GROGAN v ORR

The Family Court ordered Mrs Nove to pay to the client by way of property settlement a sum of $64,000 together with interest thereon. 8 Section 79 of the Family Law Act 1975 (Cth) enables the Family Court in proceedings with respect to the property of the parties to a marriage to make such order as it considers appropriate altering the interests of the parties in the property including an order for a settlement of property in substitution for any interest in the property. 9 The total costs and disbursements rendered by the respondent to the client up to 16 November 1990 were $68,691.25. As at 6 February 1991 the balance of that amount and subsequent fees totalled $54,472. After a notice disputing costs on 28 November 1991 costs were taxed at $7,711.30 in respect of work done for the appeal and $90,144.10 in respect of work done for the trial. The $64,000 payable by Mrs Nove was received by the respondent on 17 December 1990. By arrangement with the client, one-half of this sum, $32,000, was paid to him and the balance applied to the respondent's costs and disbursements, in particular, approximately $11,000 in payment for counsel's fees and approximately $21,000 towards the respondent's profit costs. 10 As a result of the Family Court proceedings the client retained and/or received assets to a value exceeding $300,000 including the 60 per cent beneficial interest in the Tyagarah property. 11 The third defendant, Ms Linden, was the appellants' employed solicitor. The client instructed the appellants to act for him on the sale of the Tyagarah property. Instructions were accepted by the appellants on or about 10 September 1990. Contracts for sale of the Tyagarah property were exchanged on 17 and 30 October 1990. The sales were completed in late March 1991. On the settlements, the appellants received bank cheques totalling over $300,000 payable to the client. 12 On 9 October 1990 the respondent wrote to the client as follows: "As you are aware the writer and Counsel have carried the conduct of this case on a speculative basis and we would be pleased if you would give consideration to payment of our outstanding account from the proceeds of the sale of the Tyagarah farm. If you regard this as reasonable would you please sign the enclosed authority." 13 The authority which was signed by the client and dated 10 October 1990 was in the following terms: "AUTHORITY Messrs Grogan & Co, Solicitors I JOLYON EMANUEL NOVE hereby irrevocably authorise and direct you to pay to my solicitors Messrs Orr & Co, from the proceeds of sale of the farm property at Tyagarah their costs and disbursements." 14 On 12 October 1990 the respondent sent the authority to the appellants under cover of a letter which read as follows: "We enclose an authority to you for payment of our professional costs and disbursements from the proceeds of sale of the Tyagarah farm. We will advise you of the outstanding amount in due course." 15 The third defendant, Ms Linden, read the authority and filed it, but did not, at that time, speak to the respondent about it. She intended, however, to act on the authority. She knew of the Family Court proceedings and that all of the properties of the parties to those proceedings were "in the melting pot". To her knowledge, that would have included the Tyagarah property. 16 On 21 December 1990, after judgment was given in the Family Court proceedings, the respondent wrote to Ms Linden as follows: "We refer to the irrevocable authority previously forwarded to you with regard to payment of our outstanding costs and disbursements from the proceeds of sale of the Tyagarah land and advise that the present outstanding debt by Mr Nove to this firm is $43,966.25. We would be pleased to receive your cheque accordingly. We have today forwarded a copy of this letter to Mr Nove."

Again Ms Linden read the letter and filed it without speaking to the respondent about it. 17 The client was dissatisfied with the result of the Family Court proceedings and instructed the respondent to institute an appeal. On 29 January 1991 he withdrew his instructions from the respondent. 18 On 6 February 1991 the respondent sent a further statement of account to the client showing the amount outstanding for costs and disbursements at $54,472. On the same day the respondent wrote to Ms Linden as follows: "Please note that we no longer act for Mr Nove. We forwarded to Mr Nove today an updated memorandum of professional costs and disbursements and statement of account and advised him that the final balance owing to this firm is $54,472.64. We have requested Mr Nove to confirm this with you so that payment in that sum may be made to us from the proceeds of sale of the Tyagarah farm properties in accordance with the irrevocable authority previously forwarded to you." 19 On 11 February 1991 the client informed Ms Linden that he was not happy with the respondent's services and that he did not want to pay him and that he did not want the respondent to be paid out of the proceeds of the sale of the Tyagarah property. On 12 February 1991 the client wrote to the respondent saying that he disputed the account and alleging negligence. He went on to say: "Your attention is drawn to my understanding that we jointly agreed to revoke the requirement that the payment of your fees be made from the farm sale. This was done at the time of my prior payment to you of $32,000. If indeed this payment of $32,000 is held by you not to be part of us jointly revoking the requirement then you are required within 14 days to return to me the $32,000 that you held in your trust account for me."

