Weedman & Ors, Re

BC 9606375

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(Judgment by: Drummond J)

In the Matter of: An Application by Darryl Paul Weedman, Elaine Margaret Weedman & Novamaze Pty Ltd

Court:

Judge:
Drummond J

Subject References:
Solicitors
lien
assertion of lien upon a change of solicitor
clients found to have discharged the solicitors from their retainer in circumstances where the clients no longer had confidence in the solicitors as their legal representatives and refused to provide the solicitors with instructions other than through their new solicitors as part of a subterfuge to avoid the exercise by the former solicitors of a lien over the clients' papers
allegations of misconduct by the former solicitors not made out
existence of a residual discretion to order delivery up where the client determines the former solicitors' retainer otherwise than for misconduct doubted
delivery up not ordered

Case References:
A v B - [1984] 1 All ER 265
CCom Pty Ltd v Jiejing Pty Ltd & Ors (Cooper J) - unreported, 24 June 1992
Chester v Cassidy Gibson Howlin - (1995) FLC 92- 556
Cross v National Australia Bank Ltd (Drummond J) - unreported, 13 May 1993
Gamlen Chemical Co (UK) Ltd v Rochem Ltd - [1980] 1 WLR 61
Hughes v Hughes - [1958] P 22
In re Faithfull; In re London, Brighton and South Coast Railway Company - [1868] LR 6
Ismail v Richards Butler (a firm) - [1996] 3 WLR 12
Lord v Wormleighton - (1822) Jac 580; 37 ER 969
Robins v Goldingham - (1872) LR 13 Eq 440

Hearing date: 27 June 1996
Judgment date: 17 December 1996

Brisbane

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Judgment by:
Drummond J

By proceedings commenced in the Supreme Court and later transferred to this Court, the applicants seek an order for delivery up by their former solicitors, Lynch & Co (the respondents), of the applicants' documents relating to Federal Court action QG 149 of 1994. The applicants also seek an order that certain interim bills of costs delivered by the respondents to the applicants in relation to this Federal Court action be referred, with another bill of costs, to taxation. However, following my refusal to allow the applicants to file and read a late delivered affidavit, the hearing was confined to whether the applicants should have an order for the delivery up of their former solicitors' file, notwithstanding the lien claimed by those respondents over the papers as security for their unpaid fees.

The applicants retained the respondents to act as their solicitors in relation to Federal Court proceedings brought by them against their franchisor, Cut Price Deli, and other respondents, who included the vendors of the franchised business. The applicants claimed that both the franchisor and the vendors engaged in conduct in breach of s 52 the Trade Practices Act 1974 (Cth) and sought relief under that Act against all respondents in those proceedings. The applicants have now retained Messrs Nicol Robinson & Kidd to act for them in the Federal Court action.

The applicants retained the respondents to act as their solicitors in prosecuting the Federal Court action by an agreement in writing dated 25 May 1994. This contains the following provisions:

"4.

The Solicitor shall render an interim memorandum of fees and disbursements during each thirty (30) day period during the duration of the retainer.

5.

The Client shall pay the Solicitor remuneration for the legal services provided pursuant to the Scale of Costs specified in the Schedule (with the exception of any item in the Scale of Costs which refers to an allowance for general care, skill and consideration in relation to the matter the subject of the retainer).

6.

The client shall pay the Solicitor an amount for general care, skill and consideration calculated in accordance with the formula as specified in the Schedule hereto.

7.

The Client shall pay the Solicitor the amount of each monthly interim memorandum of fees and disbursements within thirty (30) days of the date of delivery to the Client of such interim memorandum.

8.

The Solicitor shall be entitled to terminate this agreement for good cause and upon the giving of reasonable notice to the Client.

9.

The parties agree that `reasonable notice' for the purpose of Clause 8 herein shall be five (5) days from the giving of notice of intention to withdraw by the Solicitor.

10.

The parties agree that `good cause' for the purposes of Clause 8 herein shall be established if:-

(a)

the client refuses or fails to pay the Solicitor an amount of any interim memorandum of fees and disbursements within thirty (30) days of the delivery of such interim memorandum to the Client.

(b)

the Client refuses or fails to provide instructions to the Solicitor within thirty (30) days of a request for such instructions.

(c)

the Client commits a breach of any of the terms or conditions of this agreement.

(d)

the Client makes material misrepresentations about the facts of a case or matter to the Solicitor.

(e)

the Solicitor has an interest in any case or matter in which he is concerned with another Client that is adverse to that of the Client.

11.

Upon termination of this Contract by either party, the Solicitor shall retain a possessory lien over any documents belonging to the Client which have been created or have come into his possession with the Client's permission in the course of this employment and in his capacity as Solicitor (except a Clients' will or when the Clients are legally aided).

12.

The lien referred to in Clause 1 (sic) herein shall be deemed to be a general lien and shall extend to all costs owed by the Client in regard to any other matters, and shall not be restricted to the costs owing in respect of the matter the subject of this Contract.

...

14.

Time shall in all respects be of the essence of this agreement."

On 27 May 1996 the respondents served a notice of termination of retainer on the applicants, having previously given notice of their intention to do so, in reliance on clause 8 of the retainer agreement. It was not suggested that, if the respondents were so entitled to terminate the retainer, the notice of intention to terminate was in any way insufficient for the purposes of clause 9 of the agreement or that, after such termination, the respondents were not entitled to the lien provided for by clauses 11 and 12.

