B Family Lawyer Pty Ltd & Fullard
[2016] FamCA 641
•4 August 2016
FAMILY COURT OF AUSTRALIA
| B FAMILY LAWYER PTY LTD & FULLARD AND ANOR | [2016] FamCA 641 |
| FAMILY LAW - Solicitor's lien - Causal Link – Injunction to protect claim. |
| Family Law Act 1975 (Cth) |
| Carew Counsel Pty Ltd v French [2002] VSCA 1 Firth v Centrelink and Anor [2002] NSWSC 564 Gabel v Yardley (2008) 40 Fam LR 66 Roam Australia Pty Ltd v Telstra Corp Ltd t/as Telecom Australia [1997] FCA 980 |
| APPLICANT: | B Family Lawyer Pty Ltd |
| RESPONDENT: | Dr Fullard |
| SECOND RESPONDENT: | Mr Dolous |
| FILE NUMBER: | SYC | 2390 | of | 2015 |
| DATE DELIVERED: | 4 August 2016 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Gill J |
| HEARING DATE: | 11 and 14 July 2016 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Othen |
| SOLICITOR FOR THE APPLICANT: | B Family Lawyer Pty Ltd |
| SOLICITOR FOR THE RESPONDENT: | No appearance by or on behalf of Dr Fullard |
| SOLICITOR FOR THE SECOND RESPONDENT | Ms K Ford, McDonell Milne Toltz |
Orders
Orders 1 - 7 as sought in the application of 21 June 2016 are refused and the applications are dismissed;
The oral application made on 11 July 2016 for an injunction restraining the Respondent from dealing with the proceeds of the orders of 24 June 2015 is refused and dismissed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym B Family Lawyer Pty Ltd & Fullard & Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT PARRAMATTA |
FILE NUMBER: SYC2390/2015
| B Family Lawyers Pty Ltd |
Applicant
And
| Dr Fullard |
Respondent
And
Mr Dolous
Second Respondent
REASONS FOR JUDGMENT
B Family Lawyers Pty Ltd (“the applicant solicitors”) were previously the solicitors for the wife. They claim that the wife owes them money for work undertaken for her. By orders of the Court of 24 June 2015 the wife is entitled to $50,000 on the settlement of the sale of the former matrimonial home. By application filed on 21 June 2016 the applicant solicitors ask for the payment of a sum of $36,993.91 for legal costs from that $50,000.
The orders of 24 June 2015 provided for a partial distribution of the funds of sale of the former matrimonial home as follows:
15.2 That pending further order the proceeds of sale of the [C Street] property be distributed in the following order and priority;
15.2.1 In payment of agents fees and commission;
15.2.2. In payment of the conveyancing costs of sale;
15.2.3 In discharge of the registered mortgages;
15.2.4 In payment of the sum of $50,000 to the [sic] each of the solicitors for the husband and the wife by way of partial property settlement;
15.2.5 In payment of the balance into a controlled monies account by the solicitors for the parties on Trust for the parties.
The applicant solicitors were not the solicitors for the wife at the time of the making of the orders of 24 June 2015. The solicitors were then Armstrong Legal. The applicant solicitors acted for the wife from January to 23 March 2016. A final hearing listed for 26 April 2016 was vacated and is now listed for 5 September 2016. That is, the applicant solicitors acted for the wife after the interim orders were made, but ceased to act prior to the date the final hearing was originally listed.
On 11 July 2016 Armstrong Legal were not on notice of the proceedings. They were placed on notice that the matter was relisted on 14 July 2016 by the applicant solicitors and have indicated that they do not intend to take part in the proceedings.
The affidavit of Ms D (15 June 2016) asserts the applicant solicitors are owed $36,993.91 [7]. Invoices were sent to the wife between 15 January and 22 March 2016. Correspondence by email from the wife to the applicant solicitor indicated that, at 13 June 2016, the wife had no intention to pay the applicant solicitor.
The applicant solicitors assert that the amount of $50,000 to be paid pursuant to Order 15.2.4 is the “fruits of litigation”. They assert that they have a lien in respect of this fund.
Principles regarding a fruits of litigation lien
Where the efforts of the solicitors “brought about (or partially brought about)”[1] the obtaining of funds through litigation, then the solicitors have a right of recovery of their costs from the fund produced by the litigation. This circumstance gives rise to an equitable right on the part of the solicitor.
