In the matter of SM Project Developments Pty Limited (in liquidation) [2017] NSWSC 1010

Supreme Court New South Wales

Medium Neutral Citation: In the matter of SM Project Developments Pty Limited (in liquidation) [2017] NSWSC 1010 Hearing dates: 26 July 2017 Decision date: 26 July 2017 Jurisdiction: Equity - Corporations List Before: Black J Decision: The Applicants' notice of motion be dismissed. Catchwords: CIVIL PROCEDURE — Representation — Application by solicitor for leave to file notice of ceasing to act – where client said not to have paid solicitor's fees – where application made shortly before hearing and not promptly Legislation Cited: - Civil Procedure Act 2005 (NSW), s 56 - Uniform Civil Procedure Rules 2005 (NSW), r 7.29 Cases Cited: - Super 1000 Pty Ltd v Pacific General Securities Ltd [2007] NSWSC 171 Category: Procedural and other rulings Parties: SM Project Developments Pty Limited (in liquidation) (First Plaintiff) Anthony Elkerton in his capacity as liquidator of SM Project Developments Pty Limited (in liquidation) Minha Hua (First Defendant) Salim Mehajer (Second Defendant) Rodney Kent and Tom Orlizki trading as Kent Attorneys (Applicants) Representation: Counsel:

Solicitors: Bridges Lawyers (Plaintiffs) Kent Attorneys (Applicants) Kekatos Lawyers (appearing by leave) File Number(s): 2015/300318

Judgment – ex tempore (revised 28 july 2017) 1. By notice of motion filed on 26 July 2017 by leave, Mr Rodney Kent and Mr Tim Orlizki, trading as Kent Attorneys, seek leave under r 7.29 of the Uniform Civil Procedure Rules 2005 (NSW) or alternatively the Court's inherent jurisdiction for Mr Orlizki, the solicitor on the record for the Second Defendant in these proceedings, to be permitted to withdraw as the Second Defendant's solicitor and to file a notice of ceasing to act for the Second Defendant. Mr Orlizki cannot cease to act without such leave because this matter is listed for hearing next week for three days, on 1, 3 and 4 August 2017. That listing is the second occasion on which the matter has been listed for hearing. A previous hearing was vacated in late May 2017, on the application of the Second Defendant, then represented by Mr Orlizki, in circumstances that matters had arisen affecting the retainer of the Second Defendant's former solicitors. 2. Rule 7.29 provides that a solicitor may not file or serve a notice of ceasing to act unless he or she had previously filed and served a notice of intention to file and serve that notice of change which, in the case of proceedings for which a trial date has been fixed, would have had to have been given at least 28 days before notice of ceasing to act was given. No such notice has been given in this case. The purpose of that rule is apparent, namely to address the risk that a solicitor's ceasing to act, after a hearing date has been set, has the capacity to cause significant prejudice to the client; also to the community, so far as it may have the consequence that the hearing cannot proceed; and also to the wider interests of justice which include the interest in the timely determination of proceedings. 3. Mr Orlizki draws attention to the decision of Gzell J in Super 1000 Pty Ltd v Pacific General Securities Ltd [2007] NSWSC 171, where his Honour granted leave to a solicitor to cease to act on the day of a trial. His Honour there referred to well-established authority that a failure by a client to provide funds to cover disbursements is good cause for the termination of a retainer, at general law, and that steps taken by a client to prevent the solicitor from carrying out his or her duties may also provide a basis for termination. In that case, his Honour found that, notwithstanding the lateness of the application, and where his Honour held that the solicitors had not been dilatory in seeking to extract funds from the client, although those efforts were not put into high gear until late in the piece, the solicitor was justified in ceasing to act and that leave for him to cease to act should be granted. I do not doubt the general propositions established in that decision, including that it will often be appropriate to grant leave to a solicitor to cease to act where a client has not put the solicitor in funds. However, it does not seem to me that that case establishes any general proposition that, however late the application, however longstanding the problem, however significant the potential adverse implications for the administration of justice, and whatever other rights the solicitor may have, a solicitor will always be granted leave to cease to act, when an application is made for such leave shortly before a hearing where the client has not placed that solicitor in funds. Any such general proposition would, it seems to me, be inconsistent with the Court's obligations under s 56 of the Civil Procedure Act 2005 (NSW) to exercise its discretion in the particular circumstances in order to promote the just, quick and cheap resolution of the real issues in dispute in the proceedings. 4. In this case, Mr Orlizki's application for leave to cease to act might well have been granted, had it been brought promptly, when delays by the Second Defendant in providing funds arose, or had the relevant issues been drawn to the Court's attention at an earlier stage. It does not seem to me that such leave should be granted when the application is left to the last possible moment and the prejudice to the Second Defendant (if he cannot retain alternate solicitors) and to the hearing of Mr Orlizki's withdrawal would be maximised. I do not neglect the possibility that the Second Defendant might be able to retain such other solicitors, and a representative of another firm appeared by leave, although they had not yet met with the Second Defendant. 