First Industry Corp v Goh - [2004] WASC 89

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: FIRST INDUSTRY CORP -v- GOH & ANOR [2004] WASC 89

CORAM: MASTER SANDERSON

HEARD: 10 DECEMBER 2003

DELIVERED : 12 MAY 2004

FILE NO/S: CIV 1301 of 2002

BETWEEN: FIRST INDUSTRY CORP
Plaintiff
AND
BEAN SAN GOH
First Defendant
STEVEN WERN-YI GOH
Second Defendant
HEALTHY SKIN PTE LTD
Third Party
(BY ORIGINAL ACTION)
FIRST INDUSTRIES CORP
Cross-claimant
AND
BEAN SAN GOH
Cross-defendant
(BY COUNTERCLAIM)

Catchwords:

Practice and procedure - Application for payment of solicitor's costs from funds paid into joint account - Turns on own facts

Legislation:

Legal Practitioners Act 1893, s 73

Result:

Application dismissed

Category: B

Representation:

Original Action

Counsel:

Plaintiff:     Dr J T Schoombee
First Defendant             :     In person
Second Defendant         :     No appearance
Third Party                   :     Mr M D Cuerden
Applicant:     Mr A O Karstaedt

Solicitors:

Plaintiff:     Summers Legal
First Defendant             :     In person
Second Defendant         :     No appearance
Third Party                   :     Tang Lawyers
Applicant:     Michell Sillar McPhee

Counterclaim

Counsel:

Cross-claimant : Dr J T Schoombee
Cross-defendant : In person

Solicitors:

Cross-claimant : Summers Legal
Cross-defendant : In person

Case(s) referred to in judgment(s):

First Industry Corp v Goh & Anor [2003] WASC 216
Halvanon Insurance Co Ltd v Central Reinsurance Corp (1988) 1 WLR 1122
North West Construction Co Pty Ltd (In Liq) v Marian [1965] WAR 205

Case(s) also cited:

Check Distributors Pty Ltd v Cable [2002] WADC 36
Hodges v Kovacs Estate Agency Pty Ltd [1961] WAR 19
James Bibby Ld v Woods & Anor [1949] 2 KB 449 (CA) 453
Maketic v Osmanbasic [2001] WADC 106
Mason v Mason [1933] P 214
Mercer v Graves (1872) LR 7 QB 499
R & Y Crofts & Staff v Trevor Willis Nominees Pty Ltd [1994] 12 SR(WA) 24

