FEDERAL COURT OF AUSTRALIA

practice & procedure - whether solicitors, who were not parties to a proceeding, may seek relief in it after final orders, as between the parties, have been made - whether the relief sought is supplemental to the final disposition of the proceeding.

EQUITY - whether solicitors in a proceeding have an equitable interest in the judgment proceeds - whether the judgment was brought about, at least partially, by the solicitor’s efforts.

Caboolture Park Shopping Centre Pty Ltd v White Industries (Qld) Pty Ltd (1993) 45 FCR 224, referred to

Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (No 2) (1991) 28 FCR 308, referred to

Canatan Holdings Pty Ltd v Audori Pty Ltd, referred to

Ex parte Patience: Makinson v The Minister (1940) 40 SR (NSW) 96, applied

Worrell v Power & Power (1993) 46 FCR 214, referred to

Akki Pty Ltd v Martin Hall Pty Ltd (1994) 35 NSWLR 470, referred to

Kison v Papasian (1993) 61 SASR 567, referred to

Twigg v Keady (1996) FLC 92-712, referred to

Doyles Construction Lawyers v Harsands Pty Ltd, McLelland CJ in Eq unreported

24 December 1996, discussed

ROAM AUSTRALIA PTY LIMITED v TELSTRA CORPORATION LIMITED trading as TELECOM AUSTRALIA

NG 391 of 1995

LEHANE J

22 SEPTEMBER 1997

SYDNEY

REASONS FOR JUDGMENT

On 12 September 1997 Foster J made final orders in these proceedings.  His Honour dismissed the claim and the cross-claim, made no order as to costs and vacated costs orders previously made in the proceedings.  Those orders were made by consent.  Underlying them was a compromise reflected in terms of settlement signed by the parties which provided, among other things, for the payment by the respondent (Telstra) of a sum of money to the applicant (Roam).  The terms of settlement are in evidence on the motion: one of their provisions is that the parties agree to keep the terms confidential, and I shall not refer to their detail to any greater extent than is necessary to decide the motion.

The applicants on the motion (Bicknell & Monteith: I shall refer to them as the solicitors) acted for Roam in the proceedings.  They were retained in November 1995, in place of other solicitors who had previously acted for Roam.  They performed a substantial amount of work for Roam, in relation to the proceedings, over a significant period.  I shall describe some of that work in greater detail later in these reasons.  On 3 March 1997, however, the solicitors formally notified Roam that they proposed ceasing to act on its behalf in the proceedings; on 12 March 1997 they filed in the Court a notice that they had ceased to act.  The solicitors rendered accounts to Roam for costs and disbursements; Roam has paid a portion of the amount claimed in those accounts; the solicitors claim that a balance of $16,695 remains owing to them.  They claim that they have an equitable interest in the sum payable by Telstra to Roam under the terms of settlement.  By the motion they seek orders designed to ensure that they are paid out of that sum.

“Jurisdiction”

The first question which arises is whether the solicitors, who were not parties to the proceeding, may seek relief in it after final orders, as between the parties, have been made.

The order sought by the solicitors would not vary the final orders made by Foster J.  There is no doubt that the Court has power to make, after the entry of final orders, further orders which do not alter them but may be described as supplemental to them; and such orders may be made against persons who are not parties to the proceeding: Caboolture Park Shopping Centre Pty Ltd v White Industries (Qld) Pty Ltd (1993) 45 FCR 224 at 234-236. Caboolture Park was a case where, by supplemental order, solicitors who had acted for an applicant in a proceeding were ordered to pay costs for which, under the orders previously made, the applicant was liable.  That was, no doubt, a plain case of an order properly to be described as supplemental to the final disposition of the proceeding, and it was an order made against, not on the application of, a non-party.

