Case: Gamlen Chemical Co (UK) Ltd v Rochem Ltd [1980] 1 WLR 614
Outcome: followed
Gamlen Chemical Co (UK) Ltd v Rochem Ltd [1980] 1 WLR 614 ; [1980] 1 All ER 1049 (" Gamlen "), Goff LJ held that the general rule in a case where the solicitor terminates the retainer applied. His Lordship did not rule out an exception where the solicitor discharged himself for good cause but said that the solicitor would have difficulty establishing that fact in circumstances where the client alleges that the solicitor's charges were excessive or there had been a breach of duty by the solicitor. His Lordship said (at 623; 1057): "... a solicitor can withdraw for good cause and 'good cause' is 'non-payment.' But we cannot decide the questions which the defendants have raised when they say that the appellants' charges are excessive, and also a further charge which they have made, of some kind of negligence or breach of duty on the part of the appellants. They have not yet formulated that in any definite terms, but one way is suggested in the correspondence in that they allowed their partner, then an assistant solicitor, to become so involved that the plaintiffs have seen fit to add him as a defendant. There may be absolutely nothing in this at all, but Mr. Churchward still remains a party, and the allegation that he joined the conspiracy still remains upon the record. As it seems to me, we cannot decide the question of 'good cause' either on the point of the allegation that the charges are excessive, or on the second ground." Templeman LJ referred to the general rule and the exception to it in the following passages (at 624-625; 1058-1059): "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. ... 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. I wish to guard myself against possible exceptions to this general rule. The court in fact is asked to make a mandatory order obliging the original solicitor to hand over the papers to the new solicitor. An automatic order is inconsistent with the inherent, albeit judicial, discretion of the court to grant or withhold a remedy which is equitable in character. It may be, therefore, that in exceptional cases the court might impose terms where justice so required. For example, if the papers are valueless after the litigation is ended and if the client accepts that he is indebted to the original solicitor for an agreed sum and has no counterclaim, or accepts that the solicitor has admittedly paid out reasonable and proper disbursements, which must be repaid, the court might make an order which would only compel the original solicitor to hand over the papers to the new solicitor providing that in the first place the client pays to the original solicitor a sum, fixed by the court, representing the whole or part of the moneys admittedly due from the client to the original solicitor. Much would depend 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." Templeman LJ considered whether there were exceptional circumstances which justified a modification of the general practice. His Lordship said (at 627; 1060): "In my judgment, there are no grounds for modifying the usual practice. This action was begun in 1974; the appellants acted until June 1979 and the action was set down for March 1980&#8212;possibly a little optimistically. Whether the defendants this day can lay their hands on the money to pay the appellants' demands, I know not, but the defendants dispute the appellants' right to be paid in principle and in quantum. It would be disastrous for the defendants if their new solicitors could not, at this stage, obtain the papers held by the appellants." It seems to me that the effect of the authorities is that the general rule is that, where the solicitor terminates the retainer, an order for production will be made. There may be exceptional circumstances which lead to a modification of the general rule. The modification of the general rule will, generally speaking, involve the imposition of terms, such as part payment or payment into court or the provision of security. In an extreme case like A v B , where the factors identified in [44] are present, that may lead to a refusal of an order for production. However, generally speaking, the presence of exceptional circumstances will lead to the imposition of terms. That to my mind is the effect of the decision in Gamlen and, I think the decision of Moore-Bick J in Ismail is consistent with that conclusion. In Ismail , Moore-Bick J said (at 731) that he could see no basis for criticising the conduct of the solicitors and that there was evidence to suggest that the client's attitude owed more to negotiating tactics than a real sense of grievance. The matters identified by Templeman LJ in Gamlen as going to whether or not a departure from the general rule is justified are as relevant to whether security is provided as they are to whether an order for production is refused. In other words, it is not the case that the only question in determining whether there should be terms such as part payment or payment into court or security is whether the client has negated an ability to pay. That is a relevant factor, no doubt, but it is only one factor among the others which have been identified. When, in the present case, the cross-claimants' new solicitors asked the cross-respondent to produce the cross-claimants' papers, the cross-respondent offered to do so in accordance with the professional conduct rules which govern its practice as a firm of solicitors, namely, the Professional Conduct and Practice Rules 2005 made by the Law Institute of Victoria Limited ("the Victorian Rules") (cll 7, 23.4). The effect of the Victorian Rules is that, where the solicitor terminates the retainer and the client's papers are essential to the client's defence or prosecution of current proceedings, the solicitor must hand over the papers to the client upon receiving satisfactory security for the unpaid costs, or to the client's new solicitor upon the new solicitor providing reasonable security for the payment of the solicitor's costs on entering into an agreement with the client and the solicitor to procure payment of the solicitor's costs upon completion of the relevant proceedings. As far as I can see, the South Australian Rules of Professional Conduct &amp; Practice are to the same effect (cll 7, 23.4). The professional conduct rules set out circumstances in which a practitioner must hand over his client's papers. They do not purport to define exhaustively the circumstances in which a practitioner must hand over his client's papers. In any event, they could not do that, or do it in a way which binds the Court. Application of principles The cross-respondent terminated its retainer with the cross-claimants. The cross-claimants are engaged in an existing proceeding and I am satisfied that they need their papers for the proceeding, and, in view of the proximity of the trial date, the papers are needed as a matter of urgency. The cross-claimants may have a substantial counter-claim against the cross-respondent. That counter-claim is potentially much larger than the cross-respondent's claim for outstanding fees. That counter-claim has been brought and, subject to events not presently foreseeable, will be determined in the very proceedings for which the cross-claimants seek their papers. It seems common ground that at least some of the papers will be produced on discovery. Furthermore, I do not think I can, on the evidence before me, find that the cross-claimants have delayed in bringing forward their allegations against the cross-respondent. A conflict of interest in the cross-respondent acting for the cross-claimants while the cross-claimants were alleging negligence on the part of the cross-respondent was identified at an early stage. Unfortunately, the conflict was not resolved at that early stage. Of course, it may transpire that the cross-respondent is innocent of any negligence or of any criticism for its conduct of the proceeding. The point is that I cannot, on the evidence before me, find that the cross-claimants may not have a substantial claim against the cross-claimants which has not been brought forward in a timely, or reasonably timely, fashion. I recognise on the other hand that if the cross-respondent is right it is owed a substantial amount of money and that there appears to be no dispute that its fees for unrelated matters are due and owing. I also recognise that the cross-respondent's lien is likely to be of little value to it at the conclusion of the proceeding if the order now sought is made. I also recognise that the cross-claimants have not adduced any evidence that they are unable to provide security. Having said that, I do not think that there are the type of exceptional circumstances which might justify a refusal to make an order for production or the making of an order which is conditional on part payment or payment into court or the provision of security. It seems to me that this case is clearly distinguishable from the case before Leggatt J in A v B . It is also distinguishable from Ismail because I cannot say that the cross-claimants do not have a real sense of grievance or indeed a substantial cause of action against the cross-respondent. It seems to me that this case is analogous to the decision in Gamlen . It presents the same problem identified by Goff LJ (see [41] above) in that there may prove to be nothing in the cross-claimants' allegations against the cross-respondent, but it is simply not possible to say that at this stage. They are substantial, they arise directly out of the applicants' claim and they are the subject of a cross-claim.