DLA Piper Australia v Official Receiver of Singapore
[2017] VSC 216
•27 April 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2016 05083
| DLA PIPER AUSTRALIA | Plaintiff |
| v | |
| OFFICIAL RECEIVER OF SINGAPORE as the Liquidators of WINDEMAC PTE LTD (in liquidation) (and others according to schedule) | Defendant |
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JUDGE: | Associate Justice Derham |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 27 April 2017 |
DATE OF JUDGMENT: | 27 April 2017 |
CASE MAY BE CITED AS: | DLA Piper Australia v Official Receiver of Singapore & Ors |
MEDIUM NEUTRAL CITATION: | [2017] VSC 216 |
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EQUITY – Whether solicitors have equitable lien over fruits of costs judgment in client’s favour in a previous proceeding – Declaratory relief – Applicable principles – Declaratory relief granted – Consequential orders made – Ex parte Patience; Makinson v The Minister (1940) 40 SR (NSW) 96; Worrell v Power & Power (1993) 46 FCR 214; Trkulja v Efron [2014] VSCA 76; Oakley Thompson & Co Pty Ltd v Maisano (No 2) [2015] VSC 210.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D Leggatt | DLA Piper Australia |
| For the Defendant | Mr C Leonidas | Comlaw (until 24 April 2017) |
HIS HONOUR:
Introduction
The plaintiff, a law firm applies for declarations that:
(a) it has an equitable lien to the extent of AUD$97,895.82 over the proceeds of a costs judgment as ordered by Registrar Deviny of this Court on 6 November 2015 in favour of Windemac Pte Ltd (‘Windemac’) against JPG Investments Pty Ltd (‘JPG’), George Exadactylos (‘Exadactylos’) and Sharon Bryar (‘Bryar’);
(b) JPG, Exadactylos and Bryar are jointly and severally liable to the plaintiff to pay the judgment debt into Court and that such sum be held by the Court to secure the equitable lien until further order; and
(c) the plaintiff is entitled to take such action as is required to recover the judgment debt from JPG, Exadactylos and Bryar.
The equitable lien arises under what is commonly called a ‘fruits of the action’ lien and, in effect, secures legal fees owed to the plaintiff for acting as the legal practitioners for Windemac in Supreme Court proceedings.
Background
Windemac is a company incorporated in Singapore. It engaged the plaintiff in 2012 to act on its behalf in respect of disputes with Jada Ex Beverages Pty Ltd (‘Jada Ex’), JPG and the then directors of those two companies, Exadactylos and Bryar.
Windemac commenced Supreme Court of Victoria proceedings[1] seeking relief against Jada Ex, JPG, Exadactylos and Bryar in respect of a failed joint venture concerning the purchase of a warehouse and the sale of alcoholic beverages (‘Original Proceeding’).
[1]By writ filed on 17 February 2012, exhibit JCC-3 to the affidavit of Jane Catherine Coventry affirmed 13 December 2016 (‘First Coventry Affidavit’), number S CI 2012 00843.
The plaintiff acted as Windemac’s lawyers in the Original Proceeding, including during and until the conclusion of a trial.[2]
[2]The trial was heard before Sifris J on 23 - 25 October 2012 and 8 November 2012.
On 25 January 2013, Sifris J ordered in the Original Proceeding that Jada Ex, JPG, Exadactylos and Bryar were jointly and severally liable to pay Windemac the sum of AUD $312,000.00 in damages, plus interest and costs to be taxed between party and party in the absence of agreement (‘Judgment’).
On 18 April 2013, in the Original Proceeding, JPG paid the amount of AUD $312,000.00 to the plaintiff’s trust account in satisfaction of the damages component of the Judgment in favour of Windemac. Later, the defendant’s solicitor paid interest on the damages component of the Judgment.
