter from which invoices are rendered; ii. Sometimes a second more expansive instruction as to what the matter involved is given to my personal assistant; and iii. Finally I give my personal assistant my estimate of the professional fees that are going to be incurred in the matter. c. The information given in respect of creating the electronic timecosting/billing file is the same information that was used to create thecosts agreement. d. The costs agreement is created. The only variables in the costsagreement are these. All other information is the same for every costagreement that Pmf Legal issued to all of its clients. e. I sign the letter, which was created on heavy grade printed letterhead. f. My PA, or the office junior, then bring me the hard copy letter off theprinter. I then sign it and give it back to the person who brought it to me g. The letter is then mailed out to the client by the office junior. h. In my experience it is exceedingly rare to receive a signed cost agreement back from a client. The client is invariably provided with a signed cost agreement by me and a copy of that agreement, with the request to sign and return the copy of the cost agreement to Pmf Legal. This simply does not happen. i. The costs agreements to Mr Ho were sent by mail to the address that I was instructed to send them to - PO Box 4388 Castlecrag. j. Mr Ho is shown on the ASIC searches of his companies to have been born on 17 May 1941. He is therefore 73 years old. From my observation of him he is very frail. I do not know how Mr Ho collects mail from this post office box, which is also located within proximity of the offices of Bennelong Partners. k. In regard to Mr Ho's frailty, he needs a walking stick to assist him get around. The walking sticks he uses have 3 or 4 bases to assist stability. I. On one of the few occasions when Mr Ho attended by offices at 84 Pitt Street, he was unable to use the regular bathroom facilities located between floors which have to be accessed by the stairs. He had to use the handicapped bathroom facilities on Level 1 - which are located on that floor and to not require stairs to be used m. Mr Wong and Claudia Leung always drove Mr Ho to meetings with me. Mr Ho would be dropped off close to the destination he was going to and Claudia Leung would then park the car and join us in my office for the meeting."
In his affidavit of 18 November Mr Fordyce said: "1. On 17 October 2014 I caused my staff to undertake a search of all locations of the documents identified in the orders of 1 October 2014 ('the documents")"
On 11 December 2014 Mr Fordyce is recorded at T11.24- 28 as having told the Chief Judge in Equity: "I filed affidavits in these proceedings which deal with the creation of the documents, the very important material of production of these records almost a year before they were said to have been created when there was no reason to create the documents for reasons of improving my costs position. So, all of those issues are addressed."
Mr Kelly submits that Mr Fordyce was obliged to tell the Court no later than 20 October 2014 of the two matters referred to in 12(a) and (b) above. Mr Kelly also points out that the affidavit of Mr Fordyce of 18 May 2015 which contains the material I have set out at [10] above was described in a covering letter or email from Mr Fordyce as being provided to the solicitor for the plaintiffs as part of Mr Fordyce's "continuing duty of notifying the computer experts where the files that they are to report on can be located" which Mr Kelly submits only emphasises that Mr Fordyce should have included the material at [10] above in his affidavit of 20 October 2014. Had Mr Fordyce said that he had placed copies of the disputed fee agreements on the computer in June 2014 as he was unable to find those three contested fee agreements Mr Ho, it was submitted, might have decided not to progress the Klein & Co report and not challenge the setting aside of the October orders and he has been deprived the opportunity of making such a decision.
Another matter which Mr Fordyce did not divulge at any time until after the May judgment was that, on his assertion, there had been a change of the hard drive on his computer. Mr Fordyce says that he did not become aware of that fact until well after the May judgment.
Mr Fordyce did respond to Mr Ho's motion by filing and serving his affidavit of 28 October 2015, but the only two paragraphs which Mr Fordyce identified in his oral submissions (he having failed to provide written submissions on the question of indemnity costs as he had been directed to do on 13 October) as relating to the costs motion were paras 60 and 61. I set them out: "60. The net result of the non-payment of $676,199.57 to Pmf Legal as a one solicitor practice has been crippling. According to the plaintiffs they have moved all of the "fruits of the litigation" beyond the reach of Pmf Legal. Seeking costs orders against Pmf Legal in circumstances where the plaintiffs are being funded at least indirectly from the fruits of the litigation achieved by Pmf Legal's work on the litigation will operate to make it impossible for Pmf Legal to defend itself against the plaintiffs. The failure to pay these funds is affecting Pmf Legal's ability to pay all of its creditors as it goes forward. 61. In all of the circumstances the Court is asked not to make any such orders at this time which would have the effect of stifling the proceedings by Pmf Legal."
Mr Fordyce did not, in his affidavit of 28 October 2015, seek to offer any evidence concerning the matters of which Mr Ho complains. Mr Fordyce did, however, give explanations from the bar table: see T37.24- 43, T39.41- T40.29, T44.45 and T45.10 including the assertion that he could not provide any explanation concerning the fee agreements "because he didn't know how this had happened". Mr Fordyce stated that he did not become aware until after the May judgment that the hard drive on his computer had been replaced (which he asserts he learnt from his computer expert Mr Morgan): at T37.21- 22 Mr Kelly indicated that he did not oppose Mr Fordyce saying from the Bar Table when he had learnt of the replacement of the hard drive. I do not think Mr Ho has established that Mr Fordyce did know, at any time before the hearing on 17 December 2014 or indeed the May judgment, that that had occurred. What is established, however is that Mr Fordyce: 1. knew from June 2014 that he had created invoices on the computer bearing earlier dates 2. had in June 2014, if his assertions are accepted, searched for three fee agreements bearing dates in 2012, 2013 and January 2014 but been unable to find them 3. had not, on his evidence, ascertained, prior to May 2015, any reason for the three fee agreements not being found on the computer 4. had not, prior to May 2015, sought any explanation from any staff member or his computer expert as to where those fee agreements that he claims should have been on the computer were in fact located 5. expected the expert to find the missing fee agreements: see T40.7- 18 but could see on or about 24 October 2014 that the expert had not found these fee agreements 6. did not tell the Court, the independent solicitor or the forensic expert what he knew, namely that he had himself placed the three fee agreements on the computer in June 2014 7. failed to tell Bergin CJ in Eq on 11 December 2014 that the Klein & Co report did contain information relating to copies of costs agreements on Mr Fordyce's computer
