procedural. The first to tenth defendants’ summons against Ligeti Partners was dismissed, and they were ordered to pay Ligeti Partners’ costs of the summons.
Key principles
Where an insurance policy permits an insurer to take over the defence of proceedings and retain solicitors to act for the insured, the insured may have a solicitor-client...
In the absence of a proved contractual term excluding the insured’s liability, costs incurred by solicitors acting for the insured may be costs for which the insured is...
A solicitor’s lien over a client’s documents may secure costs incurred under a retainer for which the client is personally liable.
Where the client, rather than the solicitor, terminates the retainer during litigation, the solicitor may retain the client’s papers under the lien until the costs are paid,...
Issues before the court
Whether the Court had jurisdiction to order delivery or inspection of Ligeti’s documents.
Whether Ligeti had a retainer with the insured defendants and could look to them personally for costs.
Whether Ligeti’s costs gave it a lien over the litigation documents.
Plain English Summary
The Victorian Supreme Court dismissed the insured defendants’ request for their former solicitors’ file. Although HIH had appointed Ligeti, the Court found that Ligeti also acted for the insured defendants under retainers arising from the insurance arrangement. No agreement excluding the defendants’ personal liability for Ligeti’s costs was proved. Because the defendants, not Ligeti, ended the retainers, Ligeti could keep the documents under its costs lien until its costs were paid.
AI-generated legal information, not legal advice. Zoe can make mistakes. Check the cited source, and for advice about your situation consult a qualified Australian lawyer.
Deep Dive
1,891 words · generated 30/09/2026
What happened
Paul McKenzie’s underlying proceeding arose from a serious accident on 14 January 1996. He dived from a swinging rope into the Murray River near Echuca and suffered injuries resulting in quadriplegia. He issued a writ on 17 February 1997 against the Director-General of Conservation & Natural Resources. The State of Victoria and eight members of a committee of management were later joined as defendants [6].
Who terminated Ligeti’s retainer, and what consequence followed for the lien?
Cited legislation
1 cited instrument linked from this judgment.
The first to tenth defendants were insured by HIH Insurance Ltd. Gillard J records that the policy was not put before the Court and that the Department may not have had a copy. However, the parties treated it as common ground that the policy allowed HIH to take over the defence and appoint its own solicitors [38], [143]. HIH appointed Ligeti Partners to conduct the proceeding for the insured defendants after March 1997 [38].
HIH later entered liquidation. Its provisional liquidator sent a circular dated 26 March 2001 stating that HIH had no current instructions to defend matters brought against insureds, raising doubt about whether it could pay costs or claims, and not objecting to firms releasing files to clients [50]-[60]. The defendants retained new solicitors and sought Ligeti’s file. Ligeti refused and said it proposed to enforce a lien for its costs [63]-[82].
The defendants’ summons asked the Court to order delivery of the documents, or alternatively allow their present solicitors to inspect and copy them [2]. Gillard J dismissed the summons. The Court ordered the first to tenth defendants to pay Ligeti’s costs of the summons [248].
The decision was not a ruling on McKenzie’s personal-injury claim. It concerned access to the former solicitors’ file and whether Ligeti could retain the documents to secure its costs.
Why the court decided this way
The Court first considered its authority to deal with the request. Section 76 of the Supreme Court Act 1986 (Vic) addresses orders for delivery of bills of costs and documents held by legal practitioners. Gillard J said that the section did not create a jurisdiction, but recognised it and extended it to work not transacted in court [92]-[96]. The Court also had inherent jurisdiction, in an appropriate case, to require a practitioner to deliver documents [99]-[102].
The central question was whether Ligeti had a lien for costs against these defendants. Gillard J described a solicitor’s lien as a common-law right to retain property, including documents, until costs due for the retainer are paid [105]-[108]. The lien only extends to costs incurred on behalf of the client against whom it is claimed, and for which that client is personally liable [111], [136]. It is a general lien for costs due to the practitioner [114].
