Sithakoul v Su

1. [1]

   This judgment arises out of an application by a plaintiff against her former solicitor for documents from the solicitor’s file. The application was made by way of notice of motion in the proceedings which were the subject of the solicitor’s former retainer.

2. [2]

   In December last year I made consent orders for the provision of the documents sought by the plaintiff. Both the plaintiff and the solicitor now seek costs of the application.

3. [3]

   The plaintiff is Pheng Phane Sithakoul. The defendant is Yanju Su. He is married to, but has separated from, Ms Sithakoul’s stepdaughter.

4. [4]

   The proceedings arise out of dealings between Ms Sithakoul and Mr Su over a residential property at Goodridge Road, Cecil Park, a suburb of western Sydney. Ms Sithakoul bought a half share in the property in 2013. Mr Su was registered as the proprietor of the other half in 2015, replacing two other parties with whom Ms Sithakoul had initially bought the property.

5. [5]

   The proceedings were commenced on Ms Sithakoul’s behalf in April 2019. According to Ms Sithakoul, she made the Cecil Park property available to her stepdaughter and Mr Su as a home for them (her stepdaughter has cerebral palsy). She claimed that, having regard to the terms of her agreement with Mr Su, and in the events which had happened, she was entitled to the whole, or part, of his share. Mr Su alleged that in fact the balance of entitlement to the property was in his favour. He cross-claimed. The property was later sold and the proceeds were paid into court.

6. [6]

   Ms Sithakoul is currently represented in the proceedings by Longton Legal Pty Limited (“Longton”). Longton is the fourth firm to represent her. Longton took over from Bridges Lawyers Pty Limited (“Bridges”) in October last year. Bridges is the respondent to the application by Ms Sithakoul which is the subject of this judgment.

7. [7]

   The parties to the application agreed that the costs issue should be determined on the papers. There were affidavits on both sides. The admissibility of some of the evidence was contested in submissions, but there is no need to resolve any disputed question of fact.

Background and procedural history

1. [8]

   Ms Sithakoul was born in Laos. According to her affidavit, she does not speak English but does speak Mandarin. She says that, until she retained Longton (whose solicitors speak Mandarin), she was unable to communicate directly with the legal representatives who were acting for her in the proceedings. Instead communications were handled on her behalf by Mr Vincent Newey, who was her accountant.

2. [9]

   Bridges took over conduct of the proceedings in October 2020. This was apparently on the recommendation of Mr Newey. The retainer took place through Mr Philip Parker, a partner of Bridges. He gave carriage of the matter to another partner, Ms Kylie Rae. She was assisted by a senior associate, Mr Tom Karle.

3. [10]

   In May last year, the trial was fixed for hearing for three days beginning on 14 December. The hearing was allocated to me. On 1 September, the parties appeared before me for pre-trial directions. The hearing date was confirmed.

4. [11]

   On 12 October, in advance of the hearing, which was then two months away, Mr Karle wrote to Mr Newey about fees. Bridges had issued bills to Ms Sithakoul for approximately $180,000. Two of those bills were for counsel’s fees, totalling about $20,000. The other bills were for Bridges’ fees and disbursements. Ms Sithakoul had paid a total of $60,000, covering the bills for counsel and the earliest of Bridges’ bills. This left approximately $80,000 unpaid from bills issued by Bridges in June and July. There was also a sum of about $40,000 owing (or at least claimed to be owing) to another firm of solicitors, WB Legal Pty Limited, who had previously acted for Ms Sithakoul.

5. [12]

   In his email Mr Karle estimated that Ms Sithakoul’s further legal costs up to completion of the hearing would be $22,000 to $55,000. He said that she would be required to deposit $30,000 into Bridges’ trust account before the trial.

6. [13]

   According to Ms Sithakoul’s affidavit, she learned in September 2021 that Bridges had charged her $150,000. She stated that she was surprised and disappointed by the amount charged.

7. [14]

   It seems probable that the events Ms Sithakoul was referring to in her affidavit took place after receipt of the letter of 12 October, rather than in September. The figure for fees in the affidavit also does not match the figures in Mr Karle’s letter. And according to the affidavit of Ms Rae filed on the application, there had been an earlier updated fee estimate provided in May.

8. [15]

   Nevertheless, there is no reason to doubt that Ms Sithakoul became dissatisfied with the level of fees charged by Bridges. She also seems to have fallen out with Mr Newey at around this time. She approached Mr Kim Lap (known as “Tony”) Chow of Longton to act for her.