The applicants contend that, well before 27 May 1996, the retainer agreement of May 1994 had been discharged and replaced by an implied agreement for a retainer; they say that, the respondents having nevertheless determined that implied retainer, the Court should, in accordance with the principle stated in Gamlen Chemical Co (UK) Ltd v Rochem Ltd [1980] 1 WLR 614, order the respondents to deliver up the files to the applicants' new solicitor, on that solicitor's undertaking to preserve the respondents' lien and to return the papers to the respondents at the end of the litigation. The applicants also complain that the respondents failed to account for the disbursement of funds received from the administrator of Cut Price Deli. The respondents were also acting for two other franchisees, the Mykytowychs and the Tomlinsons, who, in separate actions conducted by the respondents on their behalf, were suing Cut Price Deli. The applicants say that while they and the Mykytowychs were "paying clients" of the respondents, the latter acted for the Tomlinsons on a speculative basis, conducted all three actions as though they were consolidated and, in effect, used funds received on account of the applicants' costs to fund the Tomlinsons' action. The respondents, on the other hand, say that it was the applicants who, without good cause, determined the retainer prior to the service by the respondents of the notices I have referred to; they rely on the rule that a solicitor who is discharged by his client during an action, other than for misconduct, cannot be compelled, except where there has been misconduct, to hand over the client's files. The respondents further submit that if the retainer was determined by the respondents' notice of 27 May, it was done for good cause and in accordance with the terms of the retainer agreement, so that clause 11 operates to preserve the lien.

In the absence of a special agreement, the right of a solicitor to refuse to hand over his former client's papers in order to force the client to pay his costs has long been recognised under the general law. The principles relevant to the assertion of a solicitor's lien upon a change of solicitor are set out in the judgment of Templeton LJ in Gamlen Chemical at 624, and have been accepted by this Court in CCom Pty Ltd v Jiejing Pty Ltd & Ors (Cooper J, unreported, 24 June 1992) and Cross v National Australia Bank Ltd (Drummond J, unreported, 13 May 1993):

"If before the action is ended, the client determines the retainer, the solicitor may, subject to certain exceptions not here material, exercise a possessory lien over the client's papers until payment of the solicitor's costs and disbursements. Thus, in Hughes v Hughes [1958] P 224, 227-228, Hodson LJ said:

`There is no doubt that a solicitor who is discharged by his client during an action, otherwise than for misconduct, can retain any papers in the cause in his possession until his costs have been paid ... This rule applies, as the authorities show, whether the client's papers are of any intrinsic value or not, ...'

The solicitor himself may determine his retainer during an action for reasonable cause, such as the failure of the client to keep the solicitor in funds to meet his costs and disbursements; but in that case the solicitor's possessory lien, i.e. his right to retain the client's papers of any intrinsic value or not, is subject to the practice of the court which, in order to save the client's litigation from catastrophe, orders the solicitor to hand over the client's papers to the client's new solicitors, provided the new solicitors undertake to preserve the original solicitor's lien and to return the papers to the original solicitor, for what they are worth, after the end of the litigation."

This passage cannot be read as limiting the cases in which delivery of the former client's papers will be ordered, the solicitor having terminated the retainer, to those in which the client will suffer a catastrophe, in the sense of irreparable harm in conducting his litigation if denied the papers: Templeton LJ added in Gamlen Chemical that: "Where the solicitor has himself discharged his retainer, the Court then will normally make a mandatory order obliging the original solicitor to hand over the client's papers to the new solicitor against an undertaking by the new solicitor to preserve the lien of the original solicitor." It has also been said that such an order is made "as of course", where it is the solicitor who discharges the retainer: see Gamlen Chemical at 620. See also Cordery on Solicitors , 9th Ed, para 735.

However, the modern rule is that, while it is the usual practice for such an order to be made where it is the solicitor who has terminated the retainer, "the court does not do this automatically. Whether it grants the order is an equitable matter, and therefore one of discretion, with the result that it is to be exercised judicially on the facts of the case": A v B [1984] 1 All ER 265 at 274; Gamlen Chemical at 624-625; Ismail v Richards Butler (a firm) [1996] 3 WLR 129 at 139. In Gamlen Chemical , Templeton LJ, at 624, refers to the Court's overriding discretion with respect to ordering delivery of the client's papers, notwithstanding the general rule referred to above. Whether such a discretion will be exercised in favour of the client depends, according to his Lordship, at 625, "on the nature of the case, the stage which the litigation had reached, the conduct of the solicitor and the client respectively, and the balance of hardship which might result from the order the court is asked to make"; the existence of such a discretion is based on "the inherent, albeit judicial, discretion of the court to grant or withhold a remedy which is equitable in character": Gamlen Chemical at 624. In A v B , Leggatt J said, at 274, that, in exercising this overriding discretion, the Court should make the order which would best serve the interests of justice and that, in determining where those interests lay, it is necessary to weigh up the principle that a litigant should not be deprived of material relevant to the conduct of his case and so driven from the judgment seat, if that would be the result of permitting the lien to be sustained, and the principle that litigation should be conducted with due regard to the interests of the court's own officers, who should not be left without payment for what is justly due to them.

Where it is the client who discharges the solicitor, other than for the latter's misconduct, a different position obtains: in such cases the general rule is that the solicitor is entitled to keep his lien and the court has no power to interfere with the exercise of it: Lord v Wormleighton (1822) Jac 580, 37 ER 969; Robins v Goldingham (1872) LR 13 Eq 440; Hughes v Hughes [1958] P 224 at 227-228; Gamlen Chemical at 624; A v B at 269. In Hughes v Hughes , Hodson LJ, delivering the judgment for the Court, explained the reason for this, at 228:

"The litigant need not change his solicitor without good cause. It would be odd if he were in effect able to get solicitors' work done for nothing by the simple expedient of changing his solicitor as often as he chose, leaving a trail of unpaid costs in his wake and demanding the papers without payment when he had no just cause to complain of the conduct of the solicitors instructed and discarded."

In Ismail v Richards Butler , Moore-Bick J said, at 143, that the cases show that where the client has discharged the solicitor, the court has not been willing to interfere with the exercise of the lien, even where the papers concerned are required for pending litigation.

Where it is the client who has terminated the retainer otherwise than for the solicitor's misconduct, I doubt whether there is any residual discretion in the court to order that the former client shall have access to the documents, in the face of the lien, even where the denial of access to the documents may leave the client facing what can truly be regarded as catastrophic disruption to his litigation. Such a discretion could, in my opinion, only be justified on the basis that the interests of justice may require such an order to be made in some cases. But it is difficult to see why the court should disregard the interests of its own officers and leave them without payment for what is justly due to them because insistence on the lien would deprive the former client of material essential to the conduct of his case, where that situation has been brought about by the client discharging the solicitor without any good reason. However, it is unnecessary for me to reach a concluded view on whether such a discretion exists since even if the court does have that power, I would not regard this as a proper case to exercise it in favour of the applicants, for reasons which later appear.

