Bing and Bing and Anor

[2009] FamCA 111

FAMILY COURT OF AUSTRALIA

BING & BING AND ANOR [2009] FamCA 111

FAMILY LAW – COSTS – Security for costs – Solicitor’s lien over file – Pursuit by former solicitor of unpaid costs where court has ordered litigation funding order which remains unpaid

Family Law Act 1975 (Cth)

Gamlen Chemical Co (UK) Ltd v Rochem Ltd & Ors  (1980) 1 All E R 1049

Bergman & Bergman [2008] FamCAFC 207

Ex parte Patience; Makinson v The Minister (1940) 40 SR(NSW) 96

Johns v Cassel (1993) FLC 92-364

APPLICANT: Mr Bing

RESPONDENT: Ms Bing

INTERVENOR: Rockman & Rockman
(A Firm)

FILE NUMBER: MLF 1745 of 2006

DATE DELIVERED: 24 February 2009

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: THE HONOURABLE JUSTICE CRONIN

HEARING DATE: 22 December 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: MR WALMSLEY SC WITH MR SCRIVA

SOLICITOR FOR THE APPLICANT: ISSAC BROTT & CO

COUNSEL FOR THE RESPONDENT: MR STONE

SOLICITOR FOR THE RESPONDENT: NEVILE & CO

COUNSEL FOR THE INTERVENOR: MR EIDELSEN

SOLICITOR FOR THE INTERVENOR: ROCKMAN & ROCKMAN

Orders

1. That the wife forthwith charge in favour of Rockman & Rockman (“the firm”) to the extent of $200,000, her interest and entitlement in the property proceedings in case number MLF 1745 of 2006 including arising from the money due to the wife pursuant to the orders of Mushin J made on 9 February 2007.

2. That notwithstanding the quantum of the charge in paragraph 1 of these orders, the sum ultimately due (if any) to the firm for costs and disbursements shall be subject to any determination of this Court or other agreement between the wife and the firm.

3. Upon the payment to the firm after the determination of any costs dispute as between the firm and the wife, the charge referred to in paragraph 1 shall be deemed satisfied and discharged.

4. That until further order, the wife shall, upon receiving funds as a result of orders of the Court or as a consequence of any agreement between she and the husband, direct her solicitors to hold upon trust pursuant to the charge, the sum of $200,000 or such other sum as shall satisfy the determination as set out in paragraph 2.

5. That there be liberty to all parties to apply on short notice.

6. That the application in a case (as amended) filed by the firm on 15 December 2008 and the response of the wife thereto filed on 16 December 2008 be dismissed.

IT IS NOTED that publication of this judgment under the pseudonym Bing & Bing is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLF 1745  of 2006

MR BING

Applicant

And

MS BING

Respondent

ROCKMAN & ROCKMAN (A FIRM)
Intervener

REASONS FOR JUDGMENT

1. This is an interim determination in a proceeding that is listed for final hearing before me in early 2009.

2. The application is brought by the intervener who is a legal firm that acted as the former legal practitioners (“the firm”) for the wife, she having terminated their services in September 2008. The application seeks an order that money due to be paid by the husband to the wife be effectively redirected to the firm as security for their legal costs.

3. The firm was represented by counsel and relied upon two affidavits.

4. The wife who opposed the orders for what might be described as technical reasons was represented by senior and junior counsel. She relied upon one affidavit.

5. The husband was represented by his solicitor and took no part in the argument.

6. The wife filed a response seeking a dismissal of the application of the firm but then sought orders for a release of the firm’s file notwithstanding the firm’s claim to a lien. The wife sought that the costs issue be dealt with as a costs dispute under the Family Law Rules.

7. For reasons which I shall set out, neither the firm nor the wife should be seen to be wholly successful depending upon what view one takes of the nature of the firm’s application.

8. There was also an extant interim application between the husband and the wife but at the request of the parties, that has been adjourned until February so that they can consider the sale of some assets. In addition, I have indicated that although the matter has been allocated seven trial sitting days, I propose to look at a trial management plan on the February return date for the purposes of ascertaining what issues are really in dispute.

9. The firm was joined as a party by order on 14 November 2008.

10. The firm’s application was filed on 1 December 2008 as a consequence of the joinder order. In light of the decision I made on the last occasion as between the husband and the wife, the application was probably not likely to succeed. Hence, the firm filed an amended application in a case on 15 December 2008.

