Supreme Court of WA|2006-11-03|Before: Templeman J

Lashansky v Legal Practice Board & Ors [2006] WASC 247 (3 November 2006)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : LASHANSKY -v- LEGAL PRACTICE BOARD & ORS [2006] WASC 247

Equity - Particular lien - Solicitor's client obtaining judgment in arbitration proceedings and obtains costs order - Solicitor suspended after judgment paid to client - Liquidator appointed to wind up client - Liquidator arranges for taxing of solicitor's costs - Whether entitlement to lien affected by lack of formal costs agreement or suspension of solicitor - Basis and extent of liquidator recouping reasonable costs of enforcing the costs order

Bennett & Co v CLC Corporation & Ors [2001] WASCA 51; (2001) 23 WAR 344

Challenge Plastics Pty Ltd v Collector of Customs (Vic) (No 2) (1994) 49 FCR 541

Egglishaw v Australian Crime Commission [2006] FCA 819

Firth v Centrelink & Anor [2002] NSWSC 564; (2002) 55 NSWLR 451

Harrison v Lederman [1978] VicRp 55; [1978] VR 590

In re Capital Fire Insurance Association (1883) 24 Ch D 408

In re Universal Distributing Company Ltd (In Liq) [1933] HCA 2; (1933) 48 CLR 171

In re Wadsworth (1885) 29 Ch D 517

Michell Sillar McPhee (A Firm) v First Industries Corp [2006] WASCA 24

Philippa Power & Associates v Primrose Couper Cronin Rudkin [1997] 2 Qd R 266

Wimbourne v Fine [1952] 2 All ER 681

Donnybrook Plastering Contractors v RL Wright Pty Ltd, unreported; SCt of WA; Library No 980214; 23 April 1998

Harbutt's Plasticine Ltd v Wayne Tank & Pump Co Ltd [1970] 1 QB 447

Henderson v Johnson [1969] WAR 3

In re Blake; Clutterbuck v Bradford [1945] Ch 61

Mansfield v Director of Public Prosecutions for Western Australia [2006] HCA 38; (2006) 228 ALR 214

North West Construction Co Pty Ltd (In Liq) v Marian [1965] WAR 205

Pryles & Defteros (A Firm) v Green [1999] WASC 34

R & Y Crofts v Trevor Willis Nominees Pty Ltd (1994) 12 SR (WA) 24

Sewell v Hampel (1910) 13 WALR 44

Smith v The Bar Association of New South Wales [1991] HCA 59

1 TEMPLEMAN J: The plaintiff, Robert James Lashansky, is a legal practitioner who is suspended from practice by order of the Legal Practice Board ("the Board"), the first defendant. Mr Lashansky claims an equitable lien over legal costs paid to a former client in respect of a matter in which he acted before his suspension.

2 The client is a company which has since been wound up. The second defendant, Hillary Orr, is its liquidator ("the Liquidator"). The third defendants, Price Sierakowski, are the company's solicitors.

3 It will be convenient to set out the facts relating to the claim: and having done so, to consider the legal position.

4 Mr Lashansky's client was R L Wright Pty Ltd, a building company trading under the name of Country Manor Homes ("the Company").

5 A claim was brought against the Company by Alister Russell Walker, in respect of allegedly defective building work and overcharging. The Company counterclaimed. The claims went to arbitration and were the subject of a 17-day hearing at which Mr Lashansky represented the Company. On 11 December 1998, the arbitrator delivered an award in which he dismissed Mr Walker's claim and upheld part of the Company's counterclaim. In relation to costs, the arbitrator directed Mr Walker to pay:

"70% of the (Company's) party and party costs which, if not agreed between them, shall be taxed by the Taxing Master of the Supreme Court."

(Affidavit of Hillary Elizabeth Orr sworn 3 October 2006 ("the Liquidator's affidavit"), page 58.)

6 Having given his reasons for making an award to that effect, the arbitrator went on to say:

"For the same reason the percentage applies to the solicitor's party-party costs for the arbitration." (page 59)

7 Mr Lashansky considers that the arbitrator acted precipitately in relation to costs: that is, in dealing with costs as part of his award, rather than delivering an interim award and then hearing further argument about costs. I am told that in proceeding as he did, the arbitrator was unaware that a Calderbank letter had been written by the Company in which Mr Walker was offered more favourable terms of settlement than he achieved in the arbitration.

8 Whether or not the arbitrator erred, and if so, whether the award of costs should have been different, are not matters which Mr Lashansky is able to pursue in the present application.

9 Although the award was delivered on 11 December 1998, Mr Lashansky did not prepare a bill until 6 February 2000, apparently for reasons beyond his control (Mr Lashansky's affidavit sworn 2 July 2004, vol 2, pages 19 - 21).

10 The bill is a substantial document. It first sets out in detail the work undertaken by Mr Lashansky from 1 October 1997 to 29 December 1998 in relation to the arbitration. The amount claimed was $129,700.

11 The bill then sets out post-arbitration work, apparently carried out in response to an application for a stay brought by Mr Walker in the Supreme Court. The amount claimed by Mr Lashansky for this work was $7480.

12 There were then secretarial fees of $16,618.50 and disbursements of $46,962.70, all fully itemised and supported by the relevant invoices. Thus, the total costs were $200,761.21 (Mr Lashansky's affidavit sworn 2 July 2004, vol 2, pages 137 - 227).

13 On 9 February 2000, Mr Lashansky sent a copy of the bill to Beere May & Meyer, who had been Mr Walker's solicitors in the arbitration. He referred to the award of 70 per cent of the costs to the Company and sought payment of that percentage of $146,380.50; namely, $102,422.95 (Mr Lashansky's affidavit sworn 2 July 2004, vol 2, page 228). It is not clear how the figure of $146,380.50 was calculated.

