Bankruptcy - whether solicitor may apply monies received on account of client from another party in an action in payment of bill of costs rendered to the client in connection with that action, when client subsequently becomes bankrupt and the monies have been applied during relation back period - whether good against the trustee in bankruptcy.

Solicitors - equitable right of solicitor to be paid costs out of judgment recovered by client in proceeding in which solicitor has acted for client - nature and characteristics of solicitor's equitable right - whether a purely personal right to seek a charging order - whether right arises before taxation - "self help" by appropriation of funds in hands of solicitor - effect of supervening bankruptcy of client.

Bankruptcy Act 1966, s. 122

Ex parte Patience; Makinson v The Minister [1940] NSWStRp 11; (1940) 40 SR(NSW) 96

Barker v St Quintin [1844] EngR 134; (1844) 12 M. and W. 441; 152 ER 1270

(1) The appeal be dismissed.

(2) The appellant pay the costs of the respondent.

Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules.

WILCOX, RYAN, GUMMOW JJ This appeal goes to the right of a solicitor, as against the trustee in bankruptcy of a client, to apply moneys received on account of the client from another party in an action in payment of a bill of costs rendered to the client in connection with the same action. The essential facts are not in dispute.

2. On 15 March 1991, the respondent firm of solicitors ("the solicitors") was retained by Mr Wedgwood to act for him as defendant in plaint No. 577 of 1991 issued out of the Queensland District Court by T.R. Services Pty Limited. At various times between 30 April and 29 August 1991, the solicitors rendered to Mr Wedgwood bills of their costs and disbursements incurred in the course of so acting for him. They received two payments on account of those costs so that, as at 17 February 1992, Mr Wedgwood's debit balance in the solicitors' general account was $2,779.75. On 28 May 1991, on an application for summary judgment in the District Court, various orders were made. They gave to Mr Wedgwood leave to defend, gave the plaintiff, T.R. Services Pty Limited, leave to amend its statement of claim, and required the plaintiff to pay Mr Wedgwood's costs thrown away by the amendment of the statement of claim and his costs of and incidental to the application for summary judgment, such costs to be taxed.

3. On 14 November 1991, the solicitors wrote to Mr Wedgwood stating that the plaintiff had offered to pay the sum of $1,800 in satisfaction of the order for costs to which we have just referred. The solicitors recommended acceptance of that offer. It seems that, at some time before 19 December 1991, Mr Wedgwood instructed his solicitors to accept the offer. Accordingly, on 17 February 1992, the solicitors received a cheque for $1,800 from the plaintiffs in the District Court action, and on the same day credited the proceeds of the cheque to their trust account. Then on 24 February 1992, the sum of $1,800 was transferred from the solicitors' trust account to their general account in part satisfaction of Mr Wedgwood's liability to them for the costs to date of defending the District Court action. This transfer reduced the outstanding balance to $979.75.

4. The primary Judge said that the written authorisation of the client, Mr Wedgwood, may have been necessary for the solicitors to take the moneys out of the trust account and referred to para. 8 (1) (c) of the Trust Accounts Act 1973 (Qld). Nothing turns on this point for the present appeal. Counsel for the appellant expressly conceded that the transfer did not transgress s. 8.

5. In the meantime, on 3 February 1992, Mr Wedgwood had committed an act of bankruptcy by failing to comply with a bankruptcy notice issued at the instance of Bank of New Zealand. The bank presented a creditor's petition against Mr Wedgwood on 24 February 1992 and on 24 March 1992 a sequestration order was made against his estate. The bankruptcy was deemed to have relation back to, and to have commenced on, 3 February 1992, this being the date of the earliest act of bankruptcy within 6 months before the presentation of the petition (s. 115 of the Bankruptcy Act 1966 ("the Bankruptcy Act")). The application of the sum of $1,800 on 24 February 1992 occurred on the same day as the presentation of the petition.

6. The appellant, the trustee of the estate of Mr Wedgwood, sought to recoup from the solicitors the $1,800 as a preferential payment by the bankrupt. On 4 February 1993, the solicitors stated that they did not intend complying with that request, and on 10 February the appellant wrote to the Official Receiver requesting that in accordance with the provisions of s. 139ZQ of the Bankruptcy Act "you act on my behalf as Registered Trustee" to recover the payment in question. On 23 March 1993, the Official Receiver issued a notice under s. 139ZQ addressed to the solicitors. The notice detailed the facts and circumstances upon which the Official Receiver relied for the conclusion that, as against the appellant, the transaction was void pursuant to either or both ss. 115 and 122 of the Bankruptcy Act.

