Gerber and Gerber and Anor
[2012] FamCA 1154
FAMILY COURT OF AUSTRALIA
| GERBER & GERBER AND ANOR | [2012] FamCA 1154 |
| FAMILY LAW – Property – Intervener (former solicitor for husband) claiming “fruits of litigation” lien over husband’s entitlements held in a controlled money account – Wife claiming intervener’s interest to monies held is subservient to her interest in a prospective costs order – Finding that intervener has immediate right to monies held to husband’s credit and wife has a prospective right in the event a costs order is made in her favour. |
| Family Law Act 1975 (Cth) |
| Ex parte Patience; Makinson v the Minister (1940) 40 SR (NSW) 96 Patterson v Cohen [2005] NSWSC 635 Twigg and Twigg v Keady and Keady (1996) FLC 92-712, [1996] FamCA 115 Worrell v Power and Power [1993] FCA 551, (1993) 118 ALR 237; (1993) 46 FCR 214 |
| APPLICANT: | Ms Gerber |
| FIRST RESPONDENT: | Mr Gerber |
| INTERVENOR: | Mr B |
| FILE NUMBER: | PAC | 4999 | of | 2010 |
| DATE DELIVERED: | 8 March 2012 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Collier J |
| HEARING DATE: | 2 March 2012 |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | Mr Iuliano |
| SOLICITOR FOR THE FIRST RESPONDENT: | No appearance (Self-represented Litigant) |
| SOLICITOR FOR THE INTERVENER | Mr B |
Orders
Orders as to School fees:
That the document produced to me, initialled by me and dated with today’s date, shall become Court’s Exhibit X in the proceedings as between the husband and the wife concerning amounts of money held by the Australian Scholarships Group Friendly Society Limited.
That orders are made in accordance with paragraphs 1, 2, 3, 4, 5, 6, 7 and 8 of that document, copy annexed hereto.
Orders as to the Application of the Intervener:
That leave is granted to Mr B to intervene in these proceedings
It is noted that the amount presently held to the husband’s credit in controlled money account being Commonwealth Bank Account Number … is $129,488.84. Of that sum an amount of $10,000 is to be retained as a result of the order of the Full Court of the Family Court of Australia.
That after the expiration of twenty-eight (28) days from the date of service of these orders upon the husband the parties shall do all things and execute all documents necessary to cause to be paid to the Trust Account of C Pty Ltd (the corporate entity of the Intervener) all monies to which the Respondent Mr Gerber may be entitled to receive from the sale of real property at Suburb D in the amount of $119,488.84 together with any interest accrued and payable in respect of the account.
That the Intervener serve upon the husband a copy of these orders as soon as possible. Such service may be proved by affidavit.
That the Intervener within twenty-one (21) days of these orders serve upon the husband an itemised account of fees and disbursements. Such service may be proved by affidavit.
That I dismiss all outstanding applications in a case and all responses to such applications save and accept the wife’s application that the husband pay her costs of these proceedings.
That leave is granted to the Intervener to make any application for costs that he wishes within fourteen (14) days from this date.
IT IS NOTED that publication of this judgment under the pseudonym Gerber & Gerber is approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT PARRAMATTA |
FILE NUMBER: PAC 4999 of 2010
| Ms Gerber |
Applicant Wife
And
| Mr Gerber |
First Respondent Husband
And
| Mr B |
Intervener
REASONS FOR JUDGMENT
Introduction
This is a somewhat unusual case involving competing claims to a sum of money held to the husband’s credit in a controlled money account. The amount held is $129,488.84 according to the last obtainable bank statement. A sum of $10,000 of that amount is to be held by Order of the Full Court of the Family Court of Australia on 21 October 2011, pending the determination of the husband’s appeal to that Court. That appeal lies in respect of Orders of his Honour Coleman J pronounced on 24 September 2010 and, I am informed, is listed for hearing before the Full Court on 1 May 2012.
The persons interested in this present application are the husband, the wife and an Intervener, Mr B. Mr B previously acted for the husband. The issue involving the Intervener is his right to claim moneys held pursuant to what is described as a “fruits of litigation” lien. So there is no misunderstanding, I grant leave to the Intervener to intervene in these proceedings.
