Trkulja v Efron
[2014] VSCA 76
•16 April 2014
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2013 0185
| MILORAD TRKULJA | Appellant |
| v | |
| GRAEME DAVID EFRON trading as EFRON & ASSOCIATES | Respondent |
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| JUDGES | WARREN CJ & SANTAMARIA JA |
| WHERE HELD | MELBOURNE |
| DATE OF HEARING | 21 February 2014 |
| DATE OF JUDGMENT | 16 April 2014 |
| MEDIUM NEUTRAL CITATION | [2014] VSCA 76 |
| JUDGMENT APPEALED FROM | Graeme David Efron trading as Efron & Associates v Milorad Trkulja (aka Michael Trkulja) S CI 2013 05736, Supreme Court of Victoria, Practice Court, 13 November 2013 (Sloss J) |
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PRACTICE AND PROCEDURE – Interlocutory order - Order for the preservation of assets – Asset freezing order - Whether right of appeal – Whether injunction within s 17A of the Supreme Court Act 1986 (Vic) – Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 – Forster v Legal Services Board [2013] VSCA 131.
LEGAL PRACTITIONERS – Solicitor – ‘Fruits of the action’ lien – Risk of dispersal of fund subject to lien – Order for preservation of fund – Test – Good arguable case – Sufficiency of evidence.
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| Appearances: | Counsel | Solicitors |
| For the Appellant | Mr P Zappia with Mr D Yarrow | Victorian Bar’s Court of Appeal Duty Barrister Scheme |
| For the Respondent | Mr L M F Watts | Efron & Associates |
WARREN CJ:
SANTAMARIA JA:
Application
By summons dated 26 November 2013, Milorad Trkulja (‘the appellant’) seeks leave to appeal from the orders of a judge in the Trial Division (‘the primary judge’) made 13 November 2013.[1]
[1]On 14 February 2014, the appellant filed an Amended Summons. In the Amended Summons, the appellant applied for leave to file a notice of appeal in the form of the proposed amended notice of appeal discussed below.
The nature of the process
The orders of the primary judge were made in the following circumstances. On 4 November 2013, proceedings by Originating Motion were commenced (‘the proceeding’). In the proceeding, Graeme David Efron trading as Efron & Associates (‘Efron’) was plaintiff and Trkulja was defendant. During 2012, Efron had provided legal services to the appellant in proceedings commenced by the appellant against Yahoo! Inc LLC & Yahoo!7 Pty Ltd (‘the Yahoo proceeding’)[2] and against Google Inc LLC & Google Australia Pty Ltd (‘the Google proceeding’).[3] The appellant was successful in both proceedings and has been paid and has become entitled to be paid substantial awards of damages and costs.
[2]Proceeding No SC I 2009 10916; Trkulja v Yahoo! Inc LLC [2012] VSC 88; Trkulja v Yahoo! Inc LLC (No 2) [2012] VSC 217; Trkulja v Yahoo! Inc LLC (No 3) [2012] VSC 228.
[3]Proceeding No SC I 2009 10096; Trkulja v Google Inc LLC (No 5) [2012] VSC 533.
A dispute has arisen between Efron and the appellant in respect of the payment by the appellant of the fees demanded by Efron. The dispute has taken different forms. But, Efron contends that he agreed to the retainer on a ‘No Win No Fee’ basis: the appellant contends that Efron agreed to provide his services on a pro bono basis. Efron has applied to the Court for a lien in respect of his costs and that the lien attach to any moneys that have been or become payable to the appellant in respect of the proceedings.
In the Originating Motion, Efron has sought the following relief:
1.A Declaration that the Plaintiff has a lien over monies which the Defendant has or may receive from Yahoo! Inc LLC or Yahoo!7 Pty Ltd ACN 089 187 100 in respect to or arising out of the Defendant’s claim for damages and costs against Yahoo! Inc LLC or Yahoo!7 Pty Ltd ACN 089 187 100 in Proceeding No SCI 2009 10916.
2.A Declaration that the Plaintiff has a lien over monies which the Defendant has or may receive from Google Inc LLC and Google Australia Pty Ltd ACN 102 417 032 in respect to or arisigng out of the Defendant’s claim for damages and costs against Google Inc and Google Australia Pty Ltd in Proceeding No SCI 2009 10096.
3.An Order that from the amounts paid to or potentially payable to the Defendant in respect to costs arising in out of:
(a)Proceeding No SCI 2009 10916 – Trkulja –v- Yahoo! Inc LLC & Yahoo!7 Pty Ltd …;
(b)Proceeding No SCI 2009 10096 – Trkulja –v- Google Inc LLC and Google Australia Pty Ltd …
to be paid to the Plaintiff’s [sic] on account of the Plaintiff’s lien.
…
On 4 November 2013, Efron issued a summons in the proceeding in which he sought the following interlocutory orders:
…
3.That pending the hearing and determination of this application or further order, the Defendant, his servants or his agents be restrained from:
(a)Entering into any agreement with Google Inc LLC or Google Australia Pty Ltd ACN 102 417 032 or their solicitors for payment of the costs in respect to proceeding No SCI 2009 10096 in the Supreme Court of Victoria; and
(b)Accepting any payment from Google Inc LLC or Google Australia Pty Ltd ACN 102 417 032 or their solicitors for payment of the costs of proceeding No SCI 2009 10096 as payment of the costs in respect to proceeding No SCI 2009 10096 in the Supreme Court of Victoria.
(c)Entering into any agreement with Yahoo! Inc LLC or Yahoo!7 Pty Ltd ACN 089 187 100 or their solicitors for payment of the costs in respect to proceeding No SCI 2009 10916 in the Supreme Court of Victoria; and
(d) Accepting any payment from Yahoo! Inc LLC or Yahoo!7 Pty Ltd ACN 089 187 100 or their solicitors for payment of the costs of proceeding No SCI 2009 10916 as payment of the costs in respect to proceeding No SCI 2009 10916 in the Supreme Court of Victoria.
4.Further or in the alternative, pending the hearing and determination of the proceeding or further Order, the Defendant, his servants or agents pay into court any monies paid or to be paid by Google Inc LLC or Google Australia Pty Ltd ACN 102 417 032 pursuant to the Order of the Court made on 26 November 2012 in proceeding No SCI 2009 10096, a sum sufficient to pay the costs and disbursements properly incurred by Efron & Associates in the course of conducting proceeding No SCI 2009 10096 on behalf of the Plaintiff, being an amount of $116,728.50.
5.Further or in the alternative, pending the hearing and determination of the proceeding or further Order, the Defendant, his servants or agents pay into Court any monies paid or to be paid by the Yahoo!Inc LLC or Yahoo!7 Pty Ltd ACN 089 187 100 pursuant to the Court Order made in proceeding No SCI 2009 10916 on 1 June 2012, a sum sufficient to pay the costs and disbursements properly incurred by Efron & Associates in the course of conducing this action on behalf of the Plaintiff in the amount of $64,015.55.
…
Application for interlocutory orders
On 13 November 2013, the summons in which interlocutory orders were sought was called on for hearing before the primary judge.
When the matter was called on, the appellant asked for an adjournment. That application was refused.
Interlocutory orders
In the event, the primary judge made orders on the summons. Those orders are comprehensive. They have been attached to these reasons as Appendix 1.
In effect, upon the usual undertaking for damages having been given, orders were made restraining the appellant from entering into a binding agreement with either the Yahoo parties or the Google parties in respect of the payment of his costs in the Yahoo proceeding or the Google proceeding. Further, the judge made orders that the appellant pay, without delay into the Senior Master’s Common Fund No. 1, any amount of money to be paid to the appellant in those proceedings that would be sufficient to meet the payment of the estimated costs and disbursements of Efron for the work done by his firm in those proceedings on behalf of the appellant together with other amounts sufficient to meet the payment of estimated costs in both the current proceeding and the VCAT proceeding.[4]
[4]The parties were agreed that the orders are proleptic. They apply to any moneys that hereafter come into the appellant’s hands.
