Edwards and Peters and Anor
[2012] FamCAFC 65
•14 May 2012
FAMILY COURT OF AUSTRALIA
| EDWARDS & PETERS AND ANOR | [2012] FamCAFC 65 |
FAMILY LAW – APPEAL – PRACTICE AND PROCEDURE – Where the appellant solicitor seeks an extension of time in which to file a notice of appeal against a series of orders made by a Federal Magistrate in 2010 and 2011 – Where a separate appeal has been filed in time against orders made in 2012 inherently linked to the earlier orders – Where the grounds of the proposed appeal have been agitated before the trial judge following the making of the orders and the delay in filing the appeal is therefore sufficiently explained – Where the wife is already bound to deal with a related appeal filed in time – Where the prejudice to the wife is outweighed by a clear need to address complex issues which remain unresolved by the final orders of the Federal Magistrate – Application allowed.
FAMILY LAW – APPEAL – PRACTICE AND PROCEDURE – Where the husband seeks an extension of time to appeal from final property orders made in July 2010 – Where the grounds of appeal assert errors in the exercise of discretion – Where there was no reasonable explanation for the delay – Where the husband’s position may be affected if the solicitor’s appeal is successful – Where the wife is already bound to deal with a related appeal filed in time – Where the husband’s and the solicitor’s appeals should be consolidated – Application allowed.
| Family Law Act 1975 (Cth) Legal Profession Act 2007 (Qld), s258 Family Law Rules 2004 Federal Magistrates Court Rules 2001, r.16.05 |
| Clivery & Conway [2007] FamCA 1435 Hodges Hall & Jovanic & Markov (1995) FLC 92-611 House v The King (1936) 55 CLR 499 Magnamain Investments Pty Ltd v Baker Johnson Lawyers [2008] QSC 245 |
| APPLICANT: | Mr Edwards as Trustee for the X Unit Trust trading as X Firm |
| 1ST RESPONDENT: | Mrs Peters |
| 2ND RESPONDENT/ APPLICANT HUSBAND: | Mr Peters |
| FILE NUMBER: | BRC | 503 | of | 2009 |
| APPEAL NUMBER: | NA | 22, 23 & 38 | of | 2012 |
DATE DELIVERED: | 14 May 2012 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | May J |
| HEARING DATE: | 9 May 2012 |
| LOWER COURT JURISDICTION: | Federal Magistrates Court |
| LOWER COURT JUDGMENT DATE: | 21 July 2010 1 March 2012 |
| LOWER COURT MNC: | [2010] FMCAfam 718 [2011] FMCAfam 323 [2012] FMCAfam 167 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT SOLICITOR: | Mr Hackett |
| SOLICITOR FOR THE APPLICANT SOLICITOR: | X Firm |
| SOLICITOR FOR THE 1ST RESPONDENT: | Cooper Family Law |
| SOLICITOR FOR THE 2ND RESPONDENT/ APPLICANT HUSBAND: | In person |
Orders
That the applicant solicitor, Mr Edwards as trustee for the X Unit Trust trading as X Firm, be granted an extension of time to file a notice of appeal against the orders of Federal Magistrate Coates made 21 July 2010 and 11 April 2011, and the time in which the notice of appeal is to be filed is extended to 21 May 2012.
That the husband be granted leave to file a notice of appeal out of time against the orders of Federal Magistrate Coates made 21 July 2010, and the time in which the notice of appeal is to be filed is extended to 21 May 2012.
That the appeals numbered NA 22 of 2012, NA 23 of 2012 and NA 38 of 2012 be consolidated and referred to the Appeal Registrar for directions.
That the costs of the applicant solicitor, the husband and the wife be reserved to the Full Court.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Edwards & Peters and Anor has been approved by the Chief Justice pursuant to
s 121(9)(g) of the Family Law Act 1975 (Cth).
| IN THE APPELLATE JURISDICTION OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NA 22, 23 & 38 of 2012
File Number: BRC 503 of 2009
| Mr Edwards as Trustee for the X Unit Trust trading as X Firm |
Applicant
And
| Mrs Peters |
First Respondent
And
Mr Peters
Second Respondent/Applicant
REASONS FOR JUDGMENT
Introduction
These proceedings concern two applications for an extension of time in which to file an appeal from orders made by Federal Magistrate Coates. The first is from orders made on 21 July 2010 and 1 April 2011. The applicant is Mr Edwards, as trustee for the X Unit Trust trading as X Firm (“the solicitor”). X Firm represented the husband, now the second respondent, in the substantive proceedings before the Federal Magistrate. The second application is that of the husband, who seeks to appeal the same orders made 21 July 2010.
The applicant solicitor filed a notice of appeal, in time, against orders made by Federal Magistrate Coates on 1 March 2012. These later orders relate to the orders the subject of this proposed appeal. In the events leading to the
1 March 2012 orders, the solicitor had sought to become an intervener in the proceedings. Although the Federal Magistrate so called him in the orders, no formal order to allow the intervention was ever made.
For reasons which will be explained it is appropriate in these circumstances, should leave be granted to extend time, that the two appeals NA 22 of 2012 and NA 23 of 2012 be consolidated.
The first respondent in the appeal is the wife. By her response filed 4 May 2012 the wife seeks that the application in this appeal, NA 23 of 2012, be dismissed and the solicitor be ordered to pay the wife’s costs of and incidental to the application.
The second respondent is the husband. The husband does not oppose the solicitor’s application for an extension of time. The day before this hearing, the husband filed an application in an appeal, himself seeking an extension of time in which to file a notice of appeal against the orders of 21 July 2010 (“the substantive orders”). The husband has not previously filed any appeal. The grounds set out in the husband’s draft notice of appeal do not assert any errors by the Federal Magistrate in respect of the complaints being made by the solicitor in his proposed appeal. In essence, these complaints are the treatment by the Federal Magistrate of the husband’s expenditure on legal fees as available funds rather than notional, and a solicitor’s lien claim. The husband asserts errors in the exercise of the Federal Magistrate’s discretion in relation to contributions and a s 75(2) adjustment.
The husband’s application for an extension of time is not opposed by the solicitor. The wife, however, opposes the application on the basis that there is no proper explanation for the delay and that there are no merits in such an appeal. It is appropriate as will be seen later to consider the husband’s application after that of the solicitor, as the proper course in considering an extension of time may then emerge.
There are two central complaints in the applicant solicitor’s appeals. First, it is said that the Federal Magistrate erred in treating a sum of $81,552.93, conceded as an add-back for post-separation expenditure on legal fees by the husband, as a cash sum asset of the parties available for distribution in the property settlement. The solicitor’s contention is that this sum could only have been dealt with notionally, not as an actual add-back as the Federal Magistrate considered it, as the money had already been properly paid to the firm for payment of legal services rendered.
Second, though not detailed in the draft grounds of appeal, it was contended in the written outline and oral submissions that the Federal Magistrate erred in not finding a solicitor’s lien over the other sums held in the firm’s trust accounts. The solicitor submits the lien entitles the firm to be paid legal costs and outlays owed to them by the husband, for services rendered leading up to the property proceedings.
The applicant solicitor also raises a third ground, that the orders made in
April 2011 giving effect to the substantive orders made July 2010 are not just and equitable in the circumstances, and that the Federal Magistrate erred by not having proper regard to the net financial result of the orders he pronounced. It is apparent that this ground can not directly affect the interests of the applicant solicitor but that if the solicitor’s appeal is successful, it may affect the husband and wife.
Counsel for the solicitor submitted that while the justice and equity character of the orders appear to affect the husband and wife only, the unjust and inequitable effect arose because of the Federal Magistrate’s asserted error in treating the add-back for legal fees as funds available for division between the parties. It is the solicitor’s contention that although never made a party, the reasons of the Federal Magistrate appear to require the solicitor to pay money to the wife. It was further submitted that the husband’s grounds collectively bore out the issue challenging whether the orders made were just and equitable.
