Brackenreg v KJB Law Pty Limited
[2015] ACTSC 32
•18 March 2015
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Brackenreg & Ors v KJB Law Pty Limited & Ors |
Citation: | [2015] ACTSC 32 |
Hearing Dates: | 18 July 2014, 6 February 2015, 13 March 2015 |
DecisionDate: | 18 March 2015 |
Before: | Mossop M |
Decision: | 1. The proceedings are listed on 27 March 2015 at 11:00 am for any argument in relation to the form of final order that should be made and costs. |
Category: | Principal Judgment |
Catchwords: | LEGAL PRACTITIONERS – solicitors – equitable lien – whether solicitors entitled to lien over funds held by executor where estate subject to costs order – where former client acting as tutor for minor in family provision proceedings and costs order made in favour of minor – where former client now a bankrupt - whether actions of solicitors had relevant causal link to recovery of fund – whether lien extended to costs of whole of proceedings |
Legislation Cited: | Legal Profession Act 1994 (NSW) Legal Profession Act2006 (ACT) |
Cases Cited: | Abdul-Karim v Attorney-General’s Department [1999] NSWSC 79 Akki P/L v Martin Hall P/L (1994) 35 NSWLR 470 |
Parties: | Gregory Brackenreg, Ben Fuller, Mark Flint, Stephanie Lynch, Christine Murray, Alice Tay and Archie Tsirimokos T/AS Meyer Vandenberg Lawyers (A Firm) (Plaintiff) KJB Law Pty Limited (First Defendant) Ezio Senatore as Trustee of the Bankrupt Estate of Christine Anne Lloyd (Second Defendant) Nicholas Vardos as Executor and Trustee of the Estate of the late Michael Charles Morris (Third Defendant) Terence Frances Lloyd as Trustee for Joel Morris (Fourth Defendant) |
Representation: | Counsel: Mr W Sharwood (Plaintiff) Mr R Arthur (First and Third Defendants) Ms L White (Fourth Defendant) |
| Solicitors: Meyer Vandenberg Lawyers (Plaintiff) KJB Law (First and Third Defendants) Matthews Folbigg (Second Defendant) Baker Dean and Nutt (Fourth Defendant) | |
File Number(s): | SC 143 of 2014 |
Parties and proceedings
The plaintiff is a firm of solicitors (the Solicitors). By Originating Application filed 14 April 2014 the plaintiff seeks the following orders:
1.A declaration that the Plaintiff is entitled to a lien (“the lien”) over the funds held in the First Defendant’s trust account in the name of the Estate of the late Michael Charles Morris.
2.A declaration that the lien secures the sum of $105,000 or such other amount as the Court finds appropriate.
3.An order that the First Defendant pay to the Plaintiff the sum of $105,000 (or such other sum) within 7 days of the date of these orders.
4.Costs.
5.Any other order that the Court considers appropriate.
The first defendant is KJB Law Pty Ltd (KJB), the incorporated legal practice which acts as solicitor for the estate of Michael Charles Morris and which holds certain funds of that estate in its trust account. The third defendant is the executor and trustee of that estate (the Executor). The first and third defendants were jointly represented and adopted the same position in the proceedings.
The second defendant is the trustee of the bankrupt estate of Christine Anne Lloyd (Christine), the wife of the late Michael Charles Morris and mother of Joel Morris (Joel). He played no part in these proceedings.
The fourth defendant is identified as Terence Frances Lloyd as trustee for Joel Morris. Terence Frances Lloyd is Christine’s father. He was appointed trustee of that part of the estate of Michael Charles Morris that was payable to Joel by an order of the New South Wales Supreme Court. He took an active part in these proceedings, making submissions and filing an affidavit of sworn by Christine.
Outline of the dispute
Michael Charles Morris died on 31 December 2010, leaving a son, Joel. Probate of his will was granted to the Executor on 11 April 2011. Subsequently, in December 2011, Joel commenced proceedings for family provision under the Succession Act 2006 (NSW) in the New South Wales Supreme Court (NSW proceedings). In those proceedings, because Joel was a minor, Christine was his tutor and retained the plaintiff to act as her solicitors.
In the NSW proceedings Joel also sought a determination of the meaning of clause 4 of the will. This was decided as a separate question by Windeyer AJ on 19 November 2012 and will be referred to as the “construction suit” in these reasons.
The mother of the deceased, Margaret Eleanor Morris (Margaret) was beneficially entitled under the will and participated in the family provision proceedings. She also brought her own application for provision out of the estate.
During the proceedings the Executor estimated the net distributable estate to be valued at approximately $550,000. The principle asset was a house, which was ultimately sold and the proceeds paid into a trust account held by the first defendant.
The proceedings were ultimately settled and the Court made orders by consent on 22 March 2013. The consent orders dealt with the payment of the costs of the parties and provided for an adjustment to the terms of the will. The adjustment to the terms of the will was to the effect that the residue of the estate was to be divided equally between Joel and Margaret. In relation to costs, the orders provided:
the costs of [Joel] in respect of his family provision application (not including his costs in respect of the construction suit as per the judgment of Windeyer J) be agreed or assessed and the resulting sum be treated as a liability of the estate.
Another order in similar terms provided that Margaret was entitled to have the costs of her family provision application paid out of the estate. The Executor was entitled to his costs on an indemnity basis.
The total amount billed by the Solicitors to Christine was $222,317.52. To date Christine has paid to the Solicitors a total amount of $114,795.21 for their fees.
In May 2013 the Solicitors wrote to KJB estimating Joel’s costs recoverable from the estate under the order of 22 March 2013 to be $120,000 including GST.
In September and October 2013 there were communications between the Solicitors and KJB as to the overall distribution of the estate and, in particular, the quantum of the liability of the estate for costs arising out of the family provision proceedings.
On 14 October 2013 Christine terminated her retainer with the Solicitors. On 23 October 2013 the Solicitors wrote to the Executor claiming a lien over the funds of the estate held in the KJB trust account and seeking an undertaking that no further funds would be distributed without giving the Solicitors seven days’ notice. The Solicitors indicated that they would accept $96,704.24 in full satisfaction of the lien over the trust funds.
On 27 November 2013 Christine was declared bankrupt on her own application and in February 2014 she requested that the Executor pay no funds to the Solicitors as the liability was part of her bankrupt estate.
On 13 December 2013 the Solicitors wrote to KJB describing in some detail the legal basis for the claim of a lien.
At some time after October 2013 the Executor reached an agreement with Margaret as to the payment of her costs of the family provision proceedings and those costs were in fact paid. The Executor also paid the fees of his own solicitors out of the estate. After the payment of these liabilities of the estate only $105,000 remained available in the KJB trust account.
Notwithstanding her bankruptcy and the fact that her outstanding liability to the Solicitors became a liability of her bankrupt estate, Christine made a complaint in December 2013 to the Solicitors in relation to the conduct of the matter and the costs charged. In April 2014 she made a complaint to the Law Society concerning the conduct of the Solicitors in which she sought that the $105,000 held in the first defendant’s trust account be released to a trust for the benefit of Joel. In November 2013 she had communicated an intention to KJB to apply “to the court to have the costs of all parties fully assessed”.
On 1 April 2014 KJB wrote to the Solicitors and the solicitors then acting for Christine asking the Solicitors how, in the light of the bankrupt status of Christine, the Executor could release funds to the Solicitors in the absence of an assessment of those costs. The letter also rejected a suggestion by Christine’s solicitors that there had been any agreement to transfer money from the estate to Joel or a trust for his benefit.
In response to this, the Solicitors asserted that the likely assessment of party and party costs would result in an amount currently exceeding the amount claimed under the lien and that it was open to the Executor to release the amount held in satisfaction of the lien. The Solicitors offered to permit the Executor to examine the accounts rendered to Christine in the course of the proceedings.
No application has been made by any party for the assessment in New South Wales of the costs the subject of the costs order made on 22 March 2013.
In summary, the position is as follows.
(a)Joel has the benefit of a costs order against the estate.
(b)That costs order may be enforceable against the estate once it is either agreed or assessed.
(c)Joel’s costs have not been agreed with the Executor or assessed.
(d)The Solicitors have billed Christine $222,317.52.
(e)Christine has paid the Solicitors $114,795.21.
(f)Christine has disputed the Solicitors’ fees.
(g)Christine is now a bankrupt.
(h)Christine, and now the fourth defendant, have disputed the Solicitors’ entitlement to be paid funds by the estate.
Applicable principles
The parties were largely in agreement as to the principles to be applied. They may be summarised in the following points.
(a)A solicitor has a “particular” or “non-possessory” lien over funds which the solicitor has recovered by his or her exertions. This is an equitable right to be paid his or her costs out of the funds and if he gives notice of his or her right to the person who is liable to pay it, only the solicitor and not the client can give a good discharge to that person for an amount of the money equivalent to the solicitor’s costs: Ex parte Patience; Makinson v The Minister (1940) 40 SR (NSW) 96 at 99-100; Carew Counsel Pty Ltd v French (2002) 4 VR 172 at [33].
(b)If the client and a judgment debtor make a collusive arrangement for the purpose of defeating the solicitor’s right, the Court will enforce that right against the judgment debtor notwithstanding the arrangement and notwithstanding that no notice of the solicitor’s claim had been given to the judgment debtor prior to the arrangement: Ex parte Patience at 99-100.
(c)The charge on the fund represented by the “particular” lien arises immediately upon the recovery of the monies and it is not dependent for its existence upon the judgment of a court: Ex parte Patience at 100; Worrell v Power (1993) 118 ALR 237 at 246; Color Point Pty Ltd v Markby’s Communication Group Pty Ltd (unreported Federal Court of Australia 27 November 1998) BC9806327 at 23; Carew Counsel at [33]; cf Re a Barrister and Solicitor (1979) 40 FLR 26 at 39-40.
(d)For the rights to arise it must be shown that there is a sufficient causal link between the solicitor’s exertions and the recovery of the fund. In each case that is a question of fact: Carew Counsel [33]; Color Point at 22; Roam Australia Pty Ltd v Telstra Corporation, (unreported, Federal Court of Australia, 22 September 1997 BC9704567) at 4-6; cf Doyles Construction Lawyers v Harsands Pty Ltd (unreported, Supreme Court of New South Wales 24 December 1996 BC9606389) at 4.
(e)The principle applies equally to money recovered through judgment or compromise: Roam at 4; Carew Counsel at [33]; AMC Commercial Cleaning (NSW) Pty Ltd v Coade [2013] NSWSC 192 at [20].
(f)The claim may be asserted even though the precise amount to which the solicitor is entitled has not, by appropriate means, been ascertained: Patience at 105, Worrell at 246; Akki P/L v Martin Hall P/L (1994) 35 NSWLR 470 at 474; Twigg v Keady (1996) 135 FLR 257 at 289; Roam at 4; Color Point at 31.
(g)The lien only extends to the costs of the proceedings in which the personal property is recovered and not to all costs incurred on behalf of a client by the solicitor: Color Point at 23.
(h)The entitlement may arise even though the solicitor’s exertions came to an end before the judgment was obtained or compromise negotiated: Roam at 2, 6, Twigg at 289, Doyles at 4.
(See also the summary of the authorities in Firth v Centrelink (2002) 55 NSWLR 451 at [35].)
The principle articulated at (g) above needs some elaboration because it is of some significance in this case.
The first relevant decision appears to be Lann v Church (1820) 4 Madd 391; 56 ER 749. That case involved a petition by a solicitor that a sum decreed to his client, the plaintiff in the cause, might be applied in discharge of the solicitor’s costs in the cause and also in the payment of other costs not being costs in the cause due to him from the plaintiff. The claim was ultimately settled, but the Court did state that it (at 4 Madd 392; 56 ER 749) “was unable to find any case in which it had been held that a solicitor had any lien on the fund recovered in the case, except for his costs incurred in such case.”
Lann v Church was followed in Bozon v Bolland (1839) 4 My & Cr 354; 41 ER 138. In that case a solicitor contended that, because he had produced a deed in his possession that permitted his client to recover a fund in a suit, he had a lien over the fund so realised that extended beyond the costs of that suit. This submission was rejected. Lord Chancellor Cottenham found that “[t]he lien upon the fund realised in the suit is confined to the costs of that suit; Lann v Church”. He held that the voluntary production of the deed over which the solicitor had a general lien was not sufficient to transfer to the fund recovered as a consequence an actively enforceable particular lien.
Hall v Laver (1842) 1 Hare 571; 66 ER 1158 involved a solicitor who had acted for beneficiaries of a trust in proceedings seeking specific performance of contracts for sale of land. Decrees of specific performance and costs were made. Actions of ejectment were also brought against the same defendants to recover some parts of the trust estate. The solicitor also acted in other business of the trust not connected with any case. Baron Alderson declared that the solicitor was entitled to a lien in relation to the costs of the equitable proceedings, the costs of the ejectment proceedings and the costs of the general business of the trust. Upon a rehearing, Vice Chancellor Wigram said (at 1 Hare 577-8; 66 ER 1160):
Then with respect to the trust funds in Court, belonging to the excepting parties, the cases of Bozon v. Bolland (4 Myl. & Cr. 354), Lann v. Church (4 Madd 391), and the other cases cited at the Bar, are clear authorities that in strictness the lien of a solicitor upon a fund, which his diligence recovers, is confined to the costs of recovering that very fund. In a suit to administer a trust estate the trustee may, if he pleases, claim all his costs, charges and expenses as a trustee; but, if he do not choose to extend his claim for costs (as such trustee) beyond the costs of the suit, I know of no rule which could entitle his solicitor to insist upon his doing so, or to claim a lien upon the trust fund, in respect of his costs, not being costs of the suit. The contract of the solicitor gives him a personal remedy against the party who retains him, and nothing more, except in the special case of the costs of a suit by which a fund is realised, and then his right is limited to the costs of that particular suit. Worrell v. Harford [(1802) 8 Ves 4; 32 ER 250]; Bozon v. Bolland.
In Re Baly’s Estate [1860] I Ch R 315 involved another situation where a solicitor claimed a lien covering fees going beyond a particular matter. In that case after the solicitors were no longer retained for a particular matter they were directed to lodge all deeds and documents “subject to lien”. The issue was whether the lien extended beyond their costs in that particular matter. The Lord Chancellor said (at 317):
Nothing can be better settled than this, that if a solicitor, whom his client has ceased to employ, produce a deed of the client, upon which the solicitor claims a lien, and thereby enables the client to recover a fund in a suit, his lien over that fund is confined to his costs in that suit. To give him a lien over that fund, to the extent of all costs due to him from his client, would be to turn a passive lien into an active one. The principal to which I refer is laid down in Steadman v. Webb [4 My & Cr 346] and Bozin v. Bolland.”
He then quoted from the decision of Lord Cottenham in Bozon and continued:
That is an authority that the lien only extends to the costs incurred in realising the fund, and not to general costs.
In Carew Counsel a distinction was drawn between the those costs incurred in recovering the fund and costs subsequently incurred in seeking to avoid other creditors from denying that fund to the plaintiff. The Court of Appeal upheld the trial judge’s decision that the latter category of costs was not covered by the lien.
The trial judge’s reasons were summarised by Winneke P (with whom the other judges agreed) as follows:
15.His Honour found that Carew Counsel had no equitable lien in respect of these costs because it was his view "that ... the solicitor's work following the settlement with the TAC were [sic] over and above what could fairly be said to be an incidental cost of litigation". It was his Honour's view that the work done by Carew Counsel following the settlement of the litigation was in pursuit of "further and quite separate litigation involving parties other than the defendant in the motor vehicle action" and that it was therefore "not artificial ... to say that these were separate and distinct proceedings which were being entered into. They had nothing to do with the creation of the fund and, in my view, Carew Counsel's right to have its costs paid out of the fund could not be said to extend to this type of work." Accordingly, his Honour concluded, Carew Counsel had a "general lien" in respect of those costs but did not have an equitable right to have them paid out of the fund.
...
32.Although it was his Honour's view that a "fruits of litigation lien" would extend to immediately incidental costs incurred by the solicitor in recovering a judgment sum awarded to his client, including the costs of any appeal brought to challenge that award, he concluded that the costs incurred by the solicitor after the date of compromise and until 27 January 1999 (when Carew Counsel ceased to act for French) could not attract such a lien because he did not "believe that the normal retainer would extend to this type of case involving the declaration of bankruptcy by French". Such matters were, in his Honour's view, "outside what could be described as the normal course of collecting the proceeds of the settlement that [Carew Counsel] had achieved on behalf of their client". The equitable lien of the solicitor, his Honour said, "hinges on the work which he has done to create the fund in the first place", but does not extend to "acting for the client in relation to potential litigation with third parties about the distribution of the fund". (I assume that his Honour is referring to the settlement monies.)
Winneke P (at [34]) also upheld the trial judge’s decision on this point, saying that the amounts incurred after the fund was recovered:
were not costs incurred in “recovering” the fund, nor costs “immediately incidental “ thereto.” In my view, his Honour was correct to say that, 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 my view this authority must be treated with some care. The conclusion reached is very much dependent upon the trial judge’s characterisation of the activities after realisation of the fund as “quite separate litigation” or “separate and distinct proceedings”. It is that which led to the finding, upheld on appeal, that the lien did not cover that work. The case does not stand for any general principle that the fact that work was done after the realisation of the fund was sufficient to deny the existence of the lien in relation to that work. That is made clear by Winneke P’s statement (at [33]) that “[t]he solicitors’ lien will extend to costs incurred on appeal, either in defending the fund or in promoting it, because such costs arise from exertions in “recovering the fund”: cf Guy v Churchill (1887) 35 Ch D 489”.
The authorities therefore make clear that the lien only applies to costs incurred in the proceedings in which the funds are recovered and does not cover work done in other proceedings or other work that the solicitor may have done. As Carew Counsel demonstrates, there is room, at the margins, for debate about precisely what constitutes separate proceedings or other work to which the lien will not apply.
The position at the first hearing
The proceedings were first before me for hearing on 18 July 2014. There was no contest between the parties as to the principles, summarised at [23] above, in relation to a solicitor’s lien.
At that stage the Solicitors submitted that:
(a)because they no longer acted for Joel they were not able to participate in the assessment of Joel’s costs order against the estate or have Joel’s costs as against the estate assessed;
(b)it would be inequitable to force the Solicitors to have the costs assessed because:
(i)any assessment of the Solicitors’ costs would involve expense;
(ii)would be a process in which the Solicitors would not be represented;
(iii)the parties to the assessment would each have an interest in minimising the Solicitors’ costs; and
(iv)the material supported the sum of $105,000 as a reasonable figure for Joel’s party/party costs of the family provision proceedings;
(c)the conduct of the Executor bordered on a “collusive arrangement” in that estate funds had been paid out for the estate’s own costs and for Margaret’s costs without assessment; and
(d)the Court should order that the sum secured by the lien was $105,000, that is, the whole of the balance of the funds held by the estate because that was less than the estimate of the value of the costs order, namely, $120,000.
The position of the Executor was that the liability of the estate to pay any amount only arose upon agreement or assessment of the costs. Having regard to the fact that Christine was in dispute with the Solicitors as to the costs charged to her, the absence of any agreement on Joel’s behalf as to the quantum of the costs and the fact that no assessment had occurred, there was no crystallised liability of the estate to pay costs pursuant to the consent orders of 22 March 2013.
The fourth defendant submitted that because no bill of costs had been prepared by the Solicitors, proceedings to recover the relevant fees could not be brought. The Court was referred to ss 331 and 353 of the Legal Profession Act 1994 (NSW) (NSW LPA).
During the course of the hearing the parties agreed that the proceedings should be adjourned and the question of costs reserved. There was to be some further attempt to agree upon the quantum of fees to be paid from the estate to the Solicitors. In the event that there was no such agreement counsel for the Solicitors explained that the Solicitors agreed to send their files and fee notes to a legal costing firm “to give a determination as to the overall level of solicitor/client costs that have been charged to Joel … [b]reaking down between the construction suit and the family provision claim and also with an assessment of the party/party costs of the litigation in New South Wales… the subject to the order.” The proceedings were adjourned accordingly.
The Legalcost assessments
The Solicitors’ costs were assessed by a legal costing firm. The results of the process were set out in two letters, each dated 4 November 2014, from Mr Ron Travers of Legalcost Legal Cost Consultants to the Solicitors. One letter, which became Exhibit 3, related to the costs orders in favour of Joel made on 22 March 2013 and another order made on 17 April 2013. The parties did not explain the relevance of the order on 17 April 2013 but no party objected to the assessment on the basis that it was included. In that letter Mr Travers assessed the plaintiff’s professional costs that would be recoverable from the estate at $109,910.30, made up of $78,672 for professional costs and $31,238.30 for disbursements.
The other letter, which became Exhibit 4, was an assessment of solicitor/client costs and disbursements. The 17 tax invoices that were provided to Mr Travers indicated that the solicitors had billed Christine $222,317.52, made up of $153,595.69 for professional costs and $68,721.83 for disbursements. Mr Travers was of the view that the solicitor/client costs would be assessed in accordance with the Legal Profession Act2006 (ACT) (ACT LPA) at $182,377.56 comprising $143,000 for professional costs and $39,377.56 for disbursements.
Although the fourth defendant did suggest that he might obtain an alternative assessment of the costs, no alternative assessment was ultimately put into evidence. Thus, the opinions in Exhibits 3 and 4 were unchallenged.
It is notable, however, that notwithstanding that the proposal outlined by counsel for the plaintiff on 18 July 2014 involved an assessment of the costs broken down between the construction suit and the family provision claim, Mr Travers was not asked to assess costs on that basis.
The position at the second hearing
The hearing resumed on 6 February 2015. At that point the position of the Solicitors was that they had a lien for the sum of $67,582.35. This was arrived at by starting with the assessed costs of $182,377.56 (the total of solicitor/client costs) then deducting the amount that had been paid, namely, $114,795.21, which gave the sum of $67,582.35.
The Executor pointed to the fact that the Solicitors had already been paid $114,795.21 by Christine and that the assessed costs referable to the family provision proceedings for which the estate was liable were only $109,910.30. He submitted that Mr Travers’ assessment was not an assessment giving rise to any liability of the estate but could be used as a guide. He submitted that the lien existed only in respect of unpaid costs arising from the work done in Joel’s family provision proceedings and not on other matters the subject of bills from the Solicitors. The Executor therefore submitted that $67,582.35 was the maximum amount that could be claimed under the lien. However, because the amount paid exceeded $109,910.30 it was possible that nothing was owing. He submitted that the determination of the correct amount would require a breakdown of the bills rendered and paid to ascertain the value of the work done in respect of the family provision proceedings relative to other matters.
The Executor also submitted that while a declaration may be made that a lien exists over a particular fund before the actual quantum payable is determined, it would be necessary to conclude that at least some amount known to be referable to the Solicitors’ work was unpaid. He submitted that it was not possible to reach that conclusion in this case. He submitted that in the absence of an agreement between the disputing parties he was unwilling to enter into any compromise without court sanction, but that he would obviously abide any order of the Court.
The fourth defendant adopted the submissions of the Executor as to the limitations of Mr Travers’ assessments. He also pointed to the obvious unfortunate consequences of the litigation, namely, that there is almost nothing left in the estate to be distributed to Joel and Margaret. He also submitted that the costs as between solicitor and client could not be recovered because of ss 331, 332 and 355 of the Legal Profession Act 2004 (NSW).
The position at the third hearing
Following a request by the Court for further submissions in relation to the reasons for joinder of the fourth defendant, the fourth defendant made an additional submission, not previously raised, that no amount was recoverable from the fourth defendant because Christine, not Joel, was the client of the Solicitors and any lien was only enforceable against the “client”. As a consequence, the fourth defendant submitted that no order could be made in relation to the fund arising from the costs order made in favour of Joel.
Consideration
A solicitor’s lien for unpaid fees only fixes upon funds which the solicitor has recovered by his or her exertions. In the present case the fund is the amount recovered as a result of the costs order made by the New South Wales Supreme Court on 22 March 2013. Thus, the lien would fix upon that amount of the funds held in the first defendant’s trust account equivalent to the party/party costs of Joel incurred in his family provision application other than in the construction suit and only to the extent that those costs have not already been paid by Christine.
In the present case, because the costs were awarded by a New South Wales court order, if they are to be formally assessed then that must be done in accordance with New South Wales law. Section 353(2) of the NSW LPA permits a New South Wales court to refer costs the subject of its order to assessment.
I accept that a lien may be established even though the amount of the costs have not been assessed and, in the absence of such a formal assessment, proceed on the basis of the evidence that is available.
I take as a starting point the sum of $182,377.56 being the estimated solicitor and client costs as between Christine and the Solicitors. At a conceptual level that amount can be described by reference to four components. Those components are as follows.
Component 1: Fees charged in relation to the family provision proceedings brought by Joel (not including the construction suit) comprising:
(a)party and party costs recoverable from the estate (estimated by Mr Travers at $109,910.30); and
(b)the solicitor and client component of the costs not recoverable from the estate (not subject of any estimate by Mr Travers).
Component 2: Fees charged in that part of the family provision proceedings brought by Joel comprising the construction suit (not subject of any estimate by Mr Travers).
Component 3: Fees charged in relation to the family provision proceedings brought by Margaret Morris (not subject of any estimate by Mr Travers).
Component 4: Fees charged in relation to various other matters not falling within Components 1, 2 or 3 (not subject of any estimate by Mr Travers).
The evidence about the conduct of the family provision proceedings in the NSW Supreme Court was less than complete. The orders of 22 March 2013 included orders relating to Margaret Morris’ family provision claim. Further, the evidence as to what was involved in the “construction suit” referred to in the orders is limited. The parties agreed that it involved an interlocutory process within Joel’s family provision proceedings. It appears to have involved a claim for a declaration or other order determining the correct interpretation of a clause in the will. I infer, having regard to the terms of the costs orders before me, that the construction suit was determined adversely to Joel’s interests. Overall, on the limited material before me it appears as though the family provision proceedings were conducted as a single piece of litigation even though, formally, there may have been two sets of proceedings and one of the proceedings involve a separate contest over the construction of the will.
The authorities I have referred to above make it clear that the lien may only secure the Solicitors’ costs incurred in the proceedings in which the fund is recovered. In my view, it is clear that the Solicitors’ costs in relation to Components 1(a) and (b) and 2 may be the subject of the lien. In relation to component 1(b), that is because the lien does not simply secure party/party costs but secures the costs charged to the client for work in those proceedings. In relation to Component 2, that is because notwithstanding the carving out of the construction suit from the costs order, the construction suit was part of the proceedings in which the costs order was recovered. The lien secures a lawyer’s entitlement to fees and applies to the fund recovered by his or her exertions. It does not only secure the fees payable in relation to only that subset of the lawyer’s exertions in which the client was immediately successful. It therefore does not matter that some aspects of the proceedings may not have been successful if at the end a fund is recovered and it can be said that there is a sufficient causal link between the solicitor’s exertions and the recovery of the fund.
In my view, in the present case that causal requirement in relation to Component 2 is satisfied. In Roam, Lehane J described the causal requirement in the following terms:
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 judgment is obtained, or which are compromised, obtain an equitable interest in the judgment 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 proceedings later conducted by others through interlocutory procedures and trial to judgment. In each case, in my view, it must be a question whether the requisite causal link is established, whether the judgment or compromise is, on the evidence, to be regarded as brought about (or partially brought about) by the efforts of the solicitors. ... 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.
In the present case, the Solicitors acted for Christine throughout the whole of the proceedings. Their involvement was not “slight or fleeting”. They were acting for Christine at the time that the settlement was reached and the consent orders of 22 March 2013 were made. Notwithstanding that (a) Joel was not successful in all aspects of the proceedings and (b) settlement of the proceedings is likely to have resulted from mutual litigation to exhaustion, those two features of the settlement and orders which produced the fund over which a lien is claimed are not at all unusual and do not disentitle the Solicitors from maintaining their claim. In the circumstances I am satisfied that the causal requirement is met.
In my view the decision in Abdul-Karim v Attorney-General’s Department [1999] NSWSC 79, to which the fourth defendant referred in submissions, is not a case which is analogous to the present and not one which, in my view, prevents the conclusion that I have reached above. That was a case in which a barrister made a very substantial claim over the proceeds of a costs order made in criminal proceedings. The barrister had acted for a defendant until shortly after a prima facie case had been found. His retainer was then terminated and the defendant appeared for himself or by other lawyers. He was ultimately found not guilty and a certificate under the Costs inCriminal Cases Act 1967 (NSW) was granted. One of the reasons for refusing the barrister’s claim was that the causal relationship between the barrister acting up until the point when his retainer was terminated and the ultimate costs order was not made out. Although Young J found that what the plaintiff had done at the trial was of benefit to his client because he “ate away at the credibility or reliability of the prosecution case”, his Honour found that it was the material put forward in the defence case when different lawyers were acting that led to the conclusion that the prosecution was not reasonable and hence warranted an order under the Act.
The case provides an example of a more detailed assessment of the causal contribution of a lawyer to the recovery of a fund than the approach described in Roam. In my view, the authority is of little assistance in the present case for four reasons.
First, the context of the claim was very different. It involved a claim by a barrister over a costs order in a criminal case involving the particular provisions of the Costs in Criminal Cases Act 1967 (NSW), as opposed to the more analogous circumstances of solicitors acting in civil cases which were ultimately settled, addressed in cases like Roam, Twigg or Color Point.
Second, there was no discussion of the approach to causation articulated in those latter cases or his Honour’s own decision in Kelso v McCulloch (Unreported, Supreme Court of NSW, 24 October 1994 BC9403180) in which he had said:
Accordingly, it seems fairly clear, on the authorities, that equity will not only enforce the fruits of the judgment lien in favour of the solicitor who was on the record at the time of the judgment, but any solicitor who played at least a significant part in the conduct of the litigation which led to the verdict being recovered.
Third, in so far as the reasons deal with the requirement for a causal link, they are obiter dicta because the plaintiff’s claim had to fail as a result of the findings that the costs agreement in question was void or unenforceable because it contravened certain provisions of the Legal Profession Act 1987 (NSW).
Fourth, his Honour’s adoption of a stricter than usual approach to causation may have been influenced by his impressions of the circumstances of the unusual claim. (Mr Abdul Karim was ultimately removed from the roll of legal practitioners for reasons which included entry into the costs agreement giving rise to the claim of a lien: see New South Wales Bar Association v Abdul-Karim [2003] NSWADT 152; New South Wales Bar Association v Abdul-Karim [2003] NSWADT 205; Abdul-Karim v New South Wales Bar Association (LSD) [2004] NSWADTAP 4; Abdul-Karim v The Council of the New South Wales Bar Association [2005] NSWCA 93.)
Thus, proceeding as I have on the basis that the construction suit was part of the family provision proceedings brought by Joel, the lien covers the work done on the construction suit (Component 2) even though no order as to costs was ultimately made and no fund arose from that discrete aspect of the proceedings.
In relation to Component 3 it is not clear whether there are in fact any fees that fall into this category. It may be that all the fees charged can be recovered as part of Components 1 and 2. That would be consistent with the costs incurred in responding to Margaret’s family provision application being incurred defensively in Joel’s application. Be that as it may, none of the authorities deal with a situation such as this where there are formally two sets of proceedings but they are conducted as a single matter. In my view, although the authorities emphasise the confinement of the lien to costs incurred in one case, the rule should not be interpreted in such a restrictive matter so as to exclude costs incurred in related proceedings heard at the same time, at least where they involve competing family provision claims from a single estate.
In the light of the authorities to which I have referred, Component 4 is clearly not subject to any lien because those costs were not incurred in the proceedings that produced the relevant fund.
The costs order is not a current liability of the estate because the costs the subject of the court order have neither been agreed nor assessed. The parties have only the benefit of an expert estimate of the likely outcome of assessment. The complicating factors are:
(a)there has been no assessment of the quantum of Component 4 costs which are not recoverable from the fund held by the estate; and
(b)there has been no assessment of the extent to which the fees in Components 1, 2 and 3 have already been paid.
In order to determine the amount recoverable from the fund held by the estate it would be necessary to:
(a)deduct from the total fees chargeable of $182,377.56 the amount attributable to Component 4 fees; and
(b)deduct from the amount paid by Christine, $114,795.21, the amount paid in relation to Component 4 fees.
This would result in two figures, the total charged for Components 1, 2, 3 and the total amount already paid for Components 1, 2, 3. The difference between these two figures, if any, would be the amount the subject of the Solicitors’ lien. Having regard to the amount already paid, the difference could not be more than $67,582.35 (the total of the solicitor client costs, $182,377.56, less the amount already paid, $114,795.21).
The end result is that the Solicitors would be entitled to a lien over that component of their total recoverable fees which they could demonstrate:
(a)did not relate to what I have described as Component 4 above; and
(b)has not already been paid.
While it is more likely than not that some amount is subject to a lien, on the current state of the evidence it is not possible to identify the quantum of the subject to the lien.
I do not accept the submissions of the fourth defendant concerning the operation of the NSW LPA. While I do accept that a statutory prohibition on the recovery of costs directly from the client would be relevant to any claim for equitable relief in relation to a solicitor’s particular lien, I do not accept the statutory provisions in the NSW LPA referred to by the fourth defendant apply in this case. In the light of:
(a)the terms of the fee agreement between the Solicitors and Christine (Exhibit 5), which make ACT law the governing law; and
(b)s 305 of the NSW LPA, which permits that part of the Act dealing with costs disclosure and assessment to be displaced where the matter has a substantial connection with another jurisdiction and the client enters an agreement with the law practice that the corresponding provisions of the corresponding law apply to the matter;
ss 331, 332 and 335 of the New South Wales Act do not present a barrier to the Solicitors recovering costs against their client or to the existence of a lien in relation to those costs.
I also do not accept the submission that because Christine, as Joel’s tutor, was the person who retained the Solicitors, no lien arises in relation to the funds payable to Joel under the costs order of 22 March 2013. A tutor is prima facie entitled to a personal indemnity from a minor in respect of all costs properly incurred: Murray v Kirkpatrick (1940) 57 WN (NSW) 162 at 163; Stephenson v Geiss [1998] 1 Qd R 542 at 558; J by his litigation guardian Maxwell Bernard Vardanega v Australian Capital Territory (No 2) [2011] ACTSC 36 at [8]. In a case where a lien is claimed it is not necessary for the solicitor to pursue the circuitous path of suing the tutor and then relying upon the tutor to enforce the indemnity from the minor. Instead the lien may be enforced directly against the relevant fund: Pritchard v Roberts (1873) 17 LR Eq 222.
Finally, I do not accept the submission that the fourth defendant was not an appropriate party to the proceedings. The fourth defendant was appointed by order of the New South Wales Supreme Court to be the trustee of that portion of the residue of the estate which was to be paid to Joel. Whether or not any such amount was payable and, if so, the quantum of that amount would be affected by the scope of any lien held by the Solicitors. The fourth defendant had not consented to the orders proposed by the Solicitors and hence was a necessary party to the proceedings.
Conclusion and orders
Subject to submissions of the parties about the form of the order and the effect of any costs orders to be made in these proceedings, I propose to make a declaration in general terms consistent with the conclusion reached above, namely:
1.The Court declares that the plaintiff is entitled to a lien over such of the funds held in the first defendant’s trust account in the name of the estate of the late Michael Charles Morris as are a liability of the estate by reason of the order 2 made by the New South Wales Supreme Court in proceedings 2011/407230 on 22 March 2013 as are equivalent the solicitor client costs charged by the plaintiff to Christine Morris less:
(a) any amounts not chargeable or not able to be recovered by the plaintiff under the provisions of the Legal Profession Act 2006 (ACT);
(b) any amounts attributable to work performed that was not in relation to the proceedings under the Succession Act 2006 (NSW) brought by Joel Morris (New South Wales Supreme Court 2011/407230) or Margaret Morris (New South Wales Supreme Court 2012/154455);
(c) any amount of those costs referable to work for which the plaintiff has already been paid.
In those terms the declaration only goes a part of the way towards resolution of the dispute between the parties. However, it will resolve at least that aspect of the dispute arising out of the fourth defendant’s contentions about the operation of the NSW LPA and causation. It will provide a framework for resolving the balance of the issues between the parties.
I will hear the parties further as to whether a declaration in the terms indicated above should be made and in relation to costs.
The order of the Court is:
1.The proceedings are listed on 27 March 2015 at 11:00 am for any argument in relation to the form of final order that should be made and costs.
| I certify that the preceding eighty-one [81] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Master Mossop. Associate: Date: 18 March 2015 |
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