Right of appeal
The present matter was commenced as an application for leave to serve a notice of appeal. Plainly, it was thought that such leave was necessary. On any account, the orders made by the primary judge were orders ‘in an interlocutory application’. Generally, leave is required to appeal such orders. If, however, the orders were in the nature of an injunction under s 17A of the Supreme Court Act 1986 (Vic) (‘the Act’), the appellant has a right of appeal to the Court of Appeal.[5]
[5]Some days before the hearing, the Court drew this to the attention of the parties and informed them to be prepared to argue the appeal and to do so on the basis that the leave would be granted to file the proposed amended notice of appeal. Further, on 17 February 2014, the President of the Court of Appeal, made a determination pursuant to s 11(1A) of the Supreme Court Act 1986 (Vic) that, in this case, two Judges of Appeal constitute and may exercise all the jurisdiction and powers of the Court of Appeal.
Section 17A of the Act provides:
Restriction on Appeals
…
(4) Subject to subsection (4A) or (4B), an appeal does not lie to the Court of Appeal—
(a) from an order allowing an extension of time for appealing from a judgment; or
(b) without the leave of the Judge of the Court or Associate Judge constituting the Trial Division or of the Court of Appeal, from a judgment or order in an interlocutory application, being a judgment or order given by the Trial Division constituted by a Judge of the Court or an Associate Judge, as the case requires, except in the following cases—
(i) …
(ii)cases of granting or refusing an injunction or appointing a receiver.
…
In his application for interlocutory relief, Efron did not identify the juristic nature of the orders he was seeking. In his written submission, he said the ‘issue before the Court is preservation of the Plaintiff’s entitlement to fees pending the outcome of the dispute over his fees’. Accordingly, it was arguable that the Court was being asked to make a ‘freezing order’ or an asset preservation order[6] rather than an interlocutory injunction.
[6]The Court has power to make a freezing order either under its inherent jurisdiction or under the Supreme Court (General Civil Procedure) Rules2005 (Vic) O 37A.
During the hearing of the application, the primary judge made frequent reference to the application being one for the securing of a fund or for the effective preservation of a fund of money. Reference was also made to the purpose of the order being to prevent the dissipation of the fund. For example, the judge explained the application to the appellant as follows:
So what Mr Efron’s asking the court to do today is to preserve the fund of money so that if and when it comes in, he will have the ability to maintain his arguments about his entitlement to be paid out of that fund of money …
…..
[b]ut what the court’s being asked to do today is to protect the subject matter of the litigation so that everybody can have their argument about it and that while VCAT’s going on, the money can be preserved ….[7]
[7]Transcript of Proceedings, Graeme David Efron trading as Efron & Associates v Milorad Trkulja (Supreme Court of Victoria, S CI 2013 05736, Sloss J, 13 November 2013) (‘Transcript’) page 10, line 2-6; line 23-27.
Further, the orders made by the primary judge appear to be in the nature of such a ‘freezing order’ or an asset preservation order. Paragraphs 4, 5, and 6 of the orders are critical. It will be noticed that, in ‘Other Matters’, the order contains the following:
1. The orders made in paragraphs 4, 5 and 6 below are made:
(a)for the confined purpose of preserving the amounts payable by way of costs to the Defendant as the successful Plaintiff in proceeding numbers SC I 2009 10096 and SC I 2009 10916 in the Supreme Court of Victoria so as to prevent frustration of the process of the Court; (emphases added).
In our opinion, the reference in s 17A(4)(b)(ii) of the Supreme Court Act 1986 (Vic) to ‘injunction’ includes an ‘asset freezing’ order or an ‘asset preservation’ order, even though such orders are not made to ‘protect against invasion or threatened invasion, or other unconscientious conduct or exercise of legal or equitable rights’.[8] First, if one considers the substance of the matter, an injunction is an order in which a court enjoins or directs conduct. A freezing order or an asset preservation order characteristically enjoins or directs conduct. Second, injunctions are no longer confined to the equitable jurisdiction; apart from anything else, many statutes authorize the granting of injunctions.[9] Third, in 1994, when s 17A was introduced,[10] such orders were universally referred to as ‘Mareva injunctions’. Fourth, s 37(3) of the Supreme Court Act 1986 (Vic) confers jurisdiction on the Court to ‘grant an interlocutory injunction’ under s 37(1) ‘restraining a party to a proceeding from removing from Victoria or otherwise dealing with assets located within Victoria, whether or not that party is domiciled, resident or present within Victoria.’[11]
[8]Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, 396. In Forster v Legal Services Board [2013] VSCA 131, Harper JA cited the sixth edition of I C F Spry, The Principles of Equitable Remedies (Law Book Co, 6th ed, 2001), 514 (‘Spry’) for the proposition ‘(t)he freezing order is in the nature of an injunction’; at [43]. This Court will not depart from its previous decisions unless a decisions is ‘plainly wrong’; Commissioner of State Revenue v Challenger Listed Investments Ltd (2011) 34 VR 617, 621; 84 ATR 576, 581 (Buchanan and Tate JJA and Sifris AJA). In the sixth edition of Spry (and in every subsequent edition), Mareva orders are described as ‘injunctions’; but see Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 where Gaudron, McHugh, Gummow and Callinan JJ distinguished the jurisdiction to order injunctions from the jurisdiction to make freezing orders. They then considered the distinction between, on the one hand, the requirement in equity that an injunction is available only to protect against the invasion or threatened invasion, or other unconscientious conduct or exercise of legal or equitable rights and, on the other, the powers and remedies of courts, frequently supplemented by statute, to protect the integrity of their processes once set in motion. They said (at 399): ‘In these various ways, the courts developed doctrines and remedies, outside the injunction as understood in courts of equity, to protect the integrity of its processes once set in motion. The Mareva order for the preservation of assets should be seen as a further development. There is no harm in the use of the term Mareva to identify that development, provided the source of the remedy is kept in view when considering the form of the remedy in each particular case.’ (citation omitted).
[9]Unlike other restraining orders, Mareva orders are granted in respect of property in which the plaintiff has no legal or equitable entitlement.
[10]See Constitution (Court of Appeal) Act 1994 (Vic) s 20. Section 20 is found in Part 3 which is entitled ‘Amendment of Supreme Court Act 1986’.
[11]Supreme Court Act 1986 (Vic) s 37(1) provides: ‘The Court may by order, whether interlocutory or final, grant an injunction or appoint a receiver if it is just and convenient to do so.’
Accordingly, the appellant has a right of appeal in respect of the orders made by the primary judge.
As will appear below, the principles that govern the making of a freezing order differ from those that govern the making of an interlocutory injunction in aid of a legal or equitable right.
Present application
The present application is supported by the two customary affidavits. In his first affidavit sworn 15 January 2014, the appellant has exhibited his proposed amended notice of appeal which, in this application, he is seeking leave to serve on Efron. In his second affidavit also sworn 15 January 2014, the appellant gave notice that he would apply at the hearing for leave to amend that proposed notice of appeal. At the hearing of the appeal, the Court gave him that leave.
Material filed in support of application before primary judge
In support of his application, Efron filed an affidavit affirmed 4 November 2013. That affidavit supported 72 exhibits. In his affidavit, Efron has described the work that his firm performed on behalf of the appellant in respect of the Yahoo proceeding and the Google proceeding which, he contends, gives rise to his entitlement to a solicitor’s lien. It also explains why he contends that the appellant has said and done things which mean that there is a risk that any moneys that have been or will become payable to the appellant in respect of the proceedings may be dissipated by the appellant such as to destroy the lien. It will be necessary to explain below some of the material on which Efron has relied.
In opposition to the application, the appellant filed an affidavit sworn 12 November 2013. There was one exhibit to that affidavit. That exhibit comprised the appellant’s application to the Victorian Civil and Administrative Tribunal (‘VCAT’) which is described below. In his affidavit, the appellant does not deny that Efron has provided legal services to him. At the hearing of the appeal, the substance of the appellant’s case was explained, and this case can be seen, albeit dimly, in his affidavit.[12] His counsel said that the arrangement was that Efron had agreed to appear on a pro bono basis, and that, if the appellant was successful, Efron could be paid out of whatever the defendants in the Yahoo proceeding and the Google proceeding were ordered to pay the appellant by way of costs. Counsel explained that the barrister who appeared for the appellant had agreed to appear on the same basis. Given that the appellant had retained counsel on that basis, Efron had no liability to pay counsel’s fees, and, accordingly, any lien to which he might otherwise have been entitled should not include any amount referable to counsel’s fees.[13] The appellant also said that he had retained a firm to prepare bills in taxable form for service on the judgment creditors in the two proceedings and that that same firm was responsible for responding to a summons issued by Efron in the Costs Court to have taxed the solicitor-client costs owed by the appellant to Efron.