7. The solicitors then moved this Court under s. 139ZS of the Bankruptcy Act to set aside the notice. The appellant was respondent to the application. There was a dispute as to the propriety of that joinder. The trustee submitted, and renewed that submission on the appeal, that he was not a proper respondent to the application. The primary Judge dealt with the point as follows:

"Section 139ZS of the Act gives to the applicant

a right to come to this court to set aside the

notice. Where the notice is procured at the

initiative of the trustee (s. 139ZQ (1) (b)) and

the trustee is the person to receive the value

of the property (s. 139ZQ (1) and (7)) and the

person entitled to sue for the recovery of it as

a debt (s. 139ZQ (8)), the trustee, is in my

view the proper respondent who, being the

beneficiary of the notice, has the necessary

interest to appear and argue in support of the

validity of the notice. That is what occurred

in the instant case."

8. In our view, this approach to the question by the primary Judge was plainly correct.

9. On the substantive issue, the primary Judge ordered that the notice be set aside. His Honour rejected the submission that it was only on or after 17 February 1992, the date of the receipt by the solicitors of the cheque for $1,800, being a date within the relation back period, that the solicitors first obtained any specific rights of a proprietary nature in relation to the costs order. The reasoning of the primary Judge appears in the following passage, from which citations of authority have been omitted:

"The (solicitors were), in my opinion, entitled to a

'particular lien' in respect of (their) costs in the

District Court proceedings. Upon the making of the order

for costs on 28 May 1991, (the solicitors), because the

order for costs had come about due to (their) exertions, had

a right to apply to the court to have the order for costs

held as security for (their) debt, the order for costs

itself being the relevant property . . . The applicant's

right arose outside the relation back period and continued

to be available to be actively enforced by either

application to the court, or, self help if the judgment was

reduced into money which came into the possession of (the

solicitors). . . . When the monies came into the hands of

the solicitors even though this occurred in the relation

back period, (the solicitors) had 'a common law lien' or

'particular lien' over the fund and (were) entitled to

enforce (their) lien by applying the monies in hand to the

outstanding balance of costs and fees owing in respect of

the suit in which the cost order was obtained. . . . No

new particular lien was created when the funds were

received. Rather, the existing particular lien operated in

relation to those funds. . . . The enforcement of the

lien against the funds received in satisfaction of the order

is not void under s. 122 of the Act or at all against the

trustee of the bankrupt's estate."

10. Upon the appeal, counsel for the appellant, the trustee, did not dispute that, under the general law, if the money in respect of which a solicitor claims a lien for costs is already in the hands of the solicitor, he may retain out of it the amount of the costs and pay over the balance to the client, or, as in this case where the costs exceed the amount in hand, apply it towards those costs. A proposition to that effect is stated in Halsbury's "Laws of England", 4th Edition, Vol. 44, p 181. That the law authorises "self help" of this description has been settled since Welsh v Hole (1779) 1 Dougl 238, 99 ER 155. There, Lord Mansfield CJ said:

"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."

See also Mercer v Graves (1872) LR 7 QB 498 at 504, In re Meter Cabs Limited (1911) 2Ch 557 at 562.

11. However, counsel for the appellant placed emphasis upon the fact that the money was received by the solicitors, and transferred to their general account in reduction of Mr Wedgwood's liability for costs, during the relation back period. Counsel said that, at that time, there was a relationship between the solicitors and Mr Wedgwood of creditor and debtor and that the transfer amounted to a payment constituting a preference.

12. Counsel for the respondent solicitors accepted that there was a relationship between their client and Mr Wedgwood of creditor and debtor but they said that the transfer did not amount to a "payment", within the meaning of s. 122 of the Bankruptcy Act, because it merely gave effect to a previously existing right.

13. Counsel for the appellant disputed this analysis. They said that the solicitors acquired no interest in, or lien over, the money payable by T.R. Services to Mr Wedgwood pursuant to the costs order until that money was actually paid, after the commencement of the bankruptcy. Counsel submitted that, at best, what the solicitors had previously enjoyed was but a personal right, being "merely a claim to the equitable interference of the Court to have that judgment (for costs) held as security for (their) debt". It was said that the previous right of the solicitors had been, at best, no more than a "mere" or personal equity to seek a charging order.