5. Mr Orlizki relies on his affidavit dated 26 July 2017 which provides a comprehensive account of dealings with the Second Defendant, since he first accepted instructions in respect of the prior application to vacate the prior hearing date, which was made and allowed on 23 May 2017. Mr Orlizki refers to the circumstances in which he accepted moneys in trust to bring that application, and also first required a payment to be made into his trust account as a condition of his firm going on the record. There is no doubt that, at least since late May 2017, that request for payment of funds into trust has been made in various forms, and largely not met. Mr Orlizki also refers to the circumstances in which he indicated to the Second Defendant that he would defer the requirement for the immediate payment of the full $45,000 requested earlier, on the basis that a lesser amount would be paid, after the previous listing of the hearing was vacated on the Second Defendant's application. Mr Orlizki also refers to circumstances in which the smaller amount due in respect of his first appearance on 23 May was apparently paid into his firm's trust account but difficulties arose as to the arrival of that amount into that trust account. Mr Orlizki also refers to a further discussion with a consultant to the Second Defendant, and a third party, on 1 June 2017, in respect of the payment of moneys into trust, with it being suggested that an amount of $40,000 would now be required and that that third party would provide a loan for that amount. 6. Mr Orlizki's evidence is that, by late June, he had not received funds on trust from the Second Defendant, or definite advice as to when he might receive those funds, and he then sent an email requesting an amount of $15,000 be paid by 3 July 2017 and a further amount of $25,000 by 25 July 2017. Shortly after these events, Mr Orlizki received an email from the consultant to the Second Defendant, suggesting that he would receive funds shortly, and spoke to Counsel who agreed to accept a brief on confirmation that Mr Orlizki was holding moneys in trust on account of Counsel's fees. 7. I pause to interpolate that the matter was listed for directions before me on 5 July 2017, when I made enquiries as to the readiness of the matter for hearing on the dates on which it had been listed. I note, without any criticism, that none of the matters which had occurred to that date, in respect of requests for payment, or any issue as to non-payment by the Second Defendant, was disclosed to the Court by Mr Orlizki on that occasion. I do not say that by way of criticism of Mr Orlizki, because Mr Orlizki might take the view that those were matters between him and the Second Defendant, at least at that point, and that he was prepared to address those matters without raising them with the Court. However, it must be recognised that that was a lost opportunity to draw the Court's attention to the existence of potential difficulties which might affect the hearing date, to allow those difficulties to be managed by some manner other than an application for Mr Orlizki to cease to act brought shortly before the hearing was due to commence. It seems to me that Mr Orlizki, having elected to deal with these matters without raising them with the Court, assumed the risk that leave to cease to act would not be granted on a late application. 8. Mr Orlizki's evidence is that the amount he had requested was not received into trust, and he repeated the request for that payment. It appears that, on 24 July 2017, the Second Defendant advised that he would have funds available on or before 30 August 2017, after the hearing, or could provide other security, and that proposition was not accepted by Mr Orlizki. A further proposition for the funds to be made available on or before Friday, 28 July 2017, that is, just prior to the commencement of the hearing, was also not accepted by Mr Orlizki. 9. I pause to note that Mr Orlizki accepts that he has been provided with a copy of the file of the solicitor who formerly acted for the Second Defendant in respect of the matter, or at least with electronic access to it. He also accepts that a retainer letter with the Second Defendant has also been signed. The General Terms of Business attached to that signed retainer letter provide that Mr Orlizki's firm may ask a client to pay moneys into its trust account but Mr Orlizki initially accepted in submissions that they do not expressly provide for any consequence of non-payment. Paragraph 8 of the General Terms of Business provides that, upon acceptance of the solicitor's offer to act for the client, the client charges its property in favour of the firm, and that charge in turn is said to create a caveatable interest over land owned by the client. I inquired of Mr Orlizki whether that caveatable interest would protect his rights, and he responded that would depend upon whether the Second Defendant had real property. While that may well be correct, there is no evidence led by Mr Orlizki that he has made any inquiry as to that matter, or that the Second Defendant does not have real property, or that otherwise establishes that that provision does not protect Mr Orlizki's interest in that regard. In any event, the retainer letter establishes Mr Orlizki's contractual right to charge professional fees, at hourly rates, in respect of the his performance of work for the Second Defendant. 10. I should pause to note that, after I had delivered my judgment, Mr Orlizki fairly sought leave to re-open to draw to my attention one other matter in his firm's retainer letter to which he had not referred in submissions. I noted above that Mr Orlizki's retainer letter, in its General Terms of Business, recorded his firm's ability to ask a new client to pay moneys into its trust account. Mr Orlizki now draws attention to cl 11 of the retainer letter which provides that, if a client does not within seven days comply with any request to pay an amount in request of disbursements or future costs (which I accept would ordinarily be a payment into the trust account) then the firm may cease to act for that client or refuse to perform further work. That paragraph also indicates that the firm will give reasonable written notice of the termination of its services. 