John Martin Wedgwood v Bank of New Zealand
[1993] FCA 524
•05 AUGUST 1993
JOHN MARTIN WEDGWOOD
EX PARTE: BANK OF NEW ZEALAND
No. BN717 of 1992
FED No. 524
Number of pages - 8
Bankruptcy
(1993) 116 ALR 153
COURT
IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND
GENERAL DIVISION
Cooper J(1)
CATCHWORDS
Bankruptcy - creditors petition - sequestration order - notice by Official Receiver requiring payment of monies - application to set aside notice under section 139ZQ - whether transaction is void against the trustee of the bankrupt estate - solicitor's trust accounts - whether outstanding debt owing - transfer of money from trust account to general account - whether solicitor's lien over money "retaining" lien - "particular" lien - whether funds held on trust for bankrupt.
Bankruptcy Act 1966 Sections 139ZS, 139ZQ, 122(1)
Trust Accounts Act 1973 (Qld) Section 8(1)(c)
Ramsey v. National Australia Bank Ltd. (1989) VR 59
Re Statewide Computer Services Pty. Ltd. (1992) 2 Qd R 647
In Re Born; Curnock v. Born (1900) 2 Ch 433
In Re Meter Cabs Limited (1911) 2 Ch 557
Re Wright; ex parte Clout (1984) 1 FCR 51
In Re Gray's Inn Construction Co. Ltd. (1980) 1 WLR 711
Loescher v. Dean (1950) Ch 491
Prekookeanska Plovidba v. LNT Lines SRL (1989) 1 WLR 753
Welsh v. Hole (1799) 1 Dougl 238; 99 ER 155
Bozon v. Bolland (1839) 4 My and Cr 354; 41 ER 138
Re Mosely; Ex parte Official Receiver (1953) 16 ABC 195
Re The Estate of Fuld, dec'd (No. 4) (1968) P 727
Fairfold Ltd. v. Exmouth Docks Co. Ltd. (No. 2) (1993) 2 WLR 241
Halvanon Insurance Co. Ltd. v. Central Reinsurance Corporation (1988) 1 WLR 1122
Sewell v. Hampel (1910) 13 WALR 44
Re Sutter (1890) 11 NSWLR 401
North West Construction Co. Pty. Ltd. (In Liq.) v. Marian (1965) WAR 205
Sympson v. Prothero (1857) 26 LJ Eq 671
Smith v. Betty (1903) 2 KB 317
Campbell v. Campbell and Lewis (1941) 1 All ER 274
Sykes, Law of Securities 5th Ed. 1993
Cordery on Solicitors 8th Ed. 1988
Halsbury 4th Ed. Vol. 44
HEARING
BRISBANE, 5 August, 1993
#DATE 5:8:1993
Counsel for the Applicant: Mr. J.S. Miles
Solicitors for the Applicant: Power and Power
Counsel for the Respondent: Mr. P. Favell
Solicitors for the Respondent: Baker Johnson and Partners
ORDER
THE COURT ORDERS:
1. The notice under section 139ZQ of the Bankruptcy Act 1966 dated 23 March, 1993 given to Messrs. Power and Power, solicitors, requiring them to pay the sum of $1,800.00 to Ivor Worrell as the trustee of the estate of John Martin Wedgwood, be set aside.
2. The respondent trustee pay the applicant's costs of and incidental to the application to be taxed.
Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.
JUDGE1
COOPER J This is an application under section 139ZS of the Bankruptcy Act 1966 ("the Act") to set aside a notice under section 139ZQ of the Act served on the firm of Power and Power, solicitors. The notice dated 23 March, 1993 requires the payment of the sum of $1,800.00 to the respondent Ivor Worrell, the trustee of the bankrupt's estate.
Section 139ZQ of the Act provides :-
"(1) If a person has received any money or property as a result of a transaction that is void against the trustee of a bankrupt under Division 3, the Official Receiver:
(a) if the Official Receiver is the trustee - on the initiative of the Official Receiver; or
(b) if a registered trustee is the trustee - on application by the trustee;
may require the person, by written notice given to the person, to pay to the trustee an amount equal to the money or the value of the property received.
