Price v ACN 627 087 030 Pty Ltd trading as Yates Beaggi Lawyers

The first plaintiff in this proceeding (Mr Price) is a former client of the first defendant, an incorporated legal practice trading under the name Yates Beaggi Lawyers (the Solicitors). Mr Farshad Amirbeaggi is the sole director and sole managing principal of the first defendant (the Principal Solicitor).

The second plaintiff (Ms Theodore) is Mr Price’s sister and has been appointed as his “case guardian” in family law proceedings between Mr Price and his former wife.

The Solicitors acted for Mr Price in the family law proceedings from approximately 11 June 2019 until 26 March 2020, when the Solicitors’ retainer was terminated by Ms Theodore (with the consent and approval of Mr Price).

The second defendant is a receiver and manager appointed by the Solicitors on 7 May 2020 of property in Wyndham Street, Alexandria, New South Wales (being the property contained in folio 76/SP64282 of the Register) (the Alexandria Property) and property in Roylston Street, Paddington, New South Wales (being the property contained in folio 13/1096204 of the Register) (the Paddington Property), to whom I refer as the Receiver.

Mr Price is the registered proprietor of the Alexandria Property and the Paddington Property.

Immediately after the termination of the Solicitors’ retainer in the family law proceedings, a dispute arose between Mr Price and the Solicitors about whether the Solicitors had overcharged Mr Price by invoicing and receiving payment of fees in the total sum of $458,141.25 prior to termination of the retainer and additional fees of $28,752.90 for which the Solicitors issued an invoice addressed to Ms Theodore on 26 March 2020 (which fees remain unpaid). The dispute also concerned whether the Solicitors are entitled to exercise a lien over Mr Price’s files as security for payment of the fees invoiced on 26 March 2020.

That dispute culminated in Mr Price and Ms Theodore commencing this proceeding by Summons filed on 13 May 2020.

The relief claimed by Mr Price and Ms Theodore in the Summons relevantly includes:

By Amended Notice of Motion filed on 14 May 2020 (as further amended on 15 May 2020 by adding the words “until further order”), the plaintiffs’ claim for interim relief was reformulated as a claim for an order in the following terms:

The claim for interim relief was heard before me in the Equity Duty Judge List on the afternoon of 15 May 2020.

The principles governing the grant of interim injunctions are well established: see Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; [2001] HCA 63, especially at [8]-[13], [18] (Gleeson CJ), [91] (Gummow and Hayne JJ, Gaudron JJ agreeing); see also Papas v Grave [2013] NSWCA 308 at [83] (Emmett JA, Sackville AJA agreeing).

The purpose of an interim injunction is to preserve the status quo until the rights of the parties can be determined at a final hearing of the proceeding or, to adopt the language of Gleeson CJ in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; [2001] HCA 63 at [12], to “prevent the practical destruction” of the right in respect of which the plaintiffs claim final relief “before there has been an opportunity to have its existence finally determined”.

A plaintiff must establish that:

The factors relevant to the balance of convenience include whether, if the injunction is not granted, the plaintiff will suffer harm for which damages will not be an adequate remedy. The Court must determine whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622–623.

If a serious question to be tried has been identified, the strength of the plaintiff’s case for final relief will also be relevant to the Court’s assessment of the balance of convenience. However, the extent to which it is necessary to examine the strength of the plaintiff’s case will depend on all the circumstances of the case.

The following summary of factual matters relevant to the issues arising on the claim for interim relief is drawn from the affidavit of Mr Price sworn on 12 May 2020 and the affidavit of the Principal Solicitor affirmed on 15 May 2020, both of which were read on the hearing of the plaintiffs’ application for interim relief. The factual matters referred to below were not in dispute at that hearing, save to the extent otherwise indicated in these reasons.

Mr Price separated from his wife, Mary Price, in April 2019. Mrs Price commenced proceedings against Mr Price in the Family Court of Australia on 17 July 2019.

