Supreme Court New South Wales Medium Neutral Citation: Blazai Pty Limited v Christopher Paul Maley t/as Maclarens Solicitors & Attorneys [2012] NSWSC 489 Hearing dates: 15 March 2012 Decision date: 14 May 2012 Before: Harrison AsJ Decision: (1) Blazai is to provide an undertaking that it will pay Martin Legal's costs first from the moneys recovered on its behalf in respect of the substantiative proceedings within 7 days. (2) Martin Legal is to deliver its file or files in the substantive proceedings (being proceedings 50124/2007 and/or 10646/2008) and all documents relating thereto including matter number 5531/2008 to Blazai's current solicitors, R J Thomas within 7 days after the receipt of the undertaking. (3) Costs are reserved. Catchwords: COSTS - solicitor's lien - dispute over type of lien - which party terminated the retainer - whether plaintiff owes fees to defendant -security for costs Legislation Cited: Legal Profession Act 2004 Revised Professional Conduct and Practice Rules 1995 Cases Cited: Bechara t/as Bechara & Co v Atie & Anor [2005] NSWCA 268 Blazai Pty Ltd v Gateway Developments (St Marys) Pty Ltd [2009] NSWSC 800 Gigi Entertainment Pty Ltd v Macree [2011] NSWSC 856 Spence v Gerard Malouf & Partners Pty Ltd trading as Gerard Malouf & Partners [2010] NSWSC 764 Tynside Property Management Pty Ltd v Hammersmith Management Pty Ltd [2011] NSWSC 22 Category: Procedural and other rulings Parties: Blazai Pty Limited ACN 075 060 052 (Plaintiff) Christopher Paul Maley t/as Maclarens Solicitors and Attorneys (Defendant) Representation: AD Justice (Plaintiff) AR Martin (Defendant) R J Thomas Solicitors (Plaintiff) Martin Legal Pty Limited File Number(s): 2008/282939 Judgment 1HER HONOUR: The issue to be determined is what type of lien the solicitor has over the client's files. By amended notice of motion filed 28 July 2011, the plaintiff seeks firstly, an order that the respondent, Martin Legal Pty Limited, deliver its file or files in the substantive proceedings (being proceedings 50124/2007 and/or 10646/2008) and all documents relating thereto including matter number 5531/2008, to the application within seven days; and secondly, alternatively, pursuant to s 728 of the Legal Profession Act 2004 ("LPA"), Martin Legal deliver to R J Thomas, Solicitor, their file or files in respect of proceedings 50124/2007 and/or 10646/2008, including matter number 5531/2008, within seven days. 2The applicant is Blazai Pty Limited ACN 075 060 052 (subject to deed of company arrangement) ("Blazai"). The respondent is Martin Legal Pty Limited ("Martin Legal"), the former solicitors of Blazai. 3Blazai relied on the affidavits of Mario Anthony Loiero ("Mr Loiero"), the director of Blazai, dated 22 July 2011, 17 October 2011, 19 October 2011; Charles Bannister dated 2 February 2012; and Brian Dunphy ("Mr Dunphy") dated 15 March 2012. Martin Legal relied on the affidavit of Alexander Richard Martin ("Mr Martin") dated 26 August 2011. 4During the period 2007 to 2009, Martin Legal acted on behalf of Blazai in Local Court matters and a Supreme Court matter (the substantive matter). Martin Legal has refused to deliver up the documents to Blazai and now claim an entitlement to have their costs in excess of $160,000, secured before being required to deliver up the documents. 5The following facts are mostly not in dispute. It is what flows from these facts that establish the type of lien that Martin Legal has over the files. 6There are two or possibly three types of lien available to a solicitor. They are a possessory lien and a 'fruits of ligation or action' lien. The other possible type of lien is a qualified lien. 7On 20 March 2008, Blazai entered into a retainer with Martin Legal in respect of proceedings 50124/2007 in this Court (the substantive proceedings). The retainer is comprised of two documents; one dated 11 March 2008 ("retainer agreement") and the other dated 18 March 2008 ("variation agreement"). It is not disputed that the fee agreement between the parties comprises of these two documents. The retainer agreement and variation 8The retainer agreement relevantly reads: BETWEEN:Mario Loiero, also known as Tony Loiero ("Tony Loiero") of 11 Power Street, Prairiewood NSW 2176 Blazai Pty Limited ACN 075 060 052 (Subject to Deed of Company Arrangement) ("Blazai") AND: Martin Legal Pty Limited ABN 55 112 455 973 of Level 11, 22 Market Street, Sydney ("Martins") MATTERS: Blazai Pty Limited (Subject to Deed of Company Arrangement) v Maclarens Lawyers, Gateway Developments (St Marys) Pty Limited, John Palasty and Judith Palasty Supreme Court of New