Khoury v Gonzales

5287/06 DIEB PETER KHOURY v SEF GONZALES JUDGMENT 1 The plaintiff is a solicitor. By his summons filed on 12 October 2006, he seeks a declaration that he is entitled to an equitable lien over the entitlement of the defendant, his former client, to a judgment debt. 2 The judgment debt is referable to a District Court judgment which arose from the filing in that court of a certificate of assessment of costs under the Legal Profession Act 1987 (as previously in force). A certificate of judgment issued by the registrar of the District Court at Sydney on 13 September 2006 states that the present defendant, as judgment creditor, recovered judgment against Amelita Claridades, as executrix of the estate of the late Teddy Gonzales, in the sum of $107,032.40 on 12 July 2005. 3 The entitlement of Sef Gonzales, the present defendant, reflected by the District Court judgment (itself a reflection of the costs assessment) stems from an order made in this Division on 16 July 2003. The order was made in proceedings 2260/03 between Sef Gonzales as plaintiff and Ms Claridades as defendant. Campbell J ordered as follows: "I order that the plaintiff's costs be paid out of the estate of Teddy Gonzales on an indemnity basis." 4 The assessment process to which I have referred (including review by a review panel) quantified the costs thus payable to Sef Gonzales by the executrix out of the estate in the sum of $107,032.40. 5 The plaintiff acted as Sef Gonzales's solicitor in the proceedings 2260/03 in which the costs order was made by Campbell J. Following the issue of the certificate of judgment for $107,032.40 by the registrar of the District Court, the plaintiff wrote to the solicitors for the judgment debtor (that is, the executrix) requesting payment. Those solicitors responded that the judgment was in favour of the present defendant, Sef Gonzales, and that "the question of your instructions to act for Mr Gonzales remains in issue", adding that, after discussion with the Law Society, the view was taken that Sef Gonzales would have to authorise any payment to the present plaintiff. 6 After further correspondence, the plaintiff wrote to the judgment debtor's solicitors saying: "We are obliged to remind you that this firm enjoys an equitable lien over the Cost Order made in Mr Sef Gonzales' favour, which may be enforced by us by Supreme Court proceedings if Mr Gonzales declines to authorise us to claim payment from the Estate. Such proceedings will be necessary if Mr Gonzales' written authority is not received by 14 July 2006." 7 Attempts to obtain an appropriate written authority from Sef Gonzales continued but no authority has been forthcoming. The plaintiff has therefore applied for the declaratory relief to which I have referred. 8 The defendant, Sef Gonzales, did not appear on the hearing of the plaintiff's summons. I am satisfied that he was served personally with the summons and that it showed, in the space for "Hearing Details", reference to a listing before the Registrar's Court on Level 7 at 9.30 am on 14 November 2006. I was informed by counsel that there was no appearance by or for Sef Gonzales before the Registrar when the matter was called on in the Registrar's Court on 14 November 2006 before being transferred by the Registrar to me as Duty Judge on that same morning. I proceeded to hear the plaintiff's application in the absence of the defendant: see rule 29.7(a) of the Uniform Civil Procedure Rules 2005. 9 The sum produced by the costs assessment process ($107,296.32) represents costs payable to Sef Gonzales and required by the order of Campbell J to be borne by the executrix. The question for decision is whether the plaintiff has, as security for costs and disbursements due by Sef Gonzales, a lien over Sef Gonzales' judgment debt owing by the executrix. 10 The lien asserted by the plaintiff is a "fruits of the action" lien of the kind comprehensively discussed by Campbell J in Firth v Centrelink (2002) 55 NSWLR 451. The essence of that decision, as well as other pertinent observations, appears from the following passage in the recent judgment of Bergin J in Abbott v Pilot Development Corporation Pty Ltd [2006] NSWSC 1178:

[6] In Roam Australia Pty Limited v Telstra Corporation Limited [1997] FCA 980 Lehane J said: The questions seem to be, first, did the proceeding result in a judgment award or compromise under which money is payable to the party for whom the solicitors acted; and secondly, was the part played by the solicitors sufficient to justify the conclusion that there is a sufficient causal link between the solicitors' efforts and the result so that the solicitors may be regarded as having been instrumental in obtaining the result? [7] In Doyles Construction Lawyers v Harsands Pty Limited & Others, unreported 24 December 1996, McLelland CJ in Eq said: It is sufficient to give rise to the equitable right that the settlement resulting in payment to the client came about as a result of the legal proceedings and that the solicitor had acted for the client in those proceedings, this being treated as a sufficient causal link." 11 In the present case, Sef Gonzales obtained an order for costs against the executrix in proceedings 2260/03 and, by virtue of steps taken in consequence of that order, now has a judgment debt against the executrix. That receivable of Sef Gonzales was a product of the particular litigation initiated by him in and throughout which he retained the present plaintiff as his solicitor. The plaintiff's efforts as Sef Gonzales's solicitor were instrumental in bringing that litigation to a conclusion and therefore in producing the result which included an order that the executrix pay Sef Gonzales's costs. 12 There is, in my view, a clear and sufficient causal link between the services provided by the plaintiff as solicitor and the obtaining by Sef Gonzales in proceedings 2260/03 of the costs order against the executrix, which costs order, by virtue of provision of the Legal Profession Act concerning costs assessment, has been, as it were, translated into a money judgment of the District Court. Were it not for the professional services provided by the plaintiff, Sef Gonzales would not have obtained the costs order or the District Court judgment. 13 The circumstances are such as to satisfy the requirements that must be met for a "fruits of the action" lien to attach to the District Court judgment debt as security for the costs due and payable by Sef Gonzales to the plaintiff as his solicitor. 14 It is to be emphasised, however, that the lien extends only to costs and disbursements due and payable to the plaintiff solicitor for services rendered in the litigation which resulted in the costs order. I emphasise this because there is some suggestion in paragraph 6 of the plaintiff's affidavit that he regards the lien as applicable to certain memoranda of costs rendered before 22 June 2002, whereas, as he states in paragraph 7, it was in May and June 2003 that he acted in the proceedings in which Campbell J gave judgments on 12 June 2003 and 16 July 2003, being the proceedings 2260/03 in which the costs order was made. Costs and fees rendered in the first half of 2002 cannot be seen to have such a connection with the litigation of 2003 as to warrant a conclusion that the lien extends to them. 15 In view of the matter just mentioned, it is desirable that the declaratory relief granted by the court be in terms slightly different from those the plaintiff seeks. I make the following declarations: 1. Declare that the plaintiff has an equitable lien over the judgment debt evidenced by Certificate of Judgment dated 13 September 2006 issued by the Registrar of the District Court of New South Wales for Sydney on File No 2882/05, such equitable lien being security for payment to the plaintiff by the defendant of all costs and disbursements of and incidental to professional services rendered by the plaintiff as solicitor to the defendant in Supreme Court proceedings 2260/03, being costs and disbursements due but unpaid. 2. Declare that the plaintiff is entitled to have the said costs and disbursements due but unpaid satisfied out of the said judgment debt in priority to payment of the judgment debt to the defendant as judgment creditor. **********

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