The critical question whether it is the solicitor or the client who has terminated a retainer is not to be answered by a nice evaluation of who acted first or by an exact analysis of the language used by each party at various times, in isolation from the overall context of the dealings between the parties, especially when, as here, it appears both were aware of the consequences of being the party who determines the retainer and both were, at relevant times, choosing their words with care. It is the substance of the matter that is important. See CCom Pty Ltd v Jiejing Pty Ltd and Cross v National Australia Bank Ltd .

In determining whether it was the applicants or the respondents in this case who terminated the retainer, it is necessary to consider what took place from mid April 1996 to late May 1996, when Nicol Robinson & Kidd formally became the solicitors for the applicants in Federal Court action QG 149 of 1995.

By mid April 1996, those proceedings were well advanced towards hearing; all interlocutory steps were complete, save for the filing of the statement of the applicants' expert accounting witness and the filing of the respondents' witness statements. Substantial costs had been incurred. A number of significant interlocutory contests, in which the applicants were generally successful, took place between the issue of proceedings in 1994 and the service by the respondents of their notice of termination of retainer in May last. In the course of the litigation, Cut Price Deli went into voluntary administration and then liquidation, and a sequestration order has been made against an officer of that company, Ms McKenzie, one of the respondents in the Federal Court proceedings, on the applicants' petition. These bankruptcy proceedings arose out of judgments against Ms McKenzie in respect of interlocutory costs orders obtained by the respondents on behalf of the applicants, for which leave to tax was given immediately.

In August 1995, the administrator of the Cut Price Deli group applied to the Court for an order dissolving a mareva injunction which the respondents had also obtained on behalf of the applicants and others. The administrator was negotiating the sale of the Cut Price Deli group and, in order to effect a sale, he required the consent of the applicants and the Mykytowychs and the Tomlinsons to the release of this injunction. The application was successfully opposed, but a compromise was then reached between the administrator, the purchaser, the applicants and the other claimants whereby, in consideration of the payment into the respondents' trust account of $100,000 by the purchaser, the applicants and the other Cut Price Deli franchisees consented to the dissolution of the mareva injunction.

Mr Weedman says that, by early 1996, he and his wife had been regularly paying the sum of $500 per week to the respondents, on top of lump sums totalling over $30,000 previously paid to the respondents for their costs of running the Federal Court action. He says he believes that the respondents have received about $96,000 for costs from them, or on their behalf, a sum he says includes their one-third share in the $100,000 received from the Cut Price Deli administrator, which he acknowledges was received by the respondents on account of legal costs incurred on behalf of the applicants, as well as others, and some funds received from the bankruptcy of the Cut Price Deli officer, McKenzie. Mr Weedman claims that, despite his requests, he did not receive any accounting from the respondents for these receipts. He says that in the first half of April 1996 he rang the respondents several times to speak to Mr Lynch, the firm's principal, but could speak only to his clerk, Mr Morgan. On 16 April 1996 he went to the respondents' office, where Mr Morgan raised the question of further funding of the Federal Court action, and he again asked for a reconciliation statement relating to the moneys already received by Lynch & Co and, in particular, the $33,333 received on account of the applicants from the Cut Price Deli administrator. He says he went back to the respondents' office the next day, but again could see only Mr Morgan. Mr Weedman's evidence in this regard is disputed by Mr Lynch.

By letter dated 17 April 1996, the respondents wrote to the applicants as follows:

"We further include a Memorandum of Professional Costs and Outlays and Bill of Costs in taxable form with respect to the Federal Court action in the sum of $25427.64.

We note that previously an arrangement was in place whereby you paid us the sum of $500 a week in payment of our outstanding professional costs.

We further note that you discontinued this practice some time ago despite the fact that we have continued to provide professional services on your behalf including the bankrupting of Luzette McKenzie and the drawing of the witness statements in the Federal Court action.

We are aware of the on-going financial difficulties you face but having regard to the quantum of outstanding fees we request that you make arrangements to provide us with the sum of $12,000 in part payment of our fees as soon as possible and that you recommence the practice of paying the sum of $500 a week until the balance of our outstanding costs are met ..."

There was also included with this letter an amended memorandum of professional costs in the sum of $4,739.82 incurred in connection with the McKenzie bankruptcy proceedings. It appears the applicants did not make any further payments in respect of unpaid fees outstanding after receipt of the funds from the purchaser of the Cut Price Deli group in September 1995.

Mr Weedman says that over the next "several days" following receipt of the 17 April letter, he received a number of telephone calls from Mr Morgan seeking money from him and, on 29 April 1996, Mr Lynch rang to demand money. Mr Weedman says Mr Lynch gave no accounting or explanations for the progress of the action or the moneys he had received, notwithstanding his requests. Mr Weedman said that, following this call from Mr Lynch:

"25.

I felt I could no longer communicate with Lynch & Co and was not receiving any sensible response to my enquiries about legal proceedings on which my and my wife's entire financial future depended.

26.

I was also concerned that I had asked for advice from Lynch & Co regarding the lease of our shop premises. Paul Lynch had given me certain advice about our rights but, so far as I am aware, no steps had been taken to protect the rights we may have in relation to the premises ...

27.

On 30 April 1996 I instructed Nicol Robinson & Kidd in relation to the status of the Court proceedings and other relevant matters and also sought advice regarding the bills of costs which had been delivered.

28.

Nicol Robinson & Kidd did not agree to take over the conduct of the Federal Court action at that time. Robert Gallagher told me that it may not be prudent for him to take over such a complex matter until they could better understand it and in particular the stage of the proceedings.

29.

That being so, on 1 May 1996 I sent to Lynch & Co an authority to enable Nicol Robinson & Kidd to obtain the access and information I believe they needed ...

30.

On 2 May 1996 a further authority was sent. ..."

