Practice and procedure - Stay of judgment - Turns on own facts

1 STEYTLER J: The plaintiff has brought two applications.

2 The first is an application by way of chamber summons for an order that proceedings for the execution of a judgment entered on 16 August 2000 by Registrar Powell in favour of the defendants in Supreme Court action LPA 56 of 2000 in respect of a sum of $29,073.17 be stayed. That sum is the amount payable by the plaintiff to the defendants in respect of an account ("the account") rendered by the defendants, who are solicitors practising in partnership, in respect of legal services provided by them to the plaintiff and to a company known as Misty Isle Nominees Pty Ltd ("Misty Isle"), now in liquidation.

3 The second is a chamber summons for an order and two declarations. The order sought is that all of the papers, files and documents of the plaintiff and Misty Isle in the possession of the defendants be forthwith transferred or delivered up by the defendants to the possession of the plaintiff or its solicitors. The first declaration sought is one to the effect that the plaintiff is entitled to defer payment of the account, the subject of the judgment to which I have referred, pending the settlement, resolution and trial of a Supreme Court action, being action CIV 1371 of 1993 ("the action"). The second declaration sought is one to the effect that the account, or any judgment thereon, does not or cannot found a claim by the defendants for a lien over the papers, files and documents to which I have referred before settlement or resolution of the action. The plaintiff has given, in respect of this summons, an undertaking to pay the account out of any settlement proceeds of the action.

4 While the procedures which have been adopted in the course of bringing these applications are, to say the least, somewhat unusual the parties are content that I should decide the issues without further formality and upon the affidavit evidence which is presently before me.

5 The two summonses arise out of the retainer of the defendant solicitors by the plaintiff in respect of the action. The evidence discloses that the defendants were retained by the plaintiff and by Misty Isle in or about April last year to conduct on their behalf litigation against a company known as American Home Assurance Co. The retainer is reflected in a "letter of engagement" sent by the defendants to the plaintiff and Misty Isle on 6 April 1999 and attached terms and conditions of engagement which appear to have been signed on behalf of the parties.

6 The terms of engagement contained provisions which are material to the issue of costs. Clause 2 thereof provides as follows:

"You will be charged for all time spent carrying out work in relation to the above actions [sic] with funds only being provided to us at your absolute discretion only if determined by you as being available based on the estimates of trial costs such as to leave sufficient funds to meet the costs of trial and subject to the provision of any further funds by contributing creditors.

The following hourly rates are deferred (subject to any payments of any of our interim accounts as referred to in the above paragraph) and are not payable up front or on any interim basis before trial for any accounts issued by this firm and any interim accounts will not be payable until the resolution, settlement, obtaining of a paid judgment or discontinuance of the above Supreme Court action as specified in the above paragraph.

... "

7 Clause 7 of those terms and conditions provides that the defendants are "entitled to render interim accounts to ... [the plaintiff and Misty Isle] for work performed and disbursements incurred until the matter is concluded with reference to the terms in paragraph 2 above".

8 Clause 13 provides that the plaintiff and Misty Isle are entitled to terminate the defendants' retainer at any time for any reason whatsoever but that:

"... it is acknowledged that should you wish to terminate our retainer you may be liable to pay a cancellation fee to any Barrister engaged by us and you will not be entitled to receive your file until any out of pocket disbursements or any Barristers fees referred to in this paragraph are paid in full."

9 In fact, the plaintiff and Misty Isle did decide to terminate the retainer of the defendants. This occurred in March this year. On 21 March 2000, the defendants wrote to the plaintiff advising that the writer of that letter, Mr Mijatovic, was departing from the defendants' law firm, he having been the solicitor who had the conduct of the action against American Home Assurance Co. The letter recorded that the plaintiff was entitled to request that its file be transferred to any other firm by which Mr Mijatovic might be engaged or to remain with the defendants.

