Dennis v Joukhador

1. [1]

   The plaintiffs commenced proceedings by summons on 15 December 2020. They sought a declaration that the first defendant, Marcel Joukhador, holds trust monies deposited to the account of Thomas Joukhador Practice General Trust Account on behalf of the plaintiffs and the defendants, in connection with monies received as a consequence of a Settlement Agreement entered into between various parties. They sought an order that the first defendant provide an accounting in relation to the monies received by him in accordance with the Settlement Agreement, and an order that the first defendant pay to the plaintiffs the monies to which the plaintiffs are entitled in accordance with that Settlement Agreement.

2. [2]

   The first plaintiff, Bruce Dennis, was formerly a solicitor of this Court. He practised as a sole practitioner trading as Dennis & Co from 2002 to 2009 until the second plaintiff, DC Legal Pty Ltd, was incorporated. The first plaintiff was and continues to be the sole director of the second plaintiff, and at all relevant material times he was the principal of that company when it was providing legal services.

3. [3]

   The first defendant currently practises as a solicitor through Harrow Legal Pty Ltd. He formerly practised through the business name Thomas Booler and Co Lawyers.

4. [4]

   The second defendant is a litigation funder, and has filed a submitting appearance in the proceedings.

5. [5]

   The present proceedings arise out of costs orders and assessments made in relation to four sets of proceedings involving claims by former shareholders of HIH against the liquidators of HIH. In one of those proceedings (the Baldock proceedings) the relevant plaintiffs had previously been represented by DC Legal. Carriage of the Baldock proceedings had been transferred from DC Legal to the first defendant pursuant to Heads of Agreement entered into for this purpose between DC Legal and the first defendant on 26 June 2014.

6. [6]

   Pursuant to the Heads of Agreement, it was agreed in relation to various proceedings then on foot, including the Baldock proceedings, that the first defendant would pay to DC Legal an amount equal to 50% of the profit costs received by the first defendant for the matters taken over, including the Baldock proceedings, after deduction of the amounts paid to the second defendant for its funding and other services.

7. [7]

   Pursuant to a Settlement Agreement between the liquidators, the companies and the shareholders in the HIH proceedings, the sum of $2,382,000 was to be paid to the “Thomas Booler Lawyers Law Practice Trust Account”, and $868,000 was to be paid to the “Harrow Legal Pty Ltd Law Practice Trust Account”, presumably to recognise the two periods the first defendant practised through different companies. The plaintiffs say that they do not know if the money was paid as the Settlement Agreement anticipated, but the parties agree that in July 2020 an amount of $500,000 was paid from the Thomas Booler Trust Account to DC Legal.

8. [8]

   Harrow Legal, acting for the first defendant, sought and obtained particulars of the plaintiffs’ claims in the summons. The first defendant has not filed or served evidence going to the substantive issues in the proceedings.

9. [9]

   On the same day the summons was issued, the plaintiffs served a Notice to Produce on the first defendant requiring production of the following documents:

10. [10]

    On 8 February 2021 the first defendant filed a notice of motion seeking an order that the Notice to Produce be set aside. On 17 March 2021 the first defendant filed a further notice of motion seeking that the claim made by the first plaintiff be struck out, that the second plaintiff give security for the first defendant’s costs of the proceedings in the sum of $77,500.00, and that the proceedings be stayed until the security was provided. On 23 April 2021 the first defendant filed an amended notice of motion in respect of the notice of motion filed 17 March 2021, making it clear that the order sought was that the first plaintiff’s claim be summarily dismissed pursuant to r 13.4 of the Uniform Civil Procedure Rules 2005 (NSW).

11. [11]

    It is the motion of 8 February 2021 and the amended motion of 23 April 2021 with which this judgment is concerned.