9. [16]

   On 18 October Ms Sithakoul executed an “authority to release” addressed to Bridges which purported to “direct and instruct” Bridges to transfer the file for the proceedings (and any funds in Bridges’ trust account) to Longton. This was served on Bridges by email on 19 October.

10. [17]

    On the morning of the following day, 20 October, Ms Rae responded to Longton by email:

11. [18]

    On 21 October, Bridges issued its final invoice for the work done on Ms Sithakoul’s matter. The total billed was about $40,000, bringing Bridges’ outstanding invoices to about $120,000.

12. [19]

    Following Ms Rae’s email of 19 October, further email correspondence passed back and forth between Longton and Bridges. Longton sought copies of documents relating to the proceedings, pointing out that the hearing was imminent. Longton also sought copies of documents relating to the retainer between Ms Sithakoul and Bridges, including retainer letters and invoices. Bridges maintained its lien over the former class of documents but observed that once Longton went on the record as Ms Sithakoul’s solicitor, documents would be available from the Court. Otherwise Bridges referred Longton to Ms Sithakoul for relevant documents, including retainer documents.

13. [20]

    Longton filed a notice of change of solicitor on 5 November 2021. By this stage Longton was suggesting to the solicitors for Mr Su that an adjournment would be required. Longton was also in communication with Ms Sithakoul’s previous solicitors, WB Legal Pty Limited, and with Mr Newey, requesting relevant documents.

14. [21]

    The correspondence between Longton and Bridges also continued. I will set out the critical parts of the correspondence in more detail when considering the parties’ submissions below.

15. [22]

    The notice of motion which has resulted in the present judgment was filed on 8 December. It came in for hearing before me on an urgent basis on the following day, 9 December.

16. [23]

    There were three aspects to the notice of motion. First, an order was sought vacating the trial of the proceedings on 14 December. Mr Su, as the other party to the proceedings, was named as the first respondent to the motion.

17. [24]

    The notice of motion next sought orders against Bridges for the delivery up of all of its records, including the file for the proceedings. Orders were also sought to have Bridges identify among its records any documents falling into various specified classes, such as particulars, affidavits, notices under the Evidence Act, settlement offers and other correspondence relating to costs. As I have mentioned, Bridges was named as the second respondent.

18. [25]

    Finally, the notice of motion sought from Mr Newey delivery up of any documents concerning the proceedings in his possession. He was named as the third respondent.

19. [26]

    The basis for the adjournment application in the motion was that Ms Sithakoul’s legal advisers had been unable to obtain the documents needed to prepare for the trial. It emerged at the hearing that Mr Su’s legal representatives were not ready either. As a result, there was no alternative but to vacate the hearing.

20. [27]

    Counsel for Bridges made it clear at the hearing that Bridges’ position was that, given that its retainer had been discharged by Ms Sithakoul, it was entitled to maintain its lien, and would only release the documents if security was provided for the $120,000 claimed in outstanding fees. That aspect of the application was adjourned to 15 December to allow counsel for Ms Sithakoul to obtain instructions. The application against Mr Newey was also adjourned.

21. [28]

    The application was relisted on 15 December, at which point consent orders were made as between Ms Sithakoul and Bridges. Those orders provided for Ms Sithakoul to provide security for the amount claimed by Bridges over other real property owned by her. The application as against Mr Newey was also resolved by agreement and it is not necessary to say anything more about it.

Costs

1. [29]

   Counsel for Bridges sought an order for costs in its favour on the basis that the application was for an indulgence and Bridges did not behave unreasonably in declining to release the file until security was provided in the consent orders on 15 December. Counsel for Ms Sithakoul contended, on the other hand, that Bridges’ conduct had been unreasonable and Bridges should pay Ms Sithakoul’s costs of the application.

2. [30]

   In the following paragraphs I set out the relevant correspondence between Bridges and Longton leading up to the filing of the notice of motion on 8 December.

3. [31]

   The correspondence began with an exchange of emails on 16 and 17 November:

4. [32]

   Twelve days later the issue was taken up by Mr Paul Sant, described as “principal and director” of Longton, resulting in further correspondence:

5. [33]

   The applicable legal principles were not the subject of any debate. They are somewhat complex, being made up of general law rules with statutory and professional conduct rule overlays.

6. [34]

   The general law rules are summarised by McColl JA, giving the judgment of the Court of Appeal, in Bechara v Atie [2005] NSWCA 268 at [46]-[59]. At common law, where a solicitor’s retainer had been terminated by the client otherwise than for good cause, the solicitor was entitled to retain the file unless the client was prepared to provide adequate substitute security.

