John Ljubomir Atanaskovic and the persons named in Schedule A trading as Atanaskovic Hartnell v Birketu Pty Ltd – Supervisory Jurisdiction

1. [1]

   HIS HONOUR: On 9 August 2019 I delivered the first judgment in this case: John Ljubomir Atanaskovic and the persons named in Schedule A trading as Atanaskovic Hartnell v Birketu Pty Ltd [2019] NSWSC 1006 (the first Judgment).

2. [2]

   This judgment deals with the question which I reserved for further consideration in the first Judgment, namely, should the Court, in the exercise of its supervisory jurisdiction over legal practitioners, decline to lend its assistance to Atanaskovic Hartnell (AH) in its quest to recover fees claimed in an invoice which it rendered the defendant, Birketu, on 28 February 2018? [1]

3. [3]

   For the convenience of the reader who does not wish to assume the burden of reading the somewhat lengthy first Judgment, I have set out below the centrally relevant aspects of the first Judgment which explain the background leading to this judgment. This has entailed duplicating parts of the first Judgment.

4. [4]

   Save as otherwise stated or appears from the context, definitions used in the first Judgment will be used here.

BACKGROUND TO THIS JUDGMENT

1. [5]

   On 28 September 2017, it was discovered that Clarke, a senior and well-paid solicitor employed by AH, had defrauded Birketu and WIN (collectively Birketu), companies belonging to AH’s longstanding and valued client Bruce Gordon, out of some millions of dollars. Clarke’s frauds fell into two categories.

2. [6]

   First, in connection with matters in which AH was instructed by Birketu, he dishonestly told Birketu that a Westpac bank account number into which Birketu was to pay funds, was AH’s trust account, whereas in fact it was his own personal account. Birketu paid more than a million dollars into Clarke’s account. Clarke stole the money. I will refer to these frauds as the Westpac frauds.

3. [7]

   Second, Clarke twice duped Deutsche Bank into paying him money, totalling over $7 million, held by Deutsche to Birketu’s account. To achieve this, Clarke committed forgery. I will refer to these frauds as the Deutsche frauds.

4. [8]

   Birketu, at that time represented by AH, commenced proceedings. It obtained freezing orders against Clarke’s assets, such as they were.

5. [9]

   With new representation, Birketu sued AH for damages equivalent to what was paid into Clarke’s Westpac account and not recovered, claiming that AH was vicariously liable for Clarke’s actions. AH disputed that Clarke acted within the course and scope of his employment with AH.

6. [10]

   Birketu also sued Deutsche to restore to its account the amounts which Deutsche debited as a consequence of Clarke’s conduct, claiming that Deutsche had no mandate to affect its account. Deutsche raised only one defence to the claim. It said that Clarke had ostensible authority from Birketu to conduct the dealings with Deutsche that led it to debit Birketu’s account. Birketu contended that if Clarke had (which it denied) ostensible authority, AH was vicariously liable to it for Clarke’s actions. Deutsche argued that if Clarke did not have ostensible authority, it was entitled to recover from AH whatever it had to pay Birketu because AH was vicariously liable to it for Clarke’s actions. AH’s primary position was that Clarke did not have Birketu’s ostensible authority. AH disputed, with respect to both the Westpac frauds and the Deutsche frauds, that Clarke acted within the course and scope of his employment with AH.

7. [11]

   On any scenario, a principal question in both the Westpac frauds and the Deutsche frauds was obviously and inevitably going to be whether Clarke acted in the course and scope of his employment with AH. [2] It was going to arise directly in the Westpac frauds case because Birketu was claiming (and AH was denying) that AH was vicariously liable for Clarke’s actions. It was going to arise in the Deutsche frauds case because if Clarke did not have Birketu’s ostensible authority, Deutsche was claiming that AH was vicariously liable, and, if Clarke did have Birketu’s ostensible authority, Birketu was claiming (and AH was denying) that AH was vicariously liable to Birketu for its loss.

8. [12]

   AH, for its part, sued Birketu for unpaid fees and disbursements covered by seven invoices, six of which were either not or not directly related to the dispute about the frauds.

9. [13]

   Under a formal engagement letter dated 16 November 2017 (the retainer), AH accepted a retainer from Birketu (with effect from 18 October 2017) to advise and assist it in connection with the possibility of a dispute with Deutsche.