In my view Mr Fordyce's failure to advise the Court that he had created copies of the contested fee agreements on his computer in June 2014 involved a failure to meet the standards of candour expected of a solicitor whether acting for himself or a client. It was also a breach of the orders of Court because Mr Fordyce was required to provide an affidavit as to the location of the 'Listed Things' which were defined as six costs agreements and any "reproduction copies or derivatives of" the listed things and any data storage location "involved in the creation, modification, review, transfer, copying, transmission, storage, printing or any other use of Costs Agreements" (see para 23 of Schedule A of the October Orders Exh A tab 1). He had, on his own admission, made copies of costs agreements and placed them on the computer in June 2014. This was compounded by his attack on the Klein & Co report that I have outlined above. The unqualified claim that the Klein & Co report was "not consistent with known and undisputed facts" could not have been legitimately made by a solicitor with knowledge of the truth of the information which Klein & Co had discovered. Whatever other consequences ought flow from the conduct of Mr Fordyce to which I have referred is best left until after Mr Ho's summons has been determined since Mr Ho, in effect, alleges that Mr Fordyce has backdated fee agreements, an allegation which, if substantiated, would be a serious matter.
As Ritchie points out at 42.5.5 the ordinary rule is that costs follow the event but an award of indemnity costs can be made by reason of the width of s 98 of the Civil Procedure Act 2005 (NSW) (and possibly the Court's inherent power as well). Indemnity costs can be ordered where a party has acted unreasonably in the conduct of litigation. Some of the categories of cases in which indemnity costs can be ordered are enumerated in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248; (1993) 46 FCR 225 at 233-4 per Sheppard J but it has been said that the categories are not closed: see Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (FCA, 3/05/91, unreported) per French J (as his Honur then was) unreported BC9103657 at 8 (cited in Colgate-Palmolive Co itself). In Unioil International Pty Ltd v Deloitte Touche Tohmatsu (a firm) (1997) 18 WAR 190 at 113 Ipp J ordered a party to pay indemnity costs noting: "the traditional requirement of honesty and candour on the part of lawyers and the modern duty to reduce unnecessary issues and costs, are inimical to the practice of denying or putting parties to the proof of facts which, according to the instructions in the lawyers' possession, should be admitted."
Mr Fordyce resists the making of an order for indemnity costs. Paragraphs 60 and 61 of Mr Fordyce's affidavit (at [18] above) contain an assertion of the effect of non-payment of fees on his financial position. There is no detail of the defendants' financial position to enable the assertions to be examined but in any event the defendants' financial problems, even if established, are not relevant to whether an order for indemnity costs and the related orders should be made against them. There are also submissions in which Mr Fordyce seeks to challenge some of the conclusions which I reached in the May judgment which I do not think is open to him on an application for a special costs order following judgment and none of which address the essential complaint of Mr Ho founding the claim for indemnity costs.
In considering whether an indemnity costs order should be made I think it is necessary to bear in mind that Mr Fordyce sought to set aside the October orders on a number of grounds. Mr Fordyce draws attention to the fact that none of the grounds he raised are said to be matters that he was not entitled to raise.
Given that Mr Fordyce advanced a number of grounds for setting aside the October orders and would, I think, have been likely to have sought costs from Mr Ho if Mr Ho had decided to abandon the October orders and it being unlikely that Mr Ho would have been willing to pay costs if that had occurred, it is difficult to have any confidence that the provision of information by Mr Fordyce in October 2014 as should have occurred would have led to Mr Ho abandoning the search orders entirely. I think there is some other material which tends to undermine that proposition. When Mr Fordyce revealed on 18 May that he had created three costs agreements on the computer in June 2014, Mr Ho did not abandon his attempt to obtain a final report from Klein & Co and there are reasons why to do so may have been forensically unwise if it is contended, as I understand it to be, that Mr Fordyce was prepared to create documents bearing a false date. Also Mr Fordyce did not admit he had created all six fee agreements in June 2014 and on the evidence to date he had created only three in June 2014 and one in 2013. Mr Kelly did contend that what Mr Ho did after 18 May 2015 when he learnt the truth should not be treated as indicative of what he would have done had he been told the relevant information before the hearing on 17 December 2014 and he also claimed that there was a substantial difference between the amount of costs being claimed by Mr Fordyce for the BBQ King proceedings in comparison to the other matters, a contention Mr Fordyce did not appear to challenge. Nevertheless it is at least possible that Mr Ho would at that point have decided not to expend any more money on the Klein & Co report, and he did not have the opportunity before the hearing and before 18 May 2015 to consider what he should do in the light of the facts as known to Mr Fordyce.