[12]In fairness, the affidavit appears to have been prepared by the appellant himself.
[13]This is a matter of some significance. The primary judge was told that Efron’s ‘outstanding fees for both proceedings total $180,734.05, of which $123,200 represents outstanding fees owing to counsel…’.
VCAT proceeding
In his affidavit, Efron has exhibited:
(a) Conditional Costs Agreements; and
(b) Disclosure Statements
said to be made pursuant to the Legal Profession Act 2004 (Vic). Two of those are in respect of the Yahoo proceeding[14] and two are in respect of the Google proceeding.[15]
[14]The costs agreement and the disclosure statement in respect of the Yahoo proceeding appear to have been sent to the appellant on 7 February 2012. In his affidavit, the appellant says ’The Plaintiff never provide(d) Costs agreement to the Defendant.’ This may account for the fact that, in the VCAT proceeding, the appellant seeks no relief in respect of the costs agreement exhibited by Efron to his affidavit.
[15]The costs agreement and the disclosure statement in respect of the Google proceeding appear to have been sent to the appellant on 30 Mach 2012.
In his affidavit, the appellant exhibited an application made by him in VCAT. The application to VCAT is dated and sealed on 8 November 2013. In that application, the appellant has sought the following relief:
1.To Set Aside Agreement between Efron & Associate and Michael Trkulja dated 11 October 2012.[16]
2.Produce Full Accounting in Taxable Form for all charges of each legal service.
3.Produce Solicitor Trust Account Receipts for all money that they received from the Applicant.
4.Produce all Disbursements receipts that your firm have paid on behalf of the Applicant.
5.Produce Agreement between Efron & Associate and Christopher Dibb Barrister and the Applicant.
[16]In that part of the pro forma VCAT application made under rule 4.03 of the VCAT Rules, there is a heading ‘Reason for application’. Under that heading, there is a manuscript addition to the first prayer for relief. It reads ‘AND/7/2/2012’.
The reference in the VCAT proceeding to the agreement dated 11 October 2012 appears to be a reference to a letter given to the appellant by Efron on that date in which the appellant signed an acknowledgment of various matters, including that ‘There was no agreement whatsoever for us (Efron) to be paid after taxation’ and that he (the appellant) will be responsible for any shortfall of our fees from the amount recovered from taxation.’[17] That letter is further described in paragraph 71 below.
[17]The copy of this letter exhibited to Efron’s affidavit is unmarked save for what purports to be the appellant’s signature. The appellant has exhibited another copy of the letter to his affidavit (as part, it seems, of his VCAT application). His copy of the letter is annotated.
Transcript of proceedings before the primary judge
On 19 February 2014, Efron filed a further affidavit. Exhibited to that affidavit was a transcript prepared by the Victorian Government Reporting Service of the course of proceedings before the primary judge on 13 November 2013.
Amended notice of appeal
The grounds of appeal in the amended notice of appeal are as follows:
GROUND 1
The learned primary judge erred by failing to grant the appellant’s application for an adjournment. The learned primary judge should have, having regard to the circumstances of the appellant, granted his application.
GROUND 2
The learned primary judge erred by failing to provide adequate, or any, reasons for decision. The learned primary judge should have provided adequate reasons, whether orally or in writing.
GROUND 3
The learned primary judge erred by making orders 4 and 5 of her orders of 13 November 2013 without a proper evidentiary basis and without properly evaluating the evidence before the court. Having regard to the evidence available, the learned primary judge should not have made orders 4 and 5.
GROUND 4
The learned primary judge erred by making orders 4 and 5 of her orders of 13 November 2013 without having proper regard to the interests of third parties affected by those orders. Having regard to the interests of third parties, the learned primary judge should not have made orders 4 and 5.
Jurisdiction of Court of Appeal where primary judge has made a freezing order
Two matters require preliminary consideration. First, what is the nature of the jurisdiction that the Court of Appeal is exercising in the present matter? Second, what are the principles that govern an application for an interlocutory freezing order?
The present appeal is by way of rehearing. The identification of ‘specific error is not necessary and, if this court thinks the decision was wrong, it is not saved because it might be described as embodying a view that was reasonably open to the trial judge.’[18]
[18]Per Buchanan JA in Kelso v Tatiara Meat Co Pty Ltd (2007) 17 VR 592, 594 [2]. The full reference is as follows: ‘… that s 134AD of the Accident Compensation Act 1985 …. does not create a new type of appeal, but rather emphasises that the Court of Appeal is to conduct an appeal by way of rehearing in accordance with the principles stated by the majority in Warren v Coombes. The appellant bears an onus to persuade this court that the decision below was wrong, but the identification of specific error is not necessary and, if this court thinks the decision was wrong, it is not saved because it might be described as embodying a view that was reasonably open to the trial judge.’ (citation omitted). See also, Allesch v Maunz (2000) 203 CLR 172, 180-181 [23]: ‘For present purposes, the critical difference between an appeal by way of rehearing and a hearing de novo is that, in the former case, the powers of the appellate court are exercisable only where the appellant can demonstrate that, having regard to all the evidence now before the appellate court, the order that is the subject of the appeal is the result of some legal, factual or discretionary error, whereas, in the latter case, those powers may be exercised regardless of error. At least that is so unless, in the case of an appeal by way of rehearing, there is some statutory provision which indicates that the powers may be exercised whether or not there was error at first instance. And the critical distinction, for present purposes, between an appeal by way of rehearing and an appeal in the strict sense is that, unless the matter is remitted for rehearing, a court hearing an appeal in the strict sense can only give the decision which should have been given at first instance whereas, on an appeal by way of rehearing, an appellate court can substitute its own decision based on the facts and the law as they then stand.’ (Gaudron, McHugh, Gummow and Hayne JJ) (citations omitted).
The principles that govern an application for an interlocutory freezing order are clear. In Patterson v BTR Engineering (Aust) Ltd,[19] Gleeson CJ discussed the nature of a freezing order. He said:
The remedy is discretionary, but it has been held that, in addition to any other considerations that may be relevant in the circumstances of a particular case, as a general rule a plaintiff will need to establish, first, a prima facie cause of action against the defendant, and secondly, a danger that, by reason of the defendant’s absconding, or of assets being removed out of the jurisdiction or disposed of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied.[20]
[19](1989) 18 NSWLR 319.
[20]Ibid 321-322. See GE Dal Pont, Equity and Trusts in Australia (Thomson Reuters, 5th ed, 2011) [32.05]-[32.135]( ‘Dal Pont’).
Meagher JA, who broadly agreed with Gleeson CJ said:
To obtain such an injunction a plaintiff must prove two ingredients: first, that he has a prima facie case against the defendant, and secondly, that there is some risk of a dispersal by the defendant of his assets so as to defeat the value of the plaintiff's victory if he ultimately wins.[21]
[21](1989) 18 NSWLR 319, 326; Rogers AJA also broadly agreed with Gleeson CJ but felt it was inappropriate to adopt categorical requirements for the grant of Mareva type relief in the way Meagher JA did.
In Frigo v Culhaci,[22] the Court said:
A plaintiff must establish, by evidence and not assertion, that there is a real danger that, by reason of the defendant absconding or removing assets out of the jurisdiction or disposing of assets within the jurisdiction, the plaintiff will not be able to have the judgment satisfied if successful in the proceedings. There has been much debate as to the precise degree of risk which must be shown: see generally Patterson. What is clear is that mere assertions that the defendant is likely to put assets beyond the plaintiffs reach will not be enough: Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG; Patterson.[23]
[22][1998] NSWCA 88.
[23]Ibid 8 (citation omitted). See also Victoria University of Technology v Wilson [2003] VSC 299 (Redlich J); Robmatjus Pty Ltd v Violet Home Loans Australia Pty Ltd [2007] VSC 165 (Hargrave J).
Solicitors’ liens for their costs
As indicated above, Efron is seeking final relief in the nature of a lien over the proceeds and costs payable to the appellant in the Yahoo and Google proceedings. Solicitors are entitled to the assistance of the Court to protect their claim for costs where property has been recovered as a result of their exertions.[24]
[24]Akki Pty Ltd v Martin Hall Pty Ltd (1994) 35 NSWLR 470, 473-474 (Windeyer J). In Halsbury’s Laws of England (Butterworths, 4th ed, 1995) Vol 44(1), 208 [254], the principle is described as follows: ‘Apart from statute a solicitor has at common law a lien which may be actively enforced over a fund or the proceeds of a judgment recovered for the client in the course of litigation or arbitration by the solicitor’s exertions ...’ (citations omitted). The reference to ‘common law’ in this statement of principle is used to distinguish rights created by statute. See Worrell v Power & Power (1993) 46 FCR 214, 222; 118 ALR 237, 244.
In Ex Parte Patience; Makinson v The Minister,[25] Jordan CJ said:
A solicitor has no lien for his costs over any property which has not come into his possession. If, however, as the result of legal proceedings in which the solicitor has acted for the client, the client obtains a judgment or award or compromise for the payment of money, although the solicitor acquires no common law title to his client’s right to receive the money or to any part of that right, he acquires a right to have his costs paid out of the money, which is analogous to the right which would be created by an equitable assignment of a corresponding part of the money by the client to the solicitor. That is to say, the solicitor has an equitable right to be paid his costs out of the money; and if he gives notice of his right to the person who is liable to pay it, only the solicitor and not the client can give a good discharge to that person for an amount of the money equivalent to the solicitor’s costs: Welsh v Hole. If the person liable to pay refuses, after notice, to pay the costs of the solicitor, the solicitor may obtain a rule of Court directing that the amount of his costs be paid to him and not to the client; and payment by the judgment debtor to the client after notice of the solicitor’s claim is no answer to an application for such a rule: Read v Dupper; Ormerod v Tate; Ross v Buxton. Further, if the client and a judgment debtor make a collusive arrangement for the purpose of defeating the solicitor’s right, the Court will enforce that right against the judgment debtor notwithstanding the arrangement and notwithstanding that no notice of the solicitor’s claim had been given to the judgment debtor prior to the arrangement: Ross v Buxton. These special rights have no resemblance to a solicitor’s general possessory lien, although they are sometimes miscalled liens: Bozon v Holland. In Barker v St Quinton Parke B said that “the lien which an attorney is said to have on a judgment (which is, perhaps, an incorrect expression) is merely a claim to the equitable interference of the Court to have that judgment held as security for his debt”, a remark which is reproduced in Chitty’s Archbold, and has been repeated in many later authorities: cf also Smedley v Philpot; North v Stewart. In practice, however, the solicitor has always been treated as possessing equitable rights in the judgment independently of any declaration of those rights, and the Court’s assistance is invoked not to create the rights but to enforce them: Lord v Colvin; Haymes v Cooper. The rights are assignable: Briscoe v Briscoe.[26]
[25](1940) 40 SR (NSW) 96.
[26]Ibid 100-101 (citations omitted). In Firth v Centrelink (2002) 55 NSWLR 451, Campbell J described this as the ‘classic exposition of the solicitor’s right’. In his judgment at 467 [42], Campbell J notes that Sir Frederick Jordan’s ‘chiding of those who call this equitable right of a solicitor a “lien” has not met a sympathetic reception’. In Worrell v Power & Power (1993) 46 FCR 214; 118 ALR 237, the Full Court (Wilcox, Ryan and Gummow JJ) likened (at FCR 222; ALR 244-245) the equity of a solicitor to that identified by Dixon J in Re Universal Distributing Co Ltd (in liq) (1933) 48 CLR 171, 174 namely that (as distilled in Worrell) ‘where a party has by his efforts brought into court a fund in the administration of which various parties are interested, the costs and expenses of that party should be a first claim upon the fund’. Similar liens arise in respect of the funds brought into existence by liquidators and receivers. See Shirlaw v Taylor (1991) 31 FCR 222, 228-231; 102 ALR 551, 557-61. In Jackson v Richards [2005] NSWSC 630, White J said at [62] ‘the “fruits of the litigation lien” is akin to the maritime doctrine of salvage, in that it looks to the recovery of “fruit” above other factors.’
In Carew Counsel Pty Ltd v French,[27] Winneke P (with whom Buchanan and Vincent JJA agreed) said:
As a matter of general principle, a solicitor has an equitable lien over the fruits of litigation, whether obtained by way of judgment or compromise, where those “fruits” have been gained, at least in part by the solicitor's exertions on behalf of the client. As Weinberg J noted in Colour [sic] Point Pty Ltd v Markby's Communication Group Pty Ltd:
Though it has been said that the “so-called” lien is really only a right to ask for the intervention of the court to protect the solicitor when he finds that there is a probability of the client depriving him of his costs, and though it is correct to say that the solicitor can enforce the lien only by taking court action to prevent the property recovered from being paid or transferred to the client, the “lien” attaches by the recovery of the property. It is not dependent, for its existence, upon the judgment of the court.
The essence of the solicitor's “particular” or “non-possessory” costs lien is that the solicitor has been instrumental in recovering the judgment sum (whether by way of compromise or otherwise) or, put another way, that the moneys have been recovered as a result of his exertions. Thus the fund in respect of which the lien arises is the fund represented by the fruits of the labours exercised by the solicitor in recovering it. The charge on the fund represented by the “particular” lien arises immediately upon the recovery of the moneys through the exertions of the solicitor and should be distinguished from rights which might arise through a solicitor's exertions in respect of other matters. However, for the right to arise, it must be shown that there is a sufficient causal link between the solicitor's exertions and the recovery of the fund. In each case, that is a question of fact. The costs which are protected by the lien will not only include the costs incurred in recovering the judgment, but also those “immediately incidental thereto”. The solicitor's lien will extend to costs incurred on appeal, either in defending the fund or in promoting it, because such costs arise from exertions in “recovering the fund”. As Weinberg J noted in the Colour [sic] Point case, …, the equitable non-possessory lien of a solicitor has, in some jurisdictions, been supplemented by a statutory lien by providing that the lien will attach to any property, real or personal, “recovered or preserved” through the instrumentality of the solicitor. His Honour further noted the protection conferred by such statutes is greater than that provided by the equitable lien but, in jurisdictions in which it applies, does not purport to abrogate the equitable lien which arises independently. Such a statutory lien used to exist in this State (by virtue of s 104 of the Legal Profession Practice Act 1958) but has not existed since the passage of the Legal Practice Act 1996.[28]
[27](2002) 4 VR 172.
[28]Ibid 186-187 [33] (citations omitted). See Color Point Pty Ltd v Markby's Communication Group Pty Ltd [1998] FCA 1516.
In Firth v Centrelink,[29] Campbell J described a series of propositions that authorities have established concerning this right of a solicitor. These include:[30]
[29](2002) 55 NSWLR 451.
[30]Each of these propositions has been extracted from the reasons of Campbell J where the relevant authorities are cited.
(a) the right exists over money recovered through obtaining a judgment in litigation;
(b) the 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;
(c) the right exists over money which is in the possession of the solicitor and also over money which is in court and over money which is owed to the client but not paid into court;
(d) the solicitor need not be still acting for the client at the time the money was recovered;
(e) 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;
(f) in relation to those situations where taxation is necessary to ascertain a quantum owing to the solicitor, the solicitor’s right exists in the fund prior to the occurrence of the taxation;
(g) the solicitor’s right exists before the Court is asked to intervene to protect it;
(h) it ‘arises immediately upon the recovery of monies through the exertions of the solicitor’;
(i) 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.
Pending the determination of his claim, Efron has sought interlocutory relief the effect of which is to prevent the appellant from unilaterally dealing with the Yahoo and the Google parties with respect to those proceeds and costs. In addition, he has sought an order that the appellant pay into Court, from the amounts he has already been paid by the Yahoo and Google parties, a sum that will be sufficient to pay his costs and disbursements.
Good arguable case
At the appeal, the appellant conceded that Efron has a good arguable case that he has an equitable lien in relation to the costs orders made in each of the Yahoo and Google proceedings.
