SUPREME COURT OF QUEENSLAND

Transcription

1 SUPREME COURT OF QUEENSLAND CITATION: Stark v Dennett [2007] QSC 171 PARTIES: DAVID PAUL STARK (applicant) v JOHN C DENNETT (first respondent) JOHN W LEE (second respondent FILE NO: 5441 of 2007 DIVISION: PROCEEDING: ORIGINATING COURT: Trial Division Application Supreme Court, Brisbane DELIVERED ON: 16 July 2007 DELIVERED AT: Supreme Court, Brisbane HEARING DATE: 11, 13 July 2007 JUDGE: ORDER: Douglas J Application dismissed. CATCHWORDS: PROFESSIONS AND TRADES LAWYERS LIENS WHEN LIEN ARISES where client terminates retainer for no good reason whether client then liable for fees in no win no fee retainer - whether lien exists where fees were to be paid to solicitor only in the event of a successful action but to counsel at the end of the matter and not only in the event of a successful action whether misconduct existed disentitling reliance on lien whether undertaking to pay into court from the proceeds of any judgment or settlement obtained constituted satisfactory security to substitute for the lien. Legal Profession (Solicitors) Rule 2007 r 7.4 Baker v Legal Services Commissioner [2006] QCA 145, considered and distinguished Bechara v Atie [2005] NSWCA 268, applied Re Castle (1867) 6 SCR (NSW) L 195, considered Bolster v McCallum (1966) 85 WN (Pt 1) 281, considered Blanda v Kemp Strang Lawyers Pty Ltd [2006] NSWSC 48, considered Elfis v Somers; ex parte Tydhof (Queensland Supreme Court No 270 of 1982, unreported), applied Gamlen Chemical Co (UK) Ltd v Rochem Ltd [1980] 1 All

2 2 COUNSEL: SOLICITORS: ER 1049, considered Hughes v Hughes [1958] P 224, considered and applied Re Weedman (Federal Court of Australia, QG 88 of 1996; 17 December 1996, unreported), considered The applicant in person FW Redmond for the respondents The applicant in person Cleary Hoare for the respondents [1] Douglas J: In this application Mr Stark, appearing for himself, seeks the delivery up to him of files held by his former solicitor, Mr Dennett. Some of the file documents were held by the counsel formerly acting for Mr Stark on Mr Dennett s instructions, Mr Lee, and were held in his chambers. That appears to be why Mr Stark made Mr Lee a party to the application. Mr Dennett claims a solicitor s lien over the files to secure payment of fees and outlays he claims are owing to him arising from two actions he has been conducting for Mr Stark. Mr Stark contends that he is not liable to pay the solicitor s fees unless there is a successful conclusion to an action he has instituted against a body called Indigenous Business Australia ( IBA ). Mr Dennett claims that his retainer was terminated for no good reason and that he is now entitled to claim payment of his fees and outlays. Background [2] Mr Stark had previously instituted proceedings against a company called Burnett Valley Holdings Limited ( BVH ) and as well as against IBA. The actions arose out of employment contracts he had with those organisations. He was qualified as a chartered accountant and appears to have held responsible, well paid positions. [3] The action against BVH was compromised on 25 May 2006 but he says that he needs the file from that action to enable him to use evidence from it in his other action against IBA. There was delay in the conduct of that action before it was compromised for which Mr Stark criticised the respondents, complaining that they had misconducted themselves and that the delay was their fault. He has not received any funds from the compromise of the action against BVH as the legal costs incurred in respect of that application have exceeded the amount he obtained from it, a result partly contributed to by the apparently unexpected deduction of $13,200 from the settlement sum by BVH on the ground that it was an eligible termination payment. [4] At the time of the compromise it seems that Mr Stark and his lawyers believed that the settlement sum would cover the legal costs but not give any significant sum to Mr Stark. On Mr Dennett s calculation of his fees owing in respect of the BVH matter there is still $15,700 owing in respect of those proceedings together with interest, the cost of taxation of the bill and other costs. At the time it seems that Mr Stark was satisfied with the settlement but he now complains that he should have obtained a better result. The evidence does not persuade me that a better result was available, at least by negotiation, and there were reasonable grounds advanced that it was in his interests to settle that action to allow him to concentrate on the IBA matter.