The defendants argued that HIH, not they, had retained Ligeti, and that they were not personally liable for Ligeti’s costs [139]. Gillard J rejected that argument. The Court reasoned that where an insurance contract permits an insurer to take over the defence and appoint solicitors to act for an insured, the insured has contractually agreed to the appointment. In those circumstances a solicitor-client relationship exists between the solicitors and the insured [143]-[152]. The Court found two retainers: one between Ligeti and HIH, and one between Ligeti and the Department and the other relevant defendants [156].
The finding of a retainer did not, by itself, settle who had to pay. Gillard J applied the general proposition that a person who accepts professional services on their behalf is prima facie liable to remunerate the professional, unless a contrary contractual term is established [192]-[203]. The insurer’s practice of paying costs did not necessarily remove the insured’s liability. The Court noted that no contrary term had been set up or proved in this case [203]. It therefore concluded that Ligeti could look to the defendants for costs incurred before the services ended [206].
The Court then considered who had ended the retainers. That mattered because the position differs depending on whether the client or solicitor terminates. Where a client ends the retainer, the former solicitor may retain the documents under the lien until costs are paid. Where the solicitor ends it during litigation, the Court may require handover to a new solicitor on an undertaking preserving the lien and providing for the return of the documents after the proceeding [216]-[225].
The defendants submitted that Ligeti had terminated the retainer. Gillard J accepted that HIH had made clear no further funds would be available, but found that the evidence established that the defendants decided to change solicitors and terminated Ligeti’s retainer [229]-[235]. The solicitor-termination principle therefore did not apply [235]. Since the defendants were liable for the costs and had themselves ended the retainers, Ligeti was entitled to enforce its lien [239].
Before and after state of the law
The judgment presents the lien doctrine as established, rather than novel. Gillard J said that a solicitor’s lien had long been recognised and upheld [105]-[130]. The judgment explains the established common-law position: a solicitor may retain client documents as security for unpaid costs, but only for costs incurred under a retainer for which the client is personally liable [108]-[124], [136].
The decision’s useful clarification is how that principle applies where an insurer appoints solicitors to conduct litigation in the insured’s name. The judgment distinguishes the insurer’s role in selecting and paying the solicitors from the question whether the insured is also their client and may be liable for the fees. On the facts and contractual premise accepted by the parties, Gillard J found both an insurer-solicitor retainer and an insured-solicitor retainer [143]-[156]. The insurer’s payment arrangement did not, without a contractual term to that effect, eliminate the insured’s prima facie liability [175]-[203].
The judgment also sets out the consequences of the identity of the party ending the retainer. If the client terminates, the lien may remain exercisable. If the solicitor terminates, court practice may require delivery under an undertaking so that the litigation is not put at risk, while preserving the solicitor’s security [216]-[225]. Gillard J applied that distinction by finding that the defendants terminated the retainers [235].
The supplied judgment does not describe a prior legal rule that was displaced, nor does it provide later judicial decisions changing or refining the principles. The decision should therefore be read here as an application and explanation of the rules cited in the judgment, not as evidence of the current state of every aspect of Australian lien law.
Key passages with plain-English translation
At [105]-[108], the Court says the solicitor’s lien is a common-law right to retain documents until costs due for the retainer are paid. In practical terms, the fact that a file concerns ongoing litigation does not automatically require its release if the former solicitor has a valid lien.
At [111] and [136], Gillard J limits the lien: it covers costs incurred on behalf of the client against whom the lien is claimed and for which that client is personally liable. In plain English, the solicitor cannot rely on a client’s file to secure an unrelated person’s debt merely because the solicitor possesses the documents.
At [149], the Court says that where an insurer is contractually permitted to take over a defence and appoint solicitors for the insured, a solicitor-client relationship may exist between the insured and those solicitors. This addresses the distinction between who appointed the firm and for whom it performed the legal work.
