Firth v Centrelink & Anor

Stephen Paul Firth (Plaintiff) PARTIES : Centrelink (Formerly known as The Department of Social Security) (First Defendant) Commonwealth of Australia (Second Defendant) JUDGMENT OF : Campbell J

COUNSEL : R Goodridge (Plaintiff) T Reilly (Defendants) SOLICITORS : Firths The Compensation Lawyers (Plaintiff) Australian Government Solicitor (Defendants) CATCHWORDS : ADMINISTRATIVE LAW - Judical Review legislation - claim that issue of statutory garnishee notice under section 1233 Social Security Act 1991 (Cth) is invalid - whether Supreme Court has jurisidiction to determine - EQUITY - equitable charges and liens - solicitor's "fruits of the action" lien - attributes - whether notice by solicitor to fundholder that solicitor claims to be paid costs from the fund is necessary for existence of the lien - SOCIAL WELFARE - social security payments - whether section 1233 Social Security Act 1991 (Cth) enables Commonwealth to receive the amount of a judgment debt owed to someone who is a debtor to the Commonwealth concerning overpaid social security payments, notwithstanding the existence of a solicitor's "fruits of the action" lien over that judgment - PROFESSIONS AND TRADES - lawyers - "fruits of the action" lien - costs and disbursements which are within the scope of the lien - whether interest is payable on amount of the lien Administrative Decisions (Judicial Review) Act 1977 (Cth) Commonwealth Services Delivery Agency Act 1997 (Cth) Freedom of Information Act 1982 (Cth) LEGISLATION CITED : Income Tax Assessment Act 1936 (Cth) Legal Practitioners Act 1898 (NSW) Social Security Act 1991 (Cth) Supreme Court Act 1970 (NSW) Aerolineas Argentinas v Federal Airport Corporation (1993) 32 NSWLR 595 Akki Pty Ltd v Martin Hall Pty Ltd (1994) 35 NSWLR 470 Carew Counsel Pty Ltd v French [2002] VSCA 1 Clissold v Perry (1904) 1 CLR 363 Cole v Eley [1894] 2 QB 180 Color Point Pty Ltd v Markby's Communication Group Pty Ltd [1998] 1516 FCA (Weinberg J, 27 November 1998, unreported) Commonwealth v Hazeldell Ltd (1918) 25 CLR 552 Commonwealth of Australia v Hazeldell Ltd [1921] 2 AC 373 Commissioner of Taxation v Donnelly (1989) 25 FCR 432 Commissioner of Taxation v Government Insurance Office of NSW (1992) 36 FCR 314 Dallow v Garold; Ex parte Adams (1884) 14 QB D 543 Delmore Pty Ltd v Commonwealth of Australia (1985) 2 NSWLR 179 Ex Parte Patience; Makinson v The Minister (1940) 40 SR (NSW) 96 Faithfull v Ewen (1878) 7 Ch D 495 Guy v Churchill (1887) 35 Ch D 489 Grogan v Orr [2001] NSWCA 114 Haymes v Cooper (1864) 33 Beav 431; 55 ER 435 Heid v Reliance Finance Corporations Pty Ltd (1983) 154 CLR 326 Hewett v Court (1983) 149 CLR 639 In Re Blake; Clutterbuck v Bradford [1945] 1 Ch 61 In Re Born; Curnock v Born [1900] 2 Ch 433 In Re Drax; Savile v Drax [1903] 1 Ch 781 CASES CITED : In Re Massey (1870) LR 9 Eq 367; 18 WR 444 In Re Meter Cabs [1911] 2 Ch 557 In The Estate of Fuld (No 4) [1968] P 727 Jeffcott Holdings Ltd (in liq) v Paior (1995) 18 ACSR 213 Jennings v Mather [1902] 1 KB 5 Johns v Cassel (1993) 6 BPR 13,134 Kelso v McCulloch (Young J, Supreme Court of NSW, 24 October 1994, unreported) Kison v Papasian (1994) 61 SASR 567 Leamey v Heath [2001] NSWSC 1095 Macquarie Health Corp Ltd v Commissioner of Taxation (1999) 96 FCR 238 Murdocca v Murdocca (No2) [2002] NSWSC 505 North West Construction Co Pty Ltd (In Liquidation) v Marian [1965] WAR 205 Ormerod v Tate (1801) 1 East 464 Phillipa Power & Associates v Primrose Couper Cronin Rudkin [1997] 2 Qd R 266 Re de Groot [2001] 2 Qd R 359 Read v Dupper (1795) 6 TR 361; 101 ER 595 Reliance Finance Corporation Pty Ltd v Heid [1982] 1 NSWLR 466 Roam Australia Pty Ltd v Telstra Corporation Ltd [1997] FCA 980 (Lehane J, 22 September 1997, unreported) Ross v Buxton [1889] 42 Ch D 190 Townsend v Reade (1835) 4 LJ Ch 233 Twigg v Keady (1996) 135 FLR 257 Welsh v Hole (1779) 1 Dougl. 238; 99 ER 155 Worrell v Power & Power (1993) 46 FCR 214 Zuks v Jackson MacDonald (1996) 132 FLR 317 DECISION : Lien exists; Section 1233 notice does not entitle Commonwealth to amount for which lien exists; Commonwealth not a bona fide purchaser for value without notice; No defence of laches made out; Lien bears interest; Plaintiff ordered to bring in Short Minutes of Order

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST

1500/02 STEPHEN PAUL FIRTH v CENTRELINK (FORMERLY KNOWN AS THE DEPARTMENT OF SOCIAL SECURITY) & ANOR JUDGMENT 1 HIS HONOUR: Mr Firth is a solicitor. In November 1995 he received instructions to act on behalf of Mr Jack Koushkarian in a District Court action in which Mr Koushkarian sought damages for personal injury arising out of a motor vehicle accident. The motor vehicle accident had happened on 28 April 1989, and the proceedings had been on foot since 1990, being conducted by another solicitor. 2 A signed Fee Agreement was entered into between Mr Firth and Mr Koushkarian, dated 18 June 1996. Mr Firth paid out of his own pocket on behalf of Mr Koushkarian certain disbursements, and did professional work. 3 Mr Firth gives evidence, which I accept, as follows: "6 Pursuant to instructions received from Mr Koushkarian on or about 2 May 1997 I settled his third party claim for the sum of $20,000 inclusive of costs. 7 Pursuant to an authority from Mr Koushkarian dated 3 May 1997 my professional fees and disbursements of and incidental to acting on his instructions in relation to the proceedings were to be deducted from the said settlement." 4 GIO General Ltd, which carried on business under the name "GIO Australia" ("GIO"), had the conduct of the District Court litigation for the defendant, and it was with GIO that Mr Firth negotiated the settlement. The evidence does not disclose anything about the detail of the negotiations, does not include any documentation which constituted the settlement, and does not disclose whether the authority dated 3 May 1997 ever came to the attention of GIO. 5 GIO sent to Mr Firth a letter dated 5 June 1997 which said: "We refer to the above matter which has been settled for $20,000 inclusive. We wish to advise that the deductions for GIO payments ($1,788.20) plus advance payment to the Health Insurance Commission ($2,000) amounted to $3,788.20, leaving a balance of $16,211.80. There was also a deduction of $23,188.68 to be refunded to Department of Social Security as garnishee. After contacting the Department of Social Security, they agreed to accept the balance of $16,211.80. We enclose herewith a copy of their agreement. We advise that no payment [is] outstanding to be forwarded to your office." 6 The document enclosed with that letter, was a letter dated 5 June 1997 from the Department of Social Security to GIO. It said: "Garnishee Notice relating to Jack Koushkarian Employer Reference Number MAC 032508.02. This is a garnishee notice issued under section 1233 of the Social Security Act 1991 (the Act). It relates to Jack Koushkarian (the debtor), whose last-known address is 193 Old Northern Road CASTLE HILL NSW 2154. Jack Koushkarian is indebted to the Commonwealth under the Act. I advise that, in the exercise of the powers delegated to me by the Secretary to the Department of Social Security, under Section 1299 of the Act, I require you to pay to the Department of Social Security an amount of: $16211.80 or the whole of the money referred to in paragraph (a), (b), (c) or (d) below if it is less than $16211.80. This notice is issued to you on the basis that you are a person: a) by whom is due or accruing or may become due to the debtor [sic]; or b) who holds or may subsequently hold money for or on account of the debtor; or c) who holds or may subsequently hold money on account of some other person for payment to the debtor; or d) who has authority from some other person to pay money to the debtor. You must comply with this notice: · immediately the money becomes due to the debtor or is held by you; or · after a period of 14 days has elapsed following service of this notice on you; whichever is the later. If you do not comply with this notice, or if you do not comply with the notice to the extent that you are able to comply, then (under section 1230 of the Act) you may become liable to pay the debt to the Commonwealth and the Department may seek to recover money due or owing to the debtor from you directly. The amount that may be sought from you is the lesser of: (a) as much of the amount that you are required by the notice to pay as you were able to pay; or (b) as much of the debt due by the debtor at the time that the notice was given as remains due at the time that the recovery action is taken against you. In addition, you may be charged with an offence under section 1233 of the Act. If you are found guilty of such an offence, you may be liable to serve a term of imprisonment of up to 12 months. You may also be liable to pay a fine instead of or in addition to that term of imprisonment. I will notify you if any amount is paid in reduction or satisfaction of the debt due by the debtor so as to reduce the amount that you are required to pay, as specified in this notice. Copies of sections 1230 and 1233 of the Act are attached for your information." 7 This was the first that Mr Firth knew about any money being owed by Mr Koushkarian to the Department. It was the first intimation to Mr Firth that neither he, nor Mr Koushkarian, would receive any part of the settlement which he had negotiated. 8 Mr Firth has been in practice as a solicitor for some 20 years, and is an experienced personal injuries solicitor. He is aware that personal injury plaintiffs often owe money to the Department of Social Security, and has a practice, if a client who is a plaintiff has been on social security benefits, to check with the Department of Social Security what amount will be owing to the Department from any verdict or settlement which might be arrived at. However, his understanding was that Mr Koushkarian had not received any kind of benefit from the Commonwealth, and so did not make any enquiry to the Department so far as Mr Koushkarian was concerned before effecting the settlement. 9 The costs and disbursements owing to Mr Firth, pursuant to the Fee Agreement, totalled $6,385.00. On 11 November 1998 Mr Firth began proceedings in the Local Court at Sydney against Mr Koushkarian seeking that sum, together with interest and costs. On 8 April 1999 judgment was entered, in those Local Court proceedings, in the sum of $7,632.22. 10 Mr Firth received no payment from Mr Koushkarian pursuant to the judgment. On 23 August 1999 he made application for issue of a Writ of Execution against Mr Koushkarian. That Writ was not satisfied. 11 Mr Koushkarian made an application to set aside the judgment. On 12 November 1999 the Local Court dismissed the application, and ordered Mr Koushkarian to pay Mr Firth's costs of that application. 12 Mr Firth has received nothing from Mr Koushkarian. On 25 January 2000 Mr Firth wrote to the Department of Social Security, asserting that he was entitled to a lien over the fruits of the litigation to protect his professional costs and disbursements, and complaining that the full settlement proceeds had been paid to the Department. He asserted that in those circumstances an amount of $8,105.01 was due and payable to his firm. He threatened litigation if it was not paid. 13 On 4 February 2000 a delegate of the Secretary to the Department of Family and Community Services replied. This was the start of a repetitive chain of correspondence to and fro, in which Mr Firth asserted the validity of his lien, and the Department asserted its entitlement to receive the whole of the net verdict monies pursuant to its Garnishee Notice. 14 On 3 November 2000, Mr Firth wrote to the Department enclosing a written authority from Mr Koushkarian "to release to my solicitors, Firths - The Compensation Lawyers all information they require including reports, notes and records relating to the Garnishee Order against me which was issued in June 1997." This produced no response, so Mr Firth made a Freedom of Information Act request for the file of Mr Koushkarian. Under cover of a letter from the Department dated 23 February 2001, Mr Firth received copies of documents from the electronic file of Mr Koushkarian. 15 By this time the paper file of the Department relating to Mr Koushkarian had been destroyed. In accordance with the ordinary procedures of the Department, it would probably have been destroyed towards the end of 1999, on the ground that there was no debt remaining outstanding in it. After receiving the settlement proceeds from GIO, the Department had written off the balance of what it said was Mr Koushkarian's debt, and the Department destroys closed files after two years. 16 The documents with which Mr Firth was provided in February 2001 show that the Department raised a debt against Mr Koushkarian in the sum of $23,568.68, on 18 June 1990. It was a debt arising from Mr Koushkarian having given an assurance of support to the Department, concerning his parents. It seems that, notwithstanding that assurance of support, Mr Koushkarian's parents sought, and were paid, social security benefits within some specified time after their migration to Australia. The Department claimed (and, for reasons which will appear later, I do not decide whether this claim is correct or not) that Mr Koushkarian was obliged to repay the amount they had received, and the amount that he was obliged to repay was $23,568.68. Mr Koushkarian in fact made eight payments each of $20.00 during 1991, but after 30 September 1991 made no more payments to the Department. 17 The Department wrote to Mr Koushkarian on 14 November 1993 requiring payment of the balance outstanding. 18 Some additional documents have been tendered in evidence by the Department in these proceedings. They are documents which the Department obtained from GIO this year. Those extra documents show that on 9 July 1992 the Department sent to GIO a notice under section 1233 Social Security Act 1991, relating to a debt of $23,188.68 which Mr Koushkarian owed. 19 On 15 October 1992 GIO wrote to the Department saying: "Your correspondence in relation to the above matter is acknowledged. In the event of a settlement or verdict in favour of the beneficiary, your interests will be protected." 20 On 4 June 1997 GIO wrote to the Department. The letter said: "RE: JACK KOUSHKARIAN MOTOR VEHICLE ACCIDENT ON 28/04/89 AT WILLOUGHBY YOUR REFERENCE: Q288/2597613/CRR35/CG We refer to the above matter and to your Notice issued under Section 1233 of the Social Security Act requiring GIO to impose a garnishee equivalent to $23,188.68. We wish to advise that the above claim has been settled for $20,000.00 inclusive of Solicitor's costs and inclusive of payments paid by GIO. The payments paid in advance by GIO was $1,788.20. There is also the deduction for $2,000.00 as 10% of the settlement amount to pay to the Health Insurance Commission to comply with the provisions of Sections 23,33A and 33B of The Health and Other Services (Compensation) Act 1995 (The Act). After deducting the above payments, the balance outstanding will be $16,211.80. Therefore the difference between DSS Garnishee and the residual amount left is $6,976.88 debit (-$6,976.88). Would you advise us what is your attitude towards the balance. We look forward to hearing from you." 21 The "Your Reference" in the heading to this letter is the same as the reference number on the section 1233 notice which had been issued in July 1992. 22 These proceedings were commenced by summons filed on 14 February 2002. The orders claimed were: "1 A declaration that the garnishee notice dated 5 June 1997 over the hand of V S Morrison delegate of the Secretary of the then Department of Social Security and issued to GIO Australia is invalid. 2 An order that the defendants pay to the plaintiff the sum of $10,828.41. 3 Costs." The Two Defendants 23 The summons named as the first defendant "Centrelink (formerly known as the Department of Social Security)" and "Commonwealth of Australia" as second defendant. Only the second defendant has filed an appearance in the proceedings. Counsel for the Commonwealth submits that "Centrelink" is the popular name of the statutory authority established by section 6 of the Commonwealth Services Delivery Agency Act 1997 (Cth), that "Centrelink" is not a legal person, and that consequently the proceedings against it must be dismissed. The plaintiff does not dispute that contention. I will act in accordance with that concession by the plaintiff. The Statutory Provisions 24 The Commonwealth relies on the notice issued on 5 June 1997 to justify its having received the money from GIO. It does not rely on the notice issued in July 1992 for that purpose. The legislation relating to such a notice, as at June 1997, was section 1233 of the Social Security Act 1991. It said: "(1) If a debt is recoverable from a person (in this section called the debtor ) by the Commonwealth under section 1227A or 1230C of this Act, under the 1947 Act or under the Social Security (Fares Allowance) Rules 1998, the Secretary may by written notice given to another person: (a) by whom any money is due or accruing, or may become due, to the debtor; or (b) who holds or may subsequently hold money for or on account of the debtor; or (c) who holds or may subsequently hold money on account of some other person for payment to the debtor; or (d) who has authority from some other person to pay money to the debtor; require the person to whom the notice is given to pay the Commonwealth: (e) an amount specified in the notice, not exceeding the amount of the debt or the amount of the money referred to in the preceding paragraph that is applicable; or (f) such amount as is specified in the notice out of each payment that the person becomes liable from time to time to make to the debtor until that debt is satisfied; or (g) such percentage as is specified in the notice of each payment that the person becomes liable from time to time to make to the debtor until that debt is satisfied. (2) The time for making a payment in compliance with a notice under subsection (1) is such time as is specified in the notice, not being a time before the money concerned becomes due or is held or before the end of the period of 14 days after the notice is given. (3) A person who fails to comply with a notice under subsection (1) is guilty of an offence. Penalty: Imprisonment for 12 months. Note 1: Subsection 4B(2) of the Crimes Act 1914 allows a court that convicts an individual of an offence to impose a fine instead of, or in addition to, a term of imprisonment. The maximum fine that a court can impose on the individual is worked out by multiplying the maximum term of imprisonment (in months) by 5, and then multiplying the resulting number by the amount of a penalty unit. The amount of a penalty unit is stated in section 4AA of that Act. Note 1A: If a body corporate is convicted of the offence, subsection 4B(3) of the Crimes Act 1914 allows a court to impose a maximum fine of an amount that is 5 times the maximum fine that could be imposed on an individual convicted of the same offence. Note 2: see also section 1230 (consequence of failure to comply with notice under this section). (3A) Subsection (3) applies only to the extent to which the person is capable of complying with the notice. (3B) Strict liability applies to the element of an offence against subsection (3) that a notice is a notice under subsection (1). (4) If the Secretary gives a notice to a person under subsection (1), the Secretary must give a copy of the notice to the debtor. (5) A person who makes a payment to the Commonwealth in compliance with a notice under subsection (1) is to be taken to have made the payment under the authority of the debtor and of any other person concerned. (6) If: (a) a notice is given to a person under subsection (1) in respect of a debt due; and (b) an amount is paid by another person in reduction or in satisfaction of the debt; the Secretary must notify the first-mentioned person accordingly, and the amount specified in the notice is to be taken to be reduced by the amount so paid. (7) If, apart from this subsection, money is not due or repayable on demand to a person unless a condition is fulfilled, the money is to be taken, for the purposes of this section, to be due or repayable on demand, as the case may be, even though the condition has not been fulfilled. (7A) Subject to subsections (7C), (7D) and (7E), action under this section for the recovery of a debt is not to be commenced after the end of the period of 6 years starting on the first day on which an officer becomes aware, or could reasonably be expected to have become aware, of the circumstances that gave rise to the debt. … (7C) If: (a) subsection (7A) applies so that action under this section for the recovery of a debt must be commenced within a particular period; and (b) within that period part of the amount owing is paid; action under this section for the recovery of the balance of the debt may be commenced within the period of 6 years starting on the day of payment. … (7E) If: (a) subsection (7A) applies so that action under this section for the recovery of a debt must be commenced within a particular period; and (b) within that period: (i) action is taken under this section or section 1231 (deductions) or 1232 (legal proceedings) for the recovery of the debt; or (ii) a review of a file relating to action for the recovery of the debt occurs; or (iii) other internal Departmental activity relating to action for the recovery of the debt occurs; action under this section for the recovery of the debt may be commenced within the period of 6 years after the end of the activity or action referred to in paragraph (b). (7F) This section applies to money in spite of any law of a State or Territory (however expressed) under which the amount is inalienable. (8) In this section, "person" includes: (a) the Commonwealth; and (b) a State; and (c) a Territory; and (d) any authority of the Commonwealth or of a State or Territory." The Plaintiff's Claim that the Notice was Invalid 25 The plaintiff advanced various arguments as to why the notice was invalid. He submitted that the Commonwealth had not established that any debt at all was owing by Mr Koushkarian to the Commonwealth. Alternatively, he submitted that a lien attached to the fruits of the litigation in GIO's hands, in consequence of which there was not money due or accruing to Mr Koushkarian in the full amount to which the notice related. Hence, it was said, the requirements of section 1233(1) were not satisfied, and so the notice was invalid. He submitted that the Commonwealth had not established that Mr Koushkarian had been given a copy of the notice, as section 1233(4) required, and that in consequence the notice was invalid. He submitted that, as Mr Koushkarian's debt (assuming for the purposes of the argument that the Commonwealth's electronic records adequately prove it) was raised on 18 June 1990, by the time of issue of the notice on 5 June 1997 more than the six-year period permitted by section 1233(7A) had elapsed. 26 The Commonwealth submitted I had no jurisdiction to examine these arguments. Section 9 of the Administrative Decisions (Judicial Review) Act 1977 says: Limitation of jurisdiction of State courts (1) Notwithstanding anything contained in any Act other than this Act, a court of a State does not have jurisdiction to review: (a) a decision to which this section applies that is made after the commencement of this Act; (b) conduct that has been, is being, or is proposed to be, engaged in for the purpose of making a decision to which this section applies; (c) a failure to make a decision to which this section applies; or (d) any other decision given, or any order made, by an officer of the Commonwealth or any other conduct that has been, is being, or is proposed to be, engaged in by an officer of the Commonwealth, including a decision, order or conduct given, made or engaged in, as the case may be, in the exercise of judicial power. Note: This subsection has effect subject to the Jurisdiction of Courts (Cross-vesting) Act 1987 and to subsection 1337B(3) of the Corporations Act 2001. (2) In this section: "decision to which this section applies" means: (a) a decision that is a decision to which this Act applies; or (b) a decision of an administrative character that is included in any of the classes of decisions set out in Schedule 1. "review" means review by way of: (a) the grant of an injunction; (b) the grant of a prerogative or statutory writ (other than a writ of habeas corpus ) or the making of any order of the same nature or having the same effect as, or of a similar nature or having a similar effect to, any such writ; or (c) the making of a declaratory order. (4) This section does not affect: (b) the jurisdiction conferred on the Supreme Court of a State by section 32A of the Federal Court of Australia Act 1976 ; or (c) the jurisdiction of a court of a State in respect of any matter that is pending before it at the commencement of this Act. 27 The decision to issue the notice dated 5 June 1997 is a decision made under the Social Security Act 1991. The Social Security Act 1991 is an "enactment" within the meaning of the definition of that term in section 3 of the Administrative Decisions (Judicial Review) Act 1977. Further, the decision to issue the notice dated 5 June 2002 is a decision of an administrative character. Thus, it is a "decision to which this Act applies", within the meaning of that expression in section 3 of the Administrative Decisions (Judicial Review) Act 1977. To make a declaration that that notice is invalid, on any of the grounds for which the plaintiff contends, is to review that decision by way of the making of a declaratory order. The Commonwealth is right in submitting that section 9 denies jurisdiction to this Court to make such a declaration. The Claim for Payment of Money 28 The conclusion I have just reached does not mean that the plaintiff's action must fail. As well as seeking a declaration of the invalidity of the notice, the plaintiff's summons sought an order for the payment of money. 29 One basis on which the plaintiff sought such an order was that the notice was invalid. As a matter of judicial comity I should follow the decision in Aerolineas Argentinas v Federal Airport Corporation (1993) 32 NSWLR 595, and hold that entertaining such an argument is outside the jurisdiction of this court, by reason of section 9 of the Administrative Decisions (Judicial Review) Act 1977. 30 However, there is another basis upon which the plaintiff claims repayment of money from the Commonwealth. That basis does not challenge the validity of the notice dated 5 June 1997, but instead enquires what that notice has, as a matter of construction of the notice, and as a matter of property law, effectively done. 31 The plaintiff contends that the notice was not one which required GIO to pay to the Commonwealth the whole of Mr Koushkarian's settlement proceeds (after deduction of those amounts which GIO actually deducted). Rather, the plaintiff contends, the notice effectively required the payment to the Commonwealth only of so much of the settlement proceeds as remained after the amount for which the plaintiff had an equitable security, by reason of the funds being the fruits of the plaintiff's efforts, had also been deducted. An examination of whether the plaintiff's contentions in this respect are correct is not prohibited by section 9 of the Administrative Decisions (Judicial Review) Act 1977: Delmore Pty Ltd v Commonwealth of Australia (1985) 2 NSWLR 179 at 185-186. Equitable Liens 32 There are various circumstances in which equity recognises a person as having a right, akin to a security, to be paid or recouped money from a particular item of property of another person, and refers to that right as being a "lien". Examples include the lien of an unpaid vendor of real estate over that real estate for payment of the purchase price (Reliance Finance Corporation Pty Ltd v Heid [1982] 1 NSWLR 466 at 477-478; affirmed on appeal: Heid v Reliance Finance Corporations Pty Ltd (1983) 154 CLR 326), the lien of a purchaser of real estate over that real estate for money paid prior to completion (Hewett v Court (1983) 149 CLR 639), and the lien of a trustee over the trust property to secure liabilities incurred by the trustee in the authorised conduct of the trust (Jennings v Mather [1902] 1 KB 5; Jacobs Law of Trusts in Australia, 6th edition, paragraph [2104]). Other examples of the heterogeneous collection of circumstances in which such a lien arises are set out in Fisher and Lightwood's Law of Mortgage, Australian edition, paragraph [2.8] - [2.17]. These equitable liens are alike in that they do not depend upon the person who has the lien having possession of the property over which the lien exists. In this respect, equitable liens differ from common law liens. While the equitable liens possess some common features (identified in Hewett v Court (1983) 149 CLR 639 at 663 per Deane J), "it is difficult, if not impossible, to formulate any satisfactory statement of the necessary or sufficient circumstances for the implication of an equitable lien which is applicable to any relationship at all" (Hewett v Court at 668 per Deane J). Nature of a Solicitor's "Fruits of the Action" Lien 33 A solicitor whose efforts result in the recovery of money for his client has an equitable right to have his proper costs and disbursements paid from the money so recovered. 34 In Ex Parte Patience; Makinson v The Minister (1940) 40 SR (NSW) 96 Jordan CJ gave what has become a classic exposition of the solicitor's right, contrasting that right with a common law lien. Jordan CJ said, at 100-101: "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 1 Doug 238. 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 6 TR 361; Ormerod v Tate 1 East 464; Ross v Buxton 42 Ch D 190. 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 4 My & Cr 354. In Barker v St Quinton 12 M & W 441 at 451 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 3 M & W 573 at 585-7; North v Stewart 15 App Cas 452 at 463. 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 2 Drew & Sm 82 at 92-3; Haymes v Cooper 33 Beav 431 at 433. The rights are assignable: Briscoe v Briscoe [1892] 3 Ch 543. 35 The authorities establish the following propositions concerning this right of the solicitor:

(a) The solicitor's right exists over money recovered through obtaining judgment in litigation, and also over money recovered through the settlement of litigation: Carew Counsel Pty Ltd v French [2002] VSCA 1 at [33]; Roam Australia Pty Ltd v Telstra Corporation Ltd [1997] FCA 980, Lehane J, 22 September 1997, unreported at 4.

(b) The solicitor's 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: In The Estate of Fuld (No 4) [1968] P 727 at 736; Twigg v Keady (1996) 135 FLR 257 at 266 - 267 per Finn J; In Re Blake; Clutterbuck v Bradford [1945] Ch 61 (a case concerning a statutory charging order rather than a lien arising in equity's exclusive jurisdiction, but dependent on the same principle as the equitable right - see paragraph 44 below).

(c) It exists over money which is in the possession of the solicitor, and also over money which is in court ( In Re Meter Cabs [1911] 2 Ch 557 at 562) and money which is owed to the client but not paid into court ( In The Estate of Fuld (No 4) [1968] P 727; Re de Groot [2001] 2 Qd R 359 at 375)

(d) The solicitor need not be still acting for the client at the time that the money was recovered: In The Estate of Fuld (No 4) [1968] P 727; Kelso v McCulloch (Supreme Court of NSW, Young J, 24 October 1994 unreported); Twigg v Keady (1996) 135 FLR 257 at 289 per Kay J; Roam Australia Pty Ltd v Telstra Corporation Ltd [1997] FCA 980, Lehane J, 22 September 1997, unreported at 4

(e) For the right to arise it must be shown that there is a sufficient causal link between solicitor's exertions and the recovery of the fund of money: Roam Australia Pty Ltd v Telstra Corporation Ltd [1997] FCA 980, Lehane J, 22 September 1997, unreported at 4 - 5; Carew Counsel Pty Ltd v French [2002] VSCA 1 at [33].

(f) 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: Roam Australia Pty Ltd v Telstra Corporation Ltd [1997] FCA 980 (Lehane J, 22 September 1997, unreported at 4). In relation to those situations where taxation is necessary to ascertain the quantum owing to the solicitor, the solicitor's right exists in the fund prior to the occurrence of the taxation ( Johns v Cassel (1993) 6 BPR 13,134 at 3,136 per Hodgson J; Twigg v Keady (1996) 135 FLR 257 at 289 per Kay J; In The Estate of Fuld (No 4) [1968] P 727 at 740; Roam Australia Pty ltd v Telstra Corporation Ltd [1997] FCA 980 (Lehane J, 22 September 1997, unreported at 6).

(g) The solicitor's equitable right exists before the court is asked to intervene to protect it; it "arises immediately upon the recovery of monies through the exertions of the solicitor": Carew Counsel Pty Ltd v French [2002] VSCA 1 at [33]; if the lien is over the proceeds of an order for costs, it comes into existence at the time of making of that order for cost: Phillipa Power & Associates v Primrose Couper Cronin Rudkin [1997] 2 Qd R 266; Kison v Papasian (1994) 61 SASR 567. If the lien is over the proceeds of a settlement, it arises when the settlement agreement is entered into: Re de Groot [2001] 2 Qd R 359 at 368. (These statements concern when the lien comes into existence as an item of present property - they are not concerned with the ability of the solicitor to deal with the rights under the lien as future property before the fund is in existence.)

(h) 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: In The Estate of Fuld (No 4) [1968] P 727. If the quantum of the solicitor's entitlement has been ascertained, the solicitor is entitled to an order that the amount of his entitlement be paid to him from the fund, notwithstanding opposition from the client: Leamey v Heath [2001] NSWSC 1095 (Campbell J, 22 November 2001, unreported).

(i) The right can also be enforced against people other than the client, in certain circumstances. When the money recovered takes the form of a debt owed to the client, which has been assigned, the right of the solicitor will prevail over the rights of an assignee of the debt, save where the assignee is a bona fide purchaser for value without notice: Re de Groot [2001] 2 Qd R 359. (If the assignee is a bona fide purchaser for value without notice, it may be that priorities between the solicitor's right and the right of the assignee are to be determined in accordance with the rule in Dearle v Hall , (see Meagher, Gummow & Lehane, Equity Doctrines and Remedies , 3rd edition, at [819] ff) or it may be that the court considers who, of the solicitor and the assignee, has the superior equity - Re de Groot [2001] 2 Qd R 359 at 368 - 376 - but it is not necessary for me to consider that matter further.)

(j) If the client is a company which goes into liquidation, the solicitor is entitled, in relation to costs arising from work done before the start of the liquidation, to claim the full amount of the costs from the fund, and is not required to prove in the liquidation: In Re Born; Curnock v Born [1900] 2 Ch 433; In Re Meter Cabs [1911] 2 Ch 557. This has the same practical effect as enforcing the right against the other creditors of the company. The solicitor's lien attaches to property recovered through his exertions, even if the actual recovery occurs after the client goes into liquidation: North West Construction Co Pty Ltd (In Liquidation) v Marian [1965] WAR 205 at 211.

(k) Likewise if the client is a natural person who becomes bankrupt, the solicitor is not required to prove in the bankruptcy for the amount of costs incurred, but can recover the costs from the debt which is the result of his efforts: Guy v Churchill (1887) 35 Ch D 489; Worrell v Power & Power (1993) 46 FCR 214. The trustee in bankruptcy takes that debt subject to the equitable right of the solicitor to be paid his costs, and if the amount of the solicitor's costs exceeds the value of the debt, the debt does not vest in the trustee in bankruptcy at all; if the client is discharged from bankruptcy he can sue to enforce the debt as it never was property divisible among the creditors, and any amount that the client then receives is also subject to the solicitor's lien: Kison v Papasian (1994) 61 SASR 567

(l) If the client is the liquidator of a company in liquidation, the solicitor's lien over property recovered through his exertions is to be satisfied before the statutory order of priorities for distribution of the property of the corporation comes into effect: Jeffcott Holdings Ltd (in liq) v Paior (1995) 18 ACSR 213

(m) If the money recovered is held in the solicitor's trust account, and the solicitor is served with a garnishee notice, issued to enforce a debt which the client owes to another person, the garnishee notice is not effective to attach the money in the trust account, to the extent that the solicitor has a lien over it: Phillipa Power & Associates v Primrose Couper Cronin Rudkin [1997] 2 Qd R 266. Likewise if the money recovered is held by a third party, and a garnishee notice is served on that third party, the solicitor's lien prevails over the garnishee notice: Dallow v Garold ; Ex parte Adams (1884) 14 QB D 543. 36 The Full Federal Court has said that the decision in Ex parte Patience; Makinson v The Minister, "… indicates that the lien involves more than a personal right of the solicitor to approach the court to obtain a charging order, and that the lien arises when the judgment for costs is obtained, and before there has been a taxation of the costs. The assistance of the court is invoked not to create rights but to enforce them." ( Worrell v Power and Power (1993) 46 FCR 214, at 224). 37 In In Re Meter Cabs Ltd [1911] 2 Ch 557, at 561 Swinfen Eady J quoted Lord Romilly MR in In Re Massey (LR 9 Eq 367; 18 WR 444): "Where there is a suit such as that of Kent v Freehold Land and Brickmaking Company , by means of which a fund is recovered to the company, then the solicitor is entitled to claim a lien for his costs on that fund against everyone ." (emphasis added) 38 In all these circumstances, it is apparent that the equitable right which a solicitor has to be paid costs and disbursements from the fund which his efforts have recovered, is a kind of proprietary interest in that fund. The fact that the right of the solicitor can survive an insolvency administration of the client, and is (as Sir Frederick Jordan held in Ex parte Patience) assignable, are strong indicia of it being a right of a proprietary nature. In Twigg v Keady (1996) 135 FLR 257 at 259 Fogarty J described it is, "an equitable interest in the fund". In Color Point Pty Ltd v Markby's Communication Group Pty Ltd [1998] 1516 FCA (Weinberg J, 27 November 1998, unreported) Weinberg J said that the equitable right, "… confers upon the solicitor an equitable interest in the fruits of that litigation …". 39 There are some statements in recent Australian authority which might be thought to cast doubt on whether a solicitor's lien amounts to a proprietary interest in the fund. In Re de Groot [2001] 2 Qd R 359 at 374 Muir J said: "There is thus a formidable body of opinion in support of the proposition that where such persons such as solicitors, receivers, liquidators and provisional liquidators have expended time and effort in bringing into existence a fund by means of the provision of legal services in litigation or by the realisation of assets, as the case may be, they have an equitable interest in the fund which takes priority over the equitable interests of other chargees and assignees. The authorities, however, are not entirely in favour of such a proposition." 40 His Honour then went on to consider authorities which had held that the solicitor's lien, in some particular circumstances, did not take priority over the equitable interest of certain other persons with an interest in the fund. No doubt was cast, however, on the proposition that the right of the solicitors in the fund amounted to an equitable interest. 41 In Twigg v Keady (1996) 135 FLR 257 at 290 Kay J said, of a solicitor's lien: "In the words of Jordan CJ, I accept that in practice the solicitor has always been treated as possessing equitable rights in the judgment independently of any declaration of those rights, and that the court's assistance is invoked not to create the rights but to enforce them. However, I do not accept that the authorities referred to demonstrate that the equitable right acquired is in the nature of a proprietary right. In cases such as Worrell v Power , Kisan v Papasian and Re Born the right of the solicitor to payment of his costs from the judgment monies was a right which conflicted with the right of the client's receiver or trustee in bankruptcy. The conflict was thus one between the solicitor and a party standing in the shoes of the client. The circumstances of each case were such that the solicitor's right was upheld. In my view the solicitor's entitlement to payment in such cases differs markedly from an entitlement to trace funds into the hands of a third party."

With respect, it seems to me that the solicitor's right concerning the fruits of his effort includes a right closely analogous to the right to trace funds into the hands of a third party. It is the nature of the right which the solicitor has, that he does not have the full title to the asset which has been recovered (save in the circumstance where his claim exceeds the value of the asset), but rather a right to be paid out of the asset. If that is a right which can prevail against an assignee of the asset who is not a bona fide purchaser for value without notice, that is the equivalent, in the context where the solicitor does not have full title to the fund, of being able to trace the funds into the hands of a third party. 42 Jordan CJ's chiding of those who call this equitable right of a solicitor a "lien" has not met a sympathetic reception. In Hewett v Court (1983) 149 CLR 639, at 668 Deane J referred to the equitable right as "the solicitor's lien over the proceeds of action ". In Worrell v Power and Power (1993) 46 FCR 214 the Full Federal Court (Wilcox Ryan and Gummow JJ) referred to the right as a "lien". In Phillipa Power & Associates v Primrose Couper Cronin Rudkin [1997] 2 Qd R 266 the Queensland Court of Appeal (Macrossan CJ, Derrington J and White J) referred to it as a "particular lien", it being "particular" because it applies only to the particular asset which had been recovered, not to all assets which might be in the solicitor's possession. In the Supreme Court of South Australia in Banco in Kison v Papasian (1994) 61 SASR 567 King CJ at 568 (with whom Mullighan J agreed) described the right as being "an equitable right, often referred to as a lien". Windeyer J has referred to it as a "lien" in Akki Pty Ltd v Martin Hall Pty Ltd (1994) 35 NSWLR 470. Riley, New South Wales Solicitors Manual, paragraph [10,545] refers to it is a "lien". So long as it is clearly appreciated that there is a significant difference between equitable liens and common-law liens, continuing to call it a "lien" does no harm. Indeed, given that it is a property right which bears a family resemblance to numerous other equitable rights which are called liens, there is some virtue in continuing with the terminology. 43 In this discussion of the "fruits of the action" lien, I have not tried to state fully the circumstances in which such a lien might exist. In particular, I have not considered the extent to which such a lien might exist over property other than money, or the extent to which a lien might attach to property which was preserved (rather than recovered) through the efforts of a solicitor. 44 I should also mention that there was, for many decades, in both England and New South Wales, a statutory right of a solicitor to approach the court in which he or she had prosecuted or defended an action for a charging order over the property recovered or preserved through his or her instrumentality, for his or her taxed costs. In New South Wales, this right arose under section 39A of the Legal Practitioners Act 1898. However, in those cases where the solicitor had an equitable lien, that statutory right did not confer any new substantive rights on the solicitor, but was merely a cheap and speedy mode of enforcing the lien which existed under the general law: In Re Meter Cabs Ltd [1911] 2 Ch 557 at 561-562; Ex parte Patience; Makinson v The Minister (1940) 40 SR (NSW) 96 at 101-102. Though there has never been any provision in the Legal Profession Act 1987 which is analogous to section 39A Legal Practitioners Act 1898, the repeal of section 39A of the Legal Practitioners Act 1898 only has the effect that the statutory method of enforcement of the lien is no longer available. Does Mr Firth have a Lien? 45 In the present case, Mr Firth asserts that he had a lien for his costs over the proceeds of the settlement with GIO. 46 Mr Firth had acted for Mr Koushkarian for about 18 months at the time the action was settled. He had spent his own money for disbursements. It was Mr Firth who negotiated the settlement. He has, I find, demonstrated a clear causal link between his professional activity and the obtaining of the settlement agreement. 47 The Commonwealth asserts, however, that Mr Firth did not have an equitable lien over the debt owed by GIO because he had not given notice of his claim to have a lien to GIO. Examining that submission calls for a consideration of the role which notice plays in this area of the law. 48 The rationale for the existence of the solicitor's lien over the fund recovered through his or her efforts is that, if the solicitor had not done the work, and spent the money, there would not be any fund in existence. The solicitor's role in bringing the fund into existence is of such importance that equity recognises proprietary rights which enable the solicitor to be paid out of the fund. In Read v Dupper (1795) 6 TR 361; 101 ER 595 Lord Kenynon CJ said: "the principle by which this application is to be decided was settled long ago, namely that the party should not run away with the fruits of the cause without satisfying the legal demands of his attorney, by whose industry, and in many instances at whose expence those fruits are obtained." 49 In Guy v Churchill (1887) 35 Ch D 489 at 491 Cotton LJ said: The lien of a solicitor is grounded on the principle that it is not just that the client should get the benefit of the solicitor's labour without paying for it. Here the official receiver wishes to get the benefit of the solicitor's exertions by which the £298 7s 1d has been recovered, without paying for them."

Lindley LJ, at 492 said: "I agree and have nothing to add. It is right that they who get the benefit of the recovery of money should bear the expense of recovering it."

Bowen LJ said, at 492: "I am of the same opinion. The £298 7s 1d is the fruit of the exertions of the applicants." 50 In In Re Born; Curnock v Born [1900] 2 Ch 433, at 435 Farwell J said: "Now, it is plain that they have a common law lien on the company's share of the fund in court for the amount of their costs. It would be monstrous if this were not so, as the company would never have recovered the money without their exertions. It resembles the case of debenture holders who have to allow a liquidator's costs when they take the benefit of his exertions, and it is clear that justice calls for such a lien."

(Here his Honour was calling the right a "common law lien" in contradistinction to the right to a statutory charging order.) 51 In Phillipa Power & Associates v Primrose Couper Cronin Rudkin [1977] 2 Qd R 266 at 271-2 Macrossan CJ and White J said: "Once the nature of a solicitor's interest in a fund representing the fruits of his labours is appreciated and it is accepted that the solicitor's interest in the fund dates back to the time when the fund first comes into existence, or the original order for the payment of the sum constituting the fund is made, then it is clear that the interest of the solicitor will prevail over the right of an execution creditor subsequently seeking to attach the fund. The view of an execution creditor's right under a garnishee order nisi against a debt owing to a debtor by the garnishee that is offered in Choice Investments v Jeromnimon [1981] QB 149 at 155, is that it binds the debt in the hands of the garnishee, that is it creates a charge in favour of the execution creditor. However, in a case like the present, that view of the right will not assist the execution creditor because he cannot obtain any right against the fund beyond that which the debtor himself had or could give: In Re General Horticultural Co; Ex parte Whitehouse (1886) 32 Ch D 512 at 516 and Cole v Eley [1894] 2 QB 180 at 188. It would clearly be unjust to allow an execution creditor whose only right lies against the property and interest of the debtor to convert for his own benefit the rights and interests of third parties. Alternatively, but to the same effect, the view can be taken that both the garnishee and the execution creditor are claiming rights against the same fund but the garnishee's right arose at an earlier point in time and should prevail: cf Holt v Heatherfield Trust Ltd [1942] 2 KB 1 at 11." 52 Thus, the giving of notice to anyone is no part of the circumstances which leads equity to impose the lien. Further, the lien can exist over property in the solicitor's own trust account, in which case there would never be occasion for the solicitor to give notice to anyone about the lien. 53 The reader will recall that in Ex parte Patience; Makinson v The Minister Jordan CJ made some reference to notice. I will repeat the relevant part of his judgment, at 100: "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 … 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." (Citations omitted.) 54 These remarks apply to the situation where the property which has been recovered by the solicitor's exertions, takes the form of a debt which is owed to the client. A debt is a species of property which can cease to exist if the debtor discharges it by paying the creditor. When the fund recovered by the solicitor's exertions is a debt, the point of the solicitor giving notice to the debtor is so that the debtor ceases to have power to cause the solicitor's security to cease to exist, by paying the debt. If the debtor, having received notice of the solicitor's security, chooses to pay the debt, equity will regard the debtor as having the same obligation to the solicitor as he would have had if payment had not been made. Jordan CJ does not say, however, that the giving of notice is necessary for the solicitor's lien to exist over the debt, for so long as the debt continues to be unpaid. If the debt continues to be unpaid, notice to the debtor is needed before the court will actually order the debtor to pay the amount of costs to the solicitor, and not to the client, but that does not mean that such notice is necessary for the existence of the lien. 55 Sir Frederick Jordan, in Ex parte Patience; Makinson v The Minister (1940) 40 SR (NSW) 96 at 100 said that the solicitor's right to have his costs paid out of the money was "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." If there had been an actual equitable assignment of part of the money to the solicitor, notice to the debtor would not be necessary to perfect that equitable assignment. Equity would regard any actual assignment by a client of legal property comprising the fruits of action, as security for payment of the solicitor's costs, as being an assignment for valuable consideration, and once the solicitor had provided the consideration the assignment would, in the eyes of equity, be complete. Meagher, Gummow & Lehane, Equity Doctrines and Remedies, 3rd edition, paragraph 610 say: "None of these obscurities arise if the consideration has been paid or executed. Nor, it is suggested, is it relevant in that case to ask whether the contract (or the purported immediate assignment, treated as a contract) is one of a kind of which specific performance would be ordered. Whether it is or not, equity, once the assignee has done what is required of him, regards as done that which ought to be done by the assignor …" 56 If the fruits of action took the form of an equitable interest in property, that could likewise be assigned without any notice to the person who owed that equitable interest. Meagher, Gummow & Lehane, op cit, paragraph 607 say: "… it has long been well established that notice is not necessary to perfect an equitable assignment of an equitable interest …" 57 If notice to the debtor is not a necessary prerequisite of an actual assignment of the fruits of action, it is hard to see why it should be a prerequisite for the existence of a lien 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. 58 The Commonwealth submits that the decision of the Court of Appeal in Grogan v Orr [2001] NSWCA 114 (2 August 2001 unreported) shows that notice to the debtor is essential for the existence of a solicitor's lien. The appellants in that case were solicitors who had acted for Mr Nove on a sale of property. Under orders of the Family Court, Mr Nove was entitled to part of the proceeds of sale of that property. The respondent was a different solicitor, who had acted for Mr Nove in Family Court proceedings, and whose costs were unpaid. Mr Nove gave the appellants an "irrevocable authority" to pay the respondent the costs owing to him out of the proceeds of sale, but later revoked the authority. On Mr Nove's instructions, the appellants paid the proceeds of sale to Mr Nove. At the time the appellants made the payment, they were well aware that Mr Nove owed money to the respondent for acting for him in the Family Court proceedings, and the respondent had not been paid his costs. However, prior to the time that the appellants paid the proceeds to Mr Nove, the respondent had not asserted that he was entitled to any equitable lien over the proceeds of sale. The litigation was a claim by the respondent that, even though the appellants no longer held the sale proceeds, the appellants should pay to the respondent his costs, because the respondent had had an equitable lien over the sale proceeds. The respondent's claim failed. 59 The Court of Appeal was divided over whether the proceeds of sale of the property should be regarded as the fruits of the efforts of the respondent. The majority (Meagher and Sheller JJA) held that the proceeds of sale were the fruits of the respondent's efforts (at [62]-[63]), while Powell JA held they were not. 60 Sheller JA said, at [56]: "At all times before the proceeds of the sale of the properties were transferred to the client by the appellants, the respondent relied upon the effect of the written authority as compelling the appellants as the client's agent to pay the respondent's costs out of the fund. The respondent did not rely upon it or upon any other writing or statement as notice of the existence of a particular lien or equitable right to have his costs paid out of the money as the fruits of the Family Court litigation. Essential to the success of such a claim would have been notice to the appellants of this equitable right." 61 Sheller JA then went on to quote, in the next paragraph, the portion from the judgment of Jordan CJ in Ex parte Patience; Makinson v The Minister which I have quoted above at paragraph 34 above, down to the reference to Ross v Buxton [1889] LR 42 Ch D 190. 62 The passage from the judgment of Sheller JA which I have quoted, is consistent with the analysis which I have been putting forward. Sheller JA was considering a situation where the property which had been recovered through the efforts of the respondent's solicitor, took the form of a debt owed to the client, and by the time of action that debt had been discharged by being paid to the client. When the respondent was seeking to make the appellants pay the costs which Mr Nove owed to the respondent, notwithstanding that the appellants no longer held any fund from which to pay it, it was (with respect) perfectly correct to say that, "essential to the success of such a claim would have been notice to the appellants of this equitable right." Further, if the respondent had, before the appellants had paid away the fund, made a claim to be paid his costs from that fund, he would have had to have given notice of his claim to be paid his costs from the fund before the court made an order for such payment. 63 At [63] Sheller JA said: "I am of the opinion that the client's share in the proceeds of sale would be correctly characterised as the fruits of the orders made by the Family Court. Accordingly, the respondent could be treated as possessing an equitable right in them if timely notice of that right had been given to the appellants. See Ex parte Patience and Worrell v Power & Power (1993) 46 FCR 214 at 224 where the Full Federal Court (Wilcox, Ryan and Gummow JJ) said: "[ Ex parte Patience ] indicates that the lien involves more than a personal right of the solicitor to approach the court to obtain a charging order, and that the lien arises when the judgment for costs is obtained, and before there has been a taxation of the costs. The assistance of the court is invoked not to create rights but to enforce them. So also the right of "self help"" No notice of such an equitable right was given to the appellants before the proceeds of sale were paid to the client. Notice was given only of a claim based upon the authority from the client to the appellants of 10 October 1990." 64 That passage means, as I understand it, that the appellants had been able to get an effective discharge of the obligation which they owed to the client, and over which the lien was asserted to exist, before notice that a lien was claimed was given. The repeated reference to Ex parte Patience is consistent with Sheller JA not intending to put forward any different proposition concerning the effect of notice to that which had been put forward by Jordan CJ in Ex parte Patience. 65 The principle applying here is further explained by the four cases Jordan CJ relied on for the propositions in Ex parte Patience which I have earlier quoted concerning notice. Welsh v Hole (1779) 1 Dougl. 238; 99 ER 155 involved a plaintiff who had recovered damages for assault against the defendant. The defendant brought a writ of error seeking to overturn the judgment. Before the writ of error was heard, the plaintiff personally compromised the debt with the defendant, and accepted a sum for the debt and costs. The plaintiff's solicitor then sought to require the defendant to pay the amount of the plaintiff's costs. That solicitor had given no notice of any kind to the defendant requiring, or even suggesting, that the defendant not pay the plaintiff direct. Lord Mansfield said (238-238 of Doug; 155-156 of ER): "An attorney has a lien on the money recovered by his client, for his bill of costs; if the money come to his hands, he may retain to the amount of his bill. He may stop it in transitu if he can lay hold of it. If he apply to the Court, they will prevent it being paid over til his demand is satisfied. I am inclined to go still farther, and to hold that, if the attorney give notice to the defendant not to pay til his bill should be discharged, a payment by the defendant after such notice would be in his own wrong, and like paying a debt which has been assigned, after notice. But I think we cannot go beyond these limits." 66 Read v Dupper (1795) 6 TR 361; 101 ER concerned litigation where a plaintiff had recovered a judgment. The defendant to that litigation, faced with a threat of execution of the judgment, paid the whole sum to the plaintiff himself. He made this payment after having received notice from the plaintiff's attorneys not to pay it to the plaintiff. The solicitor for the plaintiff sought to recover the amount of his costs from the defendant. (Thus, the factual situation was the converse of that which had arisen in Welsh v Hole.) Lord Kenynon CJ held that the defendant was liable to pay the costs of the plaintiff's solicitor. He said (at 362 of TR, 596 of ER): "The principle by which this application is to be decided was settled long ago, namely that the party should not run away with the fruits of the cause without satisfying the legal demands of his attorney, by whose industry, and in many instances at whose expence, those fruits are obtained. If indeed the money had been paid over bona fide to the plaintiff, before notice from his attorney of his lien, such payment would have been good; but here the payment was made in violation of this notice, which cannot be suffered. In Welch v Hole Lord Mansfield compared this to the case of an assignment of a chose in action, which indeed in legal strictness cannot be done; but still according to the rules of equity and honest dealing if the assignee give notice to the debtor of such assignment, he shall not afterwards be suffered to avail himself of a payment to the principal in fraud of such notice." 67 Ormerod v Tate (1801) 1 East 464 was another case where a judgment debtor had paid the whole amount of the judgment debt to the judgment creditor, after notice from the solicitor of the judgment creditor. Again the judgment debtor was obliged to pay the costs of the judgment creditor's solicitor. Lord Kenynon CJ said, at 465: "As to the right of the plaintiff to release any part of the damages, it is out of the question here; for this appears to be no other than a mere shuffle between the plaintiff and the defendant to cheat the attorney of his lien." 68 In Ross v Buxton (1889) 42 Ch D 190, Stirling J said, at 198-199: "… first, that where money is received or paid as a compromise of a suit, and that money is in truth and in substance the fruit of the action, the solicitor's lien for costs extends to it; and further upon the authority of the case of Welsh v Hole (1 Doug 237) before Lord Mansfield, that if a valid compromise is made, and after the compromise has been made the solicitor gives notice that he has a lien for costs, it will be at the defendant's own peril if in the face of that notice he pays over the money which has been agreed to be paid to the plaintiff by way of compromise." 69 When equity requires someone who once owed a judgment debt to the client, and who paid the client after receiving notice of a solicitor's lien over that debt, to pay the amount of the solicitor's costs, this amounts to imposing an equitable personal obligation on that debtor. When the debt no longer exists, as a result of being discharged, there is no longer any identifiable property out of which it can be paid, yet equity requires it to be paid none the less. While notice to the debtor is necessary for this form of equitable personal obligation, it is not necessary for the existence of the lien itself. Further, notice to the debtor, that the solicitor claims the right, on the basis of a "fruits of action" lien, to be paid his costs from the fund, is necessary before the court will order that, while the debt is still in existence, the debtor pay the amount of costs to the solicitor rather than to the client. That such a notice is a precondition of such an order does not mean that such a notice is the precondition of the existence of the lien. 70 I conclude that Mr Firth had a lien for his proper costs and disbursements over the obligation of GIO to pay the settlement proceeds, even though he has not proved that he had given notice to GIO that he had such a lien and required GIO to pay him rather than Mr Koushkarian. This lien arose as soon as the settlement agreement was reached, and thus prior to service on GIO of the notice dated 5 June 1997. Construction of Section 1233 of the Social Security Act 1991 (Cth) 71 The Commonwealth claims that, even if Mr Firth had a lien over Mr Koushkarian's right to receive the net settlement proceeds from GIO, section 1233 and the notice dated 5 June 1997 entitled it to receive the whole of those net proceeds. The Commonwealth says that a debt was recoverable by it from Mr Koushkarian, and therefore he is a "debtor" within the meaning of the opening phrase of section 1233(1). Further, GIO was "another person by whom any money is due or accruing … to the debtor", within the meaning of section 1233(1)(a). It says that, therefore, it is entitled to require the GIO to pay to the Commonwealth the amount set out in section 1233(1)(e). 72 Section 1233(1)(e) sets an upper limit on the amount which a notice issued under section 1233 can require to be paid, namely "the amount of the debt or the amount of the money referred to in the preceding paragraph that is applicable." This statement of the upper limit of the amount which can be specified in the notice, has two problems of construction. The first concerns the phrase "or the amount of the money referred to in the preceding paragraph that is applicable." I take it that that means, "or the amount of money referred to in whichever of paragraphs (a),(b),(c) or (d) might be applicable." 73 The second is that if section 1233(1)(e) were read literally, it would be open to the Commonwealth to specify in a notice that the recipient was required to pay the amount of the debt, even if it was many times more than, for instance, the amount which the recipient of the notice owed to the debtor. It is not necessary for me to decide, in the present case, whether section 1233(1)(e) should be read literally in this way, or whether it should be cut down by a process of construction, because the notice dated 5 June 1997 required GIO to pay to the Commonwealth: "$16,211.80 or the whole of the money referred to in paragraph (a), (b), (c) or (d) below if it is less than $16,211.80."

(I also mention here that the notice then sets out four lettered paragraphs, of which paragraphs (b), (c) and (d) are identical to the wording in section 1233(1)(b)(c) and (d). However, the wording of paragraph (a) of the notice is "by whom is due or accruing or may become due to the debtor; or" . I shall treat that part of the notice as though the wording corresponded exactly to that of section 1233(1)(a), namely, "by whom any money is due or accruing, or may become due to the debtor; or" .) 74 The Commonwealth did not contend that section 1233(1)(d) applied in the present case. It placed reliance, in a rather tentative way, on section 1233(1)(b) and (c) as applying in the present case. However, it seems to me that those paragraphs do not apply. All that had happened, as a result of GIO and Mr Firth agreeing to settle Mr Koushkarian's litigation, was that a debt had become payable by GIO. There is no reason to believe that GIO had appropriated any particular sum of money for the purpose of paying that debt, so that it held money for or on account of Mr Koushkarian. Nor is there any reason to believe that the GIO would make any such appropriation prior to payment - in the ordinary course of things, when paying in accordance with the settlement agreement, GIO would simply write a cheque. 75 This then means that the notice has legal effect pursuant to section 1233(1)(a). Its effect is to require the GIO to pay to the Commonwealth the amount of money "due" to Mr Koushkarian. 76 The Commonwealth asserts, that in circumstances where GIO's debt to Mr Koushkarian of $16,211.80 was subject to a lien in favour of Mr Firth, the notice effectively claimed the whole amount of $16,211.80, notwithstanding the lien. 77 If this contention was right, and if it meant that the Commonwealth received the whole of the amount of $16,211.80 without any obligation to account for any part of it to Mr Firth, it would mean that the Commonwealth was confiscating Mr Firth's proprietary interest in the settlement proceeds, to pay Mr Koushkarian's debt, without any compensation to Mr Firth. Legislation is usually construed on the basis that Parliament does not intend such a result, unless the wording of the legislation makes quite clear that such a result is intended (Clissold v Perry (1904) 1 CLR 363 at 373 per Griffith CJ; Commonwealth v Hazeldell Ltd (1918) 25 CLR 552 at 563 per Griffith CJ and Rich J; Commonwealth of Australia v Hazeldell Ltd [1921] 2 AC 373 at 382.) 78 This approach to statutory construction has been applied to protect a solicitor's equitable lien. The decision of Jeffcott Holdings (In Liq) v Paior (1995) 18 ACSR 213 concerned section 441 of the Companies (SA) Code, the section which set out the order of priority of payment of debts in a winding up. A question arose about how that section interacted with the equitable lien for costs which a solicitor employed by the liquidator, would have. Debelle J said, at 216: "I do not think that a solicitor's entitlement to a lien is affected by section 441(a). There is nothing in section 441(a) which expressly purports to alter the entitlement nor does it appear by necessary intendment. Had it been intended to affect the entitlement to that lien, that intention would have been clearly ascertainable: Potter v Minahan (1908) 7 CLR 277, 304." 79 Section 218 of the Income Tax Assessment Act 1936 is in terms closely analogous to those of section 1233 of the Social Security Act 1991. In particular, it contains the wording that the Commissioner may, by notice in writing, require "any person by whom any money is due or accruing or may become due to a taxpayer" to pay to the Commissioner, "so much of the money as is sufficient to pay the amount due by the taxpayer in respect of tax or, if the amount of the money is equal to or less than the amount due by the taxpayer in respect of tax, the amount of the money". 80 In Zuks v Jackson MacDonald (1996) 132 FLR 317 Steytlar J considered a situation where a debt owed to a taxpayer had been the subject of an equitable assignment prior to the service on the debtor of a notice under section 218. The debtor, faced with conflicting demands from the equitable assignee and the Commissioner of Taxation, interpleaded. His Honour made a careful survey of the previous case law concerning section 218, and said, at 327-328: "It will be apparent from the foregoing review of the case law that there is now a substantial body of authority to support the proposition that, upon the proper construction of s218, service of a notice under that section will not defeat a prior equitable charge. That appears to have been the view of Brinsden J in Commissioner of Taxation (Cth) v Lai Corporation Pty Ltd , in respect of the equivalent provisions of the Sales Tax Legislation and it was certainly the view of Burt CJ on the appeal from his Honour's decision. It was also that of each of Williams J in Tri Continental Corporation and Thomas J in Elric . The proposition is also consistent with each of the judgments in Klein and is, I think, at least left open by what was said by Kennedy J in Deputy Commissioner of Taxation v Lai Corporation Pty Ltd and by Connelly and Sheppardson JJ in Tri Continental Corporation . In this case the first defendant relies upon an absolute assignment of a debt which, because of the absence of notice to the debtor, was effective only in equity. However, that assignment created, as between the assignor and assignee, a valid and effective title in the assignee … It seems to me that in such a case, on the proper construction of s218 and having regard to the authorities to which I have referred, the Commissioner's entitlement to receive payment of the debts referred to in the notices should be found to be subject to the interest of the prior equitable assignee. Like Brinsden J in Commissioner of Taxation (Cth) v Lai Corporation Pty Ltd (at 81), I consider that it would be a big step to conclude that Parliament intended that the Commissioner should be paid his tax out of a debt which in equity had ceased to belong to the taxpayer at the time of receipt of the relevant notice. It is difficult to conceive that this could ever have been its intention. The purpose behind s218 seems to me to be that of rendering more effective the Commissioner's powers to recover property of a taxpayer in payment of his or her unpaid tax rather than that of, in effect, picking the pocket of a third party (who might have acted entirely in good faith) in order to satisfy the obligation of a defaulting taxpayer: see, in this respect, s15AA of the Acts Interpretation Act 1901 (Cth) ." 81 I see no relevant distinction between section 218 of the Income Tax Assessment Act 1936 (Cth) and section 1233 of the Social Security Act 1991 (Cth) in this respect. Nor do I see any reason why a solicitor who has an equitable lien over a debt ought be regarded as being in any different position to an equitable assignee of the debt, so far as the construction of section 1233 of the Social Security Act 1991 is concerned. 82 It follows that the notice dated 5 June 1997, on its correct construction, required the payment to the Commonwealth of so much of the amount of $16,211.80 as was not subject to Mr Firth's lien for costs and disbursements. 83 The Commonwealth submitted that this conclusion should not be reached, because of the provisions of section 1233(5) of the Social Security Act 1991. I do not accept that submission. Before section 1233(5) can begin to work, it is necessary to ascertain what amount is required to be paid to the Commonwealth in compliance with a notice under section 1233(1). What section 1233(5) says is that, if the amount which is actually required to be paid under section 1233(1) is paid, then that payment is taken to have been made under the authority of the debtor and of any other person concerned. There is ample scope for that reading fitting in with section 1233(1) when section 1233(1)(c) and (d), in stating alternative ways in which an amount can become due under section 1233(1), contemplate the existence of "some other person" than the debtor. 84 Section 218(4) of the Income Tax Assessment Act 1936 (Cth) is closely analogous to section 1233(5) of the Social Security Act 1991, though section 218(4) contains an additional phrase whereby the person making payment is indemnified in respect of that payment. In Zuks v Jackson MacDonald (1996) 132 FLR 317, at 329-330, Steytlar J did not see the existence of section 218(4) as detracting from the conclusion he had reached. He said: "I do not consider that the words of that subsection can be taken to reflect an intention, merely because equitable assignees fall within the category of "all other persons concerned" , that the pre-existing interest of such a person in a debt the subject of a notice under section 218(1) should be extinguished upon the service of that notice. It may, for example, be the case that the subsection is designed (perhaps unnecessarily), by its reference to "other persons concerned" , inter alia, to protect the debtor from claims which might otherwise be advanced against him or her by such other persons who would, were it not for the operation of s218(1), subsequently have acquired rights to the money the subject of the debt: cf the comments of Gibbs CJ in Kline (at 12). Also, it is, I think, plain that s218(4) could not have the consequence that the obligation of the debtor to make the payment to the Commissioner prevails over any other right, at all, of any other third party to receive payment of the debt even if otherwise in priority to that of the Commissioner. If the section did have that consequence then much of the discussion of the High Court in Kline would have been unnecessary: compare in this respect, the comment of Hill J in Deputy Commissioner of Taxation v Government Insurance Office (NSW) (1993) 45 FCR 284 at 299." 85 The Commonwealth also submits that section 1233(7F) assists it. I do not agree. There is no law of any State or Territory which makes the amount which GIO owed to Mr Koushkarian inalienable, nor is there any law of a State or Territory which made the amount for which Mr Firth had a lien inalienable. In the context of the present case, section 1233(7F) has no work to do. 86 In Commissioner of Taxation v Government Insurance Office of NSW (1992) 36 FCR 314 Wilcox J considered a situation where the Commissioner had served a section 218 notice on the GIO, after a taxpayer (a Mr Daoui) had recovered a judgment, which GIO was about to pay, for personal injuries. The taxpayer owed money to his solicitor, Mr Dennis, in connection with the obtaining of that judgment. Wilcox J held, at first instance, that Mr Dennis' equitable lien would need to be satisfied before money was paid to the Deputy Commissioner. He said, at 326: "In the present case, it seems that Mr Dennis' retainer predated the s218 notice. The evidence does not disclose the proportion of the total work performed by Mr Dennis in relation to the District Court action which was done in the three months between the commencement of the action and the giving of the s218 notice; presumably it was comparatively small. But it seems to me that the proportion does not matter. By the service of the s218 notice, the Deputy Commissioner became a secured creditor in relation to the proceeds of the action for damages. But proceeds would become available only if the action was prosecuted. The action has been prosecuted and its proceeds have now become available; but only through the work of Mr Dennis. It would be inequitable to allow the Deputy Commissioner to take the benefit of the judgment monies without making any deduction from those monies of the costs reasonably and actually incurred in obtaining judgment." 87 His Honour went on, at 327, to set up a regime whereby the party/party costs recoverable by the taxpayer from GIO should be taxed, with the Commissioner being given the right to require that his prior assent be given to any assessment of those party/party costs. This was because Mr Dennis' lien would extend to solicitor/client costs, and the amount which would actually need to be paid to Mr Dennis from the verdict monies, would be the difference between the solicitor/client costs which were properly payable, and the party/party costs which GIO was required to pay - hence the Commissioner had a real interest in ensuring the amount of the party/party costs was maximised. His Honour then required that a solicitor/client bill should be prepared, and, if not agreed in quantum, taxed by a taxing officer of the Federal Court. His Honour concluded, at 328: "The monies held in court should then be applied: first, in payment to Mr Dennis of the balance due under the solicitor/client bill; and, secondly, in payment to the Deputy Commissioner of whatever monies remain available." 88 When the matter went to the Full Federal Court (Commissioner of Taxation v Government Insurance Office of NSW (1993) 45 FCR 284) the appeal was disposed of on a different point. The taxpayer had become bankrupt, and had been discharged from that bankruptcy, and it was held that the debt owing to the Commissioner had been discharged when the taxpayer was discharged from bankruptcy, so that the section 218 notice was ineffective. However Hill J said, at 299-300: "It follows that if the discharge from bankruptcy had had no effect upon the obligations of the GIO to make payment to the Deputy Commissioner under the notice, the charge or other security interest of the Deputy Commissioner would have been subject to a lien in favour of Mr Dennis to secure to him the recovery of his costs of acting for Mr Daoui in the proceedings against GIO." 89 These cases concerning section 218 of the Income Tax Assessment Act strengthen the conclusion that the garnishee notice served in the present case did not require the payment to the Commonwealth of the amount for which Mr Firth had a lien. Is the Commonwealth a Bona Fide Purchaser for Value Without Notice 90 The Commonwealth asserts that, even if the lien exists, that lien does not prevail against the Commonwealth, because it received the amount of $16,211.80 as a bona fide purchaser for value. The Commonwealth says that, just as a notice under section 218 of the Income Tax Assessment Act 1936 has been held to confer a charge on the Commonwealth, for the amount referred to in the notice (Commissioner of Taxation v Donnelly (1989) 25 FCR 432; Macquarie Health Corp Ltd v Commissioner of Taxation (1999) 96 FCR 238) so also does a notice under section 1223 of the Social Security Act confer a charge on it over the debt which GIO owed. It says that any equitable right of Mr Firth loses in priority to the Commonwealth's right, because its statutory right to receive the money ought be treated as the equivalent of giving value, and that in fact it did not have notice of the lien. 91 I will assume, without deciding, that the Commonwealth is right in saying that whether it prevails over Mr Firth is to be decided by reference to the rules concerning priorities between successive assignees (cf Haymes v Cooper (1864) 33 Beav 431; 55 ER 435). I will not consider whether the Commonwealth ought properly be regarded as holding a charge, nor whether it is in the position of a purchaser who has given value, because, in my view, it is incorrect to say that the Commonwealth had no notice of the existence of the lien. 92 GIO's letter to the Department of 4 June 1997 (see paragraph 20 above) informed the Commonwealth that the settlement amount of $20,000 was, "inclusive of solicitor's costs and inclusive of payments paid by GIO". It then set out to state the amount of payments made by GIO, and another deduction for a payment which needed to be paid to the Health Insurance Commission, and arrived at a balance of $16,211.80. It is clear to any reader of the letter that the solicitor's costs had not been deducted in arriving at that balance of $16,211.80. 93 The Commonwealth says that, even so, it does not necessarily follow that the solicitor's costs and disbursements must be paid out of the settlement money - it is quite consistent with the settlement amount being $20,000 inclusive of solicitor's costs, that Mr Koushkarian had, already, paid Mr Firth the amount of his costs. While the Commonwealth is right in this textual analysis of what the letter says, even so the Commonwealth had notice, in the sense in which the relevant authorities use that term in this area of the law, of the existence of Mr Firth's lien. When one is talking of being a bona fide purchaser for value without notice, and so taking free of prior equities, the "notice" that is involved includes constructive notice. 94 Cole v Eley [1894] 2 QB 180 concerned a case where a person who had obtained judgment in litigation assigned that judgment debt. The solicitor who had acted for the assignor in the litigation obtained a statutory charging order to enforce his lien. The validity of the charging order depended upon whether the assignee was a bona fide purchaser for value without notice. Charles J said, at 183-184: "It may be that he had no express notice, but the question is whether he was in the position of a person who had actual notice that a right to a lien existed? In my opinion the authorities are decisive that he had notice, for he knew that he was buying a judgment debt."

Charles J, at 185 said, of the Court of Appeal's decision in Faithfull v Ewen (1878) 7 Ch D 495, "That judgment treats knowledge of the existence of the suit as knowledge of the solicitor's lien." On appeal ( Cole v Eley [1894] 2 QB) Lord Esher MR said, at 351: "… notice that the subject matter of the assignment is the subject matter of a suit amounts to notice to the assignee of the existence of the solicitor's right to a lien. Such notice prevents an assignee from being a 'purchaser for value without notice'."

Kay LJ and AL Smith LJ agreed. See also Haymes v Cooper (1864) 33 Beav 431; 55 ER 435. Townsend v Reade 95 The Commonwealth also submits that, "the rights (if any) possessed by the plaintiff have not survived his failure to take prompt action to secure his rights in 1997: Townsend v Reade (1835) 4 LJ Ch 233, referred to in Grogan v Orr [2001] NSWCA 114 (CA) at [65] and Halsbury's Laws of Australia [250-1080] fn 14". 96 Townsend v Reade was a case where administrators had been appointed of a deceased's estate. The administrators assigned some of the deceased's real estate to a trustee for sale, who sold it to Mr Townsend. The administrators refused to concur in completion of the sale, which led Mr Townsend to sue the trustee for specific performance of the contract for sale. As well, there was a second piece of litigation, in which people who claimed to be some of the next of kin of the deceased, sued the administrators and the trustee, seeking administration of the estate of the deceased. Mr Milbourne acted for the administrators in connection with both pieces of litigation. Both pieces of litigation were settled, on terms which involved the sale to Mr Townsend being completed. Mr Milbourne gave notice to the trustee not to hand over the purchase money to the parties without providing for his costs. The trustee said, in effect, that he would pay the money over, unless Milbourne took litigation to stop him making the payment. Milbourne took no such litigation, and the money was paid over to the administrators, who departed for America. In the suit, Mr Milbourne contended that the trustee was personally liable to him, for having paid the money over after notice. Milbourne failed. The essential reason was because he had never had a lien on the money at all. As Sir Charles Pepys said, at 235, "These monies were not recovered in the suit by the diligence of Milbourne, but were obtained by an arrangement between the parties." The specific performance claim was one where, if Milbourne's clients had succeeded, they would have retained the land, and not received the purchase money. In the administration suit, if it had been carried to completion all of the assets of the estate would have been under the control of the court, and accounts would have been directed, which would have included payment of whatever was due to Mr Milbourne in connection with that litigation, but that suit was not proceeded with by the plaintiffs after they had been ordered to provide security for costs. 97 At 235 Sir Charles Pepys said: "The case is free from all imputation of collusion and when [the trustee] stated that he could not attend to the notice, it was the duty of Milbourne to have taken such steps as would secure himself."

That statement means that when a solicitor claims to have a lien over a fund, gives notice to the fundholder to not pay the fund, and is told that the fundholder will not comply with that notice, the solicitor needs to take steps if he is to retain a security over that particular fund. If he does not take such steps, he will be left with whatever personal rights he has against the fundholder who has ignored the notice, and whatever rights he might have against the person to whom the fund was paid. 98 Sir Charles Pepys goes on to say, in a dictum, "If Milbourne had any lien, it would have been difficult to hold [the trustee] liable to pay the money a second time …". That dictum is inconsistent with the decisions in Read v Dupper (see paragraph 66 above) and Ormerod v Tate (see paragraph 67 above). 99 Paragraph [65] of Grogan v Orr [2001] NSWCA 114 says: "The appellants relied on Townsend v Reade [1835] 4 LJ Ch 233. In that case it was held to be the duty of a solicitor claiming a lien for his costs against a fund to take steps to secure himself; see per the Master of the Rolls Sir Charles Pepys, then a Lord Commissioner of the Great Seal at 235. In this opinion, the other Lord Commissioner agreed." 100 That paragraph of the judgment in Grogan v Orr does nothing more than record a submission. Further, it occurs in a part of the judgment which deals with the topic of laches. 101 I conclude that Townsend v Reade provides no basis for denying the continued existence of Mr Firth's lien, independent of any question of whether there has been laches. Laches 102 The Commonwealth submits that Mr Firth has been guilty of laches in bringing this claim, which is a sufficient defence in equity to any rights in equity he may have had. It points to the delay, from 5 June 1997 to 25 January 2000 (a little over two and one half years) between Mr Firth finding out that the Commonwealth claimed the money under a statutory garnishee, and his first asserting to the Commonwealth that he had a lien over the money. The Commonwealth also relies on the further period of a little over two years between when that first assertion of a right was made, and when these proceedings were commenced. The Commonwealth relies, for legal authority, on Grogan v Orr. 103 In Grogan v Orr a defence of laches succeeded. I have set out the facts of that case at paragraph 58 above. As I have earlier pointed out, Grogan v Orr was a case where a solicitor who had once had a lien sought an equitable personal remedy against someone who had held the fund over which the lien existed, but had paid it away. That is a vastly different situation to the situation in the present case, where the solicitor who had the lien seeks to enforce it against the Commonwealth, which has received the money with notice of circumstances giving rise to the lien. 104 The reasoning which led the Court of Appeal in Grogan v Orr to hold that a defence of laches succeeded is as follows: "The respondent failed, before the moneys came into the appellants' hands in March 1991, to claim an equitable interest in the funds by way of a particular lien. The appellants were on no notice of such a claim. The claim against them was based entirely upon the irrevocable authority but, as I have said, the appellants never attorned or engaged to pay the respondent's costs out the proceeds of sale. Had the appellants been notified of a claim by the respondent to an equitable interest in the fund clearly they would have been advised, to adopt the language of Jordan CJ in Ex parte Patience at 100, that only the respondent and not the client could give a good discharge to the appellants for that part of the proceeds of sale which was equivalent to the respondent's costs. Ms Linden [a solicitor employed by the appellants] said that she did not want to pay the proceeds of sale to the client. Her sympathies were with the respondent and she would see he was paid if she could. But on the basis on which the claim was made before the appellants received the proceeds of sale, Ms Linden was correctly advised that she should pay the proceeds of sale to the client. Had the respondent made his claim in reliance upon a particular lien there is no reason to suppose that the appellants would not have been advised that they should pay the amount of the respondent's costs out of the fund before paying the balance to the client. In my opinion, the respondent having failed properly to formulate a claim to a particular lien and equitable right to have his costs paid out of the fund in 1991, it would be inequitable, the claim as then formulated having failed, now to hold the appellants personally liable to the respondent for not accepting the respondent's claim as it was put to them, and paying the proceeds of sale to the client. The delay and that failure, in my opinion, combine to lead inevitably to the conclusion that the respondent was guilty of laches and his claim should be rejected. Accordingly, these grounds of the notice of contention also fail." 105 It can be seen that this reasoning is dependent upon the injustice of expecting the appellants, who had paid away the money over which a lien in fact existed, to be personally liable to pay the amount for which the lien existed, when the lien holder had not made any claim that there was such a lien, before the money was paid away. If anything, the injustice of upholding the claim of the respondents in that case was made all the greater by the fact that, before the appellants paid the money away, the respondent had made claims to the money which had no good legal basis, and which the appellants considered, and rightly rejected. It can readily be seen how, in that situation, the appellants were prejudiced by the delay of the respondent in correctly making his claim. 106 By contrast, in the present case, there is no evidence that the Commonwealth has done anything in reliance on a belief that its title to the money paid to it by the GIO is complete. 107 In In Re Born; Curnock v Born [1900] 2 Ch 433 Farwell J considered a situation where a company had made a claim against a deceased's estate. That claim was admitted in January 1897. Later in 1897 the company ceased carrying on business. In 1900 the solicitors for the company sought a charging order for their costs over the share of the deceased's estate to which the company had been held entitled. Farwell J said, at 435: "In the present case it has been contended that I ought to refuse the order on the ground of the applicants' delay in issuing their summons. But a mere lapse of time from January 1897, when the claim was made and admitted, to March 1900, when the summons was issued, is immaterial, seeing that the company closed their office and ceased to carry on business in June 1897, and that no intervening rights have arisen. Unless other rights intervene, the question of delay has no bearing on the point." 108 That approach is applicable in the present case. 109 Meagher, Gummow and Lehane, in Equity Doctrines and Remedies, paragraph 3601, say that the equitable defence of laches: "… is a defence which requires that a defendant can successfully resist an equitable (although not a legal) claim made against him if he can successfully demonstrate that the plaintiff, by delaying the institution or prosecution of his case, has either (a) acquiesced in the defendant's conduct or (b) caused the defendant to alter his position in reasonable reliance on the plaintiff's acceptance of the status quo, or otherwise permitted a situation to arise which it would be unjust to disturb: Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221." 110 In the present case, there is no acquiescence on the part of Mr Firth, no alteration of position by the Commonwealth in reasonable reliance on Mr Firth's acceptance of the Commonwealth retaining the money, and no other factors which have caused a situation to arise which would be unjust to disturb. 111 I should record that the Commonwealth submitted that the destruction of its paper file amounts to prejudice, which is sufficient to enable a defence of laches to succeed. On the day of the hearing, the Commonwealth produced printouts of some additional electronic records which it had located, beyond those which were produced pursuant to the Freedom of Information Act request. (I should in fairness make clear that it was not contended that these were documents which ought properly have been produced pursuant to whatever request it was which was made under the Freedom of Information Act.) An officer from the Debt Collection Branch of Centrelink gave evidence that, even with the production of those extra electronic documents, he could not be confident that all the Commonwealth's documents relating to the matter had been produced. Those electronic documents which were produced included notes of telephone conversations, and copies of letters. There was no evidence about what type of documents might have been in the destroyed paper file which were not reproduced in electronic records. Nor was it clear to me how, if the Commonwealth still had its paper file, it would have been in any better position to oppose the claim which Mr Firth makes. In all these circumstances, I am not persuaded that the Commonwealth has made out a case of prejudice arising from the destruction of the paper file. Conclusion Concerning Legal Rights 112 It follows that the Commonwealth's statutory notice to the GIO did not require GIO to pay to the Commonwealth the amount for which Mr Firth had a lien over the proceeds of the settlement. The Commonwealth received the money from GIO with notice that that amount was subject to a lien by Mr Koushkarian's solicitor. Thus, it has received the money subject to that lien. It has not been established that the lien has ceased to exist, or that there is an equitable defence to it being enforced against the Commonwealth. It remains only to consider what amount Mr Firth is now entitled to recover from the Commonwealth. Amount for which the Equitable Lien Exists 113 The solicitor's costs in relation to which a lien exists include not only those incurred in recovering the judgment, but also expenditure which is "immediately incidental thereto": In Re Meter Cabs [1911] 2 Ch 557 at 559 per Swinfen Eady J; Carew Council Pty Ltd v French [2002] VSCA 1 at [33]. The lien can include the cost of litigation which the solicitor engages in to establish his lien against someone who denies that the solicitor was retained by the client: In Re Meter Cabs [1911] 2 Ch 557 at 562. It is necessary to look at the facts of the case in a little more detail to quantify the amount for which Mr Firth has a lien. 114 The amount of costs and disbursements, ascertained in accordance with the fee agreement, was $6,385. When Mr Firth obtained judgment against Mr Koushkarian on 8 April 1999, the judgment amount, of $7,632.22, was made up of the costs and disbursements which Mr Koushkarian owed ($6,385), interest which had accrued on that amount up to the date of entry of judgment at the rates appropriate to the Local Court ($830.22), court costs and service fees in that action in the Local Court ($103), and professional costs in that action in the Local Court ($314). 115 When Mr Firth made an application, on 23 August 1999, to issue execution against Mr Koushkarian, it was for an amount of $8,105.01. That was made up of the judgment debt ($7,632.22), further interest which had accrued on the judgment debt ($300.79), an execution fee of $45, and solicitors costs connected with the application to issue execution, of $127. 116 Mr Firth has also claimed $360 as the costs of defending Mr Koushkarian's application to the Local Court on 12 November 1999 to set aside the judgment. 117 In my view, the taking of proceedings against Mr Koushkarian in the Local Court to establish the quantum of the costs owed properly falls within the scope of the solicitor's lien. Even though there was a costs agreement between the parties, that judgment in the Local Court finally determined, as between Mr Firth and Mr Koushkarian, the amount which was owing in accordance with that costs agreement. Thus, the amounts for court costs and service fees, and professional costs, included in that judgment are part of the amount for which the lien existed. However, I do not think that the costs of the application to issue execution are properly part of the lien. On the other hand, the costs of the application to set aside the judgment in the Local Court are, properly, part of the costs of quantifying the amount really owing by Mr Koushkarian to Mr Firth, and so are part of the amount for which the lien exists. There has been no court order, however, quantifying the amount of those costs. Mr Firth is entitled to whatever amount is properly allowable on taxation, for those costs of the application to set aside judgment in the Local Court, as part of the amount for which the lien exists. 118 It is a usual incident of equitable liens that they bear interest. In In Re Drax; Savile v Drax [1903] 1 Ch 781, at 796 Cozens-Hardy LJ said: "I am not aware of any case in which the Court of Chancery has refused to give interest on an equitable lien or charge, and I think the view taken by Bacon VC in Lippard v Ricketts (LR 14 Eq 291, 294) is the correct one. There he says: 'In the case of In Re Kerr's Policy (LR 8 Eq 331) the court seems to have proceeded on the theory that a debt secured by equitable mortgage will, unless something is said or maybe implied to the contrary, carry interest; and it seems to follow that, when the court has once decided that there is a charge, the sum charged must bear interest.

See also Murdocca v Murdocca (No2) [2002] NSWSC 505 at paragraphs [6] - [15]. 119 The amount for which the solicitor's lien exists would similarly bear interest, at the rates set out in Schedule J of the Supreme Court Rules. 120 If follows that the amount which Mr Firth is entitled to receive is the amount of $7,632.22, plus interest on that sum from 8 April 1999 to the date of payment at the rate set out in Schedule J of the Supreme Court Act. In addition, he is entitled to receive whatever are the taxed costs of his application to set aside the judgment in the Local Court. If Mr Firth wishes to pursue his right to receive those taxed costs, it would be necessary for him to actually tax them, or agree their quantum with the Commonwealth, before a judgment for a money sum could be entered in the present proceedings. If Mr Firth wishes to tax the quantum of those costs, it would be possible for these proceedings to result in a declaration establishing the legal basis on which Mr Firth was entitled to receive money from the Commonwealth, with liberty to apply to enter a money judgment once the taxation had occurred. Alternatively it might be possible for the parties now to agree on what sum of money a judgment should be entered for, consistently with these reasons for judgment. The only order I shall now make, therefore, is that the plaintiff bring in Short Minutes of Order to give effect to these reasons for judgment. At the time of bringing in those Short Minutes of Order I shall also deal with any application for costs. Order 121 I direct the plaintiff, within 28 days from today's date, to bring in Short Minutes of Order to give effect to these reasons for judgment. **********

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