There is, of course, nothing particularly strange or unusual in principle about a motion in a proceeding by a person who is not a party to it: a motion to set aside a subpoena is a familiar example (Federal Court Rules, O 27 r 9).  If relief sought by the non-party may properly be regarded as supplemental to, or arising out of, the final disposition of a proceeding I cannot see any reason in principle why such relief should not be sought or granted after final orders have been made: that view is consistent with the approach taken by Einfeld J in Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (No 2) (1991) 28 FCR 308.  In my view it is proper to regard an order, sought by a solicitor to enforce a claimed equitable interest in a debt under a judgment entered in a proceeding or under a compromise of it, as supplemental to the final orders: that view must, I think, underlie the decision of Einfeld J in Canatan Holdings Pty Ltd v Audori Pty Ltd, 22 February 1995 unreported.  That case, for present purposes, is indistinguishable from the present.  Judgment was entered, and an order for costs made, in favour of an applicant in proceedings under the Trade Practices Act 1974.  After final orders had been made, the solicitors who had acted for the successful applicant applied, by motion in the proceeding, for orders intended to enforce their right to receive, out of the proceeds of the costs order, costs and disbursements which, they claimed, the successful applicant owed them.

For those reasons the solicitors are, in my view, entitled to seek the relief which they claim by motion in the proceeding, and although final orders have been made.

The solicitors’ claimed equitable interest

The general principle is now well established:

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...

Ex parte Patience: Makinson v The Minister (1940) 40 SR (NSW) 96 at 100 per Jordan CJ.  The Full Court of this Court approved and applied Patience in Worrell v Power & Power (1993) 46 FCR 214 at 223, 224.  It has been applied in several later decisions: they include Akki Pty Ltd v Martin Hall Pty Ltd (1994) 35 NSWLR 470 at 474; Kison v Papasian (1993) 61 SASR 567; Twigg v Keady (1996) FLC 92-712; Doyles Construction Lawyers v Harsands Pty Ltd, McLelland CJ in Eq          unreported 24 December 1996.

Patience and the cases which have followed it make a number of things clear.  First, the principle applies equally to judgments and compromises; secondly, the right does not depend upon any intervention by the Court, the assistance of which “is invoked not to create the rights but to enforce them (Patience at 101); thirdly, the amount which a solicitor is entitled to recover out of the judgment debt or amount owing under the compromise is the amount of costs and disbursements which the solicitor is entitled to recover from the client (no doubt that entitlement may depend upon agreement, taxation or assessment) and the claim may be asserted even though the precise amount to which the solicitor is entitled has not, by the appropriate means, been ascertained: Patience at 105; Twigg at 83,552; Canatan.

The right appears to be based upon the fact that the solicitor was “instrumental” in obtaining the judgment or compromise (Patience at 103) or (Worrell at 224) that the judgment or compromise has “come about by reason of [the solicitor’s] exertions”.  The entitlement may, nevertheless, arise although the solicitor’s exertions came to an end before the judgment was obtained or the compromise negotiated.  In Twigg, the solicitors acted in property settlement proceedings under the Family Law Act 1975 for some years, but ceased to act about 13 months before judgment in the proceedings was obtained.  Their claim was, nevertheless, upheld.  In Doyles the solicitors acted in District Court proceedings.  The proceedings were settled by an agreement negotiated directly between the parties.  The solicitors were not involved.  The agreement provided for payment to the solicitors’ client of $40,000.  Shortly after the agreement was made, but before any payment was made under it, the solicitors ceased to act.  McLelland CJ in Eq (at 4) said this:

It was submitted... that there was no sufficient causal link between work that Doyles had done in relation to the proceedings and the ultimate settlement, since the March settlement agreement was negotiated directly between the parties and Doyles had ceased to act before the ultimate settlement was negotiated.  In my opinion it is unnecessary for Doyles to demonstrate that the settlement came about as the result of specific efforts by them.  According to the statement of principle [in Patience]... it is sufficient to give rise to the equitable right that the settlement resulting in payment to the client came about as a result of the legal proceedings and that the solicitor had acted for the client in those proceedings, this being treated as a sufficient causal link.

