Rosie Ianelli v John Leslie Hancock trading as Hancocks Solicitors

Judgment Introduction 1By summons filed on 29 March 2012, the plaintiff sought an order, pursuant to s 728 of the Legal Profession Act 2004, that the defendant deliver up to her a number of documents, including all documents held by the defendant in relation to a loan agreement and associated mortgage between the plaintiff and Raymond and Alison Hayek ("the Hayeks"). 2The matter came before me on 16 April 2012 but could not proceed on that day due to the late service of an affidavit by the defendant. The hearing of the evidence was completed on 20 April 2012 and the matter was adjourned until 27 April 2012 for submissions. 3I was subsequently informed that on the morning of 23 April 2012, that being the first business day following the completion of the evidence, the entirety of the documents set out in the summons were delivered up by the defendant to the plaintiff's solicitors. When the matter came before me on 27 April 2012 I was informed by the parties that the only remaining issue was that of costs. Counsel for the defendant indicated to me that there was no issue that the plaintiff was entitled to an order for costs in her favour, and submitted to me that such order should be made on the usual basis. Senior counsel for the plaintiff submitted that costs should be awarded on an indemnity basis up to and including the date on which the documents were delivered, and on the usual basis thereafter. Having heard submissions from Counsel, I made an order dismissing the summons and reserved my decision as to the form of the costs order. In order to determine that issue it is necessary for me to set out some aspects of the background to the proceedings. Background 4In the latter part of 2007 the defendant was retained by the plaintiff to act on her behalf in respect of a loan agreement she had entered into with the Hayeks. Following the settlement of the transaction, there was default by the Hayeks under the loan agreement, as a consequence of which the plaintiff wished to commence proceedings to enforce her rights pursuant to the loan agreement and associated Mortgage. She again retained the defendant to act for her in relation to that matter but at some point (it seems in about late 2011) that retainer was terminated. There were a series of issues in the proceedings arising out of that termination but in view of the fact that the documents enumerated in the summons have now been delivered up by the defendant, they are issues which I am no longer required to determine. 5In late 2011, following the termination of the defendant's retainer, the plaintiff instructed her present solicitors to commence proceedings against the Hayeks and on 30 January 2012, she executed an authority to transfer the relevant file to those solicitors. That authority was forwarded to the defendant under cover of a letter of the same date, but that letter did not meet with any written response. The plaintiff then commenced proceedings against the Hayeks in the Equity Division of this Court on 7 February 2012. 6On 17 February 2012, the plaintiff's solicitors wrote to the defendant in (inter alia) the following terms: We refer to our previous correspondence dated 30 January 2012 (x2) and 2 February 2012 and note to date we have not heard from you. We note also we have attempted to contact you by telephone on the following occasions, 30 January 2012, 31 January 2012 and 2 February 2012 but have been unable to contact you and you have failed tor return our calls. Neither we nor our client are aware of any claim you may have for outstanding costs, if any. If you assert such a claim our client undertakes to pay your reasonable costs as agreed or assessed if any such costs are claimed to be payable. Notwithstanding the above undertaking, our client reserves the right to challenge that no costs are payable to you. We require the above file to be available for collection at your offices on Tuesday 21 February 2012 at 12.30 pm. 7Importantly, the letter concluded with the following: If the above file is not available for collection by the time stipulated above, our client will have no other alternative other than to immediately make an application to the Supreme Court pursuant to section 728 of the Legal Profession Act. If our client is forced to bring such an application our client will rely on this correspondence in making an application for costs to be paid by you on an indemnity basis. 8There was no response from the defendant to that correspondence. On the morning of 21 February 2012, the plaintiff's solicitors sent a further letter to the defendant asking him to ensure that the relevant file would be available at the time stipulated in the earlier correspondence. Once again, there was no written response to that letter from the defendant. 9On 21 February 2012, consistent with the indications which had previously been given, an employee of the plaintiff's solicitors attended the defendant's premises for the purposes of collecting the relevant file. However, the file was not provided. This resulted in a further letter being sent by the plaintiff's solicitors to the defendant on 24 February 2012 which was partly in the following terms: We note that you refused to provide the file to Ms Girvan but instead provided her with a series of invoices all addressed to Mr Lee La Rocca and some in relation to an unrelated matter. We reiterate that our client urgently requires her file in relation to the loan to Raymond and Alison Hayek to prosecute her proceedings presently before the Supreme Court of NSW seeking to enforce the loan. Any delay on your part in handing over our client's file is prejudicing our client's rights and visiting unnecessary expense upon our client. We are instructed that you did not at any time provide our client with a Costs Disclosure as is required by the Legal Profession Act, or a Costs Agreement. 