Malouf v Constantinou

1. [1]

   The first defendant in these proceedings, Neil Constantinou (“the Husband”), is engaged in family law proceedings with his estranged wife, Jeanette Constantinou (“the Wife”). The second and third defendants, Chris and Thora Constantinou, are the parents of the Husband.

2. [2]

   The plaintiff is a solicitor who is the principal of the firm of solicitors known as “Malouf Solicitors” or “Maloufs” (“the Solicitor”). In these proceedings the Solicitor seeks to establish the validity and enforceability of a charge he has obtained over the defendants’ interests in certain properties as security for his fees for acting for the Husband in the family law proceedings. There are three properties in question:

3. [3]

   The Husband and Wife separated and the Husband left the Clemton Park property at the Wife’s request in September 2014. The family law proceedings were commenced in the Federal Circuit Court in early 2015. Those proceedings involve disputes both as to access to the children (the Husband has apparently had no access to the children since he separated from the Wife) and as to the division of the matrimonial property.

4. [4]

   Initially the Husband was represented in the proceedings by another firm of solicitors, Mason Lawyers (“Masons”). Masons briefed Mr Glenn Gould, of counsel. Disputes arose between the Husband and Masons. Ms Debbie Papadopoulos, a friend of the Husband, made contact with Maloufs in early February 2016 to see if they would be prepared to take over acting for the Husband.

5. [5]

   A telephone discussion took place between the Solicitor and the Husband on 4 February 2016. They discussed both the family law proceedings and the basis on which the Solicitor would be prepared to act. This was followed by a conference at the Solicitor’s office on 9 February 2016. The conference was attended by the Husband as well as his parents. Further discussion took place at that conference about the proceedings and the terms on which the Solicitor was prepared to act.

6. [6]

   On 12 February 2016 Maloufs sent to the Husband a letter summarising the initial instructions which had been received and outlining the basis on which Maloufs would be prepared to act. I will refer to this letter as the “Retainer Letter”. A separate letter was sent to the parents requesting them to guarantee the Husband’s obligations to pay the Solicitor’s fees. I will refer to this letter as the “Guarantee Letter”.

7. [7]

   The Retainer Letter and the Guarantee Letter each enclosed four other documents for signature. These were:

8. [8]

   The Husband and his parents subsequently signed and returned the documents; the precise sequence of this is discussed in more detail later in this judgment.

9. [9]

   Both the Retainer Letter and the Guarantee Letter stated that payment of Maloufs’ (and Mr Gould’s) fees would be deferred until the end of the family law proceedings. However, regular bills were sent on a “for information” basis.

10. [10]

    The family law proceedings were fixed for final hearing in November 2016. But on the day the hearing was due to begin it was instead adjourned until the following February.

11. [11]

    Following the adjournment, tensions arose between the Husband and the Solicitor concerning the lack of progress in the proceedings and the increasing level of costs which had been billed. The Husband asserted that it was necessary to sell the Roselands property.

12. [12]

    In December 2016, the Solicitor caused the Deed of Charge to be stamped. At the same time, the Solicitor lodged caveats on each of the three properties. The interests claimed in the caveat for each of the properties was stated to be “an estate as equitable Mortgagee” by virtue of the Deed of Charge.

13. [13]

    Shortly before the hearing was due to resume in February 2017, the Husband instructed the Solicitor to apply for an adjournment on the ground that, owing to anxiety, he was not fit to proceed with the hearing. The application was successful and the case was fixed for hearing in October and November this year.

14. [14]

    After the February 2017 adjournment, the tensions between the Husband and the Solicitor continued. The Solicitor’s position was that if the Roselands property were sold, the proceeds had to be used to pay the costs which had been billed. The Solicitor also asserted that interest was accruing on those costs. The Husband and the parents applied for lapsing notices on all of the caveats. The notices were issued on 28 March. The Husband and Ms Papadopoulos delivered the notices to Maloufs’ office on 28 April. On 1 May the Solicitor wrote to the Husband purporting to terminate the retainer.

15. [15]

    The present proceedings were commenced by the Solicitor by Summons on 12 May. On that day the Solicitor obtained ex parte orders for short service of an application for urgent interlocutory relief extending the caveats. The application came before me in the Duty List on 16 May. The Solicitor was represented by Mr LT Fermanis, of counsel. The Husband and his parents did not enter formal appearances and were not legally represented, but attended in person and attempted to resist the Solicitor’s application for interlocutory relief. On 17 May I delivered an ex tempore judgment in which I pointed to some of the potential issues concerning the enforcement of the Deed of Charge but concluded that there was a sufficient case for final relief to require the caveats to be extended.

16. [16]

    One of the considerations in granting interlocutory relief to the Solicitor was that I was in a position to proceed to an early final hearing. That hearing was fixed for 8 June. I made directions requiring the parties to file pleadings and to prepare any further evidence in affidavit form. The Solicitor complied with these directions, although slightly outside the timetable I had fixed.

17. [17]

    Initially the Summons had sought declaratory relief. In the Amended Statement of Claim, additional relief was sought in the nature of specific performance.

18. [18]

    The defendants filed no defences and no affidavits. On 7 June, the day before the hearing was due to commence, an appearance was filed by a solicitor for the Husband (only). When the hearing began on 8 June, the Solicitor was again represented by counsel, the Husband was represented by his solicitor and the Husband’s parents were unrepresented and appeared for themselves.

19. [19]

    Affidavits were read on behalf of the Solicitor from Mr Malouf himself and two of his employees. Both the Husband’s solicitor and the Husband’s parents attempted to cross-examine the Solicitor. The other witnesses were not required for cross-examination and the Solicitor’s case in chief closed. The Husband was called to give evidence and was cross-examined. The Husband’s father was then called to give evidence in the Husband’s case and counsel for the Solicitor began to cross-examine him.

20. [20]

    When the proceedings resumed on 9 June, I was informed that settlement had been reached between the Solicitor and the Husband. Eventually after a further adjournment, signed terms of settlement between all parties were produced to the Court.

21. [21]

    The terms of settlement provide for the Court to make a series of declarations concerning the validity of the Solicitor’s security over the defendants’ interests in the Clemton Park and Roselands properties. They then provide for the Court to note an agreement between the parties which contemplates an assessment of the bills issued by the Solicitor and the payment of the amounts so assessed from the sale of the “relevant” property, the Solicitor agreeing not to enforce his security until the assessment or the family law proceedings are completed (whichever comes later), and with enforcement against the Clemton Park property to precede enforcement against the Roselands property. The terms also provide that the defendants pay the Solicitor’s costs of the proceedings in an agreed sum, to be paid after the conclusion of the family law proceedings, the sale of the Clemton Park property or the sale of the Roselands’ property (whichever comes first).

22. [22]

    I informed the parties that the Court would not make declarations just because they were consented to by all of the parties. Counsel for the Solicitor accepted that he needed to persuade me that there was a proper legal and factual basis for the declarations sought, quite apart from any other discretionary factors which might intrude.

23. [23]

    I then invited counsel for the Solicitor to present any further evidence which he wished to put before me in support of the claim for the declarations as formulated in the terms of settlement. He did not cross-examine the Husband’s father further, but some short evidence was given by the Solicitor in reply to earlier evidence given by the Husband’s father. The defendants did not seek to lead any further evidence.

24. [24]

    Under the terms of settlement, the Solicitor now makes no claim over the Husband’s parents’ home at Cardiff. Accordingly, at the end of the hearing I discharged the interlocutory order which had extended the caveat over that property.

Issues for decision

1. [25]

   The first declaration sought is in the following terms:

2. [26]

   Declarations in the same terms are sought in relation to each of the Husband’s and his parents’ interests in the Roselands property.

3. [27]

   Of course, the first step is to satisfy myself that the documents signed by the Husband and his parents are actually reflected in the terms of the declarations claimed. In the present case, this is not a straightforward task because, as will be seen, there is significant divergence, and in some respects outright inconsistency, between the Retainer Letter, the Costs Agreement, the Costs Disclosure and the Deed of Charge. My first task, therefore, is to determine what provision the various documents, on their true construction, make as to the Solicitor’s entitlement to remuneration and security therefor.

4. [28]

   Although agreed orders for specific performance have not been put before the Court and the Solicitor makes no application for any such orders, I must nevertheless determine that the Solicitor is entitled to specific performance if I am to make a declaration that he has equitable interests of the nature claimed. This gives rise to further fields of enquiry.

5. [29]

   In my judgment of 17 May, I raised questions as to whether, having regard to the fact that the transactions in question are transactions between solicitor and client, questions of undue influence and breach of fiduciary duty as a result of non-disclosure might come in to play. I also raised the question whether the Legal Profession Uniform Law (NSW) (“Uniform Law”), s 206, which provides that a law practice may take “reasonable” security from a client, could also provide a defence to the Solicitor’s claim. I also raised the question whether the Solicitor, having withdrawn from acting, is relevantly in breach of his obligations to his client, or otherwise is disentitled from obtaining specific performance because he is not ready, willing and able to perform his obligations. These points were formally put in issue by the Husband’s solicitor at the beginning of the hearing on 8 June, and evidence was led which was relevant to them before agreement was reached to settle the proceedings.

6. [30]

   Counsel for the Solicitor accepted that although the defendants had apparently agreed on terms of settlement and did not seek to advance any defence to the Solicitor’s claim, I nevertheless needed to satisfy myself that these matters did not provide an obstacle to the Solicitor’s entitlement to relief. Counsel addressed the points in question, albeit briefly and in truncated form. Because the submissions at the hearing were limited, I have found it necessary to research some of the points extensively. Given that I have undertaken this extra research, I have, in fairness to the Solicitor, considered independently whether the concessions made by his counsel should be accepted. None of this is any criticism of counsel for the Solicitor, who admirably discharged his obligations to advance his client’s case while at the same time assisting the Court in the time available. It was simply a consequence of the declarations which counsel’s client wished the Court to make and the loss of time resulting from the negotiations of the settlement.