It is relevant at this point to make clear that the applicant solicitor no longer acts for the husband, having ceased to represent him in April 2011. The husband was self-represented at the third hearing in September 2011 and at two related hearings in the Supreme Court of Queensland.
Background
Given the lengthy and complex litigation history of this matter, it is as well to set out the relevant background to the orders that are the subject of the proposed appeals. Ultimately there were three judgments and orders: the substantive reasons and orders delivered on 21 July 2010, the further reasons and orders made on 11 April 2011, and the final reasons and orders made on
1 March 2012.
These proceedings commenced in January 2009, when the husband filed an application in the Federal Magistrates Court for final parenting orders concerning the respondents’ two children, born in June 2003 and August 2004. Property orders were sought in the wife’s response to that initiating application.
The matter proceeded to trial before Federal Magistrate Coates in March 2010. Judgment was delivered on 21 July 2010 and included the substantive final orders in respect of both parenting and property. The applicant solicitor seeks to appeal orders 19 to 23 (all of the orders made in respect of property), which provide:
Property
(19)The property of the parties be divided equally.
(20)To achieve such distribution, the value of the property and resources outlined in Orders (21) and (22) below be subtracted from the funds held in trust before distribution if [sic] such funds.
(21)The husband retain as his personal property or resources the notional sum (added back to the pool) of $57,802.00, his superannuation, bank accounts, goods and chattels, vehicle and boat in his possession.
(22)The wife retain as her personal property or resources her superannuation, bank accounts, goods and chattels and vehicle in her possession.
(23)That each party shall be solely liable for and indemnify the other against any liability encumbering any item of property to which the parties are entitled pursuant to this Order.
It can be seen immediately that the orders are a combination of intention and division of property with no real mechanics as to how the orders might be effected.
Before the trial the parties had agreed about the identity of the property and its value, with the exception of the inclusion of the add-back sums. In her case outline the wife sought orders that the total monies held in the solicitor’s trust account be divided 80 per cent to her and 20 per cent to the husband, and that the parties otherwise retain any property in their possession and/or name. In his case outline, the husband sought orders that the wife receive $40,000 from the funds in the solicitor’s account, approximately 19 per cent, and that the parties otherwise retain all property in their possession and/or name. In the written submissions for the husband it was said that the husband sought a division of the pool 80 per cent to him and 20 per cent to the wife. The written submissions for the wife confirmed the orders sought in her case outline.
The Federal Magistrate identified the property pool of the parties at paragraph 214 of his reasons in the substantive judgment as follows:
ASSET SCHEDULE DESCRIPTION
AMOUNT
Monies held by [X Firm] in trust on account [number omitted]
$35,055.88
At call [Mr Edwards] as trustee for [Mr Peters] account [number omitted]
$180,100.97
Husband’s car [omitted]
$12,000.00
Husband’s boat [omitted]
$12,000.00
Wife’s [S] Superannuation policy
$7,252.51
Wife’s [O] Superannuation policy
$313.45
Husband’s [A] Superannuation policy and [S] Superannuation policy
$4,770.00
Amount paid to [X Firm] by husband for family law proceedings
$81,552.93
Unidentified expenditure by husband, notionally added back
$57,802.00
Total
$390,847.74
Net Total after interim equal distribution per Court Order $20,000
$370,847.74
In respect of the contentious amount over which the applicant solicitor now claims he can lawfully retain, the Federal Magistrate said:
175.The pool was agreed but for part of the husband’s expenditure and I was asked to add back legal fees totalling $81,522.93 and another amount totalling $65,802.00.
176.There was agreement that the husband’s legal fees, $81,522.93 be added back. It is not a notional figure as the amount is held in trust.
177.The concessions made on behalf of the husband were proper.
…
204.This expenditure seems to correlate with his free use of marital funds on legal expenses, which have been agreed to be added back.
Soon after the substantive orders of 21 July 2010 were made, both the husband and the wife made applications seeking, inter alia, clarification of the meaning of the orders and further orders as to the specific distribution of the property pool. Submissions were also made on behalf of both the husband and the wife in respect of the alleged solicitor’s lien.
The applications were heard by the Federal Magistrate on 12 August 2010 and orders were made on 11 April 2011. Those orders provided for specific distribution of the property between the parties, following submissions including as to costs, as generally provided for in order 19 of the orders made in the substantive orders of 21 July 2010:
(1)That the wife is entitled to $177,857.91 from the monies belonging to the parties and held in trust by [X Firm] and half of the total interest therein, subject to Orders 2, 3, 4, 5, and 6 below.
(2)That the wife pay costs to the husband in the sum of $5,250.00, to be deducted from the amount stated in Order 1.
(3)That the wife pay costs to the husband in the sum of $1,465.00, to be deducted from the amount stated in Order 1.
(4)That the wife pay costs to the husband in the sum of $3,300.00, to be deducted from the amount stated in Order 1.
(5)That the wife pay costs to the husband in the sum of $1,815.00, to be deducted from the amount stated in Order 1.
(6)That the wife pay costs to the husband in the sum of $522.50, to be deducted from the amount stated in Order 1.
(7)That the husband pay half of refunded school fees to the wife.
In the reasons for judgment, the Federal Magistrate made comments about a solicitor’s lien when addressing an oral application from the wife, that the husband’s solicitor be restrained for an alleged conflict of interest arising from the husband solicitor’s claim the firm held a lien over funds held in its trust account, as against the husband for his costs. The Federal Magistrate said:
7.As a preliminary issue, Mr Cooper for the wife made an oral application that I restrain the solicitor for the husband for an alleged conflict of interest.
8.Mr Cooper had received correspondence from the husband’s solicitor advising that the firm held a lien over funds held in its trust account as against the husband for his costs and any order I may make may offend that lien. The submission was that the interests of the solicitor and the husband were now in conflict.
9.Mr Cooper’s pre-emptive submission about a conflict of interest was more out of acceptable precaution in my view.
10.Any lien held by the husband’s solicitor is a matter concerning the solicitor and the husband, not a matter for me under the wife’s current applications. It is an alleged debt for the performance of an obligation or service, but cannot be taken from joint marital funds held in trust or as trustee which are the subject of these proceedings. There is no need to deal further with the oral application.
As can be seen from the following parts of the reasons, the Federal Magistrate later detailed the submissions of the parties and clarified earlier findings and reasoning in respect of the inclusion of the amount the husband spent on legal fees into the property pool:
32.Those paragraphs also touch on the issue at trial with regard to the husband’s use of joint funds for his legal fees, which were added back by concession at the end of the trial.
33.For reasons I do not understand, submissions were made about that amount in this hearing.
34.In an affidavit supporting the wife’s application by solicitor Kylie Maree Perkins, filed 6 August 2010, I was asked to amend the judgment under Rule 16.05 - that expenditure by the husband of joint funds on his legal fees, being $81,552.93, be treated as a notional add back.
35.Mr Hamwood submitted that I did in fact make a finding about the $81,552.93, at paragraph 214 where I include the amount in the pool schedule and at paragraphs 175 and 176, where I refer to the husband’s concession at trial that the joint money he spent on legal fees was to be added back.
36.It is important to refer to the wording of the concession made at paragraph 41 of the written submissions given on behalf of the husband, which stated: “It is accepted that the monies applied by the father to his legal fees should be added back as they came from capital assets of the parties. Those monies are in the amount of $81,522 …”.
37.I note that the words “added back” were not preceded by the adverb “notionally” and subject to a mistake I made which I refer to shortly, I found the money was available.