11. Because of the disparate arguments of the parties, it is important to look at exactly what the firm sought. It was:

    Upon one or more of the parties or any of their related entities disposing of any of their or its assets then from the proceeds of such disposal or disposals a total sum of $200,000 is to be paid to Rockman & Rockman Solicitors in satisfaction of Order 1a the (sic) Orders of Justice Mushin made 9^th day of February 2007 SUCH payment to be a first charge against such proceeds of sale.

12. The wife’s application similarly needs to be scrutinised. It sought:

    That the Application in a Case of Rockman and Rockman Solicitors (“the intervener’) filed 1 December 2008 be dismissed.

    That the intervener forthwith deliver the solicitor client file of the applicant wife in these proceedings to the wife’s current solicitor on the record.

    That the costs dispute between the intervener and the applicant wife in these proceedings be dealt with in accordance with the procedure set out in chapter 19 of the Family Law Rules 2004.

13. One fundamental fact in this case affects the determination. Although the firm prepared a costs agreement for the wife to sign, it transpires that it was never executed. The firm says that it operated on the basis of the understanding of what was in the unsigned document. To add to the unusual nature of the matter, in September 2008, the firm provided to the wife a long narrative record of attendances and disbursements and then asked her to pay just over $200,000. A bill in assessable form has not yet been prepared but should be available in the ensuing weeks. As such, whilst the wife may be indebted to the firm, she has no strict legal obligation to pay or put another way, the firm cannot sue her. This dilemma means that, depending upon what view I take of the application mentioned above, the firm cannot expect the Court to order the wife to pay anything. Similarly, in relation to the wife, there is no costs dispute yet before a registrar for determination nor has one been sought as the rules would require it and as such, the wife’s application as set out above cannot succeed.

14. Mr Walmsley of Senior Counsel for the wife conceded that on the basis of the case he had argued, he could not expect the Court to somehow order the firm’s file to be released having regard to the lien it claimed. Whilst there was no opportunity to canvass any legal basis for so doing, I would have thought that where a party terminates a practitioner’s retainer at a time when costs are outstanding but in dispute, the lien on the file would prevent a court from ordering the firm to release its file[1]. That might not be the case where the retainer was justifiably terminated by a client or where there are no costs outstanding. Here, there is a claim for costs and a dispute over them which remains unresolved.

    [1] see Gamlen Chemical Co (UK) Ltd v Rochem Ltd & Ors  (1980) 1 All E R 1049

15. Counsel for the firm said that its application was not seeking final orders. It was in the form of an application in a case and was simply seeking to secure the firm’s costs such that the money so paid to it would be paid into its trust account pending the determination of any costs dispute.

16. Senior Counsel for the wife argued that the application of the firm was in the form of an absolute and final position in which it was endeavouring to recover its costs in an inappropriate way.

17. On 9 February 2007 at a time when the firm represented the wife, Mushin J made a litigation funding order known in Victoria as a Barro Order in the sum of $200,000. It was common ground that that the $200,000 had not been paid notwithstanding the significant lapse of time. It will be remembered that I ruled the recent attempt at enforcement of the Mushin J order as incompetent.

18. The evidence of the firm was in the form of two affidavits sworn by its principal Mr Raymond Rockman. He said that in her affidavit sworn in February 2007, the wife acknowledged indebtedness to the firm of approximately $85,000. He referred to the judgment of Mushin J in which his Honour said that the costs order was to enable the wife to prepare a case “in the sum of $200,000” and that the quantum was “sufficiently established”. Mr Rockman said he had costed his file and the wife was indebted to the firm in the sum of $235,465.86 but that the wife had sought a bill in “taxable form”.

19. Mr Rockman swore and filed a second affidavit. He set out how he had been engaged and made reference to a costs agreement which he had not understood had to be signed.  He said that he had therefore given the file to his costing consultant and expected the file back by the time his office reopened in January. He set out the disbursements which are large in quantum. He referred back to affidavit material of the wife in 2006 in which she acknowledged indebtedness. In summary he said the wife had not made any arrangement in relation to “securing” outstanding costs and disbursements.

20. It will be evident from the last statement that there is a subtle distinction between being paid what is owed under some disputed claim for costs and actually securing the payment.