14 On the same day, Mr Lashansky wrote also to Mrs Elizabeth Wright, one of the directors of the Company. He informed Mrs Wright that he had sent his bill of costs to Beere May & Meyer and that, failing their agreement, a taxation would be necessary. He said the taxation fee would be approximately $3,941.65. Mr Lashansky said also that in case a costs expert was to be required, he had retained Peter Sheavyn of Talbot & Olivier. He went on to remind Mrs Wright that no moneys had been paid to him "since the payment of the secretarial fees". He asked to have all matters resolved: and he enclosed his account. This contained the notation by which the Company was informed of its rights to require an itemised account (which could then be taxed) or to have the existing bill taxed, such rights to be exercised within 30 days of receipt (pages 231 - 233).

15 Mr Lashansky told me from the bar table (without objection) that the Company had not sought any taxation of his account (TS 142). I accept that to be so. He is therefore a creditor of the Company in an amount of $200,761.21, less whatever was paid in respect of secretarial fees. I find this to have amounted to $23,415 (TS 144, and par 31 of the Liquidator's affidavit).

16 It seems that Beere May & Meyer, acting on behalf of Mr Walker, did not agree Mr Lashansky's costs. However, the bill was not taxed. That is because the Company did not accede to Mr Lashansky's request to pay the taxation fee, and he was then unwilling to do so.

17 On 1 August 2000, the Supreme Court of South Australia ordered that the Company be wound up and that the second defendant be appointed as its liquidator. Shortly after her appointment, the Liquidator attended at Mr Lashansky's premises and inspected "several dozen" of his files relating to the Company (Mr Lashansky's affidavit sworn 2 July 2004, par 53).

18 Then on 27 November 2000, Mr Lashansky was suspended from practice by order of the Board.

19 On 29 November, the Board applied ex parte to McKechnie J for orders freezing Mr Lashansky's trust and general office bank accounts pursuant to s 58B of the Legal Practitioners Act 1893 (WA). Those orders were made, thus empowering the Board to appoint a supervising solicitor to Mr Lashansky's practice, pursuant to s 58D. On the same day, the Board exercised that power and appointed Peter Joseph Bogue to be the supervising solicitor (Mr Lashansky's affidavit sworn 5 October 2006, page 15).

20 On 13 December 2000, Mr Bogue and Ms Diane Howell, the Law Complaints Officer employed by the Board effected a forcible entry into Mr Lashansky's premises in his absence. They removed a number of his client files and other property (Mr Lashansky's affidavit sworn 2 July 2004, vol 1, par 2 and page 19).

21 The files relating to the arbitration were then given to the Liquidator (letter dated 17 May 2004 from Minter Ellison to Mr Lashansky, exhibited to his supplementary affidavit sworn 28 August 2004 at pages 6 - 11).

22 Mr Lashansky contends that this was done "without any protection being insisted on for my liens as an unpaid legal practitioner" (Mr Lashansky's affidavit sworn 2 July 2004, vol 1, par 61). This has not been disputed by the Liquidator and I find it to be the fact.

23 It is now necessary to refer to the evidence of John Joseph Dryka, in an affidavit sworn on 2 November 2004. Mr Dryka is a professional engineer and registered builder of long standing and considerable experience. In 1998, he was engaged at Mr Lashansky's instigation to give expert evidence for the Company in the arbitration proceedings referred to above.

24 In addition to that role, Mr Dryka agreed to act as an umpire in a dispute between the Company and other clients - Mr and Mrs Wilkinson - in relation to the construction of a house for them at Gelorup.

25 Mr Dryka was aware that the Company was in financial difficulty. He therefore arranged that $42,000 which the Wilkinsons had paid into Mr Lashansky's trust account in respect of outstanding progress claims made by the Company would be released to the Company, so as to enable it to complete the construction of the Wilkinsons' house.

26 Further, Mr Dryka agreed with Mr Lashansky and Mr W F Peacock (another expert witness engaged to give evidence for the Company in the arbitration) that they would not press the Company for outstanding fees. This was in order to assist the Company to resist what each believed to be the unmeritorious claims made by Mr Walker in the arbitration proceedings.

27 Contrary to Mr Dryka's expectation, the $42,000 paid to the Company was not used to pay tradesmen engaged on the construction of the Wilkinsons' house. Mr Dryka formed the view that Mr Wright had misappropriated the money and that he intended to allow the Company to go into liquidation. As I understand it, there was concern also that Mr Wright had misappropriated moneys paid to the Company pursuant to the arbitrator's award.

28 Following the appointment of the Liquidator, Mr Dryka had a meeting with her at Mr Lashansky's offices in about September 2000. Mr Dryka told the Liquidator about Mr Wright's conduct. He said also that he, Mr Lashansky and Mr Peacock had agreed that they would pay the costs of taxation of the outstanding costs in the arbitration and indemnify the Liquidator in respect of the fees payable to the consultant engaged in the matter. This offer was made formally in a letter dated 23 November 2000 from Mr Dryka to the Liquidator (Mr Dryka's affidavit pars 73 - 75 and pages 14 - 16).

29 The evidence of Mr Dryka, as summarised above, has not been challenged by the Liquidator, and I accept it.

30 The Liquidator's evidence is that she regarded the costs order made against Mr Walker to be an asset of the Company. However, she has not explained why she did not accept the offer to have Mr Lashansky's costs taxed. Nor does she explain why she apparently took no steps even to investigate the allegations made by Mr Dryka that Mr Wright had misappropriated the Company's funds.

31 It appears that the Liquidator did nothing in relation to this matter until she was informed by Mrs Wright that Mr Walker had died on 30 June 2002 (the Liquidator's affidavit, par 12 and page 72).

32 The Liquidator says she then became concerned that if she did not act promptly, she might lose the opportunity to claim against Mr Walker's estate.

