Plaintiff v Defendant

3 A fruits of litigation lien is an equitable right which may be exercised by a lawyer to safeguard his or her rights to recover recompense for the work done in securing the judgment or settlement.

4 Although CTT has such a right in the circumstances of this case I am not prepared to make orders enforcing that right.

5 For the purpose of this application, I adopt the factual matters I set out in Karam v Palmone Shoes Pty Ltd (No 3),[2] to which I add the following.

6 Mr Karam engaged at least six firms to act for him in relation to his cancer and asthma claims against his former employer, Palmone Shoes Pty Ltd. CTT acted for Mr Karam from April 2008 to May 2009. In May, Aloe & Co Pty Ltd (Aloe) took over the conduct of the file. Lennon Mazzeo was retained in late September 2009 until about 20 November 2009. Aloe was then re-engaged and acted for Mr Karam in the trial of both claims[3] before T Forrest J. The trial concluded on 11 December 2009. Judgment was handed down on 18 January 2010: the cancer claim was dismissed and the asthma claim was successful.

7 Both Lennon Mazzeo and Aloe sought liens over the judgment amount in the asthma claim. His Honour made declarations that both firms had liens over the judgment sum and made orders on 23 February 2010 which, inter alia, set out the process for the distribution of funds held by the Court. CTT made no application at that time. His Honour's orders were as follows:

(a) There be judgment for the Defendant in proceeding S CI 2009 09113.

(b) The Plaintiff pay the Defendant's costs of the proceeding in matter S CI 2009 09113.

(c) The payment of those costs is stayed until the resolution of the appeals by the Plaintiff relating to both matters.

(d) There be judgment for the Plaintiff in proceeding S CI 2009 09926 in the sum of $196,315.00.

(e) The Defendant pay into Court the proceeds from the judgment sum in proceeding S CI 2009 9926, to be held by the Senior Master or his equivalent pursuant to s 113(1) of the Supreme Court Act 1986.

(f) Each party bear their own costs of proceeding S CI 2009 09926 pursuant to s 134AB(28)(d) of the Accident Compensation Act 1985.

(g) I declare Lennon Mazzeo Lawyers have a lien over the proceeds of the judgment sum of proceeding S CI 2009 09926.

(h) I declare Aloe & Co Pty Ltd have a lien over the proceeds of the judgment sum of proceeding S CI 2009 09926, such lien not to include any legal fees relating to proceeding S CI 2009 09113 but to include disbursements for that proceeding and their costs and disbursements of proceeding S CI 2009 09926.

(i) Pursuant to s 134AB(30) of the Accident Compensation Act 1985 Lennon Mazzeo Lawyers are entitled to such costs as are agreed or allowed by the Taxing Master in respect of their representation of the worker in proceeding S CI 2009 09113.

(j) Pursuant to as 134AB(30) of the Accident Compensation Act 1985 Aloe & Co Pty Ltd are entitled to such costs as are agreed or allowed by the Taxing Master in respect of their representation of the worker in proceeding S CI 2009 09113, such costs not to include any legal fees relating to that proceeding but to include disbursements relating to that proceeding.

(k) Such amount is as approved upon the taxation of Bills of Costs rendered by Lennon Mazzeo Lawyers and Aloe & Co Pty Ltd in relation to both proceedings be paid to those firms from the proceeds of proceeding S CI 2009 09926 that are held in Court.

(l) The costs of Lennon Mazzeo Lawyers and Aloe & Co Pty Ltd arising out of this application for costs be paid from the proceeds of proceeding S CI 2009 09926 that are held in Court.

(m) I stay the operation of orders 4 to 12 until the resolution of the appeals.

8 When Aloe assumed conduct of the proceedings from CTT (in order to gain access to the CTT file), on 8 May 2009, by way of fax to CTT, Mr Aloe on Mr Karam's behalf undertook to pay CTT $21,405 for fees and disbursements relating to the asthma case and statutory entitlements[4] at the conclusion of the proceedings. That undertaking remains in force.

9 In T Forrest J's reasons concerning costs, the following appears as to the agreement between CTT and Mr Aloe:

Aloe assumed responsibility for the conduct of the asthma case from Clarke Toop, the plaintiff's third or fourth firm of solicitors. In order to gain access to the Clarke Toop file, Mr Aloe, on the plaintiff's behalf, agreed to pay Clarke Toop $21,405 for fees and disbursements relating to the asthma case "and no fault entitlements". Such sum was payable "at the conclusion of the proceedings".[5]

10 In September 2010, Lennon Mazzeo's costs were taxed at $166,123; in September 2014, Aloe's costs were taxed at $143,392.