[1]Roam Australia Pty Ltd v Telstra Corp Ltd t/as Telecom Australia [1997] FCA 980 per Lehane J
The principles relating to such claims were set out in Firth v Centrelink and Anor [2002] NSWSC 564 per Campbell J (disregarding those not relevant and omitting references):
a)The solicitor’s right exists over money recovered through obtaining judgment in litigation, and also over money recovered through the settlement of litigation;
b)The solicitor’s right exists over both the amount of a judgment in favour of the client, and the amount of an order for costs in favour of the client;
c)It exists over money which is in the possession of the solicitor, and also over money which is in court and money which is owed to the client but not paid into court;
d)The solicitor need not be still acting for the client at the time that the money was recovered;
e)For the right to arise it must be shown that there is a sufficient causal link between solicitor’s exertions and the recovery of the fund of money;
f)The quantum of money for which the solicitor has the equitable right is the amount which is properly owing to the solicitor by the client, whether that amount be ascertained by taxation of a bill of costs, or assessment, or pursuant to a costs agreement. In relation to those situations where taxation is necessary to ascertain the quantum owing to the solicitor, the solicitor’s right exists in the fund prior to the occurrence of the taxation;
g)The solicitor’s equitable right exists before the court is asked to intervene to protect it; it “arises immediately upon the recovery of monies through the exertions of the solicitor”; if the lien is over the proceeds of an order for costs, it comes into existence at the time of making of that order for cost. If the lien is over the proceeds of a settlement, it arises when the settlement agreement is entered into. (These statements concern when the lien comes into existence as an item of present property – they are not concerned with the ability of the solicitor to deal with the rights under the lien as future property before the fund is in existence.)
h)The right of the solicitor is one which the solicitor can enforce against the client, entitling the solicitor to an injunction to prevent the payment of the fund to the client without notice to the solicitor until such time as the quantum of the solicitor’s entitlement to be paid from the fund is ascertained. If the quantum of the solicitor’s entitlement has been ascertained, the solicitor is entitled to an order that the amount of his entitlement be paid to him from the fund, notwithstanding opposition from the client.
If the lien exists in this case, it exists independently of any order of the Court being made regarding the lien, coming into existence when the settlement agreement in relation to the $50,000 was entered into. It does not matter that the funds are held by another solicitor, nor does it matter that the wife disagrees with payment being made. Further, the right exists prior to the proper establishing of quantum.
The key issue in this case is whether a sufficient causal connection is established by the applicant solicitors.
Principles concerning the causal link
A fundamental prerequisite for the lien is a sufficient connection between the exertions undertaken by the solicitor and the recovery of the particular fund of money.
In Roam Australia Pty Ltd v Telstra Corporation Ltd [1997] FCA 980 Lehane J said of the requirement for a sufficient causal link:
Where solicitors have been actively involved over a considerable period in acting for a party to successful litigation, the conclusion is likely to follow that the solicitors have been instrumental in obtaining the result, or that the result is (at least in part) due to the solicitors' efforts.
However, it is not the mere involvement that establishes a causal link:
I do not think it follows that solicitors will always, in a case where they have acted for a party to proceedings in which ultimately a judgement is obtained, or which are compromised, obtain an equitable interest in the judgement or settlement proceeds commensurate with the amount they are owed for costs and disbursements, no matter how slight or fleeting their participation may have been or even if they acted only for a short period after the commencement of the proceedings later conducted by others through interlocutory procedures and trial to judgement. In each case, in my view, it must be a question whether the requisite causal link is established, whether the judgement or compromise is, on the evidence, to be regarded as brought about (or partially brought about) by the efforts of the solicitors.
This does not mean that there is a requirement that a solicitor seeking the relief must have been involved at the point of time that the judgment or compromise came about. In Roam Australia the solicitors ceased to act some months before the compromise of the proceedings. They were not involved in the negotiation although there was,
…no doubt they could be seen to have carried the litigation to a point where a successful negotiation could take place.
That is, the question is one of whether there is a causal link to the product of the litigation, not whether there is a temporal connection, although the latter may make it easier to establish the former.