The authorities sent by the applicants to the respondents by facsimile on 1 and 2 May 1996 were in the following terms, respectively:

"We Darryl P Weedman and Elaine M Weedman and Novamaze P/L authorise you to release our file and any other information relating to CUT PRICE DELI, DONALD & OTHERS to our solicitors Nicol Robertson & Kidd (sic) of 215 Adelaide Street, Brisbane. PH 3229 4388. If you require any further information please contact R GALLAGHER of NICOL ROBERTSON & KIDD..."

and

"We Darryl P Weedman, Elaine M Weedman and Novamaze Pty Ltd authorise you P Lynch to give to Nichol Robertson and Kidd (sic) such information as is requested from them regarding our matter..."

Mr Weedman does not deal with events subsequent to 2 May other than to exhibit, without comment, the respondents' notice of intention to terminate their retainer of 20 May 1996, the notice of termination itself and a letter received from the respondents on 23 May 1996, enclosing a letter from the District Registrar of the Federal Court containing notification of a mediation conference and seeking the applicants' instructions in that regard.

What happened between the applicants' initial approach to Messrs Nicol Robinson & Kidd on 30 April 1996 and despatch by the respondents of their notice of termination of their retainer on 27 May 1996 appears from the fairly voluminous correspondence between the two firms of solicitors that is in evidence before me.

Following the approach from Mr Weedman, Mr Gallagher, of Nicol Robinson & Kidd, promptly telephoned Mr Lynch on 30 April 1996 and told him that he had been instructed to "establish the status of Federal Court Action No. G149 of 1994". It is clear Mr Lynch raised the question of his outstanding fees and indicated that his firm would insist on a lien over the file to secure their repayment. In his facsimile of the same date, Mr Gallagher sought from Mr Lynch details of the fees and outlays due by the applicants to the respondents. Mr Lynch replied on 8 May 1996, after receiving the two authorities referred to above. He advised those solicitors of the outstanding fees in both the Federal Court action and the McKenzie bankruptcy. He provided Nicol Robinson & Kidd with information concerning the status of the action and, in particular, the status of the accounting expert's outstanding report, to which I have referred above. Referring to the directions to hand over the papers to Nicol Robinson & Kidd, Mr Lynch said:

"Clearly, we cannot act on behalf of your clients without access to their files. We consider that this letter dated 1 May 1996 [ie Mr Weedman's authority referred to above] constitutes a termination of our retainer in relation to the Cut Price Deli Pty Ltd litigation. We enclose a copy of their letter of 1 May, 1996, for your perusal. If you have a different view of the matter, please advise us.

We decline to forward the files to your firm. We exercise a lien over such files until full payment of all outstanding costs."

Mr Gallagher replied on 13 May 1996. He said his firm had a limited retainer to advise the applicants only in relation to a number of matters arising out of the Court proceedings, the retainer of the respondents' firm and the bankruptcy of McKenzie, and that it was for that purpose that Nicol Robinson & Kidd had arranged for the applicants to give the authorities to the respondents to deliver their file to Nicol Robinson & Kidd. Mr Gallagher disputed Mr Lynch's contention that the applicants had terminated the latter's retainer, saying:

"In our telephone discussion on 30 April 1996 we made it clear, we believe, that the authority to you should not be construed as a termination of your retainer. As explained, it would be premature for us to attempt to take over a substantial piece of litigation which is obviously current and active without access to files, an understanding of the action and before appropriate arrangements could be made with you."

That Nicol Robinson & Kidd may not then have accepted a retainer to act generally for the applicants in the Federal Court action in place of the respondents is not in any way inconsistent with the applicants having already terminated the respondents' retainer to act for them in that same action. Mr Gallagher went on to seek from Mr Lynch certain information concerning the question of his fees; he asked for "an appropriate accounting and reconciliation" of all amounts comprising the $25,427.64 claimed, and an explanation in relation to the moneys paid by various respondents in QG 149 of 1995 under the settlement with the administrator of Cut Price Deli. He concluded:

"We have been instructed to inform you that your conduct of this action, for the immediate future at least, is to be on the basis of instructions passed from our clients to you through this firm. In turn, you should seek instructions from us in relation to the progress of the action generally.

Fees should continue to be charged on the relevant Court scale.

... Should a decision be made to terminate your retainer that will be communicated to you by us with appropriate confirmation in writing from the clients. We will ensure that you are left in no doubt about the continuation (or discontinuation) of your retainer. For now, you should proceed on the basis that your retainer is an ongoing one."

In his reply of 17 May 1996, Mr Lynch disputed Mr Gallagher's contention that the former's retainer had not been terminated but, on the assumption that Mr Gallagher was correct, Mr Lynch advised that his firm was not prepared to take instructions "about our clients' affairs from either your firm or Mr Gallagher". He indicated that he would only take instructions from the applicants through Mr Gallagher's firm if given a validly executed power of attorney by the applicants in favour of Mr Gallagher's firm. He noted:

"We mention to you that both Mr and Mrs Weedman have declined to speak with us over the past two weeks.

This position is obviously intolerable and the only proper course is for your firm to file and serve a Notice of Change of Solicitor with respect to the Cut Price Deli Federal Court action."

Mr Lynch referred to an outstanding Court requirement in the action and said that, in the face of the refusal of the applicants to provide him with instructions, he could not attend to that matter. In response, Mr Gallagher telephoned Mr Lynch and wrote to him the same day, 17 May 1996; he referred to oral instructions which he understood Mr Weedman had that day conveyed by telephone to Mr Lynch to accept instructions for the future conduct of the Federal Court action from Mr Gallagher's firm; Mr Gallagher said that the power of attorney requested would be prepared and forwarded shortly. He also wrote:

"As we understand your letter you will accept that your retainer from Mr and Mrs Weedman and Novamaze Pty Ltd is ongoing and that is the reason why you have raised issue about your entitlement to take instructions through this firm."

That misstates Mr Lynch's position, communicated to Mr Gallagher in his facsimile of 17 May 1996: he insisted that his retainer had already been terminated by the applicants, but if he were wrong, he stated he would only act on instructions from Nicol Robinson & Kidd if they produced a valid power of attorney from the applicants.

