Willmann & Willmann (No 7)
[2023] FedCFamC1F 361
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Willmann & Willmann (No 7) [2023] FedCFamC1F 361
File number: SYC 6037 of 2021 Judgment of: CAMPTON J Date of judgment: 12 May 2023 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Application by the husband’s former solicitor to intervene and/or to join themselves and the husband’s current solicitors as parties to the proceedings – Where the husband’s former solicitor asserts a lien over the husband’s file and over the third-party litigation funding facility obtained by the husband, and further asserts that the lien and litigation funding facility are held on trust for the husband’s former solicitor – Where the husband’s former solicitor seeks that they be paid the entire sum of the litigation funding facility – Where the quantum of the outstanding professional fees owed to the husband’s former solicitor is $48,766 – Where the husband asserts he can pay the outstanding debt immediately – Where the husband’s former solicitor has not particularised or explained how an entitlement to the litigation funding facility arises beyond the quantum of the outstanding professional fees – Where the husband’s former solicitor fails to establish that their involvement as a party to the proceedings, or the involvement of the husband’s current solicitors is necessary to determine all issues in dispute in the proceeding – Application dismissed – Costs ordered on a solicitor/client basis. Legislation: Family Law Act 1975 (Cth) s 79
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 26
Federal Circuit and Family Court of Australia (Family Law) Rules rr 3.01, 10.10
Cases cited: B Pty Ltd and Ors & K and Anor (2008) FLC 93-380; [2008] FamCAFC 113
Firth v Centrelink & Anor (2002) 55 NSWLR 451; [2002] NSWSC 564
Hancock Family Memorial Foundation Ltd v Fieldhouse [No 3] [2010] WASC 223
Wayne & Dillon & Anor (2008) 40 Fam LR 543; [2008] FamCAFC 204
Willmann & Willmann (No 3) [2022] FedCFamC1F 827
Willmann & Willmann (No 5) [2023] FedCFamC1F 75
Division: Division 1 First Instance Number of paragraphs: 65 Date of last submission: 29 March 2023 Date of hearing: 25 January 2023 Place: Sydney Counsel for the Applicant: Mr Mathews Solicitor for the Applicant: Barkus Doolan Winnings Family Lawyers Counsel for the First Respondent: Mr Flick Solicitor for First Respondent: AB Lawyers The Second and Third Respondents: Did not participate The Proposed Intervener: AC Lawyers The Proposed Fourth Respondent: AB Lawyers ORDERS
SYC 6037 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS WILLMANN
Applicant
AND: MR WILLMANN
First Respondent
MR ANDREWS
Second Respondent
MS ANDREWS
Third Respondent
AC LAWYERS
Proposed Intervener
AB LAWYERS
Proposed Fourth Respondent
ORDER MADE BY:
CAMPTON J
DATE OF ORDER:
12 May 2023
THE COURT ORDERS THAT:
1.The Application in a Proceeding filed on 18 November 2022 and the amendments thereto, including the Application in a Proceeding filed on 22 December 2022 are dismissed.
2.AC Lawyers pay the costs of the wife and the husband on a solicitor/client basis of and incidental to the Application in a Proceeding filed on 18 November 2022 and the amendments thereto, including the Application in a Proceeding filed on 22 December 2022, within 21 days of an agreement in writing as to the quantum of costs, or the assessment of costs.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Willmann & Willmann has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CAMPTON J:
INTRODUCTION
Ms Willmann (“the wife”) and Mr Willmann (“the husband”) are engaged in litigation pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”) in the Major Complex Financial Proceeding List. Mr Andrews (“the wife’s father”) and Ms Andrews (“the wife’s mother”) were joined to the proceeding as the second and third respondents (collectively, “the wife’s parents”) by the husband.
The husband asserts that the wife’s parents hold a substantial farming property for the benefit of both himself and the wife. That dispute, together with relief sought by the wife’s parents for security for costs, was listed for hearing at a separate issues trial before Tree J, completed over seven days in March this year. Judgment in respect of those matters is currently reserved. It is more likely than not that the wife’s parent’s relief for security for costs will be subsumed upon Tree J publishing his substantive reserved determination, in circumstances where costs are sought by each party of the separate issues trial.
The balance of the proceedings as to the adjustment of property between the husband and wife is listed before me for hearing over three days commencing on 11 September 2023.
The husband was represented in these proceedings by AC Lawyers, the proposed intervener, from 2 June 2022 until 14 October 2022. He entered a costs agreement with AC Lawyers on 2 June 2022. From at least 14 October 2022, the husband has been and continues to be represented by AB Lawyers, the proposed fourth respondent.