Further there is a real prospect that had Mr Fordyce revealed in October 2014 that he had created three costs agreements on the computer in June 2014 (and perhaps another one in 2013) the hearing on 17 December may have been avoided or reduced in scope not because Mr Ho would have abandoned the search orders but because Mr Fordyce would know that those advising Mr Ho had become aware of a matter adverse to his position which could not be avoided by having the search orders set aside. The importance of the absence of that admission is emphasised by the expression of interest in the very matter that the Klein & Co report addressed exhibited by Bergin CJ in Eq on 11 December in the passage set out at 12 above and also by Mr Fordyce's failure to tell her Honour what he knew, but Mr Kelly and those instructing him did not know, about the Klein & Co report. Also if Mr Fordyce had admitted that he had created three fee agreements on his computer in June 2014 there may have been little point in his concentrated attack on the Klein & Co report which was, as he knew, accurate in that important respect, and I think that the time spent on the Klein & Co report at the hearing and in the extensive written submissions which followed would have been much reduced.
In my view Mr Ho lost the chance of a successful resolution, from his point of view, of the search order issue from 20 October to and including the 11 December without the need for a hearing or at least without the need for the Klein & Co report or the concentrated attack on the Klein & Co report and whilst the prospect was a limited one it is one that should sound in an order for indemnity costs. Accepting, as I do, that Mr Fordyce was entitled to mount his other arguments concerning the October orders I do not think the order for indemnity costs should apply to the whole of Mr Ho's costs. It is difficult to form an indemnity costs order that will reflect the impact Mr Fordyce's conduct has had and the loss of the limited chance that the October orders would be set aside by consent, or alternatively no longer be challenged coupled with the wasted time on the Klein & Co report, but I think if Mr Fordyce is required to pay a percentage of the costs that would be awarded on indemnity basis that would be an appropriate way of dealing with what cannot be a precise calculation, and I fix that percentage as 25%. Thus the plaintiffs are entitled to: 1. their costs on a party party basis 2. in addition 25% of the difference between their costs on a party party basis and an indemnity basis except to the extent that the costs are unreasonable in amount or unreasonably incurred
In relation to the question of whether costs should be payable forthwith I think there is much force in Mr Kelly's submissions that the motion to set aside the orders is a quite discrete matter. Those are costs to which Mr Ho is entitled whatever the outcome. The proceedings do not yet have a hearing date as the parties have not been ready to take one and so a conclusion to Mr Ho's proceedings is some time away: see Hamod v New South Wales [2007] NSWSC 707. I think Mr Fordyce's conduct is also an important factor in considering whether costs should be payable forthwith.
Against this, however, is the unfortunate reality that this case itself is wholly concerned with Mr Fordyce's fees that he claims from Mr Ho. Mr Ho does not dispute that he has not paid the amount that Mr Fordyce claims from him and there is, as I detail below, no dispute that Mr Ho has received settlement monies from the BBQ King proceedings. As I detail below none of that money has been secured. If Mr Fordyce is entitled to any fees from Mr Ho (and it seems to be agreed that even if Mr Ho is successful in these proceedings that will of itself only reduce the amount for which he will be liable) then the costs to which Mr Ho is entitled can be offset against those fees. I recognise that it is possible that for other reasons Mr Ho may not be liable for any amount claimed (it being suggested that it may even be that Mr Fordyce will be required to repay Mr Ho: see Mr Webeck's affidavit of 28 October 2015 para 15) but overall I think in the circumstances of the case including the fact that Mr Ho has been able to pay other creditors out of the proceeds of the BBQ King proceedings, Mr Ho should await the outcome of these proceedings before enforcing his costs order.
On the question of interest on costs, Mr Fordyce drew attention to Corbett v Nguyen (No 2) [2012] NSWSC 673, per Windeyer AJ in which his Honour refused to make an order that interest on costs be paid by the party ordered to pay costs on the basis that there was no evidence as to whether any payment had been made of any of the invoices. His Honour recognised that Campbell J in Lahoud v Lahoud [2006] NSWSC 126 had said that such evidence was not necessary. Windeyer AJ felt it was: see [21]. His Honour also thought that if the claim was said to be justified on the basis of the delay by the plaintiff in bringing the proceedings it would need to be established that this was the fault of the plaintiff. Windeyer AJ appeared to regard the fact that the costs over which the parties were fighting were "quite disproportionate to the amounts at issue". It would appear that the Court of Appeal's decision in Drummond and Rosen Pty Ltd v Easey and Ors (No 2) [2009] NSWCA 331 was not drawn to Windeyer AJ's attention. Although the same view as taken by Windeyer AJ had found favour with Handley JA in Drummond and Rosen, the majority held otherwise. At [3] and [4] Macfarlan JA (with whom Tobias JA concurred) stated: "In my view it is unnecessary for there to be evidence of the date or dates on which the costs concerned were paid for an order for the payment of interest to be made under subs (4). Indeed, such evidence would often not be particularly useful. If the court does not choose to order that interest be payable from a later date, interest will run, if an order is made under subs (4), from the date or dates on which the costs concerned were paid. If the costs were paid promptly, interest will run from an earlier date than that from which it would run if there was delay in payment. That is an appropriate result as the purpose of an order for payment of interest is essentially compensatory. I do not see why in the usual case the court needs to know when the costs were paid. [4] In the absence of any countervailing discretionary factor (of which there appear to be none in the present case), it is appropriate that an order for interest on costs be made to compensate the party having the benefit of a costs order for being out of pocket in respect of relevant costs which it has paid (Lahoud v Lahoud [2006] NSWSC 126 at [82-3] per Campbell J)."
I do not think it is necessary to search for particular factors supporting the award of interest but in this case there is the fact that the application for costs to be paid forthwith is resisted successfully and that notwithstanding the discrete nature of the application to set aside the October orders, and that there will be a long delay in obtaining payment of these costs. Drummond and Rosen and Leda Pty Ltd v Weerden (No 2) [2007] NSWCA 283 in the Court of Appeal support the rationale and approach of Lahoud and I think an order in the form approved in Drummond and Rosen is appropriate here.

