Simpson v Rowe
[2011] VSC 149
•11 MARCH 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. S CI 2011 00972
| JOHN CHILMAN SIMPSON | Plaintiff |
| v | |
| ELIZABETH MARY ROWE (NEE MORGANTI) | Defendant |
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JUDGE: | HABERSBERGER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 11 MARCH 2011 | |
DATE OF JUDGMENT: | 11 MARCH 2011 | |
CASE MAY BE CITED AS: | SIMPSON v ROWE | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 149 | |
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Legal Practitioners – Barrister – Costs agreements with client – Lien over proceeds of any settlement or judgment under first costs agreement but not the second – “Fruits of the action” lien – Whether barrister has lien over proceeds of settlement apart from under costs agreement – Items to be included in quantification of lien.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms R. Annesley | McKean Park |
| For the Defendant | Mr D. Triaca | Hunt & Hunt |
HIS HONOUR:
This is an application by the plaintiff, John Chilman Simpson, a member of the Victorian Bar, for a declaration that he has a lien over any proceeds of settlement payable to the defendant, Elizabeth Mary Rowe, arising out of Supreme Court proceeding No.7151 of 2006 (“the 2006 proceeding”). In that proceeding Mrs Rowe was the plaintiff, and Mr Simpson acted for a considerable time as her counsel, from the start of the proceeding on 22 June 2006, when an ex parte injunction was obtained restraining any dealings with certain land, until about 23 December 2010. The hearing commenced in late October 2010 and continued through November and December. It was adjourned part heard on 20 December 2010. Eventually, the dispute was settled in late February 2011.
Mr Simpson had entered into a number of costs agreements with Mrs Rowe, presumably because, as was stated in those costs agreements, the solicitors acting for Mrs Rowe did not agree to be responsible for the payment of Mr Simpson’s fees. In those circumstances, Mr Simpson entered into the costs agreements directly with Mrs Rowe.
Under a costs agreement dated 23 February 2010 (“the February costs agreement”) it was provided in clause 7(b) that:
The Client acknowledges and agrees that the Barrister shall be entitled to exercise a lien over the proceeds of any settlement or judgment favourable to the Client obtained in the Matter in respect of all Fees outstanding in accordance with the terms of this agreement.
The costs agreement also had provision for a giving of notice of default which could bring the agreement to an end.
Following the giving of a notice of default on 24 June 2010, a new costs agreement was entered into between the plaintiff and the defendant on 20 August 2010 (“the August costs agreement”). In Recital D to that agreement it was stated that:
This costs agreement supersedes all previous costs agreements made between the Barrister and the Client in the Matter which are agreed to have been terminated with effect from the date of this document. This costs agreement may be enforced in the same way as any other contract.
Despite the similarity of much of the wording of the August costs agreement there was no equivalent to clause 7(b) of the February costs agreement, so that there was no written agreement concerning a lien in favour of the plaintiff. It is well established that a solicitor has a lien over the proceeds of a settlement or judgment in respect of which he or she has done work which has contributed to the money being payable to the client.[1] It is known as a “fruits of the action” lien. In all of the cases that I was referred to and in others that I have read, the context always seems to be a claim by a solicitor to exercise a lien. In days gone by that would be understandable because at one stage barristers were not able to sue to recover their fees. In more recent times the practice was that the solicitor who briefed the barrister was liable for his or her fees and the solicitor would then look to the client to put the solicitor in funds to pay the barrister's fees. As such there was no direct contractual relationship between the barrister and the client.[2]
[1]Ex parte Patience; Makinson v The Minister (1940) 40 SR(NSW) 96; Roam Australia Pty Ltd v Telstra Corporation Ltd [1997] FCA 980; Color Point Pty Ltd v Markby’s Communication Group Pty Ltd [1998] FCA 1516; Carew Counsel Pty Ltd v French [2002] VSCA 1; Firth v Centrelink [2002] NSWSC 564; Karam v Palmone Shoes Pty Ltd (No.2) [2010] VSC 82; Wilmoth Fields Warne v Castel Electronics Pty Ltd [2011] FCA 193.
[2]Halsbury’s Laws of England, Fourth Edition Reissue, Vol 3(1) “Barristers” paras 531-534.
In the absence of the written clause in the August costs agreement concerning a lien, there is a question as to whether a barrister would be in the same position as a solicitor. However, as Ms Annesley of counsel, who appeared for the plaintiff, submitted there is no reason why, where the solicitor is not responsible for counsel's fees and there is a direct contractual relationship between the barrister and the client, such a lien should not arise. No argument to the contrary was put on behalf of the defendant.