Summary dismissal

1. [12]

   The first defendant submitted that, if either of the plaintiffs has any claim by reference to costs incurred in the Baldock Proceedings, it can only be a claim by DC Legal and not Mr Dennis in his personal capacity. That is because:

2. [13]

   Ms Castle of counsel for the plaintiffs submitted that Mr Dennis has an arguable case to an entitlement to the costs. She submitted that he acted for the Baldock clients from 2002; he claimed a lien over the funds in the hands of HIH and was required to release that lien against HIH as part of the settlement agreement; and Thomas Booler and Harrow Legal acted for both him and DC Legal in settling the party/party costs claim against HIH. Ms Castle submitted that the documents show a lack of clarity about whether Mr Dennis or DC Legal was acting in the matter, so that the test for summary dismissal was not met.

3. [14]

   Rule 13.4 UCPR provides:

4. [15]

   The principles to be applied on an application for summary dismissal are similar to those applied on summary judgment applications, and are well known. It would have to be found that the claim is so obviously untenable that it cannot possibly succeed or is manifestly groundless, or is one which the Court is satisfied cannot succeed, or is an abuse of process: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129; [1964] HCA 49; see also Shaw v State of New South Wales [2012] NSWCA 102 at [30]-[33]. The assessment is made taking the plaintiffs’ case at its highest.

5. [16]

   In Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41, the plurality said at [57]:

6. [17]

   In Spencer v The Commonwealth (2010) 241 CLR 118; [2010] HCA 28, a case concerned with s 31A of the Federal Court of Australia Act 1976 (Cth), French CJ and Gummow J quoted with approval what the High Court had earlier said in Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99; [1983] HCA 25:

7. [18]

   In Paul Ernest Simmons v Protective Commissioner of NSW also known as NSW Trustee and Guardian [2012] NSWSC 455, Hammerschlag J said at [62]:

8. [19]

   The provisions of ss 56 and 58 of the Civil Procedure Act 2005 (NSW) do not warrant any result different from that indicated by the General Steel test: Shaw at [134].

9. [20]

   An examination of the contemporaneous evidence tends to demonstrate that the entity who provided the legal services to the shareholders was DC Legal.

10. [21]

    The Heads of Agreement, to which earlier reference was made, was between DC Legal (referred to as “DCL” in the Agreement) and Marcel Joukhador (referred to as “MJ” in the Agreement). It relevantly provided:

11. [22]

    Counsel for Mr Dennis tendered a number of items of correspondence passing variously between Mr Dennis, DC Legal, Thomas Booler, Harrow Legal, and Ashurst, between 2014 and 2020. The correspondence principally concerned the settlement of the issue of costs between Thomas Booler & Co on the one hand, and Ashurst, the solicitors for the liquidators, on the other hand. All but three of the documents are intractably neutral in terms of casting any light on the entitlement of Mr Dennis personally to the costs. The first two tend to support Mr Dennis’s entitlement, and the third does not.

12. [23]

    The first of those is a letter from Harrow Legal to Ashurst of 9 July 2019 which relevantly says:

13. [24]

    The second letter from Harrow Legal to Ashurst of 19 August 2019 simply reiterates that Harrow Legal acts for Dennis & Co and DC Legal.

14. [25]

    In a sense, reliance on these letters by the plaintiffs is question begging, because it needs to be ascertained from other material whether it is correct that either of those entities does have a lien for legal services. The fact of Harrow Legal acting for Dennis & Co, and asserting such a lien does not, of itself, take the matter any further.

15. [26]

    The third of those letters is one on the letterhead of DC Legal Pty Ltd to Mr Scarcella and others at Ashurst dated 26 June 2014. The letter says:

16. [27]

    That letter seems to me to provide further support for the notion that the only entity having a right, or claiming a right, to the costs from the liquidators was DC Legal Pty Ltd.

17. [28]

    In his affidavit of 12 May 2021, Mr Dennis said this:

18. [29]

    In his first affidavit of 15 December 2020 Mr Dennis exhibited to his affidavit a party/party bill of costs prepared in respect of the Baldock proceedings in accordance with orders made by Brereton J on 28 April 2017. The bill claimed legal costs and disbursements of $4,824,380.75. Mr Dennis referred to the exhibit as exhibit DCB1.