These reasons determine the relief sought paragraphs 1 & 2 of the Application in a Proceeding filed by AC Lawyers on 22 December 2022 (“the joinder application”), seeking:
1. That leave is granted for [AC Lawyers] and [AB Lawyers]… to be added to the proceedings SYC6037/2021.
2. In the alternative to Order (1) that the [AC Lawyers] in added as intervenor (sic) in the proceedings SYC6037/2021.
For the reasons that follow, that relief is refused and dismissed. In circumstances were the application for intervention and/or joinder fails, the balance of the relief as sought by AC Lawyers is dismissed.
Material relied upon for the purposes of this determination
AC Lawyers relied upon:
(a)Application in a Proceeding filed 18 November 2022 as amended on 19 December 2022;
(b)Application in a Proceeding filed 22 December 2022, attaching Points of Claim;
(c)Two affidavits of Mr AD, filed on 27 December 2022 and 9 February 2023; and
(d)Written submissions filed on 15 March 2023.
The husband relied upon:
(a)Response to an Application in a Proceeding filed 6 December 2022;
(b)His affidavits, filed 6 December 2022 and 23 January 2023; and
(c)Written submissions filed 21 March 2023.
The wife relied upon:
(a)Response to an Application in a Proceeding filed on 16 March 2023;
(b)Her affidavit filed 16 March 2023; and
(c)Written submissions filed 29 March 2023.
The wife’s parents did not participate in this determination.
AB Lawyers did not file or seek to rely on any documents, such that their position and material relied upon was consolidated with the husband.
BACKGROUND TO THE APPLICATION IN A PROCEEDING
The relevant background to these proceedings was set out in the reasons for judgment delivered on 27 October 2022 at [10]–[22] (see Willmann & Willmann (No 3) [2022] FedCFamC1F 827), and in those delivered on 17 February 2023 at [12]–[26] (see Willmann & Willmann (No 5) [2023] FedCFamC1F 75). These reasons assume familiarity with each of those decisions.
Relevantly for this determination, the matter came before me on 21 October 2022 for trial management and an interim hearing as to whether the husband’s relief sought against the wife’s parents and their application for security for costs should be listed for a separate trial pursuant to r 10.10 of the Rules. Mr Macauley of counsel appeared on that date for the husband, instructed by AB Lawyers. Prior to this time Mr Macauley had been briefed by AC Lawyers for the husband. Mr AD attended the listing as an “interested party” on behalf of AC Lawyers.
On 18 November 2022, AC Lawyers filed an Application in a Proceeding seeking the following orders:
1. That this application in a proceeding in urgently listed.
2. It is declared that [AB Lawyers] and/or [the husband] hold the sum and/or loan and/or account received in litigation funding on constructive trust for [AC Lawyers] with such sum to be applied to [the husband’s] costs and disbursements in respect of the proceedings Willmann & Willmann SYC6037/2021 in the event that [the husband] - of his own will and volition - instructs [AC Lawyers] to continue acting in the said proceedings.
3. That, in the alternative to Order 1, in the event that [the husband] - of his own will and volition - wishes [AB Lawyers] to continue acting in the proceedings Willmann & Willmann SYC6037/2021 then [AB Lawyers] shall within seven (7) days of the date of these Orders file in these proceedings SYC6037/2021 an undertaking that within 28 days of that date upon which final orders are made in these proceedings, whether by way of Orders made by consent or by final hearing, it shall pay a sum equivalent to half of the litigation funding and/or costs reasonably billed by it in and/or in respect of these proceedings.
4. That until such time as [AB Lawyers] have discharged their obligations pursuant to these Orders a lien exists over any and all files electronic or otherwise in the possession, constructive or otherwise, of [the husband] and/or [AB Lawyers] and/or any counsel briefed in respect of and/or in relation to SYC6037/2021.
5. That [the husband] is to deliver to [AB Lawyers] any and all such documents as referred to in Order 3 herein by no later than 4.00 pm 19 November 2022, and, whether those files are - without limitation - in electronic and/or hard copy and whether provided to this firm by [the husband] and/or received from this firm by [the husband] in relation to the said proceeding(s) howsoever provided and/or received.
6. That in the event that [the husband] does not wish - of his own volition and choice - for [AB Lawyers] to act in these proceedings [AB Lawyers] shall be provided reasonable access to any and all documents identified and referred to in the Orders as well as the file held subject to the lien of [AC Lawyers] by [AB Lawyers].
7. That in the event [the husband] does not wish - of his own volition and choice - for [AC Lawyers] to act in the proceedings SYC6037 /2021 [AC Lawyers] is hereby permitted a right of appearance in the proceeding SYC6037/2021 and access to the Commonwealth Court Portal file.
8. That in the event that [the husband] - of his own volition and choice - continues to instruct [AB Lawyers] then within 14 days of the completion of the proceedings by Orders made by consent or by final hearing, [AB Lawyers] shall deliver up to [AC Lawyers] any and all documents identified and referred to in these Orders.