Contractual arrangements between parties

1. [31]

   Following preliminaries, the Retainer Letter stated:

2. [32]

   The next section was headed “General Background” and recounted the instructions which had been provided. The section after this was headed “Professional Costs and Expenses”. Under that heading the following appeared:

3. [33]

   The Letter next provided a costs estimate of $50,000 to $70,000 (plus GST) if the matter was to proceed to a final hearing. Under the subheading “Deed of Charge and Mortgage” the following appeared:

4. [34]

   Then under the subheading “Payment of significant disbursements required” the Letter stated:

5. [35]

   Following preliminaries, the Guarantee Letter stated:

6. [36]

   Consistently with the terms of the first declaration sought, the case for the Solicitor analysed the legal relationship between the Solicitor and the Husband as being constituted by a single contractual arrangement made up by the five relevant documents (Retainer Letter, Costs Agreement, Costs Disclosure, Deed of Charge and Authority). There was no analysis in terms of more than one contract (collateral or otherwise) and counsel for the Solicitor accepted that the Retainer Letter was itself part of the contractual arrangement. In view of the terms of the Retainer Letter (quoted at [31]-[34] above) I think this is the correct approach.

7. [37]

   Where a contract is made up of a number of documents, and especially where one or more of them is in a standard form, it may happen that the terms of the documents cut across each other. In these circumstances, the Court should, if possible, construe each document so that it has some effect. Thus if one document contains a term which is generally expressed, and another document contains a more specific contrary term, it may be possible to read the general term as subject to a specific exception so that both provisions can have some operation: Re Media Entertainment and Arts Alliance; Ex parte Hoyts Corp Pty Ltd (No 1) (1993) 178 CLR 379 at 386-7.

8. [38]

   But it may be that the provisions are irreconcilable and in that situation words or even entire clauses in the documents should be rejected by being read out if they are inconsistent with the “main object” of the contract: Glynn v Margetson & Co [1893] AC 351 at 357.

9. [39]

   The Costs Agreement and Costs Disclosure documents were in standard form, and were referred to in the Retainer Letter only in the context of the Solicitor “undertaking this matter on an hourly rate basis as discussed”. In relation to the deferral of fees, the provision of guarantees and the grant of security, the Retainer Letter was expressed (in the passage quoted at [33] above) as recording what had been agreed between the parties, and the Deed of Charge and Authority are described as merely “evidencing” that agreement. In the present case, the provisions of the Retainer Letter concerning the payment of costs would appear to embody the “main object” of the contract between the Solicitor and the Husband. I put this view to counsel for the Solicitor, who accepted it.

10. [40]

    The legal relationship between the Solicitor and the Husband as client was of course separate from the legal relationship between the Solicitor and the Husband’s parents as guarantors. Furthermore, the Guarantee Letter was less extensive than the Retainer Letter and was in slightly different terms. The case for the Solicitor did not seek to distinguish between the two contracts. The declarations sought as against the Husband’s parents treated them as party to the same “agreement”, constituted by the Retainer Letter and the four enclosures, as the Husband. I propose to proceed on the basis that, for the purposes of the contractual relationship between the Solicitor and the Husband’s parents, the four enclosures should be construed as if they were part of a single agreement also including the Guarantee Letter.

11. [41]

    The recitals to the Deed of Charge contained the following provisions:

12. [42]

    The operative provisions then followed. They included the following:

13. [43]

    The schedule included the following:

14. [44]

    The Retainer Letter (quoted at [31] above) stated expressly that the Solicitor would act on a “conditional ‘pay at end’ basis”. The Guarantee Letter (quoted at [35] above) stated that the matter would be undertaken “on the basis that we will receive payment of our professional costs and those of Counsel from the settlement yet to be achieved”. Recital (2) in the Deed of Charge (quoted at [41] above) stated that the Solicitor was acting on the basis that the Husband would pay “from monies payable to the Client upon settlement or conclusion of the Family Law proceedings”.

15. [45]

    It is not necessary for present purposes to explore the differences in formulation between each of these versions. They all provided that the Solicitor would not be entitled to payment of fees or costs (apart from the out-of-pocket expenses specifically exempted) until the family law proceedings (or at least the property dispute in those proceedings) had been resolved. In my opinion this was part of the “main object” of the contractual arrangements between the parties.

16. [46]

    It is, however, necessary to consider whether this deferral of the Solicitor’s entitlement to payment is affected by the provisions of cl 2 of the Deed of Charge, which contemplated earlier payment in some circumstances. That clause referred to seven such circumstances, identified in sub-paragraphs (a) to (g).

17. [47]

    One of the circumstances in which payment was required was the sale of the Clemton Park property (circumstance (c)). Another was the “[p]rovision of monies to the Client in the course of and/or as a result of the proceedings” (circumstance (f)). I see these as in substance the same as the provisions of the Retainer Letter, the Guarantee Letter and the Deed of Charge which provided for payment on “settlement”, or from the proceeds of the Clemton Park property.

18. [48]

    Payment was also required in the event of the sale of the Roselands property (circumstance (d)) or the sale of the Cardiff property (circumstance (e)). The properties could of course be sold before the family law proceedings were finalised. However, sale in such circumstances would require the consent and participation of the Husband or his parents, and in my opinion they could take effect without repugnancy as exceptions to the “main object” that monies are only payable at the end.

19. [49]

    In taking this view I think it is relevant that the Retainer Letter (quoted at [33] above) expressly referred to the Solicitor releasing his caveat(s) in such circumstances. Provision for some circumstances where monies could be payable before the completion of the proceedings also gives some meaning to the statement in the Retainer Letter that the Solicitor was acting on a “conditional ‘pay at end’ basis” (emphasis added).

20. [50]

    Provision was also made for payment if the Husband or his parents had “sufficient funds to do so with interest” (circumstance (a)). I think the reference to “sufficient funds” must be understood as limited to liquid funds becoming available in the future which were not available to the Husband and his parents at the time the contractual arrangements with the Solicitor were entered into. Any other understanding would upset the careful steps taken to ensure that payment was only required at the end, except in some limited circumstances. It would, however, allow for payment in the event of receiving an inheritance or some other form of windfall. Understood in that limited way, an obligation to pay, limited to a further source of funds, would not prejudice the “main object” of the contractual arrangements and, in my view, could legitimately operate as an exception without repugnancy.

21. [51]

    Similarly, provision was made for early payment if the Husband or his parents obtained “a loan of funds sufficient to pay the monies (and interest thereon)” (circumstance (b)). If this is understood as being limited to a special purpose loan voluntarily undertaken by the Husband or his parents, then again I consider it could stand without repugnancy.

22. [52]

    The reference to interest in circumstances (a) and (b) does not need to be fully considered at this point; it gives rise to a potential issue of repugnancy as discussed below, but even if it were repugnant it would not bring down the rest of the provisions.

23. [53]

    However, the Deed of Charge also purported to require payment in any event on 30 June 2017 (circumstance (g)). An obligation in any event to pay the monies by a fixed date, whether the proceedings were completed or not, was in my view repugnant to the deferral of the fees to the end. It could not sensibly take effect as an exception. Nor was it referred to in the Retainer Letter as a circumstance in which the Solicitor would release his caveat. In my view, this provision must, as a matter of construction, be read out of the Deed of Charge.

24. [54]

    The Retainer Letter, the Guarantee Letter and the Deed of Charge all referred to the Solicitor undertaking the family law proceedings. It was implicit in this that the Solicitor would undertake the family law proceedings until those proceedings were completed, or at least until the property aspect was resolved.

25. [55]

    However, the Costs Agreement provided:

26. [56]

    Questions arise as to whether the powers of termination conferred on the Solicitor by cl F.1 (and in particular the power to terminate on the Solicitor’s “sole discretion”) were repugnant to the “main object” of the contractual arrangements between the parties. Questions also arise as to whether, if those powers were not so repugnant, they were subject to implied limitations that they would be exercised in good faith or reasonably. It is not, however, necessary to resolve those questions. Each of cl F.1, F.2 and F.3 stated that the client was required to pay the costs and expenses incurred up to the date of termination, but none of those clauses specified that the payment was to become due immediately. In the light of the clear stipulation that the fees were deferred to the end as part of the “main object” of the contractual arrangements, no such acceleration arises by implication. The result is that, even if the Solicitor had a right to terminate the retainer under cl F.1, and exercised that right, fees incurred to that point remained deferred until the end of the family law proceedings (or at least until the property dispute was resolved).

27. [57]

    The Costs Disclosure provided:

28. [58]

    The provision in cl 4 entitling the issuing of a tax invoice which would then be “due and payable 30 days from the date of the tax invoice” cannot be read literally, given other provisions of the contract of retainer. It would be repugnant to the deferral of the Solicitor’s costs if they could be made due by the simple expedient of issuing a tax invoice. The provision must be read down so as to allow the Solicitor to issue a tax invoice having that effect only if the Solicitor was entitled to bill for the costs; for instance, if deferral did not apply as in the case of the specified out-of-pocket expenses. The power of termination while any tax invoices “remain unpaid” in cl F.1(a) of the Costs Agreement (at [55] above) must be read in the same way.

29. [59]

    It follows, in my view, that, except to the extent that they covered out-of-pocket expenses which were not deferred, the issue of the tax invoices by the Solicitor in the course of the family law proceeding was of no contractual significance. It is not necessary to determine whether the Solicitor could have referred them for assessment. Even if assessed beforehand, the Husband had no obligation to pay until the end.

30. [60]

    Having regard to the provisions of cl 5, a question arises as to whether, even though the costs claimed in a tax invoice were deferred until the end of the family law proceedings, interest would accrue on those costs in the meantime. In my view, cl 5 should not be read in that way. The clause imposes interest on any amounts “unpaid” thirty days after the tax invoice is sent. The natural meaning of the term “unpaid” is that there is something payable. In my view, the interest obligation imposed by cl 5 only started to run thirty days after delivery of a tax invoice if that tax invoice was due for payment (or, perhaps, once a tax invoice earlier issued became due for payment). Otherwise the clause would be quite capricious, in that the Solicitor could impose an interest obligation on the Husband before the principal sum was due, and the more often tax invoices were issued, the more interest would be payable.

