Interim Injunction Prevents Registration of Legal Fees Until Client Funds Solicitor

The court granted an interim injunction preventing the respondent from registering certain certificates as a judgment of the court until the claimant is put in funds by his client. The claimant argued that he was not obligated to pay legal fees until the client placed him in funds, and the court agreed that the claimant had an arguable case.

Supreme Court New South Wales

Medium Neutral Citation: [NAME] v [NAME] [2023] NSWSC 123 Hearing dates: 13 February 2023 Date of orders: 14 February 2023 Decision date: 14 February 2023 Jurisdiction: Common Law Before: Garling J Decision: Interim injunction granted Catchwords: LEGAL PRACTITIONERS — Injunction — where the plaintiff solicitor sought an interim injunction restraining the defendant [NAME] from registering [NAME] issued by a review panel — where the [NAME] upon registration would become a judgment of a court — where the [NAME] related to a retainer agreement between the solicitor and [NAME] — where the agreement specified that the solicitor would be liable for [NAME]'s fees only to the extent that his client had put him into the necessary funds — where the review panel found that the agreement was void ab initio — whether interim injunction restraining [NAME] from registering [NAME] should be granted — where interim injunction granted Legislation Cited: Bankruptcy Act 1966 (Cth) Legal Profession Uniform Law (NSW) 2014 Legal Professional Uniform Law Application Act 2014 Supreme Court Act 1970 Uniform Civil Procedure Rules 2005 Cases Cited: [NAME] v [NAME] & Ors [2023] NSWSC 19 Texts Cited: Not Applicable Category: Procedural rulings Parties: [NAME] (P) [NAME] (D) Representation: Counsel: [redacted] [NAME] (D)

Solicitors: [redacted] [NAME] (D) File Number(s): 2023/47815 Publication restriction: Not Applicable

JUDGMENT 1. On 13 February 2023 the plaintiff, [NAME] ("the solicitor"), commenced proceedings by Summons filed in Court against [NAME] ("[NAME]"). The plaintiff sought, by way of final relief, declarations that [NAME] has no entitlement to register certain [NAME] certificates ("the [NAME]") as a judgment of the Court until the solicitor is put in funds by his client, [NAME] ("the client"), for the amounts specified in the [NAME].

2. In that Summons, the solicitor also sought an interim injunction by way of an order of the Court, until further order, restraining [NAME] from registering the [NAME].

3. The application for the interim order was heard by me yesterday in the duty list. Because of other matters in the list, I was unable to deliver judgment immediately but adjourned the matter until this morning for the purpose of delivery of judgment. The short length of time available to me for the delivery of this judgment means that the reasons are necessarily truncated and assume knowledge of the full detail of the background facts and circumstances.

[NAME]

1. I have earlier mentioned the term "the [NAME]". Some further definition is necessary. There are two [NAME]. Both were issued on 22 April 2021 by a Review Panel ("the Review Panel") pursuant to the Legal Profession Uniform Law Application Act 2014 ("the LPULA Act"). The first is a Certificate of Determination of Review in the sum of $222,285.80 ("the first certificate"). The second is a Certificate of Determination of [NAME] in the sum of $2,100.45 ("the second certificate").

2. I am told and accept that [NAME] has paid the sum the subject of the second certificate so that he can be issued with the first certificate.

Factual Background 1. Some factual background is necessary. I largely draw this background from the judgment of Bellew J delivered on 7 February 2023, [NAME] v [NAME] & Ors [2023] NSWSC 19.

2. The solicitor accepted instructions to act for the client in proceedings seeking to annul an order made against her pursuant to the Bankruptcy Act 1966 (Cth). The solicitor retained [NAME] to advise and appear for the client.

3. A [NAME] agreement dated 16 September 2019 was executed by [NAME] with the solicitor purportedly pursuant to s 180(1)(C) of the Legal Profession Uniform Law (NSW) 2014 ("the Uniform Law"). There were two clauses in that agreement relevant to the present issue.