South Wales No. 50124 of 2007 ... This document is an offer to enter into a costs agreement with you. ... The services you require us to provide are to act for you as follows: to act for Blazai in relation to proceedings against Maclarens Lawyers, John Palasty, Judith Palasty and Gateway Developments (St Marys) Pty Limited ... TERMINATION OF AGREEMENT Without limiting the circumstances in which we are otherwise by law entitled to cease to act for you, this agreement will terminate: if you fail to pay our accounts as described herein if you fail to provide us with adequate instructions within a reasonable time if you give instructions that are false or intentionally misleading if you fail to accept an offer of settlement which we think is reasonable if you fail to accept advice we, or counsel, give you if you engage another law practice to advise you on this matter without our consent if we, on reasonable grounds, believe that we have a conflict of interest if you indicate to us that we have lost your confidence, and if there is any other just cause. If Martins take any action detailed above we shall notify you in writing. You will then be required to pay the fees for work done and expenses paid up to the date of the termination of this agreement. RETENTION OF DOCUMENTS ... We are entitled to retain possession of papers, documents and other property of yours which are in our possession from time to time until all fees, expenses and interest (if any) due to us have been paid in full. 9The variation agreement is recorded in a letter by Martin Legal to Blazai dated 18 March 2008. It reads: I refer our conference on 11 March 2008. At that conference I provided you with my original Fee Agreement. I confirm that the offer I made to you orally on 11 March 2008 is that: if you run these proceedings and you and your interests lose at first instance and you do not appeal, I will not render a bill to you if you run these proceedings and you and your interests lose at first instance and you do appeal and you win the appeal(s), such that you are ultimately successful, whether Martin Legal acts for you on the appeal(s) or not, I will render a bill to you in accordance with my Fee Agreement and expect to be paid the amount of that bill, once the appeal process has been run to its finality and won. The rationale for rendering a bill, in circumstances where you lose at first instance but win on appeal, is that the trial judge made the error, not Martin Legal, and that Martin Legal is properly entitled to be paid for the work that it has done that is eventually remunerative to you and your interests if you run these proceedings and you and your interests: win, settle out of court, or the proceedings reach some other conclusion, whereby money flows to you or a judgment is entered in your favour, I will render a bill to you in accordance with my Fee Agreement and expect the amount of that bill to be paid. ... I look forward to receipt of the signed Fee Agreement. 10Hence, this letter confirms that when Blazai: wins, settles out of court, judgment is entered in its favour or some other conclusion is reached where money flows to Blazai; Martin Legal is to be paid the amount claim in accordance with the fee agreement documents. 11As to how these two documents should be construed Blazai submitted that the opening three lines of the latter dated 18 March 2008 are critical to understanding the relationship between Martin Legal and Blazai. The first line refers to the conference on 11 March 2008. The second line records that Martin Legal gave Mr Loiero a copy of the fee agreement (the 11 March 2008 letter). Blazai says that the third line is key. The letter says that the offer made to Blazai was not the fee agreement but rather was what was contained in the three bullet points below and that the letter dated 11 March 2008 becomes a document given for legal reasons (to comply with the LPA) and to set the rates of fees. According to Blazai, those fees would only become payable under the offer in the terms of the three bullets, which have the condition precedent of money flowing to Blazai, before any liability arises. Blazai's position is that any term of the 11 March 2008 agreement that is at odds with the offer made on 11 March 2008 and recorded in the 18 March 2008 document cannot survive and cannot be enforced against the intention of the 18 March 2008 letter. 12It is my view that the contents of the letter dated 18 March 2008 does not address the circumstances whereby the fee agreement can be terminated. This letter only addresses the topic of when fees became payable and alters the term of payment set out in the retainer agreement. 