10Having then set out a number of other matters, the plaintiff's solicitors informed the defendant that in the event that the file, and a cheque in the sum of $1,000.00 (representing a filing fee which had been paid by the plaintiff to the defendant prior to the termination of his retainer), were not delivered up by midday on 28 February 2012, proceedings pursuant to s 728 of the Legal Profession Act would be commenced. The letter concluded with the following: If our client is forced to make an application to the Supreme Court for delivery up of her file and her funds our client will be seeking indemnity costs against you in relation to any such application. 11The letter of 24 February 2012 from the plaintiff's solicitors did not meet with any immediate response from the defendant, and the relevant file was not delivered by 28 February 2012 as had been requested. 12On 1 March 2012, the plaintiff was served with a Notice to Produce by those acting on behalf of the Hayeks in the proceedings which had been commenced in the Equity Division. At least some of the documents of which production was sought by that Notice were within the file held by the defendant. As a result, the provision of that file to the plaintiff assumed even greater urgency than had previously been the case. 13On 5 March 2012, the defendant finally responded to the previous correspondence from the plaintiff's solicitors. In the course of that response, which was several pages in length, the defendant (inter alia) asserted a possessory lien over the relevant file on the basis of costs which were said to have been incurred by the plaintiff as far back as 2008 but which, according to the defendant, remained unpaid. 14It is noteworthy that there was evidence before me, about which the defendant was cross examined, that on or about 13 August 2010 the defendant had prepared a draft statement of claim on behalf of the plaintiff naming the Hayeks as defendants. The draft statement of claim was verified by the plaintiff on 16 August 2010 and on 17 November 2010 an amount of $1,000.00 was transferred by the plaintiff to the defendant on account of the filing fee. The evidence before me also included a number of emails sent on behalf of the plaintiff to the defendant, particularly between January and March 2011, enquiring as to whether or not the statement of claim had been filed. There was no written response by the defendant to any of those enquiries. Indeed, at the time of the termination of the defendant's retainer in late 2011, the statement of claim had still not been filed and the amount transferred to the defendant for the filing fee remained in his Trust Account. 15Further, and in circumstances where he had received a number of enquiries on behalf of the plaintiff as to whether or not the statement of claim had been filed, the defendant did not respond in writing to such enquiries by asserting that any fees were outstanding, nor did he respond in writing by advising that no further work would be conducted unless all outstanding fees were paid. On the contrary, the defendant gave evidence before me that during this period he continued to perform work on the plaintiff's behalf, notwithstanding that there were said to be outstanding fees. In addition, it will be evident from that part of the history of the matter that I have outlined thus far, that a period of approximately five (5) weeks elapsed between the time at which a request for the file was first made to the defendant, and the time at which he first asserted that he held a lien over the file due to unpaid fees. It is no longer necessary for me to determine the issue of whether or not the lien claimed by the defendant was properly claimed. However, I found the defendant's evidence in relation to these matters to be most unsatisfactory. 16On 6 March 2012, the plaintiff's solicitors wrote to the defendant and noted their disagreement with the various assertions in the defendant's letter of 5 March. However, in an effort to resolve the matter, the letter enclosed a tripartite agreement which the plaintiff's solicitors proposed be executed between themselves, the plaintiff and the defendant. I do not propose to set out the terms of that agreement in full. However, it made provision (inter alia) for the plaintiff to give to her present solicitors an irrevocable authority to receive money from a number of other named parties, and to pay to the defendant, from that money, his costs as agreed or assessed. 17By a further letter of 8 March 2012, the plaintiff's solicitors advised the defendant that they would attend the defendant's office the following day, 9 March, in order to collect the files along with an executed copy of the tripartite agreement. By letter of 9 March 2012 the defendant responded by advising that he had arranged a "tentative meeting" with the plaintiff's nephew on 12 March 2012. The Plaintiff's nephew, a Mr Lee La Rocca, was an accountant who, from time to time, had acted as the plaintiff's agent in conveying instructions to the defendant. 