33 By this stage, the Liquidator had appointed Price Sierakowski as the Company's solicitors.

34 On 24 July 2002, Price Sierakowski wrote to Mr Lashansky informing him that the Liquidator had incurred certain costs with respect to "the Walker costs claim". They were:

"Hillary Orr and Associates $11,700.48

Hayes Knight $8,393.88

Price Sierakowski $9,560.67

Petitioning Creditors Costs $3,050.00

Mr Garnsworthy $990.00

TOTAL $33,695.03"

35 Hillary Orr and Associates is the Liquidator's firm. Hayes Knight is a firm of Chartered Accountants, to which the Liquidator is a consultant (Mr Lashansky's affidavit sworn 2 July 2004, vol 1, page 129). Price Sierakowski did not give any breakdown of the work said to have been incurred by these firms to justify costs of some $20,000, nor of the work they had carried out in relation to their costs of $9,560.67.

36 The reference to Mr Garnsworthy is to David Garnsworthy, a barrister who specialises in the law and practice relating to legal costs. Mr Garnsworthy had been retained by Price Sierakowski.

37 Although, as I have noted above, the Liquidator contended that the costs claim against Mr Walker's estate was an asset of the Company, she was on notice that Mr Lashansky claimed an interest in that asset. That is clear from Price Sierakowski's letter of 24 July 2002 to Mr Lashansky, in which they repeated the following offer to Mr Lashansky, said to have been made by letter dated 19 December 2001:

"1.1. We propose a deed between you and our client in the following terms:

1.1.1. you undertake not to exercise or pursue any form of interest in the costs order or Fund whether as a lien, a security or any other legal or equitable interest;

1.1.2. you consent to our client having discretion to litigate or settle the costs claimed as she sees fit;

1.1.3. our client undertakes to remit to you, upon her receipt, 50% of the net amount of the Fund remaining after she has deducted her expenses in getting in the Fund (including legal fees);

1.1.4. you may prove for the balance owing to you in the liquidation of the Company."

38 The letter went on to state that until the Company was in funds "it is unable even to consider" the examination of Mr Wright or any proceedings.

39 Mr Lashansky was dissatisfied with the Liquidator's conduct. He approached Mr A H Douglas-Brown, the well-known liquidator, who agreed to act as liquidator of the Company and who signed a consent for that purpose.

40 On 9 October 2002, Mr Lashansky wrote to Price Sierakowski and to the Liquidator. He enclosed Mr Douglas-Brown's consent and foreshadowed an application to remove the Liquidator. Mr Lashansky also expressed the view that in the absence of any further explanation as to how the Liquidator had incurred costs in excess of $33,000 "without any meaningful progress having been made in the liquidation" the costs appeared to be excessive.

41 Mr Lashansky then stated that he would "certainly not agree to any arrangement whereby he surrenders his lien or any rights at law in respect of the legal fees due to the writer".

42 Price Sierakowski responded to Mr Lashansky by letter dated 8 November 2002. They said that unless Mr Douglas-Brown was prepared to act as liquidator on a speculative basis, "or you or another party are prepared to provide funds to enable him to operate", there was no benefit in him replacing the Liquidator.

43 I pause to note that this was, in substance, the offer made to the Liquidator some two years earlier by Mr Dryka, on behalf of himself, Mr Lashansky and Mr Peacock: an offer which the Liquidator apparently ignored. There is no evidence that the Liquidator reported on the offer to the Company's creditors.

"Our client had hoped that, had an arrangement been reached with you with respect to the Walker costs order, that particular asset may have been realised and some funds become available to her to commence other recovery actions, including possible examinations of the directors.

Our client's view is that the Walker costs order, which has been the subject of negotiations between you and her, is the property of the company. Our client does not concede that the law is settled with respect to your alleged interest in that costs order. In any event if you have a valid lien over the funds obtained from that costs order, it is subject to a competing equitable lien in favour of our client, to the extent of the costs and expenses in getting in that fund.

When our client was appointed liquidator of the company, that costs order, while property of the company, was not in a taxable form and was subject to an allegation of set off. Our client has expended substantial funds in investigating the order, putting it into a taxable form and investigating the merit of a set off from the debtor with respect to its defamation claim. Our client's actions have been at all times reasonable.

Your refusal to negotiate an agreement and your robust assertion that you have a lien over all of the funds of the Walker costs order has resulted in a stalemate. Our client is not in a position to speculate further funds to have the bill taxed and then to proceed with execution of the taxed costs order while you continue to assert a right to all of it. On the other hand, you cannot proceed to tax or execute the costs order without our client's consent.

In addition to this, we have not yet been able to confirm that the estate of Mr Walker has sufficient funds to satisfy all or any of the order for costs once the bill is taxed.

Our client is presently arranging to obtain the views of the creditors on how to proceed."

45 I do not regard this as a sufficient explanation for incurring some $33,000 in costs. I accept that Mr Lashansky's bill was not in taxable form. It will be recalled that Mr Lashansky had himself proposed that Mr Sheavyn of Talbot & Olivier attend to that matter. However, Mr Garnsworthy's charges for carrying out the work were only $990 at that stage and were expected to amount to a further $2000 to prepare for and attend taxation. There would also be a taxation fee.

46 Apart from that, the contention that the Liquidator's actions in incurring these costs had at all times been reasonable seems to me to be inconsistent with her assertions that lack of funds prevented her from taking any action. I note that the Liquidator now claims only $1,934.90 for her fees: a fact which appears to justify Mr Lashansky's complaint that the previous claim was excessive.