14. The passage in quotation above, upon which counsel for the appellant relied, is from the judgment of Parke B. in Barker v St. Quintin [1844] EngR 134; (1844) 12 M and W 441 at 451[1844] EngR 134; , 152 ER 1270 at 1274. As Jordan CJ pointed out in Ex parte Patience; Makinson v The Minister [1940] NSWStRp 11; (1940) 40 SR(NSW) 96 at 100-101, the remark of Parke B was reproduced in Chitty's Archbold on Practice, and then repeated in many later authorities.

15. Thus, counsel for the appellant relied particularly upon the following passage in the judgment of Cockburn CJ in Mercer v Graves supra at 503. His Lordship there said:

"The matter is thoroughly well explained in

Chit Archb Practice, pp 139, 140 (12th ed.),

that although we talk of an attorney having a

lien upon a judgment, it is in fact only a claim

or right to ask for the intervention of the

Court for his protection, when, having obtained

judgment for his client, he finds there is a

probability of the client depriving him of his costs."

That passage, and the earlier remarks of Parke B. have been repeated in numerous authorities over the last century. They include Rutherford v Powell [1878] VicLawRp 158; (1878) 4 VLR (L) 384 at 387, Mills v The Crown (1907) 9 WAR (L) 167 at 169, In re Suttor (1890) 9 NSWR (L) 401 at 405, Sewell v Hampel (1910) 13 WAR (L) 44 at 46, Puddephatt v Leith (No. 2) (1916) 2 Ch 168 at 176-177, Mason v Mason (1933) p 199 at 205, 214, James Bibby Limited v Woods (1949) 2 All ER 1 at 3-4, In the Estate of Fuld (Decd) (No. 4) (1968) p 727 at 735-736, Halvanon Insurance Co. Limited v Central Reinsurance Corporation (1988) 1 WLR 1122 at 1129, and Fairfold Properties Limited v Exmouth Docks Co. Limited (No. 2) (1993) 2 WLR 241 at 245.

16. In Sykes and Walker "The Law of Securities", 5th Ed., 1993, at pp 746-748, the learned authors discuss the possessory lien which entitles a solicitor to retain certain documents and other property of the client in respect of professional charges due to the solicitor. Later (at 751-752) they go on to deal with what they describe as the "non-possessory lien of a solicitor over the fruits of a judgment". Reference is given to many of the above authorities, but not to Ex parte Patience; Makinson v The Minister supra. With a citation of Mercer v Graves, the learned authors say:

"It has been said that this 'so-called' lien is

really only a right to ask for the intervention

of the court to protect the solicitor when he or

she finds that there is a probability of the

client depriving him or her of costs and that it

is a right only to ask the court for a charging

order. It seems true that the solicitor can

enforce the lien only by taking some court

action to prevent the fund or specific property

recovered from being paid or transferred to the client."

17. It is appropriate to consider what was decided in the judgments in Barker v St Quintin, and Mercer v Graves in which Parke B. and Cockburn CJ made what have been such influential statements. It will be seen that those decisions turned very much upon procedural considerations which are now matters of legal history, although they would have been well-known and of daily importance in the last century.

18. Barker v St. Quintin was a demurrer heard by the Court of Exchequer. The plaintiff had brought an action in trespass for false imprisonment. The defendant, as sheriff, had arrested the plaintiff under a writ of capias ad satisfaciendum, this being a writ for the arrest of a judgment debtor in a civil action whereby the debtor was deprived of liberty until the judgment was satisfied. The writ had been sued out by one Finn on a judgment which he had recovered against the plaintiff in the Court of Queen's Bench. Finn's attorney was one Thompson. In the proceeding in the Court of Exchequer it was alleged that whilst Thompson's fees owed by Finn in respect of the action in the Queen's Bench were unpaid, the plaintiff and Finn agreed, for the purpose of defrauding Thompson of his lien, that Finn should execute a release of the judgment; however, at the request of Thompson, the sheriff, with notice of what had happened, executed the writ.

19. It was held on the demurrer that the attorney Thompson had no authority over the execution of the writ so as to carry it into effect, even though there had been collusion to deprive him of his lien; accordingly, the sheriff had become a trespasser. Lord Abinger CB said [1844] EngR 134; (12 M. and W. 441 at 450, 451; [1844] EngR 134; 152 ER 1270 at 1274):

"The universal practice . . . has been to treat

the sheriff, in this respect, as the mere agent

of the plaintiff. . . . (T)he sheriff had no

right to detain a defendant after notice from

the plaintiff that the defendant was released.

There might be circumstances to entitle the

attorney to come before the Court, and ask it,

in the exercise of its equitable jurisdiction,

to give him relief; but there is nothing here

which shews that the defendant ought to be

detained in custody."