13Blazai submitted that Martin Legal's position is incorrect because: (a) Martin Legal terminated the Retainer without cause and have only a qualified lien for the return of the documents at the end of the litigation and probably a fruits of litigation lien for payment of their fees if Blazai is successful; and/or (b) even if the Retainer was terminated correctly pursuant to the terms of the Retainer, in line with normal principles of construction, no fees are due and payable to Martin Legal until "money flows" to Blazai. 14While Blazai says that there is no type of lien called a qualified lien, it concedes that if there is one, Martin Legal has a qualified lien for payment of its fees. Martin Legal maintains that it has a possessory lien and is entitled to "satisfactory security" in accordance with s 728 of the LPA and the Revised Professional Conduct and Practice Rules 1995 ("Solicitor's Rules") 8 and 29. Who terminated the retainer and on what grounds? 15It is fair to say that during the period from June 2009 to November 2009 the relationship between the parties became strained until it reached the point of being unworkable. It was Mr Diren Fernando ("Mr Fernando"), an employed solicitor of Martin Legal, who handled Blazai's matter until he left that employment in about November 2009. During this period Mr Loiero had two main concerns with the way the substantive matter had been handled. They were firstly, the way the reinstatement proceedings were conducted; and secondly, his perceived lack of his solicitor's attention in complying with the timetable set by this Court. 16On 12 August 2009, Tamberlin J handed down his decision in the reinstatement proceedings. Blazai lost. Mr Loiero held firm views as how this matter should have been conducted. He did not want separate proceedings to be taken in relation to the reinstatement of Blazai Pty Ltd v Gateway Developments (St Marys) Pty Ltd [2009] NSWSC 800. He wanted subpoenae to be issued prior to the proceedings being heard. When Blazai lost, Mr Loiero wanted to lodge an appeal in relation to the reinstatement decision. I shall briefly refer to the correspondence during this period. 17On 25 August 2009, Mr Loiero, on behalf of Blazai, sent an email to Martin Legal that stated: "Hi Alex I would appreciate if to (sic) talk rather urgently to finalise your position regarding the appeal. ... Need to know what to do. I have only two weeks remaining." 18On 1 September 2009 Mr Loiero, on behalf of Blazai, sent a facsimile to Martin Legal, that included the following: "Further to the correspondence exchanged, I did never (sic) agree with dealing of the (sic) reinstatement from the onset separately, the failure to tender evidence by Diren recently and your decision regarding the appeal... Therefore as things now stand, I have no choice but to salvage the application running it through new representatives immediately. In fact I anticipate a Notice of Intention will be filed on my behalf latest tomorrow. In fact I have nothing to loose (sic) by running the appeal based on the new evidence not available until the following day under subpoena." 19So as at 1 September 2009, Mr Loiero stated that Blazai would run the appeal by instructing new representatives immediately and Notice of Intention [to appeal] would be filed the next day at the latest. These statements indicate that at least so far as the appeal in relation to the reinstatement proceedings was concerned, Blazai had terminated Martin Legal's instructions and had engaged another law practice without the consent of Martin Legal. 20On 8 September 2009, Mr Loiero, on behalf of Blazai, sent Martin Legal an email dealing with the substantive proceedings and the timetable to file evidence. On 9 September 2009, Mr Loiero, on behalf of Blazai, sent Martin Legal an email, which deals with both documents for the appeal and preparation of his affidavit in the substantive proceedings. 21On 15 September 2009, Mr Loiero, on behalf of Blazai, sent Mr Fernando an email, which includes the following: "Have you received any update from the defendants? Have you wrote (sic) to them yet? Also I have faxed you letter re documents urgently sort (sic). This issue is ongoing and endangering our relationship." 22On 22 September 2009, there is a series of emails between Mr Loiero, on behalf of Blazai, and Martin Legal detailing that Mr Fernando is leaving the employ of Martin Legal. 