Howells v Talacko
[2017] VSC 353
•27 June 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2016 001142
| STEPHEN HOWELLS | Plaintiff |
| v | |
| JAN TALACKO (Personally, and also as executor of the estate of Helena Marie Talacko) | Defendant |
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JUDGE: | JUDD J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 8 May 2017 |
DATE OF JUDGMENT: | 27 June 2017 |
CASE MAY BE CITED AS: | Howells v Talacko |
MEDIUM NEUTRAL CITATION: | [2017] VSC 353 |
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BARRISTER — Claim for fees — Lien — Fruits of litigation.
PRACTICE and PROCEDURE — Interlocutory application — Declaration of lien — Freezing order.
INJUNCTION — Freezing order over a specified fund.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms S Cherry with Mr J Ruffles | Brand Partners |
| For the Defendant | Mr D Bongiorno | Grindal & Patrick |
HIS HONOUR:
On 8 July 2016, Stephen Howells, a barrister, commenced a proceeding against Dr Jan Talacko, who was sued on his own behalf and as executor of the estate of Helena Marie Talacko, now deceased. Litigation involving the Talacko family has been conducted in this court since 1998. An overview of the family dispute and resulting litigation, is helpfully set out in the judgment of McDonald J in Talacko v Talacko.[1] In that proceeding Dr Talacko, as executor of the estate of Helena Marie Talacko, was the first plaintiff. He was given leave to appear in person. The second to fifth plaintiffs were represented by Mr Howells. In an earlier proceeding, heard initially by Osborn J (as his Honour then was) and later by Kyrou J (as his Honour then was), Mr Howells represented all plaintiffs, including Helena Marie, against Jan Emil Talacko.[2] The various proceedings related to the ownership of a number of properties in several jurisdictions in Europe.
[1][2015] VSC 287.
[2][2009] VSC 533.
There are three relevant branches of the Talacko family, each of which descended from one of the three children of Alois and Anna Talacko. The relevant living members are cousins, divided into what is referred to as the Sydney cousins (Alexandra Ann Bennet, Martin Jan Thorburn Talacko and Rowena Kirsten Eve Talacko); the Melbourne cousins (Anna Talacko and Dr Talacko); and the Czech cousins (Paul Anthony Talacko, Peter Andrew Noel Talacko, David Talacko and Nicole Vincent).
In 1998 Helena Marie was matriarch of the Melbourne branch of the family. Peter Alois Talacko was patriarch of the Sydney branch of the family. They sued their brother Jan Emil for breach of an agreement arising out of the restitution of private property following the ‘Velvet Revolution’ of November 1989. The original proceeding, commenced in 1998, was compromised soon after the trial commenced, with terms of settlement recording the obligation of Jan Emil to transfer certain property to the plaintiffs, or their nominees. Jan Emil failed to perform his obligations and the proceeding was reinstated for enforcement. The reinstated proceeding was first heard by Osborn J,[3] who concluded that Jan Emil had breached the terms of settlement. That finding gave rise to a claim for equitable compensation, which was heard by Kyrou J.[4]
[3][2008] VSC 128.
[4][2009] VSC 533.
In May 2009 Jan Emil and his sons entered into an agreement for the transfer of properties in the Czech Republic and the Slovak Republic. Soon afterwards the Melbourne and Sydney cousins commenced a proceeding seeking the re-transfer of those properties. On 24 July 2009 Kyrou J made orders requiring Jan Emil’s sons to re-transfer the properties.[5] Subsequently, Kyrou J made orders restraining Jan Emil from disposing of the Czech properties, the Slovak properties and the Dresden property.
[5][2009] VSC 349.
On 24 November 2009, Kyrou J delivered judgment on his assessment of compensation, and on 11 December 2009 made final orders that Jan Emil pay Helena Marie €4,740,830 and €296,079 by way of interest. A similar order was made in favour of the Sydney cousins, the second to fifth plaintiffs. Jan Emil was ordered to pay the plaintiffs’ costs on an indemnity basis. Costs were later fixed by Kyrou J at $2,680,239.[6] Jan Emil did not pay the compensation ordered by Kyrou J and a sequestration order was subsequently made in the Federal Court against his estate.
[6]Order made 16 September 2013.
In this proceeding, Mr Howells sued Dr Talacko in his own capacity and as executor of the estate of Helena Marie for unpaid legal fees of approximately $1.4 million. There is a contest on the pleadings, and in the evidence, as to whether Mr Howells is entitled to any fees at all. By summons filed 23 March 2017, Mr Howells sought a declaration that he has an equitable lien over a defined fund that has or will come into the hands of Dr Talacko or his solicitors from the trustee in bankruptcy of Jan Emil, and from the sale of the Dresden property. The fund is comprised of the following components:
(1)Proceeds from the sale of the Dresden property, in the sum of €204,317.59, paid directly to the estate of Helena Marie.
(2)Anticipated proceeds from the sale of the Dresden property, in the sum of approximately €89,000, to be paid by way of a dividend from the bankruptcy of Jan Emil.
(3)$299,000 received in November 2016 from the trustee in bankruptcy, paid out of the proceeds of sale of the Glenferrie Road property.
(4)$150,000 received in March 2017 from the trustee in bankruptcy, Paid out of the proceeds of sale of the Glenferrie Road property.