Having made that concession, in the ‘Appellant’s outline of submissions on Appeal’ dated 19 February 2014, it was said that:
However, any equitable lien the Respondent may have does not confer rights upon him to receive the entirety of the costs fund or to be paid the invoices which he submitted to the Appellant. In short, the Respondent does not have a good arguable case in relation to paragraph 3 of the relief sought in his Originating Motion. Paragraph 3 of the relief sought is integral to the orders made by the primary judge.
This further submission drew attention to the fact that other solicitors had also assisted the appellant and that they also would have a lien in respect of the fruits of litigation. For that reason, it was said that paragraph 3 of the relief sought in the Originating Motion was ‘not sustainable’. Paragraph 3 of the Originating Motion sought an order that certain amounts ‘be paid to the Plaintiff’s [sic] on account of the Plaintiff’s lien’. So much can be accepted. However, it does not seem to be true to say that paragraph 3 of the relief sought ‘is integral to the orders made by the primary judge’. The entitlement to a lien does not correspond to an entitlement to payment. The entitlement to payment depends upon other considerations, including orders made by the Costs Court upon a taxation. At present, the Court is only concerned with ensuring that the fund from which orders for payment may be made is itself not dissipated.
Accordingly, given that it has been conceded that Efron has a strongly arguable case that he is entitled to a lien in respect of those proceeds and costs, has he established that there is a risk, pending the trial of his case, that the appellant may take steps that would dissipate those proceeds and costs which would have the effect of destroying that lien such as to favour the granting of interlocutory relief?
Grounds of Appeal
In the light of the foregoing, it is necessary to consider the grounds of appeal in the amended notice of appeal.
Failure to adjourn as denial of procedural fairness
At the commencement of the hearing before the primary judge, the appellant asked for an adjournment.
In his written submissions, the appellant submits that the refusal of his request for an adjournment was unfair considering the surrounding context and circumstances, denied him a fair hearing and necessarily implied a failure to engage with several material considerations. These include the appellant’s status as an unrepresented litigant, the complexity of the matter, the short time in which he had to deal with Efron’s materials and prepare for the hearing (a circumstance arising from defective service), the drastic nature of the orders sought, and the lack of evidence justifying an urgent grant of relief instead of an adjournment on terms.
Efron has said that the adjournment request was made on the basis that a VCAT application to set aside the retainer was underway.
Efron submits that, even if the application to VCAT is successful, he is still entitled to claim for costs and disbursements incurred acting for the appellant, and to claim a lien over the fruits of the litigation. The orders made merely preserve the status quo until the determination of both the VCAT application and the matter before the Costs Court.
Although the matter is not entirely clear, an examination of the transcript shows that the appellant made several submissions a number of which might have been referable to his application for an adjournment. However, his principal contention seems to have been the application by Efron for interlocutory relief was premature and an abuse of process because he had issued an application in VCAT to have his costs agreements with Efron set aside.[31]
[31]Transcript page 6, line 17 – page 8, line 5.
In our opinion, this ground of appeal should be rejected for three reasons. First, this Court is exercising its powers by way of rehearing. Everything that the appellant might have wished to say to the primary judge he has been able to say, through his counsel, to this Court. Second, even if the present matter had not proceeded by way of rehearing, it was always open to the appellant to bring the matter again before the primary judge or whichever judge was presiding in the Practice Court. Order 4 was prefaced ‘pending the hearing and determination of this application or further order’. Order 8 provided ‘Liberty to the parties to apply on three days’ notice’.[32] Had the appellant been prejudiced by, for example, an inability to secure representation or to assemble material when the application for interlocutory relief was first heard, it was open to him to bring the matter back before the Court when he had secured that representation or had assembled his material. Finally, the proceedings before VCAT may not have been of particular relevance. Even if the costs agreements were set aside, that would not destroy every entitlement of Efron to be paid costs and disbursements. Those agreements may not provide the only basis of his entitlement to be paid.[33]
[32]A Mareva order is made in the exercise of a general interlocutory power; Jackson v Sterling Industries Ltd (1987) 162 CLR 612, 622 (Deane J). ‘A Mareva order is an interlocutory order granted to maintain the status quo until the final determination of the case’; Dal Pont [32.20].
[33]For example, s 3.4.19 of the Legal Profession Act 2004 (Vic) provides several bases for the recovery of legal costs not all of which are based upon the existence of a costs agreement.
Failure to provide reasons
At the hearing of the appeal, the appellant abandoned this ground of appeal.
Absence of sufficient evidentiary basis
It will be recalled that the third ground in the amended notice of appeal said that the primary judge erred by making orders 4 and 5 ‘without a proper evidentiary basis and without properly evaluating the evidence before the court.’ These grounds of appeal must be approached in the light of the concession that Efron has a arguable case that he is entitled to a lien so that the remaining question for consideration is whether there is a danger that the funds to which the appellant is entitled by way of costs will be dealt with by him in some fashion such that Efron’s claim to a lien, if successful, will not be able to be satisfied. In answering that question, it will be necessary, notwithstanding the concession, to canvass the evidence not only about Efron’s lien in the Yahoo proceeding and the Google proceeding but also about the steps taken thus far by the appellant in relation to the proceeds of judgment and his costs entitlement in those proceedings.
The principal material before the primary judge comprised the initial Efron affidavit.[34] The material in that affidavit combines direct and hearsay evidence. It will be tested at trial.
[34]At the hearing of the appeal, Efron supplied the Court with a copy of the written submissions that he had provided to the primary judge.
The appellant submits that nothing in the affidavit material filed by Efron below justified the making of orders four, five or six for their stated purpose — preserving the amounts payable as costs and ‘prevent[ing] frustration of the process of the Court.’[35]
[35]See Order of the primary judge in Appendix 1.
The appellant said that the material relied upon by Efron was no more than assertion, relied on matters in dispute that were not investigated by the primary judge or failed to demonstrate a sufficient level of risk for the taking of such drastic steps.
At the hearing of the appeal, the appellant also contended that the quantum of ‘the retention’ provided for in paras 5(a)(i) and 5(b)(i) of the orders was excessive.[36] The amounts retained are the amounts for which Efron has delivered invoices.[37] But, the appellant claimed there should have been a discount. First, it was said that Efron’s own costs agreements were void, as they had not been signed by the appellant,[38] secondly, both Efron and the barrister (whose fees constituted the greater proportion of Efron’s invoices) had agreed to work on a pro bono basis and only to be remunerated from costs recoveries from the judgment creditors in the Yahoo and Google proceedings,[39] and finally, the appellant was doing all that he could to ensure that Efron would be remunerated by proceeding with the taxation of his party-party costs in the Costs Court.
[36]The appellant did not dispute the quantum of any of the other retentions, being those referable to (i) an estimate of Efron’s anticipated costs of the solicitor/client taxation of costs; (ii) an estimate of Efron’s costs of this Application; (iii) an estimate of Efron’s costs of defending the VCAT application brought by the appellant and (iv) an estimate of the interest that Efron may claim.
[37]The Court of Appeal was told that these invoices were ‘final’.
[38]Section 3.4.31 of the Legal Profession Act 2004 (Vic) provides that costs agreements that contravene Division 5 of Part 3.4 of the Act are void. Section 3.4.27(3)(c)(iii) (which is in Div 5) provides that a conditional costs agreement must be signed by the client. But, see ss 3.4.31(2) and 3.4.19.
[39]For example, the retention in the case of the Google proceedings was $116,728.50. It was conceded that at least $99,000 was referable to counsel’s fees.
The appellant said that the evidence adduced by Efron that the funds the subject of the lien was at risk of dissipation was weak. Finally, he said that the order of the primary judge had failed to take into account the interests of third parties; the order did not accommodate the interests of the other solicitors used by the appellant in securing his awards of damages in the two proceedings.
The retainer of Efron & Associates
The circumstances of the Yahoo proceeding and the Google proceeding are not explained in the affidavits save that each involved a claim by the appellant that he had been defamed and was entitled to damages.
Both sets of proceedings appear to have been commenced before the appellant approached Efron. It seems that the appellant had previously retained (a) George Liberogiannis & Associates and (b) Gibsons Solicitors Pty Ltd before approaching Efron and had dispensed with those solicitors’ services. Efron says that the appellant approached him on or about 21 December 2011.[40] He says that, at their initial conference, he agreed with the appellant that his firm ‘would represent the (appellant) in the Yahoo Proceeding and the Google Proceeding on a “no win no fee” basis.’
[40]In his affidavit, the appellant said that the first meeting took place in Februray 2012.
The Yahoo proceeding
On 7 February 2012 , Efron provided the appellant with a conditional costs agreement in respect of the Yahoo proceeding (‘the Yahoo proceeding costs agreement’). That costs agreement is exhibited to his affidavit. The agreement contains the following:
You may accept the costs agreement by:
(i) signing and returning the copy of this document, or
(ii) by continuing to give instructions to us in this matter.
The appellant has contended that he did not sign the Yahoo proceeding costs agreement.[41]
[41]The making of a conditional costs agreement is regulated by Division 5 of Part 3.4 of the Legal Profession Act 2004 (Vic). The effect of such agreements is set out in s 3.4.30. Section 3.4.19 sets out the basis upon which legal costs are recoverable.
The Yahoo proceeding was heard by the Court in March 2012. In his affidavit, Efron outlines, in summary form, the work his firm did as the instructing solicitor in that case. For example, Efron says that his firm took instructions from and conferred with the appellant; appeared in Court to give instructions to counsel on the 4 days of the trial, attended Court as counsel for the delivery of judgment and attended Court as counsel to argue the question of costs.
On 15 March 2012, the Yahoo proceeding was determined in favour of the appellant. The Court ruled that he be awarded damages in the amount of $225,000 (‘the Yahoo damages’) together with interest at 3% per annum.
On 1 June 2012, the Court made final orders. In those final orders, the defendants were ordered to pay damages in the amount of $241,310.48 (which included interest in the sum of $16,310.48). They were also ordered to pay the appellant’s costs.
The 12 April 2012 letter
Commonly, a judgment debtor satisfies its obligation by paying the judgment sum to the solicitor for the judgment creditor. The judgment sum is paid into the trust account of the solicitor. The solicitor then raises an invoice for the legal services which have been performed and that invoice is satisfied from the funds in trust. In the present case, Efron has said that the appellant asked him to procure the cheque payable by the defendants in satisfaction of the judgment sum be issued in the name of the appellant ‘as he wanted to have a photograph taken of him holding the Yahoo cheque’. Efron says that the appellant said that he would then endorse that cheque in favour of Efron’s firm and would return it to that firm. On 12 April 2012, Efron wrote to the defendants and requested that the Yahoo cheque be issued in the appellant’s name.
The fate of the Yahoo cheque
Efron has further said that he was absent from his offices in May and June 2012 on account of his wife’s death. During his absence, his firm’s services were conducted through another practitioner. He says that the appellant dealt with that other practitioner and told him that Efron and the appellant had agreed that the Yahoo cheque was to be made out in the name of the appellant. Efron says that the appellant did not tell that other practitioner that the appellant had agreed with Efron that he would immediately endorse the cheque in favour of Efron’s firm. In the event, on 7 June 2012, the appellant attended the offices of Efron’s firm, collected the cheque and signed an acknowledgment of having received it. However, the appellant did not endorse the cheque as promised.[42]
[42]At the hearing of the appeal, the Court was told that the Google judgment had also been satisfied. In that case, it seems, that the appellant terminated Efron’s retainer after judgment, and before satisfaction of the award of damages.
On 21 June 2012, Efron returned to his office and the other practitioner told him of what had occurred and what hadn’t occurred. Thereupon, Efron engaged in a variety of communications in which he requested the payment of counsel’s fees and transcript fees which had been incurred by his firm in the Yahoo proceeding. The appellant, it seems, did not respond to some of these communications.
On 2 July 2012, a woman attended the offices of Efron’s firm and handed in a letter from the appellant dated 29 June 2012.[43] In that letter, the appellant wrote:
[43]The text of Efron’s affidavit is mistaken. The text says the letter is dated 29 July 2012. Later he says it is dated 29 June 2012. Exhibit GDE-18 is dated ’29 June 2012’.
Please be advised of my argument with Mr Efron and Mr Dibb.
The agreement is that the Mr Efron and Mr Dibb accepted my Yahoo proceeding on pro bono payment only.
·Mr Dibb account and Mr Efron account will be paid by the Defendants.
In this letter, the appellant also (a) asked Efron to prepare a bill of costs in taxable form for service on the defendants and (b) advised Efron that he would be away from Australia from 1 July 2012 until 30 September 2012.
Efron’s contentions
In his affidavit, Efron says that he had reached the following conclusions:
(a)Mr Trkulja had taken the Yahoo Cheque from my firm with no intention of returning it to us.
(b)Mr Trkulja that had no intention of paying Mr Dibb of counsel’s fees or the transcript fees.
(c)Mr Trkulja had no intention of attending our office on either 28 or 29 June 2012.
(d)Mr Trkulja had arranged to have his letter dated 29 June 2012 delivered to my firm after he had left the country.
Further services provided in the Yahoo proceeding
In August 2012, Efron performed further services relating to the preparation of the bill of costs in taxable form. On 29 August 2012, he wrote to the appellant disputing the appellant’s proposition that he and counsel had agreed to act in the Yahoo proceeding on a pro bono basis. He said that the agreement was ‘no win no fee’. Further work in preparation of the bill of costs in taxable form was conducted in September 2012. Efron wrote letters to the appellant informing him of what had been done.
On 30 September 2012, the appellant returned to Australia and made arrangements to attend a conference with Efron on 8 October 2012. Before that meeting took place, the appellant again wrote to Efron saying that Efron had agreed ‘to act in the Yahoo Proceeding on a “pro bono” basis, and stating that Efron & Associates could recover its fees from the Yahoo defendants if (the appellant) succeeded in the taxation of costs’. Once again, Efron disputed the proposition that his firm had been retained on a pro bono basis. On 8 October 2012, Efron and the appellant met. Efron insisted on the payment of outstanding fees and disbursements. He says that the appellant said to him words to the effect ‘that he had used the monies he received from the Yahoo Cheque to pay a debt of $207,000.00 which he owed to someone else’.
The Google proceeding
As indicated above, Efron had originally agreed to appear for the appellant in both the Yahoo proceeding and the Google proceeding.
On 30 March 2012 (which, it will be recalled, was after the delivery of judgment in the Yahoo proceeding), Efron provided a conditional costs agreement to the appellant. It was in the same form as the conditional costs agreement in the Yahoo proceeding.
On 11 October 2012, Efron had a further meeting with the appellant. On that same day, Efron wrote to the appellant.
The 11 October 2012 letter[44]
[44]The full text of the letter can be found in the exhibit to the appellant’s affidavit filed in support of the present application.
In the 11 October 2012 letter, Efron summarised and confirmed the contents of his conferences with the appellant on 8 October 2012 and 11 October 2012. Efron says that, in the course of the second conference, he required the appellant to sign an acknowledgment with respect to his fees. He says that he did so for two reasons: (a) by reason of having not paid his firm for the Yahoo proceeding and (b) by reason of the way in which he misled Efron and his firm in relation to the Yahoo cheque.
That letter contained the following:
Trkulja v Google Inc & Anor
Supreme Court Proceeding No. 2009 10096As a pre-condition for us to continue acting for you in the Google matter, you acknowledge that you will be responsible for any shortfall of our fees in all your matters.
…
Below the signature of Efron, the letter contains the following:
ACKNOWLDEGMENT
I, MILORAD (aka MICHAEL) TRKULJA, of [address], have read the contents of this letter and acknowledged that I understood, agreed and accept same.
The ‘Acknowledgment’ has been dated (in manuscript) ‘11/10/2012’. It has been signed. The signature is indecipherable, but it appears to be that of the appellant.
The trial of the Google proceeding
Efron says that, on the strength of the acknowledgment, his firm continued to act for the appellant and briefed Sydney counsel to appear for him at the trial of the Google proceeding. He said that he conferred with the appellant and counsel and performed the customary work of a solicitor in preparation for a Supreme Court trial. Efron says that he attended in Court, instructing counsel, on 22-26 and 29-31 October 2012.[45]
[45]Efron placed before the Court a copy of his files showing all the attendances of his firm pursuant to his retainer in the Google proceeding.
On 12 November 2012, the judge delivered reasons for decision and found in favour of the appellant. He awarded damages in the amount of $200,000 (‘the Google damages’) together with interest and costs.