18Later on the same day, 9 March 2012, the defendant was sent a further copy of the tripartite agreement. On this occasion, the copy sent to him had been executed by the plaintiff and her solicitor. The letter under cover of which that document was sent concluded as follows: Our client's expectation is that you will, on Monday afternoon at your meeting with Mr Lee La Rocca, provide to him a signed copy of the Tripartite Agreement together with our client's files, documents and funds. Absent that occurring we are instructed to immediately proceed with the application foreshadowed in previous correspondence and tender this correspondence on the question of costs. 19Yet again, the defendant did not respond to that letter. 20The plaintiff's solicitors again wrote to the defendant on 13 March 2012. Having noted the fact that a meeting had taken place between Mr La Rocca and the defendant earlier on that day, the letter confirmed the terms of a settlement offer made to the defendant at that meeting on the plaintiff's behalf in the following terms: 1.On a without prejudice basis you transfer the sum of $1,000.00 presently held in your Trust Account in payment of your alleged outstanding fees. 2.Our client pay to you, on a without prejudice basis, a further sum of $1,000.00 on or before 10.00 am on 14 March 2012 in exchange for the files and documents referred to in previous correspondence namely the files in relation to the matter of Hayek and Waldron including the original security or loan and mortgage documents signed by both Mr and Mrs Hayek. 3.That you simultaneously with 2 above hand to our client a signed copy of the Tripartite Agreement and that the Tripartite Agreement be hereby varied to provide you with liberty to have your fees assessed at any time. 21That offer was expressed to be open until the close of business on 13 March 2012. The letter proceeded to inform the defendant that in the event that the offer was not accepted by that time, the plaintiff would, as previously foreshadowed, commence proceedings seeking an order pursuant to s 728 of the Legal Profession Act 2004. The letter concluded as follows: Finally, if our client's offer is not accepted, our client proposes to tender this correspondence on an application for indemnity costs of any proceedings our client commences. 22On 14 March 2012, the time for acceptance of the plaintiff's offer having passed, the defendant responded to the plaintiff's solicitors stating (inter alia): We will consider your letter and respond shortly. 23On the evidence before me, no substantive response was ever provided by the defendant to the letter from the plaintiff's solicitors of 13 March 2012. The present proceedings were commenced by the plaintiff by the filing of a summons on 29 March 2012. 24As I have already indicated, the evidence was heard by me on 20 April 2012. The cross examination of the defendant concluded at about 4.15 pm on that day, at which time the proceedings were adjourned for submissions until 27 April 2012. By the conclusion of the defendant's cross examination a clear issue had emerged as to defendant's credit in a number of different respects. These included the question of whether or not certain conversations he maintained were had with Mr La Rocca had ever taken place, as well as the question of the circumstances which resulted in his assertion of a lien over the relevant file. 25On the first business day following the conclusion of the evidence, the relevant file, and a cheque for $1,000.00, were delivered up to the plaintiff's solicitors by the defendant. The delivery of that material was unaccompanied by any explanation of why it was that the defendant had decided to take that course. At the time of hearing submissions as to the question of costs, and although the defendant placed affidavit evidence before me which, it was submitted, evidenced the attempts to settle the matter, the defendant did not place any evidence before me which touched upon the reasons for his abandonment of his previously asserted position. The relevant principles 26Section 98(1) of the Civil Procedure Act is in the following terms: 98(1)Subject to the rules of court and to this or any other Act: (a)costs are in the discretion of the court; (b)the court has full power to determine by whom, to whom, and to what extent costs are to be paid; (c)the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. 27Rule 42.2 of the Uniform Civil Procedure Rules is in the following terms: 42.2Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis. 28Departure from the settled practice of awarding costs on the ordinary basis is necessarily discretionary. However, beyond the need for a special or unusual feature in the case, no fixed rule can be laid down as to the circumstances which might justify the making of such an order (see Harrison and anor v Schipp; Cameron and anor v Schipp [2001] NSWCA 13 at [139]). 29The categories of case in which an order for indemnity costs can be made are not rigid. It is necessary to consider each case on its own facts, having regard to the general principle that any order for costs should usually be made on the ordinary basis unless there is some special circumstance to justify the making of a different order (see Colgate Palmolive Co and anor v Cussons Pty Limited (1993) 118 ALR 248 at 256. Relevantly, for present purposes, the exercise of the discretion may be influenced by the fact that the applicant for an order for indemnity costs gave prior notice to the other party of his or her intention to make such an application (see Huntsman Chemical Co Australia Ltd v International Pools Australia Pty Limited (1995) 36 NSWLR 242). The submissions of the parties 30Mr Young made two principal submissions in support of an order for indemnity costs. Firstly, he submitted that the correspondence which passed between the parties prior to the commencement of the proceedings established that the plaintiff had made an offer to resolve the matter by the entering into a tripartite agreement which, had it been entered into, would have resulted in the defendant obtaining a more advantageous outcome than that which he had ultimately obtained. 31In particular, Mr Young submitted that had the defendant accepted the offer to enter into that agreement, the payment of the fees which he maintained were outstanding would have been, in a sense, secured. Further, and although it was not the subject of a specific submission by Mr Young, the same observation could be made, perhaps on even stronger ground, in relation to the defendant's failure to respond to the plaintiff's offer contained in the letter from her solicitors dated 13 March which incorporated not only a proposal to enter the tripartite agreement, but also the payment by the plaintiff of a sum totalling $2,000.00 to the defendant on account of the fees which were said to be payable. As events have transpired, and in light of the defendant's abandonment of his position, he has received no monies in respect of his asserted fees at all. 32Mr Young's second submission was based upon what he described as the defendant's "total surrender and abandonment" of his position immediately following the conclusion of the evidence. In this regard, Mr Young referred me to observations of Campbell JA in Lahoud and anor. v Lahoud and ors [2006] NSWSC 126. Mr Young acknowledged that (at [8]) his Honour observed that abandonment of a claim was not sufficient, in itself, to warrant an order for indemnity costs. However, he took me to [43] where his Honour observed: ......this is not a case where the making of the section 106 claim involved the kind of abuse of process which justifies an award of indemnity costs. Rather, the abandonment of the section 106 claim seems to me to have been an exercise in responsible advocacy. 33Mr Young submitted that, unlike the circumstances with which Campbell JA was dealing, the abandonment by the defendant of his position in the present case was not an exercise in responsible advocacy. He pointed out, in particular, that almost the entirety of the plaintiff's evidence had been served on the defendant when the proceedings were first commenced and that the only "surprise" which could have greeted the defendant was the cross examination which gave rise to the issue of his credit. Mr Young submitted that in these circumstances, and in the absence of any accompanying explanation from the defendant as to the reasons why he chose to take the course he did following the conclusion of the evidence, I should conclude that the defendant had ultimately come to the view, which should have been evident to him long before, that his defence to the plaintiff's claim was untenable and that it was essential to deliver up the subject matter of the dispute to avoid the matter being inevitably determined in the plaintiff's favour. 34Mr Young also relied upon the fact that in the correspondence which had passed prior to the commencement of the proceedings, the defendant had been put on notice, on a number of occasions, that the plaintiff would seek an order for indemnity costs in the event that it was necessary for her to commence proceedings. 35Mr Nagle, who appeared for the defendant, did not argue against the proposition that the actions of the defendant in delivering up the documents amounted to a total abandonment of his defence of the proceedings brought by the plaintiff. As to the reasons for that abandonment, he initially submitted to me, in quite specific terms, that I should conclude that such abandonment came about not because the defendant had concluded that his defence had no merit, but because he was fearful that I would reach conclusions as to his credit which were adverse to him, and that he did not wish to run that risk. Having made that submission, Mr Nagle then withdrew it and submitted that the evidence simply did not enable me to come to any conclusion, one way or the other, as to why the defendant had abandoned his position. 36Mr Nagle further submitted to me that I should take into account that there were efforts to try and resolve the matter prior to the commencement of the proceedings. He also took issue with the proposition that the defendant had ended up in a less advantageous position than would have been the case had he accepted one of the offers of settlement put by the plaintiff. 37Finally, Mr Nagle submitted that if I were to come to the view than an order for indemnity costs was appropriate, those costs should not include the costs of Senior Counsel. In this regard, Mr Nagle submitted that there was one fundamental issue in the case, namely whether or not the defendant held a valid lien over the plaintiff's file, and that in these circumstances the retention of Senior Counsel by the plaintiff was not reasonable. Decision 38In my view, there are a number of features of this matter which justify the making of the orders sought by the plaintiff. 39Firstly, it will be apparent that between about January and March of this year there were repeated attempts by the plaintiff to secure delivery of the relevant documents from the defendant in an effort to avoid having to commence proceedings. In making those attempts, the plaintiff and her solicitors acted, in my view, more than reasonably. In particular, the plaintiff: (a)provided an undertaking to pay any outstanding fees; (b)offered to enter into, and in fact executed, a form of tripartite agreement which made provision for (inter alia) an irrevocable authority in relation to any fees payable to the defendant; (c)made a revised offer of settlement which involved not only the execution of the tripartite agreement (in an amended form which was even more favourable to the defendant) but also the payment of a sum of $2,000.00 by her on account of the defendant's outstanding fees which she disputed by the plaintiff in any event. 