38.In this hearing, Mr Hamwood submitted that: “Your Honour was of the view and made the finding that the amount of $81,552.93 was an actual sum held in trust by the husband’s solicitors and could be distributed to meet legal fees that were outstanding,” see line 32, page 11 of the transcript dated 12 August 2010, the submissions made during these applications.
39.He then submitted that I may well have been going down the path allowing the money to be used as legal fees.
40.I have re-read the judgment.
41.I did not state that those funds “could be distributed to meet legal fees that were outstanding” and I was not going down that path as counsel has suggested.
42.I did though make a mistake.
43.The mistake was not that the money existed, but that it was held in trust.
44.The mistake does not, in my view, vitiate or change the result or in fact the reasons. Given the wording of the concession, even if I wrongly assumed the money was held in trust, the fact is, the money exists. The wording can suggest nothing else as there was no modifying adverb before the words add back indicating the money did not exist. There was no submission at trial that the money be ordered to be repaid to the trust account, but from the time of the concession the money must have been available to the joint pool from the husband’s legal firm, which seems to have accepted the money as payment for fees.
45.Whether that money should have been paid immediately to the trust account or whether the firm’s principals were trustees of the money is not of consequence, but I did not mistake that the money existed and was to be the subject of the property claim by the parties.
46.The sum of $81,552.93, part of the cash assets, was simply available and ready to be distributed in whatever proportion I decided upon the evidence. How the parties utilise their proportions is up to them.
47.In light of this, I was perplexed as to what the submissions on this issue were really about.
48.Added to this, counsel for the husband clearly put to me that I can only correct the judgment (without consent) if an issue falls under the slip rule or rule 16.
49.The husband explains how he wants the property distributed under the judgment in two affidavits by solicitor Luke Alan Brandon, one filed on 6 August 2010 and one sworn 11 August 2010 and marked as A for identification, sought to be admitted on the day of this hearing.
50.In the face of objection to the affidavit, I said I would consider whether I would admit it as an exhibit.
51.I intend admitting it as exhibit 2, because it tells me not only how the husband interprets the orders but what is in the trust account.
52.Paragraph 9 of the affidavit states the amount the husband’s view of distributions under the orders, that the wife receive $134,733.04 and the husband receives $56, 517.00.
53.As to the trust account the opening balance, as at 1 March 2010, was $181,890.00.
54.On 1 April 2010 adding an interest payment took the amount to $182,404.88.
55.On 7 April 2010 there was a withdrawal of $27,454.39 (I assume from my $20,000 distribution at the end of trial plus costs for the trial transcripts), leaving a balance of $154,950.49.
56.On 3 May 2010 an interest payment took the amount to $155,427.95.
57.On 1 June 2010, an interest payment took the amount to $155,938.95.
58.I will explain further below, but the wife is to receive under the orders the sum of $177,857.91, minus orders for costs and cost of outlays which I intend making against her and giving reasons below, totalling $12,352.50, leaving a payment to her of $165,505.41, which is Order 1 above. That also takes into account the partial distribution at the end of trial and the cost of transcripts so there was no double counting.
59.Now the tactic of the husband becomes apparent, there is only $155,938.95 held in trust. This is where my mistake as to the amount of $81,552.93 being held in trust has become an issue for the husband.
60.As I have stated above, that money either should have been paid back into the trust account or held by the solicitor’s firm as trustee.
61.It also clarifies the correspondence from the husband’s solicitor to the wife’s solicitor that the claims of the wife would cut across a lien.
62.Mr Brandon’s affidavit was the only way the evidence could be put before me to show the husband’s position because of the amount of funds held in trust. That ignores the concession that the $81,552.93 taken in legal fees was to be added back, a confirmation of its availability.
63.For all of the twisting arguments and interpretation of the words, the only thing I intended was that the property value be divided equally and that the wife receive her share from the money available.
(emphasis added)
A considerable part of the reasons of 11 April 2011 have been included as it can be seen that there was significant argument and confusion in relation to the money held by the solicitor.
Following the orders and judgment of 11 April 2011, the solicitor filed an application in the Supreme Court of Queensland, seeking declaratory relief for the claim of a solicitor’s lien over the trust fund for the unpaid fees. The matter was before Boddice J on 12 May 2011. The matter was adjourned as the judge was not prepared to make a declaration as to a lien without further submissions being made as to the power to make orders crossing over the order of another court.
The wife then filed a further application in the Federal Magistrates Court on
17 May 2011, seeking that the orders made on 11 April 2011 be amended pursuant to the slip rule under r 16.05 to deduct from the wife’s entitlement her share of transcript costs. The application also sought to join the husband’s solicitor to the proceedings as second respondent, because of the dispute about the existence of a solicitor’s lien over the wife’s entitlement.
On 16 September 2011, the husband’s solicitor filed a response, seeking a declaration from the court that “no Order of the Court affects the right of the Second Respondent from maintaining a Solicitor’s Lien over any funds it holds in the Second Respondent’s Trust Account or the right of the Second Respondent to be paid for legal costs and outlays owed by the First Respondent to the Second Respondent”. The solicitor also sought further orders, in essence, that the court set aside order 1 made 11 April 2011 and re-determine the entitlement of the wife to be paid by the husband.
The matter was heard by the Federal Magistrate on 19 September 2011, and orders and reasons for judgment were delivered the following year on
1 March 2012. It is from these orders that the solicitor filed a notice of appeal in time. No orders were made in respect of the wife’s application for amendment of the orders. The Federal Magistrate acknowledged what the wife sought by way of the application, however left the matter unresolved. It is necessary to set out in some detail what was said by the Federal Magistrate:
7.My 11 April orders saw the amount of $177,857.91 payable to the wife, subject to a number of costs orders which were to be satisfied from that amount.
8.The Application in a Case seeks to have the figures altered so that $174,130.72 is paid to the wife, subject of course to the costs orders being satisfied. It also seeks to join the husband’s solicitor’s firm as a party to resolve the dispute over the lien.
…
58.Finally, while the wife claims that the figures have to be altered, the husband or his solicitors seem to say that I cannot alter the figures. I can if the figures represent an order that I did not intend to make or there was a simple mistake in calculation of figures. Subject to clarification about a mistake in calculations, the monies must be paid to the wife, without delay. I have also considered the alternative orders sought by the solicitor that the matter be adjourned and directions given but the fact is I have delivered final judgment.
The Federal Magistrate made only one order that, “the Response in a Case filed 16 September 2011 by the Intervener be dismissed”. The Magistrate considered at length the issue of a solicitor’s lien, considering the submissions of the solicitor, and the respondent wife. Although these reasons consider the application for leave to appeal the two earlier orders, it is necessary to set out at some length the final reasons of the Federal Magistrate, which reveal the complex arguments in this case.
10.The firm’s Response seeks orders that the Application be dismissed and an order to the effect that no order of this court “affects the right of the Second Respondent (the husband’s solicitors) from maintaining a Solicitor’s Lien over any funds it holds in (its) Trust Account or the right of the (solicitors) to be paid for legal costs and outlays owed by the (husband) to the (solicitors).”
11.In the alterative [sic] the Response seeks that the orders made on 11 May 2011 be set aside and directions given as to the further conduct of the matter.
12.The solicitors for the parties have sent correspondence to each about the existence of a lien, and finally an application was made to the Supreme Court of Queensland to determine the matter.
13.Boddice J adjourned the matter, to allow the parties opportunity to have this court decide the issue, based on the circumstances of the claim which had arisen out of a final judgment.
14.The solicitors for the husband have released the sum of $117,055.53 to the wife and retain the sum of $48,449.88. There may a question of interest.
15.A lien may arise by statute, grant or operation of law.