47 On 25 July 2003, the Liquidator reported to the creditors of the Company. She informed them that Mr Patrick Mullally of Workclaims Australia had attended at her offices on 2 June 2003 to inspect the records associated with the Walker arbitration. She said Mr Mullally had submitted a written offer to take an assignment of the action for a payment of $1000 and 25 per cent of the net amount recovered after costs. The Liquidator recommended that Mr Mullally's offer be accepted, for the following reasons:

Ø Additional costs are required to be expended in advance before the costs can be taxed;

Ø Creditors have been given the opportunity to fund this matter, however, have declined;

Ø The law is uncertain as to the order of distribution of any funds that may be recovered;

Ø No agreement has been reached with the company's solicitor, Mr Robert Lashansky, as to the possibility of apportioning any proceeds after taxing; and

Ø The other party against whom costs were awarded is deceased and his solicitors are yet to confirm that his estate has sufficient funds with which to satisfy the arbitration award."

(Mr Lashansky's affidavit sworn 2 July 2004, vol 1, pages 137 - 143.)

48 Having regard to Mr Dryka's offer, referred to above, I do not understand the reference to creditors having been given an opportunity to fund the matter, but declining to do so.

49 Although, on any view, Mr Lashansky was a substantial creditor of the Company, it is not clear whether he was sent a copy of the Liquidator's report. He was then in South Africa. However, he was informed by Mr Dryka that the Liquidator was endeavouring to assign the Company's costs claim to Mr Mullally.

50 On 12 August 2003, Mr Lashansky wrote to Hayes Knight (to whom the Liquidator had requested that the responses to her report to creditors be sent) to inform them that the proposed assignment to Mr Mullally would be invalid at law. He said:

"I have a valid charge over the Costs Order at Common Law and at Statute which I intend vigorously to pursue."

He went on to say that he had not willingly parted with possession of the Wright files and that he would not consent to the assignment to Mr Mullally (affidavit of Mr Lashansky sworn 2 July 2004, vol 1, pages 118 - 121).

51 On 14 August 2003, Mr Lashansky wrote to Beere May & Meyer, the solicitors acting for Mr Walker's estate, to inform them that he had not given his approval or consent to any assignment of the Company's claim and to put them on notice that he disputed the validity of any such assignment. That being so, Mr Lashansky pointed out that any payment to Mr Mullally would not constitute a valid discharge of the debt owed by Mr Walker's estate to the Company.

52 The Liquidator did not proceed with the assignment to Mr Mullally.

53 Between April and November 2003, the Liquidator wrote four letters to Beere May & Meyer asking about the state of the administration of Mr Walker's estate and whether provision had been made for the costs of the arbitration. However, by letter of 2 December 2003, Beere May & Meyer informed the Liquidator that they had no instructions to respond to her correspondence (the Liquidator's affidavit, pages 87 - 91).

54 On 29 April 2004, Mr Lashansky wrote to the Liquidator placing her on notice that:

"With the utmost respect, you have no right to be dealing with the matter of the taxation of these costs at all."

"... in the light of the fact that I have never willingly parted with my lien over the Country Manor Homes documents and in the light of the clear authority of the Full Court of the Supreme Court of Western Australia with regard to the maintaining of a solicitor's lien for unpaid legal costs against a Liquidator, I regard your behaviour as nothing short of outrageous.

As was pointed out in the leading decision of the Full Court of the Supreme Court of Western Australia by his Honour, Justice Wallwork, a liquidator cannot confiscate the proceeds of a solicitor's work without compensation and leave me as an unsecured creditor in the winding up of the company."

(Mr Lashansky's affidavit sworn 2 July 2004, vol 1, pages 144 - 145.)

56 The Liquidator did not accept Mr Lashansky's contentions, having apparently received advice to the contrary from Price Sierakowski. That being so, the Liquidator decided to proceed to a taxation of the costs of the arbitration. On 9 June 2004, she obtained a judgment from this Court to enforce the arbitrator's award.

57 On 22 July 2004, Price Sierakowski wrote to Mr Garnsworthy to inform him that Mr Lashansky had brought an action in this Court against the Board, the Liquidator and themselves "for various remedies including the delivery up of documents that we may have in our possession". Price Sierakowski said that Mr Lashansky had commenced injunction proceedings to have them deliver up those documents and to injunct them from proceeding to tax the bill of costs. Price Sierakowski said they considered there was no cause of action against any of the parties and in particular, there was no cause of action to prevent them from proceeding to tax the costs. They requested Mr Garnsworthy to prepare the bill for taxation as soon as possible (the Liquidator's affidavit, page 92).

58 On 24 September 2004, Mr Garnsworthy wrote to Price Sierakowski enclosing the bill of costs in a form suitable for taxation.

59 The Liquidator's contention that Mr Lashansky is an unsecured creditor of the Company was advanced before Acting Master Chapman in Chambers on 7 October 2004. However, the Acting Master expressed the tentative view that Mr Lashansky's lien was preserved by the Legal Practitioners Act (TS 71).

60 Despite this intimation, the Liquidator proceeded with the taxation without notifying Mr Lashansky. On 21 October 2004, Price Sierakowski lodged the bill at this Court and paid the fee of $3,945.56 (the Liquidator's affidavit, pages 92 - 129).

61 Once Price Sierakowski had entered on to the record by obtaining the judgment referred to above, Mr Lashansky was unable to inspect the Supreme Court file. He was therefore unable to discover when the taxation might take place. However, as a result of a chance encounter in the Supreme Court, Mr Lashansky learned that the taxation was set down for 13 January 2005.

62 On 12 January 2005, Mr Lashansky applied ex parte for an injunction to restrain the Liquidator and Price Sierakowski from disposing of any moneys recovered as a result of the taxation. The application came before me but I declined to deal with it until the respondents had been served.

63 Mr Lashansky duly effected service on Price Sierakowski and the matter came before me again on 13 January on an inter-partes basis. However, there was no appearance from Price Sierakowski. I granted an interlocutory injunction as sought by Mr Lashansky so as to preserve the status quo until the question of his lien could be determined.