The client sent a copy of this letter to Ms Linden. 20 Thereafter Ms Linden consulted Ms Shirvington of the Law Society of New South Wales. She explained the situation to Ms Shirvington who advised that Ms Linden was obliged to implement the client's fresh instructions and had no obligation to the respondent. 21 On 21 February 1991 Ms Linden spoke for the first time to the respondent about his claim on the proceeds of sale of the Tyagarah property. She informed him of the advice she had received and her intention to follow that advice. The respondent said that Ms Linden made it clear to him that her sympathies were with him and that she would see he was paid if she could. However, Ms Linden believed she had no alternative but to implement the client's instructions to her and she told that to the respondent. 22 On 21 February 1991 the respondent spoke to Ms Shirvington. Ms Shirvington said that the irrevocable authority was "just an authority unless it's binding in a contractual sense". The file note went on to record "If it's in trust, he can change his mind". The respondent took Ms Shirvington's advice that the client could change his mind to be qualified by any contractual element in the authority. The respondent sought advice from senior counsel who advised that the Law Society's position was wrong. However, the respondent said that because his advice was to resolve the matter amicably rather than by court proceedings he refrained from seeking an injunction. 23 On 27 February 1991 the client wrote to the respondent setting out his complaints in some detail. He concluded: "Following my letter to you of 12th February 1991 14 days has now expired since that letter and I determine from that that the $32,000 held by you is part of us jointly revoking the requirement that your fees be paid from the sale of the farm. You are now required to pay $8,775.00 to Mr Peter Rose QC out of my $32,000 trust money." 24 On 4 March 1991 the client wrote to Ms Linden as follows: "I refer to my irrevocable authority of 10/10/90 directing payment of costs to Orr & Co from the proceeds of sale of my properties at Tyagarah. I hereby revoke that authority and direct you to make no payment of costs to Orr and Co until further direction." 25 On 7 March 1991 the respondent wrote to the client denying negligence and the release of the irrevocable authority and stated that the $32,000 had been paid simply on account and not otherwise. Release of a lien over the file was refused pending payment of the balance of the respondent's account. On the following day the respondent wrote to Ms Shirvington asking for an urgent ruling by the Council of the Law Society. On the same day the respondent wrote to Ms Linden enclosing a copy of the letter to Ms Shirvington and asking for confirmation that the outstanding funds would be retained in her trust account pending a ruling. On 11 March 1991 Ms Linden wrote to the respondent as follows: "We refer to your letter of the 8th March 1991 and advise that our client's instructions are unchanged in that we are directed not to hold any funds on your behalf from the settlement monies. As this accords with the current advice we have received from the Law Society we must adhere to our client's instructions." 26 On 12 March 1991 the respondent wrote to Ms Linden asking her to reconsider her position. On the following day he wrote to the President of the Law Society advancing arguments in support of the ruling that had been sought. 27 Part 56 of the Supreme Court Rules establishes an "interpleader" procedure by which a person faced with conflicting claims in respect of personal property can protect himself from the uncertainty and expense of separate legal proceedings with each claimant by applying to the court to compel the claimants to settle between themselves their entitlements to the property. Relief can be granted to a person who "expects to be sued" in respect of a debt or other personal property by two or more persons having adverse claims thereto; r2. The obtaining of such relief does not seem to have been considered by the appellants. It is not clear why. 28 Sperling J said: "34 Mr Orr asserts that, on 13 March 1991, he spoke to Ms Linden, advising her of his further representations to the Law Society, and that she said to him words to the effect, 'I will get a second opinion before releasing the funds'. Mr Orr has a file note dated 13 March 1991 relating to a telephone conversation with Ms Linden. It reads as follows: 'She will get second opinion before releasing funds.' 35 Ms Linden's account of that conversation is as follows: 'He said: I've obtained advice from a QC and he is clearly of the opinion that you can't ignore the irrevocable authority. I said: Will you send me a copy of that advice? He said: No, I don't want to do that. You should get an opinion from a silk. I said: We're not going to pay for that. Why don't you give me a copy of your QC's opinion. He said: No. I've written again to the Law Society. I would like you to reconsider releasing the funds to Nove or at least hold the money in trust until the Law Society hands down a ruling. I said: I can't. That's what Jolyon has instructed me to do I wish I didn't have to do this but in view of Jolyon's (Mr Nove's) instructions and the advice from Virginia Shirvington, I have to. He said: Would you at least write to the Law Society and ask for written confirmation of its earlier advice? I said: Yes, OK. But until I get different advice, I have to follow Jolyon's instructions.' 