10. [14]

    Although it is set out in the first Judgment, it is convenient to set out the retainer here again, although it will contribute to the prolixity of this judgment.

11. [15]

    Under the retainer, AH would investigate, and charge Birketu for investigating, the circumstances in which Clarke had perpetrated frauds, where Clarke might (and was ultimately found to) have been acting in the course and scope of his employment with AH. As earlier adverted to, this question was going to be central in both the Westpac frauds and the Deutsche frauds cases. AH would also investigate Deutsche’s contention of ostensible authority. At the time, Deutsche was also contending (as it happens, correctly) that AH was in a position of conflict and was saying that AH could not act for Birketu.

12. [16]

    On 25 October 2017 (that is, before the retainer was formalised but after it had taken effect informally), there was detailed consideration within AH of whether it could accept the retainer. Skene, an AH partner, sent an email to Atanaskovic and other lawyers in the firm analysing the position and drawing attention to the complications involved. It is appropriate to set out the email in full:

13. [17]

    Despite the obvious impediments in the way of doing so, AH accepted the retainer. It warrants observation that in the retainer, AH said that it did not presently consider that a conflict of interest and/or duties in acting for Birketu had in fact arisen directly.

14. [18]

    For its work under the retainer, AH rendered to Birketu an invoice being Statement of Account / Tax Invoice B10582 for $172,686.27 comprising fees on a time costs basis of $165,000 (including GST) and disbursements (including Counsel’s fees) of $7,686.27 (the invoice).

15. [19]

    The attendances included services where AH was in a position of actual conflict with its client and where subsequently it was engaged in heavily contested litigation with it over the issues that gave rise to that very conflict. [3]

16. [20]

    It is these fees which AH seeks to recover, and with which this judgment is concerned. [4]

17. [21]

    In fact, Clarke’s fraudulent behaviour, including that relating to Deutsche, was in the course and scope of his employment. [5]

18. [22]

    In fact, Birketu did not clothe Clarke with ostensible authority to deal with Deutsche as he did. [6]

19. [23]

    Thus, had the proceedings not settled, Birketu would have succeeded against AH on the Westpac frauds, Birketu would have succeeded against Deutsche on the Deutsche frauds, and Deutsche would have succeeded against AH on the Deutsche frauds.

20. [24]

    On 9 January 2018, Atanaskovic, on behalf of AH, gave the following oral undertaking to Lancaster and Bruce Gordon on behalf of Birketu (the undertaking):

21. [25]

    In the same conversation, Atanaskovic had earlier said:

22. [26]

    The undertaking was not supported by consideration. [7]

23. [27]

    $14,930.15 (including GST) claimed by AH as part of the invoice is for work done in relation to the extension of the NEC Swap (the NEC Swap fees). [8]

THE LEGAL PRINCIPLES

1. [28]

   A solicitor is an officer of the Court. [9]

2. [29]

   The Court has a well-established inherent supervisory jurisdiction, to which solicitors are amenable, which is designed to impose on them higher standards than the law applies generally: United Mining & Finance Corporation Limited v Becher [1910] 2 KB 296 at 304; Wade v Licardy (1993) 33 NSWLR 1 at 6-9. A solicitor is expected to act honourably and ethically. A solicitor is expected to keep her or his word.

3. [30]

   This jurisdiction is disciplinary and compensatory. It is not exercised for the purposes of enforcing legal rights, but for the purpose of ensuring honourable conduct on the part of the Court’s own officers. It is distinct from any legal rights or remedies of the parties, it is unaffected by anything which affects the strict legal rights of the parties, and it is not limited to technical principles: Re Gray [1892] 2 QB 440 at 443 per Lord Esher MR; R & T Thew Limited v Reeves (No 2) [1982] 1 QB 1283 at 1285; Countrywide Banking Corporation Limited v Kingston [1990] 1 NZLR 629 at 637; Australian Guarantee Corporation (NZ) Ltd v East Brewster Urquhart & Partners [1990] 2 NZLR 167 at 173; McIlriath v Ilkin [2007] NSWSC 911 at [10].