At [203], the Court says the usual inference of liability for professional costs is subject to a contrary contractual term, but none was set up or proved in the case. The finding was therefore grounded not simply in the insurer’s appointment, but also in the absence of evidence of an agreement excluding the insured defendants’ liability.
At [216]-[225], the judgment explains the different treatment of client termination and solicitor termination. The handover process described for solicitor termination is not a general entitlement to inspect or obtain a file whenever a client changes firms. The Court found that the clients had ended Ligeti’s retainers [235].
What fact patterns trigger this precedent
The reasoning is most directly engaged where an insurer has a contractual right to take over an insured’s defence, appoints solicitors to act in the insured’s name, and those solicitors later claim a lien over the litigation file for unpaid costs. The judgment’s analysis depends on evidence or agreement about the policy, the nature of the appointment, the existence of any retainer with the insured, and whether a contract excludes the insured’s liability [143]-[156], [175]-[203].
The termination issue is also central. A fact pattern in which the client ends the retainer may engage the lien rule described at [127]-[130]. If the solicitor ends it, the handover principle described at [133]-[136] and [216]-[225] may become relevant. The Court’s conclusion here depended on its finding that the defendants terminated the retainers, despite HIH’s inability or unwillingness to provide further funds [235].
The case does not determine what happens under every insurance policy or every retainer arrangement. The policy was not produced, and the Court proceeded on the parties’ common ground about the insurer’s right to take over the defence [143]. It also did not decide whether a different express agreement would exclude the insured’s personal liability; it expressly treated a contrary term as possible [199], [203].
How later courts have treated it
The supplied judgment contains no later decisions discussing how courts treated McKenzie. It would not be grounded in this material to say that later courts followed, distinguished, or limited it. The judgment itself relies on earlier authorities, including Halliday v Sacs Group Pty Ltd, Adams v London Motor Builders, Groom v Crocker and Gamlen Chemical Co UK Ltd v Rochem.
For research purposes, the propositions to trace in later decisions are the judgment’s treatment of an insured’s retainer with insurer-appointed solicitors, the insured’s prima facie liability for their costs, and the distinction between client and solicitor termination of a retainer. This identifies topics for further research; it is not a claim about what any later court decided.
Still-open questions
Several matters were not resolved on the evidence before Gillard J. First, the insurance policy was not produced. The parties agreed that it contained a term allowing HIH to take over the defence, but the Court did not analyse the complete policy wording or decide how different wording might affect the retainer or liability for costs [38], [143].
Second, the Court did not consider a proved contractual term expressly excluding the insured’s liability for the solicitors’ fees. It recognised that such a term could affect the ordinary inference of liability, but no such term was pleaded or proved [199], [203]. The judgment therefore does not settle how a particular exclusion or costs arrangement would operate.
Third, while the Court stated that the defendants’ summons could be dismissed without delivery of documents, it noted the practical risk of delay while the defendants pursued steps concerning a proper bill of costs and any taxation [242]. It addressed that concern by stating that the defendants should not be able to delay the fixing of a trial date [245]. The excerpt does not provide a broader procedure for balancing litigation access against a solicitor’s lien in every case.
This is general legal information, not legal advice. Zoe can make mistakes. Before acting on or relying on this analysis, have a qualified Australian lawyer check it.
SOLICITOR'S LIEN OVER CLIENTS' DOCUMENTS - claim for costs - application for delivery up of documents - insurer retaining solicitors on behalf of insured - solicitor's right to claim costs from insured.
[3]
This is the return of a summons, filed by the solicitors acting for the first to tenth defendants (inclusive), seeking an order pursuant to s.76 of the Supreme Court Act1986 or the inherent jurisdiction of the court, that their former solicitors, Ligeti Partners ("Ligeti"), deliver to their present solicitors all documents, papers, files et cetera in their custody, possession or power relating to the proceeding. Alternatively, they seek an order that their present solicitors be at liberty to inspect the documents and copy them.