16.A general description of a lien is given in Osborn’s Concise Law Dictionary, Eleventh Edition, 2009, and states:
“Lien The right to hold the property of another as security for the performance of an obligation. A common law lien lasts only so long as possession is retained, but while it lasts can be asserted against the whole world. An equitable lien exists independently of possession; i.e. it may bind property not in possession at the time the obligation is incurred, but it cannot avail against the purchaser of a legal estate for value without notice of the lien.
A possessory lien is the right of the creditor to retain possession of his debtor’s property until his debt has been satisfied. A particular lien exists only as a security for the particular debt incurred, while a general lien is available as a security for all debts arising out of similar transactions between the parties. Thus a solicitor has a lien on his client’s papers to secure his costs. A charging lien is the right to charge property in another’s possession with the payment of a debt or the performance of a duty. A maritime lien is a lien on a ship or freight, either possessory, arising out of contracts of carriage, or charging, arising out of collision or other damage. A vendor’s lien is the right of a seller to retain the property till payment of the purchase price, e.g. under the Sale of Goods Act 1979 s.41, an unpaid seller (q.v.) of goods who is in possession of the goods may retain possession until payment or tender of the price.”
17.That seems to be a description which more or less is repeated in other legal dictionaries, and is useful for an understanding of the proceedings.
18.I was told this was a possessory lien.
19.I am not convinced about that proposition, because the monies are not in the solicitor’s possession, it is held on trust and it is claimed for work performed, but the exact classification is possibly irrelevant in this matter.
20.Before going to the cases, the position of the husband’s solicitors is that:
a)When acting for the husband, they requested him to deposit monies into their trust account on 9 September 2009, prior to the commencement of proceedings;
b)The wife’s application was filed 20 days later;
c)The wife did not seek orders against the second respondent in the family law proceedings;
d)The source of the funds deposited into the solicitor’s trust account was the settlement of a commercial claim between the husband and a property developer;
e)The funds had been invested with the developer and the husband received them from a personal injuries claim;
f)The solicitors specifically sought those funds from the husband to be placed in trust on account of costs and outlays of the intended family law proceedings – see paragraph 32 of the submissions filed on behalf of the solicitor on 19 September 2011;
g)During the proceedings the husband authorised the solicitors to hold a portion of the funds to be available for immediate application and a larger proportion to be held on trust in an interest bearing deposit;
h)The husband authorised sufficient funds from the interest bearing deposit to pay for accounts rendered; and
i)The husband does not “cavil with the claim by” the solicitors;
21.The solicitor’s position is that the wife should have realised that a solicitor’s lien existed and exists over the monies held and did not give the solicitors notice, as a creditor, of the orders she sought.
22.The solicitors therefore may appear to claim the monies as a creditor – for work performed - and perhaps that I should have considered their position under s.75(2)(ha) of the Family Law Act 1975 (the Act).
23.The solicitors claim, because the wife had not given them notice, is that there has been a denial of natural justice – on her part as I read the submissions.
24.Submissions state the issues are:
a)Does the solicitor have a lien?;
b) Has the lien been waived or relinquished?;
c)Is the lien superior to the claim by the wife or husband?;
25.But although these are stated as the issues, I am under no illusion that the solicitor’s position is that the lien exists, because the question is posed that if the court intends to interfere with the solicitor’s entitlement, what would be the impact of orders because there has been a lack of procedural fairness and that factually, I misapprehended the amount of prepaid legal costs as being available for distribution between the parties. I must say I referred to the legal fees in judgment.
26.The solicitor relies on s.258 of the Legal Profession Act 2007, and particularly ss.(1)(a).
27.The section states:
“s.258 Dealing with trust money--legal costs and unclaimed money
(1) A law practice may do any of the following in relation to trust money held in a general trust account or controlled money account of the practice for a person--
(a) exercise a lien, including a general retaining lien, for the amount of legal costs reasonably due and owing by the person to the practice;
(b) withdraw money for payment to the practice's account for legal costs owing to the practice if the relevant procedures or requirements under this Act or prescribed under a regulation are complied with;
(c) after deducting any legal costs properly owing to the practice, deal with the balance as unclaimed money under section 713.
(2) Subsection (1) applies despite any other provision of this part but has effect subject to part 3.4.”
28.I was referred to a number of decisions. Generally, I do not disagree with the assertion that solicitor’s may be entitled to a lien at some point when their client’s have not paid them and monies or other property may be held by the solicitor. That is the thrust of one such case I was referred to, Magnamain Investments Pty Ltd v Baker John (a firm) & Anor [2008] QSC 245. In that matter, Daubney J of the Supreme Court of Queensland concluded that he would be prepared to find that a possessory lien could exist over monies held by way of court order whereby the solicitor paid into court money on behalf of his former client, who was in dispute with another party.
29.Daubney J said:
“ The lien is often spoken of as applying to documents in the possession of a particular solicitor. The weight of authority, however, appears to indicate that the lien can also apply to money, including, relevantly for these purposes, money held in a solicitor’s trust account. This possibility was considered by the Court of Appeal in Phillipa Power & Associates v Primrose Couper Cronin Rudkin where Macrossan CJ and White J stated[:
“However, without in this case expressing any final view, it may be suggested that broad principle and consistency in approach as well as a substantial body of authority could justify acceptance of the view that a possessory lien can exist over money in a bank account. It seems excessively literal to assert that relevant possession can exist only over physical items held and that money in a bank account gives rise to no more than a debt in favour of the depositor. The essential feature of possession is, after all, control, and the solicitor in whose trust account moneys are held is the one who, like any customer of a bank, controls its disposition by giving directions in respect of it which the bank must follow. This view of the matter is not impaired by the fact that the solicitor has his right to control operations on his trust account regulated by certain statutory provisions found in the Trust Accounts Act 1973. This regulation does not deprive him of his essential control or in its effect substitute any other controller. There does not appear to be any unwarranted extension of principle involved in saying that control of the funds in the bank account, equivalent to possession, remains with the solicitor, with the bank being responsive to his directions in much the same way that possession of a physical object can be held on a person’s behalf by a servant or agent answerable to him. Whilst final determination of this question may be left to another day, the following authorities may be included amongst those accepting that a possessory lien may exist over moneys in a bank account: Re Jalmoon Pty Ltd; Gilshenan & Luton v. Commissioner of Taxation (whatever might be said about certain other propositions stated in that case); Loescher v. Dean [1950] Ch. 491; 15 Prekookeanska Plovidba v. L.N.T. Lines S.R.L. [1989] 1 W.L.R. 753; Johns v. Law Society of N.S.W. [1982] 2 N.S.W.L.R 1 at 20 per Hope J.A.”
[10] Derrington J, in the same case, also noted that it was strictly unnecessary to determine the application of the lien to monies held in trust. Nevertheless, his Honour observed:
“...the preponderance of authority strongly supports the conclusion that a lien may exist in respect of the assets represented by the credit in the trust account notwithstanding that it does not consist of a physical entity capable of physical possession. See Re Jalmoon Pty Ltd [1986] 2 Qd.R. 264; Gilshenan & Luton v. Commissioner of Taxation [1984) 1 Qd.R. 199; Loescher v. Dean [1950] Ch. 491”
[11] In light of these comments, and the authorities referred to therein, I would be prepared to find that monies held in a trust account can be subject to a solicitor’s retaining lien. Money in a trust account may not be in the physical possession of a solicitor but, as observed by Macrossan CJ and White J, it remains under their control for so long as it is in the trust account. Accordingly, I see no reason why the principles applying to documents in the physical possession of a solicitor should not apply to monies in a solicitor’s trust account.
[12] That being said, a determination that money in a trust account is capable of being subject to a lien does not finally resolve the question of whether the first respondent actually holds such a lien.”