36 Mr Orr denied that there was any conversation about providing a copy of counsel's opinion. He said there was no written opinion. The advice had been received in conference. Nothing turns on that. 37 Mr Orr did not admit the balance of the conversation as recounted by Ms Linden. Mr Orr also denied that Ms Linden said that she would have to follow the client's instructions until she got different advice." 29 Sperling J said that at least it was clear that the respondent anticipated that Ms Linden would direct her request for further advice to the Law Society rather than elsewhere. He further asserted that Ms Linden expressly undertook to withhold funds from the client pursuant to the authority until such further advice was to hand and then not to disburse such funds without notice to him if the further advice was adverse. However, Sperling J was not persuaded that Ms Linden gave the undertaking asserted by the respondent. His Honour said: "The whole point of Ms Linden's dilemma was that she understood, on the advice she had received, to be [sic] that she was bound to act on the client's latest instructions irrespective of the terms of the authority. How could she undertake not to do so until further advice or confirmatory advice had been received? 42. By the same token, there is no basis for any such undertaking arising by implication from Ms Linden's agreement to ask the Law Society for further advice. 43 There is then no basis either for the asserted implication that Ms Linden would not disburse funds covered by the authority without notice to Mr Orr if the Law Society's further advice were adverse." 30 However, the trial Judge accepted that the respondent believed that Ms Linden would withhold sufficient funds to cover his costs and disbursements until she had received further advice from the Law Society and would then not disburse the funds covering his claim without notice to him if the advice was adverse. 31 On 14 March 1991 the Law Society wrote to the respondent acknowledging his letter of 8 March 1991 and advising that the matter had been referred to the Society's General Practice Rulings Committee. According to Ms Linden, in mid-March 1991 the client instructed her not to tell the respondent when the Tyagarah sale settled and she told him that she accepted those instructions. 32 Sperling J said: "48 The sale of one lot comprising part of the Tyagarah property was completed on 22 March 1991. The nett proceeds in relation to Mr Nove's 60% interest were paid to Mr Nove by bank cheque supplied by the purchaser on settlement. Mr Nove signed a receipt for the bank cheque on 25 March 1991, presumably when it was delivered to him by Ms Linden." 33 The trial Judge held that one way or another the respondent knew that sale of part of the property had been completed and the completion of the remaining lot was imminent. He made no complaint about the funds being disbursed from the sale of the first lot because he knew there were sufficient funds coming from the sale of the second lot. The sale of the second lot, comprising the balance of the Tyagarah property was completed on 28 March 1991. The net proceeds in relation to the client's interest were paid over in the same manner as in the case of the first lot. The client again signed a receipt for the bank cheque, although on this occasion the receipt was not dated. The trial Judge found that the bank cheques were handed over to Ms Linden (or her representative) on settlement and subsequently delivered to the client on each occasion. 34 On 12 April 1991 the respondent spoke to Ms Linden. He said that he understood that Tyagarah was settled and the client had got the proceeds. Ms Linden said: "Yes. I was bound by my client's instructions. Virginia Shirvington clearly told me that I had to release the funds and I did not get a reply to my letter from the Law Society to advise me otherwise. I discussed it with my partners and we all agreed that the funds should be released. I had no choice but to release the funds. I told you that this is what we would have to do." 35 According to Mr Orr, if Ms Linden had informed him that she intended to release the funds prior to obtaining a second opinion from the Law Society he would have sought a Supreme Court injunction restraining her. 36 On 2 June 1992 the client was made bankrupt on his own petition. The respondent received a dividend of $845 in January 1996. 37 On 18 March 1997 the respondent spoke to Ms Linden who said that she did not want to pay the money out to the client but her problem was that she had been told by the Law Society that she had to pay it out. "I think that I did all that I could". At all relevant times she was aware that the Tyagarah property was part of the property the subject of the Family Court proceedings. The trial Judge found that when the proceeds of sale of the Tyagarah property were disbursed, Ms Linden was aware that "the property had fallen to" the client under the Family Court judgment of 16 November 1990. 38 In the events that had occurred the respondent asserted that he had lost the sum of $27,166, being $28,011 pursuant to the taxation certificates less the bankruptcy dividend. He also asserted consequential loss being interest on his bank overdraft in the sum of $12,304.