The amendment application

On 13 October I directed Mr Ho to provide Mr Fordyce with a copy of the proposed amendment with Mr Fordyce to indicate within a specified time whether or not he objected to the amendment. Mr Ho's solicitor provided a copy of the proposed amended summons and received no response from Mr Fordyce and I permitted the amendment to be filed in Court on 30 October with no objection to that course by Mr Fordyce.

Security for costs

Mr Fordyce seeks an order that Mr Ho pay into Court an amount of $350,000 as security for his costs in the event he is successful in the proceedings. Mr Fordyce seeks the order on the basis that the two plaintiff companies are without assets, that Mr Ho has very little assets in Australia, and on the basis of his assertion that Mr Ho is a flight risk because Mr Fordyce claims Mr Ho fled Australia to avoid the Guardianship Tribunal hearing in 2012, holds dual citizenship and has two passports accordingly, and only came back to Australia after Mr Fordyce had succeeded in having the orders made by the Tribunal set aside. I should note that Mr Kelly did not dispute that the corporate plaintiffs are impecunious. I have previously found that Mr Ho had very limited funds available to him in Australia and no evidence has been tendered which shows that his situation has improved.
Mr Ho resists the application for security on a number of bases. Mr Kelly submits that: 1. there is no reliable evidence that Mr Ho is a flight risk and the assertion that he holds two passports has not been established and that Mr Fordyce has served his material late precluding Mr Ho from the opportunity of dealing with the various matters contained in Mr Fordyce's affidavit of 28 October 2015 2. whilst it is true that Mr Ho has very little assets in Australia he resides in Australia and has done so for many years (even being awarded an Order of the Medal of Australia) and is an individual against whom a security for costs order cannot be obtained. Insofar as the corporate plaintiffs are concerned, Mr Kelly submitted that on the authority of Maples v Hughes [2002] NSWSC 617 the Court should not grant an order for security against impecunious corporate plaintiffs where the director of the corporation is also joined as a plaintiff 3. the proceedings are in reality defensive in nature making it inappropriate that security be ordered 4. Mr Fordyce has not supported his claim for security of costs with any evidence of how he arrived at the figure of $350,000. Evidence of that kind is essential in applications for security and in the absence of such evidence the Court should decline to make an order
Maples and Harpur v Ariadne Australia Ltd (No 2) [1984] 2 Qd R 523, to which reference is made in Maples, are authority for the proposition that where an individual is a plaintiff together with a corporate plaintiff and the individual's claims are the same as or at least largely overlap with those of the corporations (hence removing the possibility that a costs order may be made against only the corporate plaintiffs), security will not be ordered against any of them. This approach has been the subject of some criticism: see Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621 per Ormiston J and Uptown Sydney Development Corp Pty Ltd v Bank of New Zealand (No 1) (1993) 11 ACSR 300 per Kirby P (sitting alone) but as Kirby P noted in Uptown it is an approach which has been adopted in England and other Australian states. Mr Fordyce did not point to any authority contrary to Maples but he submitted that the Court could make an order under Part 42 rule 21. That submission fails to recognise that in Maples both s 1335 of the Corporations Law (Cth) and Part 40 of the Supreme Court Rules 1970 (NSW) (the predecessor to Part 42.21) were relied on by the defendant in seeking security and security was not ordered. It seems to me that if the individual joined as a plaintiff is a person of substance there is no justification in requiring security from the corporate plaintiffs but where the individual joined has no funds in Australia from which to meet any order for costs made against all plaintiffs no 'antidote' to the corporate plaintiffs' impecuniosity is provided which ought block an order for security against the corporate plaintiffs. However, whilst I think there is room for doubt as to the correctness of the approach taken in Maples and Harpur those cases reflect the current state of the law which if it is to be reconsidered would, I think, need to be reviewed at the appellate level.
I accept Mr Kelly's submission that the present proceedings are defensive in nature. They were commenced in connection with invoices issued by Mr Fordyce whereby he seeks from Mr Ho in excess of $600,000 for fees. It is true that Mr Ho commenced the costs proceedings and that he commenced these proceedings as an adjunct to establishing a fact (on his case) relevant to the outcome in the costs proceedings but there would be absolutely no necessity for the costs proceedings and these proceedings if Mr Fordyce did not seek to recover the claimed costs by Mr Ho. Mr Fordyce had made it clear that he does wish to pursue the fees to which he claims to be entitled.
In Interwest Ormiston J at p 627.2- 10 said: "Principally it would appear necessary to characterise the proceedings in respect of which security is sought. If they are "defensive" proceedings, either directly resisting proceedings already brought or seeking to "halt self-help procedures", it would seem that to require security would be oppressive, or at least would provide serious grounds for refusing to make an order. At the least, it is a factor to be considered in the exercise of the discretion. In particular, it is a basis for reducing the amount of security ordered to a sum related to the costs of those claims which cannot be characterised as defensive: cf Sloyan's case, supra." And see discussion in Dal Pont, 'Law of costs' (3rd ed, 2013) at [28.56] and the cases there cited.
I think that the wholly defensive nature of the proceedings is readily apparent and that it would be oppressive to order security in such circumstances and it would not be appropriate to order the plaintiffs to provide security either as a matter of principle or as a matter of discretion.
Further, Mr Fordyce has provided no evidence in support of his motion as to how he has calculated the figure for costs which he claims is appropriate making it impossible to form a view of an appropriate figure even were I to have formed the view that none of the plaintiffs' contentions should be upheld, and from which would need to be deducted the costs to which Mr Ho is entitled by reason of the May judgment and orders and the further costs orders which will be made today. Not only that but without detail of how the $350,000 is calculated it is not possible to discern whether Mr Fordyce is seeking to obtain security for past costs as well as future costs and whether he has included in those past costs amounts that he is not entitled to recover because he failed in his motion to set aside the October orders.
I therefore dismiss Mr Fordyce's application for security both under s 1335 of the Corporations Act 2001 (Cth) and Uniform Civil Procedure Rules 2005 (NSW) 42.21, notwithstanding the fact that the corporate plaintiffs are impecunious and Mr Ho appears to have insufficient funds in Australia, at least, to meet an order for costs should he be ordered at the end of these proceedings to pay Mr Fordyce's costs.