23On 1 November 2009 Mr Loiero sent a facsimile to Martin Legal which stated under the heading "Re; Supreme Court -Blazai Matter - Files Return": "Further to yesterdays conversation I understand you are to (sic) busy and don't have the time to run my matter personally." 24The heading "Files Return" indicates that Blazai intended to withdraw instructions from Martin Legal. It is reasonable to conclude that Martin Legal's instructions were terminated. 25On 3 November 2009, Martin Legal filed a notice of intention to cease acting in the substantive proceedings. 26On 16 November 2009, Mr Loiero, on behalf of Blazai, sent facsimiles to the solicitors for the other defendants in the substantive proceedings, which stated: "As I understand my previous Lawyer Diren Fernando has moved on hence I will no longer be represented by Martin Legal. 27As at 16 November 2009, Mr Loiero, on behalf of Blazai, had stated that it would "no longer be represented by Martin Legal". He notified the other parties that its retainer with Martin Legal had been terminated. 28On 3 December 2009, Martin Legal filed a notice of ceasing to act. 29On 11 December 2009, Mr Loiero, on behalf of Blazai, sent a facsimile to Martin Legal which stated: "Further to your most recent correspondence it appears you have chosen to cease acting despite the ongoing delays and concerns regarding the poor case management by Diren Fernando... We therefore require the entire files as a matter of urgency. As to your bill outstanding this will be settled upon a positive outcome pursuant to your fee agreement." 30Blazai's approach on 11 December 2009 as to whether or not it instructed Martin Legal was inconsistent with its letter of 1 November 2009. In the latter letter, Mr Loiero asserts that Martin Legal had "chosen" to cease acting for Blazai. 31On or about 23 December 2009, at a meeting between Mr Dunphy, the deed administrator of Blazai, Mr Loiero and Mr Martin the following conversation occurred (Affidavit, Brian Dunphy, 15 March 2012 at [6]): Dunphy:Legal Costs will be dealt with at the end of the claim if successful. Martin:I'm happy to hand over the files to a new solicitor, I'm leaving for America next month, I'll provide them on my return as long as I get paid $6,000 for the local court debt matters. 32However, this amount rose to in excess of $13,000 in late February or early March 2010. This amount was not paid until February 2012 after Martin Legal issued a notice under s 459E(ii) of the Corporations Act 2001 (Cth). 33On or about 23 December 2010, Martin Legal wrote to R J Thomas, Solicitor stating: "... Your client, namely our former client, owes a substantial amount of money to us. Some of that liability is contingent upon the success of the plaintiff's proceedings against McLarens & Palasty. Some of those fees have no such contingency attached to them. Some of those fees are immediately payable and are pursuant to a series of matters... I am minded to assist your client in his action against McLarens & Palasty. However, I am deeply unhappy that your client has asserted that part of the McLarens & Palasty work I did is not payable immediately. ... When I have received the amount that has been owing to me for 9 months for the 5 Local Court matters I will then be happy to deal with your client, to assist him regarding McLarens & Palasty." 34Mr Martin gave the following evidence in relation to the filing of the intention to cease to act and the 23 December 2009 meeting (T45-46): Q. There's nothing from you, from Martin Legal, stating why you were filing a notice of intention of ceasing to act, is there? A. I think that's right. Q. You're aware of the Uniform Civil Procedure Rules that if someone terminates a solicitor's retainer a solicitor under rule, I think, 7.27 is able to file a notice of termination rather than a notice of ceasing to act? (T45) .... Q. In any event, it was in or around early December? A. If you can show me a document, I'd be happy to adopt that. Q. All I can show you or all I can say is that I believe it was 6 December. A. (No verbal reply) ... Q. Notwithstanding Blazai's complaints Blazai sent you a letter on 11 December 2009 and that's at TL20 dated 11 December, do you see that? A. I see it. ... ... Q. It is correct to say that as at 11 December 2009 you had chosen to cease acting for Blazai, correct? A. Yes, well, as long as that earlier date that you said about the filing of the notice of ceasing to act was truly on 6 December 2009. (T46) 35Mr Martin gave the following evidence (at T48): Q. At that meeting on 23 December 2009 you were told that other solicitors would be taking over the matter, correct? A. I don't remember that being one of the things said to me, but I don't deny it. Q. You had no objections to other solicitors conducting the matter at the time of the meeting in December 2009, correct? A. The way I looked at it on 23 December 2009 was that I had effectively ceased to act and that I had done those things which I think that I had to do pursuant to the Uniform Civil Procedure Rules to get myself off the record, from the Supreme Court's perspective, and thereby no longer have a duty to the Court as the plaintiff's practitioner. What the plaintiff did in respect of legal representation, after I got off the record was not a matter of my concern. 