31. [61]

    The Deed of Charge also contained provisions referring to interest. The Schedule contained an “interest commitment date” which was one month after the date of the issue of each bill, but the term “interest commitment date” does not appear in the body of the Deed. Clause 4 (quoted at [42] above) provided that interest would be paid on “the monies” or “so much thereof as is from time to time outstanding to the Solicitor”. Recital (2) (quoted at [41] above) defined “the monies” as “the monies that will be due … and that will become due to the Solicitor”. The overall effect of reading that definition into cl 4 is gobbledegook. My view is that these provisions must be read consistently with the interpretation which I have given to cl 5 of the Costs Disclosure, or ignored as meaningless.

32. [62]

    Interest is referred to in a number of other provisions of the Deed of Charge (quoted at [41]-[43] above) but in a context which I think clearly means no more than interest due. Interest is also referred to in cl 2(a) and 2(b) which deal with early payment in the event of monies becoming available by loan or otherwise (see [42] above). Considered on their own, these provisions might be thought to presuppose that interest is accruing before payment; however, I think that this would be repugnant to the way in which the other provisions of the contractual arrangements must be interpreted. I am fortified in this view by the fact that cl 2(a) and 2(b) are only some of the circumstances providing for early payment. If they carried the implication that interest was accruing, then I cannot see why all of the circumstances in which early payment was triggered would not contain a reference to interest.

33. [63]

    The consequence, in my opinion, is that the tax invoices, except to the extent that they related to specified out-of-pocket expenses, were ineffective to start interest running in accordance with cl 5 of the Costs Disclosure or cl 4 of the Deed of Charge. It is therefore unnecessary to resolve the contractual conflict between the two different interest rates referred to in the two clauses. (I note that even if the clauses had the contractual effect that interest ran, that effect may be overcome by Uniform Law, s 195(1) which allows interest only on “unpaid” legal costs. Section 195(4) would also limit the contractual interest rate chargeable in any event).

34. [64]

    The Retainer Letter expressly required the Husband and his parents to grant security over their interests in the Clemton Park, Roselands and Cardiff properties if the Solicitor was to act. This was reflected in the express provisions of the Deed of Charge, in recital (6) and operative clause 2.

35. [65]

    However, the Costs Agreement went further. Clause L provided:

36. [66]

    Recital (5) in the Deed of Charge provided:

37. [67]

    Curiously, this recital was not reflected in the operative provisions of the Deed of Charge. Nor was a copy of the Costs Agreement annexed to the Deed of Charge, but the Authority was probably wide enough to authorise the Solicitor to do this.

38. [68]

    It is hard to escape the conclusion that the drafting of the documentation focused on the three specified properties and these additional grants of security were standard form provisions which crept into the documentation unnoticed. The difficulty, however, is that they were not, strictly speaking, inconsistent with the specific grants of security over the three properties. They could co-exist with the specific grants. On balance, I do not think that I can treat them as repugnant to the “main object” of the contractual arrangements. The effect of cl L of the Costs Agreement was therefore to charge all of the Husband’s and the Husband’s parents’ property. It is not necessary to determine whether the reference in recital (5) of the Deed of Charge to “all real property” should be read down to the specific items of real property in the Deed. Even if it were so read down, it would not have limited cl L of the Costs Agreement.

39. [69]

    The Retainer Letter (quoted at [33] above) referred to caveats being lodged, in the Solicitor’s discretion, pursuant to the Deed of Charge. Curiously, the Deed of Charge did not itself expressly provide for the lodgement of caveats. Clause 8 of the operative provisions, however, provided:

40. [70]

    The Costs Agreement provided:

41. [71]

    This provision was ineptly worded. Any entitlement the Solicitor had to lodge a caveat depended on whether he satisfied the requirements of the Real Property Act 1900 (NSW) and in particular whether he had a caveatable interest. Whether he had such an interest was a matter which could not be determined by agreement between the parties. Furthermore, consent of the Husband and his parents as the owners of the properties was not required for a caveat to be lodged. But I think the reference to consent to “lodging a caveat … pending payment” must be understood as meaning that the Husband and his parents agreed to the Solicitor maintaining a caveat while any amounts were owing (even if not due); otherwise the provision would be meaningless in practice. This of course must have been subject to the Solicitor being under an obligation to co-operate with any sale of the properties and for that purpose to withdraw any caveats. However, the details of this are not relevant for present purposes.

Fiduciary conflict, undue influence, and reasonableness of security

1. [72]

   According to the instructions provided to the Solicitor in the initial conferences on 4 and 9 February 2016, the Husband was suffering from high blood pressure, anxiety and depression. He had previously worked as a butcher but was now unable to work. He had not seen his children for eighteen months. On his instructions this was despite having an order for access in his favour from the Family Court and was a result of the Wife poisoning his children against him.

2. [73]

   According to the Solicitor’s affidavit:

3. [74]

   The terms of the retainer and the nature of the security to be provided were discussed both in the initial telephone conference between the Solicitor and the Husband on 4 February and at the conference between the Solicitor and all of the defendants on 9 February. According to the Solicitor, on the latter occasion:

4. [75]

   The calculations to which the Solicitor referred appear in his file note of the conference, which is in evidence. The Solicitor valued the Clemton Park property at $1,300,000. Subtracting the loan from the ANZ yielded a figure of $1,080,000. He allowed $300,000 for the debt to the parents ($200,000 principal plus an allowance for $100,000 in interest). This left net equity of $780,000, or $390,000 each for the Husband and Wife. The Husband owed Masons $40,000.

5. [76]

   The Retainer Letter of 12 February, sent following the conference, stated:

6. [77]

   There appears to have been no discussion about security, as distinct from a guarantee, being provided by the parents. Nor does there appear to have been any discussion about the termination of the retainer before the family law proceedings were completed or the possibility of fees (or interest) being payable at any point before the end of the proceedings.

7. [78]

   The next hearing of the proceedings was scheduled for 23 February 2016. The letter to the Husband of 12 February (a Friday) was sent by mail and email with a request that the attached documents be signed and returned before the conference with counsel which was scheduled for the following Wednesday, 17 February.

8. [79]

   The email to the Husband’s parents was mis-addressed. The Husband’s father telephoned Maloufs with the correct address and the documents were re-sent at 4.39pm on 12 February.

9. [80]

   On Monday, 15 February, the Husband emailed Maloufs. He said that the emailed letter of 12 February and attachments had gone missing in his junk email box but had now been received. The Husband said he would print and sign the documents and either scan and email the documents back or send them by post.

10. [81]

    The following day, 16 February at 11.13am, the Husband’s mother telephoned Maloufs. A file note by an administrative assistant at Maloufs reads:

11. [82]

    On the same day Ms Papadopoulos called Maloufs at 1.38pm. She spoke to the Solicitor. According to the Solicitor:

12. [83]

    Following this conversation, at 3.52pm, the Husband forwarded copies of the Costs Agreement and Costs Disclosure signed by the Husband as client and by his parents as guarantors to Maloufs.

13. [84]

    The conference with Mr Gould went ahead the next morning, 17 February. At that stage the Deed of Charge and Authority had not been signed. According to the Solicitor, towards the end of the conference he said:

14. [85]

    The following day, 18 February, the Solicitor wrote a letter to the Husband summarising what had happened at the conference. The letter stated:

15. [86]

    The following Monday, 22 February, Maloufs sent an email requesting that the original signed Deed of Charge and Costs Agreement be brought to court for the directions hearing the next day. Apparently this did not happen but the hearing went ahead with Mr Gould appearing, instructed by the Solicitor. The final hearing was fixed for three days beginning on 14 November 2016.

16. [87]

    On 24 February the Husband’s father telephoned the Solicitor at 8.54am. According to the Solicitor the following exchange took place in the course of that telephone call:

17. [88]

    Later that morning the Husband and his parents attended Maloufs’ office with the signed documents. The File Attendance Record apparently written by a senior paralegal stated:

18. [89]

    The documents were subsequently counter-signed by the Solicitor. On 1 March the Solicitor wrote to the Husband enclosing the signed documents. The letter stated:

19. [90]

    At the hearing before me, the Husband questioned the signature which appears above his name on some, but not all, of the pages of the documents sent out under the cover of the Solicitor’s letter of 12 February 2016. I am, however, satisfied that each of the documents was duly signed by the Husband and his parents, albeit that the signatures on the Deed of Charge were not witnessed.

20. [91]

    The Husband and his parents may have signed the documents, but that does not mean that they understood them. The Deed of Charge is a particular problem in this regard. The passages already quoted are enough to show how clumsily and confusingly it was drafted. In particular, it is hard to know what to make of recitals which were drafted in operative form but were either not reflected in the operative provisions, or which were expressed in different terms from the way in which they were expressed in the operative provisions. More fundamentally, there was the difficulty in reconciling all the disparate, and in some respects, conflicting, provisions of the various documents.

21. [92]

    It is clear that both the Husband’s mother and Ms Papadopoulos, at least, read the documents sufficiently to appreciate the provisions concerning the issue of tax invoices because they asked about that issue before the documents were signed on 16 February. However, I would not infer that they had any clear understanding of the provisions to which I have referred concerning the scope of the security, exceptions to the deferral of fees, circumstances in which the retainer might be terminated early and the effects of doing so, and obligations to pay interest on tax invoices once issued. There was no cross-examination to suggest that they did have any such understanding.

22. [93]

    At the hearing before me, the Husband’s father said that he had had a conversation with the Solicitor in the toilets on one of the occasions on which the matter was before the Federal Circuit Court where he had asked for reassurance against losing his home. The Solicitor denied this conversation and I am not satisfied that it took place. It is clear from the evidence which I have summarised above that the Husband’s father was aware at the time he signed the Deed of Charge and the Authority that it covered his own home as well as his registered interest in the Roselands property. However, it is equally clear that he signed on the understanding that, at least so far as the documents relating to his own matrimonial property were concerned, that was to be reviewed.