9. That in the event that [the husband] - of his own will and volition - continues to instruct [AB Lawyers] then until Order seven (7) is discharged [AB Lawyers] shall provide reasonable access to [AC Lawyers] to any and all documents identified and referred to in these Orders.
10. That [the husband] is hereby restrained from using any and all documents identified and referred to in these Orders in any way except for the purposes of these proceedings SYC6037/2021.
11. That for the purposes of this application:
10.1 [Mr AD] of [AC Lawyers] is to file an Affidavit in respect of this Application by no later than 4.00 pm on 24 November 2022;
10.2 That [AB Lawyers] and [the husband] file and serve any affidavit on which they may wish to rely by no later than 4.00 on I December 2022 should they choose to do so;
11.3 That [AC Lawyers] is to file written submissions by no later than 4.00 pm on 8 December 2022;
11.4 That [AB Lawyers] file written submissions in response by no later than 4.00 pm on 15 December 2022;
11.5 That [AC Lawyers] file written submissions in reply by no later than 4.00 pm on 22 December 2022.
12. That in the event that [the husband] - of his own will and volition - continues to instruct [AB Lawyers] in these proceedings SYC6037/2021, and this application in a proceeding is successful, then if [AB Lawyers] does not comply with any Order referred to herein then [AB Lawyers] shall pay to [AC Lawyers] the costs of enforcing these Orders on an indemnity basis.
13. That an injunction issue whereby [the husband] and [AB Lawyers] are not permitted to use, in any way, any and all documents identified and referred to in these Orders for the purposes of contesting and/or resisting this application nor in respect of the proceedings SYC6037/2021 unless as required and/or permitted by these Orders and only so as to give effect to these Orders.
Notation
A. Order 13 naturally follows from the fact that to do so may and/or otherwise does offend the lien and/or rights of [AC Lawyers].
(As per the original)
An undercurrent of the orders (by references to the husband’s “own will or volition”), was an implication that there was some limitation or challenge to the husband’s capacity to instruct AB Lawyers in the proceedings. Neither the wife, nor the wife’s parents, were identified as respondents to the Application in a Proceeding as filed.
On 9 December 2022 at a case management hearing, a judicial registrar made the following notations:
B. On 18 November 2022 an Application in a Proceeding was filed on behalf of [AC Lawyers]… seeking, in summary, declarations and orders as against both the husband and his current solicitors, [AB Lawyers], in relation to securing costs asserted to be owed to [AC Lawyers].
C. By his Response to Application in a Proceeding filed on 6 December 2022 the husband and [AB Lawyers] seek, in summary, that the Application in a Proceeding be dismissed and indemnity costs.
D.The Court is informed that the [wife’s parents] propose to file a Response to Application in a Proceeding seeking, in summary, orders to the effect of securing their interests in any funds received by the husband in priority to any other alleged creditor of the husband.
The matter was then listed before me for a case management hearing on 19 December 2022. That morning, hours prior to the listing, AC Lawyers filed an Amended Application in a Proceeding. Again, neither the wife nor the wife’s parents were identified as respondents to that application. On that date, I made the following notations and orders relevant to AC Lawyers’ application:
C.[AC Lawyers] being the prior solicitors for the husband in these proceedings attended for the purposes of the case management hearing and defended issues on 21 October 2022 determined by way of the Judgment delivered and orders made 27 October 2022.
D.Subsequent to the delivery of those reasons and orders, [AC Lawyers] filed on 18 November 2022 an Application in a Proceeding seeking declarations and orders as against both the husband and his current solicitors [AB Lawyers] arising from unpaid costs asserted to be due to [AC Lawyers].
E.On 9 December 2022 a Judicial Registrar made directions in relation to the said Application in a Proceeding and both the husband and [AB Lawyers] and the second and third Respondents have filed responses to that Application in a Proceeding.
F.Part 3.2 of the Federal Circuit and Family Court of Australia Rules mandate that a party may only be added to the proceedings after the proceedings have been listed for trial with leave of the court. No application for leave to add [AC Lawyers] or [AB Lawyers] as parties to the proceedings has been made. That part of the rules mandates the process where by an application to add parties to the proceeding are to be adopted and implemented.
G.I am advised today that the quantum of legal costs payable by the husband to [AC Lawyers] is $48,766 and that the husband is in a position to pay that sum to the said solicitors on or before 22 December 2022 being two [days] time. I am told that the husband seeks from the prior solicitors his file on payment of those outstanding costs. It is at least implied by [AC Lawyers] today that the paying of the outstanding cost will not achieve a discharge of the lien claimed by the solicitors over the file. [AC Lawyers] could not articulate today why payment of their fees as claimed would not achieve the release of their file to the husband’s current solicitors.
H.The prior solicitors for the husband advise the Court that the source of power relied upon for the purposes of the now 16 prayers of relief contained in an amended Application in a Proceedings filed by [AC Lawyers] this morning at 6.51 am is the Legal Practitioner’s Act and other equitable principles.
THE COURT ORDERS THAT
1.[AC Lawyers] have leave to make an oral [application] today for the purposes of adding both that firm and [AB Lawyers] to these proceedings.
2.If they are so advised, at their risk as to costs, [AC Lawyers] shall file and serve on or before close of Court business on 23 December 2023, such further amended Application in a Proceeding seeking leave to add additional parties to these proceedings and such further orders as would be sought, such further amended Application in a Proceeding to identify by way of points of claim the source of power to be relied upon for each prayer of relief.
3.On or before 17 January 2023 any proposed additional party sought to be joined to the proceedings by way of further amended Application in a Proceeding shall file any response to the said Application in a Proceeding and affidavit in support thereof.
…
5.I reserve all parties costs an incidental to the listing today.
On 22 December 2022, AC Lawyers filed a further Application in a Proceeding repeating verbatim paragraphs 1, and 3–16 of the Amended Application in a Proceeding filed on 19 December 2022. The additional relief sought therein was for the joinder of AC Lawyers and AB Lawyers as parties to the proceedings, as recorded at [5] above. The document was not marked as an “Amended Application in a Proceeding” but nonetheless was filed in purported compliance with Order 2 made on 19 December 2022. It did not make plain, as is required by the rules, the amendments made to the prior Application in a Proceeding filed.
The wife and the wife’s parents were identified as respondents to the Application in a Proceeding filed 22 December 2022.
When the matter was listed for case management on 25 January 2023, the following notations and orders were made:
A.The solicitor for [AC Lawyers] cannot advise the Court or the parties including the potential 4th Respondent [AB Lawyers] as to the value of the claim contended to be supported by way of a lien today. [AC Lawyers] confirm they have issued their final invoice for legal services to the husband. They now propose to revise or issue an amended final invoice.
B.Notwithstanding the contents to Notation G made 19 December 2022 the husband has not paid to [AC Lawyers] the sum of S48,766 in circumstances where he contends and understands that [AC Lawyers] will not simultaneously provide him with his file on payment on those outstanding costs, while [AC Lawyers] is critical of the husband for not tendering the contended bank cheque they had in the amount of $48,766 on or before 22 December 2022.
C.In circumstances generated by the Christmas vacation period, [AC Lawyers] advise today that a further 14 days is required for that firm as [AC Lawyers] to file a further affidavit in support of that application for intervention and joinder.
D.[AC Lawyers] has clarified that paragraph 1 of the points of claim attached to the Application in a Proceeding filed 22 December 2022 identifies that the contended constructive trust is sought as against the husband and [AB Lawyers] only and not by way of a claim as against the wife or her parents (being the second and third respondents in the proceedings).
Orders were additionally made for AC Lawyers, AB Lawyers, the husband and the wife and the wife’s parents (should they so elect) to file affidavit evidence upon which they would rely in relation to paragraphs 1 and 2 of the Application in a Proceeding filed 22 December 2022, and “short written submissions” of no greater than three pages relevant to that relief. The determination of that relief was reserved to chambers.
THE APPLICATION FOR JOINDER
The law
Part 3.1 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) sets out the procedure for the joinder of a party to the proceeding. Rule 3.01 prescribes:
3.01 Necessary parties
A person whose rights may be directly affected by an issue in a proceeding, and whose participation as a party is necessary for the court to determine all issues in dispute in the proceeding, must be included as a party to the proceeding.
The rule does not identify the discretionary matters to be considered to join a party to a proceeding. It mandates that a necessary party to a proceeding must be joined. The rule prescribes satisfaction of two conjunctive thresholds, being:
(a)firstly, that the party who is proposed to be joined has rights that will be directly affected by the proceeding; and
(b)second, that their participation in the proceedings are necessary to determine all issues in dispute in the proceeding.
If the evidence grounds such satisfaction, the rule obliges a joinder. Rule 3.01 reflects longstanding jurisprudence that a party may only be joined to proceedings if they are directly relevant to the outcome of the matter.
The word “necessary” for the purposes of a predecessor of the r 3.01 was described by Warnick J in Wayne & Dillon & Anor (2008) 40 Fam LR 543, as meaning:
18.... something more than “useful” or “expeditious”. In my view, if there are available alternative means to joinder to the substantive proceedings, of obtaining from a third person or someone already a party what is needed to allow an applicant for joinder to establish an identified “case”, joinder is unlikely to be “necessary”.