4. [31]

   The jurisdiction extends to ensuring that a solicitor honours an undertaking given by her or him in that capacity. The fact that the solicitor may have a defence to an action at law on the undertaking does not preclude the Court from exercising the jurisdiction, but it is a factor which the Court may take into account in deciding whether or not to exercise its discretion and, if so, how: Udall v Capri Lighting Limited [1987] 3 All ER 262 at 269; Countrywide Banking Corporation Limited v Kingston [1990] 1 NZLR 629 at 637. It is no answer to a complaint that a solicitor acted in breach of an undertaking given by her or him that there was no consideration for it: United Mining & Finance Corporation Limited v Becher [1910] 2 KB 296 at 303-4; John Fox v Bannister, King & Rigbeys [1988] QB 925 at 928, 931; Wade v Licardy (1993) 33 NSWLR 1 at 9.

5. [32]

   In some circumstances, such as when the jurisdiction falls to be exercised in the course of an active proceeding, and needs to be exercised swiftly, the Court may act summarily. That is not this case. There has been a full contest on the facts and the law: Myers v Elman [1940] AC 282 at 319; John Fox v Bannister, King & Rigbeys [1988] QB 925 at 930.

6. [33]

   Rule 6.1 of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 (NSW) (the Solicitors’ Rules) provides:

7. [34]

   Leaving the Rule aside, fidelity to undertakings in the course of professional practice is an important component of a lawyer’s professional responsibility, and directly relevant to the court’s continuing accreditation of her or his fitness to practice: GE Dal Pont, Lawyers’ Professional Responsibility (6th ed, 2017, Thomson Reuters) at [22.05]. The Court exercises the supervisory jurisdiction to ensure that confidence is maintained in relation to the special nature of solicitors’ undertakings: Commissioner of Inland Revenue v Bhanabhai [2006] 1 NZLR 797 at 830.

8. [35]

   Costs agreements between solicitors and their clients are subject to control by the Court in the exercise of its inherent powers: McNamara Business & Property Law v Kasmeridis (2007) 97 SASR 129 at 137-8; Athanasiou v Ward Keller (6) Pty Ltd (1998) 8 NTLR 23 at 30; Law Society of New South Wales v Foreman (1994) 34 NSWLR 408 at 422.

9. [36]

   The Court will not permit a solicitor to enforce an agreement with a client which requires the client to pay to the solicitor for services rendered an amount which represents an overcharge beyond the bounds of professional propriety: Law Society of New South Wales v Foreman (1994) 34 NSWLR 408 at 422. Such an amount would, of course, be excessive as being unfair and unreasonable.

10. [37]

    The Court has jurisdiction to ascertain by taxation, moderation or fixation, the costs, charges and disbursements of a solicitor from the client: Athanasiou v Ward Keller (6) Pty Ltd (1998) 8 NTLR 23 at 28; Baalman (JS & JH) v Dare Reed (1984) 52 ACTR 3 at 17.

11. [38]

    A solicitor is classically a fiduciary to her or his client, and as such owes certain duties in each particular case: Maguire v Makaronis (1996) 188 CLR 449 at 463.

12. [39]

    In Law Society of New South Wales v Harvey [1976] 2 NSWLR 154 at 170 (Harvey), Street CJ, delivering the judgment of the Court of Appeal, pointed out that the duty of a solicitor to his client is paramount and he must not prefer his or the interest of another to that of his client. His Honour referred to the holding of Lord Westbury in Tyrrell v Bank of London 11 ER 934 at 939-940, the principle being that the client is entitled to the full benefit of the best exertions of the solicitor, and the solicitor is not permitted to make a gain for himself at the expense of the client beyond the amount of the just and fair professional remuneration to which he is entitled.

13. [40]

    In the well-known passage at 170-1, Street CJ went on to say:

14. [41]

    In Spector v Ageda [1973] Ch D 30 at 47, Megarry J said:

15. [42]

    Added to and consistent with this, r 12.1 of the Solicitors’ Rules provides that:

16. [43]

    As a fiduciary, a solicitor has obligations to the client both in respect of the making of a costs agreement and in the carrying of it out: Law Society of New South Wales v Foreman (1994) 34 NSWLR 408 at 435; Moss v Moss (No 2) (1900) 21 LR (NSW) Eq 253 at 258; Chan v Zacharia (1984) 154 CLR 178 at 198; United Dominions Corporation Limited v Brian Pty Ltd (1985) 157 CLR 1 at 11-12.