Mr Howells contended that he is entitled to a lien over all proceeds of settlement or judgment in the proceedings listed in a schedule to the summons. These are:
Proceeding Coram Date of
HearingDate of
JudgmentCitation 1998
ProceedingOsborn J 19–22
November
200724 April 2008 Talacko & Ors v
Talacko [2008]
VSC 1281998
ProceedingOsborn J 20 June 2008 27 June 2008 Talacko & Ors v
Talacko [2008]
VSC 2461998
ProceedingOsborn J 18 August
200822 August
2008Talacko & Ors v
Talacko [2008]
VSC 3121998
ProceedingOsborn J 18 August
200822 August
2008Talacko & Ors v
Talacko [2008]
VSC 3131998
ProceedingOsborn J 18 August
200822 August
2008Talacko & Ors v
Talacko [2008]
VSC 3232008 Appeal
ProceedingKellam JA and
Hargrave AJA28 October
200821
November
2008Talacko v
Talacko [2008]
VSCA 2291998
ProceedingKyrou J 10–11 March
200925 March
2009Talacko v
Talacko [2009]
VSC 981998
ProceedingKyrou J 10 August
200921 August
2009Talacko v
Talacko [2009]
VSC 3482009
Proceeding
Kyrou J 10 August
200910 August
2009
(reasons for
judgment
21 August
2009)Talacko v
Talacko [2009]
VSC 3492009
ProceedingHabersberger J 26 August
200910 September
2009Talacko v
Talacko [2009]
VSC 3851998
ProceedingHabersberger J 1 September
200910 September
2009Talacko v
Talacko [2009]
VSC 3871998
ProceedingOsborn J 8 September
20098 September
2009Talacko & Ors v
Talacko [2009]
VSC 4461998
ProceedingHabersberger J 18 and 30
September, 2
October 20092 October
2009Talacko & Ors v
Talacko (No 2)
[2009] VSC 4441998
ProceedingKyrou J 7–9, 12–15, 21,
26–30 October
200924 November
2009Talacko v
Talacko [2009]
VSC 5331998
ProceedingKyrou J 8 December
200911 December
2009Talacko v
Talacko [2009]
VSC 5792010 Appeal
ProceedingNeave, Harper
and Tate JJA23 November
201018 March
2011Talacko v
Talacko & Ors
[2011] VSCA 71Federal Court
ProceedingNorth J 11 March 2011 11 March
2011Talacko v
Talacko [2011]
FCA 326;High Court
ProceedingFrench J 28 October
2011Talacko v
Talacko & Ors
[2011]
HCA Trans 301
Mr Howells claimed that the fund had come into existence as a consequence of those proceedings in which he had participated as counsel. He claimed a lien to the full amount of his alleged fees of $1.4 million, plus interest, plus costs of this application, plus estimated costs of this proceeding. He estimated the cost of this application to be $25,000 and his costs of the proceeding to be approximately $250,000.
Mr Howells sought the declaration of his right to a lien, on an interlocutory basis, before the resolution of the contest of his entitlement to fees. He submitted that there are circumstances in which such an interlocutory declaration is appropriate. He relied on Simpson v Rowe.[7] Mr Howells submitted there was no need to approach the application as if an application for a Freezing Order, which would require him to establish a good arguable case on his primary claim. He did not seek an order restraining Dr Talacko from dealing with any other assets.
[7][2011] VSC 149.
In his statement of claim Mr Howells alleged a contract made in late 2004 under which he agreed to provide legal services for the benefit of Dr Talacko and members of his family. By that description, Mr Howells included the Melbourne and Sydney cousins. He alleged that under the agreements all members of the Sydney and Melbourne families were jointly and severally liable for his fees, which were to be paid, at an agreed rate. Under the agreement as pleaded, Mr Howells claimed to be entitled to request payment from time to time, although full recovery would be deferred. It is not entirely clear for how long, although he pleaded terms under which all fees would become immediately payable. The relevant events were termination of his retainer, failure to make an interim payment, failure to agree to a reasonable compromise, and when the proceedings were concluded, whether by court or by settlement. Mr Howells pleaded certain variations, partial performance of the retainer, interim requests and payments, failure to make interim payments and a breach of a reasonable settlement term.
The services alleged to have been performed by Mr Howells, for the benefit of the defendant and his family members, were pleaded as follows:
From about late 2004 to date, at the request of the defendant and in performance of the agreement and variations, the plaintiff:
(a) provided legal services; and
(b) incurred disbursements -
for the benefit of the defendant and his family members.