Appeal 39 The appellants appealed against Sperling J's decision. Ground 1 was not pressed. The remaining grounds of appeal, 2 - 9, were gathered together in what the appellants' counsel called the central question in the appeal, that is, whether an agent is personally obliged to make payment to a third party creditor of the principal, in circumstances where (a) the third party procured the principal to execute an irrevocable authority to pay him from proceeds of sale to be received in the future and delivered that authority to the agent; but (b) the third party provided no consideration to the agent; (c) the agent made no communication with the third party whatsoever until such time as the principal altered his instructions forbidding the agent to pay the third party; (d) the agent thereupon immediately told the third party of the altered instructions; and (e) when the proceeds of sale were ultimately received, the agent paid them according to the then direction of the principal."

Counsel submitted that the main point in the appeal was the trial Judge's finding that the appellants had become personally liable, notwithstanding that they never positively acknowledged that they would implement the authority and, before the proceeds of the sale arrived in their hands, in their first communication to the respondent, told him that they would not implement the authority. 40 The respondent filed a notice of contention, to the terms of which I will return. 41 Although the claim as pleaded was one in negligence for damages, Sperling J treated it as a money claim or claim for restitution, though the amount awarded seems to have been calculated as compensatory damages. His Honour said that one way in which the claim was put depended upon Article 114(3) in Bowstead & Reynolds on Agency, 16th ed, (1996), which is as follows: "Where an agent is directed or authorised by his principal to pay to a third party money out of a fund existing or accruing in his hands to the use of the principal, and he expressly or impliedly promises such third party to pay him, or to receive or hold such money on his behalf or for his use, he is personally liable to pay such third party, or to receive or hold such money on his behalf or for his use, as the case may be, even if he has had fresh instructions from the principal not to pay such third party." 42 Sperling J applied this statement of the law to find for the respondent. His Honour said that there was no express promise nor even an express acknowledgment of the receipt of the authority. Ms Linden's response to the receipt of the authority was silence. Ms Linden made no response to any of the communications from the respondent of 15 November 1990, 21 December 1990 or 6 February 1991. His Honour said: "78 By 6 February 1991, if not before, the absence of any suggestion by Ms Linden that she did not intend to implement the authority constituted an implied assurance that she did. A solicitor in Mr Orr's position would have construed her silence in that way, as Mr Orr did. A reasonable solicitor in Ms Linden's position would have expected that to be the reaction. There is no suggestion that Ms Linden herself did not expect it to be the reaction. 79 Under the Bowstead principle, once such an assurance was given the defendants were bound by the instrument to account to Mr Orr." 43 The appellants submitted that there can be no attornment by silence. In no case had it ever previously been held that there could; see Palmer Law of Bailment (2nd ed), 1368 (where attornment is said to consist of any overt or positive acknowledgment by a possessor that he now holds goods as bailee for someone other than the party who originally bailed them to him) and Laurie & Morewood v Dudin & Sons [1926] 1 KB 223 at 230-1 and 237-8. 44 At 632 the learned author of the 16th edition of Bowstead & Reynolds accepted that the liability was in restitution and that the only way in which the cases could be justified in the light of modern notions was as "a sort of attornment of money"; see Goff & Jones, Law of Restitution, 5th ed, Ch 28. 45 By the early 17th century such claims were made by actions of debt or account. "Privity" between the parties was not required; see generally Jackson, The History of Quasi Contract in English Law, (1936) at 93 and following. As the action of account was superseded by indebitatus assumpsit, the substantive law remained the same. It is said that Williams v Everett (1811) 14 East 582; 104 ER 725 marked the beginning of the rule that a beneficiary must show some special relationship between himself and the receiver of money; Jackson 97-98. In that case the principal instructed his agents, the defendants, to pay £300 to the third party, the plaintiff, from a bill for some £1126 remitted to the agents. Before the bill arrived, the third party showed the agents a letter of advice from the principal to that effect, and the agents admitted that they had received the instructions to that effect from their principal, but refused to endorse the bill. Lord Ellenborough CJ held that the agents were not liable to the third party. His Lordship said at 597 and 731: "It will be observed that there is no assent on the part of the defendants to hold this money for the purposes mentioned in the letter; but, on the contrary, an express refusal to the creditor to do so. If, in order to constitute a privity between the plaintiff and the defendants as to the subject of this demand, an assent express or implied be necessary, the assent can in this case be only an implied one, and that too implied against the express dissent of the parties to be charged."

Jackson suggests at 99 that the word "privity" in this context means "either a statement by the defendant that he holds for the plaintiff, or else an 'engagement' between defendant and plaintiff, the latter perhaps meaning a contract". 46 In Fleet v Perrins [1868] LR 3 QB 536 at 542 Blackburn J, giving the judgment of the Court, said: "The money did not according to the rule in Williams v Everett become the money of the person on whose behalf it was remitted until the depositee had by some act attorned to that person, up to which time it remained the money of the remittor." 47 On the other hand in Walker v Rostron [1842] 9 M & W 411; 152 ER 174, the plaintiff third party, the defendant agent and his principal agreed that the principal should direct the agent to meet the principal's obligations to the third party as they fell due from the proceeds of sale of goods consigned to the agent. When the principal became bankrupt, and the agent paid the proceeds to the principal's assignees, the agent was held liable to the third party. Lord Abinger CB said at 421-2 and 178: "This is a case of a party engaging himself to appropriate the proceeds of the goods according to certain directions of the owner, and appears to us to fall within that class of case where, when an order has been given to a person who holds goods to appropriate them in a particular manner, and he has engaged to do so, none of the parties are at liberty, without the consent of all, to alter that arrangement." 48 In Griffin v Weatherby [1868] LR 3 QB 753 Blackburn J said at 758-9: "Ever since the case of Walker v Rostron , it has been considered as settled law that where a person transfers to a creditor on account of a debt, whether due or not, a fund actually existing or accruing in the hands of a third person, and notifies the transfer to the holder of the fund, although there is no legal obligation on the holder to pay the amount of the debt to the transferee, yet the holder of the fund may, and if he does promise to pay to the transferee, then that which was merely an equitable right becomes a legal right in the transferee, founded on the promise; and the money becomes a fund received or to be received for and payable to the transferee, and when it has been received an action for money had and received to the transferee lies at his suit against the holder."

