Pong Property Development Pty Ltd v Paradise Constructors Pty Ltd (in liq)
[2005] VSC 241
•1 July 2005
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
PRACTICE COURT
No. 7091 of 2003
and No. 4491 of 2004
| PONG PROPERTY DEVELOPMENT PTY LTD | Plaintiff |
| V | |
| PARADISE CONSTRUCTORS PTY LTD (in liquidation) | First Defendant |
| AND | |
| BRUNO STRANGIO | Second Defendant |
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JUDGE: | Cummins J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 2 September 2004 | |
DATE OF JUDGMENT: | 1 July 2005 | |
CASE MAY BE CITED AS: | Pong Property Development Pty Ltd v Paradise Constructors Pty Ltd (in liq.) & Anor | |
MEDIUM NEUTRAL CITATION: | [2005] VSC 241 | |
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Practice Court – intervener application – solicitor’s lien.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | D. Collins S.C. with R. Andrew | Chua Tan & Associates |
| For the First Defendant | M. Barrett | |
| For the Second Defendant | In person | |
| For the Applicants Lewenberg & Lewenberg | D. Williams | Lewenberg & Lewenberg |
HIS HONOUR:
On 23 June 2005 in the Practice Court I had before me proceeding no. 6720 of 2005 in which Pong Property Development Pty Ltd was plaintiff and Bruno Strangio and Filippa Strangio were first and second defendants respectively. In the course of the hearing it became apparent that in two other matters in which Pong Property Development Pty Ltd was plaintiff – no. 7091 of 2003 and no. 4491 of 2004, in both of which Paradise Constructors Pty Ltd (in liquidation) and Bruno Strangio were first and second defendants respectively – which matters were before me in the Practice Court last year, I had reserved but not delivered judgment on an application in each of those matters. The applications were by the former solicitors for the defendants, Lewenberg and Lewenberg, by summons filed on 26 August 2004 for leave to be added as an intervener, for orders that the amount of $37,754.06 paid into court pursuant to Orders of Byrne J made on 10 June 2004 be paid to Lewenberg and Lewenberg, that the plaintiff pay to Lewenberg and Lewenberg interest on that sum, and consequential orders. I have now retrieved the files in those matters. I express my regret to the parties and in particular to Lewenberg and Lewenberg that the applications were not attended to by prompt judgment. I had reserved the matters in order to consider the question of the applicability of solicitor’s lien; and unfortunately the files had been returned with other files at the conclusion of my term in the Practice Court.
For convenience I shall refer to the applications by Lewenberg and Lewenberg by summons filed on 26 August 2004 in each proceeding, nos. 7091 of 2003 and 4491 of 2004, as “the intervener applications”. The intervener applications raise identical issues in each proceeding. In each proceeding Lewenberg and Lewenberg (hereafter Lewenbergs) acted as solicitors for the defendants at the time the relevant orders were obtained.
The first defendant company was controlled by the second defendant who was its sole director and shareholder.
Filed before me were affidavits (with exhibits thereto) in each proceeding: for the plaintiff, that of Mr F. Chu, solicitor, sworn 1 September 2004; for Lewenbergs, of Mr D. Burstyner, solicitor, affirmed 25 August 2004 and 2 September 2004 (two affidavits); and of Mr B. Strangio, sworn 25 August 2004. Based upon those affidavits the short history of the intervener applications is the following.
The plaintiff (hereafter “Pong”) is a property development company which since April 2001 was developing land which it owned at 377 Centre Road, Berwick, Victoria as a residential housing development. The first defendant (hereafter “Paradise”) was a company which carried on business as a civil earthworks contractor, engaged by Pong to carry out civil and drainage works at the development. The first defendant is now in liquidation.
Pong had has been in dispute with the defendants since 2001 shortly after Paradise commenced work at the development. Pong claims that Paradise failed to carry out the works in a proper, workmanlike and expeditious manner and carried out the works defectively, including causing damage to an adjoining property.