MASTER SANDERSON: By amended notice of motion the former solicitors for the first defendant, the plaintiff in the third party proceedings, sought, relevantly, the following orders:
"1.A declaration that the firm Michell Sillar McPhee has a first charge pursuant to section 73 of the Legal Practitioners Act for the payment of it's taxed costs, charges and expenses as between solicitor and client of and in reference to the Third Party proceedings in this matter up until 5 August 2003, but excluding all costs, charges and expenses incurred in respect of work done in relation to and in connection with the Cross‑claim proceedings, over the funds held in BankWest Perth account number 306‑089 135385‑4 in the name of MJ McPhee and KO Tang.
2.An order that the said taxed costs be paid upon delivery to the Bank of a signed Certificate of Taxation of the said costs.
3.…
4.An order for the payment of Michell Sillar McPhee's costs of this application."
At the commencement of proceedings I raised with both counsel the question of whether or not an order in the nature of that sought by the first defendant's former solicitors (who I will refer to as "the applicant") was within the jurisdiction of a Master. Both counsel took the view that it was and there being no dispute on that point, I heard argument from the parties.
In reading these reasons, reference should be made to the decision of First Industry Corp v Goh & Anor [2003] WASC 216. In that action I determined the question of who was entitled as between the cross‑claimant and the cross‑defendant to the proceeds of certain shares which had been held by the third party. In summary, I determined that there existed an equitable charge on the shares in favour of the cross‑claimant which had crystallised. Accordingly, the cross‑claimant was entitled to the funds held in a joint account - that being the joint account referred to in par 1 of the amended application. A reading of that decision is a necessary precursor to understanding the nature and intent of this application.
The application itself is brought under s 73 of the Legal Practitioners Act 1893. That section is in the following terms:
"In every case in which a practitioner shall be employed to prosecute or defend any suit, matter, or proceeding in any court of justice whatsoever, such practitioner shall be entitled to a first charge upon the property recovered or preserved, and such practitioner shall have a prior right to payment out of the same for the taxed costs, charges and expenses as between solicitor and client of or in reference to such suit, matter or proceeding; and the court before which such suit, matter or proceeding has been heard or is pending, or a Judge thereof in chambers, may make ex parte such order or orders the taxation of and for raising and paying such costs, charges and expenses, out of the said property as to such court or Judge shall appear just and proper."
On behalf of the applicants, it was submitted that as a result of the third party proceedings in this action, consent orders were made on 16 April 2003 pursuant to which certain shares then held by the third party were sold and the proceeds placed into a joint account held by the first defendant's solicitors and the third party's solicitors. (The proceeds are now in a different account but that fact is of no consequence). The costs sought to be recovered, which are set out in the applicant's Draft Bill of Costs, relate to the third party proceedings up to the stage of the filing of a cross‑claim by the plaintiff.
It is submitted by the applicant that the shares or the proceeds of their sale were recovered and preserved within the meaning of s 73 and that the applicant's costs of, and in reference to the third party proceedings, are subject to a first charge as referred to in s 73. It then follows, so it is submitted, that the costs should be paid out of the property recovered or preserved. There is no doubt, by reference to the Draft Bill of Costs, that the applicants undertook considerable work and incurred significant costs in relation to the third party proceedings. It is also submitted that the third party proceedings were successful. Despite opposition from the third party, as well as the plaintiff, the third party was joined to the action, and the shares or the proceeds thereof were brought into the jurisdiction and, in a proper sense, recovered or preserved. The applicants say that prior to the first defendant instituting the third party proceedings, the third party had threatened to dispose of the shares and retain the proceeds: see annexure "A3" to the affidavit of the first defendant, sworn 3 September 2003.
The applicants submit that the third party would not agree to transfer of the shares to the first defendant, or to a nominated trustee, although it maintained at all relevant times that it held the shares on behalf of the first defendant and not on trust for the plaintiff. To initiate the third party proceedings, leave to serve out of the jurisdiction was required. This was opposed. However, the first defendant was successful in obtaining the necessary leave. After service of the third party notice was effected, the third party applied to set aside the service. A conditional appearance was filed. Pleadings were subsequently filed. The third party, in its defence to the third party proceedings, contended that it held the shares on trust for both the plaintiff and the first defendant. That was contrary to what had previously been asserted. The applicant points out that the plaintiff opposed the third party proceedings. More than that, it applied to strike out the third party proceedings. Yet it is the plaintiff who now will obtain the benefit of the third party proceedings because it is the plaintiff who is entitled to the funds presently held in the joint account.
In the circumstances, it is submitted, it is the plaintiff who is obtaining the benefit of the work done by the first defendant's solicitors in relation to the third party proceedings. Without the orders made in the third party proceedings the plaintiff would have had to enforce its security and incur the costs of doing so. Moreover, there was a realistic possibility that the third party may have sold the shares and dissipated the proceeds. In the circumstances, it is said, it would be unfair to deny the applicants the costs of the work done in relation to the third party proceedings.
In answer to these submissions put by the applicant, the plaintiff makes a number of points. First, it is said that a solicitor's lien is an adjunct of a solicitor's claim for costs against his or her own client. Thus both at common law and under s 73, the solicitor's "first charge upon the property recovered or preserved" can only relate to property successfully recovered or preserved for the solicitor's client. On that basis it is said that the applicant could only have a lien on property recovered or preserved for the first defendant. There is no such property. As the first defendant has recovered nothing, the applicants have a lien over nothing and are not entitled to the orders they seek.
It is further submitted that the position is not altered where money is paid into a joint account held by the parties' solicitors to abide the outcome of the case. Counsel referred to the decision of Halvanon Insurance Co Ltd v Central Reinsurance Corp (1988) 1 WLR 1122 at 1130, where the Court said:
"If … after the determination of liability, or an unobjectionable settlement, the position was that the plaintiffs were not entitled to any sum from the defendants and therefore not entitled to have paid out to them any part of the sums in the joint account, then the solicitors would have no equitable right to ask that they should receive any sum themselves out of the account. No sum or property would in any relevant sense have been 'recovered or preserved'. To argue to the contrary would be to adopt the error which was rejected by the Divisional Court in Westcott v Bevan (1891) 1 QB 744."
The Court went on at 1130 ‑ 1131:
"The lien gives the solicitor no greater rights than his client has and is subject to all the equities between his client and the other parties interested in the property."
This decision is supported by the West Australian decision in North West Construction Co Pty Ltd (In Liq) v Marian [1965] WAR 205 (at 211). See also Cordery's on Solicitors (8th ed) at page 251.
In my view, this argument is unanswerable. It is clearly the case that the first defendant, at least from the date that demand for repayment of the loan was made, had no interest in the shares or the proceeds of the sale of those shares. Certainly from the date upon which the joint account was opened in the names of the respective solicitors, the funds in that account were the property of the plaintiff. In my view, that is a complete answer to the applicants' claim.
Counsel for the plaintiff raised a number of other matters which, it was said, also provided an answer to the applicant's claim. It is unnecessary to deal with any of these points. I am satisfied that the position is clear and that the applicants have no entitlement to have their costs paid from the funds held in the joint account.
I would dismiss the application. I will hear the parties as to the form of orders and as to costs.