[4]
On 14 January 1996, the plaintiff, Paul McKenzie, was at a recreation area near Echuca, dived from a swinging rope into the Murray River and suffered very severe injury resulting in quadriplegia. On 17 February 1997, he issued a writ in this court seeking damages and sued the first defendant, Director-General of Conservation & Natural Resources ("the Department"). Subsequently, a number of other parties were joined, including the State of Victoria, and eight members of a committee of management.
[5]
The proceeding has been managed in the Major Torts List and is ready for trial. It has been referred to the Listing Master to fix a date.
[6]
The first to tenth defendants (inclusive) are the Director-General of Conservation & Natural Resources, the head of a government department; the State of Victoria; and the eight members of a committee of management ("the relevant defendants"). The relevant defendants at all relevant times were insured by HIH Insurance Ltd ("HIH") and were entitled, pursuant to the contract of insurance, to an indemnity in respect of any damages and costs payable by any or all of them to the plaintiff in the proceeding.
[7]
As is well known, HIH has gone into liquidation. The relevant defendants decided to and did engage another firm of solicitors to act on their behalf. The firm is Blake Dawson Waldron.
[8]
The summons seeking relief was filed in the proceeding and was directed to Ligeti Partners.
[9]
Mr John Middleton QC, who appeared with Mr Fletcher for Ligeti, raised the question of the propriety of proceeding by summons in the proceeding. It was submitted that the application should have been made by originating motion or writ. Mr Middleton QC made it quite clear that he was not taking a technical objection, but was underlining the fact that this was not an interlocutory application in the proceeding which would have permitted evidence on hearsay. He objected to certain paragraphs of the affidavit in support.
[10]
After some discussion, counsel for the defendants, Mr Scott, applied and successfully obtained leave to call a witness to overcome the objection.
[11]
James Edwin Hughes, the claims manager of the Department, gave viva voce evidence. Mr Middleton QC did not cross-examine him.
[12]
I think that since it was an application seeking relief against a partnership which was not a party to the proceeding, the appropriate procedure was by the issue of originating motion or by the issue of a writ. However, once the hearsay problem was overcome, Mr Middleton QC did not press his objection to the procedure. Accordingly, I permitted the matter to proceed on the summons.
[13]
Upon receipt of a copy of the writ, the Department engaged Clements Hutchins & Co to act as its solicitors. The Department and the other relevant defendants were covered by a contract of insurance with HIH. The retainer of Clements Hutchins & Co was pursuant to an agreement between HIH and the Department, pursuant to which the Department was entitled to nominate its own solicitors.
[14]
Shortly after March 1997, HIH appointed its own solicitors, namely, Ligeti Partners, to conduct the proceeding on behalf of the Department and the other relevant defendants. The Department and the said defendants were not consulted. The contract of insurance was not placed before the court, and Mr Hughes gave evidence to the effect that he doubted whether the Department ever received a copy. However, it was common ground between the parties that such policy would have contained a provision which gave the right to HIH to take over the defence of the proceeding and to engage its own lawyers.
[15]
The evidence of Mr Hughes revealed that there was little contact between Ligeti, the Department and the relevant defendants. From time to time, requests were made through loss adjustors to interview potential witnesses, and HIH forwarded to the Department, from time to time, a bill for disbursements which had been paid by it to Ligeti.
[16]
The policy was subject to a $25,000 excess, and the amounts paid by the Department and the other relevant defendants was in respect of the excess.
[17]
Mr Hughes stated that he was not consulted in relation to any discussions concerning settlement, that the relevant defendants had not been served with a bill of costs or any claim for fees by Ligeti and further, that the relevant defendants did not have a complete set of court documents or any reports et cetera.
[18]
Following the collapse of the HIH Insurance Group, the provisional liquidator sent a circular to solicitors instructed by the group dated 26 March 2001. A copy of the letter was sent to the Department.
[19]
The provisional liquidator informed solicitors who may be acting in respect of claims against an insured, that the solicitors had "no current instructions from HIH to defend any matters brought against insureds".