36Mr Martin gave evidence that he withdrew from the record for two reasons (T52-53): I agree that Blazai was dissatisfied with the way the proceedings were proceeding, and the dissatisfaction was mutual. Mr Loiero was either encouraging, on the one hand, or instructing us, on the other, to do a variety of things. One was to issue some subpoenas. I now can't remember the words of Mr Raine of counsel or Mr Hull of counsel who was briefed by Martin Legal, but that counsel was strongly discouraging the issue of those subpoenas. I was accepting counsel's advice and not issuing them. Mr Loiero was getting increasingly dissatisfied with that course of action. To put it colloquially, I was sticking to my guns and accepting counsel's advice and not doing so. I formed the view that Mr Loiero was trying to bypass me and encourage or instruct or coerce Mr Fernando to issue those subpoenas. And I was effectively standing between Mr Loiero, on the one hand, and Mr Fernando, on the other, and I was stopping that from taking place. Secondly, something very similar was taking place in relation to the filing of a summons for appeal from the decision of Justice Tamberlin. Counsel was giving me advice to the effect that such an appeal was hopeless, and I was extremely conscious of the risk that I ran in filing a summons which had, from counsel's perspective, no prospect of success. 37Counsel instructed by Martin Legal was Mr Hull and Mr Raine. Mr Martin gave evidence that it was Mr Raine who gave him advice that an appeal was hopeless (T53). Counsel instructed by Mr Loiero in relation to the appeal was Mr Gollan. 38There are four relevant circumstances set out in the retainer agreement where termination of the agreement can occur. They are: (1) if you fail to accept advice we, or counsel give you; (2) if you engage another law practice to give advice you on this matter without our consent; (3) if you indicate to us that we have lost your confidence; and (4) if there is any other just cause. The agreement provides "If Martins take any action detailed above we shall notify you in writing. You will then be required to pay the fees for work done and expenses paid up to the date of the termination of this agreement". The last sentence is ambiguous. There were no detailed submissions on how it should be interpreted but my tentative view is that if any one of the circumstances occurred the agreement would terminate and Blazai would be required to pay the fees for the work done and expenses paid up to the date of the termination of the agreement. 39Blazai's letter of 1 November 2009 states, "I understand that you are busy and don't have time to run my matter personally." From the evidence it seems that it was never made clear that there was another solicitor in the employ of Martin Legal who could take over the handling of the file in the substantive matter. Thus, this letter, to my mind, was the catalyst in Blazai losing confidence in Martin Legal and causing the working relationship to come to an end. It is only if Martin Legal took action to terminate that it would notify Blazai in writing. In substance, it was Blazai's conduct that fell within the termination provisions of the retainer and resulted in the termination of the retainer. Blazai did not take Martin Legal's advice in relation to the appeal and proceeded to lodge an appeal without the consent of the law firm. Blazai terminated the law firm's instructions in the Local Court matters. These events occurred before Martin Legal filed a Notice of Ceasing to Act. The Law 40Section 728 of the LPA provides: 728Supreme Court may order delivery up of documents etc (1)On the application of a client of a law practice, the Supreme Court may order the law practice: (a)to give to the client a bill of costs in respect of any legal services provided by the law practice, and (b)to give to the client, on such conditions as the Supreme Court may determine, such of the client's documents as are held by the law practice in relation to those services. 