Solicitors:
O'Hearn Lawyers Pty Limited
Baker Love Lawyers (First Defendant)
No Appearance (Second Defendant)
File Number(s): 2019/343396
[2]
EX TEMPORE Judgment
By an amended summons filed in court today, 20 February 2020, the plaintiff, being O'Hearn Lawyers Pty Limited, seeks relief under s 138(2) of the Legal Profession Uniform Law 2014 and s 95 of the Trustee Act 1925 to the effect that they be authorised to pay into court a sum that has been held on behalf of the first and second defendant of the proceedings less an amount representing their costs.
The first defendant, Sharon Lee Barker, is a former client of the plaintiff. The second defendant, Kevin Paul Whitelum, is Ms Barker's former husband. Both of them have been served with the originating summons and the amended summons. Ms Barker submits to the orders of the court, Mr Whitelum has not appeared. Based on a statement that he made at the time of service it is clear that he disclaims any interest in the proceedings.
In around August 2007, Ms Barker engaged the services of one of a number of legal partnerships between entities that bore the business names O'Hearn Lawyers, and O'Hearn & Bilinsky Lawyers, in relation to her family law dispute with Mr Whitelum.
On 11 August 2008, the Family Court of Australia made orders pursuant to terms of settlement between Ms Barker and Mr Whitelum. Order 6 provided for the sale of a property and the distribution of the proceeds of sale according to certain priorities. Order 6(v) provided that the balance after certain payments and adjustments would be paid to Mr Whitelum. Order 7 stated that:
"In the event that the husband has not lodged his tax returns for all outstanding financial years up to and including the 2007 financial year, and provided evidence of such lodgements to the solicitors of the wife, the amount payable to the husband pursuant to order 6(v) herein is to be held in the trust account of O'Hearn & Bilinsky Lawyers, and released to the husband upon provision of such evidence of lodgement."
In his affidavit in support of the relief sought in the summons, the principal solicitor involved in those proceedings, Mr O'Hearn, explained that the order was included because Ms Barker had a Centrelink debt in her name as a result of overpayment of family tax benefit. However, it was anticipated that that debt would be reduced to nil by the lodgement of Mr Whitelum's tax returns. Thus, it seems that the moneys paid under order 7 to the plaintiff were some form of security to ensure that that would take place.
In the events that transpired, the property was sold, the proceeds were distributed and an amount of $67,760.65 was paid on or around 22 December 2008 into O'Hearn & Bilinsky's trust account. Thereafter, the plaintiff regularly sent letters to Mr Whitelum seeking his engagement with the regime made by the Family Court orders. Mr O'Hearn followed up with telephone calls. The correspondence increased throughout 2017 and 2018 all to no avail. The end result is that Mr Whitelum did not provide the required documents necessary to allow the release of the funds. Otherwise, the plaintiff was not informed that any agreement had been reached between Ms Barker and Mr Whitelum over their distribution.
Accordingly, in November 2019, the plaintiff firm filed this summons seeking orders allowing it to pay the moneys that it holds into Court less an amount for its costs. The legal basis upon which it may be entitled to do so is not entirely straightforward. Section 138 of the Legal Profession Uniform Law 2014 provides as follows:
138 Holding, disbursing and accounting for trust money in general trust account
(1) Except as otherwise provided in this Part, a law practice must -
(a) hold trust money deposited in the law practice's general trust account exclusively for the person on whose behalf it is received; and
(b) disburse the trust money only in accordance with a direction given by the person.
(2) Subsection (1) applies subject to an order of a court of competent jurisdiction or as authorised by law.
(3) The law practice must account for the trust money as required by the Uniform Rules.
Bearing in mind the terms of that section, the plaintiff approached this Court for an order which would enable it to avoid being in breach of s 138(1) if moneys were paid into court. The difficulty with that approach is of course identifying the basis upon which this Court may make an order that satisfies s 138(2). One possibility adverted to in the summons and the amended summons is the interpleader provisions in Uniform Civil Procedure Rules (r 43(2)) ("UCPR"). However, they require that the relevant stakeholder, which in this case would be the plaintiff, either have been sued, which has not happened, or have an expectation that they would be sued. Given the history of the matter, the only real expectation that Mr O'Hearn could have was that the defendants would let the matter continue to drift on.
In a different case I do not rule out the possibility that the interpleader provisions could be invoked in these circumstances by a varying so much of UCPR r 43.2(1) that requires a stakeholder to have that expectation.
In any event, in the amended summons, the plaintiff chose the wiser course of focusing upon s 95 of the Trustee Act. Section 95(1) provides:
"Where trustees, or a majority of trustees, have in their hands or under their control money or securities belonging to a trust, they may pay the same into court."
Section 138(2) provides for an exception to 138(1) where the relevant payment is "authorised by law". In my view, it is sufficiently clear that where the trustee takes the action provided for in s 95(1) of the Trustee Act, they are taking action "authorised by law". However, in doing so, they are not acting pursuant to an order of the Court. Accordingly, the appropriate relief to reflect this would be a declaration as to the capacity to do so rather than an order requiring they do so.
The more difficult question concerns the claim by the plaintiff to withhold from the payment into court and utilise for their own purposes an amount in respect of costs. Subsection 93(3) of the Trustee Act enables this Court in proceedings with respect to the management and administration of any property subject to a trust to, if it thinks fit, order any costs be paid out of such part of the property as in the opinion of the Court is the real subject matter of the proceedings. In my view, that clearly confers on this Court power in this case to order part of the corpus of the relevant trust be paid to the plaintiff. In addition, UCPR r 55.9(6) allows, on a proceeding in respect of a payment into court, this Court make an order that a person's costs be payable from the relevant money or security. The question then becomes one of quantification.
I have been provided with an itemised account setting out the various costs and expenses that have been incurred in this matter since October 2018. I have queried with the legal representative for the plaintiff the charge-out rates included. Ultimately, the amount claimed was $15,736. I took the view that it was not appropriate to require any further scrutiny of the account, but indicated that I would treat the costs as though I were assessing them effectively on a solicitor/client basis.
Although the submission was made that the full amount should be paid on the basis that the trustees would have a right of indemnity out of the fund, in the absence of more detailed evidence of the precise terms of the relevant trust upon which the moneys were held, I consider the better course is to treat UCPR 55.9(6) as enabling this Court to make its own assessment.
Bearing in mind the overall limited nature of the application, I determined an amount of $12,500 for costs as appropriate being approximately 80% of the amount claimed. I consider that amount would broadly approximate to what could reasonably be expected to be recovered on a solicitor/client basis.
Accordingly, the Court makes the following orders:
(1) The Court declares that the plaintiff may, under s 95 of the Trustee Act 1925, pay into court the net sum of $55,260.65 out of the trust amount of $67,760.60.
(2) Pursuant to s 93(3) of the Trustee Act and Uniform Civil Procedure Rules r 55.9(6), the Court orders that the plaintiff's costs be paid out of balance of the amounts held in the trust account in the amount of $12,500.
(3) The Court directs that the plaintiff serve a copy of these orders on each of the defendants by 5pm on 21 February 2020; and
(4) The Court orders that the summons be otherwise dismissed.
[3]
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Decision last updated: 26 February 2020