64 As I understand it, the reason for the non-attendance of Price Sierakowski before me on 13 January 2005 was that the solicitor concerned - Damian Cooper - was attending at the taxation. Mr Cooper has since left the firm. His successor, Mr Di Renzo, contended subsequently that he was unable to find any record of Price Sierakowski having received notice of Mr Lashansky's application. Mr Di Renzo has explained to me that although he was in fact unable to find any such record, that was due to his lack of familiarity with the file. He now accepts that Price Sierakowski were duly served (TS 217).

65 The Company's costs of the arbitration proceedings, as set out in the bill produced by Mr Garnsworthy, were taxed at $90,468.61.

66 There was then some correspondence between Price Sierakowski and Beere May & Meyer in relation to the question of interest. Ultimately, Beere May & Meyer paid amounts totalling $94,335.21 in respect of the costs and interest (the Liquidator's affidavit, pages 130 - 137). That money is now held in Price Sierakowski's trust account ("the Fund").

67 When the award was delivered in the arbitration proceedings, on 11 December 1998, Mr Lashansky was a practising solicitor and was therefore entitled to a lien over all of the papers and any other property belonging to the Company then in his possession. Such a lien was in the nature of a security: it entitled Mr Lashansky to retain the documents as against the Company until the full amount of his outstanding costs had been paid.

68 Mr Lashansky then became entitled also to what is known commonly as "a particular lien". Although referred to as a lien, this is something of a misnomer because it does not involve possession. It is a solicitor's right to receive his costs out of personal property received or preserved by his client as a result of work he has carried out for the client. For that reason, the particular lien is often referred to as a fruits of action lien or an equitable lien. If, as in this case, the lien is in respect of an order for costs "it comes into existence at the time of making that order for costs": Firth v Centrelink & Anor [2002] NSWSC 564; (2002) 55 NSWLR 451 at [35(g)] per Campbell J, citing Philippa Power & Associates v Primrose Couper Cronin Rudkin [1997] 2 Qd R 266.

69 The particular lien existed at common law, but has a statutory basis in s 73 of the Legal Practitioners Act which was in force in December 1998. That provision has been replaced by s 244 of the Legal Practice Act 2003 (WA) which is in relevantly identical terms. Section 73 provides:

"In every case in which a practitioner shall be employed to prosecute or defend any suit, matter, or proceeding in any court of justice whatsoever, such practitioner shall be entitled to a first charge upon the property recovered or preserved, and such practitioner shall have a prior right to payment out of the same for the taxed costs, charges, and expenses as between solicitor and client of or in reference to such suit, matter, or proceeding; and the Court before which such suit, matter, or proceeding has been heard or is pending, or a Judge thereof in Chambers, may make ex parte such order or orders for taxation of and for raising and paying such costs, charges, and expenses out of the said property as to such court or Judge shall appear just and proper."

70 After some judicial disagreement, it is now settled that this provision takes effect automatically to create the charge. As Steytler P said in Michell Sillar McPhee (A Firm) v First Industries Corp [2006] WASCA 24 at [22]:

"Australian courts (at least since 1940) have regarded particular liens as being equitable in nature and as existing independently of any declaration thereof. Consequently, in this country, the assistance of the Court is invoked for enforcement, rather than creation, of the common law right ..."

His Honour then referred to a number of authorities to that effect, including Firth v Centrelink & Anor (supra) at 465.

71 In the present case, Mr Lashansky was entitled to a particular lien in respect of the fruits of the arbitration award in the hands of the Company. As I have noted above, it appears that moneys paid to the Company pursuant to the award may have been misappropriated by its director(s). All that remained to be recovered was the Company's costs which would be payable following a taxation. Mr Lashansky therefore has a particular lien in relation to that claim.

72 In reaching that conclusion I reject the Liquidator's submission that Mr Lashansky has no entitlement to costs as against the Company because there is apparently no formal costs agreement in place (the Liquidator's affidavit, par 29). It is submitted that Mr Lashansky's suspension from practice "amounted to a fundamental (or repudiatory) breach of the entire contract with the Company".

73 Clearly, Mr Lashansky acted in the arbitration on the instructions of the Company and is entitled to be paid for his work.

74 The order for the winding up of the Company, made on 1 August 2000, had no effect on Mr Lashansky's lien: In re Capital Fire Insurance Association (1883) 24 Ch D 408 at 419 - 420. It was there held that a solicitor's lien over documents that came into his possession before the presentation of a winding up petition could not be defeated by the subsequent winding up order. In my view, that position is preserved in relation to the particular lien by s 73 of the Legal Practitioners Act.

75 Mr Lashansky was suspended from practice on 27 November 2000, after the winding up order was made in relation to the Company. It is the Liquidator's submission that, on Mr Lashansky's suspension, he was no longer "a practitioner" within the meaning of the Legal Practitioners Act and therefore lost his entitlement to any lien which might have existed previously. It is submitted further that, for the same reason, Mr Lashansky was not "a legal practitioner" as that term is defined in the Legal Practice Act which was in force when the costs were paid, following the taxation.

76 In s 3 of the Legal Practitioners Act, "practitioner" is defined to mean:

"a person admitted and entitled to practise as a barrister and solicitor of the Supreme Court of Western Australia ... and for the purposes of Part IV and Part VA includes a person who has been a practitioner".

77 In s 3 of the Legal Practice Act, "legal practitioner" is defined to mean a person:

"(a) who is admitted as a legal practitioner, whose name is on the Roll of Practitioners and who is not a disqualified person ..."

A "disqualified person" is defined to include a person who:

"(b) is suspended, disqualified or otherwise prohibited from engaging in legal practice in this State or in any other place (whether in or outside Australia)".

78 It may be noted, for the purposes of the definition under the Legal Practitioners Act, that s 73 does not fall within either Pt IV or Pt VA.