19. [30]

    His affidavit went on to say:

20. [31]

    Exhibit DCB1 is a lengthy document of more than 200 pages. However, its significance is that the earliest dates for which costs and disbursements were claimed by the plaintiffs was November 2013. On the basis of Mr Dennis’s statement in paragraph 3 of his affidavit of May 2021, DC Legal was the legal practice that provided legal services to the plaintiffs in the HIH proceedings after 2009, even though Mr Dennis was the solicitor on the record.

21. [32]

    In an email from Mr Dennis to Mr Joukhador of 7 December 2020 Mr Dennis said:

22. [33]

    After Mr Joukhador replied saying that the costs for DC Legal were not in the amount of $2,380,000, Mr Dennis emailed Mr Joukhador and said:

23. [34]

    Those emails contain an acknowledgement that it was DC Legal which provided the legal services.

24. [35]

    After the commencement of the proceedings, the solicitors for Mr Joukhador sought further and better particulars of the claims made in the summons. Question 1 asked:

25. [36]

    What were referred to as “the individual bills” in that answer were otherwise described in exhibit DCB1 as “unique party and party bill of costs”. One of those bills formed part of that exhibit, and it is apparent that the first work for which legal costs were claimed was carried out on 4 November 2013.

26. [37]

    The plaintiffs submitted that the evidence of the work done by Mr Dennis from 2002 was not before the Court, but pointed to the statement in paragraph 3 of his affidavit ([28] above) to submit that he had done that work. It was Mr Dennis who put before the Court the Bills of Costs in exhibit DCB1. It was open to him to adduce evidence of the work he had done by exhibiting bills for the period 2002 to 2009. However, it is to be recalled that Mr Dennis said in his affidavit that ExhDCB1 sets out “all claims for costs sought to be made” and which were compromised under the Settlement Agreement (see [30] above). If there was evidence, contrary to what was said in his affidavit, his failure to do so enables an inference to be drawn that any further evidence would not have assisted the claim he makes.

27. [38]

    In the request for particulars, question 3 asked the same question as question 1 in respect of the second plaintiff. The answer given by those acting for the plaintiffs was this:

28. [39]

    Question 5 of the request for particulars sought clarification of paragraph 6 of Mr Dennis’s affidavit of 15 December 2020. It was that paragraph which made reference to, and exhibited, exhibit DCB1. Question 5(a) asked if the first or second plaintiffs provided any instruction in relation to the drafting of the bill of costs and, if so, whether those instructions were oral. Question 5(b) asked, if the instructions were oral, what the substance of the alleged conversation was. The answer given was:

29. [40]

    What Mr Dennis says in the affidavits he swore in relation to the present applications, and what is contained in the contemporaneous documents, demonstrates beyond any serious argument that the only party entitled to the costs arising out of the settlement agreement is the second plaintiff DC Legal. It was that entity which entered into the fee agreements and it was that entity which provided the legal services to the various claimants in the Baldock proceedings. No claims for costs have been identified prior to 2013. On Mr Dennis’s own evidence, it was DC Legal that provided the legal services after 2009.

30. [41]

    No reasonable cause of action is demonstrated by the first plaintiff, and the claim brought by him should be summarily dismissed.

Security for costs

1. [42]

   In the light of my determination concerning the position of the first plaintiff, Mr Dennis, I will only deal with security for costs on the basis that the only plaintiff is DC Legal.

2. [43]

   The first defendant submitted that there were five reasons why the jurisdictional requirement is made out. First, there is no evidence DC Legal has any assets except for an amount of $100,000 in Westpac bank. Secondly, DC Legal has no active business. Thirdly, the Westpac account is controlled by Mr Dennis so that the balance in the account can be reduced. Fourthly, although $500,000 was paid to DC Legal on 13 July 2020, there is only $100,000 left in the account. Fifthly, there is no evidence about the account except between 1 April 2021 and 10 May 2021.

3. [44]

   The plaintiffs submitted that there were problems with the costs estimates provided by Mr Husaini, a solicitor in the employ of Harrow Legal. These estimates were said to have been adopted by Mr Rajeev, the solicitor for the first defendant.