(2) The notice must set out the facts and circumstances because of which the Official Receiver considers that the transaction is void against the trustee.
(3) The notice may:
(a) require the amount to be paid at a time or within a period set out in the notice; or
(b) require the amount to be paid at such times, and in such instalments, as are set out in the notice.
(4) After the Official Receiver has given a notice to a person under subsection (1), the Official Receiver may at any time, by a further notice given to the person, revoke or amend the first-mentioned notice.
(5) If the Official Receiver gives a notice under this section, the Official Receiver must send a copy of the notice to the bankrupt and, if a registered trustee is the trustee, to the trustee.
(6) A notice to be given under this section to the Commonwealth, a State or a Territory, or to an authority of the Commonwealth, of a State or of a Territory, is taken to be duly given if it is given to a person who, by any law, regulation, appointment or authority, has the function of paying, or in fact pays, money on behalf of a Department of the Commonwealth, of that State or of that Territory, or on behalf of the authority, as the case may be.
(7) If a person is required by a notice under this section to pay to the trustee the value of any property, the requirement is taken to be complied with if the property is transferred to the trustee.
(8) An amount payable by a person to the trustee under this section is recoverable by the trustee as a debt by action against the person in a court of competent jurisdiction".
On 24 March, 1992 a sequestration order was made against the estate of the bankrupt. The act of bankruptcy relied upon, namely non-compliance with the provisions of a bankruptcy notice, occurred on 3 February, 1992. On 10 February, 1993 the respondent wrote to the Official Receiver and requested in accordance with section 139ZQ(1) of the Act that notice requiring payment be given by the Official Receiver under the section to the applicant requiring payment by it of $1,800.00. On 23 March, 1993 the Official Receiver forwarded a notice as requested.
The notice of the Official Receiver, so far as is relevant provided:-
"TAKE NOTICE that I, STEPHEN RAYMOND ELEFTHERIOU, Official Receiver for the abovenamed Bankruptcy District, hereby given notice that you, being persons who have received money from John Martin Wedgwood previously of 83 Brentnall Street, Norman Park as a result of a transaction which I consider is void pursuant to Sections 115 and/or 122 of the Bankruptcy Act against the trustee of the bankrupt estate, Ivor Worrell of Level 18, 240 Queen Street, Brisbane, are required to pay to Ivor Worrell the sum of $1,800.00, being the money received by you. The facts and circumstances by which I consider that the transaction is void pursuant to sections 115 and/or 122 of the Bankruptcy Act 1966 against Ivor Worrell as trustee of the bankrupt estate are as follows:- The abovenamed was made bankrupt on 24 March 1992 on the petition of the Bank of New Zealand filed on 24 February 1992. The act of bankruptcy on which the petition was founded was committed on 3 February 1992 (see copy of sequestration order - Attachment A). Ivor Worrell is trustee of the bankrupt's estate.
In your letter to the bankrupt of 14 November 1991 (see copy - Attachment B), you advised your client, the bankrupt, to settle a costs order for $1,800.00. In your letter to the bankrupt of 28 November 1991 (see Attachment C) you referred to outstanding accounts sent to the bankrupt by you and which he had not paid.
In your letter to the bankrupt of 19 December 1991 (see copy - Attachment D), you advised the bankrupt that when the $1,800.00 was received it would be used to reduce outstanding debts owed to you by the bankrupt which from a copy of your ledger account, were in excess of $1,800.00 from at least 29 August 1991 onwards.
A copy of your ledger account (see Attachment E) discloses that you received the $1,800.00 on 17 February 1992 and applied it against the outstanding debts owed to you by the bankrupt. Thus the payment was received after the commission of the act of bankruptcy (3 February 1992) and well within six months of the presentation of the creditors petition. A perusal of the bankrupt's statement of affairs completed on 13 April 1992 shows that he was insolvent at the date of his bankruptcy viz 24 March 1992 and would have been insolvent at the time he made the payment of $1,800.00 to you. The bankrupt's statement of affairs also indicates there are other creditors over whom you, in receiving payment of the $1,800.00 on 17 February 1992 from the bankrupt, obtained a preference, priority, or advantage".
