John Byrnes & Associates (Legal) Pty Limited v Quinn

Facts

1. Initially, the law firm acted for Mr Quinn in proceedings in the Consumer, Trader and Tenancy Tribunal from 2010, then an appeal to the Housing Appeals Committee, then further proceedings before the NSW Civil and Administrative Tribunal until 2014. The dispute concerned a notice of termination issued by NSW Housing in respect of Mr Quinn's occupation of premises in The Rocks, Sydney. The law firm's fees in respect of these proceedings were paid by 22 July 2014.
2. On 8 August 2014, Mr Quinn instructed the law firm to commence proceedings in the District Court of New South Wales. On 19 September 2014, Mr Byrnes provided a costs agreement to Mr Quinn. The costs agreement in evidence is unsigned. Mr Quinn denied agreeing to retain the law firm on the terms set out in the costs agreement but, as there was no evidence in support of Mr Quinn's submission, I accept Mr Byrnes' evidence that the costs agreement was provided to his client. In the costs agreement, Mr Byrnes estimated that the costs of work done to date in the District Court proceedings was $5,500 and estimated that further work involved in preparing the case for hearing would be $50,000 exclusive of GST, disbursements and counsel's fees.
3. Attached to the costs agreement were General Terms of Business. Clause 2 of the General Terms of Business provided that Mr Quinn could accept the costs agreement by signing and returning the document to the law firm or "continuing to instruct us." Clause 6 set out Mr Quinn's rights in relation to a dispute concerning costs.
4. From 5 February 2015 on, the law firm rendered a series of invoices in respect of to the District Court proceedings. On 15 May 2015, Mr Quinn made an offer to settle the District Court proceedings, which was not accepted by NSW Housing. The District Court proceedings were heard by Judge Taylor on 28 and 29 May 2015 and adjourned for further hearing on 30 and 31 July 2015, 3 to 5 August 2015 and for final submissions on 12 August 2015. Judge Taylor reserved his decision. On 18 March 2016, Judge Taylor gave judgment in favour of Mr Quinn: New South Wales Land and Housing Corporation v Quinn [2016] NSWDC 27. NSW Housing appealed.
5. On 28 April 2016, Mr Byrnes says he forwarded another costs agreement to Mr Quinn in respect of the appeal proceedings. The costs agreement in evidence is unsigned. Again, Mr Quinn submitted that he had never received it but, in the absence of any evidence, I accept Mr Byrnes' evidence that he forwarded the document to his client. Mr Quinn estimated that the costs incurred to date in the appeal proceedings amounted to $5,000 and estimated that a further $20,000 would be incurred excluding GST, disbursements and counsel's fees. The General Terms of Business remained the same as earlier described at [11]. Further invoices were rendered by the law firm in respect of the appeal proceedings. The monies held in escrow by NSW Housing are not held in respect of the costs of the appeal proceedings and it is not necessary to consider these invoices further.
6. On 8 September 2016, the appeal was heard. The Court of Appeal reserved its decision. On 6 December 2016, NSW Housing's appeal was upheld and the matter was remitted to the District Court for final determination on the merits with no order made as to the costs of the appeal: New South Wales Land and Housing Corporation v Quinn [2016] NSWCA 338. Mr Quinn was granted leave to apply to the Suitors' Fund in respect of his costs; $10,000 was paid from the Suitors' Fund, which was used to part-pay counsel for his work done on the appeal.
7. On various dates from June to November 2017, further submissions were made to Judge Taylor on the remittal. Final submissions were made on 11 May 2018. On 31 May 2018, Judge Taylor gave judgment for NSW Housing against Mr Quinn in the sum of $8,767.82: New South Wales Land and Housing Corporation v Quinn (No 2) [2018] NSWDC 161 at [259]. On 26 June 2018, his Honour gave a further judgment, amending his earlier judgment under the slip rule so that the judgment amount was $7,704.12: New South Wales Land and Housing Corporation v Quinn (No 3) [2018] NSWDC 193. In addition, his Honour ordered NSW Housing to pay Mr Quinn's costs of the proceedings, and on an indemnity basis from 29 May 2015 by reason of NSW Housing's failure to accept Mr Quinn's offer of settlement: at [20]. His Honour also directed that Mr Quinn was entitled to set-off his entitlement to be paid his costs against the judgment sum in NSW Housing's favour.
8. Following Judge Taylor's judgment and orders, the law firm rendered a final invoice for legal services provided in the District Court proceedings and a small invoice for costs incurred in submitting the Suitors' Fund application. It is not necessary to consider the latter invoice, as the funds in escrow do not relate to that application.
9. Before paying Mr Quinn's costs of the District Court proceedings in accordance with Judge Taylor's orders, NSW Housing required Mr Quinn's costs to be assessed. The law firm paid the filing fee of $1,750 for the cost assessment. The law firm paid the assessor's costs of $5,016. The law firm did not charge Mr Quinn for time spent working with the costs consultant who prepared the application.
10. In October 2018, Mr Quinn's costs of the District Court proceedings were assessed at $188,067.27. NSW Housing has paid some of the amount assessed to counsel in full satisfaction of counsel's fees. NSW Housing holds the balance of $73,804.77 in escrow pending agreement between the law firm and Mr Quinn as to how those funds should be remitted.
11. On 14 May 2020, these proceedings were commenced seeking the relief described in the summons at [3]. On 25 August 2020, the law firm filed the motion seeking summary judgment, Mr Quinn having by then filed no evidence notwithstanding various orders to do so made on 29 May 2020 and 21 July 2020, the latter including a guillotine order. After the motion was filed, Ward CJ in Eq directed Mr Quinn to file any evidence by 8 October 2020. Mr Quinn filed an affidavit on 11 November 2020, which I granted him leave to rely upon at the hearing today.

