New South Wales Supreme Court CITATION : Rickard Constructions Pty Limited v Doyle [2003] NSWSC 585 HEARING DATE(S) : 7 February, 17 March 2003 JUDGMENT DATE : 30 June 2003 JURISDICTION: Equity Division JUDGMENT OF : Master McLaughlin DECISION : (1). I order that the Plaintiff pay the costs of the Defendant, such costs to include the costs of and incidental to the application in respect to costs.; (2). The exhibits may be returned. CATCHWORDS : Costs - Substantive proceedings were resolved - No hearing on merits - Whether Defendant is entitled to costs order against Plaintiff - Court cannot try a hypothetical action between the parties - Whether Plaintiff acted reasonably in commencing the proceedings and whether Defendant acted reasonably in defending the proceedings. LEGISLATION CITED : Legal Profession Act 1987 CASES CITED : Major Projects Pty Limited v Sybmark Pty Limited (19 February 1992, unreported) Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 PARTIES : Rickard Constructions Pty Limited (Plaintiff) James Patrick Doyle (Defendant) FILE NUMBER(S) : SC 2015/02 COUNSEL : K. Odgers (Plaintiff) J.P. Doyle (solicitor), Defendant, in person SOLICITORS : Maurice Blackburn Cashman Lawyers (Plaintiff) Doyles Construction Lawyers (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION MASTER McLAUGHLIN Monday, 30 June 2003 2015 of 2002 RICKARD CONSTRUCTIONS PTY LIMITED -v- JAMES PATRICK DOYLE JUDGMENT 1 MASTER: These proceedings were instituted by summons filed on 25 March 2002 by Rickard Constructions Pty Limited (Subject to Deed of Company Arrangement). The Defendant named in that summons is Jim Doyle. It would, however, appear that the correct name of the Defendant is James Patrick Doyle (who in his affidavit evidence describes himself as the director of "Doyles Construction Lawyers"). 2 By that summons the Plaintiff sought an order that the Defendant deliver to the Plaintiff originals or copies of certain documents (which were then described or otherwise identified), and a declaration in the following terms, A declaration that the Defendant is not entitled to maintain possession and or lien over the documents referred to in prayer 1 above. 3 On 5 September 2002 the matter came before Young CJ in Eq, who noted that the matter had settled except as to costs. 4 The hearing before me was in respect to those costs. 5 The Defendant sought an order that the Plaintiff should pay the costs of the Defendant of the proceedings. The Plaintiff submitted that there should be no order as to the costs of the proceedings, to the intent that each party should bear its or his own costs thereof and that the only costs order should be in respect to the present application. 6 I have had the benefit of receiving written outlines of submissions from the legal representatives of the Plaintiff and from the Defendant (who is a solicitor, and who represented himself at the hearing before me). Those written submissions will be retained in the Court file. 7 In order to understand the basis upon which the Defendant seeks an order that his costs be paid by the Plaintiff and the basis upon which the Plaintiff seeks to resist such an order, it is appropriate that I should set forth, at least in summary, the factual circumstances which have given rise to the present proceedings. 8 The Plaintiff is a former client of the Defendant, whom the Plaintiff retained to act for it in proceedings 55027 of 2000 in the Construction List of this Division of the Court (which proceedings have been referred to in the written submissions and in affidavit evidence as "the Proceedings" or "the Concurrent Proceedings": the latter description is probably less ambiguous). 9 The Defendant ceased to act for the Plaintiff on 19 April 2001. Since at least March 2001 there had been what might be described as a dispute between the parties concerning the costs which the Defendant was charging for his professional services. 10 It was in consequence of a meeting attended by Mr Charles Rickard, the principal of the Plaintiff and the Defendant on 29 March 2001 that the retainer of the Defendant by the Plaintiff was terminated. 11 There is a dispute between the parties as to whether at the meeting on 29 March 2001 the termination of the Defendants retainer was effected by consent of the parties, or whether it was a unilateral termination effected by the Plaintiff. 