This exposition of the rule underlies the passage in Bowstead & Reynolds which Sperling J applied. Notification to the holder of the fund that it has been transferred to a creditor on account of a debt permits but does not oblige the holder to pay the amount of the debt to the transferee, unless the holder, expressly or impliedly, "engages" to do so. But in the present case and with due respect to Sperling J, I do not think such an engagement can be implied from Ms Linden's silence. 49 Ms Linden's silence was equivocal. It was as consistent with her not engaging with the respondent to pay his costs from the fund as it was with her engaging to do so. 50 The respondent sought to support the trial Judge's conclusion by relying on custom. Laurie & Morewood v Dudin & Sons is authority for the proposition that the mere receipt by a warehouseman of a delivery order, if the warehouseman says nothing to the person who sent or brought the delivery order, is not, absent proof of some custom of the trade to the contrary, acknowledgment or acceptance of title and does not prevent the warehouseman denying the title of the person who handed over the delivery order. 51 The respondent submitted that his professional relationship with the appellants was one attended by ethical obligations and rules of professional courtesy. A solicitor in the respondent's position would have construed Ms Linden's silence as an implied assurance that she would implement the authority. If she had no intention to act upon the authority, her silence would have been seen by most lawyers as improper or underhand. Sperling J found that a reasonable solicitor in her position would have expected the respondent to interpret her silence as an implied assurance. However, in my opinion, what was required was an overt or positive acknowledgment. While such an acknowledgment can be implied from acts or words which do not amount to an express promise or engagement, they cannot be implied from silence alone nor do I think they can be implied from general considerations about how an ethical solicitor would ordinarily behave. Whatever the respondent's expectations and however much they may have been justified there was no attornment. Nor was there any evidence of a custom that a solicitor attorned in such circumstances by silence. 52 In my opinion, it was not open to Sperling J to conclude that there was an express or implied attornment whereunder the appellants became bound in accordance with the rule described in Bowstead & Reynolds to pay any part of the fund to the respondent.

Notice of Contention 53 The respondent by leave filed in Court a notice of contention that Sperling J's decision should be affirmed upon the grounds that:

1. the respondent had a particular lien over the proceeds of sale of the client's property;

2. the appellants by their employed solicitor, had notice of the lien;

3. notwithstanding that notice, the appellants paid out the proceeds of sale to the client and were accordingly liable to the respondent; and

4. the irrevocable authority dated 10 October 1990 delivered to the appellants was a good equitable assignment of part of a future chose in action. In the events that happened the appellants were liable to the respondent for paying out the proceeds of sale to the client.

Ground 4 of the Notice of Contention 54 It is convenient to deal first with ground 4. The respondent conceded his claim that the irrevocable authority constituted an assignment of future property must fail unless there was valuable consideration for the alleged assignment. The respondent submitted that the consideration for the irrevocable authority was the respondent's agreement to continue to act for the client. The respondent relied upon the terms of the letter of 9 October 1990 that he wrote to the client. We were referred to the Alliance Bank (Limited) v Broom (1864) 2 Dr & Sm 289; 62 ER 631. In that case a creditor demanded security for money due by a customer on a loan account. At 292 and 632 the Vice-Chancellor [Sir Richard Kindersley] said that when "the Plaintiffs demanded payment of their debt and, in consequence of that application the Defendant agreed to give certain security, although there was no promise on the part of the Plaintiffs to abstain for any certain time from suing for the debt, the effect was, that the Plaintiffs did in effect and the Defendant received, the benefit of some degree of forebearance; not, indeed, for any definite time, but, at all events, some extent of forebearance. If, on the application for security being made, the Defendant had refused to give any security at all the consequence certainly would have been that the creditor would have demanded payment of the debt, and have taken steps to enforce it."

The defendant's demurrer on the ground that the agreement by the customer to give security was without consideration, was overruled. 55 The respondent submitted that, with like inevitability, had the client not given the authority, the respondent would have ceased to act for him. There was no evidence that this was so. The letter of 9 October 1990 does not suggest it. The respondent pointed out that he and counsel had carried the conduct of the case on a speculative basis and "we would be pleased if you would give consideration to payment of our outstanding account from the proceeds of the sale of the Tyagarah farm." The respondent's request to the client was expressed as follows: "If you regard this as reasonable would you please sign the enclosed authority."

This is not the language of a solicitor threatening to withdraw his services unless his outstanding fees are paid or a suitable arrangement is made. In my opinion, the appellants have failed to show that the claimed equitable assignment of future property was supported by consideration. This ground of the notice of contention, accordingly, must fail.