4. [45]

   The plaintiffs relied on what was said in the High Court in Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29; (2019) 93 ALJR 1007 and the cases which have followed it, to argue that the first defendant is not entitled to costs prior to the time his present solicitors commenced to act for him.

5. [46]

   The plaintiffs submitted that there was no evidence of any costs agreement between the solicitors who claimed to be acting for the first defendant. Following further debate about this matter, I granted leave to the first defendant to file further evidence concerning a costs agreement which Mr Jones of counsel for the first defendant indicated had been entered into. I shall return to this matter later in the judgment.

6. [47]

   Rule 42.21 Uniform Civil Procedure Rules 2005 (NSW) relevantly provides:

7. [48]

   Section 1335 of the Corporations Act 2001 (Cth) relevantly provides:

8. [49]

   In Treloar Constructions Pty Limited v McMillan [2016] NSWCA 302 Beazley ACJ said:

9. [50]

   The two issues which arise in relation to security for costs are whether any order should be made and, if so, what amount should be ordered. Consideration of the second matter raises the issue of the Chorley exception [London Scottish Benefit Society v Chorley (1884) 13 QBD 872], on the basis of what was said in Bell Lawyers.

10. [51]

    DC Legal was incorporated in 2009, seemingly to be the vehicle through which Mr Dennis conducted his legal practice. Mr Dennis has not held a practising certificate since 30 June 2015, and on 6 May 2016 orders were made for the removal of his name from the Supreme Court roll.

11. [52]

    The evidence discloses that on 13 July 2020 an amount of $500,000 was paid to DC Legal in relation to the costs settlement with the liquidator. As at 10 May 2021 there remained in the Westpac Bank account of DC Legal the sum of $114,069.82. NAB holds a fixed and floating charge over all the property and assets of DC Legal. This charge was put in place on 26 May 2011.

12. [53]

    In his affidavit of 12 May 2021 Mr Dennis said that DC Legal no longer banks with NAB, it is not indebted to NAB, and he has requested that NAB discharge the charge. At the time of hearing of the motions on 4 June 2021 there was no further evidence about what had been done in relation to removing that charge.

13. [54]

    Since June 2015 DC Legal has had no active business. Although Mr Dennis says it has no business outgoings, it is apparent that the account at Westpac is being used to pay liabilities as they arise such as to the ATO, ASIC and for legal fees.

14. [55]

    Given the rate at which the amount of $500,000 has been diminished, there is a reasonable belief that DC Legal will be unable to pay the costs of the first defendant if ordered to do so. I note, in that regard, that the only evidence about the account is one bank statement showing transactions between 1 April 2021 and 10 May 2021.

15. [56]

    Mr Dennis says that he is the registered proprietor of a strata unit in Hosking Place in Sydney. No mortgage is shown on the certificate of title. However, in light of my determination that the claim by Mr Dennis should be summarily dismissed, it is significant that, although submissions filed for the plaintiffs say that Mr Dennis “has acknowledged that he would stand behind” DC Legal, and that he has unencumbered property to “support and such ability”, his affidavits do not make any such offer. Nor is it satisfactory that the first defendant should have to execute a judgment against the property. No offer of a charge or mortgage was made. In any event, where DC Legal has a bank account with funds in it, that is the appropriate source for the provision of security, if it is to be ordered.

16. [57]

    There is no suggestion that the proceedings will be stifled if an order is made. Nor is there any evidence that any impecuniosity of DC Legal has been caused by the first defendant.

17. [58]

    In my opinion the evidence causes me to believe that DC Legal will be unable to pay the first defendant’s costs if ordered to do so. The rate at which the funds placed in that account have been dissipated, and seemingly for ongoing liabilities, leads me to that conclusion. The proceedings will not be finalised until well into 2022. $500,000 was placed into the account on or about 13 July 2020. By 10 May 2021 there was only a little over $114,000 in the account, with no evidence of what had happened to $350,000 of the $500,000 prior to 1 April 2021. It is, therefore, appropriate to make an order for the provision by DC Legal of security for those costs.