11. I should note several observations as to that matter. First, it seems to me that that clause can go no further than create a contractual basis for termination of a retainer between the solicitor and client. It cannot authorise the solicitor to cease to act in ongoing proceedings other than in circumstances permitted by the Rules, where the Court's jurisdiction conferred by the Rules, the Court's inherent jurisdiction and the obligations of the solicitor to the Court otherwise constrain that course. Second, Mr Orlizki also draws attention to a request for funds, in two amounts, made at least on 4 July 2017, the day before the directions hearing on 5 July 2017. I accept that the Second Defendant's failure to comply with that request, as appears to have occurred, may have given rise to a right of termination under cl 11 of the retainer letter. However, Mr Orlizki fairly accepts that his firm did not then give written notice of termination of its services, although it has on several occasions indicated the possibility that it would do so to the Second Defendant. A notice that was now given, shortly before the commencement of the hearing would scarcely be reasonable written notice of termination of the services. 12. Third, although it is perhaps not material for this application, so far as that clause seeks to permit the solicitor to refuse to perform further work without having terminated his retainer, it may well be inconsistent with the solicitor's professional obligations, which would require the solicitor to continue to comply with his or her obligations under the retainer, while that retainer exists, and not, in effect, to create a position where the solicitor is still retained, and still on the record so far as the Court is concerned, but is not discharging the duties that are consequential either upon a retainer or upon the solicitor's role in respect of the proceedings. Finally, I should note that it seems to me that nothing turns on these matters, so far as my decision in this matter is concerned. Had an application been made in reasonable time, it is very likely that Mr Orlizki would have been given leave to cease to act. The difficulty in this case is that the application has been left so late, in circumstances that the issues which prompt it have existed for a substantial period. 13. I now return to Mr Orlizki's further submissions. Mr Orlizki put that the effect of declining leave for him to cease to act would be that he would be required to act without remuneration. I do not accept that submission, which seems to me to be inconsistent with the terms of the retainer agreement, which creates a contractual right to remuneration. It may be that, as Mr Orlizki had put to the Second Defendant in correspondence, he does not wish to be put to the trouble or costs of taking any enforcement action in respect of unpaid fees, but that is a different question from any deprivation of the underlying right to remuneration for his work. There is also no suggestion that there has been any breakdown of the relationship of solicitor and client between Mr Orlizki and the Second Defendant, since the correspondence between them (and the Second Defendant's representatives) appears to have been conducted in a civil and business-like manner, although the parties took different views as to when the amounts required by Mr Orlizki should be paid. 14. I recognise, as I noted by way of introduction, that in the ordinary course a solicitor who has been unpaid, and has made a reasonable request for payment, or who has a contractual right entitling him to payment in trust which has not been complied with, would be granted leave to cease to act. However, it seems to me that, in this case, the application is simply made too late, and the prejudice to the interests of justice which would arise from granting that application, including the risk that the Second Defendant might be left unrepresented if the three day hearing proceeds, or that a hearing would now have to be vacated for the second time because a solicitor ceased to appear for the Second Defendant shortly before the hearing, again for a second time, is unacceptable so far as the interests of justice are concerned. These matters were at least partly within Mr Orlizki's control, so far as the difficulties he has faced could have been brought to the Court's attention at an earlier point, and addressed at that time, without the prejudice to the interests of justice that arises in a late application of this character. 15. I should note that I proceed on the basis, rightly confirmed by Mr Orlizki in the course of oral submissions, that, irrespective of whether Mr Orlizki were granted leave to withdraw or left to his contractual rights under his retainer agreement, he will of course attend to the Second Defendant's defence with the full degree of diligence and commitment that he would have done, had he already held funds in trust to undertake that defence. It may be that, as Mr Orlizki notes, he will have more difficulty engaging Counsel in the particular circumstances, but given Mr Orlizki's well-polished skills in a courtroom, that will be of no real disadvantage to the Second Defendant. 16. I am not satisfied that, in the particular circumstances, which I hope will not often be repeated, I should grant leave for Mr Orlizki to withdraw from the proceedings at this late stage. I propose to dismiss the application for leave to cease to act. I should, of course, finally note that nothing in my judgment prevents any agreement which may be formed between Mr Orlizki and the Second Defendant as to a change of solicitor, if that matter occurs consensually, or prevents the Second Defendant from terminating Mr Orlizki's retainer. As I noted above, another legal representative was present today, who had not yet met with the Second Defendant, and was given the opportunity to appear, against the contingency that the Court would grant leave to Mr Orlizki to cease to act, which it has not done. The issues involved in a consensual change of solicitor or a client's termination of a solicitor's retainer are, of course, quite different from those which arise in a solicitor ceasing to act, in proceedings that are to run for several days, shortly before the hearing of the proceedings. 17. Accordingly, I make the following orders: 1. The notice of motion filed by Messrs Kent and Orlizki, trading as Kent Attorneys, be dismissed. 2. Costs be reserved.