FEDERAL COURT OF AUSTRALIA

Coshott v Coshott [2015] FCA 1284

THE COURT ORDERS THAT:

1.    There be paid out to Mr Stephen Barry and Mr Martin Board the sum of $265,911.97, calculated to 3 November 2015, together with interest at the same rate up to 23 November 2015.

2.    Mr Barry and Mr Board bring in short minutes of order specifying the final amount to be paid out to them within seven days of these Orders.

3.    Any remaining amount is to be returned to the Trustees for Sale.

4.    Mr Robert Coshott and Mrs Ljiljana Coshott pay Mr Barry’s and Mr Board’s costs of the interlocutory application filed, on behalf of Mr Barry and Mr Board, on 9 October 2015.

5.    The interlocutory application filed on 6 October 2015 by Mrs Ljiljana Coshott be dismissed with costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    On 10 September 2013, I made orders that a property at 1 Bunyula Road, Bellevue Hill be sold. One half of that property was held by the Trustee in Bankruptcy of the estate of Robert Gilbert Coshott; the other half share was owned by Mrs Ljiljana Coshott.

2    Following a judgment of a Full Court on 23 July 2014 on appeal from my earlier orders (Coshott v Prentice (2014) 221 FCR 450), I made further orders on 19 September 2014 appointing independent Trustees for Sale of the property.

3    The certificate of title to the property was held by CKB Associates Lawyers (“CKB”), a legal firm. The principals of the firm were, at the relevant time, Stephen Michael Barry and Martin Pearce Board. CKB acted for Mr and Mrs Coshott when they purchased the property as joint tenants in 2003, and retained the certificate of title after completion of the sale.

4    CKB also acted for Mr and Mrs Coshott in other matters around, and up to, that time but on 26 August 2003 the retainer was terminated. There were outstanding fees. CKB retained the certificate of title, exercising a general solicitor’s lien over it on account of the unpaid fees.

5    Over the succeeding years CKB sought assessments of their professional costs in all matters relevant to the present judgment and obtained certificates of assessment. In some cases, the assessor accepted that interest on the professional costs was also due, but in only one of those cases was interest actually quantified in the certificate.

6    Some procedural errors and omissions in the Local Court and the District Court were sought to be addressed by those Courts, on the application of CKB, to remedy the failure of cost assessors to quantify the interest due in two of those cases. To that end, one replacement judgment was issued by the Local Court and one supplementary judgment was issued by the District Court. Those judgments were set aside by the New South Wales Court of Appeal, on the application of Mrs Coshott (Coshott v Barry [2015] NSWCA 257), on the basis that the two Courts had exceeded their respective powers in giving the replacement and supplementary judgments.

7    The Court of Appeal, however, held (at [131]) that the amounts of interest could nevertheless have been recovered by a separate action at law during the currency of any applicable limitation period.

8    In other proceedings, Mrs Coshott obtained declarations that in another four cases the right to recover the debts quantified in certificates of assessment of costs had been extinguished under s 63 of the Limitation Act 1969 (NSW) (Coshott v Barry & Anor [2012] NSWSC 850). Section 63 provides:

63    Debt, damages etc

(1)    Subject to subsection (2), on the expiration of a limitation period fixed by or under this Act for a cause of action to recover any debt damages or other money, the right and title of the person formerly having the cause of action to the debt damages or other money is, as against the person against whom the cause of action formerly lay and as against the person’s successors, extinguished.

(2)    Where, before the expiration of a limitation period fixed by or under this Act for a cause of action to recover any debt damages or other money, an action is brought on the cause of action, the expiration of the limitation period does not affect the right or title of the plaintiff to the debt damages or other money:

(a)    for the purposes of the action, or

(b)    so far as the right or title is established in the action.

(3)    This section does not apply to a cause of action to which section 64 or section 65 applies.

9    For the purpose of the present case, however, the operation of s 63 may be subject to the provisions of s 68, which provides:

68    Possessory lien

Notwithstanding this Division, where:

(a)    a person is in possession of goods, and

(b)    the person has a lien on the goods for a debt or other money claim payable by a second person,

the right and title of the first person to the debt or other money claim is, as against the second person and the second person’s successors, saved from extinction under this Division for so long as a cause of action of the second person or of a person claiming through the second person for the conversion or detention of the goods or to recover the proceeds of sale of the goods has not accrued or is not barred by this Act, but only so far as is necessary to support and give effect to the lien.

10    The claims pressed on the present application concerned costs due in eight matters. In one of those matters the interest was assessed. Those claims are based on the lien, not on a separately subsisting actionable debt.

11    No claim for interest was made with respect to those matters where interest was disallowed by the costs assessor (4 matters). In one matter where interest was quantified, that was claimed up to the date specified and has been calculated by Mr Barry for the period thereafter as described hereunder. In the other three matters, where interest was allowed but not quantified, Mr Barry made a calculation at the rates prescribed by the Legal Profession Act 1987 (NSW) and the Legal Profession Act 2004 (NSW). It has not been suggested that those calculations were not accurate or proper if the original debt is properly secured by the lien.