Grounds 1 - 3 of the Notice of Contention 56 The respondent's claim to a particular lien giving rise to a right to have his costs paid out of the proceeds of sale of the properties is distinct in nature from the claim in which he succeeded before Sperling J. In particular, no attornment by the appellants was necessary. The point on which the appellants' defence before Sperling J should have succeeded, namely the want of any attornment, express or implied, was no answer to a claim based on a particular lien. However, so far as appears, the respondent did not assert a lien, as distinct from a lien on the papers, until he began the proceedings in 1997. 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. 57 The particular lien the respondent relied on in grounds 1 - 3 of the notice of contention was described in the judgment of the Full Court in Ex parte Patience; Makinson v The Minister (1940) 40 SR (NSW) 96 given by Jordan CJ, who at 100 said: "A solicitor has no lien for his costs over any property which has not come into his possession. If, however, as the result of legal proceedings in which the solicitor has acted for the client, the client obtains a judgment or award or compromise for the payment of money, although the solicitor acquires no common law title to his client's right to receive the money or to any part of that right, he acquires a right to have his costs paid out of the money, which is analogous to the right which would be created by an equitable assignment of a corresponding part of the money by the client to the solicitor. That is to say, the solicitor has an equitable right to be paid his costs out of the money; and if he gives notice of his right to the person who is liable to pay it, only the solicitor and not the client can give a good discharge to that person for an amount of the money equivalent to the solicitor's costs: Welsh v Hole (1779) 1 Dougl. 238; 99 ER 155. 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 (1795) 6 TR 361: 101 ER 595; Ormerod v Tate (1801) 1 East 464: 102 ER 179; Ross v Buxton [1889] LR 42 ChD 190." 58 At 101 Jordan CJ pointed out that 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. 59 In Ross v Buxton, the defendant to an action paid £50 into court in satisfaction of all damages to which the plaintiff might be entitled. Before trial, by agreement entered into between the defendant and his solicitors on the one hand and the plaintiff without his solicitor on the other, the action was compromised upon terms that the plaintiff should receive the £50 in court in discharge of all claims and that the defendant should do everything necessary to enable the plaintiff to get the £50 out of court. The plaintiff then gave his solicitor notice that he intended to appeal himself in person and such solicitor gave to the defendant's solicitors (but not to the defendant) notice not to pay the plaintiff any money until his (the solicitor's) costs in the action had been paid. 60 At 195 Stirling J said that he thought the £50 was handed to the plaintiff as the result of the action, and constituted the fruits of it. At 198-9 his Lordship said that Welsh v Hole decided two things - 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 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. Stirling J quoted from the judgment of Lord Kenyon in Read v Dupper. "The principle by which this application is to be decided was settled long ago, namely that the parties 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 expense, those fruits are obtained."

Coming to the case in hand Stirling J said at 202: "Then, that being the law, how do the facts stand here? In the first place, is the sum of £50, which is the subject matter of the agreement of 2 November, to be treated as the fruits of the action? It seems to me it must be. It was plainly paid under pressure of the action and in order to settle it. It was a fund which was paid into court, and which in the ordinary course could not have been got out without notice to the Plaintiff's solicitor, had it not been for the notice which was given to the plaintiff appearing in person. Then, secondly, was notice given of the Plaintiff's solicitors' claim for costs? It plainly was given to Messrs Clapham & Fitch. They had distinct notice of it on 9 November, and after they got the fund into their own hands and paid it over to the Plaintiff in disregard of the notice. Accordingly, I think, subject to one further remark, that an order against them ought to go." 61 In Johns v Cassel (1993) FLC 92-364 a plaintiff claimed that the defendant, for whom the plaintiff had acted in Family Court proceedings in which the defendant had obtained an order entitling her to 74 per cent of the proceeds of sale of matrimonial property, owed the plaintiff $57,000 in costs. The plaintiff sought a declaration that he had a lien over the property and over the proceeds of sale. Ms Noe, who appeared for the defendant, submitted that the principles relating to solicitor's liens for costs did not apply where the order obtained was one for the sale of property. The principles did not apply to the recovery of real property but only where what was obtained was in substance an entitlement to money. At 79,818 Hodgson J, as his Honour then was, said: "Dealing briefly with the legal questions raised by Miss Noe, in my view the property over which the lien is now sought is, in substance, a sum of money, and I think it is such that a lien is available. Furthermore, I think the circumstance that the sum will only be realised on completion of a contract of sale does not prevent the jurisdiction of the Court arising."

His Honour referred to H S Bird & Co v The Ship 'Karu' (1927) 27 SR (NSW) 476 and The Paris [1896] P 77. 62 Section 79 of the Family Law Act enables the Family Court to alter the interests of the parties to a marriage in the property of either of them. To do this the court may, as in the present case, make an order for a settlement of property in substitution for any interest in the property. In that sense, the whole of the parties' property is under consideration and the orders the court makes are the fruits of the cause produced by the industry of the solicitor. In the client's case those fruits were partly the proceeds of sale of the Tyagarah property. I respectfully agree with what Hodgson J said. 63 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 The appellants put no argument that notice given after they had transferred the proceeds of sale to the client was too late. The appellants rather relied upon discretionary defences of laches, acquiescence and delay. It was submitted that the respondent's conduct in

(a) voluntarily remitting $32,000 in his hands to the client in December 1990

(b) failing to apply for an injunction (i) quia timet when on 21 February 1991 Ms Linden told the respondent that she would not pay him the moneys he claimed, or when on 11 March 1991 Ms Linden wrote to the respondent confirming what would occur; (ii) after by at latest 25 March 1991 when the respondent knew that the proceeds of sale of the first lot of the Tyagarah property had been distributed to the client; (iii) immediately after 28 March 1991 when completion of the sale of the second lot of the Tyagarah property occurred; and