On 11 June 2019, the Solicitors wrote to Mr Price setting out the basis on which they would provide legal services in connection with his family law dispute and disclosing information about legal costs (the First Costs Letter).

The First Costs Letter stated that the Solicitors required Mr Price to put funds in the Solicitors’ trust account in advance of work being undertaken, in tranches of $25,000 at a time. The First Costs Letter requested that the first tranche of $25,000 be paid.

The First Costs Letter also stated that bills would be issued monthly, and would be payable within 7 days of the date of issue.

Page 7 of the First Costs Letter contained the following provisions (the abbreviation “YBL” refers to the Solicitors):

A costs disclosure was annexed to the First Costs Letter. Mr Price signed the costs disclosure annexure and dated it 22 June 2019.

Mr Price was admitted to hospital on 17 January 2020. He was diagnosed with stage 3 liver failure, with a terminal prognosis. Due to the severity of his illness, Mr Price was unable to provide instructions to the Solicitors and Ms Theodore was appointed as his “case guardian” in relation to the Family Court proceedings.

On his release from hospital in early March 2020, Mr Price filed an application in the Family Court proceedings for Ms Theodore to be released as his “case guardian”. Mr Price deposes that this application is supported by Ms Theodore and is listed for interim hearing on 1 June 2020.

On 20 March 2020, the Solicitors sent a letter to Ms Theodore, as “litigation case guardian”, entitled “Engagement to provide legal services and costs disclosure in connection with Family Court of Australia proceedings against Mary Price, and associated or ancillary litigation concerning those matters” (the Second Costs Letter).

The Second Costs Letter contains terms to the same effect as the terms of the First Costs Letter referred to above, save that the Second Costs Letter required funds to be paid into the Solicitors’ trust account in tranches of $50,000 rather than $25,000.

It appears to have been common ground on the hearing of the plaintiffs’ application for interim relief that a costs agreement between Mr Price and the Solicitors arose from Mr Price signing the disclosure annexure on 22 June 2019 or continuing to instruct the Solicitors in the family law dispute after receipt of the First Costs Letter. It is therefore convenient to refer to it as the First Costs Agreement.

Mr Price deposes that Ms Theodore did not sign the Second Costs Letter, and there is no evidence to the contrary. However, it was common ground that, for the purpose of determining the plaintiffs’ claim for interim relief, I should assume that a costs agreement between Ms Theordore and the Solicitors arose from Ms Theodore instructing the Solicitors in the family law dispute after receipt of the Second Costs Letter until 26 March 2020. It is convenient to refer to this as the Second Costs Agreement. Where I am referring to the First and Second Costs Agreements, I use the term Costs Agreements.

During the period July to December 2019, the Solicitors issued invoices to Mr Price for legal fees totalling $206,698.92. All of those fees have been paid.

During the period between 5 February 2020 and 26 March 2020, the Solicitors issued further invoices to Mr Price (or to Ms Theodore as his case guardian) for legal fees totalling $251,442.33. All of those fees have been paid, save for an amount of $28,752.90.

The unpaid fees of $28,752.90 comprise fees of $24,446.40 (including GST) that were the subject of an itemised invoice issued by the Solicitors on 26 March 2020 and an amount of $4,526.50 described in that invoice as outstanding.

On 26 March 2020, the same day on which the Solicitors’ most recent invoice was issued, Ms Theodore terminated the Solicitors’ retainer, with Mr Price’s approval and consent.

By letter dated 15 April 2020, the Solicitors sent the plaintiffs’ current solicitors copies of all invoices issued in the family law proceedings and certain related Supreme Court proceedings and stated that there was a sum of $31,051.90 presently outstanding. The evidence does not explain the reason for the difference between the $28,752.90 invoiced on 26 March 2020 and the sum of $31,051.90 said to be owing on 15 April 2020, but nothing turns on this for the purpose of determining the plaintiffs’ application for interim relief.