7. [35]

   The position was otherwise if the solicitor terminated the retainer (even if the termination was justified, for example by the refusal of the client to put the solicitor in funds). In that event, the court had a discretion, apparently equitable in character (Gamlen Chemical Co Ltd v Rochem Ltd [1980] 1 WLR 614 per Templeman LJ at 624H). The usual practice was to order the delivery up of any documents essential to the further conduct of the client’s case to the new solicitor, subject only to the new solicitor undertaking to respect the former solicitor’s lien. In practice that lien would however be of no value once the case was finished. In some circumstances the court could impose terms more favourable to the solicitor, such as a condition that some or all of the former solicitor’s fees be paid.

8. [36]

   There is now a statutory power conferred on this Court to order a solicitor to release the client’s file “on any conditions that the [Court] may determine” (Legal Profession Uniform Law 2014, s 472(1)(b). See also Legal Profession Act 2004, s 728(1)(b); Legal Profession Act 1987, s 209C). But it seems that in practice the power is exercised in accordance with the previously established general law rules: see Bechara at [69]-[70], although cf [72]; Rafferty v Time 2000 West Pty Ltd (No 3) (2009) 257 ALR 503 at [38] (Besanko J); Gigi Entertainment Pty Ltd v Macree (No 2) [2011] NSWSC 869 at [35] (Slattery J).

9. [37]

   By the time Bechara was decided, the rules of professional conduct made under the Legal Profession Act 2004 (NSW) (the Solicitors Rules) expressly dealt with the subject. The Rules provided that where the client had terminated the former solicitor’s retainer the solicitor was entitled to retain the file unless the solicitor’s costs were paid or “satisfactorily secured” (r 29.3). If the former solicitor had terminated the retainer in pending proceedings the solicitor could be required to deliver up documents essential to the conduct of the proceedings, provided that the incoming solicitor “ensure[d]” that the former solicitor’s costs were “satisfactorily secured” or entered into an agreement with the client and the former solicitor to procure payment of the former solicitor’s fees on completion of the proceedings (r 29.4).

10. [38]

    In Bechara McColl JA noted that these provisions reflected the general law rules and interpreted them accordingly. The requirement of “satisfactory security” required that “like should be replaced with like”. Where (as was the case in Bechara) the former solicitor’s fees were subject to a conditional costs agreement that would “commonly” require an undertaking to retain sufficient monies out of the verdict or settlement monies to meet the solicitor’s costs. An undertaking from the client merely to pay the amount found due was insufficient. See at [64]-[67].

11. [39]

    Since Bechara the relevant professional conduct rules have been overhauled. The Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 now provide, in rules 14.1 and 15.1:

12. [40]

    Rule 15.1.1 maintains the obligation on the former solicitor to deliver up essential client documents despite the lien, in two situations. One is if “reasonable security” (as opposed to “satisfactory security” under the former Solicitors Rules) is provided. The other is if a tripartite agreement is made between the former solicitor, the incoming solicitor and the client for payment of the former solicitor’s costs upon completion of the proceedings. It is notable that this refers to an agreement being entered into, rather than an offer in such terms being made. The wording of the current Rule suggests, on the face of it, the former solicitor must actually agree; if this is so, then such an arrangement cannot be forced on the former solicitor, who may require “reasonable security” instead.

13. [41]

    Another change is that the former distinction between retainers terminated by the client and retainers terminated by the solicitor has not been carried forward into the present rules. This has led Professor Dal Pont to suggest (Lawyers’ Professional Responsibility (7th ed, 2021, Thomson Reuters) at [16.70]) that the distinction no longer exists and that a solicitor discharged by a client has lost the favourable position which such a solicitor held under the general law rules.

14. [42]

    Rules 14.1 and 15.1 purport to require the solicitor to deliver up the file in cases where they apply. The Rules are not, as the former Solicitors Rules were, expressed to be subject to the Court’s statutory power to order delivery up of the file. On the other hand, rule 2.3 provides that while a breach of the Rules is capable of constituting unsatisfactory professional conduct or professional misconduct, and may give rise to disciplinary action by the relevant regulatory authority, the Rules “cannot be enforced by a third party”. If the overhaul of the professional conduct rules has indeed resulted in inconsistencies between solicitor’s obligations under those rules and under the general law, it may be necessary to consider whether, in proceedings such as the present, the Rules actually apply so as to displace the general law.

15. [43]

    None of this was the subject of any debate before me and I do not propose to try to resolve it.

