HIS HONOUR: If this were a tale written by Beatrix Potter, it might be entitled The Tale of the Tempestuous Teacup. Unfortunately it is not a children's story. It is a judicial decision made necessary by an application, peripheral to the real and significant issues involved in the substantive litigation, that appears to have arisen from a situation where on each side ego has triumphed over reason.

The plaintiffs were clients of the law firm known as Atanaskovic Hartnell (AH). The ninth and tenth defendants are partners in that firm, and the ninth defendant, Mr Atanaskovic, is the person specifically involved in the dispute with which I am now dealing.

The plaintiffs say, and there is a great deal of evidence to support what they say, that they were defrauded of approximately $8 million (gross) in a series of transactions effected by a solicitor then in the employ of AH. Some of that money has been recovered, in the sense that it is sitting in court awaiting a decision as to who is entitled to receive it. The plaintiffs have sued AH, claiming, in various ways, that the firm failed properly to supervise the solicitor in question so as to protect the plaintiffs from the risk of the harm which in fact eventuated.

As I have said, that is a very serious matter. It will, if not resolved by means other than a final hearing, no doubt involve significant evidence, significant court time, very substantial expense, and perhaps the prospect of a journey through the appellate hierarchy of the courts of this State and nation.

The issue with which I am dealing is an application by the plaintiffs seeking an order, said to be pursuant to s 61(1) of the Civil Procedure Act 2005 (NSW) or UCPR r 2.1, that Mr Atanaskovic not communicate directly with a number of persons who are in effect the principals or the employees of one or other of the plaintiffs, in relation to the proceeding and for as long as the plaintiffs' present solicitors continue to act for the plaintiffs. There is a subsidiary order sought seeking to restrain Mr Atanaskovic from causing any employee of AH to do likewise.

The application has arisen out of correspondence exchanged between the parties which, whatever its original justification may have been, can be seen to have been ill-advised and intemperate, and to have become worse in tone and content as time passed.

There were two principal topics involved in that correspondence. One related to an approach made by Mr Atanaskovic to the Chief Operating Officer of the plaintiffs, seeking to initiate mediation. The other related to correspondence in which AH sought recovery of a substantial amount of fees said to be owing by the plaintiffs in respect of other proceedings in which AH had acted for the plaintiffs.

The correspondence is contained in an exhibit to an affidavit that was read on the hearing of the application. I do not propose to refer to all of it. A couple of highlights (or lowlights) will suffice.

Dealing first with what might be called the mediation correspondence: on 19 March 2018, Mr Atanaskovic wrote to the Chief Operating Officer of the plaintiffs, referring to "without prejudice by phone last Friday evening” discussions, and suggesting the possibility of a claim against LawCover. I am not entirely clear why Mr Atanaskovic thought that it was his role to suggest to the plaintiffs, who by then were represented by the firm HWL Ebsworth, how to proceed. I should however add that Mr Atanaskovic was not then a party to the proceedings; indeed, he was not joined as a defendant until very recently, and after either all or substantially all of the contentious correspondence was exchanged.

HWL Ebsworth (I shall refer to the firm as "HWLE" in what follows) wrote to Mr Atanaskovic and one of his partners in AH on 21 March 2018. In the letter, HWLE requested that Mr Atanaskovic and his firm "immediately cease all communications with our clients" and demanded that "all future correspondence regarding this matter must be in writing and addressed to this firm".

It would seem that Mr Atanaskovic was not pleased by that letter. He replied two days later, on 23 March 2018. Mr Atanaskovic's letter commenced (after referring to the letter to which it was replying) by stating that the letter of 21 March 2018 was "on its face … something of an embarrassment to the legal profession, inter alia since your letter itself constitutes a breach of relevant legal conduct rules and is therefore hypocritical". After that peaceful beginning, Mr Atanaskovic made some further complaints.

The day before that letter had been sent, Mr Atanaskovic had sent an email to Mr Bruce Gordon, who I take to be a principal of the plaintiffs. That email referred to "our without prejudice phone discussion yesterday" and stated that Mr Atanaskovic was communicating "in a personal capacity, and not as a solicitor". Nonetheless, the letter made some comments on the way in which the plaintiffs' claim was framed, and as to the way in which the plaintiffs' loss should be assessed.