12 Pursuant to that termination of his retainer, the Defendant on 19 April 2001 filed a Notice of Ceasing to Act. 13 The Plaintiff on 1 June 2001 filed an application for assessment of costs, and subsequently the Court appointed Mr Leonard S. Hattersley as the Costs Assessor. Before the Costs Assessor had concluded his assessment orders were made concerning inspection of documents in the Concurrent Proceedings. It is asserted on behalf of the Plaintiff that at that time the Defendant had failed to make available documents of the Plaintiff which, pursuant to the foregoing orders, the Plaintiff was required to make available for inspection by the other parties in the Concurrent Proceedings. An offer was made by the Plaintiff on 9 April 2002 that it would pay a certain amount to the Defendant in return for documents which the Plaintiff asserted were being held by the Defendant. That offer was rejected by the Defendant. 14 On 24 April 2002 the costs properly payable by the Plaintiff to the Defendant were assessed by the Costs Assessor at $51,667.79. Subsequently, on 3 May 2002, the Plaintiff pursuant to Part 51A Rule 5 of the Supreme Court Rules appealed against the entirety of the assessment by the Costs Assessor. That appeal was dismissed with costs by Master Malpass on 27 September 2002. 15 It is relevant to the present application as to costs that when the Plaintiff originally retained the Defendant, it entered into a costs agreement with the Defendant on 19 January 2000, to which costs agreement was attached a document described as the Defendant's "Costs Agreement: Standard Clauses". That document contains the following (as clause 2 on page 3, headed "Ownership of File"), We reserve our right to a lien over the documents used for the matter and require a charge over the proceeds of any claim we have pursued on your behalf from the time of receipt or from the time of our notice to you, for your payment of any costs and disbursements on all matters. We are entitled to retain possession of your original documents supplied to us, while there is money owing to us for charges and expenses and we own the documents on our file other than original documents provided by you which we will copy for our file at reasonable costs. We will provide copies of correspondence between us and third parties or yourself at your expense and at reasonable costs once our charges and expenses are paid. 16 On the same date, 19 January 2000, Mr Charles Rickard, the principal of the Plaintiff, entered into a written guarantee for the performance and observance by the Plaintiff of the Costs Agreement and for the payment of fees and other charges to the Defendant. 17 When an administrator of the Plaintiff was appointed on 19 October 2000, the Defendant entered into a further costs agreement with the administrator, to which the Standard Clauses (including the foregoing clause 2) were again attached. 18 At the time of the institution of the present proceedings it was the assertion of the Defendant that the following fees were outstanding to the Defendant: (a) $25,569.15 for legal services to Rickard Constructions Pty Limited from 1 June 2000 to 19 October 2000 (Category 1 fees) (b) $27,125.79 for legal services provided to Mr Neil Singleton, the administrator of Rickard Constructions Pty Limited (Administrator Appointed) from 20 October 2000 to 22 December 2000 (Category 2 fees) (c) $61,583.79 for legal services provided to Rickard Constructions Pty Limited (Subject to a Deed of Company Arrangement) from 1 January 2001 to 31 March 2001 (Category 3 fees) 19 The substantive proceedings were the subject of consent orders between the parties by which, in return for the payment by the Plaintiff to the Defendant of the sum of $51,667.79 (being the amount certified by the costs assessor) the Defendant would deliver to the Plaintiff the documents which were the subject of the substantive proceedings. 20 The relevant principles relating to costs are encapsulated in the following passage from the judgment of McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624. [I]t is first necessary to state the principles which govern an application for costs when a party elects not to pursue an action because he or she has achieved the relief sought in the action either by settlement or by extra-curial means. In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs ( Latoudis v Casey (1990) 170 CLR 534). Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order ( Latoudis at 543, 566-568). When there has been no hearing on the merits, however, a Court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties ( Australian Securities Commission v Aust-Home Investments Limited (1993) 44 FCR 194 at 201). To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action ( Australian Securities Commission v Aust-Home Investments Limited at 201)… Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried… But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases [various authorities then being cited]. 