17. [44]

    Fully informed consent from the client may provide a defence to a breach of fiduciary duty. How far the doctrine of fully informed consent goes to sanitise a breach of fiduciary duty consisting of a solicitor acting in conflict with the interests of the client, is a question which is not without its complexities. It is not necessary in this case to examine what might be the outer reaches of fully informed consent.

18. [45]

    Whether there is fully informed consent, is a question of fact in all the circumstances of each case. There is no precise formula with which will determine in all cases if fully informed consent has been given: Maguire v Makaronis (1996) 188 CLR 449 at 466; Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 at 97 [465].

THE REFERENCE

1. [46]

   On 9 August 2019, under Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 20.14, I referred to the Honourable Roger Gyles AO QC, for inquiry and report, which of the items in the invoice are referable to:

   1. (1)

      work done for the benefit of AH; or

   2. (2)

      attendances where AH’s interests were adverse or potentially adverse to the interests of Birketu.

2. [47]

   Mr Gyles provided a characteristically succinct report on 4 February 2020.

3. [48]

   The parties agreed (although there was apparently some initial hesitation by AH) that the report should be adopted. I adopt it.

4. [49]

   The report provides a convenient series of categories (sometimes overlapping) into which the work covered by the invoice may be divided.

5. [50]

   It contains some useful observations as to the facts, the accuracy of which neither party challenges.

6. [51]

   It makes a number of pertinent observations, but it properly refrains from engaging with matters of principle which are for the Court. The exercise of the supervisory jurisdiction is a matter only for the Court.

7. [52]

   The invoice contains 21 line items, none of which has an amount attributed to it. They were “notionally” numbered by Mr Gyles for convenience and I have adopted his numbering. They are as follows.

8. [53]

   The invoice concludes with the following notation.

9. [54]

   The invoice was sent under cover of the following letter.

10. [55]

    As Mr Gyles reported, AH had an internal system of record keeping of costings on a time basis. A costings report was produced from this system which fairly closely but not exactly matches the amount for fees in the invoice. Nothing relevant turns on the mismatching.

11. [56]

    Mr Gyles reported that the fraudster (Clarke) was an employee of AH and was involved with Deutsche and Birketu because of his position with AH, thus enabling the fraud. He pointed out that on any view, AH was seriously at risk of a finding of vicarious liability from either or both of Deutsche and Birketu, and of being joined in litigation.

12. [57]

    He correctly observed that by acting for Birketu in dealings with Deutsche, AH had an opportunity of managing issues between them and in particular it lessened the chance that Deutsche and Birketu would down tools and take aim at AH. Closely investigating the facts and the internal workings of Birketu would be a great advantage if AH was subsequently sued in relation to issues such as causation and negligence.

13. [58]

    I interpolate that this type of mischief is one which the fiduciary rules and the Solicitors’ Rules aim to avoid.

14. [59]

    Mr Gyles reported that the authority, particularly the ostensible authority of Clarke to bind Birketu, and the vicarious liability of AH for the actions of Clarke, depended upon overlapping of a complicated underlying set of facts and that it would be difficult to investigate the facts for one purpose without having the other in mind. Mr Gyles did observe that he did not detect any failure by AH to properly put what could be put in defence of Birketu for any actions actually contrary to the interests of Birketu.

15. [60]

    Mr Gyles reported that work done for the benefit of Birketu obviously included work related to the allegation of conflict of interest on the part of AH. It also encompassed work that would reduce any amount that it might ultimately bear if vicariously liable – either on account of liability or damages. That would include all work in relation to pursuit of assets, including the freezing order proceedings, and in relation to possible negligence by Deutsche.

16. [61]

    Mr Gyles reported that attendances where Birketu’s interests were adverse or potentially adverse to the interests of AH would include work on vicarious liability and might include the authority of the fraudster (subject to the ruling by the Court).