Particulars
The plaintiff provided the legal services documented in the invoices listed in Schedule A to this Statement of Claim, copies of which have been provided to the defendant and his family members along with detailed memoranda of fees, and copies of which are available for inspection by prior appointment at the office of the plaintiffs solicitors. The legal services included but were not limited to:
(a)reinstatement of proceeding 7393 of 1998 in the Supreme Court of Victoria in order to enforce Terms of Settlement reached in 2001;
(b)assisting the defendant to locate and engage solicitors for related proceedings in the Czech Republic;
(c)reviewing approximately 25 archive boxes of material;
(d)comprehensive trial preparation;
(e)appearances at interlocutory hearings and provision of advice throughout 2006 and 2007;
(f)appearance at trial on liability (2007);
(g)liaising with new instructing solicitors on each occasion the defendant and/or his family members engaged new solicitors as set out in paragraph 10 above;
(h)obtaining a favourable judgment on liability (2008);
(i)obtaining a favourable Court of Appeal decision in relation to costs (2008);
(j)appearing at trial for assessment of damages (2009);
(k)advising on asset movement and asset tracing in Europe;
(l)seeking to enforce Victorian decisions in Europe;
(m)advising on and commencing fraud proceedings in the Supreme Court of Victoria in proceeding 7819 of 2009;
(n)obtaining judgment in proceeding 7393 of 1998 (2010);
(o)successfully opposing an appeal in 7393 of 1998 (2010);
(p)successfully opposing an application for special leave to appeal to the High Court of Australia (2010);
(g)advising in relation to an opposing party’s bankruptcy (2011);
(r)liaising with solicitors in the Czech Republic on related proceedings, including a number of necessary trips to Prague;
(s)obtaining a gross sum party-party costs order in proceeding 7393 of 1998 (2013) including $1,312,544 in fees attributable to the plaintiff;
(t)appearing at trial in 7819 of 2009 (2015); and
(u)advising on and preparing an appeal in 7819 of 2009 (matter ongoing).
Mr Howells did not verify his claim by affidavit or otherwise. His solicitor, Jane Mary Good, deposed that he had appeared in numerous Talacko proceedings on behalf of Dr Talacko. These included the reinstated proceeding before Osborn J, a subsequent appeal, the assessment of compensation before Kyrou J, and subsequent appeal. In addition, Mr Howells appeared in the Federal Court in 2011 on the application for sequestration orders against the estate of Jan Emil, and in the High Court on a special leave application. In the 2009 proceeding before McDonald J, Mr Howells appeared only on behalf of the Sydney cousins.
Mr Howells accepted that in order to support his claimed lien it was necessary to establish a ‘causal connection’ between the fruits of litigation and his work. He contended that the necessary causal connection existed between his work and the fund. He contended that a lien may attach to property that had been preserved by his work, as well as property actually recovered; that a lien may be claimed by a barrister; and the fact that fees had not yet been taxed was no impediment to the lien. He also contended that the absence of a formal costs agreement was no impediment to a lien. The foregoing propositions were not disputed by the defendant. Mr Howells also submitted that the evidentiary threshold to establish the necessary causal connection between his work and the fund was low, and in the present case he could readily establish that the fund was the end result of substantive litigation in which he was an instrumental contributor on behalf of the defendant.
Mr Howells did not plead a claim to a lien over a fund as the ‘fruits of the action’, or facts to support the necessary causal connection between his work and the four components of the fund. Dr Talacko contended that no relevant causal connection existed.
Mr Howells relied upon the order for costs made by Kyrou J, and the judgment debt against Jan Emil, as responsible for creating the fund to which his claim attached. These two debts were claimed by the Melbourne and Sydney cousins in the bankruptcy of Jan Emil. Mr Howells also sought to capture, as a discrete item within the scope of the lien, proceeds from the sale of the Dresden property paid directly to the estate of Helena Marie as its share of the proceeds, and so much of the share of Jan Emil as will be paid by the trustee in bankruptcy to the estate of Helena Marie as a dividend.
Mr Howells contended that the order for costs made by Kyrou J, in a gross sum, included his fees, which were acknowledged by Dr Talacko as having been jointly incurred on behalf of the Sydney and Melbourne families. One half of the value of the costs order was proved as a debt due to the estate of Helena Marie in the bankruptcy of Jan Emil. Mr Howells contended that all dividends paid by the trustee were impressed with the lien.
In an affidavit affirmed by Dr Talacko on 1 December 2009, in the reinstated proceeding, he had deposed to costs incurred by the Melbourne and Sydney cousins in that proceeding. Those costs included substantial fees charged by Mr Howells in and between 2005 and 2009. On their application for costs before Kyrou J, the Melbourne and Sydney cousins filed a report from a cost consultant, Raymond John De La Rue. At paragraphs 104 to 129 of his report, Mr De La Rue set out details of the work undertaken by Mr Howells. At the hearing before Kyrou J on 24 April 2013, Dr Talacko, who then appeared in person, acknowledged that the costs assessed by Mr De La Rue had been incurred jointly by all plaintiffs. He also explained how he came to appear in person. He said that funds available to him for legal representation had been exhausted.
The Dresden property was sold in March 2017 for €655,000. Mr Howells contended the sale arose as a result of legal proceedings in which he made a material contribution. The relevant facts, as deposed by Ms Good, were as follows:[8]
[8]Affidavit of Jane Mary Good sworn 28 March 2017.