There was no appearance by the husband when the matter commenced at 2.15 pm today. Subsequently, he made contact with the National Enquiry Centre for this Court. That centre in turn made contact with my legal associate in the courtroom. Mr Gerber indicated to the National Enquiry Centre officer that he had received a letter from Champion Legal only the day before. He asserted that he was calling on a mobile and was on the other side of the river. The significance of this is unclear. However, I take it to have to do with the state of flood or otherwise of a river. Whilst the river, by which I understood him to mean the Hawkesbury, was certainly rising, bridges, at the time of his call, were still open to enable him to pass to the side of the river where this Court stands. I then endeavoured to contact him on the mobile number that he had provided on three occasions. All of these calls were unsuccessful.
It is clear, however, that the husband was present in Court on 6 December 2011 when I fixed this matter for hearing at 2.15 pm on 2 March 2012. The Orders referring to that – that is, date and time – were sent to the husband at the address for service he has provided. I have experienced difficulty in the past in securing the attendance of the husband on previous occasions when the matter has come before me. I am satisfied that he was aware of the time and date that was fixed for the matter I am presently conducting to come before me. I am in no way satisfied that he was unable to attend. Certainly, as I understood it, no mention of an adjournment was made when he was speaking with the officer of the National Enquiry Centre.
Whilst I am aware that he vehemently opposed both of the aspects of the matter – that is, that moneys standing to the credit of the scholarship fund would be made available in satisfaction of arrears of school fees in respect of the parties’ sons, and that he was very much opposed to the concept of Mr B, his previous solicitor, being able to take moneys that still stand to his account. I determined then that I would deal with the matter, and I did so.
Background
A brief history of this matter is as follows:-
·The husband was born in 1961.
·The wife was born in 1964.
·There has been lengthy litigation involving these parties. Briefly, what has occurred is this:- the parties had a final hearing before his Honour Coleman J. His Honour delivered Judgment and Orders were made on 24 September 2010. Those Orders required certain things to be done, and one of those things was the sale of a home unit in Suburb D, the investment of funds and their subsequent disbursal, having regard to matters that had to be taken into account and paid from the sale proceeds.
·On 22 October 2010, the husband filed a Notice of Appeal against his Honour’s orders.
·On 22 December 2010, his Honour made Orders for the filing of affidavits and submissions in relation to an application for costs by the Applicant wife. Those submissions, as I understand it, were filed in March 2011.
·On 19 May 2011, the wife filed an application in the Full Court in relation to the appeal seeking, inter alia, security for costs.
·An Order was made in her favour in the sum of $10,000 on 21 October 2011.
·On 3 June 2011, the Intervener, as I will now refer to him, sent a Notice of Ceasing to Act to the husband.
·On 10 June 2011, I made Orders in respect of the husband’s entitlement to sale proceeds - requiring such monies to be placed in a controlled monies account, and made an order that a portion of such monies be dispersed to the wife.
·On 1 July 2011, I made Orders for the money previously ordered to be dispersed to the wife to be released. The money was subsequently withdrawn and the wife was paid her share of the moneys.
·As I understand it, on 5 September 2011 an application for a costs assessment was sent by the Intervener to a proper assessing officer of the Supreme Court.
·This matter was set down for hearing on 6 December 2011, and on 1 February 2012 further Orders were made for moneys to be paid to the Australian Tax Office and to the wife, again leaving the husband’s interest in the controlled money account.
·Subsequently, the Intervener dealt with the release of moneys to the wife, as he was a co-signatory to the fund in which the moneys were held.
The parties’ documents
The documents of the parties are as follows.
I will deal with the Intervener’s material first:-
·An Application in a Case on 8 June 2011;
·A supporting affidavit of himself sworn on 6 June 2011 and filed on 8 June 2011;
·Paragraph 5 of the husband’s affidavit filed 28 February 2011;
·Written submissions made to his Honour Justice Coleman of 29 March 2011;
·Written submissions made to myself of 27 February 2011;
·A further affidavit of Mr B sworn and filed 18 October 2011; and
·Finally, an affidavit of Mr E sworn 17 October 2011.
So far as the wife is concerned, the documents which she seems to rely upon are:-
· A Response to an Application in a Case filed 7 March 2011;
· An Application in a Case filed 29 March 2011; and
· Her affidavit sworn and filed 7 March 2011.