41Blazai submitted that the nature of this lien is limited to the new solicitor's undertaking to return the documents at the end of litigation to the first solicitors and that the new solicitors have undertaken to preserve Martin Legal's lien and return the documents at the end of the litigation and/or consent to such an order being made. 42Martin Legal has indicated that it is willing to produce the file to the plaintiff so long as their costs are secured as contemplated under the Solicitor's Rules. The Solicitors Rules, originally made pursuant to s 57B of the LPA 1987, but which remain in force by virtue of clause 24 of Schedule 9 of the LPA 2004. They relevantly provide: 8.3Upon completion or termination of a practitioner's retainer, a practitioner must, when requested so to do by the practitioner's client, give to the client, or another person authorised by the client, any documents related to the retainer to which the client is entitled unless: 8.3.1the practitioner has completed the retainer; or 8.3.2the client has terminated the practitioner's retainer; or 8.3.3the practitioner has terminated the retainer for just cause and on reasonable notice; and the practitioner claims a lien over the documents for costs due to the practitioner by the client. 8.4Despite Rule 8.3, a practitioner who claims to exercise a lien for unpaid costs over a client's documents, which are essential to the client's defence or prosecution of current proceedings, must: 8.4.1deal with the documents as provided in Rule 29, if another lawyer is acting for the client; or 8.4.2upon the practitioner's costs being satisfactorily secured, deliver the documents to the client. ... 29.3If the client has terminated the first practitioner's retainer, the first practitioner may retain possession of the documents until the practitioner's costs are paid, or their payment to the practitioner is satisfactorily secured. 29.4If the first practitioner has terminated the retainer and the client's documents are essential to the defence or prosecution of proceedings which are continuing before a Court, the practitioner must surrender possession of the documents to the client, upon the terms prescribed in Rule 8.4.2 or to the second practitioner, if so directed by the client, and, provided that the second practitioner - 29.4.1holds the documents subject to the first practitioner's lien, if that is practicable, and ensures the first practitioner's costs are satisfactorily secured; or 29.4.2enters into an agreement with the client and the first practitioner to procure payment of the first practitioner's costs upon completion of the relevant proceedings. 43Counsel for Blazai referred to a decision of Slattery J in Gigi Entertainment Pty Ltd v Macree [2011] NSWSC 856. In Gigi, Slattery J considered an application under LPA s 728 and the Court's inherent jurisdiction. Slattery J had to determine who terminated the retainer, the solicitor or the client. His Honour stated at [3]: "The consequences of deciding this first issue are significant. The position at common law and the relevant considerations that apply when the court is exercising its statutory discretion under Legal Profession Act, s 728 (to consider whether or not to order the solicitor's file to be given to the new solicitor and on what terms), differ depending upon whether it is the solicitor or the client who terminates the retainer. The parties wish me to decide the termination issue first so that they can try and work out a regime for dealing with the file by agreement." 44Slattery J continued at [16] and [17]: [16]The applicable law is not controversial. In Hughes v Hughes (1958) P 224 at 227-228 Hodson LJ summarised the applicable principles as to the relative rights of solicitors and clients depending upon which of them has initiated the termination of the retainer. These principles have been applied on numerous occasions since that statement, both in England and here: see for example Gamlen Chemicals v Rochem (1980) 1 WLR 614; Bolster v McCallum (1966) 85 WN (Pt 1)(NSW) 281, per Asprey J at 287 and Bechara v Atie [2005] NSWCA 268, per McColl JA at [50]. They are also recorded conveniently in r 29 of the Law Society of New South Wales, Revised Professional Conduct and Practice Rules and in the recent decision of McLelland J in Major Projects Pty Ltd v Sibmark Pty Ltd [1992] ANZ Conv R 349 where his Honour said: Where during the course of litigation, solicitors for a party terminate their retainer and the client retains new solicitors who for the purposes of the