The injunction

The injunction granted by Darke J remains on foot. Mr Fordyce sought by a notice to produce to Mr Ho, a copy of the terms of settlement in the BBQ King proceedings and Mr Ho through Mr Kelly indicated that he would be willing to make the terms available with the agreement of the defendants in the BBQ King proceedings.
The terms of settlement were expressed to be confidential between the parties and some of the defendants objected to them being made available to Mr Fordyce. It was agreed on 30 October 2015 between those defendants (represented by Mr McKenzie solicitor) that the terms could be produced to Mr Fordyce on a confidential basis and that if tendered that the terms would become a confidential exhibit. The terms were produced and Mr Fordyce and Mr Kelly both were given the opportunity to view the document but the terms, contained in an envelope marked "confidential", were not in fact tendered and I have not myself viewed them.
It is Mr Ho's case that all of the money that he did receive from the BBQ King settlement has been disbursed. The evidence does not come from Mr Ho himself but from the following affidavits: 1. Mr Webeck of 14 October 2015 2. Mr Webeck of 16 October 2015 3. Mr Webeck of 28 October 2015 4. Mr Webeck of 29 October 2015 5. Mr Wilson Wong of 21 October 2015 6. Mr Damian Ward of 29 October 2015
Mr Kelly contends that in the light of the unchallenged evidence Mr Ho has presented there are no funds on which the injunction can operate and as a result it should be dissolved. Mr Fordyce points to the fact that there is no affidavit from Mr Ho himself.
I summarise the evidence presented on behalf of Mr Ho on this question as follows: 1. Mr Ho received a sum in settlement of the BBQ King proceedings from the defendants in those proceedings pursuant to terms of settlement entered into by the parties to those proceedings on 26 May 2015 2. the settlement monies were received by HWL Ebsworth acting on behalf of Mr Ho from the settlement of the BBQ King proceedings between May and August this year 3. that some of the settlement monies to be paid to Mr Ho were banked into the trust account of HWL Ebsworth Lawyers, the solicitors acting for Mr Ho in the BBQ King Proceedings between the period 26 May 2015 and 29 June 2015 4. all of the monies banked into HWL Ebsworth Lawyers trust account were fully disbursed to pay legal expenses including counsel's fees, HWL Ebsworth fees and the fees of the mediator 5. the balance of the settlement proceeds from the BBQ King proceedings were paid by bank cheques to Mr Ho, the last receipt date being 25 August 2015 6. Mr Webeck has sighted the banking records of Mr Ho and source documents and has identified the complete disbursement of the settlement proceeds "to external parties" prior to 12 October 2015 7. The 'external parties' to whom funds were disbursed were: 1. the ATO 2. ASIC 3. Supreme Court of NSW 4. legal and professional advisers to the plaintiffs who have been identified 5. an expert witness retained on behalf of the plaintiffs in the BBQ King proceedings 1. a payment of approximately $2,000 and a payment of approximately $5,000 were made in respect of Mr Ho's credit card 2. HWL Ebsworth does hold an amount on trust for Mr Ho in connection with the costs assessment costs and disbursements 3. each of the persons to whom monies were paid and identified in Mr Webeck's affidavit of 21 October and 28 October have advised that they do not hold any funds received from Mr Ho on trust for Mr Ho or anyone on his behalf 4. Mr Ward of Mills Oakley lawyers (who are retained by Mr Ho in these proceedings) holds no money on trust for Mr Ho or any entity controlled by him 5. Mr Wilson Wong accountant holds no funds received from Mr Ho on trust for Mr Ho or anyone else on Mr Ho's behalf
It will be apparent that to avoid problems of confidentiality the total amount paid to Mr Ho has not been revealed but the evidence presented establishes that no money is held on trust for Mr Ho by any of the persons to whom any portion of the settlement monies were paid. Mr Ho kept none of the settlement monies but paid off $7,000 worth of credit card debt and an unspecified amount to the Australian Taxation Office. I accept Mr Fordyce's contention that the payment to Mr Ho's creditors including the Australian Tax Office should be treated as a benefit to Mr Ho.
Whilst it might have been expected that Mr Ho would put on an affidavit deposing to the fact that he has no left funds from the BBQ King settlement, the evidence of Mr Webeck establishes that fact if Mr Webeck's assertion that he inspected Mr Ho's bank records and source documents, is accepted as Mr Fordyce's submissions on security for costs seem to accept that proposition- see paras 2 and 3 of 28 October 2015. Mr Webeck was not challenged on that evidence or required at the hearing to produce for inspection the documents to which he referred and in my view Mr Ho has therefore established that there are no funds remaining from the settlement.
Accordingly the injunction that Darke J granted should be discharged.