18. [59]

    As noted earlier, counsel for the plaintiffs submitted that the first defendant had filed no evidence of a costs agreement between him and the solicitors who claimed to be acting for him in the proceedings. Counsel for the plaintiff first submitted that it should be inferred from what the solicitor, Mr Rajeev, said, that there was an agreement by the first defendant to pay his costs. When I indicated some doubt about drawing such an inference, counsel sought leave to tender the costs agreement, although submissions had almost concluded. Counsel for the plaintiffs opposed leave being given on the basis that, without seeing the costs agreement, she did not know what might flow from its admission into evidence. She said it was possible the approach to security may have been conducted in a different manner.

19. [60]

    I indicated that I was minded to grant leave to the first defendant to re-open his case to adduce the evidence of the costs agreement, but I said I would give the plaintiffs time to consider the evidence and their approach to it.

20. [61]

    Counsel for the first defendant said that he was instructed the costs agreement could be obtained within 10 to 15 minutes. However, the lunch adjournment was approaching, and Ms Castle was not available after lunch. In those circumstances, I directed that the further evidence was to be served by the following Monday, and that either a further date could be appointed for further oral submissions or, if the parties, wished, they could lodge short written submissions in relation to the evidence, and I would consider those without the need for a further hearing. The latter position was adopted by the parties.

21. [62]

    The first defendant filed a further affidavit of Mr Rajeev annexing the costs agreement. However, without any leave, the affidavit also contained a complete reassessment by Mr Rajeev of the costs he estimated would be incurred in defending the proceedings. In addition, and again without any leave, the first defendant filed a further affidavit from Ms Fogl reviewing those costs as an expert witness. Finally, and again without any leave, the first defendant filed submissions which, in addition to dealing with the costs agreement, contained arguments about the revised costs, and revisited the issue arising from Bell Lawyers.

22. [63]

    In Jordan v Goldspring [2021] NSWSC 7 Hallen J said:

23. [64]

    Although I said to counsel for the first defendant, “Mr Jones, I think you need to serve a copy of whatever other evidence you are going to serve”, that statement had to be seen in the light of his application to tender simply the costs agreement. There was no suggestion that the costs were to be reviewed by Mr Rajeev or Ms Fogl. The filing of those affidavits, and the making of those further submissions were inappropriate, and should not have occurred. I do not intend to have any regard to that material. The costs of preparing that material are not to be recovered from the plaintiffs.

24. [65]

    There is a further matter arising from Mr Rajeev’s affidavit of 7 June 2021. In his affidavit of 2 June 2021 Mr Rajeev said:

25. [66]

    In his affidavit of 7 June 2021 Mr Rajeev said:

26. [67]

    It is difficult to see how Mr Rajeev could have sworn to what appeared in the affidavit of 2 June 2021 if he had acted with any care to ensure that what was contained in that affidavit was true. This was not simply a typographical error as can easily occur. There must have been evidence in his file of the agreement on 26 February, and of the posting of the costs agreement on 12 March. Courts ordinarily act on the basis that they can accept without question statements made by lawyers in affidavits. It behoves lawyers to act with great care when they put material before the Court, especially in affidavits. This error had the potential to affect any apportionment of costs between the time Mr Rajeev was acting, and the earlier period when Harrow Legal were acting, during which time the issue arising from Bell Lawyers must be resolved.

27. [68]

    Although Mr Rajeev said in his affidavit of 7 June 2021 that the Costs Agreement became binding on 22 April 2021, the copy of the Costs Agreement annexed to that affidavit has the signature of the first defendant and the date “7/6/21”. That was a date after the hearing of the first defendant’s motions, and rather suggests that counsel’s instructions that it could be obtained within 10 or 15 minutes on 4 June were not correct. It was not otherwise explained in what way the costs agreement became binding on 22 April.

28. [69]

    The evidence of the costs estimate for the first defendant’s costs of defending the proceedings, is to be found in the affidavit of Naushad Husaini sworn 17 March 2021. Mr Husaini is a senior solicitor at Harrow Legal, Mr Joukhador’s firm. Reliance is also placed on an affidavit of Lydia Fogl, a solicitor who is put forward as an expert in the area of costs assessments.