On 20 May, Mr Lynch wrote directly to the applicants referring to his unsuccessful attempts to contact them "for some weeks now" and saying that they did not telephone his office until late on the afternoon of 17 May 1996 to give the instructions referred to in Mr Gallagher's letter of 17 May. Mr Lynch continued:

"We have been attempting to obtain your instructions for some time. Mrs Weedman hung up on the writer's telephone conversation with her last week and Mr Weedman has consistently failed to return any telephone messages which this firm has left for him."

Mr Lynch mentioned that the applicants were unlikely to be able to recover, in the Federal Court action, any of the costs incurred by his firm on instructions from Nicol Robinson & Kidd. He drew to the applicants' attention other difficulties associated with the notion that his firm should continue to act for the applicants in the Federal Court action, but only on the instructions of Nicol Robinson & Kidd. He said:

"All of these matters must be dealt with by you if you wish us to receive instructions from Messrs Nicol Robinson & Kidd.

For our part, we believe that their involvement is wholly unnecessary. If you wish that firm to act for you in relation to the Federal Court action, then please provide us with an unambiguous written Notice of Termination of our retainer.

It is abundantly clear that you have lost confidence in our ability to act as your legal representatives. Given the success which we have achieved for you in the litigation we do not understand why that lack of confidence has manifested itself.

The present position is intolerable and the only proper course is for you to terminate our retainer whilst that lack of confidence is present."

Neither the applicants nor Nicol Robinson & Kidd, on their behalf, responded to this letter. The applicants do not dispute Mr Lynch's complaints about their refusing to communicate with his firm after 30 April 1996. By a letter which he wrote on the same date to Nicol Robinson & Kidd, Mr Lynch expressed his concerns about his continuing to act, but only on instructions from Nicol Robinson & Kidd; in particular, he raised the question of the unrecoverability of costs of attendances and correspondence between the respondents and Nicol Robinson & Kidd, should the applicants' Federal Court action succeed.

Mr Lynch wrote a second letter of 20 May directly to the applicants, drawing their attention to matters that needed their urgent attention in the Federal Court action and again referring to his unsuccessful attempts to obtain instructions from them "for the past month". He received certain instructions in response from Nicol Robinson & Kidd by letter dated 23 May 1996. On 20 May, Mr Lynch also sent another letter direct to the applicants enclosing a notice of intention to terminate his retainer; this letter gave the applicants the respondents' notice of intention to terminate their retainer for failure to pay by 19 May 1996 the interim memorandum of fees rendered on 19 April 1996 in the sum of $25,427.64 and to withdraw from acting as their solicitors with respect to the Federal Court action at 12 noon on Monday, 27 May. A notice of intention to file and serve notice of change of solicitor was also enclosed. This notice was given immediately it was open to the respondents, pursuant to clause 7 of the 1994 agreement, to give it, a memorandum of fees having been issued on 19 April and being still unpaid on 20 May 1996.

On 21 May 1996, Mr Gallagher replied to Mr Lynch's letter to him of 20 May; he enclosed the powers of attorney, requested a detailed response to the queries raised in his letter of 13 May 1996 and commented:

"Your concern about costs is no doubt commendable but you may be assured that Mr and Mrs Weedman are approaching the matter in the way they have quite deliberately."

Mr Lynch acknowledged receipt of the powers of attorney forwarded under cover of Nicol Robinson & Kidd's letter of 21 May by his letter of 23 May 1996. In this letter, Mr Lynch dealt with certain comments he says Mr Gallagher made to him in a telephone conversation; this produced a lengthy response from Mr Gallagher on 23 May 1996 in which he reiterated his requirement that contact between the two firms should be in writing; instructed Mr Lynch not to communicate with the applicants, save through himself; and said:

"By your own notice (of intention to terminate retainer) and letters you have acknowledged your ongoing retainer at this time. That being so, you are required to complete the matters in which you have been instructed and directed, by 27 May 1996."

It is this letter which appears to have provoked Mr Lynch to write to the applicants' direct on 23 May seeking confirmation of the due execution of the powers of attorney; he also sought a prompt response because Nicol Robinson & Kidd required that his firm respond to their "instructions", as he described them, forthwith. In a further letter of 23 May to the applicants, Mr Lynch forwarded a notification from the Federal Court of the holding of a mediation conference on 4 June; he sought instructions from the applicants about whether they wished his firm to appear at the mediation on their behalf. He appears never to have got a response.

On the same date, 23 May, Mr Gallagher wrote to the respondents confirming Mr Weedman's oral instructions to Mr Lynch on 17 May to proceed, on behalf of the applicants, with the Federal Court action on the basis set out in Mr Gallagher's letter to Mr Lynch of 13 May 1996, to which I have referred. Mr Gallagher referred also to the notice of intention to terminate retainer sent to the applicants by Mr Lynch on 20 May 1996 and sought a copy of the retainer agreement, disputed the assertion in the notice of intention of a refusal to pay the interim memorandum of fees delivered on 19 April 1996 and asserted that the applicants had merely exercised their right to have the costs taxed. The communications that passed between Mr Lynch and Mr Gallagher in the period 23-24 May were acrimonious.

On 24 May, Mr Lynch took up the instructions given to him in Nicol Robinson & Kidd's letter of 13 May and repeated in their letter of 23 May. His letter to Nicol Robinson & Kidd of that date concluded, after referring to the taxation proceedings that the applicants had instigated, by saying that, once due execution of the powers of attorney was verified by the applicants, he accepted that it would be appropriate to receive instructions from them through Nicol Robinson & Kidd "for so long as we hold a retainer from them". This, of course, was written against the background of his notice of intention to terminate his retainer given pursuant to the 1994 agreement and sent to the applicants on 20 May, a notice on which Mr Lynch could not rely to justify termination of the 1994 retainer agreement until the notice period expired on Monday, 27 May.