[20]
"There is also serious doubt as to the extent to which HIH will ultimately be able to pay any costs or claims against insureds claimable against HIH. Accordingly insureds should be aware that they are financially exposed in respect of any costs or judgments for which their policies would normally respond. These claims will rank as non-professional unsecured creditors in any future distributions by liquidators."
[21]
The circular went on to say that the provisional liquidator had no objection to the firms releasing files to the clients.
[22]
The Department and relevant defendants then retained Clements Hutchins & Co to assume conduct of a number of files in which HIH were the Department's insurer and where Ligeti had been instructed by HIH. Clements Hutchins & Co requested Ligeti to hand over the file in the proceeding.
[23]
On 11 April 2001, Ligeti forwarded a letter to Clements Hutchins & Co by facsimile. After referring to the present proceeding, the letter commenced -
[24]
"We acknowledge receipt of your client's recent request seeking that we transfer our file to your office. We respond as follows:"
[25]
Thereafter, the undertakings that Ligeti required before it would transfer the file were set out.
[26]
The undertakings were not forthcoming. On 4 May 2001, Clements Hutchins & Co filed a notice of change of practitioner.
[27]
On 24 May 2001, Blake Dawson Waldron was retained to act for the relevant defendants. It filed a notice of change of practitioner.
[28]
On 25 May 2001, Blake Dawson Waldron wrote a letter to Ligeti, requesting that the file be forwarded to its office so that it could be photocopied and returned.
[29]
By letter dated 28 May 2001, Ligeti refused to do so and further stated that the firm proposed to enforce the lien for its costs.
[30]
The relevant defendants' summons was filed on 19 June 2001.
"The jurisdiction of the court to make orders for the delivery by a legal practitioner or firm of legal practitioners of a bill of costs or for the delivery up of any documents in the possession, custody or power of a legal practitioner or firm of legal practitioners or to make any other order in relation to any such documents extends to cases in which the business or part of the business has not been transacted in the courts."
[34]
In my opinion, the section does not create a jurisdiction in the court, but recognises it and extends the jurisdiction to cases where the business or part of the business has not been transacted in the court.
[35]
The alternative basis upon which the application was made was pursuant to the inherent jurisdiction of the court.
[36]
There is no doubt that in an appropriate case, the court does have jurisdiction to require a legal practitioner to deliver up documents.
[37]
It is equally clear that a solicitor has a lien over documents in respect of unpaid costs, and is not obliged to hand over documents to a client unless the lien is satisfied.
[38]
The lien is a right recognised at common law to retain any property, which includes documents in the solicitor's possession until he has been paid costs due with respect to the performance of the retainer.
[39]
The lien extends only to the practitioner's costs and charges incurred on behalf of the client against whom the lien is claimed, and for which the client is personally liable. See Re Mason and Taylor (1878) 10 Ch D 729, and Re Dee Estates Ltd (1911) 2 Ch 85.
[40]
The lien is a general lien and extends to all costs due to the practitioner.
[41]
The nature of the right was discussed in the case of Re Hawkes, Ackerman v Lockhart (1898) 2 Ch 1.
[42]
"A solicitor's lien is simply a right to retain his client's documents as against the client and persons representing him."
[43]
The right is maintainable until the full amount of the solicitor's costs payable by the client, are in fact paid.
[44]
The fact that there is a change of solicitors in the course of a proceeding does not take away the former solicitor's right, but his right to maintain the lien may be affected depending upon whether he discharged himself as the solicitor or was discharged by the client. The general rule is that if he is discharged by the client otherwise than for some breach of contract, he is not obliged to produce or hand over the documents until his costs are in fact paid.
[45]
This has been the law for many years and the right has always been upheld.
[46]
On the other hand, if the solicitor terminates the engagement, he may be required to hand over the documents to the next practitioner, usually on an undertaking that they will be held without prejudice and returned after the proceeding is over.
[47]
But the right does depend upon, and only extends to, the solicitor's costs which have been incurred pursuant to a retainer with the client, and for which the client is personally liable.