litigation require documents of the client in the possession of the former solicitors, who in turn claim a possessory lien over the documents to secure payment of outstanding costs, the normal practice of the Court is to order the former solicitors to deliver the documents to the new solicitors, subject to an undertaking being given by the new solicitors to preserve the former solicitors' lien and to return the documents to the original solicitors at the conclusion of the litigation. This practice is designed "to save the client's litigation from catastrophe", and the principle is that the former solicitors' security should be interfered with only so far as necessary for the progress of the litigation. Where the former solicitors have declined to continue to act for the client unless outstanding costs are paid, and the client, being unable or unwilling to pay those costs retains the new solicitors, the former solicitors are treated as having terminated the retainer for the purposes of the application of this practice (see generally Gamlen Chemicals v Rochem (1980) 1 WLR 614, and cf. Ex Parte Clowes 87 WN (1) 364 and Bolger v Bolger 82 FLR 46). [17]The precise question of whether the solicitor or the client is the discharging party is not decided in a technical way or upon the fine construction of the language used. Rather, the matter is looked at as a question of real substance: Jankowski v Mastoris (1996) ANZ ConvR 324 at 327. And it is usually resolved in a practical way: Cosgriff v Isaac Brott & Co [2008] VSC 515 at [8] per Byrne J and Nicholson v Knaggs (No 2) [2009] VSC 187 at [20]. 45In Bechara t/as Bechara & Co v Atie & Anor [2005] NSWCA 268 McColl JA (with whom Ipp and Tobias JJA agreed) at [64] stated: The expression "satisfactorily secured" should be understood, both by reference to the authorities dealing with possessory liens, and in its textual context, to refer to the provision, in lieu of payment, of something of monetary value which would ensure the satisfaction of the possessory lien. Like should be replaced with like. This is reinforced by r 29.5 which requires a practitioner "who receives a client's documents from another practitioner pursuant to an agreement between the client and both practitioners, providing that the practitioner receiving the documents will pay the first practitioner's costs from money recovered on the client's behalf in respect of the business or proceedings to which the documents relate, [to] do all things which are reasonably practicable on the practitioner's part to ensure compliance with the agreement". 46In Spence v Gerard Malouf & Partners Pty Ltd trading as Gerard Malouf & Partners [2010] NSWSC 764 Bergin CJ in Eq at [90] to [95] stated: 90In Gamlen Chemical Co (UK) Ltd v Rochem Ltd [1980] 1 WLR 614, the English Court of Appeal considered a case in which the solicitors acted for the defendants pursuant to a retainer that included a term that the defendants would make periodical payments on account of costs. A complication arose when one of the partners of the solicitors' firm was joined as a defendant. There was then a dispute between the solicitors and the clients in relation to the quantum of the fees. There was debate about the solicitors' willingness to proceed with the case culminating in a letter from the solicitors advising that if the account issued to date had not been paid within a week the solicitors would apply to the court to be removed from the record as solicitors for the client. The account was not paid and the solicitors applied for that leave. 91At first instance, Oliver J concluded that by filing the Summons for leave to be removed and in further correspondence the solicitors had "unequivocally intimated" that they were not prepared to go on unless some arrangement was made as to their costs and "that seems to me to be a clear case of the solicitor discharging himself". 92On appeal Goff LJ said at 621: I agree that each case must depend upon its own facts, but in my judgment Oliver J's view of the inference to be drawn from the facts in the present case was clearly right. Mr Bueno [counsel for the appellants/solicitors] said that all his clients were doing was to fire "warning shots" across the defendants' "bow," but after earlier warnings they took up a categorical position by their letter of June 25 and by issuing and serving a summons forthwith and that under a rule which applies where a solicitor has ceased to act and, as Oliver J pointed out, they emphasised that position in their letters of July 3. For my part, I do not think that they can complain now and say "We did not discharge ourselves; you discharged us," because the defendants, not being willing to meet the bill, took the appellants at their word and instructed other solicitors ... 