The lien

Mr Fordyce claims that he had at all relevant times a "fruits of litigation lien" to secure unpaid fees owed to him by Mr Ho. The basic principles relating to such liens (from Firth v Centrelink [2002] NSWSC 564 per Campbell J (as his Honour then was) were summarised by Bergin J (as her Honour then was) in Abbott v Pilot Development Corporation Pty Ltd [2006] NSWSC 1178): "(1) the solicitors' right exists over money recovered through obtaining judgment in litigation and also over money recovered through the settlement of litigation; (2) such right exists over both the amount of a judgment in favour of the client and the amount of an order for costs in favour of the client; (3) it exists over the money which is in the possession of the solicitor and also over money which is in court; (4) the solicitor need not be retained at the time that the money is recovered; and (5) for the right to arise it must be shown that there is a sufficient causal link between solicitors' exertions and the recovery of the fund of money; see also pp 464 and 465. [6] In Roam Australia Pty Limited v Telstra Corporation Limited [1997] FCA 980 Lehane J said: 'The questions seem to be, first, did the proceeding result in a judgment award or compromise under which money is payable to the party for whom the solicitors acted; and secondly, was the part played by the solicitors sufficient to justify the conclusion that there is a sufficient causal link between the solicitors' efforts and the result so that the solicitors may be regarded as having been instrumental in obtaining the result?' [7] In Doyles Construction Lawyers v Harsands Pty Limited & Others, unreported 24 December 1996, McLelland CJ in Eq said: 'It is sufficient to give rise to the equitable right that the settlement resulting in payment to the client came about as a result of the legal proceedings and that the solicitor had acted for the client in those proceedings, this being treated as a sufficient causal link.'"
Mr Kelly had only been provided with the amended motion dealing with the lien motion and the 8E and 8F matters that morning and had been provided with Mr Fordyce's affidavit only on 28 October 2015. He did with these limitations, make the point that the absence of the existence of a fund was fatal to Mr Fordyce's application and I indicated that I would deal with the lien issue on the basis that I would consider whether the absence of a fund was determinative of the issue and if I formed the view that it was not, or may not be, I would provide Mr Kelly with an opportunity to be heard further and to respond to any evidence on which Mr Fordyce relies.
In AMC Commercial Cleaning (NSW) Pty Ltd v Coade; Rockcliffs Solicitors & IP Lawyers v Condon as liquidator of AMC Commercial Cleaning (NSW) Pty Ltd [2013] NSWSC 192 I discussed the principles relating to fruits of litigation liens and noted that the authorities: "recognise that for the lien to apply the settlement does not have to be solely as a result of the exertions of the solicitor. Mr Mitchell relies on Roam Australia Pty Ltd v Telstra Corp Ltd t/as Telecom Australia [1997] FCA 980; Doyles Construction Lawyers v Harsands Pty Ltd (Supreme Court of New South Wales, 24 December 1996,unreported BC9606389); Carew Counsel Pty Ltd v French (2002) 4 VR 172; (2002) 190 ALR 690; (2002) 166 FLR 460; [2002] VSCA 1 unreported BC9606389), and he also draws attention to the fact a solicitor's fruits of litigation lien has been described as similar to a lien to a claim for salvage" Also of relevance is what was said by Jordan CJ in Patience, Ex Parte: Makinson v Minister (1940) 40 SR (NSW) 96: "A solicitor has no lien for his costs over any property which has not come into his possession. If, however, as the result of legal proceedings in which the solicitor has acted for the client, the client obtains a judgment or award or compromise for the payment of money, although the solicitor acquires no common law title to his client's right to receive the money or to any part of that right, he acquires a right to have his costs paid out of the money, which is analogous to the right which would be created by an equitable assignment of a corresponding part of the money by the client to the solicitor. That is to say, the solicitor has an equitable right to be paid his costs out of the money; and if he gives notice of his right to the person who is liable to pay it, only the solicitor and not the client can give a good discharge to that person for an amount of the money equivalent to the solicitor's costs"
It has been accepted that if a lien is created it is created at the time of creation of the fund: Worrell v Power & Power (1993) 46 FCR 214, 222.