4. The first was clause 4. It provided that the solicitor's liability for the payment of fees under the agreement was conditional upon him recovering [NAME]'s fees from either the client or another party to proceedings. The clause included the words "to the intent that [the solicitor] will only be liable for [[NAME]'s] fees under this agreement to the extent that one or more of [the other] parties has put him into the necessary funds to pay [[NAME]'s] fees".

5. A further clause, clause 7, provided that the obligations under the agreement were personal to the solicitor and further the solicitor would use his best endeavours and his own at his own expense to recover [NAME]'s fees from his client.

6. On 6 November 2020, a [NAME] issued two certificates of determination of the solicitor's application for the assessment of [NAME] against his client and of the solicitor's application for the assessment of [NAME] as against [NAME]. 7. [NAME] and the client applied for a review of the [NAME]'s determination. On 16 April 2021, the Review Panel issued a statement of reasons with respect to the reviews. Broadly put, the Review Panel dismissed the application for review and, although they issued new certificates, they upheld the correctness of the [NAME]'s certificates. 8. [NAME] then appealed to this Court pursuant to the provisions of the Uniform Law. As I have earlier noted, that appeal was heard and determined by Justice Bellew. His Honour dismissed the application.

Present Circumstances 1. It follows that the [NAME] issued by the Review Panel are extant. The evidence satisfies me that [NAME] has clearly evinced an intention to file the [NAME] in order to obtain a judgment against the solicitor for the total of the two certificates, in the sum of $224,386.25.

2. On 10 February 2023, the solicitor filed the [NAME], which were in his favour against the client, in the District Court of NSW, seeking the entry of judgment in his favour against the client for a total of $310,462.48, which sum includes the amounts which he owes to [NAME]. So far, the client has not put the solicitor into funds to pay [NAME].

Discernment 1. An interim injunction or any similar interim relief is only granted having regard to three circumstances. Firstly, that the applicant for the injunction proffers an undertaking as to damages in accordance with the usual form. The solicitor has proffered that undertaking through his counsel. Secondly, that the applicant can demonstrate that he has an arguable claim for relief with respect to the substantive cause of action. Thirdly, that the balance of convenience favours the grant of the order.

2. I turn to consider whether the solicitor has an arguable cause of action. The cause of action advanced by the solicitor is principally based in contract. He points to clauses 4 and 7 of the retainer agreement and submits that he has no obligation to pay any moneys to [NAME] unless and until he is placed in funds by his client.

3. The solicitor notes the submission made by [NAME] that that agreement has been found by the [NAME] and the Review Panel to be null and void. Nevertheless, the solicitor submits that the fact that the agreement is null and void was a consequence of [NAME]'s failure to comply with the relevant legislation. Further, the solicitor submits, whilst an agreement may be null and void for the purpose of the assessment of the reasonable sums of money for [NAME], the finding by the [NAME] and the Review Panel does not give rise to any issue estoppel precluding the solicitor from relying on the clauses and the agreement in relation to the present entitlement of [NAME] to recover the funds: see s 93(3) of the LPULA Act.

4. As well, the solicitor points to the fact that in the appeal determined by Bellew J, [NAME] sought in Orders 5 through to 8 of his initiating application, declarations which would have re-enforced the effect of clauses 4 and 7 to which I have earlier referred. 5. [NAME] resists a finding that there is a reasonably arguable case. He submits that this Court has no jurisdiction to make the orders sought. He submits that these orders are part of the [NAME] assessment process and that there are privative clauses in the course of that process which preclude this Court making the orders. I reject that argument. It is misplaced.

6. The [NAME] assessment process as set out in the legislation has been undertaken. It concluded either with the decision of the Review Panel issuing the certificates or else with the delivery of judgment by Bellew J with respect to an appeal against the [NAME]. There are no further steps to be carried out as part of the [NAME] assessment process.

