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Supreme Court settles firms’ row over costs

In the recent case of Sithakoul v Su,1 the Supreme Court of New South Wales considered whether to award costs for the plaintiff or their former solicitors.

The judgment arose out of an application made by the plaintiff against her former solicitors (Bridges) to have all of its records and files for the proceeding be delivered. The plaintiff owed Bridges about $120,000 in legal fees.

Bridges maintained its position that, given its retainer was discharged by the plaintiff, it was entitled to maintain its lien and would only release documents if security was provided.

Consent orders were made in December 2021 and ordered the plaintiff to provide security for the amount owed to Bridges.

Issues considered

Both parties sought an order for costs to be awarded in their favour on the basis that the other party had acted unreasonably.2

The court turned to the relevant communications between Bridges and the plaintiff’s current solicitors (Longton). Longton offered to give an undertaking to Bridges to have the outstanding legal fees be paid out of the net proceeds.3

Bridges refused and maintained its position that it was entitled to exercise a lien over the files.4 Longton then accused Bridges of breaching the Civil Procedure Act (CPA)5 and noted that the firm failed to comply with its ongoing professional obligations.6

The court referred to rules 14 and 15 of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules7 and recognised that these rules required the solicitor to deliver up files where reasonable security had been provided or a tripartite agreement between the former, incoming solicitor and the client had been entered into to cover these costs.8 The court emphasised that the rules were subject to the court’s statutory power to deliver up the file.9

The court found that the undertaking offered by Longton was not an offer of ‘reasonable security’10 because the plaintiff’s obligation to pay Bridges was not conditional on the outcome of proceedings. Further, the funds held in court pending the outcome of the case were claimed by the respondent.11

While Longton argued that the court had powers to make orders against Bridges under s99 CPA, the court found that those powers applied where costs were incurred from the solicitor’s serious neglect, incompetence or unreasonable conduct.12 The court rejected this reasoning and noted that once Bridges was discharged by the plaintiff, it had no further obligations with respect to the prosecution of her claim.13

The court found that Longton’s attack on Bridges was unfounded and concluded that Bridges was entitled to maintain its lien until proper security was offered.14 While there were no findings of disciplinary action, the court felt very strongly against the application and expressed its views that it was a waste of time and money.

In retrospect, the court noted that Longton should have advised the plaintiff of the costs implications.15 The court found that costs incurred by the plaintiff were unnecessary16 and could have been avoided as the plaintiff always had sufficient assets to provide security.17 The court awarded costs in favour of Bridges and ordered that Ms Sithakoul pay their costs of the motion.

Janelle Linato is a law student in the Queensland Law Society Ethics and Practice Centre. This article has been approved by Grace van Baarle, Manager, Ethics Solicitor, QLS Ethics and Practice Centre.

Footnotes
1 [2022] NSWSC 132 (Sithakoul).
2 Ibid 29.
3 Ibid 31-32.
4 Ibid 32.
5 2005 (NSW) ss56-60 (CPA).
6 Sithakoul (n1) 32.
7 2015 (NSW).
8 Sithakoul (n1) 40.
9 Ibid 42.
10 Ibid 49.
11 Ibid 47.
12 Ibid 51.
13 Ibid 54.
14 Ibid 65.
15 Ibid 57.
16 Ibid 67.
17 Ibid 66.

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