The facts established from the material before the Court
3. The applicant firm of solicitors was retained by the bankrupt, prior to his bankruptcy to act for him in defence of District Court Plaint No. 577 of 1991 brought against him by T.R. Services Pty. Ltd. The applicant was retained on 15 March, 1991 and on 26 March, 1991 the first debit entry occurs in the applicant's general account. The bankrupt was the first defendant to the District Court Plaint. The second defendant was a Mr. Mardell who was separately represented.
The applicant sent four memoranda of fees to the bankrupt namely :-
(a) 30.4.91 - for $3,058.00 for costs and $749.60 for disbursements;
(b) 29.5.91 - for $4,734.00 for costs and $542.95 for disbursements;
(c) 28.6.91 - for $1,596.00 for costs and $99.68 for disbursements;
(d) 29.8.91 - for $970.00 for costs and $235.00 for disbursements;
The applicant received from the bankrupt and placed in the trust account:-
(a) 15.4.91 - $2,000.00;
(b) 9.7.91 - $8,935.55;
As at 17 February, 1992 after crediting the transfer of these monies from the trust account to the general account, the debit balance on general account remained at $2,779.75.
On 28 May, 1991 Judge McLaughlan QC in the District Court on an application for summary judgment gave the bankrupt leave to defend, the plaintiff leave to amend its statement of claim and ordered that the plaintiff pay the bankrupt and the second defendant the costs thrown away by the amendment and the costs of and incidental to the summary judgment application to be taxed.
On 14 November, 1991 the applicant wrote to the bankrupt advising that the plaintiff was only prepared to pay $1,800.00 in respect of the costs order made on 28 May, 1991 in favour of the bankrupt and recommended acceptance of the offer.
On 28 November, 1991 the applicant wrote to the bankrupt in the following terms :-
"Dear Sir,
Re: Outstanding Account - $2,948.68 - TR Services
Despite numerous reminders to you your accounts dated 29th May 1991, 28th June 1991 and 29th August, 1991 remain outstanding. The accounts are far in excess of our acceptable payment terms. To date you have made no attempt to pay the outstanding debt. Accordingly, if the debt is not paid by 5.00 p.m. on Wednesday 4th December, 1991 we will immediately commence Court proceedings against you to recover the debt.
Please note :-
1. No further correspondence will be entered into prior to the institution of proceedings.
2. The institution of proceedings will result in publication in both the White Mercantile Gazette and Dunn and Bradstreet Gazette - this will have an adverse effect on your credit rating.
3. All costs associated with the recovery proceedings will be payable by you.
4. No further extensions of time will be granted.
In order to avoid Court proceedings please forward your cheque in payment of the outstanding accounts immediately to Mr Stuart Mellon of our Accounts Receivable Department."
The letter overstates the position. Of the monies paid into trust the major proportion had been transferred to general account to satisfy the costs with the balance being paid to counsel or the solicitor's agents. The balance outstanding on the general account on 28 November, 1991 was $2,775.68.
On 19 December, 1991 the applicant wrote to the bankrupt in the following terms :-
"We acknowledge receipt of your letter concerning confirmation that you are prepared to accept $1,800.00 in satisfaction of the outstanding Costs Order to be paid by T.R. Services directly to you.
The amount of $1,800.00 will be utilised by us to offset monies owing by yourself in relation to your outstanding Accounts. Once the $1,800.00 is credited to these outstanding Accounts there will be a balance owing to us of approximately $1,100.00.
We would be pleased if you could forward to us your cheque for the sum of $1,100.00 in full and final satisfaction of the balance of monies owing on your outstanding Accounts. We will require this amount to be paid to us prior to undertaking any further work. We have today received a request from the Solicitors for T.R. Services that you provide Further and Better Particulars and that you also make an Affidavit listing out all documents that you have in your power or possession. We have previously prepared a draft of your Further and Better Particulars and it will be necessary for us to receive further instructions from you and spend time in finalising your further and better particulars and preparing your Affidavit of Documents. This process may cost approximately $1,500.00.
Until we receive your cheque for $1,100.00 we will be unable to undertake any further work on your behalf. We are prepared to undertake further work once the outstanding Accounts have been paid without the need for monies in advance".