17. [62]

    Mr Gyles reported (using his notional numbering) that:

18. [63]

    Item 21 of the invoice is a catch-all. Mr Gyles reported that he did not regard this item as justifying charges in relation to an identified heading or as being an appropriate balancing item to make up a shortfall or fill any substantive gap. Because I have determined that AH will only receive the NEC Swap fees, Item 21 can be disregarded.

THE CONTENTIONS

1. [64]

   The parties provided the Court with comprehensive written submissions prior to oral argument, which took the best part of a day.

2. [65]

   Birketu argues that AH should be precluded from recovering the invoiced fees as not being fair and reasonable (or being unfair and unreasonable) because AH was in a position of profound conflict of interest with it. Birketu argues that AH should not have accepted the retainer (even if there was fully informed consent – which Birketu says there was not) because the conflict was so basic. It argues that all of the work covered by the invoice was “infected” by this conflict. Birketu argues that AH gave the undertaking, in its professional capacity, and should be held to it.

3. [66]

   AH accepts that it was in a position of conflict, but it says it disclosed it and obtained fully informed consent from Birketu to keep acting. It makes the point that Birketu was a sophisticated, commercially experienced, and well-resourced party. It argues that the retainer was a binding contract and that no order setting it aside has been made. It contends that there is an implicit finding in the first Judgment that the retainer was legally efficacious.

4. [67]

   It argues that it is not unfair or unreasonable for a solicitor to recover fees for work properly and reasonably undertaken which advances the cause of the client but incidentally produces some benefit for the solicitor’s firm. It says that the work in relation to Clarke’s ostensible authority was clearly to Birketu’s advantage because it suited Birketu to establish that Clarke did not have ostensible authority to bind Birketu. It says that the same considerations apply to AH’s work on investigating Deutsche’s possible negligence. It says that whilst AH may have “concurrently obtained an incidental benefit”, this is not a reason to deprive it of its fees because of the alignment of interests.

5. [68]

   At this point, it is worthy of mention, as being perhaps illustrative of the difficulty of AH’s position, that it also made the following written submission at the trial.

6. [69]

   AH argues the work done on freezing and tracing Clarke’s assets was done in Birketu’s interests and any incidental benefit to AH should not disentitle AH to its fees. It argues that the work it did on the topic of conflict of interest was done only to respond to assertions made by Deutsche that AH had a conflict of interest and it was necessary to carry out Birketu’s instructions to act for Birketu in the dispute.

7. [70]

   It argues that the undertaking should not be enforced because it is not a binding contract (no consideration having passed) and does not give rise to some other general law legal or equitable right or remedy in Birketu. It is a commercial arrangement, between commercial parties. It argues that AH was not acting in its professional capacity in giving it and the parties should be left to their legal and equitable rights.

8. [71]

   It argues that the bulk of the work had been done before the undertaking was given and there was in place a detailed retainer. The work was done by AH for Birketu’s benefit and not contrary to its interests and Birketu obtained the benefit of other work that AH did and did not charge for.

9. [72]

   It says that there was no reliance by Birketu on the undertaking as given.

10. [73]

    It argues that the Court should not exercise a discretion to enforce the undertaking because there has been no finding of dishonesty and no basis to find it, and this is not a clear case where enforcement is appropriate.

11. [74]

    AH argues that the Court’s supervisory jurisdiction should only be exercised if there are special circumstances and that there are none here.

DISPOSITION

1. [75]

   It is not in issue that:

   1. (1)

      at the time that AH accepted the retainer, and for so long as AH remained retained, it was in a position of actual and potential conflict of interest with its client;

   2. (2)

      work that it did under the retainer included work that was done for its own benefit where its interests were adverse or potentially adverse to those of Birketu;

   3. (3)

      the invoice charges, other than the NEC Swap charges, are within the terms of the undertaking; and

   4. (4)

      the supervisory jurisdiction is available to preclude recovery by AH.

2. [76]

   I have concluded that, except for the NEC Swap fees, the Court must withhold its assistance from AH in AH’s quest to recover the fees claimed in the invoice.

3. [77]

   To permit AH to recover more would be to:

   1. (1)

      give efficacy to the retainer which, in my view, it was not open to AH, acting ethically, to accept in the face of the clear and profound conflict between its own interests and the duties which it owed to Birketu;

   2. (2)

      require Birketu to pay AH for work which AH did in its own interests and for its own benefit, or contrary to the interests of Birketu (or both);

   3. (3)

      allow AH, dishonourably, to renege on the undertaking which it gave to Birketu in a professional capacity.