The parties did not agree to Windemac’s costs of the Original Proceeding. This led to Windemac commencing a costs proceeding against Jada Ex, JPG, Exadactylos and Bryar in which it sought taxation of its costs of the Original Proceeding (‘the Costs Proceeding’).[3]
[3]Supreme Court of Victoria proceeding S CI 2014 2320. The summons for taxation was filed on 14 May 2014: exhibit JCC-9 to the First Coventry Affidavit.
Before the Costs Proceeding had been determined, the High Court of Singapore ordered that Windemac be wound up and on the same date appointed the first defendant, Official Receiver of Singapore, as the liquidators of Windemac.[4]
[4]On 31 July 2015; Exhibit JCC-10 to the First Coventry Affidavit.
On 6 November 2015, Registrar Deviny of the Supreme Court of Victoria ordered that Windemac’s costs are taxed and allowed in the sum of $97,895.82 to be paid by the respondents (‘Costs Order’).[5] In other matters it was recorded:
Taxation pursuant to the order of The Honourable Justice Sifris dated 25 January 2013 in Supreme Court Proceeding Number S CI 2012 0843.
[5]Exhibit JCC-12 to the First Coventry Affidavit.
The plaintiff is owed AUD $104,018.96 by Windemac in invoiced fees which have been incurred in respect of work undertaken in relation to the Original Proceeding and the Costs Proceeding. The plaintiff also has AUD $19,447.92 in work in progress (‘WIP’).
Windemac is in liquidation.[6] The plaintiff has corresponded extensively with the first defendant requesting that it agree to the plaintiff enforcing the Costs Order and retaining the sum recovered (if any) in payment of its outstanding fees. Notwithstanding numerous requests for its agreement to the plaintiff taking action against the surviving defendants in the Original Proceeding,[7] the first defendant, through the Insolvency Office of the Singapore Ministry of Law, has not provided instructions to the plaintiff to enforce the Costs Order, nor has it agreed that the plaintiff may apply any sum recovered to the plaintiff’s outstanding fees.
[6]The Supreme Court of Singapore ordered that Windemac be wound up on 31 July 2015: First Coventry Affidavit, [17] and exhibit JCC-10. The Official Receiver of Singapore was appointed liquidator: First Coventry Affidavit, [23] and exhibit JCC-16.
[7]Jada Ex was deregistered on 24 April 2015: First Coventry Affidavit, [37] and exhibit JCC-30.
The Costs Order remains unsatisfied. Windemac owes the plaintiff $104,018.96 for legal fees and disbursements in respect of legal advice provided to it in relation to the Original Proceeding and enforcement of the Costs Order.[8]
[8]On 6 March 2017 the plaintiff filed another affidavit of Ms Coventry updating the calculation of the legal fees and disbursements claimed to be due to it by Windemac.
The Originating Motion and First Coventry Affidavit and exhibits were served on the defendants personally. Service was effected on the first defendant by the documents being left at the registered office of Windemac in Singapore.[9] The first defendant indicated to the plaintiff that it would not appear. The second defendant, JPG, filed an appearance on 7 March 2017, represented by Comlaw. On the same day, JPG filed and served on the plaintiff a notice to produce its relevant Trust Account ledgers and all trust account receipts and payments issued to Windemac from 1 August 2011 to 28 September 2016.
[9]Affidavit of Abdul Rahim Bin Jamil affirmed 5 January 2017.
By order made on 9 March 2017 pursuant to r 77.05 of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’), Justice McMillan referred to me the hearing and determination of this proceeding, including the trial. On the same day the proceeding came before me for directions. The solicitor for JPG was the only person who appeared for any defendant. Directions were made for the plaintiff and JPG to file and serve any further affidavits and submissions and the matter was adjourned to 27 April 2017 for trial or fixing for trial, depending on the circumstances.