Perhaps not surprisingly, that email produced yet another stern reply, again marked by much bold print and underlining, demanding "[s]o that there can be no possible doubt" that communications of the kind to which I have just referred should cease. It would appear that, by some error, that letter of HWLE was sent on two occasions. Mr Michael Sophocles, another partner in AH, took offence at that, and replied referring to "threatening correspondence" sent more than once, and commenting that he did not understand whether the double sending "was simply a mistake or was a misguided attempt at harassment". Mr Sophocles demanded that HWLE communicate with the lawyers for AH, the firm Gilchrist Connell (GC).

Matters did not really improve from there. I do not propose to satisfy, in any way further than I have done, the curiosity of those who might wonder what all this is about except by pointing out that on 25 May 2018, Mr Atanaskovic saw fit to send an email to Mr Gordon pointing out, among other things, that LawCover's insurer's solicitor had communicated an offer that Mr Atanaskovic thought was "generous", and pointing out that non-acceptance left the plaintiffs "at some risk of having to pay the insurer's future legal expenses in full". It is very difficult to understand, in light of what had passed between the parties, why Mr Atanaskovic thought it was appropriate to write that letter.

I turn to the question of fees. On 27 February 2018, GC wrote to HWLE pointing out that GC's client AH was owed in excess of $1.1 million for unpaid fees in relation to other litigation, and stating that AH claimed, and maintained its claim to, a lien in respect of the relevant papers. HWLE replied the following day, setting out what the firm understood to be the status of the various fee invoices. Apparently, Mr Sophocles thought that HWLE's response was inadequate. He wrote to HWLE on 1 March 2018, referring to the letter of 28 February 2018, and setting out various contentions as to why the fees were owing. His contentions included that nothing had been raised to suggest that the fees were in any way excessive or inappropriate.

For reasons that I do not understand, and that the evidence does not explain, there was no reply to Mr Sophocles' letter during March or April. On 2 May 2018, there was a reply which did no more than ask for further information, and, in due course, that was followed by a substantive reply to which I shall return. After the HWLE letter of 2 May 2018, Mr Atanaskovic wrote to HWLE on the topic of outstanding fees. That letter disputed, in strenuous terms, various allegations either made by or inferred from previous correspondence.

Mr Atanaskovic followed up that letter with further letters over the next week or so.

On 11 May 2018, HWLE wrote what I have referred to as the substantive reply on the question of fees. That letter made extremely serious allegations. It asserted in effect that AH had falsified billing records. It asserted, further, that AH had failed to account appropriately for a payment received, or to deal with it in accordance with the instructions of the payer. It is hardly surprising that this letter was not well received. Among other things, it caused Mr Atanaskovic to resume his contact direct with the plaintiffs or their principals.

It is the case for AH and Mr Atanaskovic that the correspondence was justified. As to the correspondence relating to mediation, he said in effect that he had been advised by GC to initiate contact direct with the plaintiffs, with a view to obtaining their consent to a mediation. There is no doubt in principle that it is or may be appropriate for the principal of one litigant to communicate with the principal of another, without going through lawyers, with a view to arranging some form of alternative dispute resolution. Whether that is appropriate where one of the principals is not only a legal practitioner, but the former legal practitioner acting for the other side, is open to question.

As to the fees correspondence, the explanation given is that it was necessitated because HWLE had failed, for a period in excess of ten weeks, to offer any substantive reply to GC's letter to which I have referred. It is certainly the case that there was no substantive reply, and the discourtesy involved is regrettable, although in the scale of this litigation hardly to be taken as surprising.

As I have said, the application is based on s 61(1) of the Civil Procedure Act and on UCPR r 2.1. Those sources of power were examined by the Court of Appeal in McGuirk v The University of New South Wales [1] . Sackville AJA gave the leading judgment. His Honour dealt with both sources of power. Young JA agreed with Sackville AJA, although he offered some reasons of his own. Giles JA agreed on the approach that Sackville AJA said should be taken to r 2.1, and the area in which he disagreed is not relevant. Giles JA also, I think, took a similar approach to s 61(1) as that indicated by Sackville AJA. In the circumstances, and without wishing to be disrespectful to either Giles JA or Young JA, I shall concentrate on the reasons of Sackville AJA.