The husband’s material (which I identify without assistance from him) and to which I have had reference are:-
·His Application in a Case filed 4 February 2011; and
·His affidavit sworn 27 January 2011 and filed 7 March 2011.
I heard submissions from the Intervener and the wife, in that order. Again, I repeat, I heard nothing from the husband, but I propose to proceed to deliver Judgment and make orders notwithstanding that fact.
The intervener’s case
It is the Intervener’s case that his entitlement to the fund that now stands to the husband’s credit in the controlled money account crystallised upon his Honour Coleman J delivering Judgment and making Orders on 24 September 2010. It is his assertion that his fruits of the litigation lien takes precedence and entitles him to receive that money over any claim that the wife may assert.
The wife’s case
The wife’s case is that the Intervener’s right is subservient to her right to monies, however obtained or based, and that the Intervener’s claim cannot be entertained until all dealings with and claims against the husband’s fund in the controlled money account have been determined. In other words, it is put to me, with real force, that the entitlement of the Intervener does not crystallise until the husband’s entitlement to the funds held has been quantified.
The submissions made to me
The Intervener submitted that the Order in favour of the wife restraining the husband from dealing with the moneys held, which represents his entitlement within the fund, was not an order that the Court had power to make. Thus, the Intervener challenges the making of any such order. It was argued that the money ostensibly standing to the husband’s credit in the account was not the property of the husband. The Intervener argued that, indeed, the husband has no beneficial interest in those funds, but, at best, a bare legal interest. This is, he argues, because the lien asserted by the Intervener is operative from the time of delivery of the Judgment.
I am not satisfied that this is necessarily so. At the time that the Order was made restraining the husband from dealing with what were, on the face of it, funds available to him, there was no claim by the Intervener, who, indeed, was acting for the husband at that time. The Intervener’s claim was identified by him filing his Application in a Case on 8 June 2011. I am of the view that the lien categorised by the Intervener may be asserted and it is, in the absence of agreement between at least the Intervener and the wife, a matter for the Court as to whether or not the lien exists, and if so, what is its relation to other claimants or claims made in respect of the relevant fund.
So far as the injunction is concerned, section 114(1)(e) of the Family Law Act1975 (Cth) is in these terms:-
114. (1) In proceedings of the kind referred to in paragraph (e) of the definition of matrimonial cause in subsection 4(1), the court may make such order or grant such injunction as it considers proper with respect to the matter to which the proceedings relate, including:
...
(e) an injunction in relation to the property of a party to the marriage; or
...
Clearly, when I turn to subsection 4(1) of the Act, “matrimonial cause” is described as including proceedings arising out of the marital relationship with respect to the property of the parties or either of them.
I am satisfied that the Court has the power to make an injunction of the kind sought and, indeed, I am satisfied that the words “in relation to the property of a party” clearly indicate that the injunction made can be one requiring a party to do something or, as is the case here, requiring a party not to do something until the Court further deals with the matter. Thus, I am satisfied that the power to make an injunction in the terms that were made on 10 June 2011 was a valid exercise of jurisdiction.
The issue of whether or not the injunction is a Mareva injunction has been raised. I have determined that the injunction presently in place is a proper exercise of jurisdiction under the Act. It can, if I determine it to be appropriate, be continued accordingly. Thus, I do not consider it is necessary to deal with any question of whether or not that which is done or to be done is to be considered, treated or defined as a Mareva injunction.
The situation at the date of this hearing, that is 2 March 2012, has altered. Clearly, the Intervener’s claim is now on foot and pressed with real force. I identify the positions of the wife and the Intervener as follows:-
The wife seeks to preserve a fund against which she can endeavour to recover any amount of costs she may become entitled to if Coleman J makes a costs order in the wife’s favour. I am told, and accept, that the wife’s costs - if awarded in their entirety or even as to any significant portion thereof – will be for an amount significantly greater than the amount presently held.
However, the trial judge has not delivered any judgment, nor made any orders in relation to the wife’s costs application. The wife’s claim to receive money for costs can only be founded upon an order, and that would be, in this case, the order of his Honour Coleman J. Therefore, the injunction is sought to protect an expectation that his Honour will make a costs order. Thus, it is sought to preserve a fund of monies to satisfy any such order that may be made.
The Intervener’s claim is based upon what has been referred to as a fruits of litigation lien. At the present, the Intervener, as I understand it, has not had his costs assessed, even though some approach has been made to an assessing officer. I am told, and I accept, that his costs in relation to the matter are in the vicinity of $250,000.
The Intervener has relied upon a number of authorities to support his contention. He refers firstly to the decision of Jordan CJ in the matter of Ex parte Patience; Makinson v the Minister[1], where his Honour said this at paragraphs 99 to 100:
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 to or any part of that right, he acquires a right to have his costs paid out of the money ...
[1] (1940) 40 SR (NSW) 96
There were then further references made to a decision of Worrell v Power and Power[2]. In that decision, their Honours of the Full Court of the Federal Court found this[3]:-
In particular, although the solicitors acquired no legal title to the right of Mr Wedgwood to receive the costs
(and this was an order for costs made against the other party)
they acquired a right which was analogous to that which would be created by a present equitable assignment of the benefit of the costs order; that brought with it a right to have their costs paid out of the moneys which were subsequently received ... .
[2] [1993] FCA 551, (1993) 118 ALR 237; (1993) 46 FCR 214
[3] Ibid at 36
In Patterson v Cohen[4], a single judge decision of his Honour Hamilton J of the New South Wales Supreme Court, his Honour said this at paragraph 7 confirming the principle set out in Worrell v Power and Power (supra):
Even where the payment of costs pursuant to a lien is made after the commencement of a bankruptcy, the payment will prevail over the rights of unsecured creditors where it is clear that the lien existed before the bankruptcy commenced...
[4] [2005] NSWSC 635
The leading authority in respect of a solicitor’s lien in the Family Court is the authority of Twigg and Twigg v Keady and Keady[5]. That was a decision of the Full Court consisting of their Honours Fogarty, Finn and Kay JJ. His Honour Fogarty J said the this at paragraph 167 and onwards:-
167. So far as the appellants' [who were the firm of solicitors] general law claim is concerned, and aside from the contractual rights which they have against their client for their costs, it seems that there are some issues of principle about which there is now no serious dispute in Australia, namely:-
168. Where in the relevant proceedings there is a judgment, award or compromise, the solicitors have a right to be paid out of that fund the costs of their work done towards the attainment of that judgment, award, or compromise. This is quite separate from any possessory lien which the solicitors may have over documents and property ...
169. The solicitors may, but it is not necessary for them to do so, apply to a court for an order against the judgment debtor to pay to them the amount of their costs and/or to restrain the judgment debtor from paying and the client from receiving that amount in the meantime.
170. With or without taking those steps the solicitors may give notice to the judgment debtor, and to that person's solicitor, and in that event the judgment debtor and that solicitor are liable to pay the amount owing to the solicitors for their costs out of the judgment debt. Thereafter, only the claimant solicitors can give a good discharge ...
[5] (1996) FLC 92-712, [1996] FamCA 115
Lastly:-
171. The solicitors' right arises prior to and without the necessity for a taxation and can be asserted notwithstanding that the solicitors have in the meantime ceased to act for the client.
That last is the situation in this present case.
The next reference within that case that I find of importance is that of her Honour Finn J at paragraph 16. Her Honour said this:
16. The first of the questions of significance as formulated by Counsel for the appellant solicitors was whether, without any specific order being made by the Court to protect their rights, the solicitors had an equitable right against the moneys received as a result of their work.
Her Honour went on to say at paragraph 17 that “(t)his question must, in my opinion, be answered in the affirmative”. Her Honour then referred to Ex parte Patience; Makinson v The Minister (supra) and to Worrell v Power and Power (supra).
Finally, dealing with extracts from that Judgment, that is Twigg and Twigg v Keady and Keady (supra), there is the statement of his Honour Kay J at paragraphs 127 and 128 under the heading “Conclusion”. His Honour said this:
127. The cases discussed establish that if, as the result of legal proceedings in which the solicitor has acted for the client, the client obtains a judgment for the payment of money, the solicitor has a equitable right, sometimes termed "a non-possessory lien", to payment of costs out of the judgment moneys.
128. It is clear law that the solicitor is not prevented from asserting the lien simply because he has ceased to act for the client prior to receipt of the judgment moneys ...
Taxation (or assessment) is not a prerequisite to that right arising. Here it is clear that Mr B’s ceasing to act does not in any way offend or defeat his rights.
I am satisfied that the significant thing that I import from those cases is that the lien that is asserted falls in at the time of Judgment of Coleman J and the Orders made by his Honour on 24 September 2010. To my mind, the fact that the moneys were not realised for some time because a property had to be sold does not alter that fact.
Hearing and Discussion
Having regard to the cases I have referred to, I am satisfied that the Intervener has an entitlement, however categorised, to be paid from the moneys held to the husband’s credit following Coleman J’s Judgment and Orders. I am satisfied the right does arise without taxation (assessment), relying on the statements I have referred to. I am satisfied, as I have said to the point of boredom, that it arises at the time of Judgment.
The fact that there is an outstanding appeal does not, in my view, interfere with this position. The appellant in that appeal is the husband. There is, so far as I am aware, no cross-appeal. I cannot conceive of a situation where the husband’s entitlements pursuant to the Orders of Coleman J would be reduced as a result of the hearing and determination of that appeal.
As I have said, the wife has asserted that the fruits of the litigation do not fall in until all claims against the fund created pursuant to the Judgment and Orders have been dealt with. So that there is no misunderstanding, I do not accept this proposition. The wife’s entitlement to receive any moneys standing to the husband’s credit presently are at best dependent upon an order for costs being made in her favour. The fund that is presently held is clearly the result of a judgment. It is now a known sum. Even if an order for costs were to be made, it would confer upon the wife a personal right to receive or recover moneys from the husband in satisfaction of that order.
I am satisfied that having the benefit of an order for costs the wife would be in the position of an unsecured creditor. I am satisfied that such a position would not work, or have effect, so as to diminish or in any way delay the coming in to effect of the husband’s former solicitor’s lien over or against the moneys held.
In any event, that stage – that is, the wife being the holder of an order for costs – has not been reached. It will not be reached until a costs order is pronounced in her favour, if that is to occur. Thus, the present situation is this - I am satisfied that the Intervener has an immediate right to the fund. The wife has, at best, a right to injunct the husband from receiving moneys so as to protect her prospective right to receive moneys pursuant to a costs order which may or may not be made.
I am not satisfied that the injunction to preserve a fund against which the wife may claim, being an injunction against the husband, can prevail so as to have priority over the claim of the Intervener. If the contest were simply between the husband and the wife, I would have no difficulty in maintaining the injunction and holding the moneys until the wife’s costs application was determined. However, the claim by the Intervener imports vastly different considerations.
I am satisfied the Intervener has made out his case. Accordingly, I propose to make appropriate orders. There was a prayer in the Intervener’s application relating to the husband’s interest in an entity known as F Pty Ltd. This was not seriously agitated before me. I do not propose to make any orders in regard thereto.
Accordingly, I propose to order the release of the money standing to the husband’s credit in the account to the Intervener. In my view, however, a number of conditions are properly to be imposed. As I have recorded, the husband did not attend, nor did he participate in the proceedings, which led to the making of these present Orders. I therefore propose to order that the payment will be delayed for a period of 28 days after the service of my Orders upon the husband. I will order that such service may be proved by affidavit. I will further order that the Intervener within 21 days of these Orders serve upon the husband an itemised account of his fees and disbursements and, again, service of such document may be proved by affidavit.
So far as the husband’s entitlement is concerned, the latest document indicates that there is a fund of $129,488.84 standing to his credit within the controlled money account. Ten thousand of that amount is to be held as against or as a result of the Order of the Full Court, made on 21 October 2011. Accordingly, the amount to which the Intervener is entitled pursuant to these Orders is the sum of some $119,488.84 with any interest that may have accrued.
So there is no doubt, the orders that I will make are in no way intended to, nor shall they affect the injunction in respect of husband’s shares or entitlements in F Pty Ltd.
I do not know if Mr B has in mind whether he wants to make a costs application. I propose to give him 14 days in which to do so, if he chooses.
I will grant leave for the Intervener to make any application for costs that he wishes within 14 days of this date.
I make the orders set out at the commencement of these reasons for Judgment.
I certify that the preceding forty-four (44) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Collier delivered on 8 March 2012.
Legal Associate:
Date: 29 July 2013
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