21 In the instant case it is submitted on behalf of the Defendant that the Plaintiff acted unreasonably in instituting the present proceedings, and that, at the heels of the hunt, the case for the Plaintiff collapsed by the payment by it to the Defendant of the assessed costs of $51,667.79. 22 It is the submission of the Defendant that the present is one of those rare cases contemplated by McHugh J in Lui Qin, where there has been a lack of reasonableness on the part of the Plaintiff in instituting the present proceedings. 23 It must be appreciated that the right asserted by the Defendant in respect to documents which were the subject of the present proceedings was a right grounded upon contract. There existed an express agreement between the Plaintiff and the Defendant concerning documents, that express agreement being set forth in of the Costs Agreement: Standard Clauses signed by the Plaintiff and the Defendant on 19 January 2000. I have already set forth the terms of clause 2. 24 Clause 3 of that agreement (also under the heading "Ownership of File"), is as follows, We will, at your request, on completion of the work, return any original documents which you have supplied to us. We own all documents held on our file which are created by or received by us from you and third parties. We may destroy the file two years after the date of the final bill rendered by us in this matter. 25 A great deal of documentary evidence (comprising in total many hundreds of pages) was placed before the Court at the hearing of this application as to costs. 26 That material has, to an extent, tended to obfuscate what is, in essence, a relatively simple matter. 27 At the time when the Defendant ceased to act as solicitor for the Plaintiff he was owed a substantial amount by way of costs. The Plaintiff was unwilling to pay the amount claimed by the Defendant, and the assessment procedure provided for by the Legal Profession Act 1987 and the Supreme Court Rules was activated by the Plaintiff. The Plaintiff was still not prepared to pay the costs of the Defendant, but sought documents held by the Defendant. The Plaintiff did not pay the amount of the costs which were assessed by the costs assessor, but appealed to the Court, that appeal being dismissed by Master Malpass on 27 September 2002. It was only in September 2002 that the Plaintiff agreed to pay the amount in the certificate of assessment. That amount must, of course, be treated as the proper amount of the costs claimed by the Defendant. There was no justification for the Plaintiff not paying those costs either at the time when they were originally claimed by the Defendant, or, at the latest, on 29 March 2001 at the time of the meeting at which the Plaintiff's retainer of the Defendant was terminated. 28 The Plaintiff at all times had the remedy for the delivery to it of the documents held by the Defendant. That remedy was the payment of the Defendant's costs. 29 I do not accept the submission on behalf of the Plaintiff that the Plaintiff had a right to the delivery up of the documents. Where, as here, there was an express agreement between the parties, concerning the right of the Defendant to a lien over the Plaintiff's documents while there is money owing to the Defendant for charges and expenses, I do not consider that there was any such right reposing in the Plaintiff. In the absence of the Plaintiff paying the costs of the Defendant the Defendant was entitled to exercise its lien over the Plaintiff's documents. He had no other security to enforce the payment of a considerable amount in costs owed to him by the Plaintiff. 30 Neither can the Defendant's right to be paid his costs be in any way dependant upon or subject to the identity of the party which terminated his retainer. 31 Further, the Plaintiff, somewhat curiously, seemed to be suggesting, and indeed made an express submission in this regard, that the existence and the exercise of a lien in the Defendant over the documents must be asserted expressly by the Defendant, and, it was further submitted that such a lien was not asserted at the time of the meeting on 29 March 2001 or at the time of the letter from the Defendant of 13 March 2002. It was submitted that the failure of the Defendant to assert such a lien at that meeting constituted an estoppel to any later assertion of such a lien. 32 That submission by the Plaintiff totally disregards the express written agreement between the parties of 19 January 2000. I do not consider that there is any basis for the submission that the lien which was created by that express written agreement between the parties was in any way waived or extinguished in consequence of the asserted failure of the Defendant at the meeting on 29 March 2001 to say to the Plaintiff words to the effect, "I assert a lien over the documents held by me". In any event, the conduct of the Defendant, rather