Submissions

1. Relying on Firth v Centrelink (2002) 55 NSWLR 451; [2002] NSWSC 564, the law firm submitted that it had an equitable lien over the monies held by NSW Housing. The law firm's unpaid fees of the District Court proceedings, together with amounts paid for the filing fee for the costs assessment and the cost assessor's fees, total $104,173.99. The amount held in escrow by NSW Housing falls well short of this amount. Notwithstanding this, the law firm does not seek any monies from Mr Quinn other than payment of the funds held by NSW Housing.
2. The law firm noted that the costs of the District Court proceedings had already been assessed on a party/party basis up to 29 May 2015 and on an indemnity basis thereafter, being $188,067.27. It was submitted that this assessed amount was less than the costs payable on a solicitor/client basis for the District Court proceedings and any further assessment of the bills on that basis would result in an amount payable by Mr Quinn to the law firm in excess of $188,067.27. The law firm submitted that any assessment of the bills on a solicitor/client basis would be a waste of time and money as it would not result in a better outcome for Mr Quinn than the sum of $73,804.77 held by NSW Housing.
3. Mr Quinn submitted that a case must be very clear to justify summary judgment: General Steel Industries v Commissioner for Railways (NSW) (1964) 112 CLR 125. The real issue is whether there is an underlying defence that has a real, not fanciful, prospect of success. This is distinct from whether such a defence is actually pleaded: O'Brien v Bank of Western Australia Limited [2013] NSWCA 71; Commonwealth Bank of Australia v Invest Pty Ltd (in liq) [2014] NSWSC 1257 at [32]. In respect of the application for summary judgment, the plaintiff bears the onus of demonstrating that there is no triable or arguable issue in defence of its claim.
4. As Mr Quinn first instructed the law firm in respect of the District Court proceedings before 1 July 2015, the Legal Profession Act applies: Legal Profession Uniform Law 2014 (NSW), Schedule 4, clause 18. The law firm was said to have failed to comply with the disclosure requirements of that Act such that the costs must be assessed on a solicitor/client basis. It was submitted that the obligation to assess the costs fell on the law firm. It was also submitted that the result of such an assessment may be less than that already assessed as Mr Quinn contended that work claimed by the law firm was performed outside of the scope of the costs disclosures and without his consent. A costs assessor may reduce the fees significantly for suggested failures to comply with the legislation, including on the basis that the plaintiff may not have an entitlement to charge on a 6 minute-unit basis if the costs agreements are void. Thus, it was said that the law firm had not discharged its onus to demonstrate that there was no triable or arguable issue in defence of its claim.
5. No written submission was made by Mr Quinn as to why an equitable lien did not arise. Rather, it was submitted that, in the event the Court found that the law firm was entitled to a lien over the funds held by NSW Housing, the law firm had no present entitlement to be paid any costs as the costs claimed had not been assessed on a solicitor/client basis. It was submitted that it would not be appropriate for the funds to be paid to the law firm prior to assessment, particularly in circumstances where Mr Quinn was said to have raised concerns that the law firm had previously applied trust monies contrary to his instructions. Rather, if a lien was found, the funds should be paid to the Court pending an assessment of the costs on a solicitor/client basis.
6. In oral submissions, Mr Quinn submitted that the law firm was not entitled to be paid costs at all. Further, Mr Quinn submitted that he had made a more than reasonable offer to the law firm, to which I have earlier referred.