40Secondly, such attempts by the plaintiff to resolve the matter were made in circumstances where the defendant was informed, on more than one occasion that if the matter could not be otherwise resolved, proceedings seeking orders pursuant to s 728 of the Legal Profession Act 2004 would be brought. The defendant was obviously aware of the fact that other proceedings were on foot and of the plaintiff's need for the file. Accordingly, he must have been aware that if the matter could not be resolved, the foreshadowed proceedings would indeed be instituted. 41Notwithstanding these matters, and but for his correspondence of 5 March 2011, the defendant, in repeated displays of professional discourtesy, failed to respond substantively, if at all, to a number of the letters which had been forwarded to him by the plaintiff's solicitors. In particular, he failed to provide any, or any proper, response to the offers which were made by the plaintiff to resolve the matter. As a consequence he finds himself, as Mr Young submitted, in a less advantageous position than would otherwise have been the case. That position is the result of his own actions, or lack thereof. 42Further, the defendant's rejection of the plaintiff's attempts to resolve the matter, and his general failure to respond, or respond properly, to correspondence which was sent to him, occurred in circumstances where he was repeatedly advised by the plaintiff's solicitors that in the event that proceedings were commenced, an application for indemnity costs would be made. On the evidence, the defendant was on notice of such matters as long ago as 24 February. To the extent that Mr Nagle submitted that there had been attempts to resolve the matter prior to the commencement of the proceedings, the evidence establishes that the majority, if not all, of those attempts were instigated by the plaintiff. The evidence also establishes that such attempts were met with little or no response from the defendant. 43Finally, and against the background that I have outlined, the defendant chose, at the conclusion of the evidence, to completely abandon his previously asserted position and deliver up the documents which the plaintiff had first sought . I am mindful of the views expressed by Campbell JA, to which I have previously referred, that abandonment of a claim is not, of itself, sufficient to justify an award of indemnity costs. However, I accept Mr Young's submission that in the circumstances of this case the defendant's abandonment of his position should not be categorised as an exercise in responsible advocacy. 44Quite apart from the fact that such abandonment occurred against the background to which I have referred, it occurred in circumstances where the evidence ultimately relied upon by the plaintiff at the hearing was, in large measure, the same as that which had been served upon the defendant at the time of commencement of the proceedings on 29 March 2012. In my view, the evidence supports a conclusion that the defendant abandoned his position because he reached the view at some point after the completion of the proceedings on 20 April 2012 that his defence to the orders sought by the plaintiff was untenable. Accepting that such a conclusion was reached, it was reached at a time when the evidence in support of the plaintiff's position had, in large measure, been in the possession of the defendant for some weeks. As a result, it is a conclusion which the defendant should have reached a long time before he did. 45As I have indicated, Mr Nagle withdrew his original submission that I should find that the defendant's abandonment of his position was brought about by a concern that I would determine the issues of his credit adversely to him. Mr Young submitted that if I were to reach the finding which Mr Nagle initially urged upon me then it would constitute a further reason to make the orders sought. However, in light of the findings I have made, and Mr Nagle's withdrawal of his original submission,I need take that matter no further. 46Finally, and although I do not consider that it is something that I am required to determine for the purposes of making the orders which have been sought, I should record the fact that I do not accept Mr Nagle's submission that it was unreasonable for the plaintiff to retain Senior Counsel. Despite Mr Nagle's attempt to portray it as such, this was certainly not what could be described as a "single issue case". In order to demonstrate that, I need do no more than point to the fact that prior to the hearing, and at my request, the parties submitted a joint statement of issues. That statement set out twelve (12) distinct issues which the parties agreed I would have to determine. Moreover, Mr Nagle added a further seven (7) issues which the defendant specifically required that I determine. Within those nineteen (19) issues were questions of both fact and law, many of which were of some complexity. In my view, in these circumstances, the plaintiff's decision to retain Senior Counsel was more than reasonable. Orders 47I therefore make the following orders: (1)The defendant is to pay the plaintiff's costs on an indemnity basis up to and including 23 April 2012. (2)The defendant is to pay the plaintiff's costs on the usual basis thereafter.