11 On 30 September 2010, Ms Toop had a bill of costs in taxable form (the untaxed bill) prepared. It amounts to $58,992.47 (inclusive of disbursements). It has not been taxed. Nor has the claim for costs by CTT in the Magistrates' Court been pursued.

12 Because of the multiple pieces of litigation initiated by Mr Karam, there was considerable delay in the solicitors realising their liens. In 2015, Lennon Mazzeo issued a summons for payment out of Court of the sum of $106,123.

13 CTT gave notice to the Court of its current application by way of email to T Forrest J's associate on 7 August 2015. Ms Toop's affidavit sworn 10 August 2015 indicated a desire to be joined to the application of Lennon Mazzeo and Aloe, and to make an application to vary the orders made in the 2010 decision to enable CTT to be included in the distribution of funds.

14 On 11 August 2015, on the application by Lennon Mazzeo, Lansdowne AsJ made orders to the following effect:

(a) an amount equivalent to 57.47% of the balance and interest of the judgment sum of the asthma proceedings paid into court be paid to Aloe; and

(b) an amount equivalent to 42.53% of the balance and interest of the judgment sum of the asthma proceedings paid into court be paid to Lennon Mazzeo.

15 Ms Toop appeared at the application before Lansdowne AsJ. The orders mention undertakings made by both Aloe and Lennon Mazzeo to repay the money into Court within seven days of an order requiring repayment. These effectively acknowledge the putative right of CTT to a lien and any subsequent readjustment of payment out of the funds in court. At that time, the amount held was in the order of $250,000. It has been distributed in accordance with the orders, subject to the undertaking being called upon.

16 CTT now seeks a declaration of a lien in its favour over the judgment sum by the Court in partial satisfaction of its costs in acting for Mr Karam. CTT also seeks an order that, following taxation of its costs, CTT be paid a proportionate sum for these costs from the judgment sum which was distributed on 11 August 2015.

17 This application was not opposed by Aloe. However, Lennon Mazzeo vigorously opposed any orders in CTT's favour.

18 CTT submitted that the resolution of the asthma proceeding was directly and causally related to its efforts. Accordingly, applying the principles established by, amongst other authorities, Ex parte Patience; Makinson v The Minister,[6] and Simpson v Rowe,[7] CTT argues that it is entitled to a declaration of a lien over the judgment sum.

19 In an affidavit sworn 8 April 2016 , Ms Toop says that she had been informed by Mr Aloe that CTT 'would be included in any distribution of funds payable at the conclusion of the matter.' Ms Toop said that she only became aware of the 2010 decision (and the liens declared in favour of Aloe and Lennon Mazzeo) in July 2015 when she was informed by Mr Aloe 'that he had unsuccessfully attempted to include my costs and disbursements as a disbursement in his own bill of costs'.

20 The reference to 'my costs and disbursements' is to the untaxed bill. In precis, the untaxed bill sets out all of the work undertaken by CTT on Mr Karam's asthma, cancer and statutory benefits claims from 15 April 2008 until 1 May 2009.

21 Ms Toop also asserts that CTT did not oppose the application heard before Lansdowne AsJ to have the judgment sum paid out on the basis of its view that the undertakings given by Lennon Mazzeo and Aloe 'would enable a pro-rata payment from those funds should my firm be permitted to claim a lien.'

23 Lennon Mazzeo argued that CTT ought not be a beneficiary of the monies paid into court because:

(a) obtaining the undertaking from Aloe constituted an election to pursue that path to recovery and, accordingly, a waiver of its rights to enforce the lien;

(b) equity would not be done to allow CTT to access the funds in circumstances where it has delayed bringing the application to protect its interests; and

(c) the untaxed bill of costs failed to differentiate between the various claims: cancer, asthma and statutory benefits under the Accident Compensation Act ('statutory benefits'), therefore there was insufficient precision for a lien to be granted.

24 Fundamentally, Lennon Mazzeo argues that CTT is unable to claim any sum in excess of the $21,405 which was the subject of the undertaking.