3 3 [5] The IBA proceedings are still on foot having commenced in The pleadings had closed and disclosure had occurred. There was a mediation of them on 23 June 2006 which was adjourned. An offer was made at the mediation which was subsequently rejected by Mr Stark on 7 July After that mediation it appears that Mr Stark and his counsel, Mr Lee, took differing views about the appropriate manner in which to plead the damages claimed by Mr Stark. They consist of damages for breach of contract and misleading and deceptive conduct in respect of his acceptance of employment with IBA rather than with another company, GPS Online.com Ltd. [6] Mr Stark s case against IBA appears to be that his acceptance of employment with it was caused by their breach of contract and misrepresentations and, if he had been employed by GPS, he would have received a very significant income which was not adequately reflected in the calculations in the various statements of claim prepared by his counsel. His counsel sought to explain his approach to the pleading of the damages in a number of advices but Mr Stark still disagreed with the approach and criticised his barrister for failing to quantify the claim, by reference particularly to the evidence of a witness, Mr Angel, about his likely prospects and income earning capacity had he been employed by GPS. [7] The matter was due to go to mediation again on 18 April Before then there was a flurry of communication between Mr Stark, his solicitor and Mr Lee about Mr Stark s access to the files that he wished to examine for the purposes of the mediation. He telephoned Mr Lee on 10 April 2007 asking for part of his brief but was advised properly by Mr Lee that the brief was Mr Dennett s and that he could not hand over anything without Mr Dennett s consent. There was some discussion between Mr Stark and Mr Dennett about the possibility of engaging another barrister and on 12 April 2007 Mr Stark attended Mr Lee s chambers and asked for the brief but again was declined on the basis of Mr Dennett s lien. [8] Mr Stark, later, on 12 April 2007, was presented with the possibility of him presenting his own case at the mediation with his lawyers present. He said that he wanted access to certain documents but Mr Lee requested that he sign a retainer to be drawn up by Mr Lee overnight. Mr Stark was unwilling to sign the retainer when it was presented to him, apparently on the basis that Mr Lee included in it a provision that he would be entitled to require payment of his fees for all work done, whatever the outcome of the action, in the event an offer of settlement providing for the payment of a sum of money to the plaintiff was made by the defendant which he considered to be reasonable but which was rejected by the plaintiff. Mr Stark also objected to a proposed acknowledgement that he did not maintain that there had been any negligent act or omission by his lawyers. [9] Mr Dennett was agreeable to Mr Stark obtaining access to those documents provided he signed Mr Lee s retainer. By 16 April 2007 Mr Lee had agreed to waive his requirement that Mr Stark sign his retainer to allow the mediation to go ahead but Mr Dennett says that Mr Stark told Mr Dennett that he and Mr Lee had had their chance. Mr Stark says that he only said that Mr Lee had had his chance but he then proceeded to act in the matter on his own behalf and, in my view, to terminate the retainer with Mr Dennett. He is now acting for himself here and in the case against IBA.