4. [78]

   The ultimate consequence, were the Court to permit AH to recover, would be that AH would be the beneficiary of unfair and unreasonable charges excessive beyond the bounds of professional propriety and the confidence which the Court and the public are entitled to have that solicitors will honour their undertakings would be eroded. This should not be allowed.

5. [79]

   The NEC Swap work falls into a different category. It was commercial work done to extend the NEC Swap which would have needed to be done in Birketu’s commercial interests anyway. The conflicted position of AH had no impact on it. I think that it falls outside the undertaking, but, in any event, its distance from AH’s conflict is sufficient that I would not exercise my discretion to preclude AH from being paid for it. It follows that AH is entitled to judgment for the further amount of $14,930.15.

6. [80]

   It is apt to emphasise that in exercising supervisory jurisdiction, the Court does not engage in a final determination of legal rights but determines whether one of its officers should be held to ethical and honourable behaviour.

7. [81]

   In exercising its discretion, the Court will have regard to all the circumstances, which, in this case, includes the state of the legal relationship and rights and duties between the parties. But the Court is concerned not with strict legal rights and duties or matters of technicality.

8. [82]

   That the retainer has not been impeached, in the sense of it being set aside, is no bar to the exercise by the Court of the supervisory jurisdiction. The same goes for the fact that the undertaking is not legally enforceable as a contract and the fact that there was no subsequent reliance on it so as, for example, to give rise to an equitable estoppel.

9. [83]

   It is also to be remembered that the retainer was terminated and that Birketu’s position has, from the time that it obtained proper representation, been to dispute AH’s claimed entitlement to the fees charged pursuant to it. The first Judgment did not deal with the contractual or legal efficacy of the retainer.

10. [84]

    I find that AH did not obtain fully informed consent.

11. [85]

    As Street CJ pointed out in Harvey, the solicitor in a conflicted situation undertakes a heavy burden. AH did not discharge it.

12. [86]

    AH did not, or did not sufficiently, disclose that the retainer would be a vehicle by which AH would be given access to information which it might use against Birketu in subsequent litigation between them.

13. [87]

    AH did not, or did not sufficiently, disclose that the investigation of Clarke’s ostensible authority from Birketu to deal with Deutsche was closely connected and overlapped inextricably with the subject of whether Clarke was acting within the course and scope of his employment with AH both in the context of the Deutsche frauds and in the context of Birketu’s rights against AH directly in connection with the Westpac frauds.

14. [88]

    AH did not, or did not sufficiently, disclose that if Clarke did have Birketu’s ostensible authority, the contest would then be between Birketu and AH, and in that contest Clarke’s course and scope of employment would be a critical issue in respect of which the interests of Birketu and AH were plainly at odds.

15. [89]

    AH did not, or did not sufficiently, disclose the potential benefits to itself and corresponding potential disadvantages to Birketu to which the retainer might, and in my view did, give rise.

16. [90]

    As Skene pointed out in his 25 October 2017 email, it was ultimately going to be necessary to carefully consider separately each of Clarke’s fraudulent acts as against all the surrounding facts and circumstances. This would of course include facts and circumstances known to Birketu and, by all accounts, unbeknown to AH, of which facts AH would learn with Birketu’s cooperation in the investigation.

17. [91]

    As Mr Gyles pointed out, by acting for Birketu in dealings with Deutsche, AH had an opportunity of managing issues between them and in particular it lessened the chance that Deutsche and Birketu would down tools and take aim at AH. Closely investigating the facts and the internal workings of Birketu would be a great advantage if, as came to pass, AH was subsequently sued in relation to issues such as causation and negligence.

18. [92]

    Birketu’s sophistication, experience and resources did not excuse AH from the heavy burden of full disclosure. Atanaskovic himself is sophisticated, experienced and no doubt possessed of resources, and the retainer itself reflects an acute awareness of the position of conflict of interest.

19. [93]

    But even if, contrary to my finding, there was full disclosure, this too is not a bar to the exercise of the supervisory jurisdiction.