There followed a series of emails between the Solicitors and the plaintiffs’ current solicitors concerning the outstanding fees and the lien over the plaintiffs’ file that the Solicitors were exercising. It is unnecessary to describe the substance of this correspondence in any detail, save to note that:

The Principal Solicitor deposes that, on 7 May 2020, he executed a deed appointing the Receiver to the Alexandria Property and the Paddington Property (the Deed of Appointment).

Clause 2.1(1) of the Deed of Appointment provided that it was made pursuant to the agreement between Mr Price and the Solicitors dated 11 June 2019 (that is, the First Costs Agreement).

Clause 2.1(2) of the Deed of Appointment provided that the appointment was made with all of the powers conferred on receivers and managers by the Corporations Act 2001 (Cth) (despite the fact that Mr Price is an individual and not a corporate entity) and any other means. It is reasonably arguable that clause 2.1(2)(a), properly construed, incorporates by reference the powers of receivers under the Corporations Act in the appointment of the Receiver to the Alexandria Property and the Paddington Property. Pursuant to s 420 of the Corporations Act, those powers include the power to enter into possession of, dispose of and lease property.

At a directions hearing on 13 May 2020, the Principal Solicitor (who appeared for the Solicitors on that occasion) stated that the Receiver had not taken possession or any steps to sell the Alexandria Property or the Paddington Property. It was said that the Receiver would collect rents paid in respect of those properties to apply those rents to the amount that the Solicitors claim is owing to them by Mr Price. The Receiver’s powers under the Deed of Appointment are not so limited.

The solicitor who appeared for the plaintiffs at the directions hearing on 13 May 2020 informed the Court that he was instructed that one of the properties is presently vacant and the other property is leased, but rent is in arrears and Mr Price had been endeavouring to collect those arrears in circumstances where he is seriously unwell and has no employment.

Mr Price deposes that neither the Principal Solicitor, nor any other person from the Solicitors, advised him to seek any legal advice before entering into the First Costs Agreement.

Mr Price also deposes that neither the Principal Solicitor, nor any other person from the Solicitors, explained to him the security provisions contained in the First Costs Agreement or the consequences of those provisions if he had outstanding fees.

Mr Price deposes that he would not have entered into the First Costs Agreement had it been explained to him that it contained provisions entitling the Solicitors to put a charge on his properties.

Mr Price also deposes on information and belief from Ms Theodore that the Second Costs Agreement was not explained to her.

In his affidavit affirmed on 15 May 2020, the Principal Solicitor does not depose to any person on behalf of the Solicitors having advised Mr Price or Ms Theodore to seek independent legal advice concerning the security provisions, or any other aspects of the First Costs Agreement (in the case of Mr Price) or the Second Costs Agreement (in the case of Ms Theodore). Nor does the Principal Solicitor depose to any person on behalf of the Solicitors having explained the security provisions to Mr Price or Ms Theodore. I accept that the Solicitors had limited time to prepare their evidence to be relied on in resisting the plaintiffs’ application for interim relief. I infer from the Principal Solicitor’s role as sole director and principal managing solicitor of the Solicitors that, if any person advised Mr Price or Ms Theodore to obtain independent legal advice or explained the security provisions to them, it would most likely have been the Principal Solicitor who did so. I note that the Principal Solicitor has given evidence of other conversations that he says he had with Mr Price (referred to below). It therefore seems to me to be likely that the Principal Solicitor could readily have given evidence about any advice that he gave to Mr Price or Ms Theodore to obtain independent legal advice before entering into the Costs Agreements, or any explanation that he provided to Mr Price or Ms Theodore about the operation of the security provisions in the Costs Agreements.

The Principal Solicitor has given evidence to the effect that Mr Price, prior to the onset of his illness in January 2020, was a sophisticated business man. The Principal Solicitor also deposes that Mr Price asked him on several occasions to use the security provisions contained in the First Costs Agreement to lodge a caveat on his properties and to tell Mrs Price’s lawyers and Mr Price owed the Solicitors $1 million in fees.