4 4 [10] Mr Dennett sent him a tax invoice dated 3 May 2007 claiming $107, as professional fees and outlays. Mr Stark contends that no fees are payable unless there is a successful outcome from the trial and that his preparation for trial is prevented by Mr Dennett withholding his files. [11] The client agreement between Mr Dennett and Mr Stark dated 31 December 2002 said that monthly accounts would be sent for costs and outlays and required accounts to be paid within 14 days of their issue. Clause 6 of a notice attached to it provided that if Mr Stark changed solicitor or firm his original solicitor or firm may charge and recover fees and costs from him for work done before he gave notice that he was changing his representation. [12] Mr Lee was engaged by Mr Dennett verbally, initially in about March In May 2003 Mr Dennett told Mr Lee that Mr Stark was in financial difficulties and was not likely to be able to pay his fees before the conclusion of the matter. He says that Mr Lee continued to act on that basis. After an invoice of 5 May 2003, without waiving his right to payment, Mr Dennett ceased to render regular invoices to Mr Stark. On 6 May 2003, however, he said to Mr Stark in a letter of that date that he was prepared to carry an amount of $ incurred to that time and additional costs in pursuing your claim on the basis that they are paid only in the event of a successful action. He made it clear, however, that Mr Lee may be prepared to render a tax invoice at the end of the matter and did not commit Mr Lee to charging a fee only in the event of a successful action. There was no suggestion that any consideration was provided by Mr Stark in return for that waiver of Mr Dennett s rights. [13] Mr Stark argued that Mr Dennett s lien should not apply on the basis that he was not liable to pay except in the contingency that his action succeeded. He also argued that there had been misconduct by Mr Dennett and Mr Lee in their delaying prosecuting his claim and in Mr Lee s refusal to adopt directly the assessment by Mr Angel of Mr Stark s likely income had he worked for GPS as the basis for calculating the damages to be claimed in his statement of claim. Termination of the retainer [14] The solicitor s retainer was terminated, in my view, for no good reason. The criticism for the delay and the result in the earlier proceedings against BVH, if it were valid, had been overtaken by its compromise and the disagreement between Mr Stark and Mr Lee over how best to plead Mr Stark s claim for damages in the IBA matter can by no means be described as misconduct on the part of the solicitor or, for that matter, on the part of Mr Lee, should that be relevant. It is the sort of disagreement about the tactics of running a case that lawyers are familiar with in their attempts to balance the wishes of clients against their clients interests and the lawyers duties to the Court. There is nothing in the evidence I have seen to warrant setting aside the lien claimed on the ground of misconduct. [15] As McPherson J said in Elfis v Somers; ex parte Tydhof (Queensland Supreme Court No 270 of 1982, unreported): But it is not every breach of contract by a solicitor that results in his being deprived of his remuneration. Incidental or collateral negligence in the course of performing the contract, but which falls short of rendering the work wholly useless does not have such a

5 5 consequence: see Isaacs v Cachia [1981] 2 NSWLR 92 at 99. No doubt this is because, on ordinary principle, such an incidental breach of duty does not justify the client in terminating the retainer: and unless the retainer is justifiably determined, the right of the solicitor to payment of his fees, and pro tanto to assert the lien, remains. In such a case the remedy of the client is to claim against the solicitor for damages in respect of the loss flowing from the breach of duty (see Isaacs v Cachia): but, subject to this, he remains liable for the fees, at least in so far as they were incurred in performing proper services: Hannaford v Hannaford (1871) 24 LT 86. (See the extract from the decision in Quick on Costs at [7.1610].) Mr Stark s liability for Mr Dennett s fees [16] Even if Mr Dennett s client agreement had been varied to turn it into a no win no fee agreement by the letter of 6 May 2003, it does not seem to me that, for that reason, he should have no lien in respect of the files held by him. It seems more likely that there was a waiver of Mr Dennett s rights under the agreement rather than a variation of the contract. The waiver might ground an estoppel against an earlier demand for the fees had the solicitor-client relationship persisted but the situation seems to me to be different where there has been a termination of the retainer by the client for no good reason. [17] Leaving that issue to one side for the moment, there may still be a liability to pay the balance of the fees in the BVH matter, at least if one assumes that was a successful action, an assumption that may be unlikely; cf. Baker v Legal Services Commissioner [2006] QCA 145 at [19]-[21], [65], [71]. There is arguably also, even on Mr Stark s case, at least a contingent liability in Mr Stark to pay Mr Dennett s fees for the IBA matter and probably a present obligation in Mr Dennett payable in the future in respect of Mr Lee s fees. [18] Where, however, Mr Stark has terminated the retainer for no good reason, it seems to me that the liability is now actual rather than contingent. The views expressed by McPherson JA in Baker v Legal Services Commissioner at [28]-[32] about the difficulties a solicitor faces in recovering fees in a no win no fee case where a retainer has been discharged by frustration or where the solicitor had terminated it do not apply, in my view, where, as here, it is the client who has terminated the retainer for no good reason. [19] Mr Stark has benefited from the work done for him by Mr Dennett and Mr Lee in the IBA matter which is now at the stage where pleadings have been delivered, disclosure has taken place and a mediation had been organised. Even if he disagrees with some of the pleadings delivered or the advice he was given it is clear that he has adopted the benefit of much of the work previously done for him; cf. Baker v Legal Services Commissioner at [32] and [80]-[82]. [20] His liability to pay is also consistent with the provisions of the notice attached to Mr Stark s client agreement. As I said earlier, it provided in cl. 6 that if the client changed solicitor or firm the original solicitor may charge and recover fees and costs from him for work done before notice was given by him of the change. Although no new solicitor or firm has been engaged by Mr Stark it would be