20. [94]

    In support of its argument that the fees are not unfair or unreasonable, AH placed significant reliance on Mr Gyles’ observation that he did not detect any failure to properly put what could be put in defence of Birketu for any actions actually contrary to the interests of Birketu. This observation is pertinent to communications which AH had with Deutsche’s solicitors in relation to Deutsche’s assertion of ostensible authority. It is to be read together with Mr Gyles’ other observations about the position of conflict of interest in which AH was. It is not pertinent to the conflict that was present, on the assumption that those arguments failed. AH may have adequately put arguments on one aspect of the wider dispute, but this has little to say about its position generally.

21. [95]

    The present case is of the type, I think, that Street CJ had in mind where the conflict of interest is such that it is not proper or even possible for the solicitor to continue to act for and advise her or his client, even with consent.

22. [96]

    For example, and not far off from the present circumstances, a solicitor could not, even with consent, act for a client in a litigious dispute between the client and the solicitor.

23. [97]

    If there was fully informed consent, and it was effective to constitute a defence to a breach of fiduciary duty, it was not effective to make AH’s position any less untenable from the point of view of its professional ethical obligations.

24. [98]

    As Skene correctly pointed out, r 12.1 of the Solicitors’ Rules does not provide as an exception that a solicitor can act if there is a conflict provided there is fully informed consent.

25. [99]

    As to the work for which AH seeks payment, as Mr Gyles pointed out, Clarke’s authority and AH’s vicarious liability for his actions depended on an overlapping of a complicated underlying set of facts which it would be difficult to investigate for one purpose without having the other in mind.

26. [100]

    I think that the conflict of interest work, the freezing and tracing of assets work, and the work related to the negligence of Deutsche are in the same position with respect to their connectivity to Clarke’s authority and AH’s vicarious liability and to each other. This work was as much infected by the conflict of interest as the work on authority and vicarious liability.

27. [101]

    It is difficult to see what, if any, benefits Birketu actually obtained from the work. I am inclined to the view that it received no benefit, but only detriment. It can hardly be suggested that Birketu benefited from AH’s investigations into its own manifest position of conflict. Birketu had to retain different representation not long after. It found itself embroiled in substantial and hotly contested litigation against its erstwhile solicitors, who took an adverse position on the most significant issue in the case, namely the course and scope of Clarke’s employment, in which contest AH had the benefit of investigations for which it wishes Birketu to pay. I do not accept AH’s submission which characterises what occurred as AH doing work for the benefit of Birketu from which AH received some incidental benefit.

28. [102]

    In my view, the acuteness of the conflict and the significance of the potential and actual consequences, disadvantageous to Birketu and advantageous to AH, are reasons why recovery would result in Birketu having to pay fees which are unfair and unreasonable.

29. [103]

    Added to what has been said earlier, the undertaking was not given in a vacuum. It was given at a time when it had become well understood that Birketu’s situation had been brought about by an AH solicitor. As observed in the first Judgment, the commercial, moral and ethical imperatives of the situation supported Lancaster and undermined Atanaskovic as to whether the undertaking had been given. [11] The finding that the undertaking was given credits Atanaskovic with, despite everything else that had gone before, having done the right thing at that time. Unfortunately, he did not keep to that course. The absence of consideration is of little moment here. That the bulk of the work was done before the undertaking explains and re-enforces it rather than undermines it.

30. [104]

    I reject the submission (although I think it was only made faintly) that Atanaskovic was not acting in a professional capacity. That is the only capacity in which he was acting. He was retained in his professional capacity, he did work covered by the retainer in his professional capacity, he claims the fees in his professional capacity and he gave the undertaking in his professional capacity. The undertaking is concerned with his professional entitlement and position.

31. [105]

    The special circumstances necessary for the exercise of the supervisory jurisdiction are present.

32. [106]

    There will be judgment for the plaintiffs for the additional amount of $14,930.15 (including GST).

33. [107]

    The remainder of the summons is dismissed.

34. [108]

    Should it be necessary, I will hear the parties on costs and on any aspect which requires attention to bring these proceedings to an end.

35. [109]

    Within fourteen days, each party is to send to the other and to my Associate, a position paper with respect to costs (and any other remaining aspect), and its proposed short minutes of order.