16. [44]

    In the present case, there is no suggestion that Bridges’ retainer was terminated for just cause. Ms Sithakoul simply exercised her right to replace Bridges with another firm of solicitors of her choice. Under the general law rules, Ms Sithakoul was therefore not entitled to have Bridges’ file delivered up without proffering security for the $120,000 in fees being claimed.

17. [45]

    There appeared to be no dispute about this from counsel for Ms Sithakoul. At the hearing on 8 December counsel expressly acknowledged that Ms Sithakoul could not get the documents sought without putting up security for the amount claimed by Bridges.

18. [46]

    Counsel stated at the hearing that security had been offered but rejected. Presumably this was a reference to the revised undertaking offered by Longton in Mr Sant’s letter of 29 November (the earlier offer to pay the amount found due was obviously untenable: see Bechara at [58] and [67]). The revised undertaking was to pay Bridges’ costs out of the proceeds of sale held in court.

19. [47]

    At the time the offer was made, the monies were held in court pending the outcome of the case. As Bridges pointed out in their response, all of the monies were claimed by Mr Su. In effect, therefore, the offer was an offer of security over such monies, if any, as Ms Sithakoul might recover in the proceedings.

20. [48]

    As already noted, such an offer was considered in Bechara to be an offer of “satisfactory security”. But that was a case where the solicitor was charging fees on a conditional basis. The solicitor would only have been entitled to payment from the client if the client succeeded. In that sense, the offer of security over the proceeds in return for discharging the lien was an offer of “like for like”.

21. [49]

    In the present case, Ms Sithakoul’s obligation to pay Bridges’ fees was not conditional on the outcome of the proceedings. It therefore seems to me, in the absence of any argument that the applicable law has changed since Bechara was decided, that Longton’s offer was not an offer of “reasonable security”. I am not sure in the end that counsel for Ms Sithakoul contended to the contrary.

22. [50]

    Instead, in written submissions, counsel for Ms Sithakoul tried to counter-attack. Counsel asserted that the solicitors at Bridges had breached their professional obligations with respect to the proper and efficient conduct of the proceedings under the Civil Procedure Act 2005 (NSW), ss 56 and 59. In this regard, counsel referred (as had Longton’s correspondence) to the guidance laid down by Kunc J in Tugrul v Tarrants Financial Consultants Pty Ltd [No 5] [2014] NSWSC 437 at [68]-[77].

23. [51]

    Counsel went so far as to suggest that the Court’s power to make orders against legal practitioners personally under CPA s 99 was engaged. That power applies in cases where costs have been incurred as a result of the solicitor’s serious neglect, serious incompetence, impropriety, or unreasonable conduct.

24. [52]

    Counsel contended that Bridges should be ordered to pay the costs of the dispute with Longton (presumably from 19 October onwards), and those costs should be assessed on an indemnity basis after 29 November (the date of Mr Sant’s letter).

25. [53]

    These submissions treated the issue between Ms Sithakoul and Bridges as an interlocutory one arising in the course of Ms Sithakoul’s action against Mr Su. This was reflected by the notice of motion procedure used to bring the dispute before the Court.

26. [54]

    But this overlooks that once Bridges had been discharged as Ms Sithakoul’s solicitor, its practitioners had no further obligations with respect to the prosecution of her claim. The subject matter of the motion was Bridges’ right to maintain its lien in accordance with its prior contractual and professional relationship with Ms Sithakoul. As between Bridges and Ms Sithakoul, the issues were substantive, and distinct from the claims made by Ms Sithakoul against Mr Su.

27. [55]

    At the hearing on 8 December, it was pointed out by counsel for Bridges that the notice of motion procedure was inappropriate. This was accepted by counsel for Ms Sithakoul, who acknowledged that if the application was to be pursued it should be by way of separate proceedings. In the end, the consent orders made on 15 December made the filing of a separate summons unnecessary.

28. [56]

    The statement in Ms Rae’s initial email of 19 October that Bridges would pursue its claim for costs directly against Ms Sithakoul was a clear intimation that the issues raised by that claim, including any dispute about a lien, were separate from the ongoing conduct of the proceedings between Ms Sithakoul and Mr Su. Longton of course did not have to accept the implicit brush-off. It was open to obtain instructions from Ms Sithakoul to act for her on the dispute with Bridges. But the costs of doing so would in no way be recoverable from Mr Su even if Ms Sithakoul eventually succeeded in her claim against him.