I do not think it follows that solicitors will always, in a case where they have acted for a party to proceedings in which ultimately a judgment is obtained, or which are compromised, obtain an equitable interest in the judgment or settlement proceeds commensurate with the amount they are owed for costs and disbursements, no matter how slight or fleeting their participation may have been or even if they acted only for a short period after the commencement of proceedings later conducted by others through interlocutory procedures and trial to judgment.  In each case, in my view, it must be a question whether the requisite causal link is established, whether the judgment or compromise is, on the evidence, to be regarded as brought about (or partially brought about) by the efforts of the solicitors.  In Doyles the causal link was not difficult to see: although others had acted for the plaintiffs at earlier stages in the proceedings, Doyles acted for a period of about ten months up to, and overlapping with the time when the compromise was negotiated.  Though they were not involved in the negotiation, no doubt they could be seen to have carried the litigation to the point where a successful negotiation could take place.  In  Twigg (see the judgment of Finn J at 83,562) it was admitted on the pleadings that work had been done by the solicitors towards the attainment of the judgment.  Where solicitors have been actively involved over a considerable period in acting for a party to successful litigation, the conclusion is likely to follow that the solicitors have been instrumental in obtaining the result, or that the result is (at least in part) due to the solicitors’ efforts.

The only evidence before me of the work undertaken by the solicitors in this case is that of Mr Monteith, one of the solicitors.  Roam did not lead or tender any evidence, and there was no challenge to any of the factual matters stated by Mr Monteith.  It is appropriate, therefore, to proceed on the basis that Mr Monteith’s evidence is correct.  On that footing, the solicitors received instructions in November 1995, some five months after the proceedings had been commenced.  They continued to act in the proceedings for about 16 months, ceasing to do so shortly before trial.  They ceased to act because they chose to terminate their retainer, in circumstances where, on Mr Monteith’s evidence, they were told that Roam was not in the position to pay sums required to meet the solicitors’ costs and counsels’ fees.  They briefed counsel from time to time, they attended directions hearings, they attended to discovery and inspection and obtained affidavit evidence; they acted for Roam on a mediation, which failed to achieve settlement; they took part in some further unsuccessful settlement negotiations. 

On that evidence, and consistently with the authorities, I cannot resist the conclusion that the solicitors were instrumental in obtaining the compromise which led to the final orders.  No suggestion was made that anything turns on the precise terms of the compromise or on any comparison between those terms and the relief which had been claimed by Roam in the proceedings.  Certainly nothing in the authorities suggests that any such comparison is relevant: the questions seem to be, first, did the proceeding result in a judgments award or compromise under which money is payable to the party for whom the solicitors acted; and, secondly, was the part played by the solicitors sufficient to justify the conclusion that there is a sufficient causal link between the solicitors’ efforts and the result, so that the solicitors may be regarded as having been instrumental in obtaining the result.  Applying those tests, I think the solicitors’ motion succeeds.

Conclusion

There is then the question of the orders to be made.  It is, I think, inappropriate, in the absence of taxation or assessment, and of agreement as to the amount owing, to order payment of any sum to the solicitors.  Certainly (subject to the question of the costs of this motion) Roam is entitled to so much of the amount payable by Telstra as exceeds $16,695, the amount claimed by the solicitors.  An appropriate arrangement may be that the sum of $16,695 be placed in a joint interest-bearing account pending ascertainment, by the appropriate means, of the amount which the solicitors are owed.  If there is no agreement on some such arrangement, then the appropriate order is, I think, that the sum of $16,695 be paid into Court pending ascertainment of the amount owing.  Clearly the process of ascertainment should be undertaken without delay.  Finally, Roam should pay the solicitors’ costs of the motion, and the authorities indicate that the solicitors’ interest in the sum payable under the compromise includes those costs.  It may, accordingly, be appropriate to add an amount, representing those costs, to the sum to be set aside from the settlement proceeds.

I shall, when I deliver these reasons, invite submissions as to the way in which orders to give effect to my conclusions may conveniently be settled.

Associate:

Dated:              22 September 1997