23. [94]

    Counsel for the Solicitor conceded that the fiduciary relationship between the Solicitor and the Husband obliged the Solicitor to provide an explanation of the terms of the various documents to the Husband before he entered into them. He contended, however, that an adequate explanation had been given. He also contended that the Husband’s parents were never clients of the Solicitor and that, as non-clients, no fiduciary duty arose.

24. [95]

    There is of course no question that a solicitor owes fiduciary duties to his client. However, questions of conflict can only arise in relation to some other transaction or activity of the solicitor if there is a sufficient relationship between that transaction or activity on the one hand and the tasks undertaken by the solicitor for the client under the retainer (that is, as fiduciary) on the other. This is a consequence of the fact that a fiduciary duty only operates within a defined area; outside that area, the solicitor is free to pursue his own interests without regard to those of the client: Blythe v Northwood (2005) 63 NSWLR 531 at 545 [211] per Bryson JA. Nor, within the area of fiduciary duty, does every hope or expectation of remuneration necessarily give rise to a conflict; there must be a sufficient likelihood that that hope or expectation might affect the fiduciary’s judgment: Phelan v Middle States Oil Corp (1955) 220 F (2d) 593 at 602-603 per Learned Hand J. It might therefore be asked whether a fiduciary conflict arises where a solicitor seeks security for payment of costs to which he will be entitled, especially if that is a condition imposed by the solicitor when first approached to act for the client.

25. [96]

    In MJ Leonard Pty Ltd v Bristrol Custodians Ltd [2013] NSWSC 1734 Windeyer AJ dealt with an application by a solicitor corporation to have caveats over real property owned by its clients extended. The costs agreement in question contained a clause charging in favour of the solicitor all of the clients’ “assets, land, realty or otherwise” and also authorising the solicitor to lodge a “charge, mortgage or caveat” over those assets. His Honour considered the potential defences to the claims in the caveats, but ultimately decided, as I did in this case, that the caveats should be extended until the hearing.

26. [97]

    Among the possible defences referred to was fiduciary duty. His Honour said:

27. [98]

    This does support the view that a fiduciary conflict arises whenever the solicitor seeks security from the client, even at the inception of the retainer. But his Honour did not need to decide the question and, although he expressed himself in trenchant terms, he did not refer to authority.

28. [99]

    In many cases, particularly at the outset of the retainer, a solicitor will not know and will not have occasion to ask for information concerning the client’s ability to pay the costs to be charged, or to provide security. Even in cases where the solicitor does ask for that information, it may be obvious to the client that the solicitor is seeking to obtain the information for the solicitor’s own commercial purposes in dealing with the client. But the present case is different. Because of the property dispute in the family law proceedings, the Solicitor needed (and in fact obtained) instructions on the Husband’s financial position. The information obtained from the Husband and his parents in the initial conferences on 4 and 9 February 2016 (and any information obtained in the initial discussion between the Solicitor and Mr Gould) was obtained before the Solicitor formulated the terms on which he was prepared to act (in his letter to the Husband on 12 February 2016). If the Husband had not accepted the Solicitor’s terms and no retainer had resulted, the information would still have been confidential and the Solicitor would have been unable to use it for the advantage of his other clients or for his own advantage.

29. [100]

    In my opinion, the financial information provided to the Solicitor fell squarely within the area of the Solicitor’s fiduciary responsibility, namely to act for the Husband in the family law proceedings. When the Solicitor stipulated for security to be provided over the properties, and for payment to be made by the client in the event of the properties being sold, the Solicitor was using information which had been provided to him in his capacity as solicitor. If it had not been part of the Solicitor’s instructions, the Solicitor might never have even found out about the Roselands property, for instance. Furthermore, the rights of security which the Solicitor was seeking to obtain potentially affected the assets which would be available to the Husband, and hence the Husband’s ability to prosecute the family law proceedings, should the Husband wish to retain a different solicitor. The Solicitor was advancing his own commercial interests by seeking to obtain favourable terms from the client as to payment and as to security for undertaking the case, when he was in a position of fiduciary conflict.

30. [101]

    For these reasons, I accept the concession made by counsel for the Solicitor concerning the fiduciary duty owed by the Solicitor to the client. In propounding provisions in the contract of retainer dealing with security (at least: I do not need to consider whether other payment terms were also relevant for this purpose), the Solicitor was in a position of conflict between his obligations to the client and his own personal interests, and needed to obtain the Husband’s fully informed consent if he was to comply with his fiduciary duties as solicitor.

31. [102]

    It is not necessary for present purposes to consider whether a solicitor stipulating for security in other types of proceedings is in a position of fiduciary conflict, nor whether such a conflict may arise in relation to the terms of the solicitor’s remuneration generally.

32. [103]

    The next question is whether the Solicitor did discharge his duties in this regard. In MJ Leonard, Windeyer AJ said:

33. [104]

    The Solicitor did go somewhat further than in MJ Leonard in that he expressly referred to the possibility of the Husband obtaining independent legal advice in the documents submitted to him. But I think this makes no real difference. The Solicitor did not actually recommend that the Husband actually obtain independent legal advice; all he did was allow him a short period (only four days) in which to do so. Most importantly, the critical requirement was not just a recommendation to obtain legal advice, but rather an explanation as to why such advice was necessary. Even if the Husband had been able to read and fully take in the documents sent to him by the Solicitor (which I doubt), he would have been left with no idea as to why the Solicitor was conflicted and why he needed to obtain independent advice.

34. [105]

    Counsel for the Solicitor argued, as I understood him, that the salient features of the retainer contract, and the security provisions in particular, were adequately disclosed in the documentation. I am not sure that this is an answer where there has been a failure to obtain fully informed consent. Once failure to disclose is established, speculation about what course the Husband would have taken had proper disclosure been made is irrelevant: Brickenden v Lending Loan Savings Co [1934] 3 DLR 465 at 469 [16]; Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 at 91-94 [435]-[447]. However, I will proceed to consider the question nonetheless.

35. [106]

    It is true that in the very first meeting between the Solicitor and the Husband, the Solicitor indicated he would not act unless guarantees were provided by the Husband’s parents and security was provided. The Retainer Letter made these conditions clear, and clearly identified the properties in question.

36. [107]

    However, I do not think this was enough. The deferral of payment of the Solicitor’s costs to the end of the proceedings when monies could be expected to be available from the sale of the Clemton Park property was obviously a critical factor in the Husband deciding to retain the Solicitor. It was essential, therefore, that any exception, or potential exception, to this deferral be made totally clear to the Husband.

37. [108]

    As has been seen, at the end of a process of construction of the five documents which make up the contractual arrangement it is possible to discern from cl 2 of the Deed of Charge that there were exceptions to the principle in the event of the sale of the properties and in some other circumstances. Although the Retainer Letter referred to this, it did not do so by directly explaining that the circumstances in question (which were not all of those listed in cl 2) were exceptions. Rather it described circumstances in which a caveat, once lodged, might be withdrawn. Although to a lawyer that might carry the implication that there was to be a payment in those circumstances, that could scarcely be adequate for a lay person, especially somebody in the position of the Husband. (In passing, I should note that the terms of recital (3), although they dealt with the same exceptions as in cl 2, were drafted in a more confusing way). In my opinion, nothing less than a clear oral exposition, warning the client about the specific circumstances in which deferral of the fees would cease to apply, was necessary. There was no evidence that any explanation at all was offered orally on this subject.

38. [109]

    Similarly, the circumstances in which there could be termination, and the potential for an argument that termination would accelerate the payment of the fees, also needed explanation. It is clear that Ms Papadopoulos did realise the potential inconsistency created by the provision concerning tax invoices. The Solicitor’s response (which effectively reflected the conclusion I eventually reached as a matter of construction at [58]-[59] above) was that this exception would not apply. But there was no disclosure or explanation concerning the other circumstances listed in cl F.1 of the Costs Agreement in which the Solicitor might cease work, or of the basis of the Solicitor’s apparent belief that termination would make all costs immediately payable.

39. [110]

    Furthermore, there was no disclosure of the provisions which gave the Solicitor a charge beyond the three properties in question, nor of the Solicitor’s apparent belief that interest would accrue during the period the fees were deferred. These also were material matters which required proper explanation.

40. [111]

    It is also true that the Solicitor is not now seeking to enforce any security over the Husband’s parents’ home and the terms of settlement provide for payment of fees only at the completion of the family law proceedings or the earlier sale of property. But in my opinion, the adequacy of the Solicitor’s disclosure needs to be judged by reference to the circumstances which in fact developed in the course of the retainer and following its purported termination.

41. [112]

    When these proceedings were commenced, the Husband was facing the contention that he was in breach of the terms of the retainer, that he owed the Solicitor $180,000; and that this amount was immediately payable and was carrying interest. The family law proceedings had not been heard and the further costs of proceeding to hearing were going to be substantial. The Solicitor had caveats registered on all three properties. As I explain in further detail below, a caveat is not a security and in theory it does not sterilise the property caveated. However, in practice it usually does so.

42. [113]

    This was a desperate position for the Husband to be in. He was left in the position where he had assets of little or no value available to fund the defence of the proceedings brought by the Solicitor against him, let alone to fund the prosecution of the family law proceedings. There is nothing surprising or unforeseeable about these circumstances; they were the natural, and indeed in a sense the intended, consequence of the provisions inserted into the contractual documentation by the Solicitor.

43. [114]

    I acknowledge that, on my analysis, the actual rights of the Solicitor are less far-reaching than this, but in my view that simply illustrates the problem. Meaningful advice about the terms of the retainer should at the very least have drawn attention to, and explained, the provisions later relied upon by the Solicitor. Had the Husband sought independent legal advice, they are the very matters on which it might reasonably be supposed a competent solicitor would have warned him about.