29. [70]

    Objection was taken by the plaintiffs to Ms Fogl on the basis of a conflict of interest. Ms Fogl was said to have acted as an expert in the interests of the plaintiffs in recovering party/party costs for them. I do not see any basis for finding a conflict of interest. Ms Fogl was an expert in both cases. The present costs being considered are not the same costs as the plaintiffs were earlier recovering. Ms Fogl’s opinion does not concern opinions she may have expressed earlier. An expert owes his or her duty to the Court. Ms Castle ultimately submitted that the issue went to weight. I do not think it even impacts the weight to be given to Ms Fogl’s opinion.

30. [71]

    Mr Husaini estimates the costs of a one day hearing together with all necessary preparation at $49,800. He estimates disbursements at $27,700, making a total figure of $77,500. Ms Fogl has assumed that the tasks, estimates of time and disbursements made by Mr Husaini are correct. She considers the hourly rates to be charged by him and his subordinates are at the lower end of the rates ordinarily charged in these type of proceedings. She makes some adjustments to his figures, and concludes that an amount of $64,725 is likely to be allowed for professional fees and disbursements on a party/party basis.

31. [72]

    Mr Husaini’s breakdown of costs includes costs of $7,500 for costs incurred in relation to work performed for the present Notice of Motion. Part of the costs allowed for counsel also includes work related to the present applications. Counsel for the first defendant accepted that it was not appropriate to include costs of that work in any security ordered. In my opinion, an amount of $10,000, representing the costs of the present applications, should first be deducted from any amount awarded for security.

32. [73]

    In his affidavit of 1 June 2021, Mr Rajeev says that work totalling $10,250 from Mr Husaini’s estimate was work performed by Mr Husaini before Mr Rajeev commenced to act. That raises the issue from the decision in Bell Lawyers because Mr Husaini was an employee of Harrow Legal which was the first defendant’s firm. Harrow Legal was an incorporated legal practice.

33. [74]

    In Bell Lawyers, the High Court held (Nettle J dissenting) at [3], [63] and [93], that the Chorley exception, whereby a solicitor acting for himself or herself could recover professional fees for acting in the litigation, should not be recognised as part of the common law of Australia. The joint judgment of Kiefel CJ, Bell, Keane and Gordon JJ) then went on to deal with a submission that serious inconvenience would be caused in relation to the use of in-house solicitors by governments and corporations by the removal of the Chorley exception.

34. [75]

    The joint judgment said:

35. [76]

    Bell Lawyers was considered in the Victorian Court of Appeal in United Petroleum Australia Pty Ltd v Freehills [2020] VSCA 15. In that case Freehills acted for itself in litigation, albeit, the work was mainly carried out by employees of the firm. The Court of Appeal said that the issue flowing from Bell Lawyers was this:

36. [77]

    The Court of Appeal said this:

37. [78]

    The Court then considered matters which might be thought to favour the matter fitting into the exception of an employed solicitor, and said:

38. [79]

    That case is not determinative of the present issue because Freehills was the party sued and the solicitors who acted.

39. [80]

    In D A Starke Pty Ltd v Yard & Anor (No 2) [2020] SASC 81, the solicitor who acted through an incorporated legal practice, sued a former client for fees and disbursements. The defendant resisted the claim in reliance on Bell Lawyers. Judge Boschner (a Master of the South Australian Supreme Court) said:

40. [81]

    In Hurst-Meyers v Aulich Civil Law Pty Ltd [2021] ACTSC 16, an incorporated legal practice, which was sued, was represented by an employed solicitor and a director of the practice. The practice was successful, and sought costs. Justice Mossop said at [30] and [31] that he followed the decisions in Bell Lawyers, United Petroleum, and D A Starke, and refused to order costs.