93Goff LJ also observed at 623: ... a solicitor who has discharged himself is not allowed so to exert his lien as to interfere with the course of justice - he has, as it has been put, only a qualified lien. 94In the same case, Templeman LJ observed that the appeal illustrated the difficulties that arose when "a client and his solicitor part company in the midst of litigation". His Lordship said at 624: 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. 95The present case is distinguishable from Gamlen Chemical Co (UK) Ltd v Rochem Ltd because the solicitors promised that, subject to the circumstances referred to above, they would not charge the plaintiff any fees unless there was a "win", that is, unless the plaintiff's claim was successful. In Gamlen Chemical Co (UK) Ltd v Rochem Ltd there was an agreement for the payment of the solicitors' fees as the matter progressed. 47For the reasons given earlier, pursuant to Rule 8.3.2, Blazai the client terminated the practitioner's retainer. Clauses 8.4.2 and 29.3 of the Rules require that the practitioner's costs be satisfactorily secured before Martin Legal is required to deliver the documents to the Blazai. Security for costs 48Counsel for Blazai referred to Tynside Property Management Pty Ltd v Hammersmith Management Pty Ltd [2011] NSWSC 22, where Pembroke J at [16] stated: 16.Ordinarily, satisfactory security will mean something of monetary value which will ensure the satisfaction of the possessory lien: Bechara v Atie (above) at [64]. However what amounts to satisfactory security will vary depending on the parties' agreement and the relevant facts. Where the parties have agreed that the costs will only be paid out of a verdict, judgment or settlement, if any, then satisfactory security will be less than if, as in this case, the parties' agreement provides for payment of costs as and when incurred and invoiced. In the former category of case the solicitor is prepared to take a chance; in the latter he is not. What is satisfactory security will be conditioned by matters such as these. Thus the option of entering into a tripartite agreement as contemplated by Rule 29.4.2 and Rule 8.4.2 will sometimes result in a satisfactory outcome. And sometimes it will not. It does not do so in this case. 49Counsel for Blazai submitted that Martin Legal is not entitled to have its fees secured in order to deliver up the documents. However, Blazai submitted that if the court found that Martin Legal was entitled to security, the appropriate security would be $7,000 as Martin Legal viewed that appropriate at the meeting on 23 December 2009. I do not think so. As at 23 December 2010, Martin Legal viewed appropriate security as $10,000 or payment of the Local Court matters. The solicitors' fees incurred in the Local Court matters have now been paid. According to Blazai there is no evidence to show why Martin Legal should seek more. However, on 11 August 2011, Martin Legal rendered a draft bill of costs in taxable form in the sum of $160,267.04 in relation to the substantive proceedings up to the date of termination. Should this matter be referred to assessment, at some stage, the amount assessed would be less than this sum. 50It is my view that Martin Legal's costs should be satisfactorily secured before it is required to deliver the documents to Blazai. Blazai should provide an undertaking to Martin Legal that it will pay Martin Legal's costs first from the moneys recovered on its behalf in respect of the substantive proceedings. This undertaking should be provided within 7 days. Martin Legal should deliver its file or files in the substantive proceedings (being proceedings 50124/2007 and/or 10646/2008) and all documents relating thereto including matter number 5531/2008 to Blazai's current solicitors, R J Thomas within 7 days. The Court orders that: (1)Blazai is to provide an undertaking that it will pay Martin Legal's costs first from the moneys recovered on its behalf in respect of the substantiative proceedings within 7 days. (2)Martin Legal is to deliver its file or files in the substantive proceedings (being proceedings 50124/2007 and/or 10646/2008) and all documents relating thereto including matter number 5531/2008 to Blazai's current solicitors, R J Thomas within 7 days after the receipt of the undertaking. (3)Costs are reserved. ********** 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: 16 May 2012