6 6 anomalous to prevent the recovery of the solicitor s fees or costs simply for that reason. Availability of the lien [21] The availability of a lien where the litigation was undertaken in circumstances where payment would occur only in the event of a successful outcome was recognised in passing by McColl JA in Bechara v Atie [2005] NSWCA 268 at [65]. In that decision her Honour referred at [46] to a useful explanation of the nature of the lien by Asprey JA in Bolster v McCallum (1966) 85 WN (Pt 1) 281, 286 where his Honour said: At common law a solicitor has a lien upon any documents which come into his possession in the course of his employment and in his capacity as a solicitor with the sanction of his clients and which are the property of his clients (see Halsbury's Laws of England 3rd ed., vol. 36, par. 238). The lien extends only to the solicitor's taxable costs, charges and expenses incurred on the instructions of the clients against whom the lien is claimed and for which those clients are personally liable; and the lien is a general lien extending to all costs due to the solicitor and is not limited to the costs incurred in relation to the particular documents in question or upon the particular instructions in consequence of which the documents came into the possession of the solicitor (see Halsbury, par. 239). A solicitor having a retaining lien over the documents in his possession is entitled to retain the documents against the clients until the full amount of the solicitor's taxed costs payable by the clients is paid; and the clients have no right to inspect the documents or to take copies of them. (see Halsbury par. 240). [22] The practical rationale for the lien was also explained by Hodgson LJ in Hughes v Hughes [1958] P 224, 228 as follows: The litigant need not change his solicitor without good cause. It would be odd if he were in effect able to get solicitors' work done for nothing by the simple expedient of changing his solicitor as often as he chose, leaving a trail of unpaid costs in his wake and demanding the papers without payment when he had no just cause to complain of the conduct of the solicitors instructed and discarded. [23] Again, Templeman LJ said in Gamlen Chemical Co (UK) Ltd v Rochem Ltd [1980] 1 All ER 1049, 1058: A solicitor who accepts a retainer to act for a client in the prosecution or defence of an action engages that he will continue to act until the action is ended, subject however to his costs being paid. That principle was reaffirmed in Bluck v Lovering & Co. If before the action is ended the client determines the retainer, the solicitor may, subject to certain exceptions not here material, exercise a possessory lien over the client's papers until payment of the solicitor's costs and disbursements. Thus in Hughes v Hughes