Eventually, Pong terminated the contract and issued proceedings in the Victorian Civil and Administrative Tribunal seeking damages against Paradise and Strangio. Paradise issued a counterclaim seeking damages in excess of $300,000.00. Pong denies that there is any substance to the counterclaim. Lewenbergs acted for Paradise and Strangio in the VCAT proceedings (D769 of 2002). VCAT made an Order on 17 July 2003, as to which Pong sought leave to appeal in proceeding no. 7091 of 2003, which application was dismissed by Master Wheeler on 21 August 2003 and wherein the Master ordered that Pong pay the defendants’ costs. An appeal from the Master’s Order was dismissed by Dodds-Streeton J on 15 September 2003 with costs. The two amounts of costs so ordered totalled $11,134.75. On 2 February 2004 the VCAT costs order was fixed at $24,082.80 and was registered in this Court in proceeding no. 4491 of 2004. Shortly after a VCAT compulsory conference on 19 November 2003, Strangio appointed Mr J. Sleiman, of Frasers Insolvency Advisory, Sydney, as administrator of Paradise. Pong made application to the Court to remove Mr Sleiman and appoint an administrator. The matter was heard before Mandie J in February 2004 in proceeding no. 9154 of 2003. On 30 March 2004 Mandie J found for Pong and ordered the defendants, including Strangio, to pay its costs. There has been no appeal from that judgment. Lewenbergs ultimately did not act for Mr Sleiman in that proceeding.
During May and June 2004 Lewenbergs, acting for Strangio, sought to enforce costs orders which Strangio had obtained against Pong, including issuing warrants on Pong’s land. Pong sought not to pay Strangio because it had other costs orders, including the costs ordered by Mandie J, which it says will far outweigh the costs claimed by Strangio. The total of the costs claimed by Strangio are $37,745.06. Pong estimates its costs will when taxed exceed $100,000.00.
Accordingly, by summons dated 7 June 2004 in both proceeding no. 7091 of 2003 and 4491 of 2004 Pong made application to stay the costs orders, a copy of which was served on Lewenbergs, who were then acting for Strangio.
Pong’s stay application was to be heard by Byrne J in the Practice Court on 10 June 2004. Strangio was represented by Lewenbergs, who had briefed counsel to appear. Pong was represented by Chua Tan & Associates who had briefed counsel to appear. Paradise did not appear. Prior to 10 June 2004, the parties had discussions. Strangio refused to consent to the stay unless Pong paid the sum claimed ($37,754.06) into an interest-bearing trust account. Pong declined so to place the sum; instead, it offered to pay it into the Court fund pending the assessment or taxation of Pong’s costs orders. Agreement as to the terms of the orders was reached, resulting in Orders made by Byrne J on 10 June 2004 to which I shall come. Pong has subsequently paid the money into Court.
Paradise and Strangio had all of their costs taxed and the total claimed by them is $37,754.06. At the time of hearing by me in the Practice Court in September 2004, Pong was awaiting assessment of two costs orders in its favour to be assessed by VCAT.
Lewenbergs by the intervener applications seeks to have the money which Pong paid into Court paid to it on account of its costs.
Pong opposes the intervener applications.
The Order dated 10 June 2004 of Byrne J in proceeding no. 7091 of 2003 stated in relevant part:
“OTHER MATTERS: 1. The Plaintiff has agreed to pay the sum of $11,732.14 (“the sum”) into Court. The sum is to remain in Court pending the determination of the Plaintiff’s Summons filed 4 June 2004 in proceeding No. 9154 of 2003 for taxation of the costs ordered by the Honourable Justice Mandie in that proceeding on 2 April 2004. The payment into Court is made:
(a)without prejudice to the Plaintiff’s assertion of a right to set-off against those costs when taxed and allowed the costs payable to it under the orders for costs made by Master Wheeler on 21 August 2003 and the Honourable Justice Dodds-Streeton on 15 September 2003;
(b)the Secondnamed Defendant’s costs of the Warrant of Seizure and Sale issued in execution of those costs orders; and
(c)without prejudice to any lien asserted by the Secondnamed Defendant’s solicitor over the costs orders of Master Wheeler and the Honourable Justice Doods-Streeton.
THE COURT ORDERS THAT:
1.Upon payment of the sum of $11,732.14 into Court by the Plaintiff, the orders of Master Wheeler on 21 August 2003 and the Honourable Justice Dodds-Streeton on 15 September 2003 are stayed until further order.
2.The sum paid into Court pursuant to paragraph 1 not be paid out without either the written consent of the parties or their solicitors, or further order of the Court.
3.The summons filed 7 June 2004 is adjourned to a date to be fixed.
4. The costs of this day are reserved.
5.Reserve liberty to apply to the parties on 48 hours notice in writing.”
The Order dated 10 June 2004 of Byrne J in proceeding no. 4491 of 2004 stated in relevant part:
“OTHER MATTERS: The Plaintiff has agreed to pay the sum of $26,021.92 (“the sum”) into Court. The sum is to remain in Court pending the determination of the Plaintiff’s Summons dated the 4 June 2004 in proceeding no. 9154 of 2003 for Taxation of the costs ordered by Justice Mandie in that proceeding on 2 April 2004. The payment into Court is made:
(a)without prejudice to the plaintiff’s assertion of a right to set-off against those costs when taxed and allowed the costs payable to it under the order for costs made by Deputy President Cremean in the Victorian Civil and Administrative Tribunal on 29 September 2003;
(b)the second defendant’s costs of the Warrant of Seizure and Sale issued in execution of that costs order; and
c)without prejudice to any lien asserted by the second defendant’s solicitors over the costs order of Deputy President Cremean.
THE COURT ORDERS THAT:
1.Upon payment of the sum of $26,021.92 into Court by the Plaintiff, the order for costs made in favour of the second defendant by Deputy President Cremean made in the Victorian Civil and Administrative Tribunal on 29 September 2003, and registered in this Honourable Court in this proceeding on 11 February 2004, be stayed until further order.
2.The sum paid into Court pursuant to paragraph 1 shall not be paid out without either the written consent of the parties or their solicitors, or further Order of the Court.
3.The Summons dated 7 June 2004 is adjourned to a date to be fixed.
4. The costs of this day are reserved.
5.Reserve liberty to apply to the parties on 48 hours notice in writing.”
Mr Burstyner in his first 2 September 2004 affidavit deposed that on 10 June 2004 before Byrne J counsel for Strangio raised “the possibility of Lewenbergs asserting an interest in the cost order the subject of the application” and that His Honour stated that he “would regard it inappropriate if Lewenbergs agitated their claim for a lien at the same time as acting for Mr Strangio in the application”.
On 16 August 2004 Lewenbergs ceased to act for Mr Strangio in the Supreme Court proceedings.
In support of the intervener applications before me counsel for Lewenbergs, Mr Williams, submitted as follows.
Mr Williams submitted that the funds were paid into Court by Pong as the price of a stay on judgment debts in each proceeding. Those debts arose pursuant to orders made by the Court and by VCAT in favour of the defendants (“the relevant orders”). By consent, the stay was granted upon the monies payable pursuant to the relevant orders (including certain enforcement costs and accrued interest) being paid into Court; thus the orders made in respect of the stay applications on 10 June 2004 (“the 10 June orders”). Lewenbergs performed the work which gave rise to the relevant orders being obtained. It has not been paid for that work. It asserts (and has always asserted) its solicitors’ lien in relation to the relevant orders. The lien extends to any fund recovered or created pursuant to those orders. The monies presently in court are such a fund. The assertion by the firm of its entitlement to a lien was expressly recognised in “Other Matters” in the 10 June Orders. The lien could not be agitated on that occasion because the firm was then representing Strangio in these two proceedings. It since ceased to do so, and accordingly was then free to asserts its own interests.
The submission continued that it is well recognised in Australia that a solicitor enjoys an enforceable, non-possessory lien over any fruits of litigation brought into existence wholly or partly as a result of the solicitor’s exertions: Carew Counsel Pty Ltd v French[1]. The solicitor’s lien is sometimes referred to as a “particular lien”. This designation is used to distinguish it from the solicitor’s wider right, called a “general lien”, to recover from a fund coming into his hands in one matter his costs in acting for the same client in other matters. Here, Lewenbergs has a particular lien as it performed the work which gave rise to the relevant orders. A solicitor’s particular lien is not a true lien, since it does not require possession of the fund over which it may be exercised. Rather, it is in the nature of a charge: Carew Counsel; Colour Point; Firth. Accordingly it survives the bankruptcy of the client: re Wedgwood: ex p. Bank of New Zealand[2]; and is not defeated by garnishee proceedings in relation to the fund over which it exists: Firth; Power v Primrose. Counsel for Lewenbergs noted that Pong resists the intervener claim on the basis that there is no solicitor’s lien because the firm is not in possession of the funds, which are in Court (“the possession point”); and Pong seeks at a future date to set off against the funds in Court other sums which will become payable to Pong by Strangio and/or Paradise when orders are taxed (“the set-off point”). Before me counsel for Lewenbergs submitted that the possession point is unsound because the solicitor’s “particular lien” is non-possessory; and the set off point misunderstands the effect of the lien. It is a charge over the funds, in priority to the interests of the firm’s clients in them. Pong’s entitlement to a set-off can be exercisable only against the interests of Strangio and Paradise in the funds. In view of the lien, the argument concluded, there is no such interest.
[1](2002) 4 VR 172 at 186-7 per Winneke P.. See also Firth v Centrelink (2002) 55 NSWLR 451; Worrell v Power & Anor (1993) 118 ALR 237; Philippa Power & Associates v Primrose [1997] 2 Qd. R 266; and Colour Point Pty Ltd v Markby’s Communication Group Pty Ltd [1998] FCA 1516.