30.I was then referred to Prekookeanska Plovidba v LNT Lines SRL [1989] 1 WLR 753, on the basis that the plaintiffs who obtained an award against the defendants were later granted an injunction restraining the defendants from dealing with any of their assets including sums held by two firms of solicitors. The injunction was expressed not to extend to the rights of set off the solicitors had.
31.It is upon similar decisions that the submission was made that the wife’s right to recover money was against the husband, but that right did not extend to seek funds back from the husband’s solicitors to the extent of their possessory lien – see paragraph 65 of the solicitor’s submission.
32.The solicitor’s then rely on s.256(3) of the Legal Profession Act 2007, which states:
“256 Protection of trust money
(1) Money standing to the credit of a trust account kept by a law practice is not available for the payment of debts of the practice or any of its associates.
(2) Money standing to the credit of a trust account kept by a law practice is not liable to be attached or taken in execution for satisfying a judgment against the practice or any of its associates.
(3) This section does not apply to money to which a law practice or associate is entitled.”
33.During the hearing of this application, I was a taken by counsel for the solicitor to comments of his Honour, Boddice J, stated during the course of submissions in the Supreme Court and which may, at face value, indicate some support of the solicitor’s position. I think that would be quite an improper suggestion, if that is why I was being taken to the comments, especially when no decision had been made and it was clear to me upon reading the transcript that there would have to be consideration of the submissions.
34.The submission then seems to be on two basis, although it is difficult to discern, that the wife did not give the solicitor notice of her claim and that I was in error with regard to my findings that the prepaid legal costs were available to the parties in orders made in the property matter.
35.The cases I have located refer to what is called a “fruits of litigation” or “fruits of action” lien.
36.In Khoury v Gonvales [2006] NSWSC 1290, Barrett J of the NSW Supreme Court made a declaration that a solicitor was entitled to a judgment made by the NSW District Court against a former client for fees. Barrett J referred to the lien as being an equitable lien
37.Barratt J [sic] referred to Firth v Centrelink (2002) 55 NSWLR 451, where Campbell J extensively reviewed the authorities. He said:
“Equitable Liens
32 There are various circumstances in which equity recognises a person as having a right, akin to a security, to be paid or recouped money from a particular item of property of another person, and refers to that right as being a “lien”. Examples include the lien of an unpaid vendor of real estate over that real estate for payment of the purchase price (Reliance Finance Corporation Pty Ltd v Heid [1982] 1 NSWLR 466 at 477-478; affirmed on appeal: Heid v Reliance Finance Corporations Pty Ltd [1983] HCA 30; (1983) 154 CLR 326), the lien of a purchaser of real estate over that real estate for money paid prior to completion (Hewett v Court [1983] HCA 7; (1983) 149 CLR 639), and the lien of a trustee over the trust property to secure liabilities incurred by the trustee in the authorised conduct of the trust (Jennings v Mather [1902] 1 KB 5; Jacobs Law of Trusts in Australia, 6th edition, paragraph [2104]). Other examples of the heterogeneous collection of circumstances in which such a lien arises are set out in Fisher and Lightwood’s Law of Mortgage, Australian edition, paragraph [2.8] – [2.17]. These equitable liens are alike in that they do not depend upon the person who has the lien having possession of the property over which the lien exists. In this respect, equitable liens differ from common law liens. While the equitable liens possess some common features (identified in Hewett v Court [1983] HCA 7; (1983) 149 CLR 639 at 663 per Deane J), “it is difficult, if not impossible, to formulate any satisfactory statement of the necessary or sufficient circumstances for the implication of an equitable lien which is applicable to any relationship at all” (Hewett v Court at 668 per Deane J).
Nature of a Solicitor’s “Fruits of the Action” Lien
33 A solicitor whose efforts result in the recovery of money for his client has an equitable right to have his proper costs and disbursements paid from the money so recovered.
34 In Ex Parte Patience; Makinson v The Minister (1940) 40 SR (NSW) 96 Jordan CJ gave what has become a classic exposition of the solicitor’s right, contrasting that right with a common law lien. Jordan CJ said, at 100-101:“A solicitor has no lien for his costs over any property which has not come into his possession. If, however, as the result of legal proceedings in which the solicitor has acted for the client, the client obtains a judgment or award or compromise for the payment of money, although the solicitor acquires no common law title to his client’s right to receive the money or to any part of that right, he acquires a right to have his costs paid out of the money, which is analogous to the right which would be created by an equitable assignment of a corresponding part of the money by the client to the solicitor. That is to say, the solicitor has an equitable right to be paid his costs out of the money; and if he gives notice of his 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: Welsh v Hole 1 Doug 238. If the person liable to pay refuses, after notice, to pay the costs of the solicitor, the solicitor may obtain a rule of Court directing that the amount of his costs be paid to him and not to the client; and payment by the judgment debtor to the client after notice of the solicitor’s claim is no answer to an application for such a rule: Read v Dupper [1795] EngR 4137; 6 TR 361; Ormerod v Tate [1801] EngR 256; 1 East 464; Ross v Buxton 42 Ch D 190. Further, 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: Ross v Buxton. These special rights have no resemblance to a solicitor’s general possessory lien, although they are sometimes miscalled liens: Bozon v Holland [1839] EngR 1053; 4 My & Cr 354. In Barker v St Quinton [1844] EngR 134; 12 M & W 441 at 451 Parke B said that “the lien which an attorney is said to have on a judgment (which is, perhaps, an incorrect expression) is merely a claim to the equitable interference of the Court to have that judgment held as security for his debt, ”a remark which is reproduced in Chitty’s Archbold, and has been repeated in many later authorities: cf also Smedley v Philpot [1838] EngR 261; 3 M & W 573 at 585-7; North v Stewart 15 App Cas 452 at 463. In practice, however, the solicitor has always been treated as possessing equitable rights in the judgment independently of any declaration of those rights, and the Court’s assistance is invoked not to create the rights but to enforce them: Lord v Colvin 2 Drew & Sm 82 at 92-3; Haymes v Cooper [1864] EngR 277; 33 Beav 431 at 433. The rights are assignable: Briscoe v Briscoe [1892] 3 Ch 543.”
38.In this particular case, the issue is not whether a lien arises because money is held, the issue is whether a lien arises in favour of the solicitor, whether by possession or in equity, capable of extending over all money which was subject of proceedings pursuant to the property provisions of the Family Law Act and upon which a decision has been made.
39.How it came to the solicitor is irrelevant, as were the client’s instructions at that time when it was obvious that the money was going to be the subject of a decision as to the make-up of the marital pool. The instructions of the client are irrelevant if such were given to deprive the other party, or the court, opportunity to examine this question of the make-up of the marital pool of assets or opportunity of determining its place, if any, in the pool.
40.And while it may be questionable as to whether it is in the solicitor’s possession as such, it is, or should be in a trust account pursuant to the Legal Profession Act 2007, and general professional practice of a solicitor’s firm.
41.The principles with regard to this style of lien were addressed and stated by Campbell J when he reviewed the authorities and Bergin J, in Abbott trading as Piper Alderman v Pilot Development Corporation Pty Limited (In liq) [2006] NSWSC 1178, set out the principles. He said:
“5 In Firth v Centrelink [2002] NSWSC 564; (2002) 55 NSWLR 451 Campbell J reviewed the authorities and set out the principles applicable in relation to a solicitors’ lien in respect of costs. His Honour summarised the principles, at 463, relevantly to this case as: (1) the solicitors’ right exists over money recovered through obtaining judgment in litigation and also over money recovered through the settlement of litigation; (2) such 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; (3) it exists over the money which is in the possession of the solicitor and also over money which is in court; (4) the solicitor need not be retained at the time that the money is recovered; and (5) for the right to arise it must be shown that there is a sufficient causal link between solicitors' exertions and the recovery of the fund of money; see also pages 464 and 465.