44. [115]

    I therefore conclude that the Solicitor was in breach of his fiduciary obligations to the Husband in stipulating for the entitlements of security over the Husband’s assets in the Costs Agreement and the Deed of Charge. Those entitlements cannot be enforced and, in particular, specific performance cannot be granted of the Deed of Charge as against the Husband.

45. [116]

    So far as the Husband’s parents are concerned, they had their own interest in the family law proceedings because of the loan which they (on their account) had made to the Husband and Wife. The first question is whether they too were clients of the Solicitor. The difficulty for the Solicitor is the statement in the letter of 18 February (quoted at [85] above) that he would act for the parents in the family law proceedings. Counsel for the Solicitor contended that the letter should be understood as an intimation of something which might happen in the future, but I do not read it that way. The letter purports to be a record of matters which were agreed at Mr Gould’s chambers. The agreement, as recorded in the letter, was expressed in terms of the Solicitor acting from that point forward and the reference to the possibility of some change in the future if a conflict emerged is consistent with this.

46. [117]

    Counsel noted that the Solicitor had not provided a disclosure to the parents and had not treated them as clients. This, however, cannot affect the position if in law, as I have held, the Solicitor was retained by the parents in relation to their own interests in the outcome of the family law proceedings. It just means that the Solicitor, no doubt inadvertently, has failed to comply with his obligations under the Uniform Law so far as the retainer with the Husband’s parents is concerned.

47. [118]

    So far as the question of conflict is concerned, the Husband’s parents were in a position similar to that of the Husband. It is clear that before the Guarantee Letter was sent on 12 February, the Solicitor had been provided with information concerning their ownership of the Cardiff property. I infer this was because it was perceived to be relevant to the conduct of the family law proceedings. Again, the Solicitor was in the position of acting for a client (the Husband’s parents) and stipulating for security in circumstances where financial information concerning the client had been provided to him in the course of the relationship of confidence associated with the retainer.

48. [119]

    No fully informed consent was obtained from the Husband’s parents. Like the Husband, they were simply offered an opportunity to obtain independent legal advice in the short period of time between the date of the Guarantee Letter and the date of the first conference. They were provided with no information as to why the advice was necessary. The disclosure to them was similarly flawed and their personal circumstances, although not perhaps so emotionally dire as that of the Husband, were broadly similar.

49. [120]

    There was a further important feature of the parents’ situation. Simply by acting for the parents in circumstances where the Solicitor was also acting for the Husband created a further conflict which required proper disclosure and fully informed consent. The Solicitor and Mr Gould appear to have considered that there was no conflict at that point, but I cannot agree. The Husband’s interests were not the same as those of the Husband’s parents. Indeed the parents’ interests were opposed to that of the Husband and Wife since it was in their interests to dispute the validity of any loan for the purposes of increasing the property which would be divisible between them. Furthermore, the security the Solicitor was seeking on the Clemton Park property would conflict with recovery by the parents out of that asset.

50. [121]

    In my view, just as the security provisions of the contract of retainer are unenforceable against the Husband, the Solicitor is unable to enforce the security provisions of the contract of guarantee against the Husband’s parents.

51. [122]

    Counsel for the Solicitor accepted that a relationship of influence existed presumptively over the Husband as client and that it was for the Solicitor to rebut this presumption. He contended that sufficient disclosure had been provided to rebut the presumption. On the basis of his submission that there was no solicitor-client relationship with the Husband’s parents, counsel contended that the issue of undue influence did not arise so far as they were concerned.

52. [123]

    As Barrett J pointed out in Multi-Span Constructions No 1 Pty Ltd v 14 Portland Street Pty Ltd (2001) 10 BPR 19,253 at [66], the cases usually cited concerning undue influence of a solicitor over the solicitor’s client are nearly all old ones. Most, if not all, of them concern benefits conferred on solicitors who had acted for some period of time. It might be asked whether the principles of undue influence apply so as to allow the impeachment of a security for which the solicitor has stipulated as a condition of taking on the client.

53. [124]

    In MJ Leonard another possible defence was undue influence. Windeyer AJ said:

54. [125]

    Windeyer AJ expressed the view that principles of undue influence applied, but, as with fiduciary conflict, did not give full reasons or cite authority for that proposition. Nevertheless, and essentially because the relationship of confidence began even before the Solicitor’s letter of 12 February 2016 was formulated (see at [99] above), I am satisfied that I should accept the concession by counsel for the Solicitor that a relationship of influence existed in this case. It follows that the grant of security must be shown to have been the product of the Husband’s free will, fully informed, and uninfluenced by the presumed taint of abuse of confidence.

55. [126]

    The present case is far removed from Multi-Span. In that case, the client was a corporate entity with directors who were experienced in business transactions. In the present case the Husband is an unsophisticated man of limited education with no apparent experience in legal matters. The break-up of his marriage and the loss of his relationship with his children have left him in a pitiable state. Without meaning any disrespect, it is quite apparent from the evidence he gave before me, as well as from the way he conducted the case when appearing for himself, that he was quite incapable of protecting his own interests. That would have been apparent to the Solicitor from the outset.

56. [127]

    I have already concluded, in connection with the fiduciary conflict issue, that the Solicitor’s disclosure was inadequate (at [104]-[121] above). In my opinion, the same analysis means that the Solicitor has failed to show that the Husband’s grant of security over his assets was an independent and voluntary decision based on proper consideration of his own interests. I conclude that the Solicitor has failed to rebut the presumption of undue influence. In such circumstances it is not open to the Court to substitute some lesser security: Zamet v Hyman [1961] 1 WLR 1442 at 1451. The security stipulations are therefore entirely unenforceable in equity against the Husband on the ground of undue influence.

57. [128]

    It is not necessary to consider whether there was a direct relationship of influence between the Solicitor and the Husband’s parents as guarantors. I have concluded, in connection with the fiduciary conflict issue, that the Husband’s parents were clients of the Solicitor at the time they granted security interests over their properties, and that the disclosures to them were inadequate. It follows that the security stipulations are invalid as against them also on the ground of undue influence.

58. [129]

    Whether a particular agreement is being procured by undue influence often overlaps with the question of whether the party obtaining the benefit of the agreement has acted unconscionably. However, the doctrines are distinct (Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 474 (Deane J)):

59. [130]

    An additional distinguishing feature is that the doctrine of unconscionable transaction applies at the point of enforcement, so that even if the agreement when entered into did not involve taking an unconscionable advantage, the party with the benefit of the agreement may still be seen to have acted unconscionably in all the circumstances, including the actual performance of the agreement, when coming to enforce the agreement. Once the agreement is shown to be unconscionable, the onus then shifts to the party having the benefit of it to demonstrate that the agreement was “reasonable”, which I understand to mean objectively reasonable rather than just fairly obtained.

60. [131]

    Had I not found against the Solicitor on the issues of fiduciary conflict and undue influence, it would have been necessary to consider the application of this separate doctrine and the statutory version of the doctrine found in the Contracts Review Act 1980 (NSW). It would also have been necessary to consider the question from the point of view of the Solicitor’s conduct in the course of the contractual arrangement, which is explored in further detail (at [181]-[209] below) in connection with the issue of termination. Had the contractual arrangements been found to be unconscionable, it would have been necessary to consider the question of reasonableness (an issue which at [173]-[179] below I address in considering whether the arrangements were, when made, objectively reasonable).

61. [132]

    As a result of my findings it is also not necessary to consider whether the description given in the Retainer and Guarantee Letters to the documents was misleading so as itself to give rise to a defence of misrepresentation to the claim for specific performance.

62. [133]

    It is convenient to begin by summarising, for context and for comparison, the restrictions which the law imposed on solicitors in making agreements with their clients relating to their remuneration.

63. [134]

    A retainer contract has, of course, always been subject to legal and equitable doctrines which apply to the enforceability of contracts generally, and these include fiduciary conflict, undue influence and unconscionable transaction. Thus, if a solicitor embarks on a retainer on a particular agreed basis of remuneration, and then later obtains the client’s agreement to more favourable remuneration arrangements, the subsequent agreement can be attacked on these grounds. There was a comprehensive review of the authorities to this effect by the Supreme Court of South Dakota in Egan v Burnight (1914) 34 SD 473; 149 NW 176. The Victorian Full Court in Westmelton (Vic) Pty Ltd v Archer & Shulman [1982] VR 305 proceeded on the basis that the variation of a retainer agreement so as to provide for the solicitor to have a profit share in lieu of a payment of fees gives rise to a question of undue influence, although none was established on the facts. The later decision of the Victorian Court of Appeal in Weston v Connor (Supreme Court of Appeal (Vic), 9 February 1998, unrep) is to a similar effect although the client again failed on the facts.

64. [135]

    There were additional bases upon which a client could ask the courts to restrict the exercise of rights to remuneration created by the retainer contract. In Woolf v Snipe (1933) 48 CLR 677 Dixon J said at 678-9 (citations omitted):

65. [136]

    There is an overlap between the Court’s general jurisdiction to review solicitors’ remuneration and the doctrines of undue influence, unconscionable transaction and fiduciary conflict as they apply to solicitors and clients. In Clare v Joseph [1907] 2 KB 369 the English Court of Appeal discussed the provisions of the 1870 UK Act (described at [139] below) by reference to the pre-1870 law. Fletcher Moulton LJ said at 376:

66. [137]

    This is the language of equitable doctrine, and Buckley LJ spoke to the same effect. But as Lord Alverstone CJ pointed out, the pre-1870 jurisdiction had been exercised on the basis of what was “fair and reasonable” (at 372). And as the passage from Dixon J which I have quoted makes clear, the doctrine was not confined to the courts of Equity but applied to Common Law courts as well. The general jurisdiction thus imposed disabilities on the solicitor which went beyond those which existed by reason of the equitable doctrines of fiduciary conflict, undue influence and unconscionable transaction. Relevant considerations included “fairness” generally in entering into the contract (which included the doctrines in question but potentially extended further) and also the objective reasonableness of the terms.