30.1.on or about 27 June 1995, the German land titles register was amended to record that the property at Kiefernstrasse 19, Dresden was owned by Peter, Helena and Jan Emil Talacko;
30.2.on or about 3 May 1996, the restitution office at Dresden decreed that the property at Kiefernstrasse 19b, Dresden, was to be returned to the beneficiaries of the estates of Anna and Alois, namely, the siblings Peter, Helena and Jan Emil Talacko;
30.3.in the 1998 proceeding, Helen Marie Talacko and other members of the Talacko family claimed equitable compensation by reference to two-thirds of the value of the Properties including the Dresden Properties together with an adjustment for income earned on those Properties. The plaintiffs were looking to the Properties as the main assets of Jan Emil Talacko from which to satisfy any judgment in the 1998 Proceeding;
30.4.terms of settlement were entered into on 23 February 2001, by way of settlement of the 1998 Proceeding, but when Mr Jan Emil Talacko breached his obligations under those terms of settlement, Mr Howells on behalf of the Defendant (and other members of the Talacko family) successfully applied for reinstatement of the 1998 Proceeding;
30.5.Mr Howells appeared for the Defendant and the Defendant was appointed litigation guardian of Helena Marie Talacko by. Order of his Honour Justice Gillard on 8 July 2005;
30.6.on 24 April 2008, his Honour Justice Osborn held that Jan Emil Talacko had breached the terms of settlement. Jan Emil Talacko was found liable to pay equitable compensation to the plaintiffs in accordance with cl 6 of the terms of settlement which included the Dresden Properties;
30.7.by order dated 10 August 2009, in which Mr Howells acted for the Defendant, his Honour Justice Kryou (sic) made a mareva-type order against Jan Emil Talacko restraining him from disposing of the among other properties the Dresden· Properties;
30.8.the consequence of that order was to restrain the disposal of the Dresden Properties in circumstances where interests in some of the Properties had already been transferred by Jan Emil Talacko to David and Paul Talacko and the transfer of other interests was imminent. His Honour found that anything short of this type of relief runs the risk of the Properties becoming permanently beyond the reach of any judgment of the Court;
30.9.on 11 December 2009, final orders were made by Justice Kyrou requiring Jan Emil Talacko to pay the Defendant and his cousins the total sum of €10,073,818 ("the Judgment Debt"). On 16 September 2013, the Defendant and his cousins also obtained an order for costs in a substantial money sum against Jan Emil Talacko;
30.10.on 7 November 2011 a sequestration order was made against Jan Emil Talacko having failed to pay the Judgment Debt;
30.11.the Dresden Properties had not been able to be sold since 1995 because Jan Emil Talacko refused to consent to the sale; and
30.12.it was as result of the mareva-type order made on 10 August 2009 that:
(a)the share that Jan Emil Talacko held in the Dresden properties was preserved in Jan Emil Talacko’s name; and
(b)once it was vested in the Trustee in bankruptcy, the Trustee in bankruptcy was able to co-operate with the Defendant and his cousins to sell the Dresden properties and obtain the proceeds of sale.
Dr Talacko argued that proceeds from the sale of the Dresden property were not the subject of any order made in the proceedings because, in 1995, it had been transferred to his mother, his uncle Peter, and his uncle Jan Emil. His mother’s share from the sale, paid in March 2017, was €204,317.59. Jan Emil’s share will form part of his bankrupt estate. Dr Talacko estimates that, having regard to the interests of his Sydney cousins, the trustee in bankruptcy is likely to distribute a further sum of €89,000 to his mother’s estate.
Mr Howells contended that the Dresden property was the subject of the 1998 proceeding. The prayer for relief sought a declaration that the Dresden property was held on trust for the three branches of the family. The Dresden property was also mentioned in the terms of settlement. He argued that Jan Emil had been restrained from disposing of the Dresden property, and that it was through his efforts that the Dresden property was preserved. He had sought the injunction restraining Jan Emil from disposing of it. Accepting that there may be some uncertainty as to whether Jan Emil could have disposed of the property, without the involvement of the Melbourne and Sydney cousins, Mr Howells argued that Jan Emil had prevented a sale or at least made the sale difficult. Thus, he argued, the value of the property had been preserved by his efforts. He maintained that it was only after the bankruptcy of Jan Emil, with the cooperation of the trustee in bankruptcy, that a sale of the property was achieved.
Mr Howells submitted that it was not in dispute that he had acted as counsel for the defendant and that, on any view, some of the fees rendered had not been paid. He merely sought to enforce a pre-existing equitable right, with an ancillary order that the fund be paid into court pending quantification of the lien.
By his defence and counterclaim, Dr Talacko rejected the whole of the Mr Howells’ claim, and counterclaimed for the return of the sum of $126,605.80 paid to Mr Howells between August 2005 and July 2010. He alleged that in around November 2004 he approached Mr Howells, then a social acquaintance, to recommend a suitable barrister to assist in the reinstatement of the proceeding commenced in 1998. Dr Talacko alleged that Mr Howells offered to perform some preliminary work on a pro bono basis. He alleged that around June 2005 he engaged Mr Howells to represent him to secure his appointment as litigation guardian for his mother, Helena Marie. On 8 July 2005 he was appointed litigation guardian. An account for that work was rendered and paid.
Dr Talacko further alleged that in around August 2005 he entered into an agreement with Mr Howells to represent his mother and other family members in relation to the reinstated proceeding. He rejected Mr Howells’ formulation of retainer terms, pleading an arrangement under which his mother and other family members would pay Mr Howells what they could reasonably afford during the course of the litigation. If they did not achieve an outcome in which they received a payment of money, Mr Howells would not be entitled to recover any unpaid fees. If, on the other hand, the Melbourne and Sydney cousins received a payment of money, whether by settlement or judgment, and if costs were awarded in their favour, Mr Howells’ unpaid fees would be paid from the amount of costs recovered. In addition, Mr Howells would be entitled to a success fee representing a proportion of the settlement or judgment sum once received, such amount to be determined by the Melbourne and Sydney cousins.
Dr Talacko further alleged that the terms of the retainer were void under the Legal Profession Act 2004, and that Mr Howells was required to repay the amount already paid. In paragraph 10 of his defence and counterclaim, Dr Talacko alleged the retainer of various solicitors on the same or similar terms to the retainer of Mr Howells. He admitted that Mr Howells provided his mother with legal services in the Supreme Court and in two Federal Court proceedings. Dr Talacko alleged that on 22 July 2010 the retainer was terminated, although Mr Howells was later retained to provide legal services in respect of the appeals lodged against the judgments of Osborn and Kyrou JJ in proceeding 7393 of 1998. Mr Howells alleged that fees in the sum of $96,800 were rendered between termination of the retainer and 28 October 2011. Dr Talacko does not seem to accept that he was invoiced for all such fees. In his defence and counterclaim, he alleged that $78,100 was invoiced, and that at least $25,410 had been paid. Presumably, non-compliance with statutory requirement defences are relied upon in respect of those fees, and the amount paid forms part of the counterclaim.
Dr Talacko deposed that Mr Howells had not represented him in any capacity, whether as executor of his mother’s estate, or in his personal capacity, since 28 October 2011. He deposed that from that time, subject to a few exceptions, he and the estate had been without legal counsel. He sought to differentiate his position from his Sydney cousins, who continued to retain Mr Howells. In his judgment on costs,[9] McDonald J rejected any material distinction between the Melbourne and Sydney cousins in terms of their liability for costs in the proceeding before him. His Honour observed:
[9][2015] VSC 496.
8When the proceedings were commenced on 17 July 2009, the first plaintiff was Helena Marie Talacko by her litigation guardian Jan Talacko. Helena Talacko died on 10 May 2012. Dr Jan Talacko obtained a grant of probate on 13 August 2012 and was given leave to appear as the executor of Helena Talacko’s estate by order of the court of 11 December 2012. The estate of Helena Talacko was ordered to be substituted for the first plaintiff and the writ and statement of claim amended accordingly.
9Subsequent to the court’s orders of 11 December 2012, the first plaintiff appeared in his capacity as executor of the estate of Helena Talacko, without legal representation. Dr Talacko adopted the position advanced by counsel retained by the second to fifth plaintiffs who had carriage of the plaintiffs’ case, but who did not represent the first plaintiff.
10The written submissions filed on behalf of the first plaintiff in respect of the question of costs contend that the court should adopt a different approach when considering the potential liability of the first plaintiff compared to that of the second to fifth plaintiffs. The submissions point to the history of costs orders in respect of interlocutory applications in the proceedings. Of the costs orders which were made in respect of interlocutory applications, the only order which required the first plaintiff to pay costs was an order of Kyrou J on 21 August 2009. Five subsequent costs orders were made against the second to fifth plaintiffs, with no order made directed to the first plaintiff.
11For reasons set out below, the primary costs liability of the plaintiffs in the current proceeding flows from the unsuccessful pursuit of claims against the fifth and sixth defendants. The joinder of the fifth and sixth defendants was a consequence of a summons filed by the second to fifth plaintiffs. That summons was filed on 26 August 2014 and sought leave to join the fifth and sixth defendants and to file a further amended statement of claim making specific allegations against the fifth and sixth defendants. The joinder application was heard by Zammit AsJ in September 2014. An issue arose during the course of those proceedings as to whether the first plaintiff supported the application. On 16 September 2014, Dr Talacko, in his capacity as executor of his mother’s estate, wrote to the court in the following terms:
At the commencement of the Application on 12 September ... I indicated to the Court that I hadn’t had the benefit of any legal advice in relation to that Application and that my mother’s Estate was in no position to make a contribution to costs
...
As I stated at the hearing on 12 September, I do not seek to advance a different case to the case advanced by the 2nd to 5th Plaintiffs in relation to the Joinder and associated Amendment to the Statement of Claim. I confirm that the First Plaintiff supports the Application and does wish to seek relief in the form set out in the 3rd Amended Statement of Claim lodged on behalf of the 2nd to 5th plaintiffs.[10]
12Dr Talacko’s involvement in the proceedings subsequent to September 2014 is consistent with the terms of the correspondence set out above. He appeared sporadically during the course of the 12 days of hearing of the trial in March 2015. He gave evidence on 5 March 2015. His evidence in chief and cross-examination took up 23 pages of 1299 pages of transcript. He made no submissions orally or in writing. Plainly, he was not an active participant in the proceedings. Does it follow, however, that the estate of Helena Talacko should be treated differently from the second to fifth plaintiffs on the question of costs?
13The fifth amended statement of claim, although filed on behalf of the second to fifth plaintiffs, makes claims and seeks relief on behalf of all plaintiffs including the first plaintiff. Although the first plaintiff did not actively participate in the proceedings and was not legally represented, if the claims contained in the second to fifth amended statement of claim had been upheld, the estate of Helena Talacko would have benefited directly. Indeed, it is likely that the estate will benefit as a consequence of the orders made pursuant to s 172 of the Property Law Act 1958 (Vic) (‘s 172 claim’) setting aside the transfer of the first defendants interests in the Glenferrie Road property to the fourth defendant in October 1998. Based on the evidence before the court in the principal proceeding, the Glenferrie Road property is a very valuable piece of real estate. An amount equivalent to 50% of the value of that property will find its way into the first defendant’s estate in bankruptcy. It will be available for distribution to the first defendant’s creditors. The first plaintiff, along with the second to fifth plaintiffs, is a significant creditor of the first defendant by reason of the judgment debt arising from the equitable compensation proceedings before Kyrou J.
14There is no rational reason for treating the first plaintiff any differently from the second to fifth plaintiffs on the question of costs. The fact that the first plaintiff decided to represent himself in the proceedings to avoid incurring legal costs does not provide a sound basis for relieving the estate which he represents of any liability to pay costs. The key consideration which supports this conclusion is the fact that the estate of Helena Talacko joined with the second to fifth plaintiffs in pursuing claims against the defendants and would have benefitted if those claims had been upheld. The fifth and sixth defendants have incurred costs in defending claims which were pursued jointly by all of the plaintiffs. The costs consequences flowing from the rejection of the plaintiffs’ claims should therefore flow through to all of the plaintiffs.
[10]First plaintiff’s submissions on costs, 21 August 2015 [5].
The only relief obtained by the plaintiffs in the proceeding before McDonald J was a declaration that the transfer by Jan Emil of his Glenferrie Road property to his wife, Judith Gail Talacko, was void. It was otherwise unsuccessful. In my view a determination of liability for costs payable to the opposite party does not necessarily correspond with a party’s liability to its own counsel.
Claim for lien
Mr Howells’ case for a declaration and protective order, based on a claimed lien, involved an element of confusion. If he failed in his primary claim for fees, the basis for any lien would fail. Furthermore, his claim depended upon unpleaded facts, to establish a sufficient causal connection between his work and the recovery of the fund.[11] There exists a dispute between Mr Howells and Dr Talacko concerning any entitlement to fees. While Dr Talacko conceded that legal services had been performed, he denied any entitlement to fees. His challenge goes to the very root of the claimed lien.
[11]Carew Counsel v French (2002) 4 VR 172, 186–7.
Mr Howells conceded that in many instances, where a lien over a fund was claimed by a legal practitioner, with orders seeking the preservation of the fruits of litigation, the claim was advanced in the proceeding in which the services had been provided and a fund created. In my opinion, any dispute over the connection between a lawyer’s work and the outcome of litigation should be determined, if at all possible, in the litigation in which the relevant work was done and a fund created. The reasons are obvious. The trial judge in that proceeding will be in the best position to make an assessment of the necessary connection without the need for a separate trial. If, as in this case, the question is to be determined as part of a new proceeding, a resolution of that question will ordinarily require a trial of all issues: the claim for fees and the existence of the lien over the fund.
Mr Howells relied on Simpson v Rowe as authority to support his interlocutory application for a declaration of his claimed lien over the fund. The reasons for judgment in that case indicate that a new proceeding had been issued by the barrister. It was unclear whether the hearing before Habersberger J was treated as the trial of the proceeding. While judgment was delivered on the day of the hearing, the facts do not suggest an interlocutory application. Accordingly, I do not regard that case as providing support for Mr Howells’ interlocutory application for a declaration. Each case must be decided on its own facts.
Dr Talacko submitted that Mr Howells’ application should fail for three reasons. First, there was reason to doubt, even on a summary basis, the existence and enforceability of the debt underlying the claim to a lien. Second, the plaintiff delayed asserting the lien, thereby disentitling him from the remedy sought. Third, the fund over which the plaintiff asserted his lien has not been recovered as a result of Mr Howells’ work.
Mr Howells’ claim for fees, extending over such a long period of time, is arresting. It is atypical of barristerial practice. The agreement alleged by Mr Howells is very unusual. He did not verify his fees by affidavit or other means, relying instead on affidavits sworn by Ms Good, based on information and belief. He did not set out to establish his case, as if at trial, or as if in support of an application for summary judgment, or even a freezing order. In order to make out his case for a lien, Mr Howells must establish a claim to fees, and a causal connection between those fees and the fund.
I am not persuaded that an interlocutory application, in a collateral proceeding in which a claim is made for fees, where the evidence is largely hearsay, is an appropriate occasion to make the declaration sought. The position might have been different had the application been made in the 1998 proceeding, before the trial judge fully acquainted with Mr Howells’ involvement. If that had been done, the challenge now made by Dr Talacko to Mr Howells’ entitlement to fees would probably not have arisen, or would have been much less complex than is revealed by the pleadings.
Dr Talacko submitted that the court should doubt the underlying debt as a basis for the relief sought by the plaintiff. He submitted that the plaintiff had not established a ‘good arguable case’ to support the claim for a lien, or a freezing order. Dr Talacko submitted that the plaintiff’s claim relied on invoices for work done as far back as 15 November 2004. Invoices issued prior to 7 July 2010, being six years prior to the commencement of this proceeding, call for payment of $790,900. Dr Talacko argued that having regard to all invoices now issued, the value of Mr Howells’ claim up to $1,476,530, related to work done between 15 November 2004 and 7 July 2010.
Dr Talacko claimed that a significant portion of the amount claimed related to services performed after the termination of the retainer. It seemed common ground that the plaintiff ceased to provide any services to the Melbourne cousins after October 2011, although the sum of $845,960 related to work apparently performed after this date. Dr Talacko suggested a likely explanation was that these fees related to work performed on behalf of the Sydney cousins, and not on his behalf or the estate of Helena Marie.
Mr Howells’ reliance on a declaration of his proprietary right, as the basis for a protective order, was misconceived. That does not mean he is without a remedy. In Trkulja v Efron & Associates,[12] the Court of Appeal considered an application by a solicitor, Mr Efron, to preserve assets pending the hearing and determination of a proceeding, initiated by originating motion, for a declaration of a lien over the proceeds of a judgment. The application before the trial judge was for an injunction in the nature of a freezing order. The application required Mr Efron to establish a good arguable case, coupled with evidence of a risk that a judgment would be wholly or partly unsatisfied in prescribed circumstances.
[12][2014] VSCA 76 (‘Trkulja’).
There is a dispute as to the underlying debt, and the extent to which the defendant, in his personal capacity, or as executor of the estate of Helena Marie, is liable. There was also a dispute as to the underlying debt in Trkulja, although the appellant in that case conceded a good arguable case. No such concession was made by Dr Talacko in this proceeding. On the other hand, his version of the retainer included a term which would benefit Mr Howells in the event of an order for costs made against Jan Emil in the main proceeding. Such an order was made, and the amount proved in the bankruptcy of Jan Emil.
I am satisfied, on the material before this court, that Mr Howells has established a good arguable case that he is entitled to substantial fees exceeding the value of the fund, including both components derived, or to be derived, from the sale of the Dresden property. That finding is based primarily on the composition of the costs order made by Kyrou J, the concessions made by Dr Talacko about his liability for Mr Howells’ fees, and his conduct in claiming the costs in the bankruptcy of Jan Emil.
It is because Mr Howells’ case was advanced on the basis of a proprietary interest in the fund, that it became relevant to consider whether there was a good arguable case for a lien. Had he confined his case to address the danger that a judgment will be wholly or partly unsatisfied for the prescribed reasons, the court would need only consider the merits of his claim for fees. If approached from this perspective, there is no material distinction between the various elements of the fund in the hands of Dr Talacko. Thus, the dividend paid by the trustee in bankruptcy, from the share of Jan Emil in the Dresden property, would not, for the purpose of this application, be treated differently to the amount received directly into the estate of Helena Marie, provided there is a real risk of dissipation.
Having based his case on the claimed lien over the fund, Mr Howells assumed a burden to establish a good arguable case for a causal connection between his work and the fund. While the causal connection and claimed lien have not been pleaded, that case has been addressed in the evidence and submissions.
Notwithstanding his elaborate defences and counterclaim, Dr Talacko must confront his evidence before and submissions to Kyrou J in support of an application for indemnity costs, which included a substantial claim for Mr Howells’ fees. The costs order was in the sum of $2,680,239. Dr Talacko claimed half of this amount in the bankruptcy of Jan Emil, on behalf of the estate of Helena Marie. Mr Howells maintains that over $1.3 million of the total claim supporting the costs order were attributable to his fees. Thus, there would appear to be a direct connection between what Dr Talacko asserted to the court as Mr Howells’ entitlement to fees, the costs order and dividends paid to the estate of Helena Marie by the trustee in bankruptcy.
Dr Talacko contended that, unlike the Czech properties, the Dresden property was never wrongfully transferred by Jan Emil to his sons, and was not the subject of any compensation order. In relation to the payments from the trustee in bankruptcy, resulting from the sale of the Glenferrie Road property, Dr Talacko contended that they had become available after the judgment of McDonald J, and well after the termination of the retainer. In other words, to the extent that the estate of Helena Marie derived a direct benefit from the sales, it was not as a result of the work of Mr Howells.
While it is clear that Mr Howells did not act on behalf of Dr Talacko, in his own capacity, or as executor of the estate of Helena Marie, in the proceeding before McDonald J, he did appear on behalf of the Sydney cousins and may be taken to have contributed to the outcome. Insofar as it is necessary to decide the question, I am satisfied that there exists a sufficient connection between the work of Mr Howells in obtaining judgment of McDonald J, the sale of the Glenferrie Road property and dividends paid to the estate of Helena Marie by the trustee in bankruptcy from the proceeds of sale, to support a good arguable case for a lien in relation to that component of the fund. That connection augments the connection based on the costs order proved by Dr Talacko in the bankruptcy of Jan Emil.
On the limited evidence available to the court on this application, I am not satisfied that Mr Howells has a good arguable case for a lien over the proceeds from the sale of the Dresden property paid directly to the estate of Helena Marie. The sale and distribution does not appear, on the evidence presently before the court, to have a sufficient connection with Mr Howells’ efforts. The anticipated further payment of €89,000 is in a different category, forming part of the estate of Jan Emil available for distribution to creditors, one of whom is the estate of Helena Marie, who proved in the liquidation for costs which included fees payable to Mr Howells.
I do not regard Mr Howells’ failure to make a claim for a lien over particular funds in his prayer for relief, or to plead facts to support a relevant causal connection, to be a material impediment on an interlocutory application. He has issued a summons in the proceeding and thereby giving notice of his claim, which is sufficient for present purposes, although such a claim should be pleaded in the main proceeding.
Risk of dissipation
The requirement for interlocutory injunctive relief to preserve the fund requires the court to be satisfied in this case that there exists a real risk that a judgment would be wholly or partly unsatisfied because the fund will be disposed of, dealt with or diminished in value. Dr Talacko denied any indebtedness to Mr Howells, and has already disbursed some of the funds received from the trustee. The position adopted by Dr Talacko reveals an intention to deal with the funds in the estate of Helena Marie as funds belonging to the estate, without regard to the interests of Mr Howells.
Nothing is said in the material filed on behalf of Dr Talacko about his assets or the assets of the estate, or his capacity to meet any judgment in favour of the plaintiff. Dr Talacko has, however, indicated that he may not have the funds to engage counsel, and intends to use the fund to do so. Correspondence passing between the solicitors is unambiguous. Unless restrained by an order of the court, Dr Talacko will apply funds held by the estate, or to be received by the estate, as needs arise. That is not to suggest there will be nothing left for Mr Howells should he succeed in his claim; rather the evidence suggests that in the absence of an order of the court, the affairs of the estate will be administered without regard to the validity of Mr Howells’ claim.
Discretionary considerations
Dr Talacko submitted that the judgments over which Mr Howells could feasibly have claimed a lien, if at all, were entered in August 2008 and December 2009. Since then, he has acted to his detriment based on the expectation of funds flowing from the judgments. He also submitted that the legal nature of the judgment debts had been altered. He submitted that he and the Sydney cousins had pursued Jan Emil, as judgment debtor, and spent more than $480,000 in doing so. He deposed that had he known that Mr Howells would assert a lien over any money from the bankruptcy he would have adjusted the manner in which he dealt with his Sydney cousins, by declining to waive a priority, shared with them, for costs incurred in obtaining the bankruptcy. He claims that he would have sought to maximise his share of the bankruptcy dividend by maintaining his priority payment.
Dr Talacko also contended that the bankruptcy of Jan Emil transformed the judgment debts into no more than a right to claim in the bankruptcy. He appeared to argue that such a transformation defeated Mr Howells’ claim to a lien, because the judgment debt, being the fund over which a claim might be made, no longer existed. I do not regard such a transformation as effective to defeat the claim to a lien over the dividend paid or to be paid by a trustee in bankruptcy to the beneficiary of the judgment debt proved in the bankruptcy. Notwithstanding the change in the character of the fund, equity will follow the money.
Dr Talacko proposes to participate in a forthcoming application, for leave to appeal from the judgment of McDonald J.[13] He estimated the cost of his application as between $82,000 and $90,000. He deposed that had he known that funds to be received from the bankrupt estate might be frozen for the plaintiff’s benefit, pending the outcome of this proceeding, he would have carefully considered whether to undertake the application for leave to appeal. He was relying on the proceeds from the bankrupt estate to fund that litigation.
[13][2015] VSC 287.
Mr Howells contended that there was no undue delay in making an application for a lien, because of the nature of the ‘deferred fees’ retainer. While the retainer alleged by Dr Talacko is in different terms, it also contained a ‘deferred’ element. Nevertheless, some action on the part of Mr Howells, to secure his fees, once the costs order was made (which included a very substantial amount attributable to his fees) might reasonably have been expected. Mr Howells’ failure to advance his claim in the 1998 proceeding or even before McDonald J, has already been prejudicial to his own case, with the added complexity of a new trial of the defences now raised by Dr Talacko. Moreover, Mr Howells has assumed a burden to establish a causal connection between his claim to fees and the fund.
It was not until there was evidence of a flow of cash from the trustee in bankruptcy that Mr Howells took steps to protect his interests. While he might have done so at a much earlier time, once he became aware of a flow of funds, he moved reasonably promptly. I am not persuaded that Mr Howells’ delay has been prejudicial to the interest represented by Dr Talacko. On the contrary, Mr Howells’ delay may well have advantaged Dr Talacko. It is not a disqualifying delay. Nor am I persuaded that Dr Talacko has so changed his position that relief ought to be denied on that basis.
I have considered whether there exist other discretionary considerations which might militate against the making of a freezing order against the fund, until the hearing and determination of the proceeding, or further order. No other factors were advanced by Dr Talacko.
In Bradto Pty Ltd v State of Victoria,[14] the Court of Appeal said:
In our view, the flexibility and adaptability of the remedy of injunction as an instrument of justice will be best served by the adoption of the Hoffman approach. That is, whether the relief sought is prohibitory or mandatory, the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’, in the sense of granting an injunction to a party who fails to establish his right at the trial, or in failing to grant an injunction to a party who succeeds at trial.
[14][2006] VSCA 89, [35].
While the preservation of the fund, pending the hearing and determination of this proceeding, will cause inconvenience to Dr Talacko, I am not persuaded that any such inconvenience outweighs the risk to Mr Howells, that will be unable to recover on a successful judgment for his fees should he establish his claim. Apart from submissions made by Dr Talacko to explain why he appeared in person in a number of proceedings, there is very limited evidence about his financial position or that of the estate. I have not been asked to draw an inference one way or the other about the absence of such evidence. That is not surprising, having regard to the way in which Mr Howells advanced his case on this application. He confined the property to be attached with an order to the fund, and no more.
Conclusion
For the reasons given above, I reject Mr Howells’ claim for a declaration of lien, and a remedy based upon his claimed proprietary right over so much of the proceeds from the sale of the Dresden property as were paid directly to the estate of Helena Marie. On the other hand, I consider that Mr Howells is entitled to the protection of a freezing order over the whole of the fund, including the two components derived from the sale of the Dresden property, based on a good arguable case for his fees exceeding the value of the fund. The scope of such a freezing order does not extend beyond the fund to other assets of Dr Talacko, or the estate of Helena Marie. Mr Howells’ application was confined to the fund, including the anticipated dividend.
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