6 In Roam Australia Pty Limited v Telstra Corporation Limited [1997] FCA 980 Lehane J said:
The questions seem to be, first, did the proceeding result in a judgment award or compromise under which money is payable to the party for whom the solicitors acted; and secondly, was the part played by the solicitors sufficient to justify the conclusion that there is a sufficient causal link between the solicitors' efforts and the result so that the solicitors may be regarded as having been instrumental in obtaining the result?
7 In Doyles Construction Lawyers v Harsands Pty Limited & Others, unreported 24 December 1996, McLelland CJ in Eq said:
It is sufficient to give rise to the equitable right that the settlement resulting in payment to the client came about as a result of the legal proceedings and that the solicitor had acted for the client in those proceedings, this being treated as a sufficient causal link.”
42.In answer to some of the principles identified, there is no dispute that there is the causal link between the solicitor’s efforts and the property orders on behalf of the husband. In other words, I have no doubt that the solicitor performed the legal work for the husband.
43.The authorities I have referred to, and I could find no authorities which differ, generally only apply a lien to that part of any judgment - to the property of the solicitor’s client or that property due to the client, such as a costs award.
44.Section 258 of the Legal Profession Act, especially ss.(1)(a), with the greatest of clarity, states the lien is for costs owing by the person – the person is the client, not the opposing parties in a matter. The person has an equitable duty to pay for the costs for the solicitor’s work performed or the solicitor has an equitable right to claim such costs. I accept that the definition may include a possessory lien, but the important point is that it is only as against property of the solicitor’s client and not against monies held after judgment has disposed of part of that money to another person. Under the Family Law Act, the judgment altered the interests of the ownership of that money, extinguishing the husband’s interest.
45.Section 256 is not at odds with s.258.
46.That in general matters there may appear to be decisions which have allowed solicitors to take from a fund which is in dispute is not how the law regarding in family proceedings is or can be applied.
47.The Family Law Act is very clear, the proceedings are to end the financial relationship between parties - to declare their rights under s.78 as to property. That section, with s.79, causes the consideration of what property the marital pool contains and why the pool has to be identified in property proceedings and usage of the assets accounted for, see Hickey & Hickey [2003] FamCA 395 at 39, which refers to the four inter-related steps, the first of which is to identify the pool. The section does not and cannot cover the rights of third parties, other than where directed under s.79 and s.75(ha) or those sections dealing with bankrupt estates or by exercise of injunctive and declaratory powers. I was referred to the case Official Trustee in Bankruptcy v Mateo [2003] FCAFC 26 and the reference at paragraph 52, among other references, that a court exercising family law jurisdiction does not have the power, except in limited circumstances, to alter the rights of a third power. Further, the property in dispute is not available to a solicitor claiming a lien, before the decision is made, no matter what direction a client has given, when the dispute has to determine the pool.
48.In this particular matter, the solicitor is claiming a lien on the property which is in the form of money, where the interests in a portion of that money having been altered in favour of the wife. The solicitor claims the wife should have known or ought to have known the lien existed.
49.It cannot be the case, on the authorities I have referred to and the wording of the Act, that the solicitor has any claim whatsoever, any entitlement whatsoever, to that property which now belongs to the wife. From what I have said, it cannot be the case that the solicitor had a claim before orders altering the interests were made, on the basis that a decision was to be made on the contents of the pool. Further, the argument at trial did not claim that the solicitor had an interest as now being defined by the solicitor.
50.If that were not the case, the Family Law Act and proceedings would be thrown into the utmost disorder, as solicitors would seem to take some sort of priority in the property, over the parties. It is an illogical position.
51.Whether the solicitor has a claim over any property of his client is a different question, and whether his client then has enough of the pool after the property orders have been made is irrelevant to the wife’s position.
52.Further, why should the wife or any party have to conduct a case whereby the solicitor for the opposing party may have a lien against the opposing client, to be satisfied from the joint property funds, where such is not specifically part of the case before the court? The duty was on the solicitor to become a party or to otherwise litigate the interest now claimed, because it is against the pool as a whole. The solicitor’s position also seems to be that because the husband received monies after a dispute with a developer and that because the monies were paid before proceedings, that such provides some sort of base for this claim. The money was always going to be considered as a contribution to the joint pool of the husband and wife. That the husband at a time before the decision altering the interests in the money gave direction to the solicitor does not enliven a claim to a lien over that part of the property which now belongs to the wife. That is why the money was held on trust until the proceedings decided how to alter the joint property.
53.I have addressed the issue of the legal fees in judgments, and held that it must have been monies held on trust pending decision. The decision was not appealed, yet purportedly comes back now in a different guise.
54.Since orders have been made the legal and professional obligation of the solicitor holding the money in trust is to handover the wife’s property, including the money held on trust.
55.The solicitor has no right and has had no right retain the wife’s money, other than for a claimed mistake in the calculations I made, which only requires clarification by the parties. There was no lack of natural justice and if the solicitor was a creditor or claimed an interest, then as I have stated, the solicitor should have notified the court, sought to become a party and stepped away from the husband’s representation. The Applicant referred me to the decision of the High Court in Port of Melbourne Authority v Anshun Proprietary Limited (1980-1981) 147 CLR 589, where it was said that parts of a case usually cannot be reopened.
56.I do not understand how this case is before the court.
57.As such, the Response and the orders therein sought filed 16 September 2011 is dismissed.
(original emphasis)
As already mentioned, on 5 March 2012 the applicant solicitor filed a notice of appeal against the order of 1 March 2012 dismissing his response in the application in a case. That appeal is NA 22 of 2012.
On 21 March 2012, the solicitor then filed an application in a case, seeking a stay of the orders of 11 April 2011, “insofar as they apply to any funds currently standing to the credit of X Firm Trust Account pending the determination of the Appeal”. A notice of discontinuance of the stay application was then filed on 22 March 2012. Presumably, the application was discontinued because no notice of appeal in respect of the
April 2011 orders had been filed, as leave is required as the appeal is sought to be filed out of time.
The matter had been listed for hearing before Federal Magistrate Coates on
1 May 2012, and there being no appearance on behalf of the applicant solicitor or either respondent, it was ordered that “in accordance with the Notice of Discontinuance filed on 22 March 2012 the application on a Case filed
21 March 2012 be dismissed.”
On 19 April 2012 the wife filed an application in the Supreme Court of Queensland seeking a declaration that the solicitor had no entitlement to maintain and exercise a lien over the funds in the trust account. The wife sought corresponding orders that the solicitor pay to her the sum of
$48,449.88 plus interest, and the wife’s costs of and incidental to the application.
The matter was listed for hearing on 26 April 2012, and was adjourned by Justice P Lyons, until a date to be fixed following the delivery of judgment in these appeal proceedings.
It is clear that the proposed appeal, NA 23 of 2012, for which the solicitor seeks an extension of time to file, is inextricably linked with the appeal
NA 22 of 2012, which the solicitor filed in time. In circumstances such as these where the orders, interests and questions for determination are inherently connected, it is appropriate, if leave is granted in this appeal, to consolidate the two appeals together.
Voluminous material was filed by both the applicant solicitor and the respondent wife in this application in an appeal. The majority of this material is of limited assistance to the issue for determination in the application before me, confined to the question of an extension of time to file an appeal.
Leave out of time principles
In Clivery & Conway [2007] FamCA 1435 the well known principles referable to leave applications were discussed:
14.The principles emerging from Gallo v Dawson may be summarised as follows:
·The grant of an extension of time is not automatic.
·The object is to ensure that Rules which fix times do not become instruments of injustice.
·Since the discretion to extend the time is given for the sole purpose of enabling the Court to do justice between the parties, the discretion can only be exercised upon proof that strict compliance with the Rules will work an injustice upon the applicant.