7. I am satisfied that s 23 of the Supreme Court Act 1970 gives this Court all the jurisdiction necessary to make the orders sought. 8. [NAME] submits that as he has the [NAME], that he is entitled by the legislation to register those Certificates immediately and that the Certificates stand as a judgment of the Court upon registration. He submits that he has that absolute right, and that the Court should not prevent him from exercising his right and entitlement. I reject that submission.

9. It is undoubted that [NAME] has an entitlement to register the [NAME] and that upon registration those Certificates become a judgment of the Court. However, if the solicitor is correct about the proper construction of clauses 4 and 7 of the retainer agreement, then [NAME] has entered into a contract by which he has agreed to condition his right to enforce the [NAME] by the provision that first requires the solicitor to have been put in funds by his client.

10. In any event, it is not without relevance that if [NAME] is permitted to file the [NAME] and they become a judgment of the Court, there is only a very limited basis upon which such a judgment of the Court can be set aside. Rule 36.15 of the Uniform Civil Procedure Rules 2005 limits the circumstances in which a court may set aside a judgment to those where it has been procured irregularly, illegally or against good faith. Such a test is hard to meet and, in the circumstances here, may well prove a significant barrier to the solicitor in advancing his contractual rights.

11. I am persuaded that the solicitor has an arguable case that he has no obligation to pay the funds until such time as he is put in funds by his client.

12. I need to consider the balance of convenience. [NAME] advances the proposition that he is not entitled to receive interest on the sum stated on the [NAME] between the date of issue and the date they are registered and become judgments. There may be an issue about that question. However, assuming it be correct that [NAME] is not entitled to claim interest, and that the period during which he has no entitlement is extended by reason of these proceedings and by the injunction which I have been asked to issue, then it seems to me that such prejudice may well be the subject of a claim on the basis of the solicitor's undertaking as to damages which has been proffered to the Court.

13. In any event, I am not satisfied that the prejudice is such as would outweigh all other matters in favour of the grant of the injunction. Those matters include, but are not limited to, the fact that unless the injunction is made, the subject matter of the reasonably arguable dispute would be set at nought. After all, what the solicitor is contending is that unless and until his client puts him in funds, [NAME] has no entitlement to be paid. And indeed, if that be correct, [NAME] may never have an entitlement to be paid. However, that simply reflects the terms of the contract that were entered into.

14. Secondly, the entry of a judgment against a person, of itself and without more, is a significant detriment. It may affect a person's credit rating. It may require them to disclose matters to their bank or other financial institutions. The failure to satisfy the judgment may constitute an act of bankruptcy upon the basis of which other creditors of the solicitor may wish to take proceedings.

15. There is a range of potentially adverse consequences to a person if judgment is entered. Furthermore, as I have earlier indicated, the limited basis upon which judgments can be set aside is a compelling reason in favour of the grant of interim relief unless and until the dispute is heard and determined.

16. I note that the solicitor by his counsel has provided an undertaking as to damages to the Court. In all of those circumstances, I am satisfied that it is proper to grant an interim injunction in the following terms:

1. Order until further order that the defendant be and hereby is restrained by himself, his servants or agents from taking any step or causing any step to be taken to register a Certificate of Determination of Review dated 22 April 2021 in the amount of $222,285.80 as a judgment of any Court, and the Certificate of Determination of [NAME] dated 22 April 2021 in the sum of $2,100.45 as a judgment of any Court.

2. Order until further order that the defendant be restrained from taking any step to enforce any claim for payment pursuant to the certificates earlier described.

3. Pursuant to rule 6.6(2) of the UCPR, order that these proceedings continue on pleadings.

4. Direct that on or before 17 March 2023 the plaintiff is to file and serve a statement of claim. Thereafter, I direct that the proceedings are to continue as if they had been commenced by statement of claim.

5. Stand the proceedings over for directions to Monday 24 April 2023 before the Common Law Registrar.

6. Grant the parties liberty to apply on three days' notice.

7. Order that the [NAME] of the interlocutory proceedings be the plaintiff's [NAME] in the cause.

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