Solicitors' liens

1. As to whether the law firm is entitled to an equitable lien, the principles were set out by Campbell J in Firth v Centrelink (2002) 55 NSWLR 451; [2002] NSWSC 564 at [35]: The authorities establish the following propositions concerning this right of the solicitor: (a) The solicitor's right exists over money recovered through obtaining judgment in litigation, and also over money recovered through the settlement of litigation: Carew Counsel Pty Ltd v French [2002] VSCA 1 at [33]; Roam Australia Pty Ltd v Telstra Corporation Ltd [1997] FCA 980, Lehane J, 22 September 1997, unreported at 4. (b) The solicitor's right exists over both the amount of a judgment in favour of the client, and the amount of an order for costs in favour of the client: In The Estate of Fuld (No 4) [1968] P 727 at 736; Twigg v Keady (1996) 135 FLR 257 at 266 - 267 per Finn J; In Re Blake; Clutterbuck v Bradford [1945] Ch 61 … (c) It exists over money which is in the possession of the solicitor, and also over money which is in court (In Re Meter Cabs [1911] 2 Ch 557 at 562) and money which is owed to the client but not paid into court (In The Estate of Fuld (No 4) [1968] P 727; Re de Groot [2001] 2 Qd R 359 at 375) … (e) For the right to arise it must be shown that there is a sufficient causal link between solicitor's exertions and the recovery of the fund of money: Roam Australia Pty Ltd v Telstra Corporation Ltd [1997] FCA 980, Lehane J, 22 September 1997, unreported at 4 - 5; Carew Counsel Pty Ltd v French [2002] VSCA 1 at [33]. (f) The quantum of money for which the solicitor has the equitable right is the amount which is properly owing to the solicitor by the client, whether that amount be ascertained by taxation of a bill of costs, or assessment, or pursuant to a costs agreement: Roam Australia Pty Ltd v Telstra Corporation Ltd [1997] FCA 980 (Lehane J, 22 September 1997, unreported at 4). In relation to those situations where taxation is necessary to ascertain the quantum owing to the solicitor, the solicitor's right exists in the fund prior to the occurrence of the taxation ( Johns v Cassel (1993) 6 BPR 13,134 at 3,136 per Hodgson J; Twigg v Keady (1996) 135 FLR 257 at 289 per Kay J; In The Estate of Fuld (No 4) [1968] P 727 at 740; Roam Australia Pty ltd v Telstra Corporation Ltd [1997] FCA 980 (Lehane J, 22 September 1997, unreported at 6). (g) The solicitor's equitable right exists before the court is asked to intervene to protect it; it "arises immediately upon the recovery of monies through the exertions of the solicitor": Carew Counsel Pty Ltd v French [2002] VSCA 1 at [33]; if the lien is over the proceeds of an order for costs, it comes into existence at the time of making of that order for cost: Phillipa Power & Associates v Primrose Couper Cronin Rudkin [1997] 2 Qd R 266; Kison v Papasian (1994) 61 SASR 567. …
2. In particular, Campbell J noted that the right to an equitable lien arises if there is a sufficient causal link between the solicitor's efforts and the recovery of a particular fund of money. The quantum of money for which the solicitor has an equitable right is the amount which is properly owing to the solicitor by the client, whether that amount is ascertained by taxation of a bill of costs or assessment or pursuant to a costs agreement. In relation to those situations where costs assessment is necessary to ascertain the quantum owing to the solicitor, the solicitor's right exists in the fund prior to the assessment. Indeed, the solicitor's equitable right exists before the Court is asked to intervene to protect it, arising immediately upon the recovery of monies through the exertions of the solicitor.
3. As James J observed in Salvatore Blanda v Kemp Strang Lawyers Pty Ltd [2006] NSWSC 48 at [55]-[56], in respect of an earlier form of the current legislation: 55 It seems to me that the consequences of a failure to comply with [costs disclosure requirements] should be limited to the consequences expressly stated in [the legislation], that is that the client is not obliged to pay the solicitor's costs unless the costs had been assessed and the solicitor is not entitled to maintain proceedings for the recovery of the costs unless the costs had been assessed. On this view of the consequences of a failure to comply with [costs disclosure requirements], any such failure would not affect any lien to which the solicitor might be entitled. 56 It is noteworthy that [the legislation] did not, according to its terms, destroy a solicitor's entitlement to costs or to any lien the solicitor might have over documents of the client in order to secure payment of costs. The section merely provided that, if there had been a non-compliance with [costs disclosure requirements], a client did not have to pay the costs unless they had been assessed and a solicitor could not avail himself of the particular remedy of maintaining proceedings, that is court proceedings, for the recovery of the costs, unless the costs had been assessed.
4. It is clear from these cases that, in situations where an assessment is necessary to ascertain the quantum owing to a solicitor, the solicitor's right created by the lien exists in the fund prior to the occurrence of any assessment. It is not clear, however, that a solicitor is correspondingly entitled to pay themselves 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 of a device for affecting satisfaction of an outstanding account whose precise quantification remains in doubt: Goldberg v Beckett [2015] NSWSC 1966 at [36] per Harrison J.

