Supreme Court New South Wales Medium Neutral Citation: Tyneside Property Management Pty Ltd & Ors v Hammersmith Management Pty Ltd & Ors [2011] NSWSC 156 Hearing dates: Wednesday 9 February 2011 Decision date: 09 February 2011 Before: Brereton J Decision: Application to set aside subpoena dismissed, defendants to have access to documents produced pursuant to subpoena on a limited basis. Plaintiffs to bear costs of recipients of subpoena. Catchwords: SOLICITORS - possessory lien over client's documents - general principles - retainer discharged by solicitor - former client's documents subject to subpoena - interest of third party to solicitor client relationship involved - third party has interest which would be embarrassed by assertion of lien - former solicitors not entitled to retain documents in face of subpoena - practice of Court to protect interests of former solicitors in such circumstances - third party granted access to documents on basis that former client will not have access. Legislation Cited: (NSW) Legal Profession Act 2004, s 728 Uniform Civil Procedure Rules (Part 33.4) Cases Cited: Bechara (t/as Bechara & Co) v Atie [2005] NSWCA 268 Blander v Kemp Strang Lawyers Pty Ltd [2006] NSWSC 48 Bolger v Bolger (1985) 82 FLR 46 Bolster v McCallum and Another [1966] 2 NSWR 660 Gamlen Chemical Co (UK) Ltd v Rochem Ltd and others 1 All ER 1049 Hughes v Hughes (1958) 2 All ER 366 Hughes v Hughes (1958) 3 All ER 179 In the Marriage of Rhode; Borthwick, Butler and Yee intervening (1983) 9 Fam LR 159 In re Rapid Road Transit Company [1909] 1 Ch 96 Jankowski and Anor v Mastoris (Supreme Court of New South Wales, Hodgson J, 19 September 1995, unreported) Major Projects Pty Ltd v Sibmark Pty Ltd (Supreme Court of New South Wales, McLelland J, 19 February 1992, unreported) Robins v Goldingham (1872) LR 13 Eq 440 Tyneside v Hammersmith [2011] NSWSC 22 Category: Procedural and other rulings Parties: Tyneside Property Management Pty Limited (First Plaintiff) Namlot Nominees Pty Limited (Second Plaintiff) Roy Frederick Haggis (Third Plaintiff) Hammersmith Management Pty Limited (First Defendant) Roche Group Pty Limited (Second Defendant) John Oliver (Third Defendant) Tasmanian Prosperity Investment Pty Limited (Fourth Defendant) Bluegrass Nominees Pty Limited (Fifth Defendant) Nathan Oliver (Sixth Defendant) Frederick James Boswell (Seventh Defendant) RMB Lawyers (subpoena party) Representation: Counsel Plaintiffs: Mr D.A. Smallbone Mr D.P. O'Connor Defendants: Mr David L. Williams SC Mr Scott Goodman RMB Lawyers: Ms M. Bateman Solicitors Plaintiffs: Moray Agnew Defendants: Clayton Utz File Number(s): 2003/83732 Judgment ( Ex Tempore) 1HIS HONOUR: By application filed on 8 February 2011, the partners of the law firm Russell McLelland & Brown, whom I shall call "the former solicitors", apply to have set aside a subpoena for production issued on 31 January 2011 at the request of their former clients, the plaintiffs in the present proceedings, seeking production of the following: All original and/or copy documents that form part of the documents described in part 1 of the discovery and supplementary discovery provided by the Plaintiffs in Supreme Court Proceeding's Number 2003/83732. 2For reasons which will appear, the plaintiffs do not oppose the application, but it is opposed by the defendants, who seek access to certain of the documents the subject of the subpoena, as specified by them in an email of 7 February 2011, which is annexure F to the affidavit of Mr Ryan Daniel Grove sworn on 8 February 2011. 3The background to this matter, which I have largely had to derive from the judgment of Pembroke J given on 25 January 2011 in Tyneside v Hammersmith [2011] NSWSC 22, appears to be that the former solicitors had acted for the plaintiffs upon the terms of an agreement made on 4 February 2008, under which the former solicitors had agreed that they would not charge until the conclusion of the case, but reserved the right to review and change those arrangements in the future at their discretion. For various reasons not presently relevant, the former solicitors exercised that right to review the arrangement, and a "cost plan" was formulated and agreed to on or about 15 October 2008, under which the plaintiffs were to pay costs. The plaintiffs subsequently paid some of the costs due under that plan, but not all of them. 4The evidence does not disclose precisely the course by which the plaintiffs came to change solicitors, and that, as will become apparent, is a not insignificant matter in how the law operates in these circumstances, and how relevant discretions are to be exercised. However, doing the best I can on the limited material available, I infer that the former solicitors announced that they would not continue to act for the plaintiffs unless their outstanding costs were paid, or at least satisfactory arrangements were made, and that the plaintiffs were either unable or unwilling to meet that condition, and chose to change solicitors as a result. If, on the other hand, the former solicitors, exercising a right to terminate for non-payment of costs under the fee agreement, terminated the retainer on that basis, that would, as will become apparent, make no difference in practice. 