By affidavit affirmed on 23 March 2017, Ms Coventry produced various documents showing the state of the plaintiff’s Trust Account in relation to Windemac between 1 August 2011 to 28 September 2016. These documents show that Windemac has paid the plaintiff a total of $253,522.86 in respect of fees rendered in the sum of $357,541.82, that the sum of $9,826.10 had been written off, that $323,390.00 was paid in respect of the Judgment and interest, out of which the plaintiff paid to Windemac the sum of $240,231.00 (from its trust account), leaving the sum of $104,018.96 for fees and disbursements outstanding by Windemac.
On 24 April 2017, Comlaw filed a notice of solicitor ceasing to act for JPG. There was then no appearance for any defendant at the hearing of the application.
Applicable Law
The relevant principles were re-stated by Elliott J in Oakley Thompson & Co Pty Ltd v Maisano (No 2) substantially as follows:[10]
[10]Oakley Thompson & Co Pty Ltd v Maisano (No 2) [2015] VSC 210 at [77]; see also Trkulja v Efron [2014] VSCA 76, [34] (Warren CJ and Santamaria JA).
(a) at common law, a solicitor has a general possessory lien for all professional costs due by their client. This entitles the solicitor to keep in their possession all property of the client which comes into the solicitor’s possession during the course of their professional employment until the solicitor’s costs have been paid;[11]
[11]Ex parte Patience; Makinson v The Minister (1940) 40 SR (NSW) 96, 99.10–100.2 (Jordan CJ, Davidson and Halse Rogers JJ).
(b) a solicitor has no lien for costs over any property which has not come into their possession;[12]
[12]At 100.3.
(c) if a client obtains a judgment for the payment of money (including a judgment for costs),[13] the solicitor acquires a right to have their costs paid out of the money payable, such right being an equitable right to be paid. This right is not dependent upon an order having been made to recognise the right,[14] or upon a taxation having occurred;[15]
[13]Worrell v Power & Power (1993) 46 FCR 214, 224.3 (Wilcox, Ryan and Gummow JJ).
[14]Ex parte Patience; Makinson v The Minister (1940) 40 SR (NSW) 96, 100.3; see also Twigg v Keady (1996) 135 FLR 257, 265.4, 272.2 (Finn J, with whom Fogarty J agreed); see also 258.6 (Fogarty J), 289.5 (Kay J).
[15]Ex parte Patience; Makinson v The Minister (1940) 40 SR (NSW) 96, 100.4; see also Firth v Centrelink (2002) 55 NSWLR 451, 463 [35(b)], 464 [35(f) and (g)] (Campbell J); Worrell v Power & Power (1993) 46 FCR 214, 224.4 (Wilcox, Ryan and Gummow JJ); Oakley Thompson & Co Pty Ltd v Maisano (No 2) [2015] VSC 210 at [77(3)] footnote 42.
(d) if a solicitor gives notice of the right to the person who is liable to pay the money, only the solicitor (and not the client) can discharge that person for the amount of the money equivalent to the solicitor’s costs;[16]
(e) if the person liable to pay has notice of the solicitor’s right, but refuses to pay the solicitor, the solicitor may obtain a ‘rule of court’ directing that the costs be paid to the solicitor and not to the client[17] (in this context, a ‘rule of court’ is a reference to an order or a direction of the court;[18] and
(f) if the client and a judgment debtor make a collusive arrangement in order to defeat the solicitor’s right, the Court will enforce that right against the judgment debtor notwithstanding the arrangement and provided that no notice of the solicitor’s claim has been given to the judgment debtor prior to the arrangement.[19]
[16]At 100.5, citing Welsh v Hole (1779) 1 Doug 238 [99 ER 155] (Lord Mansfield).
[17]At 100.6.
[18]See the definition of “rule” in Encyclopaedic Australian Legal Dictionary, which includes: “3. An order or direction made by a court during proceedings …”.
[19]At 100.7.
In the case of insolvency of the client, any claim that precedes the insolvency has priority over claims made by other creditors.[20]
[20]Jones v Turnbull (1839) 150 ER 897 at 898.