In Firth Campbell J (as his Honour then was) held at [41]: "With respect, it seems to me that the solicitor's right concerning the fruits of his effort includes a right closely analogous to the right to trace funds into the hands of a third party. It is the nature of the right which the solicitor has, that he does not have the full title to the asset which has been recovered (save in the circumstance where his claim exceeds the value of the asset), but rather a right to be paid out of the asset. If that is a right which can prevail against an assignee of the asset who is not a bona fide purchaser for value without notice, that is the equivalent, in the context where the solicitor does not have full title to the fund, of being able to trace the funds into the hands of a third party."
It has been said that: "To obtain the benefit of the particular lien, the solicitor must make an interlocutory application, in the proceedings in which the client's monetary entitlements arise, for a declaration both of the existence of the lien and for ancillary orders to facilitate the protection of the moneys the subject of the lien" (see Dal Pont, 'Law of costs' (3rd ed, 2013) at [27.4])
Mr Fordyce emphasises the willingness of Courts to assist the solicitor to obtain protection for his costs and submits that this Court should require Mr Ho to pay into Court all of the monies that were paid out of the BBQ King settlement funds (and he extends that claim to have reinstated all of the money he claims is owing to him on the six fee agreements not just those that relate to the BBQ King proceedings). He submits that the Court should, as a matter of fairness and equity, require Mr Ho to pay the equivalent of the claimed lien as a condition of his being able to continue with his claims in these proceedings.
In light of the principles that I have outlined above I have little doubt that Mr Fordyce had a proper basis to make an application to the Court in the BBQ King proceedings for preservation of the funds over which he claims a lien although he made no such application. Even if the funds had been paid to HWL Ebsworth but were retained by them Mr Fordyce may well have had good grounds to injunct in fresh proceedings the payment of those funds or a portion of them. I say "a portion of them" because consideration would need to be given as to whether Mr Fordyce could be entitled to preservation of the entire fund given that numerous other persons who had contributed to the result in the BBQ King proceedings (and all of whom were in fact paid out of those monies) were also entitled. Although it was held in In Re Wadsworth; Rhodes v Sugden (1886) 34 Ch D 155 and Halvanon Insurance Co Ltd v Central Reinsurance Corp [1988] 3 All ER 857 that the most recently involved solicitors were entitled to be paid in full before any previous solicitors received payment that view was not accepted in Atkinson v Pengelly [1995] 3 NZLR 104 in which the approach taken was that they ranked pari passu: see further the discussion in Dal Pont, 'Law of costs' (3rd ed, 2013) at [27.7]. Another question would be whether the Australian Taxation Office would be entitled to priority by virtue of any legislative provision.
Were such a fund found to exist regard would need to be had to the fact that Mr Ho has obtained costs orders against Mr Fordyce. Additional questions would need to be addressed, namely whether Mr Fordyce did give adequate notice to HWL Ebsworth, whether Mr Ho is affected by that notice and whether Mr Fordyce's conduct of this litigation is relevant to any order that might otherwise be made.
It is not, in my view, necessary however to venture into these interesting questions because the fact is that the BBQ King settlement proceeds have been paid out to all of the persons (except Mr Fordyce) who helped bring about the result. Mr Fordyce may have rights against HWL Ebsworth and others for ignoring his lien (I express no view on the strength or weakness of these claims) but what does not exist is a fund which requires the assistance of the Court to preserve.
Mr Fordyce was unable to point to any authority in which the Court has ordered the reinstatement of a fund over which a lien was or could have been asserted and Mr Kelly said his research revealed none. I do not find their inability to find such authority at all surprising. It would be a most unusual order. Doyles Construction Lawyers v Harsands Pty Ltd (Supreme Court of New South Wales, 24 December 1996, unreported BC9606389) relied on by Mr Fordyce in relation to his claimed lien more generally and to which reference is made in [48] above does not provide any support for such a course. To order Mr Ho to pay any money into Court as a pre-condition of his having the Court determine whether Mr Fordyce did in fact provide him with fee agreements in respect of the claimed costs would be a most significant and unusual order particularly when Mr Fordyce's right to trace the funds (and in what amount) has not been determined in any proceedings yet brought and Mr Fordyce himself is liable to pay costs of Mr Ho but is not required to pay those costs at present. In my view it is an order which ought not be made. Accordingly Mr Fordyce's amended motion, except for paragraphs 8E and 8F, is dismissed, those paragraphs raised matters of which no notice was given to Mr Kelly until 30 October and these were not dealt with at the hearing on 30 October.