7 7 ([1958] 3 All ER 179 at 180, [1958] P 224 at ) Hodson LJ said: 'There is no doubt that a solicitor who is discharged by his client during an action otherwise than for misconduct can retain any papers in the cause in his possession until the costs have been paid This rule applies, as the authorities show, whether the client's papers are of any intrinsic value or not ' [24] Mr Redmond, for the respondents, also drew my attention to a statement by Drummond J in Re Weedman (Federal Court of Australia, QG 88 of 1996; 17 December 1996, unreported; BC ) where his Honour said: Where it is the client who has terminated the retainer otherwise than for the solicitor's misconduct, I doubt whether there is any residual discretion in the court to order that the former client shall have access to the documents, in the face of the lien, even where the denial of access to the documents may leave the client facing what can truly be regarded as catastrophic disruption to his litigation. Such a discretion could, in my opinion, only be justified on the basis that the interests of justice may require such an order to be made in some cases. But it is difficult to see why the court should disregard the interests of its own officers and leave them without payment for what is justly due to them because insistence on the lien would deprive the former client of material essential to the conduct of his case, where that situation has been brought about by the client discharging the solicitor without any good reason. However, it is unnecessary for me to reach a concluded view on whether such a discretion exists since even if the court does have that power, I would not regard this as a proper case to exercise it in favour of the applicants, for reasons which later appear. [25] In my view, therefore, the solicitor has an appropriate claim to exercise his lien. It would go against the policy identified by Hodgson LJ in Hughes v Hughes to prevent Mr Dennett from exercising his rights. Satisfactory security instead of the lien [26] Rule 7.4 of the newly promulgated Legal Profession (Solicitors) Rule 2007 now provides that, in a case such as the present where the documents are essential to the client s prosecution of current proceedings, the solicitor, upon receiving satisfactory security for the unpaid costs, must deliver the documents to the client. [27] Mr Stark s only likely source of funds with which to pay the costs sought by Mr Dennett is if his action is successful. Without his files it will be difficult for him to conduct that action. Accordingly I explored with the parties the possibility of resolving the matter by the applicant providing security instead of the solicitor's lien claimed by undertaking to pay into court from the proceeds of any judgment or settlement obtained in his action against IBA funds sufficient to secure the fees and outlays claimed to be owing to Mr Dennett pending the determination of the amount of such fees and outlays that should be paid to Mr Dennett. It is a necessarily uncertain or contingent proposal but partly reflects the terms of Mr Dennett s letter of 6 May 2003, if not his obligation in respect of Mr Lee s fees or what I regard as

8 8 his present entitlement in respect of his own fees and other outlays since his retainer was terminated. [28] In Bechara v Atie McColl JA dealt with a case where a plaintiff had withdrawn instructions from her former solicitor and gone to another firm. The former solicitor, when asked to surrender the file, required an authority from the former client authorising the new firm to pay her costs and an undertaking from the new firm to pay her costs as agreed or assessed and to retain an amount from any settlement or verdict in its trust account pending agreement or assessment of her costs. The new firm proffered, instead, an undertaking to pay the former solicitor s reasonable costs and disbursements as agreed or assessed at the successful completion of the matter. Her Honour discussed the applicable principles usefully at [40]-[67] and concluded at [67] that the undertaking offered by the new firm did not satisfactorily secure the claimant s possessory lien in the manner to which she was entitled. It did not, on its face, provide an equivalent in monetary value to the claimant s claim for costs and disbursements. See also Re Castle (1867) 6 SCR (NSW) L 195, 199 and Blanda v Kemp Strang Lawyers Pty Ltd [2006] NSWSC 48 at [77]-[79]. [29] Although Mr Stark was willing to offer such an undertaking, which he extended to any amount that he recovered, the respondents submitted that it did not provide any security to Mr Dennett, came from a person who was not an officer of the Court and so would not carry with it the sanctions that might be visited on the head of a substituted solicitor. They also submitted, with some justification, that there was an inference available on the evidence that Mr Stark had an inflated view of the prospects of his case such that reasonable offers by his opponent might remain unexploited and that he had pondered bankruptcy as an outcome should he be unsuccessful at a trial. Order [30] These submissions are persuasive and lead me to the conclusion that no satisfactory security for the payment of the respondents fees has been offered and that the application should be dismissed.