On 27 May 1996, Mr Lynch wrote to Nicol Robinson & Kidd confirming verification of due execution of the powers of attorney, and acknowledging that it would be proper for his firm to receive instructions on behalf of the applicants in the Federal Court proceedings from Mr Gallagher; Mr Lynch also responded to some of the questions raised by Mr Gallagher in earlier correspondence about his firm's fees claim. The same day, however, Mr Lynch despatched to the applicants the notice of termination of retainer and the notice of having ceased to act in the Federal Court proceedings for the applicants and their company, a notice which Mr Lynch also filed in the Court that day. This notice of termination was given immediately clauses 8 and 9 of the 1994 agreement permitted its issue. Mr Lynch accompanied the notice of termination with a letter to the applicants enclosing his final bill of costs in relation to the Federal Court proceedings. He noted he had not yet received payment of the interim memorandum of costs and demanded the sum of $25,427.64 forthwith, threatening legal proceedings in the event of non-payment.

Late on 27 May, Mr Gallagher sent a facsimile to Mr Lynch. He referred to having been handed Mr Lynch's notice of termination of retainer by the applicants and said:

"In the circumstances, we propose to immediately file in the Federal Court a Notice of Change of Solicitors and to take over the conduct of the Federal Court proceedings on behalf of the clients."

Mr Gallagher went on to demand delivery of Mr Lynch's file relating to the Federal Court matter on his firm's "undertaking ... to preserve any lien you may have in relation to the papers and documents for costs, if any, which may be found to be owing to you." He foreshadowed the present proceedings if the file was not delivered. Mr Lynch responded to this facsimile on 28 May, rejecting the adequacy of the proffered undertaking and noting that there was no dispute to his proposition in another letter he had sent on 27 May to Nicol Robinson & Kidd that he had terminated the retainer for good cause and upon reasonable notice.

This provoked a reply by facsimile from Mr Gallagher on the same day. Mr Gallagher asserted that Mr Lynch had breached the terms of his retainer and that the termination was wrongful because, inter alia, he had failed to carry out instructions given by Mr Gallagher pursuant to the powers of attorney; he had failed to carry out instructions given by the applicants from time to time "since at least December 1995" and he had overcharged in respect of costs and outlays. He noted that the only ground for termination relied on by Mr Lynch was the applicants' non-payment of costs, which were the subject of a pending taxation, and that there had therefore been no refusal to pay. He concluded by referring to the applicants' being prejudiced in the ongoing conduct of their Federal Court action by Mr Lynch's claim of lien. He again called for the file. Mr Lynch replied on 28 May referring to the provisions of the retainer agreement entitling him to cancel it for good cause and on reasonable notice.

Further correspondence passed between Mr Gallagher and Mr Lynch to which I think it is unnecessary to refer.

The view I have formed from the material before me is that, by 30 April, when Mr Weedman first approached Nicol Robinson & Kidd, he had decided that he did not want to retain the respondents as solicitors in the Federal Court action any longer. Mr Weedman's decision to engage new solicitors in place of the respondents may have been provoked by his concerns over the costs he was called on to pay on 17 April when Mr Lynch delivered the interim bill for $25,427.64. In any event, his own evidence shows that he had, by 30 April 1996, lost confidence in the respondents as the applicants' legal representative in the Federal Court action. He does not say in terms that he had decided, by 30 April 1996, to engage new solicitors to replace the respondents. But that that was the position appears clearly enough from what he says in paragraphs 25 and 26 of his affidavit and from the authorities of 1 and 2 May. Nicol Robinson & Kidd were not prepared to agree to accept a retainer from the applicants without proper information about the proceedings. But it is apparent that Mr Weedman was determined to provide them with the information they needed to decide whether to accept a new retainer from him. The applicants' direction to the respondents to release their file to "our solicitors", coupled with Mr Weedman's own admission of his loss of confidence in Mr Lynch, strongly suggest the applicants had decided, by 30 April, to dispense with the respondents' services and instruct Nicol Robinson & Kidd in their stead. I take into account the absence of an explanation why Mr Weedman regarded the respondents as still retained by the applicants, notwithstanding what he had to say in those paragraphs of his affidavit which I have referred to and the events that occurred through May. The persistent refusal of the applicants to speak to Mr Lynch or to respond to his requests for instructions confirms that the applicants had, by then, decided to terminate that retainer: Mr Weedman made it impossible for Mr Lynch sensibly to continue to act as the applicants' solicitor by refusing to communicate with Mr Lynch. I also think that by their own actions and by the actions of Mr Gallagher on their behalf, the applicants had communicated to Mr Lynch by 1 May, but by 20 May at the latest, their determination to end the respondents' retainer.

In those circumstances, the respondents were entitled to adopt the position that the applicants had discharged them from the retainer that hitherto existed, whatever form that retainer then took. The relationship between solicitor and client is one based on trust and confidence: once the client indicates he no longer has that confidence, a solicitor cannot continue to force himself upon an unwilling client, but is entitled to treat himself as having been discharged by the client. Cf Chester v Cassidy Gibson Howlin (1995) FLC 92-556.

It is clear from the correspondence between Mr Gallagher and Mr Lynch that, when Mr Gallagher first spoke to Mr Lynch on 30 April, after Mr Weedman's initial approach, Mr Gallagher was left in no doubt that Mr Lynch would insist upon a lien for his costs. I think that the course proceedings took from 30 April was shaped by an awareness by both Mr Gallagher and Mr Lynch of the importance to the fate of the lien that Mr Lynch said he was claiming, whether it was the applicants or Mr Lynch who terminated the retainer. Mr Gallagher was careful not to state explicitly that the respondents' retainer was terminated until he received Mr Lynch's notice of termination of 27 May, whereupon he promptly called for delivery up of the file on the usual undertaking to protect the respondents' lien. Prior to that he adopted what I consider to be the highly unusual position of insisting, right up to 27 May, that the respondents remained retained by the applicants in the Federal Court action, but that they were to take instructions from the applicants only through him. I think Mr Gallagher was, in effect, engaged with the applicants, who had previously decided to dispense with the respondents' services, in a subterfuge to get around the problem created by Mr Lynch's insistence on the lien: he was, I think, trying to manoeuvre Mr Lynch into terminating, while avoiding acknowledging that the applicants had already made the decision to end their relationship with the respondents.