The Court of Exchequer had had an equitable jurisdiction: The Attorney-General v Halling [1846] EngR 829; (1846) 15 M and W 687, 153 ER 1027. The full passage in which the later quoted remarks of Parke B. were made is as follows (12 M. and W. at 451, 152 ER at 1274):

"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 the judgment

held as a security for his debt. The doctrine

of an attorney's lien on a judgment was first

established in the case of Welsh v Hole, where

it was held that an attorney has a lien on money

of his client in his hands, and that he may

retain the amount of his bill; and that if the

plaintiff gave notice to the defendant not to

pay the money to the attorney, the Court would

probably assist him by compelling the defendant

to pay the money over again. But the attorney

is not the dominus litis, so as to marshall the

proceedings on the judgment or the execution as

he may think fit. The rejoinder amounts to

this: that after judgment the attorney has an

authority over the execution, and has a right to

carry it into effect against the order of the

plaintiff, because the plaintiff and defendant

have colluded together to defeat the lien which

he has in respect of his costs. It is perfectly

clear that he has no such right. If he is to

obtain in any way the fruits of that judgment,

it must be by an application to the equitable

jurisdiction of the Court."

20. It is therefore apparent that Barker v St. Quintin was concerned with matters of procedure for the enforcement of judgments at common law; the court was not concerned further to explain what was involved in the phrase "the equitable interference of the Court". Whatever the nature or the limits of that interference, the equitable jurisdiction had not been invoked.

21. Mercer v Graves was concerned with the application of the Statutes of Set-Off where, on a liquidated claim by A against B, B sought to set off a sum recovered for costs in action in another court against A. The set-off was claimed in an action brought in the Court of Queen's Bench before the commencement of the Judicature system. At the relevant time, in common law actions certain equitable defences and replications were permitted by the Common Law Procedure Act 1854 (UK) (17 and 18 Vict. c. 125); see Mines Royal Societies v Magnay [1854] EngR 931; (1854) 10 Ex. 489, 156 ER 531, The Commonwealth of Australia v A.E. Goodwin Limited (1961) 78 WN (NSW) 1166, and K.S. Jacobs "Law and Equity in New South Wales After the Supreme Court Procedure Act 1957, s. 5", [1959] SydLawRw 8; (1959-61) 3 Syd L Rev 83 at 86-87.

22. In Mercer v Graves supra, to the plea by B of set-off under the Statutes, A pleaded a replication on equitable grounds. This was that B should not be allowed the set-off in respect of the costs in the earlier proceeding because his attorney had a lien upon the orders and sums payable thereunder such that A never had any beneficial interest in the sums in question and was a trustee for his attorney. Therefore, it was alleged that on equitable grounds the set-off claimed by B ought not to be allowed because to do so would be to prejudice the lien of the attorney.

23. In his work "Set-Off", 1987, pp 141-142, Mr Derham cites Mercer v Graves in support of a proposition that whilst the Statutes of Set-Off were confined in their operation to cross-debts at law between the parties to an action at law, the equitable title to one of the demands might be raised in order to prevent a set-off from proceeding under the statutes, even though the demands were mutual at law. The learned author goes on to say that it would be dangerous to accept this as a universal principle. He also refers to In re Whitehouse and Co. (1878) 9 Ch D 595 at 597, where Sir George Jessel MR said:

"First of all, it must be remembered that at common

law there was originally no right of set-off

at all, and it was not till the statutes of

set-off beginning in the reign of George II that

there was any such right established; and when

we look at the terms of those Acts of Parliament

- there were two of them - it is plain they only

applied to what was then an action at common law

- and so it has been held - and that they only

applied to the case of mutual debts, whatever

they might be.

. . . (B)ut the Court of Equity, following the

spirit of the statutes, would not allow a man to

set-off, even at law, where there was an equity

to prevent his doing so; that is to say, where

the rights, although legally mutual, were not

equitably mutual. . . .

(I)nasmuch as the Bankruptcy Acts enabled the

assignee, who is now called a trustee, to sue in

his own name - for he took under a legal

assignment - of course, if he sued a Defendant,

there was no debt due from him to the Defendant,

although there might be a debt due from the

bankrupt to the Defendant, and consequently, in

terms, this form of set-off would not apply. It

was to avoid that injustice that in the

Bankruptcy Acts clauses of set-off were

inserted, and which clauses are in fact rather

wider than the Statutes of Set-Off."