than the vocal enunciation by him of some formula, clearly indicates the assertion of such a lien. I am not persuaded that there is any basis for a submission that, in the absence of such an oral assertion at the meeting of 29 March 2001 the Defendant is in any way estopped from asserting such a lien. 33 If, as is submitted on behalf of the Plaintiff, the costs claimed by the Defendant were excessive (and the outcome of the assessment procedure is directly contrary to that submission), nevertheless, the Court will not deprive a solicitor of protection in respect to outstanding costs (a lien over documents being one of the few protections which the solicitor has for his costs). In Major Projects Pty Limited v Sybmark Pty Limited (19 February 1992, unreported), McLelland J (as he then was) said, If Major Projects wishes, pending resolution of the question of what costs are due to Mr Nikolaidis' firm, to have its documents for some other purpose, then an order for delivery of the documents should be made only if Mr Nikolaidis' firm is sufficiently protected pending such resolution. 34 His Honour suggested that such protection might be provided by requiring the former client to pay into Court or otherwise secure to the solicitor the amount claimed to be due. 35 Further, it should not be overlooked that the relief sought in the summons includes, as prayer 2, a declaration that the Defendant is not entitled to maintain possession and or lien over the documents referred to in prayer 1. 36 Whilst it is possible, had the matter proceeded to a final hearing on the merits, that the Plaintiff might have been successful in obtaining delivery of the documents referred to in prayer 1, upon terms which (as in Major Projects Pty Ltd v Sidmark Pty Limited) would protect the solicitor as to his costs, nevertheless, I do not see how the Plaintiff could possible have succeeded in obtaining the declaratory relief sought in prayer 2. So long as the Defendant's costs remained unpaid, such a declaration would have been directly contrary to the express terms of the written agreement between the parties. 37 It must also be recognised that the ultimate settlement of the proceedings (in accordance with the letter of 4 September 2002: Exhibit BH2 to the affidavit of Boris Hristovski) occurred some six months after the institution of the proceedings, and more than four months after the Costs Assessor had issued his certificate on 24 April 2002. 38 The submissions concerning what were referred to as Category 1 and Category 2 costs (in respect to costs incurred by the Plaintiff whilst under voluntary administration) cannot affect the clear fact that the Defendant sought to retain (in accordance with an express written agreement in that regard) possession of documents, some of which were in the ownership of the Defendant, until costs incurred up to the date of the termination of his retainer were paid. The Plaintiff declined to pay the costs in the amount determined by the Costs Assessor until more than six months after the institution of the present proceedings and more than four months after the Costs Assessor had issued his certificate. Upon the payment of the assessed costs the Defendant delivered up the documents which were the subject of the proceedings. 39 To the extent that it is relevant to the matter presently under consideration by the Court, I would express my view that there was no requirement that the Defendant should await payment of the Category 1 and Category 2 costs before he was paid the costs owing to him by the Plaintiff (since the Category 1 and Category 2 costs were incurred consequent upon a costs agreement with the administrator, in the same terms as that with the Plaintiff itself). 40 In my conclusion, the conduct of the Defendant has been entirely reasonable throughout, and the institution of the present proceedings by the Plaintiff has been unreasonable in the sense in which that phrase was used by McHugh J in Lai Qin. The Defendant was relying upon an express written agreement between himself and the Plaintiff in order to protect his entitlement to costs, while the Plaintiff was refusing to pay costs to which the Defendant was clearly entitled. 41 It follows, therefore, that I that in my conclusion the Plaintiff should pay the costs of the Defendant of the substantive proceedings, including the costs of the application before me. 42 I make the following orders: (1). I order that the Plaintiff pay the costs of the Defendant, such costs to include the costs of and incidental to the application in respect to costs. (2). The exhibits may be returned. ********** Last Modified: 07/10/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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