(c) failing to sue the appellants shortly thereafter, before the subsequent bankruptcy and discharge of the client (it would have been open to the respondent to stand outside the client's bankruptcy and rely on his alleged equitable rights in the proceeds of sale)

plainly resulted in real prejudice to the appellants. 65 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. 66 Reference was made also to the joint judgment of Blackburn CJ, Connor and Davies JJ in Re a Barrister and Solicitor (1979) 40 FLR 26 at 39-40. Their Honours observed that the particular lien is one of which it may be said that it may be "actively enforced". "The meaning of the rule that it may be 'actively enforced' is that the solicitor may apply to the court to order a charge over the property; but unless that order is made the solicitor has no right to the property." These remarks were obiter. Their Honours observed that the particular lien was not in question in the case before them. That view, with due respect, seems contrary to what was said by Jordan CJ in Ex parte Patience at 101 affirmed by the Full Federal Court in Worrell v Power & Power at 224. However that may be, the appellants claim that the respondent's entitlement to enforce the lien is defeated by laches. The appellants submit that both conditions of that defence are satisfied. There was unreasonable delay on the respondent's part in the commencement and prosecution of proceedings and in view of the nature and consequences of that delay it must be unjust in all the circumstances to grant the relief sought; see generally, Spry, Equitable Remedies, 5th ed at 431. 67 Sperling J made no findings on this defence. The conclusion he reached did not require him to do so. The delay in beginning the proceedings from March 1991 until March 1997 is unexplained. The respondent said that in April 1992 he obtained a certificate of taxation in the Family Court proceedings trial and that after the client was made bankrupt on his own petition in 1992 the respondent filed a proof of debt in August 1995 for which he received the dividend already referred to in January 1996. At one point during his cross-examination the respondent said that he resiled himself to the remaining remedies that were available and that he was chasing the client for his money. His action in 1997 was stimulated by reading the judgment of the Full Family Court delivered on 1 November 1996 in Twigg v Keady (1996) FLC 92-712 where it was held that solicitors had an equitable rights in the moneys received as a result of their work without any specific order being made by the court to protect that right and that the right so obtained prevailed over the interest of a later assignee of the fund except where the assignee was a bona fide purchaser for value and without notice. 68 In their written submissions at trial the appellants asserted that no complaint had been made about Ms Linden's release of the moneys to the client until 18 March 1997, the day before the proceedings were begun. During the interval the appellants alleged the respondent did not reaffirm to the client his reliance upon the authority but asserted, in its stead, a lien over papers held. The appellants submitted that the respondent's failure in March 1991 to take steps to protect his claimed right and the continued failure to act in any way constituted acquiescence. The respondent's ignorance of his right to claim an equitable interest was no answer. Generally when the facts are known from which a right arises, the right is presumed to be known. The respondent knew the work he performed, the issues in the family law case and the contents of the judgment. The appellants submitted that the respondent could not now be heard to say that he did not claim his equitable interest in 1991 because he did not know such a right to exist. 69 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 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. 70 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.

Conclusion 71 I would propose the following orders: 1. Appeal allowed with costs; 2. Set aside the orders made by Sperling J on 15 July 1999; 3. In lieu thereof judgment for the first and second defendants in the proceedings below with costs. 72 POWELL JA: I have read in draft the Judgment which has been prepared by Sheller JA. Save that it is my view that, in the circumstances of this case, the Respondent was not entitled to a lien upon the proceeds of sale of the Tyagarah property, I agree with the orders which his Honour proposes and with his reasons for so doing. 73 The bases for my view that, in the circumstances, the Respondent was not entitled to a lien upon the proceeds of sale of the Tyagarah property are two, they being:

1. the nature of the facts which must be shown to exist before a solicitor is entitled to claim such a lien; and

2. the property rights of the client and his former wife and the claims which were made by them in the proceedings in the Family Court of Australia. 74 As put in Cordery on Solicitors (8 Ed. 250): "A solicitor has at common law a 'lien' over property recovered or preserved or the proceeds of any judgment obtained by his work on his client's behalf for the costs incurred thereby which have been authorised by his retainer."

This being so, the question which arises is whether, in the circumstances of the case, it can be said that the Tyagarah property - and, by substitution, the proceeds of sale of that property - was either "recovered" or "preserved" by the exertions of the Respondent. 75 In the Judgment which he delivered on 16 November 1990, Moss J recorded the following as to the real estate of which the client and his former wife were registered as proprietors or in which they or either of them had an interest (Blue AB 125):

Valuation Comment registered in 1 Longueville $900,000 Respondent's name and unencumbered $685,000) both registered in 2 Linley Point ) Applicant's name and ) subject to mortgage of $312,500) $1.138 million 3 Trouve Street ) (approx.) as at 31 ) July 1990