On 17 February, 1992 the applicant received a cheque in the sum of $1,800.00 from the plaintiff in the District Court proceedings. The cheque was credited to the Trust Account on 17 February, 1992 and was transferred to the general account on 24 February, 1992. Immediately prior to the proceeds being credited to the general account, the outstanding balance on that account stood at $2,779.75.
The Contentions of the PartiesThe applicant submits that there was no payment which would attract the operation of section 122(1) of the Act. This followed, so it was contended, because there was never any debt due by the plaintiff in the District Court proceedings to the bankrupt, the latter only having a right of indemnity for his liability to pay costs to the applicant which indemnity was legally enforceable because the plaintiff was bound to comply with the order of the District Court. In support of this contention the applicant relied upon the decision of the Full Court of Victoria in Ramsay v. National Australia Bank Ltd. (1989) VR 59.
The applicant further contended that it had a solicitor's lien over the sum of $1,800.00 received into its trust account as money recovered in the District Court proceedings on account of the costs order made in favour of the bankrupt. In support of this contention the applicant relied upon the decision in Re Statewide Computer Services Pty. Ltd. (1992) 2 Qd R 647, In Re Born (1900) 2 Ch 433; In Re Meter Cabs Limited (1911) 2 Ch 557.
The respondent contends that there was at all relevant times a debtor/creditor relationship between the bankrupt and the applicant. That when the cheque was paid by the plaintiff it was credited to the trust account standing in the bankrupt's name. That when the cheque was cleared the funds were held in trust for the bankrupt and were his property. When the funds were transferred from the trust account to the general account with the authority of the bankrupt and appropriated against the debit balance, there was then a payment. Such a payment pro tanto reduced the indebtedness of the bankrupt to the applicant. There was, it was submitted, no payment by a third party from its own funds directly to a creditor to reduce the indebtedness of a debtor to bring this case within the category of cases dealt with by Ramsay v. National Australia Bank.
Further, it was submitted that the applicant was not entitled to a lien. In this respect the respondent relied upon the decision in Re Wright; ex parte Clout (1984) 1 FCR 51 per Beaumont J. If any lien did exist, then it was submitted the lien had been extinguished by a payment. It was the payment which was subject to section 122 of the Act and as such was void against the trustee.
Conclusion
15. I agree with the analysis of the respondent as to the treatment of receipt and disposition of the cheque for $1,800.00 by the applicant. There was no payment by the plaintiff in the District Court proceedings to the applicant to extinguish the bankrupt's indebtedness. The applicant did not receive and bank the cheque on its own account. It treated the cheque as the property of the bankrupt. So much is clear from the letter of the applicant to the bankrupt of 19 December, 1991 and the copies of the general and trust accounts provided by the applicant to the trustee. On 24 February, 1992 the relationship of debtor and creditor existed between the bankrupt and the applicant. Such being the case the transfer of the monies from the trust account to the general account and the appropriation of them against the outstanding balance constituted "payment" within the meaning of section 122(1) or a disposition of property within the relation back period (section 115). (See Re Wright; Ex parte Clout at 52 - 53; Ramsay v. National Australia Bank at 70; In Re Gray's Inn Construction Co. Ltd. (1980) 1 WLR 711 at 715 - 716 where Buckley LJ deals with the analogous situation of a bank receiving and clearing a third party's cheque for the benefit of its customer). Unless the applicant makes good its claim to a lien or brings itself within one of the protective provisions of the Act (which it has not sought to do) the facts alleged and found would support the notice.
There are two circumstances in which the question of a solicitor's lien may arise and in the submissions made on behalf of the applicant and the respondent no clear distinction was made between the two. The first is the right of a solicitor to retain property already in his possession until the solicitor is paid the professional costs due to the solicitor in his or her professional capacity (Halsbury 4th Ed. Vol. 44 paras. 226 - 227 ff.; Cordery on Solicitors 8th Ed. (1988) at 236 - 240; Sykes Law of Securities 5th Ed. (1993) at 216 - 217). This "retaining" lien extends to money held in the solicitor's bank account on behalf of the client (Loescher v. Dean (1950) Ch 491 at 496 per Harman J; Re Wright; Ex parte Clout at 53; Statewide Computer Services Pty. Ltd. at 649 per Ryan J; Prekookeanska Plovidba v. LNT Lines SRL (1989) 1 WLR 753 at 756 per Hirst J). The second right is one to ask the court to direct that personal property recovered by the solicitor's exertions stand as security for payment of the solicitor's costs (Welsh v. Hole (1799) 1 Dougl. 238; 99 ER 155; Halsbury at paras. 226, 236 ff., Cordery at 250 - 254; Sykes at 216 - 217, 751 - 752).
The distinction between the two rights is made clear by Cottenham LC in Bozon v. Bolland (1839) 4 My. and Cr. 354 at 357 - 358; 41 ER 138 at 139 - 140, where his Lordship said :-
"It appears to me that in these observations the distinction between the solicitor's lien upon the fund realised in the cause, and his lien upon, or rather right to retain, his client's papers in his hands as solicitor, is not sufficient kept in view. The lien upon the fund realised in the suit is confined to the costs of that suit; Lann v. Church (4 Mad. 391); although that seemed to be doubted in Worrall v. Johnson. This is a lien which the solicitor is entitled actively to enforce. If this were the whole ground of the claim of the assignees of Mr. Cole, such claim could not exceed the 99, 14s. 2d., the costs in the cause. The solicitor's lien upon, or right to retain, his client's papers till the bill is paid is of a nature totally difference. It applies to all his bills of costs; but he cannot actively enforce it. So long as the client leaves the papers in the solicitor's hands, the solicitor's lien is unavailing. It is merely a right to retain; and if the solicitor refuses to act for the client it is of little, if any, value, as he cannot in that case deprive the client of the full use of the papers for the purposes of the suit; as I held in Heslop v. Metcalfe (3 Mylne and Craig, 183), upon the authority, amongst other cases, of Colegrave v. Manley (l T. and Russ. 400). But if the client discharge or cease to employ the solicitor, the solicitor is not compellable to afford any facilities to the client by the use of the papers; as Lord Eldon decided in Lord v. Wormleighton (Jac. 580), contrary to what he had before held in Ross v. Laughton (1 Ves and B. 349)."
A "retaining" lien gives to the solicitor a right of retainer only and this right cannot be actively enforced (Re Mosely; Ex parte Official Receiver (1953) 16 ABC 195 at 199 per Clyne J). The lien is available against a trustee in bankruptcy (Prekookeanska v. LNT Lines at 756; Re Wright; Ex parte Clout at 53; Statewide Computer Services Pty. Ltd. at 649; Halsbury para. 231). The lien is a general lien extending to all costs due to the solicitor (Halsbury para. 228 and the cases there cited). The lien gives the solicitor no greater right to retain the property than the client would have if still in possession of the property (Re Wright; Ex parte Clout at 53; Re Mosely at 199; Halsbury at para. 230). The lien is discharged, inter alia, by payment of the solicitor's costs (Halsbury para. 235).
The solicitor's lien upon a fund recovered in an action does not rely upon possession of the property by the solicitor. To say that a solicitor has a "lien" on a sum of money which comes into existence as a result of the solicitor's exertions is a misnomer. As Scarman J explained in Re the Estate of Fuld, dec'd (No. 4) (1968) P 727 at 735 - 736 :-
"As security for payment of his remuneration, a solicitor has what is commonly called a lien on a sum of money which comes into existence owing to his exertions. In Bibby (James) v. Woods (Howard, Garnishee) (1949) 2 KB 449; (1949) 2 All ER 1, D.C. Lord Goddard CJ commented
(1949) 2 KB 449, 453, that, in this connection, the term 'lien' is a misnomer. 'That,' he said, 'was made clear by Cockburn CJ in Mercer v. Graves (1872) LR 7 QB 499, in which he said (Ibid 503):- 'There is no such thing as a lien except upon something of which you have possession...although we talk of an attorney having a lien upon a judgment, it is in fact only a claim or right to ask for the intervention of the court for his protection, when, having obtained judgment for his client, he finds there is a probability of the client depriving him of his costs'.
In Mason v. Mason and Cottrell (1933) P 199, CA, Lord Hanworth MR referring to Mercer v. Graves LR 7 QB 499, said (1933) P 199, 214: 'The nature of a solicitor's lien is pointed out in the course of that case. It is merely a right to claim the equitable interference of the court, who may order that the judgment obtained by the solicitor's client do stand as security for her costs and that payment of such an amount as will cover them be made to the solicitor in the first instance. That lien is one which prevails over a fund which is in sight; the right is one which, so to speak, cannot prevail at large'.
By their application, therefore, the solicitors are claiming, at this stage, the equitable interference of the court. If they are to obtain the assistance of the court, they must first show that there is a fund in sight. It is well settled that costs payable by one party to another are a fund which can be made the subject of a charge in favour of the party's solicitor: Campbell v. Campbell and Lewis (1941) 1 All ER 274, CA. It is immaterial that the costs are ordered, as in the present case, to be paid personally to the client. In Ex parte Bryant
(1815) 1 Madd 49 it was argued against the solicitor that the order directed that the costs should be paid to the client personally. The Vice-Chancellor gave the argument short shrift (Ibid 52):
'This is an attempt to deprive the solicitor of his lien for his costs... Though the order was personal, and the costs directed to be paid to List, it was not meant, nor can it have the effect, to deprive him of his lien. I do not wish to relax the doctrine as to lien, for it is to the advantage of clients, as well as solicitors; for business is often transacted by solicitors for needy clients, merely on the prospect of having their costs under the doctrine as to lien'."
See also Fairfold Ltd. v. Exmouth Docks Co. Ltd. (No. 2) (1993) 2 WLR 241 at 245; Halvanon Insurance Co. Ltd. v. Central Reinsurance Corporation (1988) 1 WLR 1122 at 1129; Sewell v. Hampel (1910) 13 WALR 44 at 46 - 47, 49; Re Sutter (1890) 11 NSWLR 401 at 405 (FC); North West Construction Co. Pty. Ltd. (In Liq.) v. Marian (1965) WAR 205 at 212. But see Sykes at 752 who argues that such a characterisation is too narrow and inconsistent with Sympson v. Prothero (1857) 26 LJ Eq 671 at 672 - 673.
In Re Meter Cabs Limited (1911) 2 Ch 557, Swinfen Eady J said at 559:-
"It is clear that at common law a solicitor is entitled to a particular lien, which is capable of being actively enforced, on a fund or on the fruits of a judgment recovered by his exertions for the costs of recovery, or those immediately incidental thereto. In this case the proceedings were by arbitration, so that there is no question of any statutory charge under the Solicitors Act, 1860 (23 and 24 Vict c 127), s.28. Now the common law lien prevails notwithstanding the bankruptcy of the client. There are many authorities to this effect".
The "particular lien" is limited to the costs of the action in which the fund or property is recovered and over which the lien may be exercised. In contrast, the "retaining" lien is available to secure professional costs generally on any account (Bozon v. Bolland at 357-358; ER 139 - 40; Smith v. Betty (1903) 2 KB 317 at 322 (CA)). The lien may be actively enforced by applying to the court for court orders including a charging order granted in the inherent jurisdiction of the court (Campbell v. Campbell and Lewis (1941) 1 All ER 274 at 276 - 277 (CA)) to protect the solicitor as to the recovery of his or her costs of the action. If the money is already in the solicitor's hands, the solicitor may retain out of it the amount of the solicitor's costs and pay over the balance to the client (Halsbury para. 239; Sewell v. Hampel at 46; North West Construction Co. Pty. Ltd. (In Liq.) v. Marian at 212). The right to retain the costs out of the funds held by the solicitor as the means of enforcing the lien in priority to the trustee in bankruptcy, without the intervention of the court, was the basis of the reasoning of Wood V.C. in Hanson v. Reece (1857) 27 LR Ch 118 at 120 and is founded upon the statement of principle by Lord Mansfield in Welsh v. Hole at 238 - 239; ER 155 - 1565:-
"An attorney has a lien on the money recovered by his client for his bill of costs; if the money comes to his hands, he may retain the amount of his bill".
The applicant did not specifically assert a right to a retaining lien when the proceeds of the cheque came into the solicitor's trust account. As is made clear in Re Wright; Ex parte Clout (at 53) and Re Mosely (at 199 - 200) the date upon which the property comes into the possession of the solicitor, the circumstances in which possession is taken and the knowledge of the solicitor as to the solvency of the client may, in appropriate circumstances, bring into operation the avoidance provisions of the Act to defeat what would otherwise, in the absence of the statutory provisions of the Act, be a valid retaining lien. It is sufficient for present purposes to say that the facts in the present case are against a finding that the applicant obtained on 17 February, 1992 a retaining lien over the proceeds of the cheque enforceable against the trustee.
The applicant was, in my opinion, entitled to a "particular lien" in respect of its costs in the District Court proceedings. Upon the making of the order for costs on 28 May, 1991, the applicant, because the order for costs had come about due to the applicant's exertions, had a right to apply to the court to have the order for costs held as security for the solicitor's debt, the order for costs itself being the relevant property; (Fairfold Ltd. v. Exmouth Docks Co. Ltd. at 245; In The Estate of Fuld dec'd at 736; Campbell v. Campbell and Lewis at 277). The applicant's right arose outside the relation back period and continued to be available to be actively enforced by either application to the court, or, self help if the judgment was reduced into money which came into the possession of the applicant. Nor, in my view, was the exercise of the right affected by the bankrupt agreeing to allow the proceeds of the cheque to be transferred out of the trust account into general account and then to be applied pro tanto to reduce the outstanding account. The written authorisation of the bankrupt may have been necessary to take the money out of the trust account depending upon the circumstances of the case (see section 8(1)(c) of Trust Accounts Act 1973 (Qld). Once the money was in the general account and still subject to the particular lien the agreement by the bankrupt to allow the applicant to do what in law it was entitled to do does not render the particular lien nugatory. When the monies came into the hands of the solicitors even though this occurred in the relation back period, the applicant had "a common law lien" or "particular lien" over the fund and was entitled to enforce its lien by applying the monies in hand to the outstanding balance of costs and fees owing in respect of the suit in which the cost order was obtained (North West Construction Co. Pty. Ltd. (In Liq.) v. Marian at 211). No new particular lien was created when the funds were received. Rather, the existing particular lien operated in relation to those funds (In Re Born; Curnock v. Born (1900) 2 Ch 433 at 435). The enforcement of the lien against the funds received in satisfaction of the order is not void under section 122 of the Act or at all against the trustee of the bankrupt's estate.
The alleged facts and circumstances set out in the notice of the Official Receiver of 23 March, 1993 in the circumstance of the applicant's lien do not give rise to a transaction which is void against the trustee of the bankrupt under Division 3 of the Act. Accordingly, subdivision J of Division 4B of the Act does not apply and the applicant is entitled to an order setting aside the notice.
The respondent trustee has argued that he is not a proper respondent to the application. By his counsel he argues that the proper respondent is the Official Receiver and that the Official Receiver's decision to send the notice is only reviewable by administrative review or judicial review of administrative decisions. I do not agree. Section 139ZS of the Act gives to the applicant a right to come to this court to set aside the notice. Where the notice is procured at the initiative of the trustee (section 139ZQ(1)(b)) and the trustee is the person to receive the value of the property (section 139ZQ (1) and (7)) and the person entitled to sue for the recovery of it as a debt (section 139ZQ(8)), the trustee, is in my view the proper respondent who, being the beneficiary of the notice, has the necessary interest to appear and argue in support of the validity of the notice. That is what occurred in the instant case. Having failed on the application the trustee ought to pay the applicant's costs.
THE COURT ORDERS:
1. The notice under section 139ZQ of the Bankruptcy Act 1966 dated 23 March, 1993 given to Messrs. Power and Power, solicitors, requiring them to pay the sum of $1,800.00 to Ivor Worrell as the trustee of the estate of John Martin Wedgwood, be set aside.
2. The respondent trustee pay the applicant's costs of and incidental to the application to be taxed.
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