[2](1993) 116 ALR 153.
Mr Barrett for the liquidator opposed Lewenbergs’ application both on the ground that it was inconsistent with the agreed position of the parties (including for whom Lewenbergs then acted) as formalised in the Byrne J Orders of 10 June 2004, and on the ground that it was just in all the circumstances to refuse it. Mr Barrett generally adopted the submissions of counsel for Pong, to which I shall shortly come.
Mr Strangio was self-represented before me. When the matter first came on, he wished to make no submission. Mr Strangio did not return to Court in the afternoon (this matter being intersected by other matters in the Practice Court) so I did not have the opportunity of hearing him in reply. In Mr Strangio’s affidavits of 25 August 2004 he deposed:
“I do not dispute the claim made by Lewenberg and Lewenberg to a lien over the sums payable to myself and/or Paradise Constructors Pty Ltd (in liquidation).”
He deposed that he had been invited by Lewenbergs to obtain independent legal advice before swearing the affidavits.
Mr Collins, who with Mr Andrew appeared for Pong, before me did not pursue the submission that no lien could ever arise. Rather, he submitted that in the circumstances of these applications the claim of Lewenbergs was both misconceived and premature. He submitted that it was misconceived because it was inconsistent with the Orders of Byrne J of 10 June 2004 and of relevant authority; and premature because any claim should await the taxation yet to be effected.
In my view, Mr Collins’ submissions are clearly correct. The Orders of Byrne J, which were by consent, are predicated upon the funds remaining where they were placed until the stated event. The provisions that the Orders were “stayed until further order” (paragraph 1) and were without prejudice to “the plaintiff’s assertion of a right to set-off” (paragraph 1(a) of Other Matters) and without prejudice to “any lien asserted by the secondnamed defendant’s solicitors” (paragraph 1(c) of Other Matters) do not override the basal provision of the Orders relevant to the present applications. That basal provision is:
“The sum is to remain in Court pending the determination of the plaintiff’s summons filed 4 June 2004 in proceeding no. 9154 of 2003 for taxation of the costs ordered by the Honourable Justice Mandie in that proceeding on 2 April 2004.”
To allow that basal provision to be overridden by the other above-quoted terms of the Order would be to allow the tail to wag the dog. Mr Williams’ submission that the taxation is merely quantification is not to the point; the Orders speak for themselves.
Further, as Mr Barrett correctly submitted, the terms of the letters of Mr Burstyner exhibited to his affidavit of 25 August 2004 support that that was the then intention of the parties.
Next, I consider Mr Collins is correct about the general law. The claim of the intervener cannot be better than the claim of the client: Windeyer J in Akki Pty Ltd v Martin Hall Pty Ltd & Anor[3]. One must treat the English authorities with caution because of the different pathway taken in England; but in Australia, the careful analyses of Windeyer J in Akki and of Doyle CJ in Cade Pty Ltd v Thomson Simmons & Anor (No. 2)[4] demonstrate that the court will not deprive a party of set-off merely because the set-off will have the effect of eliminating a fund over which a solicitor would otherwise have a lien.
[3](1994) 35 NSWLR 470 at 483.
[4](2000) SASC 369 at [16]. See also In the matter of UTSA Pty Ltd (in liquidation); In the matter of an application by McCann & Anor: Chernov J, 26 June 1998.
Although Mr Collins submitted that the strategy of Lewenbergs ceasing to act for Strangio before this Court was a “device”, Mr Collins noting that Lewenbergs continued to act for Strangio before VCAT, it is unnecessary for my conclusion to make such a finding and I do not.
I also agree with Mr Barrett that it is just in all the circumstances[5] to refuse the intervener applications. The parties went before Byrne J on an agreed basis and it would not be just to permit that fundamental now to be changed. Once the basal matter contemplated by the Orders comes to pass, that is, the taxation, the lien issue may be agitated. Not before. And that is not to say it would be successful even then: Akki and Cade.
[5]See Chernov J in UTSA above.
For those reasons I refuse leave for Lewenbergs to be joined as intervener in proceeding no. 7091 of 2003 and in proceeding no. 4491 of 2004 and for the relief sought in the intervener applications.
Costs ordinarily follow the event and subject to submission I shall order that Lewenbergs pay the costs of the intervener applications of Pong and of the liquidator. However I shall not make such Orders for fourteen days so that the parties if they wish may make submissions on the matters of costs. If submissions are made, they should be in writing, served on the other parties, and filed by 15 July 2005. I shall conclude the matters on the papers on 18 July 2005 with final orders.
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