5On 14 January 2011, the plaintiffs made application to the court for an order pursuant to (NSW) Legal Profession Act 2004, s 728, for production and delivery up to their new solicitors, Moray & Agnew, of the former solicitors' file and the documents held by them. In the judgment to which I have referred, Pembroke J, on 25 January 2011, made the following orders (at [20]): (a) I order pursuant to s 728 of the Legal Profession Act that the respondents deliver to Moray & Agnew their file or files in respect of the proceedings number 2003/83732. (b) That order is subject to the condition that the plaintiffs first cause $100,000 to be held on trust for the outstanding costs due to the respondents pending assessment or agreement between the parties. (c) I order the plaintiffs to pay half the respondent's costs of this application. 6The condition imposed by Pembroke J's second order has not been fulfilled. There is no suggestion that it will, or is likely to, be fulfilled. Accordingly, his Honour's order for production had not taken practical effect. 7Following correspondence between the defendant's solicitors and the plaintiff's new solicitors, the plaintiffs - albeit, it would seem, at the instance of the defendants - issued the subject subpoena, in order that their discovered documents might be available for inspection and use by the defendants at the trial. In the course of the correspondence, the plaintiffs have proffered undertakings, to which they continue to adhere, in the following terms: We will not access the discovered documents produced by RMB in response to the subpoena. We will agree on the return of the documents to an order to the effect that access to the documents produced under the subpoena is restricted to the defendants. 8The law in this field is not without its complexities. Upon a short review of it, it seems to me that the relevant principles may be summarised as follows. First, a solicitor is not entitled to resist production of documents over which a possessory lien is claimed when a subpoena for their production is issued by a third party - that is to say, someone other than the former client [ In re Hawkes; Ackerman v Lockhart [1898] 2 Ch 1; Bolster v McCallum [1966] 2 NSWR 660]. Secondly, a solicitor can, however, refuse to produce documents in response to a subpoena for production over which the solicitor has a possessory lien under a subpoena for production, issued by, or at the instance of, the former client [ In Re Hawkes ; Bolster v McCallum ]. Thirdly, the second proposition is subject to the qualification that where the retainer is terminated by the solicitor, as distinct from by the client, the court may, and usually will, require production of the documents at the client's instance in the interests of justice and to avoid catastrophe for the client's litigation, subject to terms preserving, so far as can be preserved, the lien - including, usually, security for the unpaid costs [ Major Projects Pty Ltd v Sibmark Pty Ltd (Supreme Court of New South Wales, McLelland J, 19 February 1992, unreported); Blander v Kemp Strang Lawyers Pty Ltd [2006] NSWSC 48]. In connection with this proposition, as a matter of discretion - but I think only as a matter of discretion - the ability and willingness of the former client to secure the outstanding costs is an important consideration [ Re Bevan v Whitting (1864) 33 Beav 439, 55 ER 438; Re Jewitt (No 2) (1864) 34 Beav 22, 55 ER 539; Re Galland (1886) LR 31 Ch D 296, 302-303; Bechara v Atie ; Major Projects ; Jankowski v Mastoris ; Blander v Kemp Strang Lawyers ]. 9Fourthly, the position is otherwise where the client terminates the retainer without just cause: then, the solicitor can withhold production against the former client [ In re Rapid Road Transit Company [1909] 1 Ch 96; Bechara (t/as Bechara & Co) v Atie [2005] NSWCA 268; Blander v Kemp Strang Lawyers ]. Fifthly, for these purposes, a solicitor is taken to have discharged the retainer when the solicitor says that he or she will not act further unless outstanding or further costs are paid, and the client, taking the solicitor at his or her word, then instructs another solicitor to act [ Robins v Goldingham (1872) LR 13 Eq 440; Gamlen Chemical Co (UK) Ltd v Rochem Ltd and others 1 All ER 1049; In the Marriage of Rhode; Borthwick, Butler and Yee intervening (1983) 9 Fam LR 159; Ex parte Clowes; Re a Solicitor (1968) 87 WN (Pt 1) (NSW); Bolger v Bolger (1985) 82 FLR 46]. Accordingly, whether the client terminates the retainer in circumstances where the solicitors have said that they will no longer act unless paid on the one hand, or whether the solicitors terminate for non-payment of their fees, on the other, for present purposes the solicitor is deemed to have been the discharging party. 10Sixthly, where the interest of a third party intervenes, the solicitor is, in any event, not entitled to resist production. This is consistent with the rule that the solicitor is not entitled to resist production of documents over which he or she has a lien where a subpoena is issued by a third party, but was separately identified as a relevant principle by Wrangham J in Hughes v Hughes [1958] 2 All ER 366. Having referred to the general rule that a solicitor who is discharged by a client during an action otherwise than for misconduct could retain any papers in the cause or action until the costs were paid, his Lordship added: That rule, however, is subject to this qualification, that this absolute lien cannot be asserted where the cause is one in which other parties are interested and where those other parties would be embarrassed by the assertion of the lien. In such a case the solicitor must deliver up the parties subject to his lien, that is to say, subject to his right to have the papers returned to him at the conclusion of the proceedings for which they are needed, and to such undertakings