Thus, whilst there is no evidence that the security provisions in the Costs Agreements were explained to Mr Price or Ms Theodore or that they were counselled to obtain independent legal advice before entering into the Costs Agreements, there is evidence that Mr Price understood, at some time during the period of the Solicitors’ retainer, that the Solicitors had an ability to lodge a caveat over his properties if their fees were unpaid. There is no evidence, however, that Mr Price was informed about or otherwise understood this before entering into the First Costs Agreement, or that he understood at any time that the Solicitors had the ability to appoint an external controller to all of his property. Nor is there any evidence that Mr Price understood that a receiver and manager appointed by the Solicitors may be entitled to collect rents from the Alexandria Property and the Paddington Property. Nor is there any evidence that Ms Theodore understood those matters in relation to the Second Costs Agreement.

Mr Price deposes that, in circumstances where he is suffering serious and terminal liver failure, he has no employment, is unable to obtain employment and is not currently in a financial position to pay the fees that the Solicitors claim are owing to them.

It is common ground that Mr Price and his former wife have a substantial matrimonial asset pool.

On Mr Price’s evidence, the value of the asset pool is in excess of $7.4 million.

On the Principal Solicitor’s evidence, the asset pool includes assets disclosed to the Family Court of Australia to the value of $19.55 million, including a share portfolio of $1 million and cash of $8 million. The Principal Solicitor deposes that liabilities of approximately $1 million are secured against the matrimonial pool of assets. However, there is no evidence about any unsecured liabilities. Nor is there any evidence about whether, or the extent to which, Mr Price is presently able to draw on the cash and/or other liquid assets included in the matrimonial assets described by the Principal Solicitor. These assets are the subject of the Family Court Proceedings.

The Principal Solicitor deposes that he has not been provided with particulars of the plaintiffs’ concerns about the outstanding fees, and has not received any satisfactory response from the plaintiffs’ to offers made by the Solicitors to discount those fees. The Principal Solicitor also deposes that he has been warning of escalating enforcement costs, including the costs of appointing an external controller, and has not received any satisfactory response. That evidence is not relevant to the determination of the plaintiffs’ application for interim relief because:

At the hearing on 15 May 2020, counsel for the Solicitors accepted that there is a serious question to be tried as to whether the security provisions of the Costs Agreements are valid and enforceable. The solicitor for the Receiver adopted the submissions of counsel for the Solicitors, and so made the same concession.

That concession was very properly made, having regard to the evidence summarised above and the judgment of Parker J in Malouf v Constantinou [2017] NSWSC 923.

In Malouf, the solicitor’s costs agreement included a charge over all of the client’s current and future property in very similar terms to the security provisions in the costs agreements. The solicitor had also entered into a deed of charge with the client and with the clients’ parents (as guarantors) in respect of the client’s property and two properties owned by the client’s parents. The solicitor had become aware of the specific properties owned by the client and his parents in the course of taking preliminary instructions concerning the family law proceedings in which the solicitor was to be retained to act for the client. Parker J held that, in those circumstances, the solicitor was in a position of conflict between his own interest in obtaining security for his fees and his obligation to act in his client’s best interests. His Honour therefore accepted the concession made on behalf of the solicitor that the fiduciary relationship of solicitor and client obliged the solicitor to provide an explanation of the terms of the costs agreement, deed of charge and other related documents to the client before the client entered into those documents: see [2017] NSWSC 923 at [94]–[101].

Parker J expressly refrained from considering whether a solicitor stipulating for security in other circumstances is in a position of fiduciary conflict: [2017] NSWSC 923 at [102]. However, his Honour referred to dicta of Windeyer AJ in M J Leonard Pty Ltd v Bristrol Custodians Ltd (in liq) [2013] NSWSC 1734 at [52]–[53] to the effect that a fiduciary conflict arises whenever a solicitor seeks security from the client, even at the inception of a retainer.