29. [57]

    Arguably what was required was a separate retainer and the opening of a separate file. At the very least it was necessary to give clear advice to Ms Sithakoul on the nature of the dispute with Bridges and the costs implications of that dispute. That was particularly important given Ms Sithakoul’s unfamiliarity with, and difficulties in understanding, the legal process.

30. [58]

    It follows from all of this that the provisions of CPA ss 56 and 59 were not directly relevant to the dispute between Bridges and Longton. Nor was the guidance given by Kunc J in Tugrul. This of course did not mean that the parties were not obliged to behave reasonably and proportionally.

31. [59]

    In support of his assertion of unreasonable conduct on the part of Bridges, counsel for Ms Sithakoul made two complaints. The first was that Bridges declined to provide a “comprehensive suite of documents” in support of costs claimed under their lien. The second was that Bridges did not identify what security they actually wanted until the very last moment, on 15 December.

32. [60]

    In developing these submissions, counsel observed that Ms Sithakoul was in a vulnerable position, and Mr Parker and Ms Rae knew that. The suggestion seems to have been that in some way they exploited that vulnerability. I see no factual basis for any such suggestion, and why it was made is a mystery. Ms Sithakoul was throughout represented by Longton and the solicitors at Longton were clearly at no disadvantage whatever in their dealings with Bridges.

33. [61]

    It is hard to see how counsel’s first complaint, about failure to provide documents in support of the costs claimed, was relevant at all. On an application to have documents handed over despite the existence of a lien, the Court does not go into disputed issues about quantum. As I have said, and as counsel for Ms Sithakoul himself accepted, the obligation is to provide replacement security for the amount claimed. In any event the correspondence which I have quoted shows that Bridges did in fact provide particulars of the amounts claimed, and copies of documents in support.

34. [62]

    It is not clear what counsel’s second point actually meant. Counsel pointed out that there was no mention in Mr Karle’s email of 17 November about the provision of security in lieu of the lien. But it was completely clear from the context that Bridges was relying on the lien. It went without saying that if Ms Sithakoul wished to obtain documents the subject of the lien she would have to offer security to replace it.

35. [63]

    If counsel’s point was that Bridges had some sort of obligation to specify the form of the security which it wanted, I disagree. It was sufficient for Bridges to say, as it did, that it maintained the lien. It is unlikely that the Bridges practitioners had full knowledge of Ms Sithakoul’s financial position. In any event, any knowledge which they had acquired of her finances in the course of acting for her could not properly have been used by them for their own benefit in negotiations about the form of security. It was a task for Longton, as Ms Sithakoul’s solicitor, to identify a suitable form of replacement security and offer it to Bridges.

36. [64]

    I do not propose to go into the negotiations which took place immediately before the making of the consent orders on 15 December. The proceedings only reached that point because of the application made to the Court on Ms Sithakoul’s behalf. Once counsel for Ms Sithakoul indicated that he needed to seek instructions on the provision of security for the amount claimed by Bridges, the additional costs associated with an adjournment were inevitable.

37. [65]

    For these reasons, the attack made by counsel for Ms Sithakoul on the conduct of the solicitors at Bridges (which was, unfortunately, expressed in unnecessarily offensive terms) was unfounded. There were regrettable undertones of resentment and hostility in Bridges’ correspondence. But the substance of the matter is that Bridges was entitled to maintain its lien until proper replacement security was belatedly proffered on Ms Sithakoul’s behalf in the consent orders of 15 December. Ms Sithakoul must pay Bridges’ costs of the application.

38. [66]

    This result for Ms Sithakoul is unsatisfactory, to say the least. It is clear from the form of the orders ultimately made on 15 December that she always had sufficient assets to be able to provide security for the sums claimed by Bridges. In retrospect the whole dispute with Bridges has proved to be a waste of time and money.

39. [67]

    I do not know what advice Ms Sithakoul was given but on the face of it costs have been unnecessarily incurred. I propose, in the exercise of the Court’s powers under s 99 of the Civil Procedure Act, to require Longton to show cause why the Court should not order that any costs charged to Ms Sithakoul in connection with Longton’s dealings with Bridges after 19 October be disallowed, and Longton should not be required to indemnify Ms Sithakoul against her liability to Bridges.

Orders

1. [68]

   The orders on the motion dated 8 December 2021 are:

   1. (1)

      Order that the applicant (plaintiff) pay the second respondent’s costs of the motion.

   2. (2)

      Direct that at 9:30am on 8 March 2022, or such other date as may be arranged with my Associate, the solicitors for the plaintiff, Longton Legal Pty Limited, show cause why the Court should not order: