Brady v Official Trustee in Bankruptcy (No.4)
[2001] FMCA 90
•21 September 2001
FEDERAL MAGISTRATES COURT OF AUSTRALIA
BRADY v OFFICIAL TRUSTEE [2001] FMCA 90
IN BANKRUPTCY (No.4)
LEGAL PRACTITIONERS – Lien – Costs order – Nature of – Priorities of – inherent power of court to make orders enforcing alleged lien.
Verity v Wylde; Re Downes (1859) 4 Drew 427; 62 ER 164;
Chick v Nicholls (1877) 26 WR 231;
Ex parte Patience; Makinson v Minister (1940) 40 SR (NSW) 96; 57 WN (NSW) 65 per Jordan CJ.
Re Union Cement and Brick Co (1872) 26 LT 240.
Akki Pty Ltd v Martin Hall Pty Ltd and Anor (1994) 35 NSWLR 470
| Applicant: | PETER JOHN BRADY |
| Respondent: | OFFICIAL TRUSTEE IN BANKRUPTCY |
| File No: | WZ 7 of 2001 |
| Delivered on: | 21 September 2001 |
| Delivered at: | Melbourne |
| Hearing Date: | 21 September 2001 |
| Judgment of: | McInnis FM |
REPRESENTATION
| Applicant Brady | No appearance |
| Applicant H Kremer & Co (Notice of Motion) | Mr W J Chesnutt of Counsel |
| Solicitor for the Respondent: | Mr T Carey |
| Solicitors for the Respondent: | Australian Government Solicitor |
ORDERS
That the notice of motion dated 7 September 2001 be dismissed.
That Messrs Kremer and Co pay the respondent's costs to be agreed, in default to be taxed in accordance with the Federal Court Rules.
Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH
WZ 7 of 2001
PETER JOHN BRADY
Applicant
And
OFFICIAL TRUSTEE IN BANKRUPTCY
Respondent
REASONS FOR JUDGMENT
This is a notice of motion which is dated 7 September 2001 which has been filed by Messrs H. Kremer and Co (Kremer & Co), former solicitors for the applicant in the application of Peter John Brady v Official Trustee in Bankruptcy in action number WZ 7 of 2001.
In that action I have in fact delivered judgment on the substantive issues before the court on 22 August 2001 and have this day delivered judgment and made orders for costs and interest in relation to that matter.
The net effect of the orders that I have made this day for costs and interest - having regard to orders I have made taking into account the offer of compromise which had been made by the respondent to the applicant, means that there is indeed little, if any, prospect of there being funds in the hands of the respondent at this stage which could be the subject of a lien or a priority to Kremer & Co.
In any event it is true that a more accurate assessment will not be known exactly until after there has been a taxation of costs in accordance with the orders made. It is on the basis of the prospect of there being at least one further step, having regard to the fact that there is indeed a judgment at this stage of a monetary amount of $17,550 to be paid by the respondent to the applicant, that I understand counsel for Kremer & Co to pursue the notice of motion, which effectively seeks a declaration by this court that Kremer & Co have a lien over the judgment sum awarded to the applicant to the extent of the sum of $11,691.60.
I have been urged to make that declaration and in addition to further make orders effectively granting some degree of priority to the former solicitors for the applicant in relation to funds which may or may not be available as a result of the judgment.
I have accepted for the purposes of this application that this court has an inherent jurisdiction, as a modern court of equity, to deal with an application of this nature. No challenge has been made to the standing of counsel for the mover of the motion, that is for the former solicitors of the applicant, in this matter before me. I accept for the present purposes that this court does have inherent powers to deal with the matter on its merit and on the material before it.
For the sake of completeness I should add that Mr Chesnutt Counsel for Kremer & Co, prior to the making of orders in relation to costs and interest in the Brady v Official Trustee matter, had sought to be heard on that issue and as a practical matter had sought to be heard specifically in relation to any orders that may be made or which are proposed to have been made concerning a set-off of the amount of the judgment and costs in favour of the applicant, compared with the amount of the costs which have been ordered by the court in relation to amounts payable by the applicant to the respondent.
I declined to allow Mr Chesnutt to appear for and on behalf of Kremer & Co in that part of the proceeding and did so for reasons which I have stated earlier today. Essentially, however, the inability of Mr Chesnutt to advance submissions at that stage, and indeed as part of the proceedings, does not in a sense detract significantly from the consequences of any orders that are now sought or indeed what may be sought, because in my view the fact remains that as the material presently stands there is simply no amount of money from which Kremer & Co will be able to draw any comfort at all. In terms of the practical reality, notwithstanding the fact that the taxation has not yet occurred, I accept what has been said from the bar table from Mr Carey for the respondent; that there is indeed very little, if any, likelihood of there being funds payable by the respondent to the applicant or indeed any funds in the hands of the applicant.
That leaves the former solicitors for the applicant in a somewhat invidious position, but in my view it is not appropriate for the court in a case of this kind to exercise its discretion, which it undoubtedly has, to make orders of a kind that are sought in the motion, namely a declaration and some order concerning priority.
After all, as indicated by Mr Carey for the Respondent, the lien, if any, only attaches to property to the extent of the client's interest in it and to that extent I have been referred to, amongst others, the cases which are listed in Volume 16 Halsbury's Laws of Australia and in particular paragraphs 250-1070 and footnote 11, namely Verity v Wylde; Re Downes (1859) 4 Drew 427; 62 ER 164; Chick v Nicholls (1877) 26 WR 231; Ex parte Patience; Makinson v Minister (1940) 40 SR (NSW) 96 at 107; 57 WN (NSW) 65 per Jordan CJ. A lien cannot give a solicitor a greater right than his or her client (Re Union Cement and Brick Co (1872) 26 LT 240).
It is also appropriate to refer to a decision of Windeyer J in Akki Pty Ltd v Martin Hall Pty Ltd and Anor (1994) 35 NSWLR 470, where at 483 his Honour says:
“It follows from this that I do not consider the court should make an order which would give the solicitor an advantage which would be inequitable when considered in light of the positions of the respective parties to litigation, out of which the claim to the lien arose”.
On the material presently before me I consider that to grant the declaratory relief sought in the motion would indeed be an inequitable exercise of this court's jurisdiction, because it would give an advantage to the former solicitors for the applicant, which the applicant indeed does not have, and place those solicitors in a position better than the applicant, and would prejudice unfairly and unduly the respondent's entitlement to pursue as best it can the rights it may have after a taxation of the costs which follow on from the orders made, in circumstances where at the very least it appears that any difficulties arising out of the offer of compromise may well be the subject of fault on the part of the applicant Mr Brady in not disclosing that material to his solicitors.
Whether Mr Brady had disclosed that material or the substance of the offers of compromise or not, really does not matter very much in terms of the exercise of my discretion, because in the circumstances of this case even if I had allowed Mr Chesnutt to appear and to argue independently of the applicant, who is no longer represented by Kremer & Co, the issue of costs and whether there should be set-off, in my view the interests of justice and equity would still have resulted in the orders I have made already in the substantive action. It should be noted that Mr Chesnutt for Kremer & Co advised the Court that Mr Brady had communicated with Kremer & Co and advised that he wanted the application dismissed and was otherwise unable to attend.
Having said that, it is further relevant to consider, in my view, the law and equity which may arise in relation to this motion. Likewise in my view, for the reasons I have given, it would not be equitable for me to accede to the orders that are sought in the motion. The motion therefore will be dismissed.
I have been asked by the solicitor for the respondent to make an order in relation to costs. There is indeed a degree of uncertainty about the extent to which the former solicitors for the applicant were aware that judgment was to be delivered prior to the motion being listed in this matter. To the extent that there was that lack of awareness, it seems to me that is regrettable.
However, the exchange of correspondence to which I have been referred by the solicitor for the respondent would at the very least indicate that at a reasonably early stage an opportunity was available to those seeking the orders in the notice of motion to at least determine and make some assessment of the practical outcome of the orders that had been sought by the respondent in its written submissions to this court prior to the judgment delivered this day.
An analysis of those submissions would put the solicitors who formerly acted for Mr Brady on notice that there was a prospect that after allowing for the set-off that was sought there would be very little point of pursuing this motion. In those circumstances a more prudent approach may have been to defer or at least adjourn the motion, or by consent perhaps arrange for it to be struck out or dismissed.
However, Kremer & Co persisted with the motion. Submissions were made in support of the motion and I was referred to the affidavit which had been filed in support of that motion. I conclude that it is appropriate to make an order for costs. I am satisfied that in the circumstances of this case it would be appropriate to order that those costs be payable pursuant to the Federal Court Rules, where provision is specifically available for costs arising out of a notice of motion, whereas in schedule 1 of the Federal Magistrates Court rules there is no similar provision. Accordingly, I order:
(1)That the notice of motion dated 7 September 2001 be dismissed.
(2)That Messrs Kremer and Co pay the respondent's costs to be agreed, in default to be taxed in accordance with the Federal Court Rules.
I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of McInnis FM
Associate:
Date: 21 September 2001
0