79 Clearly, when the costs were paid, Mr Lashansky was a disqualified person, by reason of his suspension from practice. That being so, he was not then a legal practitioner. However, I do not consider that the disqualification provisions of the Legal Practice Act were intended to deprive Mr Lashansky of valuable rights which came into existence before his suspension.

80 There can be no doubt that the intention of s 73 is that the solicitor who is responsible for his client recovering or preserving property should be entitled to the lien, even if he is no longer the client's solicitor when the relevant order is made: Wimbourne v Fine [1952] 2 All ER 681 at 686 - 687, following In re Wadsworth (1885) 29 Ch D 517. In that case, Kay J considered s 28 of the Attorneys and Solicitors Act 1860, a provision to the same effect as s 73 of the Legal Practitioners Act. The particular lien to which s 28 applied, arose where property was recovered or preserved for the client "through the instrumentality" of the solicitor. Kay J held, at 520:

"The words are 'through the instrumentality' of such solicitor: suppose that a solicitor is employed in a hotly contested action, and prepares the whole of the case of the plaintiff down to the moment of trial, and that just before the trial the plaintiff changes his solicitor, and then, owing to the exertions of the solicitor formerly employed, succeeds in the action. Can it possibly be said that success is not owing to the instrumentality of the discharged solicitor? I cannot conceive that it could fairly be held that such a case as that is not within the statute. I have heard no reason whatever for doubting that the exertions of the applicant were instrumental in procuring the result which was arrived at. Therefore it seems to me that the fact that he had ceased to be solicitor before the judgment was delivered, is not a good reason why a charging order should not be made in his favour. No doubt the solicitors who were acting for the Plaintiff at the time when this property was recovered, and the order made for payment, would have, quite independently of the Act, a lien on this sum of money. That was the law long before this statute." (my emphasis)

81 The result should be the same, I think, whether or not the former solicitor remained a solicitor "when the judgment was delivered"; that is, when moneys were paid to which the lien attached.

82 If the Liquidator's contention is correct, a solicitor in Mr Lashansky's position who, after obtaining a judgment for his client retired from practice and surrendered his practice certificate, would be equally unable to enforce a particular lien: he would not be a legal practitioner.

83 In Mr Lashansky's case, the Liquidator's contention would mean that his suspension would have the effect of extinguishing his entitlement to the fruits of the action which he had obtained for his client. He would be reduced to the status of an unsecured creditor, while at the same time remaining liable for all the debts of his practice, including debts incurred in the course of prosecuting the arbitration proceedings to their ultimately successful conclusion.

84 In my view, if that is the literal construction of the Legal Practice Act, such an unjust result should be avoided by applying the principle that very clear words must be used in a statute if it is to have the effect of confiscating rights without compensation.

85 That principle was applied by the Full Court in Bennett & Co v CLC Corporation & Ors [2001] WASCA 51; (2001) 23 WAR 344 at [29] by Wallwork J, with whom Pidgeon and Murray JJ agreed. There, the Court was concerned with s 530B(1) of the Corporations Law which provided that a person was not entitled, as against the liquidator of a company, to claim or enforce a lien on the books of the company but that "such a lien is not otherwise prejudiced". However, in my view, the proposition that the Corporations Law is not a confiscatory statute applies equally to the Legal Practice Act.

86 Similiarly in Harrison v Lederman [1978] VicRp 55; [1978] VR 590, Gillard J applied "the oft-repeated dictum of Younger LJ, in In re Jordison; Raine v Jordison, [1922] 1 Ch 440 at p.465:

'The Legislature is not, by the use of other than the clearest words, to be taken to have subverted in any statute fundamental principles whether of law or of equity. It is a matter of judicial obligation to the Legislature itself, that the Court, in construing a statute, shall make that presumption.' "

87 It is next necessary to consider the actions of Mr Bogue and Ms Howell in entering on to Mr Lashansky's premises and removing his files relating to the Company. My conclusions in relation to those matters are necessarily tentative. That is because I have not had the benefit of submissions from the Board. The Board has not appeared on this application, no relief having been sought against it. Subject to that qualification, I set out my views as follows.

88 Mr Bogue had been appointed as supervising solicitor and was therefore subject to s 58E of the Legal Practitioners Act which sets out the powers and duties of a supervising solicitor. Section 58E(2) provides:

"The supervising solicitor may, on production, if so required, of the instrument by which the appointment in respect of the practice was made -

(i) the practitioner to whom the appointment relates ... to produce to the supervising solicitor any records relating to the practice that, in the opinion of the supervising solicitor, may be reasonably necessary for the purposes of conducting the practice;

...

(b) enter upon any premises of the practitioner to whom the appointment relates ... and take possession of all records or other things relating to the practice that, in the opinion of the supervising solicitor, may be relevant to or necessary for the conduct of the practice."

(my emphasis)

89 As I understand it, the actions of Mr Bogue and Ms Howell in making forcible entry to Mr Lashansky's premises were thought to be justified because Mr Lashansky had refused to cooperate with Mr Bogue. The circumstances are set out in a letter dated 17 May 2004 from Minter Ellison, the solicitors for the Board, to Mr Lashansky. The letter (to which I have referred above) included the following passage:

"We note also that the supervising solicitor met with you at your office at 344 Abernethy Road, Belmont on 7 December 2000, but, you were not prepared at that time to hand over the files to him. Subsequently you were still not prepared to do so even though Mr Bogue had been negotiating with your then solicitor, Mr O'Connor.

Accordingly, on 13 December 2000, the Law Complaints Officer and the supervising solicitor entered your premises in your absence and seized such files as were present ...

The files which were taken were then delivered either to Mr O'Connor, who was your solicitor at the time, alternatively, they were distributed to your respective clients."