10 The letter said that if the plaintiff chose to remain with the defendants the matter would be conducted by another legal practitioner as determined by the partners of the defendants' firm. It also said that if the plaintiff chose to transfer the matter, any outstanding accounts would be required to be paid before its files were removed and an account of costs to date was enclosed accordingly. This account (being that referred to above as "the account") showed costs due of $28,274, of which an amount of $27 comprised disbursements. The account records:

"To our fees for professional services in relation to the above matter (interim account) pursuant to costs agreement with client dated February 1999 - deferred fees."

11 Mrs Betty Levi, the plaintiff's managing director, in an affidavit filed on behalf of the plaintiff in support of its summonses, has deposed to the fact that on or about 5 April 2000 the plaintiff engaged E & S Legal Group as its solicitors in place of the defendants. It was apparently this which led the defendants to require the plaintiff to pay the account. She says that she provided the defendants with a cheque for $27 payable to them in respect of the disbursements appearing in the account.

12 She says that the action, in respect of which the defendants had originally been retained, is at "the specific discovery and expert evidence stage" and is close to being entered for trial but that the major matter preventing the entry for trial is the fact that she has been unable to recover the files, papers and documents of the plaintiff from the defendants. She has said in this respect that they have in their possession or control some 10 to 30 relevant files. It is common cause that the defendants have refused to release those files save upon payment of the account.

13 Mrs Levi has also deposed in her affidavit to the fact that in March or April this year the plaintiff asked that the account be made the subject of taxation. This request was repeated on 23 May 2000 in a letter of that date written by Mr Maurice Levi, now deceased but then the liquidator of Misty Isle and a representative of the plaintiff, to the second-named defendant. The letter, which is exhibited to the affidavit of Mrs Levi, records, amongst other things, the following:

" ... It would seem to me to be more sensible for you to now proceed to have your costs taxed as previously requested by me after which we may be able to renegotiate the terms of payment and if I do not have sufficient funds to then pay the taxed costs with sufficient funds being held over for the costs of the trial then I may need to give you some form of assurance of payment of the balance from the outcome of the trial. This is in no way to be interpreted by you as an admission of liability or variation of our agreement but is suggested on a without prejudice basis so that we can both put this behind us. I await your further advices."

14 Mrs Levi next deposes to the fact that there was a dispute, at the taxation which subsequently took place on 16 August 2000, in regard to the question whether or not payment of the account should be deferred. The plaintiff did not there object to the quantum of the amount claimed. However Mrs Levi says that her solicitor submitted to the Registrar that he should waive or stay the provisions of O 66 r 57 (which provides that the signing of a certificate of taxation operates as a judgment pending the resolution of the action). She says that her solicitor produced various documents to the Registrar who read those documents but refused to waive or defer the payment of the account. Instead, she says, he signed the certificate of taxation on 16 August 2000 saying that he had no jurisdiction to determine whether the fees were deferred and not payable immediately. She said that he did this "instantly and at the same time as he spoke those words".

15 There is little in the remaining affidavit evidence before me which is of any assistance. The fact is that the defendants continue to assert a lien over the plaintiff's files and also continue to assert their entitlement to execute upon what they say was the judgment obtained as a result of the signing of the certificate by Registrar Powell.

16 Three contentions are pressed on behalf of the defendants in this respect. The first is that the retainer agreement is ambiguous about the terms of payment of any accounts rendered. The second is that the retainer agreement, insofar as it permitted the deferral of fees payable, did not survive the termination of the agreement. The third is that any rights which the plaintiff might have had as a consequence of the making of that agreement have, in any event, become merged in the judgment obtained through the signing of the certificate by Registrar Powell and are now extinguished.

17 There is, in my opinion, no substance to those contentions.

18 As to the proper construction of the agreement, it seems to me to provide, in plain and unambiguous language, that the plaintiff was not obliged to pay for work rendered under that agreement except in the terms provided for by cl 2 thereof. This gave to the plaintiff and to Misty Isle an "absolute discretion" to pay only so much as would "leave sufficient funds to meet the costs of trial [of the action against American Home Assurance Co] ... subject to the provision of any further funds by contributing creditors".