·When determining whether the Rules will work an injustice, it is necessary to have regard to the history of the proceedings, the conduct of the parties, the nature of the litigation, and the consequences for the parties of the grant or refusal of the application for extension of time.
·When considering an application for extension of time in which to file an appeal or an application, it is necessary also to consider the prospects of success of that appeal or application.
Merits of the Appeal
Counsel for the applicant solicitor in his extensive submissions sought to demonstrate the merits in the proposed appeal by reference to the orders, reasons and parts of the transcript of proceedings of each set of orders. Although the third orders made 1 March 2012 have been appealed in time, it was correctly submitted that these later orders form part of the train of the solicitor’s appeal and were therefore addressed in submissions by counsel.
For the purposes of the application for an extension of time, the solicitor need only demonstrate that there is some prospect of success, or some merit, in the proposed appeal. Detailed submissions were made by counsel, however for the purposes of this application, these can be briefly summarised.
The contentious add-back
In respect of the treatment of the $81,552.93, it was said that the Federal Magistrate erred in the first instance by considering it as an available sum, when it had in fact already been properly paid to the solicitor’s own account for legal fees incurred by the husband. It was accepted that in written submissions and at trial, the husband had conceded that the monies “should be added back as they came from capital assets of the parties”. Counsel submitted however, that the Federal Magistrate made an error of fact in finding that the funds were “available” and consequently erred in treating the sum as an actual rather than notional add-back.
Counsel then submitted that the Federal Magistrate further erred when at the second hearing, held to resolve “interpretational” issues which were said to arise from the substantive orders not being “fulsome”, his Honour acknowledged the error in finding that the funds were held on trust and available but insisted that because the funds existed, “from the time of the concession the money must have been available to the joint pool from the husband’s legal firm, which seems to have accepted the money as payment for fees”. Counsel submitted the error was exacerbated because this finding, that the firm should have paid the money back to the trust account or in any event were deemed trustees of the funds, was made despite the applicant solicitor not being joined to the proceedings and no such order against him having been sought by the wife or the husband.
The solicitor for the wife submitted that the add-back issue was of no practical significance for the solicitor. It was also said that there were no submissions made at trial that the amount should have been dealt with otherwise, and indeed that submissions were made that the pool could be dealt with globally. The solicitor for the wife in his submissions questioned what else could the judge have done in such circumstances.
The solicitor’s lien
In regards to the claimed solicitor’s lien, it is as well to clarify the amount claimed and the nexus with the amount claimed by the wife. Order 1 made
11 April 2011 provided that the wife was entitled to $177,857.91, minus the sum of $12,352.50 for costs against her in orders 2, 3, 4, 5, and 6. The amount to be paid to the wife as found by the Federal Magistrate is therefore $165,505.41. The wife has received by payment from the solicitor’s account $117,055. 53, referred to as the “undisputed sum”. Her remaining entitlement is then $48,449.88. The amount retained in the applicant solicitor’s trust account is approximately $49,781.33, the slight increase being attributable to interest.
In the wife’s response to the extension of time application in this appeal, she states the amount claimed by the solicitor as owed to him is $35,213.33. It was confirmed in oral submissions by counsel for the solicitor that the fees claimed are in the order of $35,000. It was also confirmed that approximately $15,000 has been retained as a claimed security for costs.
Counsel for the solicitors submitted that in the reasons for judgment delivered
1 March 2012, the Federal Magistrate wrongly applied the legal principles applicable to liens, namely by considering that the lien asserted was a fruits of judgment lien, rather than a possessory lien as was asserted and been maintained by the solicitor. It was submitted that when legal practitioners receive funds on trust from their client, as the applicant solicitor did receive into trust funds from the husband prior to the commencement of the property proceedings, it is self-evident that a solicitor’s lien arises. Section 258 of the Legal Profession Act was referred to in this respect.
The further submission put was that given the self-evident solicitor’s lien over these funds, the wife or anyone in her position could have applied to restrain the use of those funds or required them to be held elsewhere. Relevant to the lien issue and the requirement that the solicitor transfer the funds to the wife, counsel cavilled with the Federal Magistrate’s finding that “[U]nder the Family Law Act, the judgment altered the interests of the ownership of that money, extinguishing the husband’s interest”. It was submitted that neither the substantive nor the later orders altered the interest of the husband, or the solicitor, in the monies held in trust. To support the claimed lien and the solicitor’s non-altered interest therein, counsel referred to the transcript of proceedings in August 2010 where the Federal Magistrate confirmed that the orders were not against, or did not affect, the solicitor.
Counsel referred to the case of Hodges Hall & Jovanovic & Markov (1995) 19 FamLR 241 to demonstrate that the solicitor had standing to appeal against orders which were made against his interests despite not being a party to the original proceedings, that the solicitor had not been given sufficient notice of the orders to be made notwithstanding his knowledge of what sum the wife was seeking, that being informal and insufficient to put the solicitor on notice that he should attend and participate at the trial to protect his interest, and to suggest that the equitable interest of the solicitor could be directly traced to the monies retained in trust.
The solicitor for the wife sought to distinguish these circumstances from the Hodges Hall case relied on by the applicant solicitor. It was submitted that in that case, there was a clear equitable charge in the form of an interest in the former matrimonial home held as security for costs. It was an interest which was made known to the court prior to any hearing, and the solicitor ceased acting for the husband before property proceedings.
It was said that the applicant solicitor in this case, has no such enforceable equitable charge. The solicitor for the wife referred to the case of Magnamain Investments Pty Ltd v Baker Johnson Lawyers [2008] QSC 245 where it was accepted that a possessory lien, the kind asserted by the applicant solicitor does not have the character of an encumbrance or equitable charge but rather it merely passive and possessory.
It was further submitted that the applicant solicitor could not reasonably rely on the notice and natural justice arguments, given he had notice of the wife’s claim seeking 80 per cent of the funds and therefore notice of the potential effect to his perceived interest.
Finally it was said for the wife that the effect of finding and maintaining the lien would be that the wife is contributing to the husband’s legal fees, thereby cutting across the purpose of s 117 of the Act. Further, if the appeal succeeds on the lien point, the orders providing for the entitlement of the wife would not necessary be altered, and in order to obtain the fruits of the judgment, the wife would be required to pursue the husband for the remainder of the entitlement, a futile course as the husband has no such funds available.
The just and equitable requirement
In oral submissions, counsel for the solicitor submitted that the order that the wife be entitled to $177,857.91 in the form of a cash payment resulted in the husband receiving a cash entitlement of only $17,298.92. It was submitted that this did not reflect the intention of the original substantive order, that the property of the parties be divided equally, and in fact resulted in the wife receiving 82 per cent of the funds held by the applicant solicitor, which formed the majority of the property pool as the other significant amounts were a notional add-back and the $81,552.93 contentious add-back.
Counsel for the solicitor further suggested that this result stemmed from the inclusion of the $81,552.93 as an actual rather than notional add-back. It was submitted that this result could not be said to satisfy the just and equitable requirement of section 79 property orders, and that the Federal Magistrate erred by not considering, or not expressly providing reasons explaining, the just and equitable effect of the orders which were to be made on the basis of equal contributions.
It can be seen from the short recitation of these arguments that there are substantial matters to be argued on the appeal.
Explanation for the delay
It was said for the applicant solicitor that since the making of the substantive orders, the parties and the solicitor have participated in a timely manner in the bringing of a variety of proceedings to correct the alleged mistakes in the judgment of the Federal Magistrate. It was further submitted that while issues were sought to be dealt with by the parties in a timely way, significant periods elapsed between filing dates, hearing dates and delivery of reserved judgments. The solicitor submitted that none of the parties is responsible for the delays involved, and that the period of delay in the matter is artificially affected by the drawn out process of receiving the later judgments which clarify the earlier orders of 21 July 2010.