[48]
Mr Scott submitted that there was no retainer between Ligeti and the Department and other relevant defendants, that they were not personally liable for the costs, and accordingly, there was no lien enforceable against those parties. He submitted that the retainer was between HIH and Ligeti. In the alternative, he submitted that the facts show that Ligeti discharged itself as solicitor and accordingly, was obliged to hand over the documents.
[49]
The contract of insurance was not placed before the court. The Department and other relevant defendants did not have a copy. However, it was common ground between the parties that it did contain a term to the effect that the insurer had the right to take over the defence of any proceeding, and conduct it on behalf of the insured.
[50]
In those circumstances, there were two retainers as a result of the insurer retaining Ligeti to act on behalf of the Department and the other relevant defendants.
[51]
Where there is a term of a contract of insurance, that an insurer may take over the defence of the proceeding, retain its own solicitors and defend the proceeding on behalf of the insured, the insured contractually agrees to the insurer retaining its solicitors. When the insurer retains a firm of solicitors in those circumstances, there is a relationship of solicitor-client between the parties. Having retained solicitors with the permission of the insured, pursuant to contract, a solicitor-client relationship is created between the insured and the solicitors. See Groom v Crocker (1939) 1 KB 194 at 201.
[52]
In an earlier case involving the Groom v Crocker litigation, Clauson J held that when the insurer nominated the solicitors to act on behalf of the insured, the solicitors were the solicitors of the insured and were obliged to give the insured access to the documents in their possession. See In Re Crocker and Taxation of Costs (1936) Ch 696.
[53]
49 Groom v Crocker establishes that the insurers and the solicitors appointed owe a duty to the insured to have proper regard to the interests of the insured in conducting the proceedings.
[54]
In my opinion, there were retainers between Ligeti and HIH, and Ligeti and the Department and other relevant defendants, which involved rights and obligations between the various parties. I reject the submission of Mr Scott that there was no consideration for the retainer between the Department and other relevant defendants and Ligeti. Clearly, both had obligations to each other and in particular, the solicitors owed a duty of care to conduct the proceedings, taking into account the interests of the Department and the relevant defendants.
[55]
But it must be steadily borne in mind that there is a contractual relationship between the Department and other relevant defendants of the one part, and HIH of the other. See Distillers Co Bio-Chemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd [1974] HCA 3; (1974) 130 CLR 1. Hence, where the contract so provides, the insurers have the right to employ their solicitors and to decide what tactics to employ in the conduct of the action, subject to considering the interests of the insured.
If a challenge is made to the existence of a retainer, then the party challenging the retainer bears the onus of establishing the absence of it.
[58]
In Halliday v Sacs Group Pty Ltd [1993] HCA 13; (1993) 67 ALJR 678, Mason CJ quoted with approval what Dawson J said in an earlier hearing in that case at p.679. Dawson J said -
[59]
"The mere fact that a person appears on the record as the solicitor for a party does not necessarily justify the conclusion that there is a contract of retainer between a solicitor and that party. But at least where the party is aware of this and takes no steps to rectify it, then a presumption must arise that there is a contract of retainer between them. And, both in so far as the court is concerned and as between the parties to an action, the presumption that the solicitor on the record represents the party for whom he is recorded as being solicitor must surely be a strong one."
As Halliday's case confirms, the fact that an insurer engages solicitors to act on behalf of a lay client does not alter the fact that the costs incurred by the solicitor are in fact costs incurred on behalf of the insured. Mason CJ at 680, after noting that the insurer was exercising its right under the contract of insurance to conduct the litigation on behalf of the insured in the name of the insured, said -
[62]
"In that case, there is no need for the insurer to have indemnified the insured before taking over the conduct of the litigation. In such circumstances costs incurred by the solicitors retained are costs incurred on behalf of the insured."