25 Lennon Mazzeo submitted that the intervention of the Court was not required to protect CTT's costs, as the undertaking constituted an undisputed obligation on Aloe to pay the agreed sum for CTT's fees and disbursements regarding the asthma claim (and no fault entitlements). Accordingly, CTT cannot now have an entitlement to claim nearly $59,000, as it has already agreed to accept a lesser sum pursuant to the undertaking.

26 I should add that there was no appearance by My Karam at the hearing of this application. Mr Karam filed 'submissions' on 15 April 2016. In summary, Mr Karam argued that because of the undertaking, the application by CTT is invalid and constitutes an abuse of process of the Court.

27 It has long been accepted that solicitors have the right to claim a 'fruits of judgment' lien for the product of work performed.[8] The principles by which such a lien arises and is enforced were stated in Patience, as follows:

A solicitor has no lien for his costs over any property which has not come into his possession. If, however, as the result of legal proceedings in which the solicitor has acted for the client, the client obtains a judgment or award or compromise for the payment of money, although the solicitor acquires no common law title to his client's right to receive the money or to any part of that right, he acquires a right to have his costs paid out of the money, which is analogous to the right which would be created by an equitable assignment of a corresponding part of the money by the client to the solicitor. That is to say, the solicitor has an equitable right to be paid his costs out of the money; and if he gives notice of his right to the person who is liable to pay it, only the solicitor and not the client can give a good discharge to that person for an amount of the money equivalent to the solicitor's costs. If the person liable to pay refuses, after notice, to pay the costs of the solicitor, the solicitor may obtain a rule of Court directing that the amount of his costs be paid to him and not to the client; and payment by the judgment debtor to the client after notice of the solicitor's claim is no answer to an application for such a rule. Further, if the client and a judgment debtor make a collusive arrangement for the purpose of defeating the solicitor's right, the Court will enforce that right against the judgment debtor notwithstanding the arrangement and notwithstanding that no notice of the solicitor's claim had been given to the judgment debtor prior to the arrangement. These special rights have no resemblance to a solicitor's general possessory lien, although they are sometimes miscalled liens. In Barker v St Quinton Parke B said that 'the lien which an attorney is said to have on a judgment (which is, perhaps, an incorrect expression) is merely a claim to the equitable interference of the Court to have that judgment held as security for his debt', a remark which is reproduced in Chitty's Archbold, and has been repeated in many later authorities. In practice, however, the solicitor has always been treated as possessing equitable rights in the judgment independently of any declaration of those rights, and the Court's assistance is invoked not to create the rights but to enforce them.[9]

28 There is another matter that must be recognised on this application. A solicitor's right only extends to work performed on the proceeding in which the judgment sum has been obtained - not to work generally undertaken for the client's benefit, or on other matters. As the Court of Appeal said in Carew Counsel v French:[10]

Thus the fund in respect of which the lien arises is the fund represented by the fruits of the labours exercised by the solicitor in recovering it. The charge on the fund represented by the "particular" lien arises immediately upon the recovery of the monies through the exertions of the solicitor and should be distinguished from rights which might arise through a solicitor's exertions in respect of other matters. However, for the right to arise, it must be shown that there is a sufficient causal link between the solicitor's exertions and the recovery of the fund. In each case, that is a question of fact. The costs which are protected by the lien will not only include the costs incurred in recovering the judgment, but also those "immediately incidental thereto".[11]

29 It is not in dispute that CTT performed work for Mr Karam in the asthma proceeding. Accordingly, as counsel for Lennon Mazzeo conceded, CTT has an equitable right over the judgment sum in the asthma proceeding, such rights not requiring a declaration of the Court.

30 But that is not the end of the matter. The Court has a discretion as to whether or not to enforce such rights.[12]

31 A solicitor may call upon the Court to enforce an asserted right where there is a 'significant' or 'appreciable' risk that he/she will not be paid their costs from the judgment sum.[13] The Court should use its discretion only where it is truly necessary. As Groves J recently observed:

In my view, the intervention of the Court needs to be attracted by demonstration of a requirement for protection or, put another way, an appreciable risk that the plaintiff may be unable to recover his costs from the settlement monies. There needs to be genuine utility (and dispute, other than simply whether or not the plaintiff's contention can be endorsed) in order to attract the discretionary remedy of declaratory relief.[14]

32 At the risk of justifiably being accused of repetition, I restate the three points that emerge out of the authorities:

(a) first, the discretionary nature of the remedy;

(b) second, the need for the applicant to demonstrate that there is an appreciable risk that the solicitor will not be able to recover his/her costs absent the aid of the Court; and

(c) third, the need for an applicant to demonstrate that the amount sought to be protected by the Court is related to the work performed by the lawyer on the matter which is the subject of the judgment.