24. It is against this background that the decision in Mercer v Graves is to be understood. The court held that despite the plaintiff's replication on equitable grounds, there should be judgment for the defendant on his plea of set-off. Lush J (at 506-507) said:

"(This) is simply a case in which the defendant

pleads to an action on a judgment a set-off of a

cross judgment, which by the Statute of Set-off

he is absolutely entitled to do, and this Court

has no discretion in the matter. The plaintiff,

however, by his replication, says it is

inequitable to allow the defendant to plead this

set-off, because the debt which he sues for is

really due to his attorney, being a debt for

costs for which the attorney has a lien. The

plaintiff says, in effect, a Court of equity

would interfere and restrain the defendant from

pleading that plea. We have no authority as a

Court of law to interfere, and the question is

whether there is any authority in a court of

equity to interfere in such a case; and no

precedent has been produced in support of the

proposition, that an attorney could maintain a

bill in equity in such a case against a judgment

debtor, to restrain him from exercising his own

legal rights under the Statute of Set-off. Such

a proposition cannot be supported."

25. Likewise, Quain J (at 508) held that there being no trust created, there was nothing in the replication that could set aside the legal right of set-off conferred by statute. Blackburn J (at 504-505) said that the protection afforded to the attorney stopped very far short of putting him in the position of a beneficiary of his client, and that when the client had the right to plead a set-off by statute, he knew of nothing which enabled the attorney to say that this should not be done. The Lord Chief Justice (at 503) before making the remarks so often later repeated, made the points (i) that if the present were a case of an execution and the equitable jurisdiction of the court were invoked to allow one judgment to be set off against the other, there was no doubt that the court would protect the interest of the attorney, and (ii) the attorney's lien was not such as to enable him to compel the client to bring an action on his behalf, as his trustee.

26. Whilst Mercer v Graves rejects the proposition that there was an equity to prevent the client pleading the statutory right to set-off because the client was the trustee for the attorney of the judgment for costs, it does not offer any further analysis of the nature of the equitable rights of the solicitor. It is, in our view, certainly not authority for the wide proposition that the solicitor has no more than a personal or mere equity arising from the recovery of the judgment for costs.

27. Some further analysis was, however, suggested by Page-Wood V-C in Sympson v Prothero (1857) 26 L J Ch 671 at 672 and by Farwell J in In re Born (1900) 2Ch 433 at 435. The second decision recently was followed by Ryan J in Re Statewide Computer Services Pty Limited (in liq.) (1992) 2 Qd R 647 at 649. In Sympson v Prothero, the Vice-Chancellor said:

"The principle upon which, I apprehend, the

Court should proceed in these transactions is to

consider how the fund has been obtained; and if

you find that it has been recovered by the

exertions of the party claiming the lien, it is

but right that he should have his reward out of

the fruits of his exertions."

In In re Born it was decided that the solicitor's lien survived the intervening winding-up of the corporate client. Farwell J said (at 435):

"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."

It is apparent from the context that his Lordship was using the term "common law" in opposition to rights created by statute. In Guy v Churchill (1887) 35 Ch D 489, an order for payment of a specified sum to the client was made after a receiving order had been made against the client, but the Court of Appeal held that the official receiver could not get the benefit of the exertions of the solicitor by which the sum had been recovered without bearing the costs of the solicitor in that recovery. This and other authorities to like effect were followed by Neville J in North West Construction Co. Pty Ltd (In Liquidation) v Marian (1965) WAR 205 at 210-212.

28. An equity of a similar description was identified by Dixon J in In re Universal Distributing Company Limited (In Liquidation) [1933] HCA 2; (1933) 48 CLR 171 at 174, namely that where a party has by his efforts brought into court a fund in the administration of which various parties are interested, the costs and expenses of that party should be a first claim upon the fund. Shirlaw v Taylor [1991] FCA 415; (1991) 31 FCR 222, an appeal from the Australian Capital Territory, decided that a provisional liquidator appointed by the Supreme Court had an equitable lien for expenses and remuneration over the assets under his administration, and that the lien survives the termination of the appointment. Other illustrations of equitable liens, the existence of which is supported by like reasoning, are given in Shirlaw v Taylor supra at 228-231. They include cases where a claim to contribution by one co-owner from the other to recoup expenditure which benefits their joint property is supported by an equitable lien or charge upon the undivided share of the other co-owner.

29. Later authority indicates that the equitable rights under the solicitor's lien arise before there is a fund in court, and indeed, before the judgment for costs has been quantified by taxation.