[63]
The retainer between the solicitor and the insured, unless there is a provision to the contrary, obliges the insured to pay the legal costs incurred on its behalf. As a matter of practice, when the client insured is covered by a policy of insurance, invariably the contract of insurance will provide an indemnity for costs, which means that the costs are invariably paid directly by the insurer. But unless there is a specific provision in the agreement between the solicitor and the insured, or between them and the insurance company that the insured would not be liable for the costs, the solicitor is entitled to look to the insured for the payment of costs.
[64]
In Davies v Taylor (No. 2) (1974) AC 225, the House of Lords was concerned with a situation where a successful party to an appeal, who was covered by an insurance policy with respect to the costs, was entitled to recover costs against a defendant who was legally aided. The Legal Aid Act 1964 enabled costs to be recovered where they were incurred by a party to the proceeding. It was held that although the insurance company covered the costs, the fact was that the party incurred costs.
[65]
"In this case the solicitors, no doubt first instructed by the insurance company, were the solicitors on the record as solicitors for the respondent. They acted for him and, in the absence of proof of an agreement between him and them and between them and the insurance company that he would not pay their costs, they could look to him for payment for the work done and his liability would not be excluded by the fact that the insurance company had itself agreed to pay their costs." (Emphasis added).
[66]
This statement was quoted with approval by Mason CJ in Halliday's case, supra, at p.680.
[67]
In an earlier case of Adams v London Improved Motor Coach Builders (1921) 1 KB 495, Bankes LJ said at p.501 -
[68]
"When once it is established that the solicitors were acting for the plaintiff with his knowledge and assent, it seems to me that he became liable to the solicitors for costs, and that liability would not be excluded merely because the union also undertook to pay the costs. It is necessary to go a step further and prove that there was a bargain, either between the union and the solicitors, or between the plaintiff and the solicitors, that under no circumstances was the plaintiff to be liable for costs." (Emphasis added).
[69]
In the same case, Atken LJ summarised the rationale which is based on the premise that if a professional person is requested to do professional services by or on behalf of another, the inference is that the professional person is entitled to look to that person for his costs.
[70]
It is important to emphasise that such an inference is subject, of course, to any contrary contractual term which is binding on the parties. This is made clear by Atken LJ in the Adams case at p.502 when he said -
[71]
"It appears to me therefore that the learned judge was perfectly correct in saying that the solicitors were in fact acting as solicitors for the plaintiff. If they were so acting, they did so upon the ordinary terms applicable to a person who employs a professional man to do professional work on his behalf - namely, that he shall remunerate him. That is the prima facie obligation which at once emerges when the employment is proved. It is perfectly possible for the agreement of employment to contain a term by which the agent agrees that he will not claim remuneration from his employer, but will either do the work for nothing or claim remuneration from some third party. But in the absence of such a term - which would have to be proved by the party setting it up - the ordinary deduction from the employment of a professional man accepted in this way is that the person accepting the agent's services is bound to remunerate the agent." (Emphasis added).
[72]
That is the position here where the insurer, exercising a contractual right it had, retained solicitors to provide services for and on behalf of the Department and the other relevant defendants, and to conduct the litigation in their name. This leads to the conclusion that the solicitors have a retainer with the said clients and further, is entitled to look to those clients for their costs. This general proposition is subject, of course, to proof of any contractual term to the contrary and in the present case, there was no attempt to set up a term of any contract to the contrary, let alone prove one.
[73]
It follows that, in my opinion, Ligeti is entitled to look to the Department and the relevant defendants for the costs incurred to the point where its services were terminated.
[74]
This entitlement to costs establishes a right of lien over the documents in its possession relating to the proceeding.
[75]
It is clear on the evidence that in March 2001, Ligeti's retainers with HIH and the Department and the other relevant defendants were terminated.
[76]
The law is that if the solicitor terminates the retainer, whether there are grounds or not for termination, he is obliged to hand over the documents to the new solicitor, usually on an undertaking by the new solicitor to hold them without prejudice to the solicitor's rights to the lien, and to return them intact after the completion of the proceeding. That has been the law for many years.
[77]
In Commerell v Poynton (1818) 1 Swan 1; [1818] EngR 88; 36 ER 273, the solicitors declined to be further concerned in the proceeding. Lord Eldon LC held that in the circumstances, it was not open to the solicitor to demand payment of his costs by refusing to permit such inspection of the papers in his hands as were necessary for the proceeding.
[78]
The principle was discussed more recently in the Court of Appeal in Gamlen Chemical Co UK Ltd v Rochem (1980) 1 WLR 614.
[79]
In that case, Templeman LJ summarised the law at p.624 -
[80]
"A solicitor who accepts a retainer to act for a client in the prosecution or defence of an action engages that he will continue to act until the action is ended, subject however to his costs being paid. ... If before the action is ended, the client determines the retainer, the solicitor may, subject to certain exceptions not here material, exercise a possessory lien over the client's papers until payment of the solicitor's costs and disbursements. ... The solicitor himself may determine his retainer during an action for reasonable cause, such as the failure of the client to keep the solicitor in funds to meet his costs and disbursements; but in that case the solicitor's possessionary lien, ie his right to retain the client's papers of any extrinsic value or not, is subject to the practice of the court which, in order to save the client's litigation from catastrophe, orders the solicitor to hand over the client's papers to the client's new solicitors, provided the new solicitors undertake to preserve the original solicitor's lien and to return the papers to the original solicitor, for what they are worth, after the end of the litigation."
[81]
It was submitted on behalf of the Department and the other relevant defendants, that Ligeti terminated the retainer.
[82]
I observe that it would be extremely surprising that any solicitor, who has conducted litigation to the point that the proceeding is ready to be fixed for trial and who has a client as big as the State of Victoria, would willingly and consciously terminate the retainer.
[83]
But the submission depends upon the evidence. In my opinion, the evidence establishes beyond doubt that it was the decision of the Department and the other relevant defendants to change solicitors and terminate Ligeti's retainer. I do not dispute that HIH made it clear to Ligeti that there would be no more funds available to conduct the litigation, but the evidence shows that the clients' retainer was terminated by the clients. Accordingly, the principle based on termination does not apply.
[84]
It follows that Ligeti Partners is entitled to a lien over the documents held by it concerning the proceeding, and is entitled to enforce that lien. Accordingly, the Department and the other relevant defendants are not entitled to an order that the documents be handed over without paying the costs.
[85]
The relevant defendants' summons must be dismissed. This creates a problem. The problem is that the Department and the other relevant defendants are entitled to exercise their rights before being compelled to pay the costs of Ligeti. This may involve the preparation of a proper bill of costs, and compliance with the various statutory provisions concerning the payment of costs. Much time could pass whilst the necessary steps were being taken, and time would even be further extended if it was necessary to have the costs taxed. This could result in a substantial delay to the proceeding being set down for trial and heard.
[86]
As it is unlikely that the date for trial will be this year, justice to all parties to the proceeding would be best served if the case was fixed for trial. In the meantime, the relevant defendants can determine their course but they should not be in a position to delay the fixing of a date for trial.
[87]
1. That the first to tenth defendants' summons filed 19 June 2001 against Ligeti partners is dismissed.
[88]
2. That the first to tenth defendants (inclusive) pay the costs of Ligeti Partners of their summons.
[89]
I certify that this and the 12 preceding pages are a true copy of the reasons for Judgment of Gillard J of the Supreme Court of Victoria delivered on 2 July 2001.
Parties
Applicant/Plaintiff:
McKenzie
Respondent/Defendant:
Director-General of Conservation & Natural Resources [2001] VSC 220
Legislation Cited (1)
Legal Aid Act 1964
Cases Cited (3)
(1974) 130 CLR 1
(1996) 1 VR 518
(1993) 67 ALJR 678
AI Analysis
Outcomeprocedural
Disposition:
The first to tenth defendants’ summons against Ligeti Partners was dismissed, and they were ordered to pay Ligeti Partners’ costs of the summons.