In my opinion, equity would recognise that it would be just where the barrister has done work which has contributed to the recovery of the judgment or the settlement proceeds, that the barrister should also be entitled to look to those proceeds for the payment of his or her fees.
Following the conclusion of the hearing in 2010, the plaintiff served a notice of default on the defendant requiring payment of some $42,000 of fees within 48 hours and when no such payment was made, the plaintiff returned the brief.
A number of arguments were raised by Mr Triaca of counsel, who appeared for the defendant, about the circumstances in which the notice of default was served, the discussions including offers and counteroffers that were made in the intervening period, and the consequences that might flow from such arguments. However, as I pointed out during argument, I am not in a position to determine such arguments at this stage. They may well have merit, and they may have the consequence that less or even no fees are owing.
Nevertheless, the cases are quite clear that the lien arises regardless of the fact that the amount of fees is not ascertained.[3] This is hardly surprising because, in the normal course of events, where solicitors are involved, the process of finalising the amount of the fees could take some time. It is clear that the lien arises when either a judgment is given in favour of the client or a settlement is entered into, and this occurs regardless of the fact that the fees may not be ascertained.
[3]Roam Australia Pty Ltd v Telstra Corporation Ltd [1997] FCA 980, 6 (Lehane J); Firth v Centrelink [2002] NSWSC 564, [35] (Campbell J).
Another requirement of the existence of a lien is that there be a causal connection between the work performed by the legal practitioner, to use a neutral term, and the eventual settlement or judgment.[4] It is also clear that the legal practitioner does not have to be still acting at the time of settlement or judgment.[5] The evidence disclosed that the plaintiff’s role included drawing pleadings, providing advice, conferring with the defendant and witnesses and appearing with junior counsel between 18 October and 20 December 2010 on more than 30 hearing days. It seems to me this work satisfies the requirement of a causal connection. Without the plaintiff’s involvement it would be unlikely that the defendant would have been in a position to negotiate the eventual settlement, albeit that the settlement occurred with the assistance of replacement counsel.
[4]Ex parte Patience; Makinson v The Minister (1940) 40 SR(NSW) 96, 103 (Jordan CJ); Carew Counsel Pty Ltd v French [2002] VSCA 1, [33] (Winneke P, with whom Buchanan and Vincent JJA agreed).
[5]Roam Australia Pty Ltd v Telstra Corporation Ltd [1997] FCA 980, 4 (Lehane J); Firth v Centrelink [2002] NSWSC 564, [35] (Campbell J).
I therefore consider that it is appropriate to make a declaration that the plaintiff does have a lien over any proceeds of the settlement payable to the defendant.
The plaintiff was initially hampered by virtue of the fact that, as he had withdrawn from acting for the defendant, he was not involved in the settlement negotiations and was therefore unaware of the precise terms of the settlement. A notice to produce was served requiring production of the deed of settlement. This was resisted by the defendant on the ground that it was a term of that deed that the document was confidential and was not to be disclosed to any other person under any circumstance without the prior written consent of all other parties to the deed, save that such disclosure might be required by law, or for the purposes of the deed. However, I made an order requiring production of the deed because it was a relevant document in this proceeding.
The deed of settlement was immediately produced. It was then revealed that contrary to some other more simpler settlements there were no immediate funds coming to the defendant as the proceeds of the settlement. Instead, in clause 14 of the deed, the order of priority of payments is set out, and eventually, if there is sufficient money, some funds will be payable to the defendant. The extent of any such payment is dependent on the price that the liquidators of the second defendant in the 2006 proceeding, the Association For Visual Impairment The Homeless And The Destitute Inc (In Liquidation) (“the Association”), are able to obtain for the balance of the land to be sold by them.
I do not see that the fact that there may eventually be nothing payable to the defendant, or only a very little amount which could be less than the amount claimed by the plaintiff, affects the plaintiff's right to a declaration that he has a lien over the proceeds. At the moment, the defendant’s entitlement under the deed of settlement is a chose in action, which may or may not result in a sum of money being payable.