21. The evidence for the wife was in the form of one affidavit. She said that she disputed the quantum of the firm’s debt and that she could not make an informed assessment until she received the bill in “taxable” form which she complained had not been produced since her request in June 2008. As for the statements referred to above attributed to her as acknowledgements of debt, she said that that was what the firm told her. She claimed in turn that the advice she received about costs was based on a false assumption about a costs agreement. She said the amount now claimed which is also referred to above, was grossly excessive and she disputed it. She complained about not receiving interim accounts.

22. Counsel for the firm, Mr Eidelson, submitted that it was nonsense for the wife to deny the responsibility for payment as she had incurred substantial costs and disbursements. It was said that all of the applications had been conducted on the basis of her instructions and had involved senior counsel. It was said that Mushin J specifically referred to the estimates of costs when making the “Barro” order. It was quite clear on that material that the money was to go to the firm for the purposes of enabling it to represent the wife. Mr Eidelson was critical of the wife’s affidavit in asserting that the firm had acted improperly including asserting that her former legal practitioner had lied and led her stray. Here, he said, the pool of assets was of some millions of dollars and to deny the firm its right would leave it ‘high and dry”.

23. Mr Eidelson conceded that there was no valid costs agreement. He was at pains to point out that this was not a claim absolutely for payment but rather for security of costs.

24. Mr Walmsley said the firm was ignoring the fact that the order of Mushin J was for the benefit of the wife. The fact that it was a sum to be paid to the firm was not to the point. There was no order for the money to be paid to the firm for the cost of the litigation per se. As such, the firm’s current application was not based upon the Mushin J order but seeking the funds absolutely.

25. Importantly, Mr Walmsley conceded that the firm would be paid “in the fullness of time”.

26. Notwithstanding the order of Mushin J directed the payment to be made to the legal practitioners, there can be no doubt that it was intended for the benefit of the wife. A “Barro” order is, as the Full Court described it in Bergman & Bergman [2008] FamCAFC207, the term used in Victoria to describe an order which provides a party with funds for the purpose of pursuing family law litigation and with the ultimate characterisation of those funds being left to the judge who finally determines the litigation between the parties.

27. Notwithstanding the apparent enormous amount of work done by the firm and the fact that the wife not only had the benefit of other legal practitioners engaged on her behalf and orders were obtained, there is no immediate basis that I can see under which I could order the wife to pay her practitioners. In Ex parte Patience; Makinson v The Minister[2] , the New South Wales Court of Appeal held that quite apart from the possessory lien, solicitors who are unpaid in respect of particular litigation acquire an equitable right to have their costs paid out of the fruits of the judgment. That was not argued here but it is a principle that I would adopt.

    [2] (1940) 40 SR(NSW) 96

28. Whilst I could not therefore order that the benefit that the wife received under the Mushin J orders should be properly assigned in some way to her former practitioners, there is jurisdiction to order the securing of them against the “fruits” of the judgment[3].

    [3] see Johns v Cassel (1993) FLC 92-364

29. It became clear in discussion particularly with Mr Eidelson that the firm’s claim is really about securing its position. In this case, according to Mr Eidelson, there is a significant pool of assets and the firm has done a large amount of professional work and incurred but not paid disbursements. Whilst I would not necessarily adopt the phrase used by Mr Eidelson that his client would be left “high and dry” and I have noted the statement of Mr Walmsley that the firm will get paid, there must be some risk for the firm where it has committed itself to pay other practitioners, not received any significant sum on account of costs and faces a disgruntled client.

30. Mr Walmsley said that he could not argue if I determined that this was a security for costs case but he suggested that I should not in this case, make such an order.

31. I think this is a security for costs case and there is some risk for the firm. In those circumstances, it is appropriate to make orders requiring any payment received by or on behalf of the wife to be charged with the firm’s entitlement generally. The only evidence I have is that the firm’s claim exceeds $200,000 but that that sum is challenged as excessive. Having regard to the size of the property pool in dispute, I see no prejudice to the wife in quarantining a sum of up to $200,000 and for that sum to be held upon trust by the current solicitors for the wife pursuant to the charge pending the determination of the costs dispute between the wife and the firm. I intend that any money received by the wife be so charged and that would include any money she receives under the “Barro”order.

I certify that the preceding Thirty One (31) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate: 

Date:  24 February 2009