90 As is clear from the opening words of s 58E(2) which I have italicised above, the power to enter upon any premises of the practitioner is conditional upon the production, if required, of the instrument of appointment of the supervising solicitor. This suggests a legislative intention that the supervising solicitor would not enter the relevant premises unless there was someone present to admit him, and who could be shown his instrument of appointment if required. I do not think the provision could reasonably be construed to authorise a forcible entry, without notice, if the premises were unattended, whether or not the solicitor was cooperative. There would be even less justification, I think, where (as here) the occupier of the premises had legal representation.

91 I note that s 58K of the Legal Practitioners Act made it an offence for a person to hinder or obstruct a supervising solicitor in the exercise of his powers or the performance of his duties. The penalty in 2000 was $200. However, the section did not authorise the supervising solicitor to employ any remedy of self-help.

92 In the absence of cooperation, I should have thought that the appropriate course would have been for the Board to apply to the Court for an order, in the nature of a mandatory injunction, requiring the recalcitrant solicitor to allow the supervising solicitor to enter into his premises. (I note that in the equivalent English provision, entry, including forcible entry, requires an order of the High Court: Solicitors Act 1974, Sch 1, pars 9(5) and (6).)

93 In Challenge Plastics Pty Ltd v Collector of Customs (Vic) (No 2) (1994) 49 FCR 541, Heerey J considered the actions of the Collector of Customs in entering premises and removing documents under a Customs Warrant, but without the consent of the owner. Heerey J held (at 543):

"Generally speaking, administrative acts are presumed to be valid and the onus is on the party challenging them: see F Hoffman-La Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295; Comptroller-General of Customs v Kawasaki Motors Pty Ltd (No 1) [1991] FCA 519; (1991) 32 FCR 219 at 228-229. However, here we have a rather special situation of an entry on premises and removal of documents without the consent of the owner of the premises and documents. Without lawful justification, such conduct would constitute a trespass. In substance, this proceeding has been concerned with the legal justification advanced by the respondent for that action. Where the exercise of executive discretion interferes with liberty or property rights, once the person affected has shown a prima facie case the burden of justifying the legality of the decision is on the executive: R v Secretary of State for the Home Department; Ex parte Khawaja [1984] AC 74 at 112 per Lord Scarman."

94 The approach of Heerey J was approved by Branson J in Kennedy v Baker [2004] FCA 562; (2004) 135 FCR 520 at [85] and [86] and by Sundberg J in Egglishaw v Australian Crime Commission [2006] FCA 819 at [19]. I would add to the proposition set out above that where documents are removed from premises without lawful authority, those responsible for the removal and those into whose hands the documents pass can have no title to them, nor any right to possession.

95 I repeat that it has not been necessary for the Board to justify the actions of Mr Bogue and Ms Howell in their forcible entry on to Mr Lashansky's premises in December 2000. However, the Liquidator has been on notice since August 2006 of Mr Lashansky's contention that she is unlawfully in possession of the documents seized from his office in the circumstances referred to above: see the Plaintiff's Concise Particulars dated 23 August 2006, pars 101 - 106. Despite that, the Liquidator has adduced no evidence, nor made any submissions relating to this issue.

96 In my view, if the Liquidator has committed a tortious act in relation to Mr Lashansky's files, that consideration is less significant than it might otherwise have been. That is because Mr Lashansky seeks to take advantage of the benefit received by the Company through the use by the Liquidator of his documents.

97 The principle which applies in these circumstances is set out in Goff & Jones on the Law of Restitution, 6th ed, par 36-001:

"A person upon whom a tort has been committed and who brings an action for the benefits received by the tortfeasor is sometimes said to 'waive the tort'.

'Waiver of tort' is a misnomer. A party only waives a tort in the sense that he elects to sue in restitution to recover the defendant's unjust benefit rather than to sue in tort to recover damages; he has a choice of alternative remedies. But the tort is not extinguished. Indeed, it is said that it is a sine qua non of both remedies that he should establish that a tort has been committed." (citations omitted)

98 This principle is, in essence, an example of election; or of the proposition that a plaintiff cannot approbate or reprobate. In other words, it would have been open to Mr Lashansky either to sue for conversion and detinue or, as he has done, to claim the benefit obtained by the Company from the use of the documents which were subject to his lien.

99 In these circumstances, I accept the Liquidator's submission that she should be entitled to recoup her reasonable costs of enforcing the costs order out of the Fund.

100 That approach was taken by Dixon J in In re Universal Distributing Company Ltd (In Liq) [1933] HCA 2; (1933) 48 CLR 171 at 174. His Honour said:

"If a creditor whose debt is secured over the assets of the company come in and have his rights decided in the winding up, he is entitled to be paid principal and interest out of the fund produced by the assets encumbered by his debt after the deduction of the costs, charges and expenses incidental to the realization of such assets ...

In applying this principle, only those expenses appear to have been thrown against the fund belonging to the debenture-holders which have been reasonably incurred in the care, preservation and realization of the property. In the present case the liquidator has employed a material part of his time and energies in recovering moneys, both uncalled capital and debts, which enure for the debenture-holder, and in so far as these services increase the remuneration which he receives, I see no reason why the burden should not be thrown upon the proceeds." (my emphasis)

101 This principle is incorporated into s 73 of the Legal Practitioners Act (now s 244(2) of the Legal Practice Act). Those provisions empower the Judge before whom an application such as this is made, to make an order for payment of the costs out of the relevant fund "as the Court or Judge thinks just and proper".

102 The Liquidator claims reimbursement from the costs under a number of heads. I deal with each in turn.

103 The taxing fee claimed is $3,945.56. That was the filing fee, based on the amount of costs claimed. However, as appears from the taxed bill of costs, the taxing fee was $2,206.55. That is an amount which it was necessary to pay in order to obtain a taxation. It was therefore reasonable for the Liquidator to incur that cost which should be reimbursed to her.