41. [82]

    Since this matter was argued, the New South Wales Court of Appeal has delivered judgment in Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd [2020] NSWCA 148. The case involved an incorporated legal practice which had obtained a lump sum costs order against a former client who had unsuccessfully sued the practice. One of the issues on the appeal concerned whether the decision in Bell Lawyers prevented the making of the costs order in circumstances where employees of the legal practice had acted for the practice in the litigation. The issues were complicated by the fact that there had been a change in the legal structure of the practice during the retainer by the former client, with the result that the successor legal practice (M & K Lawyers Group) acted for the former legal practice (M & K Sydney) in the litigation against it, albeit with employed solicitors doing the work. That means that the issue to be determined was not the straightforward issue in the present case of an employed solicitor doing work for his own incorporated legal practice.

42. [83]

    However, a number of passages in the judgments suggests that the abolition of the Chorley exception will not affect the recovery of costs by an incorporated legal practice where the legal work was carried out by an employee of that practice.

43. [84]

    The principal judgment was given by Leeming JA. His Honour examined the statutory basis for recovery of costs, including the definition of ‘costs’ in s 3 of the Civil Procedure Act 2005 (NSW) which is:

44. [85]

    Leeming JA said of the joint judgment in the High Court:

45. [86]

    His Honour next dealt with a submission that the corporate veil should be pierced, so that the earlier legal practice for whom the latter practice acted should be regarded as one and the same entity. This was not a consideration of whether an employee who acted for his legal practice should be identified with it, by piercing the veil, but similar considerations are likely to arise. His Honour said that there was no basis, on the authorities, to pierce the corporate veil, and went on to say:

46. [87]

    His Honour then said this of United Petroleum:

47. [88]

    Justice Meagher agreed with Leeming JA adding some reasons of his own, where he said of Bell Lawyers:

48. [89]

    White JA also agreed with Leeming JA with added reasons. In the course of those he said:

49. [90]

    Although the decision in Burrows does not bind me because of the unusual factual situation in that case, I consider that I should adopt a similar approach to the reasoning in that case, and respectfully not follow D A Starke and Hurst-Meyers. I consider that the decision in United Petroleum is of limited usefulness because it did not concern an incorporated legal practice and its employees.

50. [91]

    The result is that the costs estimated to have related to the work carried by Mr Husaini before Mr Rajeev was retained, should be taken into account.

51. [92]

    The authorities show that the amount of security ordered should be sufficient, but not a complete indemnity: Brundza v Robbie & Co (No 2) (1952) 88 CLR 171.

52. [93]

    The plaintiffs did not adduce any evidence of the likely costs to the first defendant, nor were any of the first defendant’s deponents cross-examined. On the other hand, the breakdown of the costs and disbursements by Mr Husaini has been done on a very broad-brush basis. Estimates are given of 10 hours each for paralegal staff and secretarial staff. The disbursements are said to be include $10,500 which includes lay and expert witness expenses (if any). It is not readily apparent, for example, why an expert would be needed, or what sort of expert that might be. These matters highlight one of the difficulties in assessing an appropriate figure.

53. [94]

    The application is made at a very early point in the proceedings. No evidence in relation to the substantive claim appears to have been filed by the first defendant. I am not at all critical of the early application. However, it makes it more difficult to reach an informed view about the complexity of the case, and what costs are likely to be incurred in its preparation. On one view, it is a relatively straightforward case. Whether the money was received on trust would not seem to depend on a great deal of evidence. Whether there should be an accounting is likely to be determined by similar evidence to the trust point. It is likely that evidence about the background will be agreed. The case may well depend largely on the construction of documents. By reason of my decision on the position of the first plaintiff, the issues are likely to be narrower.

54. [95]

    It seems to me that the fairest way to proceed is to make an order for security up to the conclusion of the filing of evidence. By that time, a better estimate can be made about the complexity of the case, its ultimate hearing time, and the further costs that are likely to be incurred to the end of the hearing. It will be open to the first defendant to make a further application for security at that time.

55. [96]

    If I take Ms Fogl’s figure of $64,725 and deduct $10,000 for the costs of the present applications, the starting point is $54,725. I then deduct $14,500 being the solicitor’s and counsel’s costs of the hearing. The figure should then be reduced again by a reasonably arbitrary amount, although based on Mr Husaini’s affidavit, of $5,000 for other costs and disbursements likely to be related to the hearing and its immediate preparation. In those circumstances, I consider an order should be made for an amount of $35,000 up to the time when all of the evidence has been filed.