30. The matter of the jurisdictional basis and incidents and characteristics of the solicitor's lien for costs was considered by the New South Wales Full Court (Jordan CJ, Davidson, Halse Rogers JJ) in Ex parte Patience; Makinson v The Minister [1940] NSWStRp 11; (1940) 40 SR(NSW) 96. In 1931, certain land belonging to one Foster had been resumed pursuant to the Public Works Act 1912 (NSW). At the date of the resumption, the land was subject to a first and a second mortgage. Foster died later in 1931 and in 1937 an action was commenced by his executor to recover compensation in respect of the resumption. The Land and Valuation Court found that the compensation payable in respect of the land was 250.0.0 pounds. That finding was deemed by statute to be the verdict in the action. Judgment had not been signed for the amount of the verdict because the defendant had intimated a willingness to pay the amount, subject to evidence of title and releases. The solicitor for the plaintiff claimed an entitlement to receive 644.O.6 pounds as the plaintiff's costs of the action upon a solicitor and client basis. The matter proceeded on the footing that it might be assumed that upon such a taxation a sum approximating to this would be allowed. The solicitor sought a charging order for his costs and the motion was referred to the Full Court.

31. The Full Court held that the solicitor had an equitable right to receive his costs, when taxed, out of the 250.0.0 pounds recovered in the action and that in the exercise of its inherent jurisdiction the court should preserve this right for the solicitor by an appropriate order against the plaintiff and the mortgagees. This was so, even though, as a matter of procedure, no order might be made directly binding the Crown as the resuming authority.

32. Jordan CJ (at 100) explained the nature of the solicitor's lien as follows, omitting citations of authority:

"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.

. . . 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. . . . Further, if

the client and a judgment debtor made 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."

(Emphasis supplied)

33. His Honour went on to point out that these "special rights" have no resemblance to a solicitor's general possessory lien, although they are sometimes miscalled liens. He also referred to the passage, discussed earlier in these reasons, from the judgment of Parke B. in Barker v St. Quintin supra to the effect that the lien is "merely a claim to the equitable interference of the Court" to have the judgment held as security for the debt. Jordan CJ then stated, however, that in practice the solicitor has always been treated as "possessing equitable rights in the judgment" independently of any declaration thereof and that the assistance of the court is invoked "not to create the rights but to enforce them". The Chief Justice also referred to Briscoe v Briscoe (1892) 3 Ch 543 as an example showing that the rights in question were assignable by the solicitor by way of mortgage to secure an advance to the solicitor.

34. Jordan CJ also (at 102) pointed out that where a solicitor had acquired a right to receive his costs out of moneys which had become payable to his client as the result of legal proceedings in which the solicitor had acted, he could enforce his right by applying to the court for a rule directing the judgment debtor to pay the solicitor the amount of his costs when ascertained by taxation and, in the meantime, restraining the judgment debtor from paying and the client from receiving the money without first accounting to the solicitor for the costs. When dealing with the position of the Crown (at 103) Jordan CJ said:

"I see no reason to doubt that the fact that the

present applicant was instrumental in obtaining

for his client the verdict which has been given

against the Crown has vested in the applicant,

as between himself and his client, a right to

have his costs paid out of the moneys recovered

under the verdict. I am of opinion, also, that

if the Crown has been notified of the

applicant's claim to the moneys, the Crown is

affected by the notice at least to the same

extent as it would be affected by notice of an

equitable assignment; and it will disregard the

applicant's rights at its peril."

35. With respect to what has been said upon the subject in other decisions, Ex parte Patience; Makinson v The Minister contains a reasoned and thorough exposition of the nature and characteristics of the equitable rights which supports the operation of a solicitor's lien in a case such as the present. It is a decision of a strong Australian intermediate court of appeal, and one which we should follow. It 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".

36. In the present case, it follows that the primary Judge correctly concluded that upon the making of the order for costs on 28 May 1991, the solicitors, because the order had come about by reason of their exertions, had equitable rights in the order, which arose forthwith and therefore before the commencement of the relation back period. In particular, although the solicitors acquired no legal title to the right of Mr Wedgwood to receive the costs, they acquired a right which was analogous to that which would be created by a present equitable assignment of the benefit of the costs order; that brought with it a right to have their costs paid out of the moneys which were subsequently received in February 1992. This was during the relation back period but, as the primary Judge pointed out, when the moneys came into the hands of the solicitors they were by virtue of their pre-existing equitable rights entitled to enforce the lien by applying the moneys in hand to the outstanding balance of costs in respect of the proceeding in which the order had been obtained.