12    In the present case, the certificate of title had never been surrendered by CKB, and its lien was unbroken. A new certificate of title had not been issued when the bankruptcy application was registered because the Registrar-General was prepared to register the bankruptcy without the production of the certificate of title.

13    The Trustees for Sale of the property, however, required the certificate of title in order to complete the sale of the property. On 14 August 2015, I ordered Mr Barry and Mr Board to deliver the certificate of title to the Trustees for Sale upon the basis that it was without prejudice to reliance on the lien and that the Trustees for Sale were to pay into Court, upon settlement, $271,807.68 on account of the lien.

14    Thus, a fund was established to replace the certificate of title as the subject of the lien and the parties were directed to make such application for payment out of that sum as they may be advised. Mr Barry and Mr Board sought an order for payment to them of their outstanding professional costs with interest quantified at $265,911.97 as at 3 November 2015.

15    The amount claimed was based on the certificates of assessment of costs as being an appropriate determination and quantification of CKB’s costs in eight matters where an assessment had been made, together with Mr Barry’s calculations of interest. Mrs Coshott and Mr Coshott (who has been discharged from his bankruptcy and claims an interest in the proceedings separate from his Trustee in Bankruptcy) resist payment of any amount. The Trustee in Bankruptcy did not oppose the amounts claimed. Fewin Pty Ltd took no part in this aspect of the proceedings. Nor did James Coshott.

16    I am satisfied that CKB’s outstanding costs have been appropriately identified as a matter of evidence, including the interest payable to 3 November 2015 and the rate of interest applied. What is really at issue is the status of the lien and whether CKB’s outstanding professional costs and interest may be recovered pursuant to it.

17    Each of the debts is statute barred by the Limitation Act, although those deemed to be judgments would still be enforceable. Some other costs assessments (not deemed to be judgments) have been found to be extinguished in their own right as a separate foundation for action.

18    However, a solicitor’s lien is in a special category. It is not a form of action. It is a passive and possessory right (see e.g. White v Bini [2003] FCA 669 at [6]). The lien is not lost if a fund in court is established to replace it. Then, the fund is available to the extent of a proper claim protected by the lien (Beneficial Finance Corporation Ltd v Conway (No 2) [1971] VR 594 at 607; The Official Trustee in Bankruptcy v Kioussis [2000] NSWSC 248).

19    In the present case, Mr and Mrs Coshott place particular reliance on s 63 of the Limitation Act to claim that any debt to which the lien relates has been extinguished. But that was not so when the lien was taken. It cannot, in my view, be defeated by mere effluxion of time.

20    Then it is said that the continued existence of the lien depends, in any event, upon the operation of s 68 of the Limitation Act, which does not apply because a certificate of title is not “goods”. I have some doubts about the first part of this argument, but it is not necessary to be delayed by them, or to resolve them.

21    In my view s 68 does apply in the present case to preserve the effect of the lien if necessary. There is no reason not to regard the certificate of title as a form of chattel, and as falling within “goods” in s 68(a) (see Kanbur Pty Ltd v Adams (1984) 3 FCR 192 at 200, 204; Chen v Gu; Chen v Nguyen [2011] NSWSC 1622 at [148]). Furthermore, it was accepted in argument that the appropriate forms of action to recover possession of the certificate of title would have been conversion or detinue. They are forms of action which concern chattels. They are expressly accommodated within the operation of s 68.

22    Then, it was argued that the condition in s 68, that the action of the “second person” not be barred, cannot be met.

23    However, I accept the submission made for Mr Barry and Mr Board that no action in conversion or detinue can be taken to have accrued, or be barred, so as to defeat the lien because each requires a wrongful dealing with goods, rather than the lawful exercise of a lien.

24    In my view, the lien remains valid and fully effective. The fund in Court is available to satisfy it.

25    I accept the amounts quantified by Mr Barry. They are each supported by the assessment of costs processes, the findings that interest was properly claimable and by the application of the appropriate statutory test for the calculation of interest. I note that two items where costs were calculated by Mr Barry, where CKB acted for Mr Coshott alone, are not pursued. The balance represents costs incurred by Mr and Mrs Coshott in respect of which a lien was available and to which effect should now be given.

26    I will, therefore, order that there be paid out to Mr Barry and Mr Board the sum of $265,911.97, calculated to 3 November 2015, together with interest at the same rate to the date of this judgment – i.e. 23 November 2015.

27    Mr Barry and Mr Board are to bring in short minutes of order specifying the final amount to be paid out to them (i.e. as at 23 November 2015) within seven days.

28    Any remaining amount is to be returned to the Trustees for Sale.

29    Mr and Mrs Coshott must pay Mr Barry’s and Mr Board’s costs of the interlocutory application.

30    On 6 October 2015, Mrs Coshott filed an interlocutory application seeking payment to her forthwith of half of the monies which I directed be paid into Court. The interlocutory application was not accompanied by any affidavit in support. The application cannot survive the findings made above. It was probably misconceived in any event. If any costs have been incurred by the respondents to this application (Messrs Barry and Board) they must be borne by Mrs Coshott.

Associate:

Dated:    23 November 2015