The other issue that I should mention is that it would seem that there is going to be a dispute between the plaintiff and the defendant as to his entitlement to any fees. I have already mentioned the arguments arising out of the events of 20 to 23 December 2010. There was in evidence an email in the name of the defendant to the plaintiff's clerk, which indicated that the defendant would be seeking to tax all of the plaintiff's bills back to 2006, pursuant to which he had already been paid some $900,000. And, of course, it was also said that the defendant would seek to tax the fees which the plaintiff claimed were outstanding. They were said to amount to $94,489.50, part of which, approximately $42,000, was for fees that allegedly should have been paid in December, and the remaining $52,000 approximately was in respect of amounts held back pursuant to the February costs agreement. It was provided in that agreement that four-fifths of the plaintiff's bills would be paid promptly by the defendant and that one-fifth would be held back and would become payable in the event that there were:
proceeds of any settlement or judgment favourable to the Client from which the balance of 1/5th Fees incurred but not paid can be satisfied.
There may well be argument about whether the one-fifth fees are payable under that clause or whether those that arose prior to the entry into the August costs agreement were still payable or whether they had been waived by the termination of the February costs agreement and the entering into the new costs agreement.
It was also said in communications between the parties that the defendant would be seeking to make a claim against the plaintiff for negligence in respect of earlier work performed by him.
All of this indicates that there may well be a lengthy battle between the plaintiff and the defendant over his entitlement to fees. But, as I have said, I do not consider that these potential disputes destroy the lien or prevent any orders being made in the plaintiff’s favour.
The evidence also establishes that apart from the unpaid fees claimed by the plaintiff, fees are also payable to the replacement counsel, the junior counsel and to the defendant's solicitors. They might also claim a lien if they have not been paid by the defendant at the time the proceeds of the settlement are to be paid to her. If the proceeds are insufficient to pay out all of the entitlements of the legal practitioners then there would probably have to be some sharing pari passu between them because, as Mr Triaca submitted, the plaintiff should not get all of his claim pursuant to an order made by the Court to the prejudice of the other legal practitioners.
Further, the deed of settlement provides that when moneys are payable to the defendant they are to be paid by the liquidators of the Association from the net proceeds of the sale of the land. It also provides that the payment to the defendant is to be to the defendant's solicitors, Hunt & Hunt. Ms Annesley submitted that if any proceeds were paid to Hunt & Hunt, the solicitors would most likely acquire a common law lien which would possibly rank in priority to the plaintiff's claimed lien and therefore that would be prejudicial to his claim.
The proposed order sought by the plaintiff after the declaration was that the sum of money, the quantification of which I will come to in due course, should be paid into Court from the proceeds of the settlement of the 2006 proceeding on account of the plaintiff's lien until such further order of the Court. Over the luncheon adjournment, that was amended to read that “the sum be paid by the liquidators from any amount payable to the defendant in accordance with clause 14(d) of the deed of settlement entered into in the 2006 proceeding and attached and marked with the letter A, on account of the plaintiff's lien until such further order of the Court”.
The order I have drafted is similar to that but it does not attach the deed of settlement. I do not think that it should be attached. It is confidential to the parties in the 2006 proceeding and I think the objective can be attained without having it as part of the Court order and therefore open to anyone who wanted to search the Court file.
The next question is, what sum of money should be preserved by any Court order, either to meet what by then might have become the plaintiff's established entitlement to fees or to be preserved pending the outcome of any dispute over his fees. As I understand it, because the bills in respect of which the plaintiff now sues have not been taxed, they will have to be taxed before he has any entitlement, so that it is anticipated that, inevitably, the costs of a taxation will be incurred.
The first item is the amount of fees claimed to be outstanding which, as I have said, is $94,489.50. Whilst the claim is disputed, the calculation of the alleged entitlement was not.
Secondly, there is a claim for interest of $3061.24 which, as I understand it, was said to be the amount of interest accruing at 6.5 per cent for six months. That calculation was made on the basis that it was likely that there would be no payment for that period. The defendant disputed that interest should be included. However, it seems to me that it would be appropriate to include interest for one or other of two reasons. First, it is a usual incident of equitable liens that they bear interest.[6] Secondly, it may well be that, in due course, the plaintiff might be able to mount a claim for interest on his unpaid fees under the provisions of the Supreme Court Act 1986. I reiterate that at this stage I am not actually awarding interest, but merely making provision for there to be a sum to which the plaintiff can look for payment of his claim for interest if he is successful in the dispute over fees.
[6]In Re Drax; Savile v Drax [1903] 1 Ch 781, 796 (Cozens-Hardy LJ); Firth v Centrelink [2002] NSWSC 564, [118]-[119] (Campbell J).
I will deal with the fourth item before considering the third. The fourth item was for the costs of this application, which were suggested to be up to $7500. This seems to be a recognised head of entitlement to add into the lien.[7] Were it not for the clear statements in the cases dealing with liens that this item could be included, I might well have thought that it went beyond the idea of the lien being in respect of fees for work done that has resulted in the settlement. Probably the rationale is that if the legal practitioner is forced to take legal proceedings to have his or her right recognised with respect to the lien, then it is appropriate, if that is successful, that the lien should extend also to those costs. There was no argument about the quantum of that amount and, of course, again it is not saying anything other than that amount is to be included if indeed any money is forthcoming to the defendant pursuant to the settlement.
[7]In Re Meter Cabs [1911] 2 Ch 557, 562 (Swinfen Eady J).
The third item sought was the amount of $22,500 to cover the costs of the anticipated taxation. I have real doubt about the entitlement to include the costs that might be involved in the legal practitioner quantifying the amount of his or her fees. However, in Firth v Centrelink[8] Campbell J held that the solicitor, Mr Firth, had a lien not only in respect of the amount of his unpaid fees plus interest, but also in respect of the costs of suing the client, Mr Koushkarian, and obtaining judgment and in respect of the costs of defending an application by Mr Koushkarian to set aside that judgment. However, his Honour held that the lien did not include the costs of attempted execution.
[8][2002] NSWSC 564, [117], [120].
The dispute in that case was that all of the proceeds of the settlement which Mr Firth's efforts had brought about had been paid to Centrelink, pursuant to a garnishee notice. However, pursuant to his Honour's judgment, Mr Firth was able to look to Centrelink to disgorge the amount of his lien, which as I have said included not only the amount of fees but the costs of successfully suing for the fees and resisting an attempt to set aside judgment.
On that basis, it seems to me that it is certainly arguable, as it has in fact been held, that the costs of establishing the entitlement in terms of the quantification of the amount of the lien should also be included in any order. There was no challenge to the amount of $22,500.
I considered that the terms of order being sought, which require the liquidators to pay money into Court rather than to the defendant, were akin to an injunction in that it interferes with rights otherwise established, and was simply a holding order pending the outcome of the apparent dispute between the plaintiff and defendant over the plaintiff's entitlement to fees. In those circumstances I indicated to the plaintiff's counsel that I thought the application could only be successful on the basis of the plaintiff giving the usual undertaking as to damages. Over the luncheon adjournment instructions were obtained and that undertaking was given.
In my opinion, the plaintiff is entitled to the costs of this application. The application was doing nothing more than recognising that the plaintiff has a lien over any proceeds of settlement for any outstanding fees and seeking some means of securing the payment of those fees. I consider that this matter could and should have been resolved by agreement between the parties and yet each of them has been put to the expense of coming along to Court to argue about a number of matters, many of which, as I have said, are not for determination by me today. In those circumstances I think the plaintiff, having been successful, is entitled to his costs of the summons.
As I have indicated, the plaintiff sought to include in the amount over which the lien was said to arise, an amount for the costs of this application. In those circumstances, whilst the costs of this application can in the interim be taxed or agreed, it would not be appropriate, in my opinion, nor indeed was it sought by the plaintiff's counsel, that he also have the opportunity to enforce that order. I therefore consider that payment of those costs should be stayed until further order. When it has become clear whether or not the settlement has generated any funds for the defendant, application could be made to lift the stay at that stage.
The order I therefore propose to make is:
1.Declare that the plaintiff has a lien over any proceeds of the settlement of proceeding No.7151 of 2006 payable to or at the direction of the defendant in the sum of $127,550.74 calculated as follows:
(a) claim for outstanding fees $94,489.50;
(b) claim for interest $3061.24;
(c) claim for costs of taxation $22,500; and
(d) claim for costs of this proceeding $7500.
2.Order that from the amounts potentially payable to the defendant pursuant to clause 14 of the Deed of Settlement dated 22 February 2011, and made between the defendant, Bruno Anthony Robert Seccatore and Daniel Peter Juratowitch in their capacity as the liquidators of the Association For Visual Impairment The Homeless And The Destitute Inc (In Liquidation) (“the liquidators”) and a number of other persons and companies, the liquidators first pay into Court the sum of $127,550.74 before paying any other amount to the defendant or her solicitors Hunt & Hunt on account of the plaintiff's lien, such sum to await the further order of the Court. In the event that the amount payable to the defendant as aforesaid is less than $127,550.74 then the liquidators are to pay all of such lesser sum into court.
3Order that the defendant pay the plaintiff's costs of the summons filed 4 March 2011, such costs to be taxed in default of agreement.
4.Order that payment of such costs be stayed until further order of the Court.
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