Consideration and Determination
The Full Court in B Pty Ltd and Ors & K and Anor (2008) FLC 93-380 held as follows:
52.We do not accept that it is proper to allow joinder of third parties merely upon the formulation of a paragraph in, or to be added to, an application, on the basis that at trial facts to support the application may be asserted and proved. Sufficient facts must be asserted to demonstrate that, if proved, the law arguably provides the relief sought.
This is consistent with the approach taken in other jurisdictions to joinder of third parties, as was usefully summarised by Le Miere J in Hancock Family Memorial Foundation Ltd v Fieldhouse [No 3] [2010] WASC 223, who explained why it is necessary for a party seeking to join a third party to litigation to establish an arguable case, in the following terms:
27.The applicant on a joinder application must show that there is an arguable case sufficient to resist the entry of summary judgment by the parties sought to be joined. It would be futile to order that a person be joined as a defendant if the material before the court disclosed that if the person, having been joined as a defendant, applied for summary judgment the application would succeed.
(Citations omitted)
An examination of the nature of AC Lawyers’ proposed claim against the current parties to the proceedings and AB Lawyers, and its foundation is necessary to determine the necessity of their joinder.
AC Lawyers’ substantive relief
The fundamental prayers for relief sought are difficult to distil. Doing the best I can on the material identified, they appear to be:
(a)a declaration that the husband and AB Lawyers hold the total sum of the litigation funding facility obtained by the husband “on trust” for AC Lawyers;
(b)a declaration that AB Lawyers hold “any and all costs” paid to it by the husband in these proceedings on “constructive trust” for AC Lawyers;
(c)a claim that the funds obtained by the husband from the litigation funding facility, in addition to the funds paid by the husband to AB Lawyers (regardless of the source of those monies) for their legal services, be paid to AC Lawyers within fourteen days of the making of final orders;
(d)various claims in relation to what might be described as the husband’s “file”, comprising documents in relation to these proceedings albeit that the documents were not particularised, including:
(i)that the file, insofar as it is currently in possession of either the husband or AB Lawyers, be delivered to AC Lawyers;
(ii)that until the file is delivered to AC Lawyers, the husband and AB Lawyers be restrained from “using any and all documents” comprising the file; and
(iii)that after the file is delivered to AC Lawyers, should the husband wish to transfer the file to any other legal representative, that legal representative file an “undertaking” and return to AC Lawyers the file after the completion of the proceedings; and
(iv)that the husband and AB Lawyers be restrained from otherwise using the file for purposes outside of these proceedings.
The Points of Claim filed by AC Lawyers plead that the firm “holds a lien” (presumably over the husband’s “file”, although the subject of the lien is not adequately identified), but fails to particularise the entitlement to, or extent of, the contended lien, save for broadly asserting:
(a)that AC Lawyers “remains presently entitled to [the litigation funding facility] obtained [by the husband]” because “as at that point in time at which [the husband] obtained the funding he used documents and information subject to and of the lien in favour of [AC Lawyers]” (paragraph 7); and
(b)that “funding facility, that is funds constituting the facility, thus are ‘fruits of the litigation’” (paragraph 8); and
(c)that “the fund does not constitute, ‘future costs’ in the hands of [AC Lawyers] it is a discrete and identifiable fund which constitutes ‘fruits of the litigation’” (paragraph 10); and hence
(d)“neither [AB Lawyers nor the husband] was and/or remains presently entitled to the funds constituting the funding facility, and, as a result a constructive trust arises as against both [AB Lawyers nor the husband]” (paragraph 11); and
(e)the wife and the wife’s parents do not have a claim against AC Lawyers, as would justify them being given priority, over, and above AC Lawyers approaching the court with “unclean hands on the issue of funding and costs” (paragraph 12).
The affidavit evidence of AC Lawyers contain a raft of statements, opinions and submissions relating to the matters pleaded in the Points of Claim, with limited relevant evidence. It does readily not clarify, particularise or give foundation to the bare assertions made in the Points of Claim.
The affidavit of Mr AD filed on 27 December 2022 records that the “final invoice” rendered by AC Lawyers in the sum of $48,766 was sent to the husband on 20 October 2022 (at paragraph 35), being the same quantum as recorded in Notation G made on 19 December 2022. Notwithstanding Notation A made 25 January 2023, no amended invoice of AC Lawyers has been placed into evidence.
The language used in the affidavit evidence of AC Lawyers refers to a lien “over [the husband’s] file”, to a lien over submissions prepared by counsel previously briefed by AC Lawyers and used by counsel on subsequent occasions when briefed by AB Lawyers, and to AB Lawyers using those “documents in breach of the lien” (affidavit of Mr AD filed 27 December 2022, paragraph 30). The affidavit then records:
31. There may be a paramount duty to the Court, that’s fine, however, solicitors are entitled to be paid and are one of the few privileged industries entitled to hold a lien. Lawful continued use of a file is subject to proper arrangements having been made to the extent that a lien is claimed by the former solicitor. The law is clear and that is clearly the law.
(As per the original)
The same affidavit evidence later opines:
38. By using the documents subject of a lien, [AB Lawyers] came into possession of the identifiable fund - in the hand of [AC Lawyers] - provided to [the husband] as litigation funding, and, did so prior to any discharge of any lien.
39. The documents and information subject to and of the lien and the funding are, by definition, fruits of the litigation owing to [AC Lawyers].
…
41. The funding gained by [the husband] is held on constructive trust as, simply, the circumstances are analogous to a conversion of files of [AC Lawyers] - including documents which may constitute that file and documents which would be subject of a lien to this firm in any event - and that that conversion has resulted in an identifiable fund and/ or value being the litigation funding that is presently held by [the husband], and /or, a sum equivalent to that sum of the costs charged by [AB Lawyers] in the continuation of this matter.
The written submissions of AC Lawyers supplement this evidence, as follows:
2. [AC Lawyers] need not identify any particular tort, so to speak, by which a right to trace and a constructive trust flows. The constructive arises as [Mr Willmann] cannot claim better title than [AC Lawyers]. Nonetheless, a constructive trust also arises in circumstances of conversion.
3. Title not having passed to [Mr Willmann], it must be, that he became a trustee of the property so taken, the beneficiary of whom, is [Mr AD] of [AC Lawyers].
4. The Court cannot resist the intervention and/or joinder of [AC Lawyers], as, simply, to do otherwise would be for the Court to permit what is or is otherwise tantamount to an act which gives rise to a constructive trust.
5. The right of joinder and/or intervention, under [the Act], whilst I do not necessarily believe necessary for me to address arises from the taking of the property pleaded, and, the Court would be compelled by several powers to join [AC Lawyers] to the proceedings. As to joinder, this Court has relevantly set out the principles, indeed, in these proceedings.
6. The property is traced into that to which the property is put to use, that is, the litigation fund attested to in paragraph 10 of the Affidavit of [Mr AD] 22 December 2022 [10] through [54]. On these facts, equity would not permit [Mr Willmann] to retain or otherwise assert against the trust, because, to do so would be to act entirely contrary to the existence of the trust. Noting that I do not seek damages in conversion, but, instead, a constructive trust arising from the conversion of the property.
7. The Court cannot permit [Mr Willmann] and/or [AB Lawyers] as it would be a heresy to its very role and function. It would be to use equity against the equitable intervention that is a constructive trust, but, the latter of which is mandated by the acts contrary to [AC Lawyers] ownership of the property, as pleaded.
…
9. The errant trustee, the fiduciary, is [the husband]. However, it is the case that the litigation funder and [AB Lawyers] are accomplices in equity being recipients of the fund and knowingly or otherwise being wilfully blind to the fact that title had not passed as set out in paragraph one (1) and/or otherwise noted in these submissions.
…
16. To the extent that a lien exists, the lien permits tracing into the property subject of the constructive trust the beneficiary of which is [Mr AD] of [AC Lawyers]: The property, and litigation fund, in any event and for the reasons set out herein, are thus held object of a constructive trust. In turn, the property must be delivered to [Mr AD] of [AC Lawyers], as pleaded, because, it is trust property, on the facts of the instant case.
(Footnotes omitted)
For reasons best known to AC Lawyers, an informed election was made not to illuminate by reference to legislation or binding authorities setting out legal principle, how or why AC Lawyers seek the entire litigation funding facility contended to be held by the husband on “constructive trust”, save to boldly contend that:
18. It is submitted that damages would not be a sufficient remedy as this would cause [AC Lawyers] a mere debtor and to lose priority in respect of his own property, being the property and the fund, over which, the Court is compelled to Order a constructive trust.
The husband agreed to pay the sum of $48,766 to AC Lawyers as at the date of the notation made on 19 December 2022 as confirmed by the husband his affidavit filed 23 January 2023, which records:
5.I presently have the amount of $48,766.10 available to pay [AC Lawyers], in exchange for the release of my file.
There is no evidence that he has since changed his position on that matter. He asserts that AC Lawyers refuses to release his file, “without a court order requiring him [it] to release it”. The seven-day trial before Tree J has completed (without the husband having the file held by AC Lawyers) and judgment is reserved. No party or proposed party asserts the file is required for the s 79 trial listed to commence in September 2023.