4 Farm $364,916 anticipated net pro- ceeds of sale."

Although registered in the client's former wife's name, the Longueville property - which was the former matrimonial home - had been acquired with moneys provided by the client (Blue AB 108), the Trouve Street property - which was an investment property - had been acquired with moneys provided by the client; the Linley Point property was a property acquired by the client after he and his former wife had separated, the whole of the purchase price ($755,000.00) together with the requisite amount of stamp duty (in excess of $30,000.00) being raised by loans - totalling in excess of $800,000.00 - from the Perpetual Trustee Company Limited and the Commonwealth Bank, those loans being secured on the Linley Point property itself and by way of collateral mortgage over the Trouve Street property which, prior to the acquisition of the Linley Point property had been unencumbered (see Blue AB 113-114). 76 Moss J then turned to record the other assets of the client and his former wife as follows (Blue AB 125): "As to other relevant assets, it was common ground that these should go to the party in whose possession or power they are in the moment. I do not think there is any need for me to list each of these matters. Suffice it to say that the more valuable items include shares held by the Respondent with a value of some $56,000 and an interest in a yacht by the latter valued at approximately $6,000 and an interest in a yacht by the Applicant valued at $27,000. The Respondent also has a quantity of jewellery some of which came to her from the Applicant's late mother. Most of these items seem to have an agreed value and I think it is open upon the whole of the evidence about such valuation of these items to conclude that the total value of such items going to the Respondent exceeds by some $50,000 the total value of the items going to the Applicant."

77 The claims which were made by the client and by his former wife in respect of the real estate, and the general approach which he adopted in relation to those claims were recorded by Moss J in his Judgment as follows (Blue AB 126-128): "As has been mentioned, the competing submissions were, on the one hand, that the whole of the equity in the various pieces of real estate set out above should be apportioned equally after bringing into account the whole of the indebtedness including the indebtedness arising from the purchase of the Linley Point property; on the other hand, the submission was that the Respondent should keep the former matrimonial home and that the remainder of the real estate should go to the Applicant, the latter being liable for the whole of the indebtedness arising from the purchase of Linley Point. As I have said, so far as relevant personalty is concerned, there is a common approach that that should remain with the party in whose possession each particular item presently is, subject to an appropriate adjustment to reflect the fact that the personalty in the Respondent's possession out-values the personalty in the Applicant's possession by a sum in excess of $50,000. In my opinion, neither of the submissions as to the real estate should be acceded to because to do so in either case, would bring about a result which would not be a just and equitable one. I reject the Applicant's submission, because to accede to that would burden the Respondent with a portion of the liability arising from the Linley Point purchase whereas, in my opinion, there is no ground at all for burdening her with any such liability. She played no part in the creation of that liability and had no legal or equitable interest in the Linley Point property at any time. But to accede to the Respondent's submission would result in the Applicant receiving less than a just and equitable apportionment of relevant property. In other words while I think it only fair that the Applicant bears the responsibility of the indebtedness which he alone created, after separation, and in respect of the purchase that he alone stood to make any gain had things turned out as he hoped, that does not mean that it is proper to treat the Linley Point property as a relevant asset when it is clear that in any practical sense it does not represent an asset at all because the Applicant has no equity in it. In my opinion the only practical way to view the Linley Point purchase transaction is that it currently represents a net liability well in excess of the agreed market value. In order to reach a just and equitable result I think the Linley Point transaction, in toto, should be removed from the relevant equation and that the remaining relevant real estate should be apportioned having regard to the whole of the evidence but excluding entirely the Linley Point purchase and its consequences. Taking into account the valuations of the former matrimonial home, Trouve Street and the Applicant's share in the farm proceeds of sale, as I have found that to be, the total is $1,577,416. If that total value were to be apportioned equally the result would be in practical terms an award of $788,708 to each party."

78 Then, after referring to a number of other matters which he considered relevant, Moss J recorded his conclusion as to the proper manner of resolving the competing claims of the client and his former wife as follows (Blue AB 129): "In my opinion, on the whole of the evidence, including in particular the very significant pre-separation contributions of each party and the relevant post-separation events as well as the difference in earning capacity of the parties (the Respondent's present earning capacity appears to be about 61% of the Applicant's), and not forgetting the imbalance in favour of the Respondent in respect of the relevant personalty, I think a just and equitable result will follow if the Respondent takes the former matrimonial home, subject to a payment of $64,000 to the Applicant and the Applicant is apportioned the Trouve Street property and the anticipated $364,916 from the farm proceeds of sale. This will mean in approximate terms that the Respondent takes approximately 53 per cent of the relevant total value of real estate ($1,577,416) and the applicant approximately 47 per cent thereof."

79 As is made apparent by that part of Moss J's Judgment in which he recorded the competing submissions of the client and his former wife, although the client sought to have brought to account for the purposes of apportionment his former wife's interest in the former matrimonial home, the client's wife made no claim to have the client's interests in the Linley Point and Trouve Street properties or his interest in the farm brought to account and apportioned in her favour - her only claim was a claim to retain the former matrimonial home and the various items of personal property to which Moss J had earlier made reference in his Judgment. This being so, it seems to me that it cannot be said that the client's interest in the Tyagarah property was property which had been recovered or preserved by the efforts of the Respondent, and still less that the proceeds of sale of that property had been obtained by the Respondent's efforts on the client's behalf. If anything could be said to have been recovered or preserved or obtained by the Respondent's efforts on the client's behalf, it would have been the sum of $64,000.00 which the client's former wife was ordered to pay to the client, the payment of which sum was as the result of Moss J's order charged upon the former matrimonial home, but this sum, when received, was, by agreement between the client and the Respondent, apportioned equally between them. 80 As I have previously recorded, I agree with the orders proposed by Sheller JA for the disposition of this appeal.

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