Counsel for the solicitor submitted there initially had been no reason for the applicant to appeal the substantive July 2010 orders because no order was made against him. Only when the second orders were made in April 2011 did the solicitor perceive his interest to be affected. It was said that following those orders, the solicitor followed the Full Court’s preferred approach of returning to the trial judge to attempt to resolve an issue or dispute, rather than immediately filing an appeal. The statement of the Full Court (Fogarty, Lindenmayer and O’Ryan JJ) in Hodges & Hall & Jovanovic & Markov (supra) was referred to in support of this course of action.
It was submitted that the only reason the extension of time in which to file the appeal is practically required is that the efforts made to resolve the issue first by rule 16.05 were not successful. It is the applicant solicitor’s contention that considering the grounds of appeal in relation to the July 2010 and April 2011 orders is necessary for a proper determination of the matter.
It is submitted for the respondent wife in her outline of argument that a proper assessment of the facts of the case does not establish that the applicant has demonstrated any reasonable excuse for the delay in filing the notice of appeal. In the wife’s affidavit filed 4 May 2012, she explained she accepted that the issue concerning whether or not the applicant solicitor could maintain a lien over funds was alive between the parties from 11 April 2011. The wife questions however, why the solicitor did not raise the issue before the court or her lawyers, prior to or during the trial leading to the substantive orders.
In oral submissions, the solicitor for the wife submitted that the proper course for the applicant solicitor would have been to apply to the Federal Magistrate after the pronouncement of the July 2010 orders for their own slip rule amendment, or to have appealed those orders at the time. It was said that the issue was alive in July 2010 and it was not until April 2011 that the solicitor actively pursued any defence of his purported interest, that delay itself causing prejudice to the wife.
In this complicated matter, attended by court appearances both in this and in a state court, the delay is explained.
Possible Prejudice
It was submitted for the solicitor that given the 1 March 2012 order has been appealed in time, there would be no prejudice in the inclusion of the two earlier sets of orders being made the subject of the same appeal proceedings. This is because the orders concern the same subject matter and the same parties.
The applicant solicitor notes in his affidavit filed 5 March 2012 that each party to this appeal is suffering by not having access to the fruits of their respective grounds of entitlement. He further submitted that the prejudice to each party is equally balanced, given that the funds are resting in a solicitor’s trust account as a result of his claim of a lien. The solicitor confirmed that the funds remain partitioned in his account, ready to be applied according to the determination of the court.
It was submitted for the wife that the applicant solicitor has not established any detriment to him and that the prejudice rests solely with the wife. She explained in her affidavit that the only entitlement presently established is her entitlement.
In her affidavit, the wife lists a number of points which she says establish the prejudice to her in these appeal proceedings:
(a)Judgment was first delivered in July 2010;
(b)Until now, no party has appealed that judgment;
(c)She has received $117, 055.53, being part of the judgment sum payable;
(d)$ 48, 213.33 (exclusive of any interest payable) remains owing;
(e)The applicant solicitor retains that sum in his trust account;
(f)The applicant solicitor claims $ 35, 213.33 is payable to him; and
(g)The applicant solicitor retains a further $ 15, 000 in the trust account for what he claims is putative security for his costs.
It is apparent that these factual assertions are correct. The wife explained further that since July 2010 she has accrued $47,624 in legal fees in order to obtain the funds she says she was entitled to pursuant to the judgment. Of the $117,055.53 she has so far received in part satisfaction of the July 2010 judgment entitlement, the wife has no funds left, having paid approximately $60,000 in legal fees for the proceedings up to July 2010, a car, living expenses and other personal creditors.
Any attempt to consider the proportionality of this dispute by any of the parties leading to a resolution seems to have failed.
The husband’s appeal
As mentioned, the husband’s draft notice of appeal seeks to appeal from the orders made in July 2010. It is not opposed by the applicant solicitor. Indeed, the solicitor submitted that the husband may necessarily be affected by the outcome of the other appeals and should therefore be allowed to proceed.
The grounds of appeal asserted by the husband are that the Federal Magistrate erred in finding that the contributions of the parties were equal, specifically in finding that the wife’s non-financial contributions were equal to the husband’s financial contributions; in considering there should be no adjustment to the husband for s 75(2) factors due to the disparity between the parties in qualifications and capacity to work; and in placing unreasonable weight on the fact that the husband “may” receive a lump sum capable of allowing him to purchase or have a reasonable deposit for a home.
The husband appeared in person at this hearing. He sought to explain the delay in filing his notice of appeal and said he had applied for legal aid however was refused, had sought some legal advice however was unable to pay the monies required up front for proper advice, and that it was only now that he has the confidence to pursue the matter and the errors in the judgment. The husband is dependent on a disability pension.
In regard to the merits, the husband submitted that he made 100 per cent of the financial contributions and this was not reflected in the contributions findings, and that the Federal Magistrate did not take into account the ultimate position of the parties and effect of the final orders, namely that the husband cannot work due to incapacitation, whereas the wife simply chooses not to work.
The wife’s opposition to the application is on the basis that there is no proper explanation for the delay and absence of merit. It was submitted that the husband was represented up until April 2011, inferentially has received advice in the intervening period and could have filed an appeal earlier.
I accept the solicitor for the wife’s submission that it was difficult for him to respond to the merits of the appeal given the application had only been filed the day before. It was nonetheless submitted that no clear error of law or principle was demonstrated in the husband’s draft grounds, they being generally grounds relating to the exercise of discretion, the husband would face the obstacles of House v The King (1936) 55 CLR 499.
The prejudice submissions made on behalf of the wife are similarly relevant to her opposition to the husband’s application. It must also be considered that the wife is bound to deal with the appeal filed by the solicitor within time. The proposed appeals would add to the arguments likely to be made in the filed appeal.
Conclusion
It is apparent that the applicant solicitor’s proposed appeal raises some complex questions in respect of add-backs and the rights of solicitors to retain moneys on account of legal expenses. The submissions from counsel for the solicitor and the solicitor for the wife demonstrate that these are contentious issues which were before the Federal Magistrate in lengthy and complex proceedings. The question is whether it is necessary for justice to be done to allow the solicitor to file an appeal against the orders. I consider there is merit in the solicitor’s proposed appeal and that the reasons and orders are so inextricably interwoven that it would be artificial and likely to lead to an unfair result if all reasons and orders are not considered together.
I consider that while the prejudice to the wife is significant and the length of time elapsed since the substantive judgment is unfortunate, examination of the course of the proceedings demonstrates that the matter has been pursued and kept alive by both the wife and the solicitor in an attempt to resolve the issues such that the delay in filing the notice of appeal has been sufficiently explained.
Balanced with the serious questions of fact and law to be dealt with on appeal, I consider it appropriate to grant the applicant solicitor an extension of time within which to file his appeal. For the reasons set out above, I also consider it appropriate to join this appeal with the appeal made in time against the orders of 1 March 2012.
Notwithstanding the content of the husband’s draft grounds of appeal appearing to be unrelated to the main grounds propounded by the applicant solicitor, it is apparent that the husband’s position will be affected should the applicant solicitor’s appeal succeed. It is appropriate in these unusual circumstances for the appeals to be joined. It should be noted that without the connection to the solicitor’s appeals, it is unlikely the husband’s application for an extension of time to appeal against the substantive orders made in July 2010 would be granted, given the significant delay without extensive explanation, and the obviously significant prejudice to the wife.
Costs
In oral submissions each party agreed that in the event the applications of the solicitor and the husband are successful, costs should be reserved to the appeal.
I certify that the preceding seventy-seven (77) paragraphs are a true copy of the reasons for judgment of the Honourable Court delivered on 14 May 2012.
Associate:
Date: 14 May 2012
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