67. [138]

    There is also a statutory jurisdiction limiting a solicitor’s ability to enforce his retainer contract with his client in accordance with its terms. The jurisdiction can be traced back to a statute of 1729 (2 George II c 23) which provided that no action could be brought by the solicitor until one month had elapsed after delivery of the solicitor’s bill and which gave the client a right to have the bill taxed. This was carried forward by a statute of 1843: Solicitors Act 1843 (UK) (6 & 7 Vict c 73).

68. [139]

    The Attorneys’ and Solicitors’ Act 1870 (UK) (33 & 34 Vict c 28) created a system whereby a solicitor was entitled to make an agreement with the client (which had to be in writing) allowing the solicitor to charge at rates higher than those that would be allowed on taxation. However, the enforcement of such an agreement was under court control, and they could only be enforced if the court (through the taxing officer or, on reference, a Judge) considered that they were “fair and reasonable”: ss 4, 8, 9.

69. [140]

    The Solicitors’ Remuneration Act 1881 (UK) (44 & 45 Vict c 44) made provision for remuneration of solicitors in non-contentious matters. It established a system of delegated legislation in the form of “General Orders” made by a committee chaired by the Lord Chancellor. The committee was empowered by General Order to fix scale rates for solicitors’ remuneration in non-contentious transactions. It also contained provisions in essentially the same terms as the 1870 UK Act, allowing a solicitor to agree (in writing) with his client to charge for non-contentious business in such manner as they saw fit, but subject to the client’s right to have the agreement cancelled or the amount payable under it reduced, if the court considered that it was “unfair or unreasonable”: s 8.

70. [141]

    In New South Wales, the Legal Profession Act 1898 (NSW) consolidated the existing statute law and did not incorporate the provisions of the 1870 UK Act. Nor did it incorporate the provisions of the 1881 UK Act, but these were copied in essentially the same terms in the Conveyancing Act 1919 (NSW), with the power of review for unfairness or unreasonableness conferred on this Court: s 212.

71. [142]

    The Conveyancing Act provisions were repealed in 1984 and replaced by amended provisions inserted into the 1898 Act: Conveyancing (Solicitors’ Remuneration) Amendment Act 1984 (NSW), s 3; Legal Practitioners (Solicitors’ Remuneration) Amendment Act 1984 (NSW), Sch 1. A board known as the Legal Fees and Costs Board was created and given the power to fix costs in both contentious and non-contentious matters. It remained open for the solicitor to agree with his client, in non-contentious matters, to be remunerated at a higher rate than the prescribed fees, but subject to review by this Court in the course of taxation if the Court considered the agreement to be unfair or unreasonable: Legal Practitioners Act 1898 (NSW), ss 20T, 20U.

72. [143]

    The present system whereby costs are assessed by costs assessors, who have powers to review the fairness and reasonableness of costs agreements for this purpose, was introduced in 1993 and commenced in 1994: Legal Profession Reform Act 1993 (NSW), Sch 3.

73. [144]

    So far as security is concerned, it appears to have been accepted before 1870 that there was a rule at general law that a solicitor had no right to take a mortgage for future legal costs. The rule was stated by Lord Eldon LC in Jones v Tripp (1821) Jac 322 at 323 as follows:

74. [145]

    Lord Eldon said nothing more to explain the basis for the rule. Lord St Leonards explained it in a parliamentary debate in 1864 on the ground that “by allowing a solicitor to take such a security expensive litigation might be incurred, over which the client might have no control”: House of Lords Debate (21 June 1864) vol 176 cols 5-18. However, in the form stated by Lord Eldon, the rule was an absolute one and could not, apparently, be rebutted if the facts of the particular case showed that the client was not in fact being exploited.

75. [146]

    The rigour of the rule was somewhat mitigated by the fact that equity recognised that a solicitor who was instrumental in recovering money for a client was entitled to an equitable charge (misleadingly described as an equitable lien) over the monies in question: see, generally, Firth v Centrelink (2002) 55 NSWLR 451.

76. [147]

    The rule against a solicitor taking security for costs appears to have been understood as applying only to future costs. It did not prevent a solicitor from taking security for costs already incurred, but such an arrangement would obviously give rise to questions of undue influence or fiduciary conflict such as those that I have addressed above.

77. [148]

    The rule that a solicitor was unable to take security for future costs was abrogated by the 1870 UK Act. Section 16 provided:

78. [149]

    The 1881 UK Act also made specific provision for security for non-contentious business. Section 5 provided:

79. [150]

    This power was exercised by the General Order made pursuant to the Act, effective from 31 December 1882. Clause 7 relevantly provided:

80. [151]

    This Order authorised a solicitor to take security for future costs but it did not attempt to regulate the terms on which security could be taken.

81. [152]

    Neither s 16 of the 1870 UK Act nor s 5 of the 1881 UK Act were adopted in the 1898 NSW Act. Section 5 of the 1881 UK Act was, however, later enacted as the Conveyancing Act 1919 (NSW), s 209 and a General Order commencing 1 October 1920 was made containing cl 7 of the General Order made under the 1881 UK Act. However, the rule against a solicitor taking a mortgage for future costs, as it applied to contentious business, appears to have been left unaffected.

82. [153]

    In 1984, s 209 of the Conveyancing Act was repealed and, in its place, s 20V was inserted into the Legal Practitioners Act 1898 (NSW): Conveyancing (Solicitors’ Remuneration) Amendment Act 1984 (NSW), s 3; Legal Practitioners (Solicitors’ Remuneration) Amendment Act 1984 (NSW), Sch 1. Section 20V provided:

83. [154]

    The effect of this provision was that, apparently, for the first time in New South Wales, a solicitor was authorised to take security for future costs in contentious as well as non-contentious matters. The provision was replaced in the Legal Profession Act 1987 (NSW), which repealed the entirety of the 1898 Act, in s 207. Section 207 provided:

84. [155]

    Section 207 was renumbered as s 191 and amended as a result of the 1993 amendments to the 1987 Act: Legal Profession Reform Act 1993 (NSW), Sch 3. Section 191 was in the following terms:

85. [156]

    This provision was not limited to future costs and in its terms permitted a solicitor to take security for past costs as well as future costs.

86. [157]

    When the 1987 Act was replaced by the Legal Profession Act 2004 (NSW), the provision was enacted in amended form as s 320:

87. [158]

    This provision qualified the previous provisions by permitting a solicitor to take “reasonable” security.

88. [159]

    Most recently, the provision was re-enacted in s 206 of the Uniform Law in the following form:

89. [160]

    The question arises as to what extent the current legislative provisions allow a client to challenge security taken by a solicitor on the grounds that it is not “reasonable”; or conversely, the extent to which, provided that the security is “reasonable”, the solicitor is protected from claims which the client would otherwise have.

90. [161]

    For this purpose, I have reviewed the second reading speeches relating to the 1984, 1987, 1993, and 2004 enactments, as well as the 2014 enactment applying the Uniform Law. None of these are of any assistance. In the time available I have not attempted to research whether there are any committee reports or other materials produced in the course of the consultation and drafting process which would cast light on the reasons for the amendments to the provision dealing with security.

91. [162]

    In Jones v Baker (2002) 10 BPR 19,115, Young CJ in Eq was considering a challenge by a client to an agreement he had made to provide a caveat to his solicitor over land which was the subject of the proceedings. His Honour said at 19,123-19,124:

92. [163]

    In the end it was not necessary for his Honour to decide the question.

93. [164]

    His Honour’s observations are open to the interpretation that the effect of the nineteenth century English legislation (strictly speaking, the reference to the 1881 Act should really be a reference to the 1870 legislation, which came first and applied to contentious as well as non-contentious business) and its successors down to s 191 of the 1987 Act had been to reduce the degree to which courts would scrutinise an agreement between a solicitor and his client granting security to the solicitor. On the other hand, his Honour seems to have accepted that this did not affect the application of the doctrine of undue influence.

94. [165]

    It has not been possible for me to undertake comprehensive research on the parliamentary proceedings which led to the enactment of s 16. However, on the information available, it appears that the purpose was to assimilate the treatment of a security for future fees to the existing equitable rules covering the grant of security for past fees. Given that security for future fees had been absolutely prohibited before the enactment of s 16, it can hardly have been intended that such a security would be in a more favourable position after the enactment than a security for past fees.

95. [166]

    It therefore seems clear enough that the statutory provisions authorising a solicitor to take security do not affect the application of the equitable doctrine of undue influence (and also unconscionable transaction and fiduciary conflict) which continue in full force. But there is a further possible basis for the Court’s intervention which needs to be separately considered.

96. [167]

    Before 1870, it would have been a purely academic question to ask whether the Court’s “general jurisdiction” extended beyond remuneration to the grant of security. However, with the abrogation of the old rule, that possibility was opened up. In my view, there is much to be said for it as a matter of principle. For practical purposes, remuneration and security are closely related. The Court’s jurisdiction to control solicitor’s remuneration depends ultimately on their status as officers of the Court and there is no reason why, if the Court is prepared to scrutinise the fairness and reasonableness of provisions dealing with remuneration, it should not likewise be prepared to scrutinise provisions relating to the grant of security.

97. [168]

    If, as I have suggested, the purpose of the enactment of s 16 of the 1870 UK Act was to abrogate the old absolute rule, then there would be room for the Court to exercise its “general jurisdiction” with respect to security.

98. [169]

    It is not necessary to consider to what extent the Court’s general jurisdiction, as it applies to provisions relating to remuneration, has been affected by the establishment of the system of costs assessment and the conferral of costs assessors’ powers to consider the fairness and reasonableness of costs agreements. The grant of security has always stood, and continues to stand, outside these provisions. Relief in relation to security is exclusively a matter for this Court.