Conclusion and orders

1. Having regard to these principles, the funds held in escrow by NSW Housing in respect of Mr Quinn's costs of the District Court proceedings appear to me on the evidence to have a sufficient causal link between the law firm's exertions and recovery of the fund of money. That equitable lien existed even before these proceedings were commenced. The law firm is entitled to an equitable lien in the monies which are presently held in escrow by NSW Housing and is entitled to maintain its lien even while any assessment proceeds to determine the final amount of those costs, if such an assessment is sought.
2. As to the law firm's submissions as to the utility of an assessment, I agree that an assessment of the law firm's costs on a solicitor/client basis will almost certainly exceed the costs already assessed on a party and party basis until 29 May 2015 and an indemnity basis thereafter. The costs of having the law firm's fees assessed on a solicitor/client basis are likely to result in the assessment of a higher amount being owed by Mr Quinn than what the law firm currently seeks. Whether Mr Quinn has the means to pay the costs of an assessment is unknown but unlikely. Whether the law firm is obliged to have the costs assessed is unclear: see section 317(1), Legal Profession Act. Whether the law firm - if put to the costs of an assessment - would be content to limits its claim for payment of fees to the funds held in escrow by NSW Housing or to seek any higher assessed amount from Mr Quinn is also unknown. It is not necessary for me to determine these matters today.
3. As to Mr Quinn's submissions that summary judgment should not be ordered given his offer of settlement, referred to at [8], it was not clear to me why a portion of the monies held in escrow by NSW Housing, to be used to pay Mr Quinn's legal costs as assessed, should be paid to Mr Quinn directly. The purpose of the funds is to pay Mr Quinn's legal bills, not for Mr Quinn to derive a financial benefit. This position might be different if Mr Quinn had already paid the law firm, but he has not.
4. For these reasons I make the following orders: 1. Enter summary judgment in favour of the plaintiff in respect of Prayer 1 of the summons filed on 14 May 2020 pursuant to rule 13.1(1) of the Uniform Civil Procedure Rules 2005 (NSW). 2. Declare that the plaintiff has an equitable lien over the costs ordered by Taylor DCJ to be paid to the first defendant in the District Court proceedings case number 2014/232539 between the first and second defendants. 3. Direct the plaintiff to re-serve its bills of costs in relation to the District Court proceedings, complying with section 333 of the Legal Profession Act 2004 (NSW), by 21 December 2020. 4. Direct the plaintiff's solicitor to communicate with the second defendant, copied to Mr Quinn, as to whether the second defendant is content to continue holding the remaining monies in escrow; what interest rate if any, is earnt on such monies; and whether the second defendant will remit that interest to the parties on the final resolution of these proceedings. 5. Depending on the second defendant's response to these queries, direct the parties to notify the associate to Rees J whether it is proposed that the remaining monies held by the second defendant continue to remain with the second defendant in escrow or be paid into court, noting that Rees J may make further orders in chambers on this subject. 6. Stand the matter over before the Registrar in Equity at 9.30 am on 2 February 2021 for further directions.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 December 2020