19 While it is true that cl 9 of the agreement does say that "[a]t the expiry of 60 days, all unpaid accounts are given to our debt collectors ... unless satisfactory arrangements are made with the solicitor handling the matter or our accountant ... ", it is plain that this must be read together with cl 2 of the agreement and therefore relates only to accounts which are not merely payable but which are presently due. That construction is I think assisted by the fact that the balance of cl 9, which required the plaintiff to "ensure that the account is paid in full within 60 days", has been deleted.

20 I am consequently not persuaded that there is any relevant ambiguity in the agreement.

21 I am also satisfied that the agreement has the effect that there will be no lien over the plaintiff's files save in respect of the amount of any "out of pocket disbursements" or any "cancellation fee" payable to any barrister or any barrister's fees which might be payable. So much is, in my opinion, plain from the terms of cl 13 of the agreement.

22 It also seems to me to be plain that the right to defer payment of fees rendered survived the termination of the retainer. So much is apparent from the terms of cl 13 itself which, in my opinion, is plain and unambiguous in this respect.

23 As to the third, and last, contention, namely that to the effect that the rights of the plaintiff under the cost agreement have merged in the judgment which arose as a consequence of the signing of the certificate by Registrar Powell, it seems to me that the judgment which so arose was one in respect only of the quantum due by the plaintiff and Misty Isle to the defendants. The learned Registrar expressly said that he could not, and did not, determine the question of the plaintiff's entitlement to defer payment of the account. It also seems to me to be quite plain from the terms of the retainer agreement to which I have referred that the defendants have no right to execute upon any judgment so obtained until such time as the conditions set in that agreement have been met, that is to say until such time as payment has become due under the terms of that agreement. The account, the quantum of which is now not able to be disputed by the plaintiff because of the operation of the res judicata doctrine, is only payable at the "absolute discretion" of the plaintiff and Misty Isle at least until such time as the action in respect of which the fees were incurred has reached a conclusion by way of some "resolution, settlement, obtaining of a paid judgment or discontinuance" (cl 2 of the agreement). Until that time there is no entitlement in the defendants to be paid, and consequently no entitlement to enforce the judgment as to quantum to which I have referred.

24 I should mention that some reliance was placed by the defendants on the case of Rapoff v MacDonald Rudder, unreported; SCt of WA (Franklyn J); Library No 8353; 6 July 1990. The ratio of that decision appears relevantly to be that, when a client requires that a bill rendered for legal services be taxed, the client must be taken to admit the existence of a retainer but desires to be assured that he or she is being charged only what is appropriate to the services rendered pursuant to the retainer and not to matters which do not fall within it. While that is no doubt so, it does not, in my opinion, bear upon the circumstances of this case. There is no doubt, having regard to the events which have occurred, that the plaintiff must be taken to accept that the defendants were entitled to charge for the services rendered by them. It is also plain, having regard to the judgment which has effectively been obtained through the signing of the taxing certificate, that the plaintiff is bound by the quantum so determined. However the plaintiff is not, in my opinion, in any way precluded from relying upon its agreement with the defendants in respect of its right to defer payment of the account.

25 It follows from what I have said that the plaintiff is entitled to the order which it seeks to the effect that all of its papers, files and documents in the possession of the defendants be forthwith transferred or delivered up by the defendants to the possession of the plaintiff or its solicitors. Because Misty Isle is not a party to these proceedings no similar order can be made on its behalf. I should add that I am told that this has no consequence as Misty Isle is no longer a party to the action.

26 It also follows that the plaintiff is entitled to a declaration that it is entitled to defer payment of the account in accordance with the terms of the retainer agreement and to an order staying the execution of the judgment to which I have referred pending any of the events referred to in cl 2 of the retainer agreement.

27 Finally, it follows from what I have said that the plaintiff is entitled to a declaration that the defendants have no lien over the papers, files and documents belonging to the plaintiff merely as a consequence of the fact of the unpaid account or the existence of the judgment.