99. [170]

    The effect of the 2004 amendments was to cut back the protection, if any, which had originally been afforded by s 16 of 1870 UK Act. Henceforth, that protection only applied where the solicitor took “reasonable” security. Technically, it might be argued that this left the absolute rule against mortgaged security for future costs, as enunciated by Lord Eldon, in place for grants of security which were not “reasonable”. In practical terms, the outcome would be very similar to a conclusion that the Court’s “general jurisdiction” to review agreements made by solicitors with their clients on the grounds of fairness and reasonableness extended to grants of security. In either case, it is open to argue that the client may obtain relief from the Court against the grant of a security on the grounds that the security is not “reasonable”.

100. [171]

     In MJ Leonard (decided under the 2004 Legislation) Windeyer AJ said:

101. [172]

     Having regard to my analysis of the legislative history, the only real effect of s 320 may have been (and the only real effect of its replacement, Uniform Law s 206, may be) to remove the previous disability of general law on a solicitor taking security, and to do so only where the security is “reasonable”. It seems clear enough that the removal of the disability does not affect the operation of other equitable doctrines such as fiduciary conflict and undue influence; and it may be that, if the “general jurisdiction” applies, it does not affect that either. Therefore, while s 320 was (and Uniform Law s 206 is) in a sense a provision which “cannot be enforced” against the solicitor, it is only a very limited protection against other bases for challenge to the grant of security which can be so enforced.

102. [173]

     Having regard to my findings on fiduciary conflict and undue influence, it is not necessary to determine whether the grant of security was otherwise unfair or unreasonable so as to fall foul of the Court’s inherent jurisdiction, if such exists with respect to security. However, in case I am wrong about the continued operation of the equitable doctrines of undue influence and fiduciary conflict in the light of Uniform Law s 206, I will consider whether the grant of security was objectively “reasonable”. For this purpose, I think the analysis needs to be carried out by reference to the actual obligations I have found which the documentation imposed on the client, and which were less extensive than those which the Solicitor believed were being imposed.

103. [174]

     For this purpose, Windeyer AJ’s observations concerning desirable practice have considerable weight owing to his Honour’s distinguished career as a solicitor and then as a Judge of this Court.

104. [175]

     I respectfully share the concerns expressed by Windeyer AJ about the possibility that agreements of this sort could become widely used or even standard practice. While I see nothing wrong with a solicitor deferring payment of fees until the proceedings in question have been completed, and I see nothing wrong in principle with the idea of a solicitor securing a client’s obligations on property, or even taking a guarantee in an appropriate case, security provisions of this sort must be very carefully handled if they are not to have the potential for being oppressive to clients, particularly clients lacking business skills or experience.

105. [176]

     In my opinion, the fundamental difficulty about arrangements of the type in this case is that the solicitor in effect becomes the client’s financier. A client who lacks other financial resources is in the position of in effect being advanced the cost of the litigation on credit, secured on the client’s property. The client is locked into a dependent position with little or no control over the conduct of the proceedings, and often a diminishing interest in their outcome.

106. [177]

     I respectfully agree with his Honour that it is inappropriate for a solicitor to take security by means of a clause in a costs agreement and that if security is to be taken it should be by separate document, so that the client has a clear opportunity to understand the separate nature of the security obligations. In the present case there was, of course, a separate Deed of Charge which expressly charged the three properties. But there was also an “all property” charging clause in the Costs Agreement, and an “all real property” charge in one of the recitals to the Deed of Charge, which made an already clumsily drafted document even more confusing. His Honour’s comments apply, in my opinion, with even greater force to such a situation.

107. [178]

     I also respectfully agree with his Honour that an “all assets” security is unlikely to be reasonable. In this case, on the Solicitor’s calculations, the Husband had $390,000 in equity in the Clemton Park property. Subtracting the $40,000 owed to Mason Lawyers, that still left $350,000 available to meet the Solicitor’s costs. The Solicitor’s estimate of costs was $55,000 to $77,000. I appreciate that this was based on the assumption of an equal division of the Clemton Park property, and accept that when the retainer began the Solicitor was only embarking on the matter and could legitimately point to some uncertainty about the eventual costs. But in my view, the Clemton Park property should have been sufficient on its own to cover the Solicitor’s costs in any reasonable eventuality. It is hard to see what legitimate interest the Solicitor had in taking additional security over the Roselands property and the Cardiff property, let alone (in Windeyer AJ’s phrase) the Husband’s motor car and trousers.

108. [179]

     In these circumstances, I would, if it had been necessary to consider to make a decision on the question of reasonableness, have concluded it was not reasonable for the Solicitor to have taken security over the Roselands property, the Cardiff property, or any of the other assets of the Husband apart from his interest in the Clemton Park property.

Contractual entitlement to specific performance

1. [180]

   In order to address the issues concerning the Solicitor’s contractual entitlement to specific performance, it is necessary to consider the developments that took place between the execution of the contractual documentation and the final breakdown in relations between the parties.

2. [181]

   On 22 April 2016 the Husband sent an email to Maloufs concerning the proceedings. One of the points made in the email was as follows:

3. [182]

   On 28 April the Solicitor responded:

4. [183]

   At a conference on 5 May, according to the Solicitor, the issue was raised and he said words to the effect:

5. [184]

   The Solicitor’s subsequent letter stated:

6. [185]

   This represented a subtle but important shift in the Solicitor’s position. The Solicitor was saying that he would only give consideration to releasing property from the charge “in due course”. But the Solicitor’s earlier letter (quoted at [89] above) had spoken about reviewing the charge “with a view to releasing your parents property [sic] at Newcastle”. It was an overstatement for the Husband to say that the Solicitor had agreed to release the property, but at the same time the Solicitor’s wording implied a predisposition to releasing it. Given that at the time the estimate for fees to complete the matter was $55,000 to $77,000 and given the value of the Husband’s equity in the former matrimonial property at Clemton Park, it would not have been unreasonable for the Husband and his parents to have assumed that the properties would be released.

7. [186]

   As already noted, the proceedings were due to be heard in November 2016, but were instead adjourned to the following February. This apparently happened on the first day which had been fixed for hearing, 14 November 2016.

8. [187]

   By the time the proceedings were adjourned, the Solicitor had sent bills totalling $96,000 to the Husband. The Solicitor had also provided a revised estimate, in which he estimated that the further costs to completion would be approximately $45,000 to $55,000. The total cost was thus estimated to be $141,000 to $151,000, compared with the initial estimate of $55,000 to $77,000.

9. [188]

   On 18 November the Husband sent an email to his legal team, including the Solicitor. After recounting his frustrations with the Wife’s conduct and the lack of progress in the family law proceedings, he said:

10. [189]

    On 23 November the Solicitor replied:

11. [190]

    It is not clear whether in fact the Roselands property was actually listed for auction on 19 November. Certainly if it was, the property did not sell. The Solicitor sought to present the supposed steps to sell the property as having been some sort of underhand conduct on the part of the Husband and his parents. In my view, this fails to pay adequate regard to the expectations which are likely to have been created by what the Solicitor told the Husband’s father before the Deed of Charge was signed in February 2016, coupled with the Solicitor’s abstention from lodging a caveat. A lawyer might understand that, even in the absence of caveat, it was a breach of a chargor’s obligations to seek to dispose of property subject to a charge. However, so far as the evidence goes, the Solicitor never advised the Husband or his parents of this beforehand, nor did he do so in his letter of 23 November.

12. [191]

    As already noted, in December the Solicitor stamped the Deed of Charge and then lodged caveats on all three properties. It appears that, contrary to the undertaking given in the Solicitor’s letter of 28 April, the Solicitor did not inform the Husband or his parents about this.

13. [192]

    On 22 December Maloufs wrote to the Husband with a further bill of costs. The total amount outstanding was now said to be approximately $131,000. The letter invited the Husband to deposit payment to Maloufs’ trust account and stated that tax invoices were normally payable in full within fourteen days “in the absence of other agreement which we have with you”. Later that evening the Husband replied. Among other things he said:

14. [193]

    On 30 January 2017 the Solicitor wrote in reply. He said:

15. [194]

    The Solicitor acknowledged that the fees for the matter would not be payable until the end. He appears however, to have been asserting, apparently for the first time, that interest was running on the tax invoices that had been issued even though payment of the principal was deferred. For reasons I have given above, I consider that this was wrong because the provisions in question were repugnant to other aspects of that arrangement which prevailed over them.

16. [195]

    On 8 February Maloufs sent a further bill to the Husband for “out of pocket expenses”. Although not referred to in the letter, the bill included approximately $660 for registration fees on the caveats and stamp duty. It appears that this was the first occasion on which the Solicitor provided any information to the Husband about the registration of the caveats, which had happened on 20 December.

17. [196]

    On 24 February the Solicitor wrote to the Husband following the adjournment of the hearing which had been scheduled for 20 February. The letter stated:

18. [197]

    On 7 March the Husband replied complaining about severe anxiety and depression and continuing:

19. [198]

    On 15 March the Solicitor replied as follows:

20. [199]

    A letter in the same terms was sent directly to the Husband’s parents.

21. [200]

    The Solicitor (and Mr Gould) were apparently now taking the position, in their own interest, that if the Roselands property was sold, the whole of the proceeds would be applied first to their costs and fees. On the view that I have taken of the interpretation of the contractual arrangement between the parties (see [48] above), the sale of the Roselands property would trigger an exception to the deferral of their fees. The Husband and his parents, however, had no obligation to sell. Nor, on my analysis, was interest accruing on the fees in the meantime.

22. [201]

    This illustrates the fundamental problem with the Solicitor’s conduct. The Husband and his parents were not to appreciate that what they were being told was a statement of their lawyer’s position which was opposed to their own interests. Proper advice to them in their own interests would have emphasised that the deferral of fees was binding on both the Solicitor and Mr Gould no matter how frustrated they might be about the “inordinate time” the proceedings were taking, and that the last thing the Husband and parents should be doing was to take voluntary steps such as selling the Roselands property which would trigger an exception to that deferral. They should also have been advised that the issue of the tax invoices was of no contractual significance and did not cause any interest obligation to start to run, or at least that there was debate about that matter.