Moreover, the factual differences between Malouf and the present case are arguably immaterial to the analysis about whether a fiduciary conflict arose in this case. If the Solicitors chose to appoint an external controller over all of Mr Price’s assets pursuant to the security provisions in the First Costs Agreement or the Second Costs Agreement as a result of any invoice being unpaid, this would have the effect that, unless and until the controller realised assets sufficient to pay the outstanding fees, enforcement costs and interest claimed by the Solicitors, Mr Price would have no assets on which he could potentially draw to fund any application for assessment of the Solicitors’ costs or the ongoing conduct of the family law proceedings. This would be the consequence of the security provisions that the Solicitors included in the First Costs Agreement and the Second Costs Agreement. It was this potential consequence that led Parker J to conclude in Malouf that the solicitor should have at least drawn the client’s attention to the charging provision in the costs agreement and explained those provisions, and that the failure to do so meant that the solicitor was in breach of his fiduciary obligations in stipulating for the entitlements of security over the client’s assets in the costs agreement and deed of charge and that those entitlements could not to be enforced against the client: [2017] NSWSC 923 at [113]–[115].

In my opinion, the balance of convenience favours the grant of the interim relief sought by the plaintiffs for the following reasons.

If the Court were to decline the interim relief sought, the Court would be facilitating the Solicitors taking ongoing steps to enforce a security taken over the property of their former client, Mr Price, in circumstances where:

Assuming in the Solicitors’ favour that there may be some circumstances in which the Court might countenance an officer of the Court enforcing security against a client or former client in circumstances where there is a serious question to be tried about whether that security was obtained by a breach of fiduciary duty by the solicitor, it is my opinion that such circumstances do not exist in the present case.

On the contrary, in my opinion, the following additional matters tip the balance of convenience in favour of granting the interim relief sought in this case:

In my opinion, the matters referred to above, considered as a whole, favour the grant of the interim relief, irrespective of the strength of the plaintiffs’ claim for final orders that the Costs Agreements (including the security provisions) are void, voidable or unenforceable, or should be rescinded ab initio. On the evidence presently before the Court, the plaintiffs’ claim is reasonably strong in the absence of evidence from the Solicitors directly contradicting Mr Price’s evidence that the security provisions in the Costs Agreements were not explained and that the plaintiffs were not told to get independent legal advice.

It is appropriate to record that the plaintiffs’ claim for interim relief was listed for hearing on 15 May 2020 over the objection of the Solicitors. The Court heard those objections at a directions hearing on the afternoon of 13 May 2020, which was adjourned and resumed on the morning of 14 May 2020 to give the Receiver an opportunity to be heard. The Receiver raised no objection to the interim application being listed for hearing on 15 May 2020, but the Solicitors objected that they required additional time to put on affidavit evidence that was described as relating to “issues of the bona fides of the claim” and the balance of convenience. The Solicitors sought a hearing in the week commencing 18 May 2020 to allow them more time to adduce evidence.

I declined to defer the hearing of the plaintiffs’ interim relief application, in circumstances where:

As referred to above, by the time of the hearing of the interim relief application on the afternoon of 15 May 2020, the Solicitors accepted that there was a serious question to be tried about whether the security provisions in the Costs Agreements were valid and enforceable. Thus, any suggestion that the plaintiffs’ claim was not bona fide had fallen away.

Nevertheless, the Principal Solicitor’s affidavit affirmed on 15 May 2020 repeated the complaint about lack of time to complete evidence, in circumstances where the Principal Solicitor was working remotely from his office and had other pressing professional commitments relating to other proceedings, and had responsibility for supervising employed solicitors and other staff of the Solicitors.

I remain of the view that the pressure created by the plaintiffs’ need for a prompt hearing of their application for interim relief and the Solicitors’ other professional commitments could have been alleviated by the Solicitors providing documentation and information about the appointment of the Receiver when requested by the plaintiffs’ current solicitors. This would have facilitated the plaintiffs commencing these proceedings earlier, and would have allowed a few more days’ time after commencement of the proceeding before the interim relief application required an urgent hearing.

For the reasons above, I make the following orders: