Marsh & Marsh
[2014] FamCA 361
•20 May 2014
FAMILY COURT OF AUSTRALIA
| MARSH & MARSH | [2014] FamCA 361 |
| FAMILY LAW – LEGAL PRACTITIONERS – Solicitor lien – Nature of lien – Where the applicant, by an Application in a Case, sought orders that certain sums held in two separate trust accounts be paid to him on account of his fees – Relevant authorities cited – Where a lien can only arise if there is a sufficient causal link between the solicitor’s exertions and the recovery of the fund of money – Where the Court determined that only one sum of money held in trust was paid as a result of the proceedings taken before an interim property settlement or costs order in which the solicitors acted – Where that sum of money was obtained for the respondent through the actions of the applicant, and therefore there is the necessary causal link between the industry of the solicitor and the funds – Where the same cannot be said for the second sum of money paid into a different trust account – Where there is no evidence that establishes that the second sum was obtained as a result of the actions of the applicant – Where the purpose of a solicitor’s lien is not to create a general security over the assets of the client but is limited to the specific circumstances set out in Firth & Centrelink (2002) NSWSC 564. |
| Family Law Act 1975 (Cth) |
| Firth & Centrelink (2002) NSWSC 564 Jackson & Richards (2005) NSWSC 630 |
| APPLICANT: | Mr Majumdar |
| RESPONDENT: | Ms Marsh |
| FILE NUMBER: | SYC | 3464 | of | 2009 |
| DATE DELIVERED: | 20 May 2014 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Aldridge J |
| HEARING DATE: | 20 May 2014 |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | Mr Davies |
| THE RESPONDENT IN PERSON: | No appearance |
Orders
That the sum of $250,000, together with any accrued interest being the proceeds of the sale of the property LL Street, KK Town, presently held in the Champion Legal Controlled Monies Account pursuant to Orders of this Court made on 12 July 2013, shall be paid to the applicant.
That Order 1 above is stayed up to and including 24 June 2014.
That liberty is granted to the respondent, Ms Marsh, to apply to set aside Order 1 hereof or, to seek a further stay, upon forty-eight (48) hours’ notice.
That a copy of these Orders are to be served upon the respondent, Ms Marsh, either personally or by leaving the documents at … MM Street, K Town.
That leave is granted to the applicant to file an application for costs in respect to this application. Such application is to be served upon Ms Marsh as soon as practicable and evidenced by an affidavit of service.
That, providing the Court is satisfied the respondent, Ms Marsh, has been served with the application for costs, that application is listed before me at 9.30am on Friday 13 June 2014 to be dealt with.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Marsh & Marsh has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 3464 of 2009
| Mr Majumdar |
Applicant
And
| Ms Marsh |
Respondent
REASONS FOR JUDGMENT
Introduction
By an Application in a Case filed on 16 September 2013, the applicant seeks orders that the sum of $23 168 held in the trust account of Meyer Partners Family Lawyers and the sum of $250 000 presently held in a controlled monies account by Champion Legal be paid to him on account of his fees.
The applicant was, from 28 February 2013 until 7 July 2013, the lawyer for Ms Marsh (‘the respondent’). The respondent was engaged in proceedings with Mr Marsh (‘the husband’) pursuant to section 79 of the Family Law Act1975 (Cth) (‘the Act’). I delivered a judgment in those proceedings earlier this morning.
On 14 June 2013, I delivered judgment in an interim hearing in those proceedings, whereby orders for spousal maintenance were made and an order was made that a property at LL Street, KK Town (‘the KK Town property’) be sold and the funds divided between the parties and one of their creditors. One of the orders provided that there be a payment to the solicitors for the respondent in the sum of $250 000 to be used for the respondent’s legal fees in the proceedings against the husband.
By the time the KK Town property was sold, the applicant had ceased to act as the respondent’s lawyer and there were no solicitors on the record for the respondent to whom that sum could be paid. It has been held since then in a controlled monies account by the solicitors for the husband, Champion Legal.
After the making of this application, orders were made freezing payment from that account without a further order of the court.
The property in the Meyer Partners Family Lawyers trust account is said to be money that the lawyers are holding on account of the respondent’s legal fees incurred in proceedings against the husband.
On 11 March 2013, the applicant sent to the respondent an email enclosing the terms and conditions of him acting for her. The agreements contained in that correspondence, after some amendments, were ultimately accepted by the respondent in an email on 29 April 2013. The applicant then acted as the respondent’s lawyer in these proceedings and, amongst other things, engaged counsel and independent financial experts.
I will not deal in detail with the evidence which sets out the nature of the relationship between the parties. It makes it clear that the issues facing the respondent and her lawyers, the applicant, were difficult, particularly in relation to the husband’s membership of a group known as PP Group, which was referred to more fully in the judgment I delivered earlier this morning. The true legal nature of that group never became known to the court. Nonetheless, the husband discloses receiving approximately $1 million at least per year from that source.
It is established by the evidence that the respondent expected the applicant to become familiar with a vast number of documents which the respondent said would assist in them dealing with that issue. As part of his retainer, the applicant appeared for and instructed counsel in the hearing that gave rise to the judgment making provision for the spousal maintenance and the $250 000 being set aside on account of costs.
The applicant asserts that there is what is commonly described as a solicitor’s lien. In Firth & Centrelink (2002) NSWSC 564, Campbell J, as his Honour then was, conveniently summarised the law relating to solicitor’s liens as follows:
35.The authorities establish the following propositions concerning this right of the solicitor:
(a)The solicitor's right exists over money recovered through obtaining judgment in litigation, and also over money recovered through the settlement of litigation: Carew Counsel Pty Ltd v French [2002] VSCA 1 at [33]; Roam Australia Pty Ltd v Telstra Corp Ltd [1997] FCA 980, Lehane J, 22 September 1997, unreported at 4.
(b)The solicitor's right exists over both the amount of a judgment in favour of the client, and the amount of an order for costs in favour of the client: In The Estate of Fuld (No 4) [1968] P 727 at 736; Twigg v Keady (1996) 135 FLR 257 at 266 - 267 per Finn J; In Re Blake; Clutterbuck v Bradford [1945] Ch 61 (a case concerning a statutory charging order rather than a lien arising in equity's exclusive jurisdiction, but dependent on the same principle as the equitable right - see para44 below).
(c)It exists over money which is in the possession of the solicitor, and also over money which is in court (In Re Meter Cabs [1911] 2 Ch 557 at 562) and money which is owed to the client but not paid into court (In The Estate of Fuld (No 4) [1968] P 727; Re de Groot [2001] 2 Qd R 359 at 375)
(d)The solicitor need not be still acting for the client at the time that the money was recovered: In The Estate of Fuld (No 4) [1968] P727; Kelso v McCulloch (Supreme Court of NSW, Young J, 24 October 1994 unreported); Twigg v Keady (1996) 135 FLR 257 at 289 per Kay J; Roam Australia Pty Ltd v Telstra Corp Ltd [1997] FCA 980, Lehane J, 22 September 1997, unreported at 4
(e)For the right to arise it must be shown that there is a sufficient causal link between solicitor's exertions and the recovery of the fund of money: Roam Australia Pty Ltd v Telstra Corp Ltd [1997] FCA 980, Lehane J, 22 September 1997, unreported at 4 - 5; Carew Counsel Pty Ltd v French [2002] VSCA 1 at [33].
(f)The quantum of money for which the solicitor has the equitable right is the amount which is properly owing to the solicitor by the client, whether that amount be ascertained by taxation of a bill of costs, or assessment, or pursuant to a costs agreement: Roam Australia Pty Ltd v Telstra Corp Ltd [1997] FCA 980 (Lehane J, 22 September 1997, unreported at 4). In relation to those situations where taxation is necessary to ascertain the quantum owing to the solicitor, the solicitor's right exists in the fund prior to the occurrence of the taxation (Johns v Cassel (1993) 6 BPR 13,134 at 3,136 per Hodgson J; Twigg v Keady (1996) 135 FLR 257 at 289 per Kay J; In The Estate of Fuld (No 4) [1968] P 727 at 740; Roam Australia Pty ltd v Telstra Corp Ltd [1997] FCA 980 (Lehane J, 22 September 1997, unreported at 6).
(g)The solicitor's equitable right exists before the court is asked to intervene to protect it; it "arises immediately upon the recovery of monies through the exertions of the solicitor": Carew Counsel Pty Ltd v French [2002] VSCA 1 at [33]; if the lien is over the proceeds of an order for costs, it comes into existence at the time of making of that order for cost: Phillipa Power & Associates v Primrose Couper Cronin Rudkin [1997] 2 Qd R 266; Kison v Papasian (1994) 61 SASR 567. If the lien is over the proceeds of a settlement, it arises when the settlement agreement is entered into: Re de Groot [2001] 2 Qd R 359 at 368. (These statements concern when the lien comes into existence as an item of present property - they are not concerned with the ability of the solicitor to deal with the rights under the lien as future property before the fund is in existence.)
(h)The right of the solicitor is one which the solicitor can enforce against the client, entitling the solicitor to an injunction to prevent the payment of the fund to the client without notice to the solicitor until such time as the quantum of the solicitor's entitlement to be paid from the fund is ascertained: In The Estate of Fuld (No 4) [1968] P 727. If the quantum of the solicitor's entitlement has been ascertained, the solicitor is entitled to an order that the amount of his entitlement be paid to him from the fund, notwithstanding opposition from the client: Leamey v Heath [2001] NSWSC 1095 (Campbell J, 22 November 2001, unreported).
(i)The right can also be enforced against people other than the client, in certain circumstances. When the money recovered takes the form of a debt owed to the client, which has been assigned, the right of the solicitor will prevail over the rights of an assignee of the debt, save where the assignee is a bona fide purchaser for value without notice: Re de Groot [2001] 2 Qd R 359. (If the assignee is a bona fide purchaser for value without notice, it may be that priorities between the solicitor's right and the right of the assignee are to be determined in accordance with the rule in Dearle v Hall, (see Meagher, Gummow & Lehane, Equity Doctrines and Remedies, 3rd edition, at [819] ff) or it may be that the court considers who, of the solicitor and the assignee, has the superior equity - Re de Groot [2001] 2 Qd R 359 at 368 - 376 - but it is not necessary for me to consider that matter further.)
(j)If the client is a company which goes into liquidation, the solicitor is entitled, in relation to costs arising from work done before the start of the liquidation, to claim the full amount of the costs from the fund, and is not required to prove in the liquidation: In Re Born; Curnock v Born [1900] 2 Ch 433; In Re Meter Cabs [1911] 2 Ch 557. This has the same practical effect as enforcing the right against the other creditors of the company. The solicitor's lien attaches to property recovered through his exertions, even if the actual recovery occurs after the client goes into liquidation: North West Construction Co Pty Ltd (In Liquidation) v Marian [1965] WAR 205 at 211.
(k)Likewise if the client is a natural person who becomes bankrupt, the solicitor is not required to prove in the bankruptcy for the amount of costs incurred, but can recover the costs from the debt which is the result of his efforts: Guy v Churchill (1887) 35 Ch D 489; Worrell v Power & Power (1993) 46 FCR 214. The trustee in bankruptcy takes that debt subject to the equitable right of the solicitor to be paid his costs, and if the amount of the solicitor's costs exceeds the value of the debt, the debt does not vest in the trustee in bankruptcy at all; if the client is discharged from bankruptcy he can sue to enforce the debt as it never was property divisible among the creditors, and any amount that the client then receives is also subject to the solicitor's lien: Kison v Papasian (1994) 61 SASR 567
(l)If the client is the liquidator of a company in liquidation, the solicitor's lien over property recovered through his exertions is to be satisfied before the statutory order of priorities for distribution of the property of the corporation comes into effect: Jeffcott Holdings Ltd (in liq) v Paior (1995) 18 ACSR 213
(m)If the money recovered is held in the solicitor's trust account, and the solicitor is served with a garnishee notice, issued to enforce a debt which the client owes to another person, the garnishee notice is not effective to attach the money in the trust account, to the extent that the solicitor has a lien over it: Phillipa Power & Associates v Primrose Couper Cronin Rudkin [1997] 2 Qd R 266. Likewise if the money recovered is held by a third party, and a garnishee notice is served on that third party, the solicitor's lien prevails over the garnishee notice: Dallow v Garold; Ex parte Adams (1884) 14 QB D 543.
As is apparent from paragraphs (e) and (g), a lien can only arise if there is a sufficient causal link between the solicitor’s exertions and the recovery of the fund of money. It arises immediately upon the recovery of money through the exertions of the solicitor.
In Jackson & Richards (2005) NSWSC 630, White J said:
47.It is clear from paragraph 62 of the judgment of Sheller JA, which I have quoted, that the Court accepted that for a solicitor to be entitled to a lien over the fruits of litigation, those fruits must be “produced by the industry of the solicitor”. This is not an exacting standard. It is not necessary to demonstrate that a judgment or settlement came about as a result of specific efforts by the solicitor, but there must be some causal link between the solicitor having acted for the client in the proceedings and the resulting payment to the client.
(References omitted)
It can be seen quite clearly that the sum of $250 000 was paid to the trust account of Champion Legal as a result of the proceedings taken before an interim property settlement or costs order in which the applicant acted. That sum of money was obtained for the respondent through the actions of the applicant, and therefore there is the necessary causal link between the industry of the applicant and the funds.
That, however, cannot be said of the funds in the Meyer Partners Family Lawyers trust account. There is no evidence that establishes that that sum was obtained as a result of the actions of the applicant. The purpose of a solicitor’s lien is not to create a general security over the assets of the client. It is limited to the specific circumstances set out in the judgment of Campbell J, above.
Conclusion
The parties had the costs of the applicant assessed by a costs assessor. On 24 March 2014, the Supreme Court of New South Wales issued the Certificate of Determination of costs, which had been issued by the costs assessor on 12 March 2014. The costs of the applicant were determined to be $306 170.60, which is well in excess of the sum presently held in the trust account.
For those reasons, and subject to the matter to which I will refer in a moment, it is appropriate to make order 2 as sought in the Application in the Case, but not order 1.
The respondent has not appeared this afternoon. She did not appear when the matter was called and judgment was delivered earlier this morning. The respondent did not appear at the commencement of the property proceedings on 13 May 2014. At that time, there was evidence as to the respondent’s whereabouts. She was telephoned from court on both her mobile number and the premises where she was present at the time. The respondent did not answer those calls. I was satisfied at that time that she had notice of the property proceedings and I proceeded in her absence.
The Application in a Case has been travelling separately because I determined on its first return date, with the assistance of counsel then appearing for the applicant, that it would not be appropriate for me to hear this application whilst I was dealing with the section 79 proceedings between the respondent and the husband. This was because the applicant wished to divulge in his evidence confidential matters between him and the respondent which were not appropriate to be heard in the property proceedings. For that reason, arrangements were made for the application in a case to be heard by another judge.
The application and affidavit were served on 17 September 2013. There was no appearance by the respondent, it was fixed for hearing for a judge of this Court on 12 December 2013, but for reasons of which I am unaware, the matter did not proceed.
On 12 December 2013, the respondent made a successful application before me to vacate the hearing dates for the property proceedings that had been fixed for February 2014. The property proceedings were then fixed for hearing and commenced on 13 May 2014.
It appears from the court records that on 7 May 2014, the Application in a Case was listed for hearing before Loughnan J. Court records establish that the respondent did not appear on that day. Attempts were made to contact the respondent. The attempts were not successful.
The parties were notified that the judgment was to be given today. This was done in an email sent by my associate at 12.07 pm on 19 May 2014.
In addition to advising the parties, including the respondent, that the matter was listed for delivery of judgment today at 9.30 am, the following also appeared:
In respect of the application in a case filed by Mr [Majumdar] on 12 September 2013, that application was listed before his Honour to be dealt with tomorrow, Tuesday, 20 May 2014 at 2.15 pm.
The respondent has not appeared this afternoon. The evidence clearly establishes that she was, in September last year, served with the Application in a Case in the evidence. It is less than clear, however, whether she was aware of more recent hearings, in particular, the hearing before Loughnan J. However, she was aware the s 79 matter was listed before me on 13 May 2014.
I have, however, nonetheless decided to proceed with the matter today and I have delivered judgment. I am of the view that she had sufficient notice of the hearing.
However, for more abundant caution, the appropriate course is not to pronounce orders that take effect immediately. I propose to stay those orders for a period and require a copy of the orders and the judgment be served upon the respondent, giving her the opportunity to apply to set these orders aside if she is so advised.
I certify that the preceding twenty-six (26) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Aldridge delivered on 20 May 2014.
Legal Associate:
Date: 27 May 2014
3
5
1