In my opinion, there was in existence at the beginning of May 1996 a retainer of the respondents by the applicants. Counsel for the applicants submitted that it was not open to Mr Lynch to terminate the retainer as he purported to do by his notice of 27 May, given in reliance on the agreement of 25 May 1994, because that agreement had long since been abandoned. Counsel for the applicants, in support of this submission, relied on what Mr Lynch himself had to say:

"64.

In late 1994 it became apparent to me that the Applicants could not comply with their obligations under the retainer agreement to pay monthly costs. Mr Weedman agreed with me that he would pay the sum of $500.00 per week in discharge of the unpaid fees outstanding. This arrangement was adhered to by the Applicants until September 1995 when funds were received from the purchaser of the Cut Price Deli Group in consideration of the Applicants agreeing to lift the mareva injunction granted in their favour.

65.

I saw little point in providing monthly memoranda of costs to the applicants when they were not in a position to meet them ..."

However, it is unnecessary to pursue this further since, even if the agreement of 25 May 1994 had previously been discharged by the making of these new arrangements, there was an implied retainer agreement in force between the applicants and the respondents as at 1 May 1996 which the applicants then terminated, a decision they had communicated to the respondents by 20 May 1996, at the latest.

Mr Lynch clearly thought the applicants had, by the time of delivery of the authority of 1 May 1996, so acted as to terminate the respondents' retainer. But in the face of Mr Gallagher's assertions to the contrary and in the absence of an unequivocal statement by the applicants that the retainer was at an end, Mr Lynch's invocation of the termination provisions of the 1994 agreement is understandable. By early May 1996, the applicants had both brought to an end any retainer that then existed between them and the respondents and had communicated that to the respondents. It does not affect the respondents' entitlement now to rely on that termination by the applicants to refuse delivery up of the file to the applicants' new solicitors that they themselves subsequently purported to invoke the termination provisions of the 1994 agreement. They never had to elect between the two alternative positions since they were asserting throughout a right to refuse to hand over the file: either position, if established, was sufficient to justify that refusal even if the other might turn out to be insufficient. It therefore does not matter that the respondents may not, as at 27 May 1996, have been entitled to justify refusal to hand over the file in reliance on the 1994 agreement because that agreement may by then have been discharged and replaced by a new implied agreement.

Given my conclusion that the respondents' retainer was effectively determined by the applicants, the respondents are prima facie entitled to maintain their lien over the applicants' papers until payment to them in full of their outstanding fees.

Two further matters now require consideration. First, there is a question whether the applicants can rely on the exception to the general rule as to the enforceability of the lien that arises where the client terminates the retainer on the ground of the misconduct of the solicitor. Secondly, there is a question whether even if, contrary to my preferred view, I have a residual discretion, where the client has terminated the retainer otherwise than for the misconduct of the solicitor, to order the respondents to deliver up the applicants' papers, it would be appropriate to exercise that discretion in favour of the applicants.

The applicants' allegations of misconduct fall into three broad categories: failure to account, failure to carry out instructions and overcharging.

There is much conflicting evidence from the applicants and Mr Lynch in relation to these complaints. I was not asked and, in the absence of cross-examination, am not able to resolve this factual conflict. It is not possible, for example, on the material before me, to ascertain whether the applicants had legitimate cause for complaint over the failure of Mr Lynch to keep them informed as to the state of their account and, in particular, the position following receipt of the $100,000, of which the applicants were entitled to a one third share, from the administrator of Cut Price Deli. Mr Lynch says that the $100,000 was dealt with in accordance with written authorities provided by the applicants, the Tomlinsons and the Mykytowychs. Mr Lynch deposes to advising Nicol Robinson & Kidd on 24 May that he would provide a trust account statement to the applicants upon receipt of an appropriate written authority to do so, but that he never received any such authority, only the initiating proceeding that is now before me; he also said that he had never received any written request from the applicants pursuant to the Trust Accounts Act 1974 (Qld) for delivery of a trust account reconciliation statement, but that, following service of the originating proceeding, he delivered to the applicants on 14 June 1996 a trust account and general account statement with respect to the Federal Court action and the McKenzie bankruptcy.

Counsel for the applicants suggested that this statement showed that the respondents had used moneys received on account of the applicants to fund the action the respondents were running on behalf of the Tomlinsons against Cut Price Deli. He submitted that, since there was evidence that the respondents were running the Tomlinsons action on a speculative basis, this was clear evidence of impropriety on the part of the respondents. I am not prepared to accept this submission: counsel for the respondents satisfactorily explained why funds received into trust, apparently on behalf of the applicants from the settlement with the administrator of Cut Price Deli, were disbursed for the benefit of the Tomlinsons. For reasons unexplained, it appears that $50,000 of the $100,000 settlement was posted to the applicants' account in the respondents' trust account, when they were only entitled to $33,333. Trust account entries for 22 September 1995 show that three amounts totalling the over-allocation of $16,667 to the applicants included in this $50,000 receipt to which the applicants had no entitlement and to which it appears the Tomlinsons were entitled were disbursed for the benefit of the Tomlinsons.

It was submitted that Mr Lynch had not accounted to the applicants for how the sum of $96,000 or so received by Mr Lynch had been disbursed. But that cannot be correct because it is common ground that a number of bills of costs were delivered between 5 July 1994 and 30 April 1996. The complaint really appears to be that, until proceedings were commenced, Lynch & Co did not account for how the $33,333 received from the Cut Price Deli administrator was dealt with. But Mr Lynch deposes that he was not asked to do that prior to the present dispute and that is not contested.