In establishing a causal link it is essential that the conduct of the solicitors be directed to obtaining the fruits of the litigation rather than some other legal objective. In Carew Counsel Pty Ltd v Fullard [2002] VSCA 1 the solicitors sought to exercise a lien in relation to steps taken after the compromise of a case. This involved advice about bankruptcy in order to keep the results of the litigation in the hands of the client. The Victorian Court of Appeal found that no lien had arisen in by reason of these efforts because they “were not costs incurred in ‘recovering’ the fund, nor costs ‘immediately incidental’ thereto.” That is,
…fairly analysed, the exertions undertaken by the solicitor were "outside ... the course of collecting the proceeds of the settlement" and had nothing to do with the creation of the fund represented by the settlement monies.
In summary, the connection between the legal work and the fruit must be a causal link that has substance, rather than a merely fleeting connection. The work must be able to be seen as bringing about, or contributing to the bringing about of the result. It is not established by a connection to the litigation that does not relate to the obtaining of the result.
Is there a sufficient causal link?
Given that the applicant solicitors did not act for the wife at the time of, nor before the making of the orders that secured the $50,000 by way of distribution of property described as a partial property settlement, a question arises as to the causal link between the exertions of these solicitors and the funds they seek to access.
For the applicant solicitors it is argued that the partial property settlement is an exercise of the s 79 power even though that is, as yet, not completely exercised. That is, it is a part of the sum ultimately to be paid to the wife, the ultimate sum being something toward which they have worked. It is argued that even if the efforts of the applicant solicitors post-dated that which caused the release of these funds, these funds are but a part of the end point of the exercise of power to which they were working. This characterisation is consistent with what was said in Gabel v Yardley (2008) 40 Fam LR 66 per Bryant CJ and Coleman J at [57] in relation to the exercise of the s 79 power:
[57] The legislative framework, and the authorities to which we have been referred, suggest that the court’s power to make orders with respect to settlement of property is not necessarily exercisable at only one time, and can properly be exercised by a succession of orders until the power to make orders with respect to property is exhausted. Logic suggests that the power to make orders for settlement of property will be exhausted or “spent” when there remains no property of the parties to the marriage or either of them with respect to which orders by way of alteration of interests of property could be or have been made.
The essence of the argument is that, although the order granting the fruits the subject of this application pre dated the involvement of the applicant solicitors, the fruit must be characterised as a part of the ultimate property distribution to be effected in exercise of the s 79 power rather than as a discrete item unrelated to what follows. While it may be the result of a separate order, it only has existence as a part of the whole. It is to this whole that the applicant solicitors asserts it has worked.
However, at present this theoretical whole is not in existence. Its constitution is unknown. Further, the manner in which the efforts of the applicant solicitors contributed, or did not contribute to it is also unknown.
Focussing then upon what is in existence, it cannot be said that the applicant solicitors’ endeavours contributed in any fashion to the exercise of power that generated this fund. Whether this exercise of power constitutes the complete disposition to the wife, or only a part, whatever it was that was done by the applicant solicitors (noting there is no evidence about what was done aside from a reference to a conference with counsel and a reference to the amount that was charged) had no bearing on this fund.
Accordingly, I do not find a causal connection such as to establish the lien in favour of the applicant solicitors and decline to make the orders sought.
Preservation pursuant to section 114
In the alternative, an injunction was sought pursuant to s 114 to preserve the sum.
Even if the liberal approach[2] to the preservation of property in relation to which parties make a s 79 claim under the Family Law Act is applicable to what is essentially a debt claim by the applicant solicitors, the requirement that there be an objective risk of disposition to defeat an order[3] is not made out on the evidence presented by the applicant solicitors on this application.
[2] Waugh [43]
[3] Waugh [50]
It is for the applicant solicitors to establish such an objective risk. There is an absence of evidence to establish an inadequacy on the part of the wife’s claim in the ultimate proceedings to make good on the claim made by the applicant solicitors. The wife’s articulation that she does not consider payment to be appropriate does not equate to a scheme or intention to defeat a claim. No other matters have been identified as constituting a risk of defeat.
Noting that a scheme is not a necessary prerequisite for the granting of relief pursuant to s 114, the failure to establish either a scheme or other justifying factors means that a sufficient evidential basis is not established to justify the restraint. I decline the relief sought.
I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Gill delivered on 4 August 2016.
Associate:
Date: 4 August 2016
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