23. [202]

    It was in these circumstances that the Husband apparently applied for lapsing notices on the caveats. As noted above, those notices were issued on 28 March but were not at that stage served. On 30 March the solicitor issued a further bill of costs. The total shown as outstanding was now approximately $180,000. The covering letter stated:

24. [203]

    On 31 March the Husband replied:

25. [204]

    The Solicitor replied by letter dated 7 April 2017:

26. [205]

    The Husband’s comments about the caveat issue were an exaggeration. But the Solicitor’s response was an over-reaction, and with far less justification. Unlike a lay client, a solicitor is supposed to know the law. The Solicitor had changed his position on releasing the other properties from the charge and had failed to give the Husband and his parents adequate advice on their rights. Even if he was entitled to take the position that the removal of caveats was a matter for his discretion, the discretion still had to be exercised in good faith and having regard to the amount of security actually required. It was not open to the Solicitor to take the position that in no circumstances would the caveats be released unless the Solicitor was paid early, something he was not entitled to.

27. [206]

    Moreover, it is clear from the last paragraph quoted above that the Solicitor now wished to be rid of the client (on the assumption that he would then be entitled to be paid immediately for the work he had so far done). It appears that the Solicitor was playing a careful tactical game of not himself terminating the contractual arrangement but seeking to engineer a termination in some other way. In these circumstances, the client’s interests demanded that he be advised on circumstances in which the retainer could be terminated, and the effect of such termination. Such advice would not be easily or briefly provided, given the issues to which I have referred concerning repugnancy, good faith and reasonableness. No information at all was provided on these matters, and the Husband was not even advised to seek independent legal advice on them.

28. [207]

    As already noted, on 28 April the Husband and Ms Papadopoulos delivered the lapsing notices to Maloufs’ offices. That was a Friday. This provoked the Solicitor’s letter of termination which is dated the following Monday, 1 May. The letter stated:

29. [208]

    On 6 May the Husband replied:

30. [209]

    However, the Solicitor proceeded to lodge his notice of withdrawal with the Federal Circuit Court of Australia. As already noted, on 12 May he commenced these proceedings.

31. [210]

    The Solicitor’s letter of 1 May does not make clear whether he was purporting to exercise a right of termination at common law on the basis of a repudiatory breach on the part of the Husband, or purporting to exercise a contractual right of termination under the terms of the Costs Agreement, or both.

32. [211]

    So far as a common law right of termination is concerned, I am prepared to accept, based on the analysis at [71] above, that the action of the Husband and his parents in issuing lapsing notices against the caveats was a breach of their obligations under cl M of the Costs Agreement. The question therefore is whether such a breach was sufficiently serious to justify the termination of the contract (“failure of performance”) or if it evinced a repudiatory intention (“renunciation”): Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at 135-6 [44].

33. [212]

    In answering this question, it is important to bear in mind that a caveat is not itself a security. It is only a means under which the holder of an alleged security may notify his interest on the register. If challenged, the onus remains on the claimant to justify the interest. The practical effect of the caveat is (or should be) nothing more than a convenient way for a person claiming the interest to ensure that he or she is given sufficient opportunity to justify it.

34. [213]

    A caveat does not prohibit any further dealings with a property, although many people seem to proceed on the basis that it does. It only prohibits the registration of dealings which are inconsistent with the interest claimed. Leaving a caveat in place is therefore not an undertaking not to enter into dealings which might affect the property.

35. [214]

    It is also possible to challenge a caveat (for instance, on the basis that it does not satisfy the appropriate formal requirements, or because it does not disclose an interest in land) without impugning the validity of the underlying transaction to which the caveat relates. Furthermore, there may be another reason why the underlying transaction is unenforceable or is liable to be set aside.

36. [215]

    In the present case, on my findings, the security provisions were unenforceable in equity and were liable to be set aside. I would be very reluctant to accept that the proper and legitimate exercise of the client’s rights to challenge the security interest claimed by the Solicitor amounted either to failure of performance or renunciation. It is also relevant that the Solicitor had twenty-one days from the service of the lapsing notice before the caveat would lapse. Yet he acted on the very next business day, without any attempt to remonstrate with the client and without having previously given the client adequate advice on the client’s position. In my opinion, the client’s conduct did not deprive the Solicitor of a substantial enough benefit that it should amount to failure of performance. Nor should that conduct be seen as evincing an intention not to abide by his obligations irrespective of what the Court might find those obligations to be: see DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 431-2.

37. [216]

    So far as a possible contractual right of termination is concerned, similar questions arise. However, it is not necessary to go into detail as to the precise content of the various rights of termination and whether they were hedged about with implied obligations of reasonableness or good faith. The Costs Agreement expressly provided that the Solicitor would give “reasonable notice” of termination. No notice whatever was given, let alone reasonable notice. In my opinion, the failure to do so disentitles the Solicitor from relying on any of the contractual provisions. It may also disentitle the Solicitor from relying on common law rights of termination, especially having regard to the contractual provision which picked up any lawful right of termination (cl F.1(i)), but it is not necessary to go into that for present purposes.

38. [217]

    In my opinion, the Solicitor was wrong in thinking that he had a right of termination as a result of the service of the lapsing notices. His purported termination was invalid and was itself a repudiatory breach of his obligations under the retainer contract.

39. [218]

    If I had not concluded that the clients’ service of lapsing notices was non-repudiatory, it would have been necessary to consider whether there was some other contractual justification for repudiation by the Husband as at 28 April. This would have required consideration of whether the Solicitor’s failure to give adequate advice on the contractual arrangements was sufficiently serious to justify termination by the client.

40. [219]

    It might also be necessary to consider other potential breaches. One of the other items of complaint made by the Husband in the period leading up to termination (not quoted in the material I have set out above) was the position so far as the claims by Masons were concerned. Initially, it appears that Masons were prepared to co-operate with the transfer of the matter to Maloufs on the basis that they would be paid at the end of the family law proceedings. A proposed tripartite deed between the Husband as client, Masons and Maloufs was proposed by Masons to Maloufs, and the Solicitor apparently gave some advice to the Husband about it. But, by the following year, Masons were taking the position that they were entitled to be paid, they had apparently assessed their costs (after unsuccessful objections by the Husband), and they had proceeded to obtain a judgment and commence bankruptcy proceedings. By March 2017 the Solicitor was asserting that the dealings with Masons formed no part of his retainer and if he was to act the client would need to pay separately. The question was not argued before me and the evidence is incomplete. However, the apparent failure to take up the initial proposal on the tripartite deed is troubling. One particular area of concern is that Masons were apparently seeking some form of caveat to protect their interest and the question of priority as between Masons and Maloufs might have fallen into the area of fiduciary conflict between the Solicitor’s interests as security-holder and the Husband’s interests as litigant. However, in the light of my earlier findings, I do not need to go into this further for the purpose of this judgment.

41. [220]

    Despite my conclusion that the Solicitor repudiated his contractual obligations by purporting to terminate, there remain two matters to be considered before it would be possible to conclude that the Solicitor’s repudiatory conduct had disqualified him from being otherwise entitled to specific performance.

42. [221]

    The first is that, although I have found the Solicitor has repudiated his obligations under the retainer contract, it is not clear to me that the Husband has accepted that repudiation. The Husband, of course, did not formally need to write electing to terminate. However, in the absence of a written election, it will be necessary for the Husband to have taken some step which was inconsistent with the continuation of the Solicitor’s retainer. One such step might be to appoint a new solicitor to conduct the family law proceedings. However, there is no evidence about this. Until and unless the repudiation is accepted, it is open to the Solicitor to resile from it and in that event the Solicitor might still be entitled contractually to insist on specific performance.

43. [222]

    The second issue is that even if repudiation has been accepted, there is a question about whether the Solicitor’s breach is such as to debar him from any form of specific performance either against the Husband or the Husband’s parents. It is often said that a party in breach is not entitled to specific performance, but this statement is too broad. One qualification to it is that not every breach, no matter how trivial, deprives a party of entitlement to specific performance. There may be other situations in which a party who has substantially performed an agreement may obtain specific performance. One instance recognised in the authorities are the cases in which specific performance has been decreed of a lease even after the expiry of the lease term. In such a situation, of course, there has not necessarily been a breach, but the party in question has performed and presumably can obtain specific performance because, by performing, that party has qualified for specific performance despite the fact that no further action is required under the contract in question. In the present case, the Solicitor of course was required to continue to act and in that sense some of the consideration remained executory. But some work had been done giving rise to an executed consideration. It might be possible for the Solicitor to argue that this executed consideration was sufficient to qualify the Solicitor for specific performance of the security arrangements. This argument is of particular significance in the case of the contract of guarantee between the Solicitor and the Husband’s parents.

44. [223]

    In the light of my other findings, I do not need to go into these questions.

Conclusion and orders

1. [224]

   I have concluded that the security provisions in the contract of retainer between the Solicitor and the Husband and in the contract of guarantee between the Solicitor and the Husband’s parents are unenforceable in equity because of fiduciary conflict and undue influence. The Solicitor’s claims in these proceedings must therefore fail. It is not necessary to consider other potential bases on which those provisions might be unenforceable.

2. [225]

   I have also concluded that:

3. [226]

   I will hear the parties should any party wish to seek further relief arising out of these findings.

4. [227]

   A question will arise as to the effect of my conclusions on the enforceability of the settlement agreement embodied in the terms of settlement provided to the Court in the course of the hearing. The terms of settlement, at least in so far as they provide for costs, may be severable and enforceable despite my refusal to grant the relief sought by the Solicitor. If that part of the agreement is not severable then it will be necessary to consider what costs orders ought to be made in the exercise of the Court’s discretion, having regard to the result of the proceedings. I will grant liberty to the parties to apply with respect to both of these questions once they have considered the terms of my judgment.

5. [228]

   The orders of the Court are as follows: