HIS HONOUR: By her notice of motion filed in court on 16 August 2016, Ms Beckett seeks the following orders:
"1. The sum of $675,000 or such other amount as the Court considers appropriate be released to the first defendant from the monies paid into Court.
2. That the remaining monies paid into Court be released to the first defendant unless the plaintiff [sic] undertakes to pay interest - from the date upon which the monies were paid into Court at the difference between the rate applicable to Supreme Court proceedings as prescribed under the Civil Procedure Act 2005 and the rate being earned on the monies paid in - on any balance to which it is found they are not entitled."
The background to this application has to some extent been summarised by me in Goldberg v Beckett [2015] NSWSC 1966 which I published on 18 December 2015. In that case I dismissed Turner Freeman's application for an order that the funds in Court, representing the judgment sum paid by the State of New South Wales, be paid to them pending ascertainment of their entitlement to costs by assessment or otherwise. Since that time, on 14 June 2016, $2.5M has been released from the funds in Court to Turner Freeman by agreement between the parties in recognition of the uncontroversial likelihood that Turner Freeman's entitlement to solicitor client costs will be not less than that amount. The present dispute therefore concerns how the balance of the funds in Court should be treated pending final assessment of Turner Freeman's costs for acting as Ms Beckett's solicitor in the principal litigation: see Beckett v State of New South Wales [2015] NSWSC 1017 and Beckett v State of New South Wales [2015] NSWSC 1500.
Ms Beckett contends that her motion enlivens consideration of the principles that should guide this Court in exercising its power to retain monies in Court, or alternatively to order that they be paid out, pending final determination of the parties' competing claims. She submits that those powers should be exercised conformably with the principles that would apply if Turner Freeman had sought an interlocutory injunction to freeze the monies in the hands of a third party. On that approach, Turner Freeman would need to establish both a prima facie case and that the balance of convenience favoured them in order to have the monies retained in Court.
The parties' respective positions were exposed in correspondence passing between them earlier this year. On 1 June 2016, Autore & Associates, who then acted for Ms Beckett, wrote to Turner Freeman on the topic of entitlement to monies in Court in the following relevant terms:
"Entitlement to monies in Court
…
It would further appear that the effect of dismissal or stay of proceedings on the Summons would be to leave you with no claim before the Court to restrain payment out of the funds in Court.
Would you please advise whether you agree with this analysis, and if not, why not.
If you do not agree, there is still an issue about the monies in Court. Your recent bill of costs, including item 6758, totals $3,682,752.60. The amount paid into Court was $4,090,717.
In our letter of 18 April 2016 we accepted that the subsistence of the lien may in appropriate circumstances justify the freezing of a sum sufficient to cover your claimed entitlement to costs. However, we maintained that on no view could it justify the freezing of surplus funds which are not part of your claimed entitlement. You have not to date identified any basis upon which you are entitled to have the surplus funds remain in Court. Your bill of costs has now quantified the maximum amount of your claimed entitlement and it is substantially below the fund in Court. Accordingly, will you agree at least to the payment out of the surplus funds? If not, why not?"
Turner Freeman's attitude to this contest is best seen in the terms of their reply dated 10 June 2016. It is relevantly as follows:
"Payment on account
3. We enclose short minutes of order to release $2,500,000 from the monies in Court on account of our costs, and thank your client for this proposal.
Entitlement to monies in Court
4. We don't agree with your analysis.
…
5. In principle, we accept that any surplus monies in Court should be paid to your client. However, we doubt there is any surplus when one allows for the interest which will accrue on the unpaid costs and disbursements whilst the bills are assessed …"
This letter was responded to by letter dated 28 July 2016 in these relevant terms:
"Monies in Court
6. As at present advised we consider that of the amount in Court $675,000 is unjustified and shouldn't be retained. This is reflected in our motion. The amount consists of interest on counsels' fees, filing fees for the assessment of costs, Mr Breen's fees, the charge to Ms Beckett for the preparation of the party/party bill of costs, the professional costs charged for the party/party assessment, part of the interest calculated by Mr Goldberg in this [sic, his] affidavit of 9 June 2016, part of the costs of the proceedings as estimated by Mr Goldberg (we do not accept the amount estimated or that all the costs are the costs of enforcing the lien) and the remainder of funds in Court (understanding that Mr Goldberg's affidavit demonstrated a remainder and estimated interest in a manner which is now not accurate following the payment out of $2,500,00).
7. If you are prepared not to press your claims in relation to any of these items, please let us know and consent orders can be made in relation to any of the items."
Turner Freeman's letter of 9 August 2016 effectively ended this exchange with the following response:
"8. We did not ask for the monies to be held in Court. We asked for the monies to be paid to this firm on its undertaking set out in the summons. Our prayer for relief was refused. Instead, Harrison J ordered that the monies be paid into Court. In those circumstances, no undertaking as to damages was appropriate, required nor [sic] now offered.
As to the payment out of court to your client, we have considered the various matters referred to in paragraph 6 of your letter. We do not agree that all of the items you have identified are not properly secured by the funds in Court … We consider no further monies should be released, pending assessment."
My reasons for judgment delivered on 18 December 2015 are presently relevant. It is timely to recall at least the following paragraphs:
"[35] There can be no doubt that Ms Beckett is obliged to pay Turner Freeman for the fees earned and disbursements incurred by them in successfully representing her since 2009 in what was very difficult and protracted litigation. Only the quantum of those fees remains to be determined. It is regrettable in the extreme, having regard to the emotions and consequences generated by the original proceedings, and the apparently close and harmonious relationship between Ms Beckett and Turner Freeman forged in single-minded cooperation over many years, that this current dispute has emerged. It effectively concerns no more and no less than the dual questions of whether or not Turner Freeman's bill will or will not be varied following an assessment, and secondly who as between Ms Beckett and Turner Freeman should be out of pocket pending assessment of their costs, and the quantification and receipt of the costs of the proceedings payable by the State of New South Wales. Both parties appear to be operating upon the not unreasonable assumption that Turner Freeman's costs will exceed the costs for which the State will eventually agree or be found liable to pay. Having regard to the fact that a considerable proportion of those costs are to be assessed on an indemnity basis, including the costs of the final hearing before me, the difference between the two sums is unlikely to be significant. Be all that as it may, Ms Beckett contends that it is Turner Freeman who must wait to be paid, whereas Turner Freeman insist that Ms Beckett agreed long ago and recently confirmed that they should not have to.
[36] It is clear from authority that in relation to those situations where an assessment is necessary to ascertain the quantum owing to the solicitor, the solicitor's right created by the lien exists in the fund prior to the occurrence of the assessment. It is not, however, clear that a solicitor is correspondingly entitled to pay himself or herself from funds over which a lien exists before the amount that is payable has been ascertained by assessment or otherwise. The very nature of the lien suggests that its fundamental characteristic is that of a security, not a device for effecting satisfaction of an outstanding account whose precise quantification remains in doubt.
[37] In support of the proposition that the whole of the fund should be paid to them now, Turner Freeman have proffered an undertaking to restore so much of the fund that they may be permitted to utilise in payment of their fees as may exceed their entitlement when ultimately determined. One presumable consequence of that proposal would also see the presently anticipated differential between the costs claimed by Turner Freeman and the total amount of the fund immediately released to Ms Beckett. The proposal seems to me to be eminently sensible. It would coincidentally discharge Ms Beckett's extant and undiminished (albeit lately contested) contractual obligation to permit Turner Freeman to deduct their costs from the judgment sum in accordance with the terms of the costs agreement and thereby staunch the flow of accruing interest on unpaid disbursements and accounts rendered by those entitled or determined to charge it.
[38] However, Ms Beckett is not prepared to agree to any such regime, despite what seem to me to be the obvious advantages of doing so. In the absence of any such agreement, I do not consider that I can authorise the payment of the funds in court to Turner Freeman for disbursement by them in accordance with their bill of costs. There is little utility in doing so if the funds only remain untouched in their trust account, particularly as they attract interest in their present location where Turner Freeman's lien is also not imperilled. Correspondingly I consider that it would be wholly inimical to the security provided by their equitable lien to direct the payment of the judgment amount to Ms Beckett upon the basis of some equivalent undertaking.
[39] In this context the several alleged breaches of the costs agreement by Turner Freeman, or their alleged failures to disclose matters concerning their costs, or the ultimate enforceability of their costs agreement, are all for present purposes entirely beside the point. None of these matters has any effect upon the existence, validity or enforceability of Turner Freeman's equitable lien. By the same token, Turner Freeman does not seem to me to be entitled to receive the secured costs in specie until such time as the quantum of those costs has been determined and Ms Beckett's corresponding and undoubted obligation to pay them has crystallised."
The not unreasonable inspiration for Ms Beckett's present application comes from the fact that the interest rate currently being paid on funds in Court is one percent. That is considerably less than the current Court interest rate applicable to a judgment, which is 7.5 percent. It is also significantly less than the prescribed 3.5 percent maximum rate for interest on bills under the Legal Profession Uniform Law 2014 (NSW) which Turner Freeman is claiming in the assessment proceedings. Ms Beckett maintains that this situation is seriously unfair to her. Turner Freeman's lien over the funds in Court has effectively frozen a portion of Ms Beckett's judgment monies, being the balance of the funds in Court after calculation and deduction of whatever may be Turner Freeman's entitlement to those funds. Ms Beckett emphasises that to the extent that Turner Freeman succeed in their claim to that balance, the monies will be retained in Court until paid out together with interest at the rate claimed under the Legal Profession Uniform Law. Alternatively, as the matter now stands, Turner Freeman will not be liable to her for interest on any surplus that may become payable to Ms Beckett after Turner Freeman's costs have been finally assessed.
One of the difficulties associated with Ms Beckett's current claim for relief is that it requires me to make a determination of the worth of significant portions of Turner Freeman's claim for costs. Shortly stated, Ms Beckett contends that on no proper analysis of Turner Freeman's bill of costs could they be entitled to significant portions of the costs claimed. Ms Beckett's best calculation of those allegedly unsustainable claims is $675,000. She reasons that Turner Freeman's lien could never secure the several categories of costs claimed that together roughly amount to that sum, and that it should be released to her forthwith as her reasonable estimate of the likely surplus. Ms Beckett has provided detailed written submissions in support of the argument that Turner Freeman will never be able to justify these claims, so that the security provided by their lien extends well beyond the funds in Court and also beyond any sum to which they might ultimately become entitled.
I do not consider that the material available to me permits me to make a reliable assessment of either the value or the worth of the disputed claims. I am satisfied that Ms Beckett has clearly adumbrated her challenge to these items, but they ought in my view to be determined as part of the costs assessment procedure in the normal course. It goes without saying that Turner Freeman have been put on notice that these items are in dispute and that Ms Beckett is dissatisfied with the continued embargo upon the surplus funds in Court to which these items notionally correspond.
Although it is Ms Beckett's preference to have this disputed surplus released immediately, I consider that her particular concerns could be adequately addressed and with equal force, as well as the added certainty of hindsight, by treating her present claim as one for interest, at an advantageous rate, upon the surplus funds in Court, if any, to which she is ultimately found to be entitled. That is to some extent the approach that underpins her second claim for relief in the notice of motion. I accept that it would not satisfy the first claim to which, for the reasons I have attempted to identify, I am not presently prepared to accede. However, an order for interest of the type I consider is appropriate, or its equivalent, would necessarily compensate Ms Beckett in full for her anticipated losses. Such an approach would also obviate the need to embark upon a speculative calculation or assessment of the contested items, which calculation may in due course prove to be unsupported by the facts.
It will also be apparent that to do otherwise would to a considerable extent undermine the approach that I took with respect to the Turner Freeman application to be paid the funds in Court. That approach is exemplified in the paragraphs from my judgment on 18 December 2015 that are extracted above at [8] of these reasons.
However, Turner Freeman have indicated that they are not prepared to undertake to pay interest in this way. It is not suggested that I have power to require them to give such an undertaking. I am also in doubt about my power to make an order for interest in the way I have described.
It will be apparent that as things presently stand, Ms Beckett is at the greater risk of disadvantage. On the one hand she faces the prospect of being out of pocket to the extent of the difference between interest that may be earned on any of the funds in Court to which Turner Freeman are ultimately found not to be entitled, and the interest that may be earned on that amount at some other notionally available commercial rate. On the other hand, Turner Freeman are not obviously liable for that difference having regard to the fact that the funds in Court are there pursuant to an order made by me which they did not seek. Indeed, Ms Beckett would in fact have been better off, all other things being equal, if the judgment monies had in fact been paid to Turner Freeman in accordance with the costs agreement that Ms Beckett maintains is void or has no operation. That is because Turner Freeman would presumably have been obliged, or could have been required, to deposit the funds into a controlled monies account or its equivalent attracting reasonable interest.
In my opinion, the funds in Court should be utilised or applied in such a way as best to eliminate or reduce the prospect of any loss to either party. I consider that the funds in Court should be paid into a controlled monies account in the joint names of the solicitors for Ms Beckett and Turner Freeman to abide the outcome of the assessment of Turner Freeman's costs in due course. Interest earned on the fund so invested should be applied and paid to each of the parties in direct proportion to their respective entitlements when that is ultimately determined by agreement or assessment.
I will direct the parties within seven days to bring in short minutes of order to reflect my conclusions.
[2]
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Decision last updated: 23 November 2016