Notice to produce

1. [97]

   The first defendant submitted that the documents sought in paragraphs 3 and 4 of the Notice to Produce are documents to which the plaintiffs would be entitled if they were successful in obtaining the declaration and order sought in the Summons. The first defendant submitted that the issue in the case is whether the monies are held on trust for the plaintiffs. He submitted that his case will be that the arrangement between the parties was a contractual one and not one of trust. He submitted that a Notice to Produce must have a legitimate forensic purpose. In that regard, the documents sought to be produced will not assist in determination of the issue in the case.

2. [98]

   The plaintiffs submitted that a solicitor was obliged under the Legal Profession Uniform Law (NSW) No 16a of 2014 and the Legal Profession Uniform General Rules 2015 (NSW) to hold trust moneys in a trust account, and to provide a trust account statement to each person on whose behalf trust money is held. The plaintiffs submitted that it would be surprising if they were not able to obtain under a Notice to Produce something to which under the statute law they were entitled. The plaintiffs submitted that the documents they seek may help to cast light on the basis on which the money was received, held and disbursed from the trust account, that is, how the money was characterised by the first defendant, whilst accepting that any description of it by the first defendant would not be determinative.

3. [99]

   What seems not to be disputed is that the $2,382,000 was paid into the Thomas Booler Lawyers Law Practice Trust Account, and that $500,000 of that money was paid out to DC Legal.

4. [100]

   Sections 137 and 138 of the Uniform Law provide:

5. [101]

   Rule 52 of the Uniform General Rules provides:

6. [102]

   In my opinion, the first defendant’s submissions confuse proof of the claim made by the plaintiffs with the documents sought to be produced. Paragraphs 3 and 4 of the Notice to Produce do not assume that the money received into the trust account was held on trust for them, although it must be said that the plaintiffs’ submission that they must be entitled to the documents by reason of s 138 and r 52 does make that assumption. It may reasonably be assumed that the money was received on trust for someone, because the money was paid into the trust account. Until final judgment it will not be known who the beneficiary was or who the beneficiaries were.

7. [103]

   Whether the money was received and held for the plaintiffs on trust is a matter which will be decided objectively, having regard to the Heads of Agreement, the terms of the Settlement Agreement (perhaps), some oral evidence (perhaps), as well as any contemporaneous documentary evidence. Part of that contemporaneous evidence may be trust account documents required to be created and maintained by the first defendant, whose legal practice no doubt operated the trust account. The identification of the person for whom the money was received under the Settlement Agreement is likely to throw some light on the ultimate question in issue, even if it does not determine that issue. Similarly, the persons to whom that money was disbursed might assist in the determination.

8. [104]

   In that way the documents sought by the plaintiffs have a legitimate forensic purpose. They should be produced. The Notice to Produce should not be set aside.

Conclusion

1. [105]

   I make the following orders:

   1. (1)

      Dismiss the claim of the first plaintiff pursuant to r 13.4 Uniform Civil Procedure Rules 2005 (NSW).

   2. (2)

      The second plaintiff provide security for the first defendant’s costs of the proceedings in the sum of $35,000 up to the conclusion of the filing and serving of evidence in the proceedings, within 14 days of the date hereof.

   3. (3)

      The proceedings be stayed until the security has been provided.

   4. (4)

      The plaintiffs are to pay the first defendant’s costs of the amended notice of motion filed 23 April 2021 with the exception of costs associated with the affidavits of Vaikom Sundar Rajeev sworn 7 June 2021 and Lydia Fernandes Fogl sworn 8 June 2021, and preparation of the submissions of the first defendant of 9 and 21 June 2021.

   5. (5)

      Dismiss the first defendant’s notice of motion filed 8 February 2021.

   6. (6)

      The first defendant is to pay the plaintiffs’ costs of that notice of motion.