33 For the following reasons, there should be no equitable relief.

34 First, CTT and Aloe reached an agreement for the payment of a sum in relation to CTT's costs of the asthma claim. As far as I can tell, the untaxed bill of $58,992.47 (including disbursements) relates to CTT's work done for Mr Karam on the asthma claim, the cancer claim, and the statutory benefits claim. It is completely unclear what specific amount is attributable to the asthma claim.. Ms Toop has not specified the amount which CTT now claims in relation to the asthma claim; we merely know that an amount, presumably in excess of that provided for by the undertaking, is sought.

35 The deal with Aloe is for approximately $21,000. It may be the case that, when the agreement was made between CTT and Aloe, Ms Toop made an error as to the proportion of work performed on the asthma claim, or, for that matter, on her work generally. Indeed, Ms Toop said that she provided an 'off the cuff estimate' to Aloe at the time. But, absent duress or other vitiating conduct, it is not the role of the Court to correct errors made by solicitors in their private dealings with each other.

36 What matters is that there is no firm evidence that an appreciable risk exists that CTT will be unable to recover its costs for work undertaken in relation to the asthma claim over and above that secured by the undertaking. The onus rests on CTT to establish that the deal with Mr Aloe would lead to a shortfall of costs associated with the asthma claim, and that declaratory relief is necessary.

37 It was submitted by Aloe that for Aloe to now be solely responsible for CTT's costs would be inequitable and would result in Lennon Mazzeo 'being unjustly enriched.' This submission has no basis. At the time of entering into the agreement with Lennon Mazzeo as to payment out of the fund, Aloe could have been in no doubt that its client, Mr Karam, had a potential indebtedness to CTT. The agreement was on behalf of Mr Karam and not for Aloe's benefit.

38 It was argued by Lenno Mazzeo that by entering into the deal with Aloe, CTT made an election not to pursue its right to equitable relief.[15]

39 An election occurs where a person has two truly alternative rights or sets of rights and, with knowledge of the facts giving rise to the inconsistent rights, elects to pursue one of them (which is inconsistent with the exercise of the other right).[16]

40 I doubt whether this was a true election - it is clear that CTT had two options, and it chose one (the undertaking), but not to the exclusion of the other potential rights.

41 The argument does, however, reveal a potential inconsistency which should also militate against equitable intervention. If the right to the lien over the full amount claimed by CTT is recognised and the subject of recovery, then, assuming CTT also recovers the amount owed to it by Aloe, it may well obtain double recovery or, at least, a disproportionate amount for work performed on the asthma claim as compared to that recovered by the other two firms. Of course if CTT, in its application, had proved exactly what work it had done on the asthma claim and only sought the differential between that amount and the amount secured by the deal it struck with Aloe, then there may not be an inconsistency. But it did not.

42 Next is the question of delay which, in and of itself, is generally insufficient to defeat equitable rights.[17] The question here is: has the delay given rise to a situation in which it would now be unjust for CTT to be granted the relief sought; or, conversely, it would not be inequitable to deny the relief sought by CTT.[18]

43 This normally occurs if, by the delay, the applicant:

(a) has acquiesced to the respondent's conduct;

(b) caused the respondent 'to alter his position in reasonable reliance on the plaintiff's acceptance of the status quo';[19] or

(c) in some other way allowed 'a situation to arise which it would be unjust to disturb'.[20]

44 The classic statement of these principles is that of Lord Selborne:

Now the doctrine of laches in Courts of Equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.[21]

45 CTT was in a position to make an application for a lien, as the other two firms did, at the end of the trial before T Forrest J. This is not uncommon. CTT did not appear and seek a lien. It did not oppose the application made by Lennon Mazzeo and Aloe as to the existence of their liens.

46 So, both Aloe and Lennon Mazzeo acted promptly to protect their rights to equitable liens - they made applications to be heard; attended Court and made submissions; and ultimately had their rights determined. I readily infer that no application was made by CTT because of the deal it had done with Aloe. CTT was, until August 2015, content to rely on this arrangement as sufficient protection of its interest in relation to work performed for Mr Karam on the asthma claim. For reasons that have never been properly articulated (other than a comment that the estimate for the purpose of the deal was made 'off the cuff'), CTT now seeks equity to intervene and provide it with a greater allowance.

47 Finally, it is clear, I think, that CTT's conduct did not give rise to an equitable estoppel. For the sake of completeness, it is not necessary to go past the High Court's recent statement of principle to conclude that this concept has no application in the circumstances of this case. In Sidhu v Van Dyke,[22] the Court said:

In point of principle, to speak of deploying a presumption of reliance in the context of equitable estoppel is to fail to recognise that it is the conduct of the representee induced by the representor which is the very foundation for equitable intervention. Reliance is a fact to be found; it is not to be imputed on the basis of evidence which falls short of proof of the fact. It is actual reliance by the promisee, and the state of affairs so created, which answers the concern that equitable estoppel not be allowed to outflank Jorden v Money by dispensing with the need for consideration if a promise is to be enforceable as a contract.

48 Here, there is no evidence that Lennon Mazzeo, on whose behalf it was said the estoppel operated, placed any reliance on the actions of CTT in its dealings with Aloe or in CTT not prosecuting its rights to a lien more expeditiously.

49 In summary, CTT is not entitled to the Court's intervention. For four and a half years it relied upon the undertaking with Aloe to protect its interest. It then appeared at the door of the Court when the final adjustment of the rights between the other lawyers (who had, in contrast, acted promptly, prudently and effectively) was about to be determined. It failed to identify what amount, if any, it was owed for work done on the asthma claim. It did not attempt to calculate what amount, if any, it was owed on the asthma claim over and above that provided for by the arrangement with Aloe. Inevitably, if granted, CTT's entitlement would diminish the monies paid to the two firms who acted efficiently. It would be unjust to grant CTT the relief it seeks in these circumstances.

[1] CTT was formerly known as Clark Toop and Taylor.

[2] [2016] VSC 228.

[3] See Karam v Palmone Shoes Pty Ltd (No 2) [2010] VSC 82, [11.1] - [11.14].

[4] This expression, I assume, refers to the claim in the County Court for payment of compensation under the Accident Compensation Act. It is used interchangeably with the expressions 'no fault entitlements' and 'statutory benefits'.

[5] Karam v Palmone Shoes Pty Ltd (No 2) [2010] VSC 82, [11.10] (citation omitted).

[6] [1940] NSWStRp 11; (1940) 40 SR (NSW) 96 ('Patience').

[7] [2011] VSC 140.

[8] Groom v Cheesewright [1985] 1 Ch 730, 732 (Kekewich J).

[9] Patience [1940] NSWStRp 11; (1940) 40 SR (NSW) 96, 100-1 (citations omitted).

[10] (2002) VR 172.

[11] Ibid 187, [33] (citations omitted).

[12] G E Dal Pont, Law of Costs (LexisNexis Butterworths, 3rd ed, 2013) 916 [27.6].

[13] Mercer v Graves (1872) LR 7 QB 499, 503; Patience [1940] NSWStRp 11; (1940) 40 SR (NSW) 96, 108; Johns v Cassel (1993) FLC; Clifford Harris & Co v Solland International Ltd [2005] 2 All ER 334, [23]. More recently see: Batrouney v Forster [2016] VSCA 80, [120]

[14] Doyles Construction Lawyers v D'Jamirze [2004] NSWSC 507, [18].

[15] Noting that the term 'election' is used to refer to three distinct doctrines: the common law doctrine of election, the doctrine in relation to remedies, and 'equitable election'.

[16] Sargent v ASL Developments Ltd 131 CLR 634 at 641, 645-6 and 655-6 and 658; Commonwealth v Verwayen [1990] HCA 39; 170 CLR 394 at 407-8 and 421; Khoury v Government Insurance Office (NSW) [1984] HCA 55; 165 CLR 622 at 633-4.

[17] J McGhee (ed) Snell's Equity (Sweet & Maxwell, 33rd ed, 2015) 93, 5-011. Jones v Stones [1999] EWCA Civ 1379; [1999] 1 WLR 1739.

[18] J McGhee (ed) Snell's Equity (Sweet & Maxwell, 33rd ed, 2015) 93, 5-011; Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221.

[19] R P Meagher, J D Heydon, M J Leeming, Equity doctrines and remedies (LexisNexis Butterworths, 4th ed, 2002) 1031 [36-005].

[21] Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221, 239-240 (emphasis added).

[22] [2014] HCA 19; 251 CLR 505, 522-523, [58] (French CJ, Kiefel, Bell and Keane JJ).