as may be required to make his lien effective against his former client: Re Boughton, Boughton v Boughton (1883) 23 ChD 169). This qualification has been applied in the cases of a partition action ( Boden v Hensby [1892] 1 Ch 101) and of an action for the dissolution of a partnership: Dessau v Peters Rushton & Co Ltd [1922] 1 Ch 1. The question now arises whether a petition for divorce should be regarded as a matter in which parties other than the petitioner are interested, and one in which the withholding of relevant documents might embarrass those parties, or as being analogous to a civil action in which the plaintiff alone has a beneficial interest. In the latter case, as Sargant J, points out in Dessau v Peters, Rushton & Co, Ltd (ibid at p4), the plaintiff's former solicitor would be entitled to enforce an absolute lien, however much it might embarrass the plaintiff, whereas in the former case only the qualified lien could be asserted. 11His Lordship held that a petition for divorce did indeed fall within the exception. In that respect, the judgment was overturned in the Court of Appeal [ Hughes v Hughes [1958] 3 All ER 179], but the exception to which I have referred does not appear to have been doubted. 12To apply those principles then to the present case, it seems to me, first, that the case is one in which the proper conclusion is that the former solicitors discharged their retainer. It is important to appreciate that this does not in any way imply that there was any wrongful termination by the solicitors, or that they were not entitled to terminate. This is not a finding about the rights or wrongs of termination, but simply who was or is taken to have been the discharging party, so as to inform which approach the court takes to whether the solicitors are absolutely entitled to refuse to produce - as they would be had the clients terminated - or whether the matter is "subject to the practice of the court to order production on appropriate terms" - as it would be where the solicitors terminated or are deemed to have terminated. 13Secondly, the present case is one in which it should be considered that third parties, namely the defendants, have an interest in the relevant documents. Although the inability to obtain production of the documents might be of some embarrassment to the plaintiffs, it is apparent, from the course the argument has taken, the undertakings proffered by the plaintiffs and the use and the restrictions which it is proposed be placed on their use, that it is primarily to aid the defendants' conduct of their case that production of the documents is sought. In that situation, the defendants - relevantly a third party - have an interest in the documents in respect of which they would be embarrassed if the documents were not produced. 14From each of those two propositions it follows that this is a case in which the former solicitors are not absolutely entitled to retain the documents, at least in the present circumstances in the face of the subpoena that has been served on them. That is not to say that the documents should be produced unconditionally. The practice of the Court in such circumstances is to protect, as best it can, the interests of the former solicitors [ In the Marriage of Rhode; Borthwick, Butler and Yee intervening (1983) 9 Fam LR 159]. 15It is a powerful discretionary consideration that no security is offered by the plaintiffs. Although there is but slight evidence of it, the inference I would presently draw on the limited available evidence is that the plaintiffs are unable to provide security. Against that discretionary consideration, the undertakings proffered by the plaintiff mean that the plaintiffs will themselves get slight if any benefit from the production of the documents in question: in effect, the only benefit they will obtain is that it will not be able to be said that they have failed to procure production of documents which they were obliged to produce for the defendants' use at the trial. 16I do not consider that the conclusion which I have reached in this respect is inconsistent with that of Pembroke J. His Honour was considering a different application - one made by the plaintiffs under the Legal Profession Act, s 728, the effect of which, if successful, would have been that the documents, the subject of the lien, would have been made available to the plaintiffs for their use and benefit generally in the proceedings. His Honour was not concerned with an application for a subpoena made essentially for the benefit of a third party to the solicitor client relationship. 17Accordingly, my orders are: Upon the undertakings of the plaintiffs and the plaintiffs' solicitors, that they will not seek or obtain access to the documents produced pursuant to the subpoena, and that they will consent to orders limiting access to the documents so produced to the defendants: (1) Order pursuant to UCPR, Pt 33 r 4, that it shall be sufficient compliance with the subpoena if the former solicitors produce, in compliance with the subpoena, the documents specified in the email of 7 February 2011, being annexure F to the affidavit of Ryan Daniel Grove sworn 8 February 2011; (2) Extend time for compliance with the subpoena to Friday, 11 February 2011; (3) Order that the application filed on 8 February 2011 be otherwise dismissed; (4) Order that the plaintiffs pay the costs of the recipients of the subpoena of producing the documents to the Court, agreed in the sum of $640. ********** 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: 14 March 2011