The 8E and 8F matters

The amended motion also seeks an order for equitable discovery in relation to the proceeds of the receipt of funds from the BBQ King proceedings and seeks leave for Mr Fordyce to file a cross claim joining a number of persons including Mr Ho's solicitors in these proceedings Mills Oakley and Mr Kelly. Mr Kelly resisted any expansion of these proceedings with such claims, contending that it was appropriate that these proceedings determine whether the fee agreements were given to Mr Ho so that the costs assessor could proceed with the costs assessment which would then determine what amount, if any, was owed by Mr Ho to Mr Fordyce.
I do not think it is appropriate to permit a cross claim of that kind to be filed in these proceedings and for the following reasons: 1. the only question to be determined in these proceedings is did Mr Fordyce provide the contested fee agreements to Mr Ho 2. the answer to that question may affect the amount to which Mr Fordyce will be entitled which amount will be determined by the costs assessor but will not be determined in these proceedings 3. the cross claim seeks to join to this litigation third parties. The claims against these parties which Mr Fordyce wishes to join are quite independent of Mr Ho- if the payment out of HWL Ebsworth exposed HWL Ebsworth or any of the recipients of the funds to a liability to Mr Fordyce that liability is not dependant on Mr Ho being a party to that case 4. no notice has been given to the proposed third parties of the intention to seek the orders that they be joined as cross claimants to litigation in which they are not currently involved 5. the joinder of the solicitors Mills Oakley and Mr Kelly to these proceedings would force them to cease acting in the proceedings and that is a factor to be borne in mind since it will require the engagement of new solicitors and counsel at additional cost to Mr Ho
Mr Fordyce says that he does not know what has happened to the proceeds which I have difficulty accepting given the material to which I have earlier referred but in any event I do not think an application for equitable discovery against non-parties should be permitted in these proceedings given the conclusion I have reached in relation to the cross claim.

Conclusion

It follows that: 1. Mr Ho is entitled to an indemnity costs order albeit limited but he fails in his application for an order for costs to be paid forthwith 2. Mr Ho is entitled to an order for interest on those costs in the form of the order approved in Drummond and Rosen Pty Ltd 3. the injunction ordered on 13 October 2015 and continued on 15 October and 19 October should be discharged 4. Mr Fordyce's amended notice of motion should be dismissed

Costs

In the light of these conclusions I shall hear the parties on the question of the appropriate costs order to be made as a consequence of the outcomes referred to in [62] above.

Amendments 26 November 2015 - Typographical amendments 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: 26 November 2015

At a glance

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Judgment (12 paragraphs)

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