The 21 October 2012 letter
On 21 November 2012, Efron met the appellant. They discussed fees. At that conference, the appellant gave Efron a letter dated 21 October 2012. (It will be noticed that the date on that letter was one day before the commencement of the trial of the Google proceeding.) In that letter, the appellant said that he had been forced to sign the letter of 11 October 2012. He wrote:
The agreement between You firm (sic) and Me that I signed 4 days before Google started must be amended or Cancelled as from today.
·Our agreement was and is “no win no fees”
·Plaintiff pay all Court and jury fees.
I do not pay any money from my Damages that I receive from Google and Yahoo. Or any of my proceeding were (sic) your firm acting for me.
Efron says that, upon reading this letter, he formed the belief that the appellant was proposing to renege on his agreement with Efron and was proposing to terminate Efron’s services despite Efron’s firm having acted successfully for him in both sets of proceedings.
November 2012
During November 2012, Efron and his firm continued to attend to matters on behalf of the appellant arising out of the Google proceeding. On 26 November 2012, Efron attended Court to receive final orders. On or about that day, the appellant emailed a letter to Efron saying that Efron and his firm ‘has been sacked by me today 26/11/12 at 6:00 p.m.’. In that letter, the appellant said that he was cancelling the letter ‘that you forced me to signee (sic) without proper explanation’. Further, in that letter, the appellant made several suggestions to the effect that Efron was not entitled to be paid for the work he had done.
On 27 November 2012, the appellant sent Efron a communication to which he attached emails to the defendants in the proceedings saying that he had terminated Efron’s retainer.[46] On 4 December 2012, the appellant sent Efron a further letter in which he told Efron that he had now instructed Gibsons Solicitors ‘to act on his behalf for purposes of the taxation of costs in the Yahoo proceeding and the Google proceeding’ and requested Efron & Associates forward its files to Gibsons. He added that Efron ‘would be paid whatever costs were awarded by the Taxing Master’. Apparently inconsistently, the appellant also said that Efron had been retained on a ‘pro bono’ basis.
[46]At the hearing of the appeal, the Court was told that, after the termination of Efron’s retainer, the judgment sum in the Google proceeding was paid to the appellant.
The lien over the solicitor’s files
Efron has said that, in respect of the Yahoo proceeding and the Google proceeding, his firm has delivered substantial invoices to the appellant which remain unpaid.
In February 2013, he had further communications with the appellant. The appellant repeated his request that Efron provide his file to the appellant’s new solicitors for the purposes of the taxation of costs. Efron also wrote to the new solicitors saying that he held a solicitor’s lien over the appellant’s files and that he would be prepared to release those files ‘upon receiving an undertaking from (the new solicitors) acknowledging on behalf of (the appellant) that Efron & Associates has a lien over the files to secure fees of services rendered by Efron & Associates and (counsel) in the amount of (amount included).’
The appellant then wrote to Efron and told him that he had instructed his new solicitors not to respond to Efron’s request for an undertaking and directing that all future correspondence be sent to him directly. In subsequent correspondence, the appellant continued to request that the files be provided to him and Efron responded by a demand for a written undertaking.
On 22 February 2013, Efron provided the appellant with an acknowledgment for him to sign that the appellant acknowledged that his firm held a lien over the files in both proceedings to secure outstanding fees owed by the appellant to Efron and to counsel ‘and that he would return the files to us upon completion of the taxation proceeding’.
The release of the files
On that same day, the appellant provided the written acknowledgment which had been requested. On 13 March 2013, the appellant collected the files in the Yahoo proceeding. On 22 March 2013, he collected the files in the Google proceeding.
In June 2013, Efron and the appellant had further correspondence. In summary, Efron insisted that the payment of his invoices was not conditional upon the completion of the taxation proceeding.
As at the date that Efron swore his affidavit (4 November 2013), Efron’s fees remained unpaid.
Further contentions
Efron has submitted to the Court that he does not believe the appellant will account to his firm ‘for any money he receives in payment of costs in the Yahoo Proceeding or the Google Proceeding, and that his pattern of behaviour is such that there is a real risk that Efron & Associates will never be able to recover monies from (the appellant)’.
The appellant submits that the orders are ‘drastic’, an unjustified constraint and have the potential to affect third parties and his ability to meet his obligations to those parties. Additionally, a failure to comply would constitute contempt.
Efron also contended the amount of the retention was in the nature of a ’budget’: it was calculated to ensure that any entitlement to fees was safely accommodated. He also submitted that the rights of third parties were not prejudiced as other solicitors could also have liens over the same fund, and, in the event that all their entitlements could not be satisfied, they could be resolved in equity on a pari passu basis. Efron also contended that the matter should not be approached primarily on the basis of a risk of dissipation of the fund. It was not as if Efron only had rights in personam; rather, he had rights in rem which were being disputed and threatened by the appellant.
Finally, Efron denied that the appellant has suffered any prejudice by these orders, submitting that it is appropriate that the status quo be preserved pending the VCAT and Costs Court proceedings.
Reasoning
In our opinion, the appeal should be dismissed.
The jurisdiction has been said to arise where there is a probability of the client depriving the solicitor of his or her costs.
The appellant accepted that Efron had made out an arguable case for a lien in respect of his costs in the Yahoo and Google proceedings.
In our opinion, there is material before the Court that establishes a risk of dispersal by the appellant of the damages and costs awarded in the proceedings such that if Efron succeeds in obtaining final relief in the nature of a lien over the costs and proceeds of those proceedings, he will be unable to have his judgment satisfied.
In reaching that conclusion, we take into account the following matters:[47]
[47]It goes without saying that all that is being decided is that a prima facie case has been established in respect of these matters. None has been tested at trial.
(a) Efron has adduced material that shows, on a prima facie basis that
(i) his firm was retained in both sets of proceedings;
(ii) his firm is entitled to their costs with respect to both sets of proceedings;
(iii) he was retained by the appellant on a ‘no win no fee’ basis;
(b) the appellant won both sets of proceedings;[48]
[48]A lien arises regardless of the fact that the amount of fees remains unascertained. See Simpson v Rowe [2011] VSC 149, [10] (Habersberger J).
(c) the earliest that the appellant raised the contention that Efron was retained on a pro bono basis was in his letter of 29 June 2012;[49]
[49]In current legal practice, the expression ‘pro bono basis’ is understood to refer to the basis where a practitioner offers his or her services on a voluntary basis without any entitlement to or expectation of remuneration.
(d) no document has been adduced in evidence in which Efron may be seen as suggesting that he was offering his services on a pro bono basis;
(e) Efron has also adduced material that shows, on a prima facie basis that
(i) the appellant contrived to deprive him of his lien by failing to fulfil his promise to endorse the Yahoo cheque in favour of Efron;
(ii) the appellant has taken steps in relation to the Google proceedings that leave Efron vulnerable to the destruction of his lien by the appellant;
(iii) the appellant has chosen to satisfy other creditors out of the fruits of his litigation in advance of the entitlements of Efron.[50]
[50]In the further written submissions filed on behalf of the appellant, considerable attention was given to the proposition that the appellant had misled Efron in obtaining the Yahoo cheque. Various submissions have been made as to the strength of the evidence and the absence of corroborative detail. But, in our opinion, there was sufficient evidence to suggest that, absent the intervention of the Court, the appellant was capable of destroying Efron’s lien.
In Carew Counsel Pty Ltd v French,[51] Winneke P adopted Weinberg J’s statement of principle in Color Point Pty Ltd v Markby's Communication Group Pty Ltd.[52]Weinberg J spoke about there being ‘a probability of the client depriving (the solicitor) of his costs’.[53] In our opinion, Efron has established that he is at risk of having the appellant deprive him of his costs. In those circumstances, it is reasonable, in our opinion to restrain the appellant pending the trial of the action, the usual undertaking being given.
[51](2002) 4 VR 172, 186 [33].
[52][1998] FCA 1516.
[53]Ibid 18.
Third party rights
The appellant submits that the primary judge failed to account for a mandatory consideration, i.e., the rights of third parties who might be adversely affected by such orders.[54] The orders, particularly the requirement to pay sums into Common Fund No. 1, are alleged to operate to the disadvantage of two other solicitors who had previously worked on his proceedings and are entitled to liens of their own. In the further submission submitted on his behalf, the appellant drew attention to the fact that Efron’s affidavit did not refer to the possible effect of the orders upon non-parties such as the other two firms of solicitors whose services the appellant had retained. The further submission continued:
Properly informed, the primary judge ought not to have made any orders without ensuring that other parties who might be affected by the orders had notice of the application and an adequate opportunity of being heard in respect of the application, particularly given the delay by (Efron) in making the application and the fact there was no evidence of urgency as to the making of the orders.
[54]Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, 426 [118], 428-429[124] (Kirby J).
Efron submits instead that as the primary judge’s orders do not make any final determination of their entitlements to costs they act to preserve the rights and interests of all parties — there is no basis for any allegation that they negatively impact the rights or interests of any third party.
A review of the transcript makes it plain that the primary judge was well aware of the involvement of other legal practitioners who may have a claim for outstanding costs. The fact of such possible claims was drawn to the primary judge’s attention by counsel for Efron. The primary judge said:
I can only deal with what’s before me and what’s on the material before me. There might be other solicitors who’ve got other claims against Mr Trkulja, but at the moment I’m setting up a fund to be available in the event that Mr Efron, having gone through a taxation or by agreement and after the VCAT proceedings, can demonstrate that he’s entitled to claim an amount from that fund.[55]
[55]Transcript page 97, line 6-12.
As is plain, the primary judge was not making a final determination. Again, neither is this Court asked to make a final determination. If other solicitors also have a claim on the fruits of the Yahoo proceeding and the Google proceeding, they also can apply to the Court for a declaration of their entitlement to a lien in respect of the fruits of those proceedings. If the fund proves insufficient to meet all of their entitlements, equity will determine the basis upon which the fund should be distributed between them.[56]
[56]See Atkinson v Pengelly [1995] 3 NZLR 104, 109 (Tipping J).
The amounts retained do not seem to be excessive. It is to be remembered that the greater proportion of the amounts retained relate to fees payable to counsel. The appellant has not placed before the Court any material emanating from counsel that suggests that counsel agreed to appear on the basis that he would only be remunerated out of costs recovered from the judgment creditors. It is true that there is material that may be taken to suggest that the appellant retained counsel directly. It may be the case that Efron is not be personally liable to pay counsel’s fees. However, in that case, counsel would have his own lien in respect of the same fund.[57]
[57]Simpson v Rowe [2011] VSC 149.
For these reasons, the appeal should be dismissed.
Appendix 1
Extract from General Form of Order dated 13 November 2013
| OTHER MATTERS: | 1. The orders made in paragraphs 4, 5 and 6 below are made: (a) for the confined purpose of preserving the amounts payable by way of costs to the Defendant as the successful Plaintiff in proceeding numbers SC I 2009 10096 and SC I 2009 10916 in the Supreme Court of Victoria so as to prevent frustration of the process of the Court; (b) upon the Plaintiff by his Counsel undertaking: (i) to submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person, whether or not a party, adversely affected by the operation of the interlocutory order or undertaking or any continuation (with or without variation) thereof; (ii) to pay the compensation referred to in (b)(i) to the person there referred to; (c) the Plaintiff has filed with the Costs Court proceeding No SCI 2009 10096 a Summons dated 27 September 2013 for the taxation of his costs; (d) the Plaintiff has filed with the Costs Court proceeding No SCI 2009 10916 a Summons dated 27 September 2013 for the taxation of his costs; and (e) the Defendant has filed an Application with VCAT dated 8 November 2013 to set aside Costs Agreements between the Plaintiff and the Defendant in respect to the Defendant’s engagement of the Plaintiff in proceeding No SCI 2009 10096 and proceeding No SCI 2009 10916. 2. This order is signed by the Judge pursuant to rule 60.02(1)(b) of the Supreme Court (General Civil Procedure) Rules 2005. |
THE COURT ORDERS THAT:
The Defendant’s application to adjourn the hearing of the summons was dismissed.
Leave is given to dispense with the requirements of Rules 5.03(1) and 8.02.
Leave is given to the Plaintiff to commence this proceeding by Originating Motion in Form 5C.
That pending the hearing and determination of this application or further order:
(a)Without first giving the Plaintiff 10 days notice in writing of his intention to do so, such notice to be sent to the Plaintiff by email sent to [email protected] and by fax to (03) 8640 0777 and filing with the Prothonotary’s Office, the Defendant or his agents be restrained from:
(i)entering into any binding agreement with Google Inc or Google Australia Pty Ltd ACN 102 417 032 or their solicitors for payment of the costs in respect to proceeding No SCI 2009 10096 in the Supreme Court of Victoria; and
(ii)accepting any payment from Google Inc or Google Australia Pty Ltd ACN 102 417 032 or their solicitors for payment of the costs of proceeding No SCI 2009 10096 as payment of the costs in respect to proceeding No SCI 2009 10096 in the Supreme Court of Victoria.
(iii)entering into any binding agreement with Yahoo! Inc or Yahoo! Pty Ltd ACN 089 187 100 or their solicitors for payment of the costs in respect to proceeding No SCI 2009 10916 in the Supreme Court of Victoria; and
(iv)accepting any payment from Yahoo! Inc or Yahoo! Pty Ltd ACN 089 187 100 or their solicitors for payment of the costs of proceeding No SCI 2009 10916 as payment of the costs in respect to proceeding No SCI 2009 10916 in the Supreme Court of Victoria.
(b)In the event that the resolution of party-party costs in respect of proceeding number S CI 2009 10096 or proceeding S CI 2009 10916 proceeds by way of a Taxation in the Costs Court of the Supreme Court of Victoria, the Defendant shall give 10 days notice in writing to the Plaintiff by email sent to [email protected] and by fax to (03) 8640 0777, of the date fixed for Taxation and the Defendant acknowledges that the Plaintiff may attend the Taxation if he wishes to do so, at his own cost.
The Defendant, his servants or agents shall pay without delay into the Senior Master’s Common Fund No. 1:
(a)From any monies to be paid by Google Inc or Google Australia Pty Ltd ACN 102 417 032 pursuant to the Order of the Court made by the Honourable Justice Beach on 26 November 2012 in proceeding No S CI 2009 10096, a sum sufficient to meet payment of:
(i)$116,728.50 being the amount of costs and disbursements sought by Efron & Associates in the course of acting for the Defendant in proceeding No S CI 2009 10096;
(ii)$10,000 being an estimate of the Plaintiff’s anticipated costs of the solicitor/client taxation of costs;
(iii)$6,250 being 50% of an estimate of the Plaintiff’s costs of this Application;
(iv)$1,250, being 50% of an estimate of the Plaintiff’s costs of defending the VCAT application brought by the Defendant and
(v)$9,000, being 50% of an estimate of the interest that the Plaintiff may claim.
(b)From any monies to be paid by the Yahoo! Inc or Yahoo! Pty Ltd ACN 089 187 100 pursuant to the Court Order made in proceeding No SC I 2009 10916 on 1 June 2012 by the Honourable Justice Kaye, a sum sufficient to meet payment of:
(i)$64,015.55 being the amount of costs and disbursements sought by Efron & Associates in the course of acting for the Defendant in proceeding No SC I 2009 10916;
(ii)$10,000 being an estimate of the Plaintiff’s anticipated costs of the solicitor/client taxation of costs;
(iii)$6,250 being 50% of an estimate of the Plaintiff’s costs of this Application;
(iv)$1,250, being 50% of an estimate of the Plaintiff’s costs of defending the VCAT application brought by the Defendant; and
(v)$9,000, being 50% of an estimate of the interest that the Plaintiff may claim.
Following the final determination of:
(a)Costs Court proceeding number S CI 2009 10096;
(b)Costs Court proceeding number S CI 2009 10916; and
(c)VCAT application dated 8 November 2013,
the Plaintiff or the Defendant may make application to the Judge in the Practice Court for the payment out of moneys in the Senior Master’s Common Fund No. 1 by reference to the total of the taxed costs in paragraphs 5(a)(i)-(iv) and 5(b)(i)-(iv) above together with such amount of interest as may be payable under the Supreme Court Act, in default of agreement between the parties.
The Defendant pay the Plaintiff’s costs of and incidental to this application such costs to be taxed in default of agreement.
Liberty to the parties to apply on three days’ notice.
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