104 Mr Garnsworthy's fees amount to $5,913.60 including GST. It is clear from Mr Garnsworthy's invoice that the work for which he has charged was all directed to the preparation and taxation of the Company's bill of costs. It is accepted by Mr Lashansky that work of that kind was necessary. It will be recalled that he had proposed to instruct Mr Sheavyn of Talbot & Olivier to carry out the work.

105 Further, Mr Lashansky does not wish to challenge the amount charged by Mr Garnsworthy. It will not be necessary, therefore, for Mr Garnsworthy's bill to be taxed.

106 Mr Lashansky has undertaken to pay Mr Garnsworthy's fees out of the Fund. However, I think that as a matter of principle, because Mr Garnsworthy was retained by Price Sierakowski on the instructions of the Liquidator, his costs should be paid out of the Fund in the Liquidator's hands.

107 The Liquidator claims the sum of $11,468.60 (including GST) in respect of "work relating to the Bill of Costs, attending taxation and recovery of the funds currently held in trust". In support of this claim, the Liquidator exhibits to her affidavit a copy of Price Sierakowski's tax invoice on which she has highlighted the items claimed (the Liquidator's affidavit, pages 141 - 154).

108 Mr Lashansky objects to this evidence on the basis that it is hearsay. In my view, that objection is well-founded. The tax invoice is evidence of the amount claimed by Price Sierakowski against the Liquidator. However, it is not evidence of the work actually carried out by Price Sierakowski. There is no evidence from Price Sierakowski as to those matters.

109 If I am wrong in this view, I would require Price Sierakowski to tax their costs because it seems to me that the work referred to in the tax invoice may well involve unjustifiable charges for self-education and duplication of work carried out by Mr Garnsworthy.

110 But, in my view, there is a more fundamental objection to allowing the Liquidator to recover Price Sierakowski's costs. As I have noted above, the principle to be applied in situations of this kind is to allow the Liquidator's reasonable costs of enforcing the costs order. And, in my view, the Liquidator acted unreasonably in ignoring the offer made by Mr Dryka, Mr Lashansky and Mr Peacock to attend to the taxation at no cost to the Company. I have referred above to the fact that the offer was made and that no explanation has been offered by the Liquidator as to why she did not accept it. In these circumstances, I can only conclude that her conduct was unreasonable.

111 The Liquidator claims administrative fees of $1,934.90 including GST. This amount is considerably less than the $20,094.36 claimed originally by the Liquidator as fees incurred by her firm and Hayes Knight: see Price Sierakowski's letter dated 24 July 2002 to Mr Lashansky as set out above.

112 The fees now claimed are set out in a summary of costs (the Liquidator's affidavit, page 155). These costs appear to relate principally to communications between the Liquidator (and her staff) and Price Sierakowski. In my view, they are costs which were incurred unreasonably. That is to say, as with Price Sierakowski's costs, the Liquidator would not have incurred costs had she accepted the offer of Mr Dryka et al to attend to the taxation.

Witness and expert witness fees, photocopying and miscellaneous fees

113 The Liquidator has itemised various fees and expenses incurred in the arbitration proceedings and which were allowed on taxation (the Liquidator's affidavit, pars 34 - 38). I do not think it necessary to deal with these matters. Expert witnesses will either have been retained by the Company itself or by Mr Lashansky. If the former, witnesses are unsecured creditors of the Company: if the latter, the witnesses must look to Mr Lashansky for their payment. Given that Mr Lashansky has a first charge on the Fund, I do not think any deduction should be made for the payment of witness fees.

114 The balance of the claim, relating to photocopying and miscellaneous fees, should not be deducted in my view. That is because they were charges incurred unreasonably, for the reasons given above.

115 Having regard to the relief sought by Mr Lashansky in his chamber summons dated 23 August 2006, I consider it appropriate to make the following orders:

(1) Compliance with O 59 r 9 of the Rules of the Supreme Court 1971 (WA) be waived.

(2) It be declared that the plaintiff has a first charge over the moneys paid to the second defendant and held in the third defendant's trust account pursuant to the judgment entered in ARB 30 of 1997 on and the subsequent taxation of costs, such moneys amounting to $94,335.21 and interest accrued thereon, less the second defendant's reasonable costs incurred in recovering the said moneys, being $8,120.15.

(3) The amount of $86,215.06 be forthwith paid out of the Fund to the plaintiff.

(4) The second and third defendants pay the plaintiff's out of pocket expenses reasonably incurred in relation to this application.

116 Order 1 above requires further explanation. On 24 August 2006, Mr Lashansky filed a memorandum supporting a waiver of conferral pursuant to O 59 r 9(2) of the Rules of the Supreme Court. In that memorandum, Mr Lashansky referred to Price Sierakowski's failure to appear when this matter was listed before me on 14 August 2006 and their failure to explain their absence. Mr Lashansky refers also to the failure of Price Sierakowski to appear on 13 January 2005, having been duly served: and Price Sierakowski's repeated assertions that they could find no record of service. As I have noted above, Price Sierakowski now accept that they were served.

117 Further, Mr Lashansky relied on the intransigent attitude to his claim of both the Liquidator and Price Sierakowski.

118 In all the circumstances of this case, I accept that conferral would have been a pointless exercise and I am therefore prepared to waive compliance with O 59 r 9(1).

119 It will be necessary for the orders to be extracted in the usual way. However, they will take effect from publication of these reasons.

Practitioners Act 1893

Lashansky v Legal Practice Board & Ors [2006] WASC 247

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (184 paragraphs)

Lashansky v Legal Practice Board & Ors [2006] WASC 247 (3 November 2006)

Witness and expert witness fees, photocopying and miscellaneous fees

Parties

Legislation Cited (3)

Cases Cited (7)