The authorities demonstrate that, in appropriate circumstances, courts will grant relief to facilitate solicitors being duly remunerated from the proceeds of a judgment obtained based on the exertions of the solicitor. Such relief may be granted whether or not the solicitor is a party to the proceeding.[21]
[21]Roam Australia Pty Ltd v Telstra Corporation Ltd [1997] FCA 980, 2–3 (Lehane J); See generally, Supreme Court Act 1986 (Vic), s 24(1); Oakley Thompson & Co Pty Ltd v Maisano (No 2) [2015] VSC 210 at [116].
Analysis
Through its legal representation of Windemac in the Original Proceeding, the plaintiff generated for Windemac an entitlement to funds arising out of the Judgment, and subsequent Costs Order. The plaintiff submits, and I agree, that it has a ‘fruits of the action’ lien over the proceeds of the Judgment, and subsequent Costs Order, in respect of work which has contributed to money being payable to Windemac.[22] Importantly, the ‘claim’ arose before any taxation of the costs was delivered.[23]
[22]Simpson v Rowe [2011] VSC 149 [5].
[23]Worrell v Power & Power (1993) 46 FCR 214 at 222-4.
It is clear from the evidence adduced by the plaintiff that a ‘fruits of the action lien’ arose upon receipt of the Judgment[24] and prior to the date the High Court of Singapore ordered that Windemac be wound up. Further, the Costs Proceeding was commenced, but not determined, prior to Windemac being wound up. It is therefore clear that the claim to the equitable lien precedes the insolvency and has priority over claims made by other creditors of Windemac.
[24]On 25 January 2013.
In these circumstances, applying the principles stated above, the plaintiff is entitled to a declaration that it has an equitable lien over the proceeds of the Costs Order made in favour of Windemac, and against Jada Ex, JPG, Exadactylos and Bryar. Jada Ex was de-registered on 24 April 2015 and as far as the plaintiff is aware, has no assets. The plaintiff does not seek any relief or remedy as against Jada Ex.
The plaintiff has acquired a right to have its costs paid out of the money payable under the Judgment and Costs Order. That right is an equitable right to be paid. In these circumstances, the plaintiff is entitled to an order directing that the costs be paid to the plaintiff and not to the client.
The Court will therefore make declarations and orders to the following effect:
(a) a declaration that the plaintiff has an equitable lien over the proceeds of:
(i) the order of Sifris J made on 25 January 2013 that the defendants in proceeding S CI 2012 00843, being Jada Ex Beverages Pty Ltd, JPG Investments Pty Ltd, George Exadactylos and Sharon Bryar, jointly and severally pay the plaintiff’s costs of that proceeding (‘the Order of Sifris J’);
(ii) the order of Registrar Deviny of the Supreme Court of Victoria made on 6 November 2015 by which the costs the subject of the Order of Sifris J were taxed and allowed in the sum of $97,895.82, and any statutory interest thereon;
(‘the Judgment Debt’);
(b) JPG Investments Pty Ltd, George Exadactylos and Sharon Bryar are jointly and severally liable to the plaintiff to pay the Judgment Debt;
(c) the plaintiff is entitled to enforce in its own name, and to take such action as is required to recover, the Judgment Debt from JPG Investments Pty Ltd, George Exadactylos and/or Sharon Bryar; and
(d) the plaintiff’s costs of this proceeding are payable by JPG Investments Pty Ltd, George Exadactylos and Sharon Bryar.
SCHEDULE OF PARTIES
DLA PIPER AUSTRALIA First Plaintiff OFFICIAL RECEIVER OF SINGAPORE as the Liquidators of WINDEMAC PTE LTD (in liquidator) First Defendant JPG INVESTMENTS PTY LTD (ACN 119 716 193) Second Defendant GEORGE EXADACTYLOS Third Defendant SHARON BRYAR Fourth Defendant
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