Doyles Construction Lawyers v D'Jamirze & anor

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

12989/03 - DOYLES CONSTRUCTIONS LAWYERS v ALICK D'JAMIRZE and NICKOLAI D'JAMIRZE t/as PLASTERBOARD PROFESSIONALS

JUDGMENT 1 HIS HONOUR: By summons filed on 11 November 2003 the plaintiff, a firm of solicitors, sued the defendants, former clients, who are tradesmen plasterers. The kernel of the dispute relates to a claim for legal costs, however at the hearing only pars 2 and 7 of the summons were pressed, the other prayers being almost inevitably determinable upon the outcome of outstanding costs assessment proceedings. Relevantly the plaintiff seeks a declaration of entitlement to a lien over certain money which is in fact presently paid into this Court. The pursuit of such an order in that circumstance would seem, at least at first blush, curious and it is necessary to sketch some background preceding the issue of the summons and a subsequent particular discovery concerning one of the defendants. 2 In May 2001 the defendants retained the plaintiff in connection with the recovery of money claimed to be due to them for work done and materials provided in connection with subcontracting work on a building project. The head contractor from whom payment was sought was Grindley Constructions Pty Limited (Grindley). On 23 May 2001 the defendants signed a costs agreement with the plaintiff. I note in passing that the costs and expenses estimate totalled $1,700 for a statute based claim and there was said to be mention of an estimate of $17,000 to $20,000 if litigation was needed to be pursued. At various times up to November 2001 invoices were sent for fees. Payments totalling a little over $7,000 were made. The present dispute is focussed upon a claim for something in the order of a further $50,000. The quantum of the claim must be determined by costs assessment process which is in train and it is not an issue in these proceedings save that it was for the purposes of making argument other than academic it seems to have been accepted that some sum for fees would be owing. 3 In early 2002 one of the defendants was contacted by the plaintiff's accounting staff about being "behind in payment". Nevertheless the plaintiff prepared and filed documentation in the District Court seeking to amend a statement of claim which had been filed against Grindley. On 8 July the plaintiff terminated the retainer. On a return of the notice of motion on 25 July, one of the defendants appeared without legal representation. 4 In the meantime, the plaintiff gave notice to the solicitors acting for Grindley that a lien (for legal costs) was asserted in its favour over any award of damages or settlement payable to the defendants ("the fruits of action"). 5 On 30 July 2002 the defendants retained new solicitors (Johninfo) and Mr Cameron of that firm continues to act for them. A settlement was negotiated in the action by the defendants against Grindley and on 29 August 2003 Johninfo received the settlement sum of $150,000 from Grindley which was deposited in the firm's trust account. 6 There followed a considerable exchange of correspondence between the plaintiff and Johninfo. There were assertions and counter assertions which are collateral to the issue with which I have to deal. At stages, Johninfo denied the claimed lien and at other times the plaintiff denied that its accounts could be subjected to assessment. As I have mentioned, in the event, a bill of costs is being assessed. 7 The following significant matters can be extracted from the affidavits and correspondence exhibited to them. No deponent of an affidavit was required for cross examination. On 26 August 2003 (three days before the receipt of the settlement cheque by Johninfo) Grindley's solicitors advised them of the plaintiff's claim for lien. This was communicated to the defendants. On that day the defendants agreed to the disputed amount of the plaintiff's costs being retained in Johninfo's trust account. In a letter dated 11 August 2003 there was confirmation that the full amount of claim (stated at $52,274) would be held. 8 In a letter to the plaintiff dated 29 August 2003 Johninfo stated: "Should you have difficulties with monies being held in our trust account pending assessment of your bill of costs, please indicate an acceptable place where you would wish those monies to be held, pending expeditious resolution of your claim." 9 For several weeks thereafter the principal subject of contention was whether the plaintiff's bill of costs could or would be submitted for assessment. Eventually an application for costs assessment was filed by the defendants on 15 October 2003. By letter dated 28 October 2003 the plaintiff maintained objection to costs assessment but requested that $45,000 held in Johninfo's trust account be paid into Court, or alternatively, Johninfo provide an express undertaking not to pay such sum out of trust without seven days prior notice to the plaintiff. 10 On that date Johninfo replied. The reply specified agreement in principle to payment of $52,274.65 into Court upon stated conditions. 11 On 3 November 2003 Johninfo wrote to the plaintiff advising that the Court had declined to receive payment in as there was no pending action. The Registry advised that costs assessment application was not of the necessary character to enable the money to be received. 12 As indicated the plaintiff then filed the current summons on 11 November and on the same day, in further correspondence, suggested to Johninfo that "you should be able to transfer the monies held in your trust account to the Supreme Court" as summons had now been filed. 13 On 27 November 2003 Johninfo paid $51,769.96 into Court. 14 I turn to the specific relief sought. There can be no doubt that a solicitor whose exertions have contributed in a causal sense towards the right of a client to obtain money by verdict or settlement can claim a lien over the "fruits of action". The entitlement has been said to be analogous to the right created by an equitable assignment of a corresponding part of the money: Ex Parte Patience; Makinson v The Minister 1940 40 SR (NSW) 96. It is not necessary that the assessment of costs be finalised for the right to exist: Johns v Cassel (1993) FLC 92-364. Mr Doyle and Mr Cameron who respectively appeared on the summons have, in compliance with directions, supplied written submissions which extensively canvass authorities touching upon a wide range of aspects of a lien of the type claimed. 15 It has been convenient to speak of a lien but it should be observed that what is involved is not a lien in the strict sense: Barker v St. Quintin (1844) 12 M & W 441 cited in Ex Parte Patience (supra) in this State. The description of Cockburn CJ in Mercer v Graves 1872 LR 7 QB 499 is frequently cited and I apply it. What is involved is a claim or right of a solicitor to "ask for the intervention of the Court for his protection, when, having obtained a judgment for his client he finds there is a probability of his client depriving him of his costs". 16 Is such a probability demonstrated in this case? I accept that in this context the level of probability can be equated simply with significant risk: cf Johns (supra). In Johns Hodgson J held that where the defendant did not "admit that anything is due, would not give an undertaking, and has no other significant assets to satisfy the plaintiff's demand" there was at least an appreciable risk. 17 In the present case the money is, as a result of payment into Court, under the control of the Court. It is true that payment in was rejected until there was litigation on foot. However, on the very day of receipt by the defendants' new solicitors of the settlement money the plaintiff was invited to specify where it was acceptable to it for the money to be held. It was never suggested by Johninfo that funds sufficient to meet the plaintiff's demand in its entirety were being removed from the trust account, nor that they had been given any instructions so to do. 18 The posture adopted by the plaintiff at hearing was that a declaration must follow upon demonstration of entitlement to lien. In my view, the intervention of the Court needs to be attracted by demonstration of a requirement for protection or, put another way, an appreciable risk that the plaintiff may be unable to recover his costs from the settlement monies. There needs to be genuine utility (and dispute, other than simply whether or not the plaintiff's contention can be endorsed) in order to attract the discretionary remedy of declaratory relief. (See Declaratory Orders, Young 2nd Edn Butterworths especially Chap. 7). 19 The plaintiff was constantly advised that the necessary funds would be preserved pending the outcome of costs assessment. The defendants agreed to the payment into Court prior to the commencement of litigation by the plaintiff. When invited to specify where it was desired that funds be held, it was the plaintiff who sought payment into court and although the technical obstacle was removed by the initiation of this litigation, it was not any risk of dissipation of the funds by the defendants which provoked it. 20 The evidence falls far short of establishing grounds for reasonable apprehension that the settlement money would not be available to meet the plaintiff's claim for legal costs. The onus lies on the plaintiff but, in any event, I am satisfied that the facts and circumstances do not give grounds for any such apprehension. 21 I turn to what I have referred to as a discovery. In March 2004 the plaintiff learned (by search) that one of the defendants (Alick D'Jamirze) had on 9 September 2003 been made bankrupt on his own petition. The matter was raised with Johninfo which confirmed his identity and noted its unawareness of the matter until raised in a letter from the plaintiff in April 2004. On 26 May 2004 Federal Magistrate Raphael gave leave to the plaintiff to proceed against Alick D'Jamirze pursuant to the Bankruptcy Act 1966 (Commonwealth). So far as it is relevant Nickolai D'Jamirze consented to that order. 22 It was stated by Mr Doyle (and not disputed by Mr Cameron) that the trustee in bankruptcy had "shown no interest" in these proceedings. Mr Doyle submitted that he was satisfied that the plaintiff's lien would vest appropriate priority for any debt for costs demonstrated by the assessment. 23 As abovementioned, the nature of the solicitor's right which I have conveniently referred to as a lien is analogous to equitable assignment of appropriate funds and has variously been described as an "equitable right", an "equitable interest" and a "claim to equitable interference": Ex Parte Patience (supra); Twigg v Keady (1996) FLC 92-712; Re Allied Glass Manufacturers Limited (1936) 36 SR (NSW) 425. 24 It was not suggested that the plaintiff's position, should claims be made against the bankrupt estate of the particular defendant, would be strengthened by declaratory judgment concerning the lien nor weakened by absence of such judgment. 25 That circumstance therefore does not give rise to a reason for granting the relief sought on an alternative basis. 26 It is necessary for the proceedings to remain on foot for the purpose of ultimately disposing of the money paid into Court. It can be anticipated that this should be able to be achieved by consent orders once the outcome of the costs assessment is finalized. 27 The defendants have been successful on the issue contested and an order for costs in their favour should follow that event. 28 I make the following orders:

1. The plaintiff's claims for orders in terms of pars 2 and 7 of the summons are dismissed. 2. The balance of the summons is stood over to a date to be fixed pending the outcome of the assessment of the plaintiff's claim for legal costs against the defendants. Liberty to either party to restore the matter to the list on seven days notice to the other. 3. The plaintiff to pay the defendants' costs of the summons up to and including today. **********

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