Mr Lynch's failure to comply with the instructions of Mr Gallagher, in particular those contained in the latter's letter of 13 May, could not amount to misconduct, since I consider those instructions were not given bona fide, but as a subterfuge. Mr Lynch, appropriately in my view, required Mr Gallagher to provide him with a validly executed power of attorney before he would accept any instructions from Mr Gallagher; once he was provided with that, and satisfied by the applicants that it was duly executed by them, he did proceed to respond to Mr Gallagher's enquiries. As to the allegation that he failed to comply with the applicants' instructions up to December 1995, that was not the subject of any evidence from Mr Weedman, and was not raised by the applicants prior to the events of late April-May 1996: this complaint appears to be first made in Mr Gallagher's letter of 28 May 1996. If such a complaint was well- founded, Mr Weedman could have terminated the respondents' retainer without fear of a lien being claimed, and would have had no need to resort to the artificial arrangement instigated by Nicol Robinson & Kidd. I am not in a position to form any firm conclusion as to the merit of the applicants' complaints; but I do think that the time and manner in which complaints about the respondents have been raised is a relevant consideration for me to take into account. As to the failure to account for receipts, there was, on the evidence, no claim made by the applicants until Nicol Robinson & Kidd became involved in the matter. Their request for a reconciliation statement was contained in Mr Gallagher's letter of 13 May. A reconciliation statement was provided by the respondents on 14 June 1996. Given that the power of attorney, required by Mr Lynch before he would accept instructions through Mr Gallagher, was not delivered until 21 May, in my view the failure to account until 14 June cannot amount to misconduct.

Counsel referred to what he submitted was evidence of overcharging: he referred to a bill of costs delivered to the Mykytowichs by the respondents for attendances at Court by a law clerk and a solicitor on 2 March 1996 on the hearing of the "Applicants' and Respondents' Notices of Motion" and to a bill of costs delivered to the applicants which showed the applicants had also been billed for a court attendance on 2 March 1996 on the hearing of the respondents' notice of motion. The applicants were charged $816, the Mykytowichs $614. Counsel submitted that this was evidence that Mr Lynch had charged each client separately when in fact the matters had been heard together and this involved overcharging. It appears that separate motions in separate actions were brought before the Court that day at the same time by Mr Lynch. Counsel may have charged a single fee for appearing on both motions. The issue of overcharging was touched on only briefly in argument; counsel took me only to this one alleged example, in the context of a case in which charges have been made for a wide range of services rendered over a long period, which charges amount in all, to many thousands of dollars. I am not prepared, in these circumstances, to find that the episode I have referred to provides any evidence of the kind of overcharging that would justify the applicants terminating their retainer of the respondents, as I have found they had by late May 1996.

I decline to draw an inference, from the material to which I was directed, that the respondents used moneys received on account of the applicants to fund the Tomlinsons' litigation. On the evidence before me I am not satisfied that the allegations of overcharging or failure to follow instructions have been made out. The question of the amount properly due by the applicants to the respondents will be resolved in the taxation sought by the applicants in the proceedings before me, but which application I declined to deal with.

Even if there is a residual discretion to order delivery up to the former client's new solicitors of the file the subject of the old solicitor's lien in a case in which it is the client who has terminated the old solicitor's retainer, I am not satisfied that the circumstances of this case justify the exercise of such a discretion in the applicants' favour. The main consideration relied on by the applicants to justify the exercise of the discretion said to exist in their favour was that they are in default of a direction to file and serve their expert accountant's statement. The applicants' new solicitor deposes to a conversation in late May with the solicitor acting for the vendor-respondents in the Federal Court action in which the latter advised that, in view of delays by the applicants in prosecuting the Federal Court action, his instructions were to move to have the action struck out for want of prosecution unless the outstanding matters were promptly attended to. But it was not suggested that the vendor-respondents have instituted or further threatened to institute such action because of the applicants' failure to deliver their expert accountant's evidence. The accounting expert delivered his report to the respondents on 22 May 1996, together with a memorandum of his fees in an amount of $4,143.20. He asked the respondents to ensure that his report was not released to the applicants until his account was paid. Mr Lynch says that, so far as he is aware, the only respect in which the applicants are presently in default of directions made by this Court in the Federal Court proceedings brought by the applicants is that they have failed to file Mr Calabro's report. Mr Lynch says:

"Although I assert a lien on Mr Calabro's report I am prepared to waive such lien with respect to his report if the Applicants attend to payment of Mr Calabro's fees. In this way no possible grounds will then exist for the Respondents to the Federal Court action to strike out the action for want of prosecution."

Counsel for the applicants did not submit that Mr Lynch's assessment of the extent to which the applicants' Federal Court action was at risk of being struck out because of their default in complying with directions was incorrect. In view of Mr Lynch's unchallenged statement, I would not, in any event, be prepared to order delivery up of any part of the respondents' file other than the expert's report. Given Mr Lynch's preparedness to waive his lien in so far as it extends to that report, provided the expert's fees are paid by the applicants, and given the absence of any suggestion they are unable to attend to that, it is appropriate to order delivery up to the applicants' solicitor of Mr Calabro's report, but only upon the presentation of proof to the respondents that Mr Calabro's fees have been paid.

The only other consideration put forward to justify the exercise of the discretion in the applicants' favour was that, pursuant to another Court direction, the applicants and the respondents in the Federal Court proceedings were to participate in a mediation conference a few days after the hearing before me: a previous attempt at mediation was aborted when it became apparent that the respondents had material obtained on discovery and which is comprised in the applicants' former solicitors' file which the applicants need before any sensible attempt at mediation could be made. However, the difficulty faced in this regard by the applicants seems to me to be no more than the inevitable problem which a litigant who changes solicitors in the course of litigation is likely to face as a result of that change when the former solicitors assert their right to a lien over the client's documents. The cases accept that, once the solicitor has established his right to his lien, he can use it to "embarrass the client in order to force him to pay what is due to him": In re Faithfull; In re London, Brighton and South Coast Railway Company [1868] LR 6 Eq 325 at 328 or "hamper" the client in the presentation of his case to his own disadvantage: Hughes v Hughes at 228; see also Ismail v Richards Butler at 136. In my opinion there is no ground to justify the exercise of any discretion that may exist in favour of the client where all that can be said is that the client needs his documents from his former solicitor to get on with progressing his action.

Save that the respondents will be ordered to deliver up Mr Calabro's report to the applicants' solicitors, but only upon the presentation of proof to the respondents that Mr Calabro's fees have been paid, paragraph 1 of the applicants' application is dismissed.