There is merit in the husband’s contention that paragraph 4 of AC Lawyers’ written submissions are little more than “a bare assertion” with no discernible meaning, and that paragraph 5 does not in reality engage with the express directions made on 25 January 2023 for AC Lawyers to file written submissions “in support of the relief [for joinder]”. The husband further highlights that referring to general powers without identifying a basis for their exercise is entirely inadequate.
There is also merit in the written submissions of the wife that record in response to the submissions of AC Lawyers:
4. It is difficult to understand what to take from that document in circumstances where it appears to be a collection of words as opposed to targeted submissions that set out with precision the basis upon which [AC Lawyers] and [AB Lawyers] ought to be added to the proceedings or alternatively for the [AC Lawyers] to intervene in the proceedings.
5. Doing the best one can, it appears [AC Lawyers] contends he is the object of a constructive trust in some form of property that [the husband] and [AB Lawyers] (the Potential fourth Respondent) somehow have possession of and which they are somehow using and that equity, in those circumstances, ought to intervene.
6. The difficulty with the submissions advanced on behalf of [AC Lawyers], is that no attempt has been made to set out the relevant principles which are said to give rise to the existence of the constructive trust and the facts which would underpin such a finding.
7. All that has been done, is to baldly assert the existence of a constructive trust in relation to unknown property.
So that it is clear, it inappropriate for a party to expect the Court or the other parties to anticipate a possible basis upon which they are pressing a claim for particular relief.
The claims for relief identified by AC Lawyers are not pleaded to be grounded from a contractual lien by way of paragraph 14 of the solicitor’s costs agreement entered with the husband on 2 June 2022.
Although not expressly identified by AC Lawyers, it may be that the pleaded claim is for an equitable lien upon the basis that it would be unconscionable for the husband as the owner of intellectual property prepared by the prior firm to retain of its improvement made by AC Lawyers with funds or work contributed by them without appropriately compensating them. AC Lawyers does not particularise how the value of that compensation could be greater than the value of the outstanding invoice for professional fees in the sum of $48,766.
AC Lawyers pleads what is described as a “fruits of the litigation” (sometimes known as fruits of the action) lien for priority payment of outstanding legal costs as against the wife, her parents and AB Lawyers (it is assumed to be from out of the property division ordered in favour of the husband).
It has long been recognised that a particular lien arises in favour of a solicitor who has performed legal work which has resulted in the generation of a fund for a particular client. Campbell J summarised the relevant position in Firth v Centrelink & Anor (2002) 55 NSWLR 451 at [35], being that the rights of a solicitor exist “over money recovered through obtaining judgment in litigation, and also over money recovered through the settlement of litigation”. None of these categories apply to AC Lawyers at this time on the facts in this case.
Campbell J further said that 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” (at [35(f)]. In this case on the evidence that amount is $48,766.
What further falls from that summary of Campbell J is that if the lien exists, it exists independently of any order of the Court being made regarding the lien (at [41]). It comes into existence when a settlement agreement, judgment or order is entered into and it does not matter where the funds are held, whether they are held by another solicitor or somewhere else.
There is no evidence to support the bald assertion made absent foundation that a capacity to draw down on a litigation funding facility, and the monies made available from that contractual arrangement, can be the subject of a lien. Absent evidence, it cannot be simply assumed that anticipated funds to pay future legal fees are “the husband’s funds” in respect of which a lien could attach. There is no evidence before me, for the purpose of this determination, as to the terms of any agreement made between the husband and the funder providing the litigation funding facility.
When the matter first came before me in the Major Complex Financial Proceedings list on 26 August 2023, Mr AD appeared for the husband, contending that the value of the pool of property of the parties available for adjustment was in the range of not less than $20 million. The husband by way of his Response to an Initiating Application filed 18 October 2021, broadly sought that the wife pay to him by way of property adjustment, 50 per cent of the total value of the property pool (hence, in the range of $10 million). On his case then prosecuted by AC Lawyers, there was no risk that AC Lawyers’ outstanding fees would not be paid upon the proceedings being finalised.
Fundamental to this application for joinder are three facts, being:
(a)the quantum of the claim of AC Lawyers for outstanding professional fees is $48,766; and
(b)the husband says that debt can be paid without delay, such that payment would not await the s 79 determination being made later this year; and
(c)implicitly, neither the husband nor AB Lawyers require the prior “file” held by AC Lawyers for the s 79 trial later this year.
CONCLUSION
Insofar as AC Lawyers’ relief sought against the husband and AB Lawyers is for a declaration that the husband and AB Lawyers hold the total sum of the litigation funding facility obtained by the husband, and “any and all costs” paid by the husband to AB Lawyers “on trust” for AC Lawyers, I am not satisfied that AC Lawyers has established it has an arguable case for that relief. Putting it another way, it is difficult to discern any other relevant dispute or any foundation as to why equity would facilitate AC Lawyers to receive the benefit of the “third‑party litigation finance entity”, when its outstanding professional fees are $48,766. As a corollary, I am not satisfied that AC Lawyers has established any basis upon which it could seek to have those monies identified paid to it. Those prayers for relief as articulated, on the material identified thus far, is misconceived both as to foundation and as to value.
Insofar as the relief sought is for the raft of injunctive orders in relation to the husband’s file identified at [29(d)] above, those orders would seem to have little utility having regard to the substantive relief as presently articulated being without merit.
The application to join AB Lawyers therefore fails to achieve the second threshold in r 3.01 and will be dismissed.
If the relief sought by AC Lawyers is restricted to the recovery of the amount which is properly owing to them by the husband (as identified at [46] above), then they may potentially have rights that may be, as opposed to will be, affected by the proceedings. While accepting that anything is possible, there is no reason not to accept the husband’s evidence that the outstanding professional fees due to AC Lawyers can be forthwith paid and the debt satisfied in a way that is unaffected by the determinations to be made in this litigation. Why AC Lawyers will not tender the husband’s file on receipt of payment for their outstanding fees as claimed remains obscure and cryptic.
Any claim as to priority by way of the lien is yet to crystallise. No current party to the proceeding is presently seeking priority as against the claim of AC Lawyers in the sum of $48,766. That claim of AC Lawyers for payment of its outstanding professional fees is not directly relevant to the determination of the matters reserved by Tree J or to the s 79 proceeding listed later this year. Putting it another way, the determination of the claim for unpaid professional fees as sought by AC Lawyers is not necessary for the Court to completely and finally determine all the matters currently in dispute in the substantive litigation. Alternate means are available to AC Lawyers other than joinder to the substantive proceeding to pursue their final invoice of $48,766 in professional costs due.
AC Lawyers has not identified a case of merit outside that of the lien sufficient to ground the exercise of discretion to join them to the proceedings. This is because:
(a)I am not satisfied that the proposed joinder of the firm is necessary for the Court to determine a matter that is currently strictly as between the husband and AC Lawyers of limited compass; and
(b)The cause of action pleaded by AC Lawyers to access all of the litigation funding facility is insufficiently identified and particularised such that it is misconceived.
I am mindful in this determination as to the provisions of s 26(2) of the Federal Circuit and Family Court of Australia Act 2021 (Cth). The application for AC Lawyers to join the proceedings, or in the alternative for them to intervene in the proceedings, will be dismissed.
This determination does not prevent AC Lawyers from pursuing such relief as they consider appropriate in another forum. In circumstances where the application for joinder has been unsuccessful, the balance of the relief sought in the Application in a Proceeding is not available in this forum, such that an order will be made dismissing the Application in a Proceeding filed on 18 November 2022 and the amendments thereto, and the Application in a Proceeding filed on 22 December 2022.
Costs
The wife sought in order for indemnity costs as against AC Lawyers. In her written submissions, she asserted that she had incurred legal costs of $7,056.50 in responding to AC Lawyers’ applications (at paragraph 11). She did not put into evidence any fee agreement with her solicitor or any itemisation of the quantum sought. She put AC Lawyers on notice by way of letter dated 16 January 2023 as to the failure of AC Lawyers to seek any order directly against the wife, and requested particulars as to the basis upon which the wife was listed as the third respondent to the Application in a Proceeding filed on 22 December 2022. The letter put AC Lawyers on notice that she would rely on that correspondence in relation to the issue of costs. No response was received by the wife’s solicitors to that letter.
The husband sought an order that AC Lawyers pay his costs also on an indemnity basis as assessed within 28 days of the assessment. Similarly, he did not put into evidence any cost agreement with his current solicitors, AB Lawyers. By way of a letter dated 12 December 2022, he invited AC Lawyers to “withdraw [its] application immediately” giving notice to AC Lawyers to the effect that, in the event, his application to intervene was dismissed, costs would be sought. The letter records that the proposed application of AC Lawyers was misconceived and incapable of success.
No application for costs was made by AB Lawyers.
The financial circumstances of AC Lawyers are not known. The husband and the wife have property of significant value available for adjustment.
The application for joinder has been unsuccessful. The intervener was placed on notice by both the husband and the wife as to costs being sought should its relief for joinder be refused. Each of these factors are justifying circumstances to order costs. Order 2 made on 19 December 2022 flagged to AC Lawyers’ as to its risk as to costs.
By reference to the well-known authorities, all of the requisite evidence to ground discretion to order costs on an indemnity basis are not available. I am satisfied that it is just that costs of and incidental to the application for joinder be awarded in favour of the husband and the wife on a solicitor/client basis as agreed or assessed.
An order will be made to that effect.
I certify that the preceding sixty-five (65) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Campton. Associate:
Dated: 12 May 2023
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