Australia and New Zealand Banking Group v Meilak

This judgment concerns two Notices of Motion. The first is by the Defendant, Francis Meilak, who seeks an order that Vatche Janoyan and/or Citilawyers Pty Ltd appear and produce documents sought by him under subpoenas issued to them, those subpoenas being annexed to the affidavit of Josephine Karipis sworn 6 October 2016. Secondly, Citilawyers and Mr Janoyan by Amended Notice of Motion filed 11 October 2016 have sought orders that the subpoenas be set aside and that the Defendant pay security to those Applicants for the costs of complying with the subpoena up to the present time.

The proceedings commenced by the ANZ Bank seek possession of a property in Betts Road Greystanes which the Defendant had mortgaged to the bank as security for a loan obtained by it. The background is set out in the judgment of Adamson J, Australia and New Zealand Banking Group and Meilak [2016] NSWSC 1392.

Her Honour ordered judgment for possession of the land and judgment in a stipulated sum against the Defendant. However, a stay was put in place for a period of eight weeks to enable the Defendant to consider whether some form of cross-claim should be brought arising out of the entry into the loan agreement and mortgage. The matter was further complicated by the fact that those now appearing for the Defendant had sought an order for the appointment of a tutor on the grounds of the Defendant's mental incapacity.

At the time of Adamson J’s judgment there was no medical evidence to support the appointment of a tutor and I have been informed that that process is still under way. In the meantime, the Defendant instructs Ms Karipis who has briefed Mr Jefferis of counsel in the matter.

The issue between the parties in relation to the subpoena is simply this: The lawyers who have been subpoenaed claim that they have a solicitor's lien over the file which the Defendant seeks to have produced. That is because various invoices for work performed for the Defendant have not been paid.

The Defendant submits that the solicitors do not have a lien over the documents for a number of reasons but chiefly by reason of the fact that, as the Defendant asserts, he was not the client of Citilawyers and no tax invoices have been rendered to him and, in any event, the Defendant says no costs disclosure was made to him by Citilawyers as s 174 of the Legal Profession Uniform Law (NSW)(2014 No 16a) (NSW) requires.

The affidavit material discloses in substance that Citilawyers were retained for the benefit of the Defendant against the claim made by the bank for possession of the land and judgment for the amount owing under the loan agreement.

Some arrangement seems to have been made between the Defendant and at least one other person known as Frank Divido (also known as Frank Fischetti) whereby Mr Divido would pay Citilawyers' costs of acting on behalf of the Defendant. So much appears from a disclosure of costs and legal services and costs agreement document entered into on 24 September 2015. On that day a conference was held with Mr Divido, the Defendant and Albert Meilak who is the Defendant's son.

A conversation ensued in this form:

The costs agreement was said to be between Mr Divido and Mr Janoyan. Paragraph 1, headed Scope of Work read this way:

Thereafter, Mr Janoyan acted for the Defendant and filed on 17 December 2015 an appearance in the proceedings commenced by the ANZ Bank.

Section 171 of the Uniform Law expressly provides for persons who are known as third party payers in relation to a client of a law practice. It is clear that Mr Divido, under the arrangement set out in Mr Janoyan's affidavit and the costs disclosure, was a third party payer.

The definition of "client" in the Uniform Law is this: "Client includes a person to whom or for whom legal services are provided".

Sections 174 and 176 of the Uniform Law relevantly provide:

In all likelihood the provisions of s 174 were not strictly complied with by Citilawyers in that, at least, Mr Meilak ought to have been made a party to the costs disclosure, alternatively a separate costs disclosure ought to have been entered into with him, notwithstanding that he was not himself to pay any of Citilawyers' costs. I reach that conclusion having regard to sections 171 and the terms of sections 174 and 176 of the Uniform Law.

Nevertheless, the failure to comply with those provisions does not mean that if it otherwise arises a solicitor's lien is ousted. So much appears from s 178 of the Uniform Law and from what was said by Hamilton J in Patterson v Cohen [2005] NSWSC 635 at [14]:

I am entirely satisfied from the evidence that the Defendant was the client of Citilawyers. It was the Defendant who withdrew the instructions of Citilawyers. That appears to have come about as a result of a conflict which emerged between the Defendant and Mr Divido. Rules 14 and 15 of the Legal Profession Uniform Law Australian Solicitors' Conduct Rules 2015 provide for what is to happen when a solicitor's retainer comes to an end. In particular, r 15 deals with the position where the solicitor's retainer is withdrawn by the client. Ultimately it requires that an undertaking must be given, by or on behalf of the client, for the payment of the first solicitor's costs if documents the subject of any lien are to be provided and produced.

I am satisfied, by reason of the relationship between the Defendant and Citilawyers, that a solicitor's lien arose. The mere fact that the Defendant is not in the first instance or at all responsible for the payment of the legal costs, by reason of the arrangement entered into, does not mean the lien does not arise. To require the production of the client's documents by the solicitor now, simply because the client was not under the obligation to pay the legal costs, would be an improper way of ousting the solicitor's lien that came into existence as a result of the agreement, entered into by the Defendant, whereby there would be a third party pay-out responsible for those costs.

The result is that the solicitor is entitled to retain its lien and not to produce the documents in the absence of the appropriate undertaking or the usual form of the tripartite agreement that is applicable to circumstances similar to these.

It has been submitted that it would be unfair to the Defendant if the documents were not produced, particularly because he is in the position where he does not have any money to pay the solicitor's costs. I am informed from the Bar Table that Mr Divido is no longer in the position of being able to pay the invoices that have been issued to him, because he is incarcerated in prison.

Whilst that might produce unfairness in general terms towards the Defendant, who thought he had an arrangement with Mr Divido, there is no unfairness as between Citilawyers and the Defendant in ordering that the documents are not required to be produced. Work was performed by those solicitors for the Defendant pursuant to the three-way arrangement that was entered into. It is not unfair, in any sense known to the law, for those solicitors to be entitled to insist upon their lien until those costs are paid or until some satisfactory arrangement is entered into, as the Solicitors’ Rules anticipate.

I do not consider, in all the circumstances, that it is appropriate at this stage to require the Defendant to pay security for the Applicant's costs of complying with the subpoena. It will be open to the Applicants at the appropriate time to seek whatever appropriate costs they are entitled to in relation to work performed in relation to the issue of the subpoena.

Citilawyers are entitled to have the subpoena set aside. However, I have acceded to a request of the Defendant not to set it aside today to give the Defendant a further opportunity to see if some arrangement can be reached in relation to Citilawyers’ costs. The matter will be re-visited on the date to which the proceedings will be adjourned for further mention.

I make these orders: