Supreme Court New South Wales Medium Neutral Citation: Ferrer Lawyers Pty Ltd trading as Ferrer Lawyers ACN 641 830 873 v Khanchedar [2023] NSWSC 1085 Hearing dates: 14 August 2023 Decision date: 08 September 2023 Jurisdiction: Equity - Duty List Before: Robb J Decision: See [33]-[34]. The parties are to provide appropriate short minutes of order to the Associate to Robb J. Catchwords: LAND LAW – caveats – extension of caveats – where plaintiff seeks an extension of the caveat it had lodged against the title to the property of the first defendant – whether there is a serious question to be tried – whether the balance of convenience favours an order being made for the extension of the caveat – held that there is a serious question to be tried – held that the balance of convenience favours the Court declining to make an order for the extension of the caveat upon the first defendant providing an adequate alternative security to the plaintiff – orders to be made for the removal of the caveat if the first defendant establishes an alternative security in the form of a fund of $45,000 EQUITY – equitable remedies – solicitors' liens – where plaintiff asserts a solicitors' lien over the first defendant's matter file to secure payment of outstanding costs and disbursements incurred under a retainer and payment of costs incurred in seeking to recover the currently outstanding costs and disbursements – held that plaintiff is not entitled to assert a solicitors' lien in respect of costs incurred in seeking to recover the currently outstanding costs and disbursements – orders to be made for the return of the matter file to the first defendant's solicitors if the first defendant establishes an alternative security in the form of a fund of $45,000 Legislation Cited: Civil Procedure Act 2005 (NSW), s 60 Legal Profession Uniform Law (NSW), s 472 Real Property Act 1900 (NSW), s 74K Cases Cited: Bechara t/as Bechara & Co v Atie [2005] NSWCA 268 Bell Lawyers Pty Ltd v Pentelow (2019) 269 CLR 333; [2019] HCA 29Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd [2021] NSWCA 148 Sithakoul v Su [2022] NSWSC 132 Strikis v Legal Services Commissioner [2012] NSWADT 68 Sutherland v Vale [2008] NSWSC 759; (2008) 14 BPR 26,255 White v Bini [2003] FCA 669 Category: Principal judgment Parties: Ferrer Lawyers Pty Ltd trading as Ferrer Lawyers ACN 641 830 873 (Plaintiff) Majid Ali Khanchedar (First Defendant) Macquarie Bank Limited ACN 008 583 542 (Second Defendant) Representation: Counsel: T Fermanis (Plaintiff) I Chatterjee (First Defendant) Solicitors: Ferrer Lawyers (Plaintiff) Shore Lawyers (First Defendant) File Number(s): 2023/00251853 Publication restriction: Nil JUDGMENT 1. By summons filed in the Duty List on 8 August 2023, the plaintiff, Ferrer Lawyers Pty Ltd trading as Ferrer Lawyers, sought as final relief a declaration that the first defendant, Majid Ali Khanchedar (the defendant), had charged his interest in a property at Glenmore Park (the Property) with the due payment of the sum of $22,084.42, together with consequential relief by way of judgment for $22,084.42 and orders to enforce the charge. 2. As interlocutory relief, the plaintiff sought an order pursuant to s 74K of the Real Property Act 1900 (NSW) extending a caveat that the plaintiff had lodged against the title to the Property. 3. The plaintiff's interlocutory application was heard before me as Duty Judge on 14 August 2023. 4. The sum of $22,084.42 claimed by the plaintiff is the balance of the legal fees and disbursements rendered by the plaintiff for acting for the defendant in proceedings in the Federal Circuit and Family Court of Australia (Division 1) at Parramatta (the Division 1 Court), in which the defendant in these proceedings was the respondent. Those proceedings were determined by the award of an arbitrator made on 8 February 2023 and consequential orders made by a Registrar on 28 June 2023. The orders include a requirement that the defendant pay a sum of money to the applicant in those proceedings within 90 days of the award becoming effective, failing which the Property was required to be sold on certain terms and conditions to enable the amount required to be paid to the applicant to be paid. 5. The defendant has apparently already paid a large sum in legal fees and disbursements to the plaintiff. The plaintiff's Office Ledger Account Report as at 6 August 2023 appears to record that the defendant has been debited with costs and disbursements in the total amount of $385,321.82, and that $363,237.40 has been paid, leaving the balance of $22,084.42. 6. The defendant needs to borrow funds on the security of a mortgage over the Property to pay the amount required under the orders of the Division 1 Court and to avoid the requirement to sell the Property. The caveat that is the subject of the plaintiff's interlocutory application is preventing the registration of the proposed mortgage on the title to the Property. 7. On 4 August 2023, the plaintiff received a lapsing notice that the first defendant caused to be issued. 8. For the purposes of the interlocutory application, the defendant accepted that, by clause 7 of the letter of engagement between himself and the plaintiff, he charged all his right, title and interest in any land he then or thereafter owned with the performance of his obligations under the letter of engagement, and he consented to the registration by the plaintiff of a caveat against the title to such land to protect the charge created by the letter of engagement. 9. Counsel for the defendant at the hearing reserved the defendant's right at any final hearing to argue that he was not bound by this charge because the plaintiff had failed to comply with its fiduciary obligation to him to avoid conflicts of interest between itself and the defendant, in that the plaintiff had not adequately explained the effect of the charging provision. 10. The defendant also accepted on this basis that the letter of engagement was to be read with a document called "Terms of Engagement", clause 5.1(e) of which had the effect that the costs incurred by the plaintiff, including its own costs incurred in the course of collecting any overdue account, were payable by the defendant to the plaintiff, and so were included in the defendant's "obligations under this Letter of Engagement" and accordingly secured by the charge. 11. The plaintiff has also asserted a lien over its file in order to secure payment by the defendant of the outstanding costs and disbursements and the recovery costs claimed by the plaintiff. 12. The defendant proposes to institute a costs assessment process in respect of all of the legal costs and disbursements paid to or claimed by the plaintiff. 13. Not only does the defendant need the caveat to be withdrawn to enable him to make the payment to the applicant required by the orders made by the Division 1 Court, he also apparently requires access to the plaintiff's file in order to comply with other orders made by the Division 1 Court that were not fully identified. Finally, it was said that the defendant needs access to the file in order to obtain advice from his current solicitors so that he will be able to take a considered approach to the institution of a costs assessment. 14. The defendant has paid $24,000 into his current solicitors' trust account for the purpose of providing alternative security to the plaintiff instead of the caveat against the title to the Property and the plaintiff's lien over its file. The amount offered by the defendant to provide alternative security to the plaintiff is therefore a greater amount than the claim by the plaintiff for its outstanding costs and disbursements. 15. The defendant has not made a formal application under s 472 of the Legal Profession Uniform Law (NSW) for the delivery of the plaintiff's file, but the plaintiff was content for the defendant's application to be dealt with at the hearing. 16. The issue between the parties has arisen because the plaintiff requires not only alternative security to cover its outstanding claim for costs and disbursements of $22,084.42, but also what it claims to be its costs to date of seeking to recover the outstanding amount, being a sum of $28,696.43. That amount is made up of the following components, according to the plaintiff's letter to the defendant's current solicitors dated 11 August 2023, which was an annexure to the defendant's solicitor's affidavit read at the hearing: i. Filing fee – $3,550.00 ii. Counsel's fees – $3,850.00 iii. Our professional fees – $17,352.55 iv. Our disbursements – $3,531.48 v. Interest – $412.40 1. The total amount claimed by the plaintiff is $50,780.85. The Court's attention was not directed to any evidence as to the make up of the plaintiff's own professional fees of $17,352.55. The total costs claimed by the plaintiff as having been incurred in the attempt to recover the balance of the costs and disbursements claimed from the defendant represent almost exactly 130% of the amount of the claim. 2. At the hearing, counsel for the defendant obtained instructions to offer to pay $45,000 into court to provide alternative security for the plaintiff's costs in lieu of a continuation of the caveat and the lien asserted by the plaintiff over its file. The Court was informed by counsel that the defendant's financial position did not enable him to offer to pay a larger sum into court, but there was no evidence to that effect. 3. It is uncontroversial that, upon an application by a caveator to extend a caveat, the Court must decide the application on the same basis as if the caveator had sought an interlocutory injunction from the Court (see Sutherland v Vale (2008) [2008] NSWSC 759;14 BPR 26,255 at [11] per Brereton J, as his Honour then was). Accordingly, the caveator has the burden of persuading the Court that there is a serious question to be tried that it has the interest that the caveat seeks to protect, and that the balance of convenience favours an order being made for the extension of the caveat. 4. Counsel for the defendant flirted with the possibility that the plaintiff, as an incorporated legal practice and a self-represented litigant, may not be entitled to recover its costs of recovering the outstanding costs and disbursements from the defendant, given that the effect of the decision of the High Court in Bell Lawyers Pty Ltd v Pentelow (2019) 269 CLR 333; [2019] HCA 29 (Bell Lawyers) was to reject the so-called "Chorley exception", whereby a lawyer who successfully acts for him or herself in litigation will be able to recover costs from the unsuccessful party, even though the lawyer has not been charged costs by another lawyer, as being part of Australian law. It is not necessary for the Court to consider this issue in these reasons. The issue was not raised effectively in advance of the hearing, and the evidence is inconclusive as to whether the plaintiff did incur costs in the form of the salaries paid to employed lawyers. As Meagher JA observed in Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd [2021] NSWCA 148 at [15], the plurality in Bell Lawyers expressly left open the question of whether a solicitor employed by an incorporated legal practice of which he or she is the sole director and shareholder (or perhaps one of a number of directors and shareholders) should be entitled to be indemnified by an unsuccessful party for a salary paid to that solicitor in respect of the conduct of the proceedings. This is not a suitable case to engage with that issue, as it has not been the subject of adequate submissions. In any event, the present question is not whether the plaintiff will be found to be entitled to recover its costs of seeking to recover the outstanding costs and disbursements that it claims from the defendant in any costs assessment process. The source of the entitlement relied upon by the plaintiff is the contractual obligation imposed on the defendant by clause 5.1(e) of the Terms of Engagement. 5. Applying the principles outlined above, I am satisfied that the plaintiff has established that it has a strong case that it has an equitable charge over the Property to secure payment to it by the defendant of whatever amount is found to be owing to it. Prima facie, at this stage, the amount the subject of the equitable charge is the full amount claimed by the plaintiff of $50,780.85. 6. The balance of convenience favours the Court declining to make an order for the extension of the caveat upon the defendant providing an adequate alternative security to the plaintiff by means of a payment into court or the retention of an appropriate sum in a controlled monies account held by a solicitor on appropriate terms. That will be necessary to enable the defendant to comply with the orders of the Division 1 Court and to avoid the Property being sold, contrary to the defendant's wishes. 7. The only outstanding issue is the amount of money that the defendant should be required to pay as the alternative security for the plaintiff's caveat. Although the caveat is supported by clause 5.1(e) of the Terms of Engagement, it does not follow that the amount that the defendant will be required to pay to the plaintiff will be whatever the plaintiff chooses to claim. Section 60 of the Civil Procedure Act 2005 (NSW) provides: 60 Proportionality of costs In any proceedings, the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute. 1. I consider that clause 5.1(e) of the Terms of Engagement should be construed in a manner consistent with this principle, and that the costs that a solicitor in the plaintiff's position is entitled to charge a client for recovering outstanding costs and disbursements must be reasonable and proportionate to the amount claimed. Ordinarily, the Court would not on an interlocutory application be too ready to reject the amount claimed by the solicitor. But, as I have explained above, the amount claimed by the plaintiff is 130% of the currently outstanding costs and disbursements owed by the defendant. In saying that, I have not at this stage given any weight to the defendant's claim that, following a costs assessment, he is likely to be found not to be indebted to the plaintiff at all for outstanding costs and disbursements. Presently, the Court has no basis for acting on that claim. But the evidence does not appear to contain any explanation of or justification for the plaintiff incurring its own professional fees of $17,352.55 in pursuing a claim for $22,084.42 (where counsel's fees are a reasonable $3,850.00). 2. In the circumstances, I hold that the plaintiff will be given a reasonably adequate alternative security for its caveat if the defendant pays $45,000 into court, or into a controlled monies account on terms agreed between the parties. 3. I will now turn to address the question of whether the security provided by the means described in the preceding paragraph will be sufficient to require the plaintiff to deliver its file to the defendant, notwithstanding its entitlement to maintain a solicitor's lien over the file. 4. Section 472 of the Legal Profession Uniform Law (NSW) relevantly provides: 472 Supreme Court may order delivery up of documents etc. (1) On the application of a client of a law practice, the Supreme Court may order the law practice— … (b) to give to the client, on any conditions that the Supreme Court may determine, any of the client's documents that are held by the law practice in relation to those services. 1. As Parker J noted Sithakoul v Su [2022] NSWSC 132 at [36], this statutory power is in practice exercised in accordance with the previously established general law rules, including relevantly by the Court of Appeal in Bechara t/as Bechara & Co v Atie [2005] NSWCA 268 at [69]-[70]. It is sufficient for present purposes to note that, in that case, McColl JA observed that the then requirement that the solicitor claiming the lien was entitled to "satisfactory security" required that "like should be replaced with like": see her Honour's discussion at [64]-[67]. (For the reasons that follow, it is not necessary in this case to consider the changes that have been made to the relevant professional conduct rules that now only require that the solicitor receive "reasonable security" in exchange for the lien, rather than the former requirement of "satisfactory security"). 2. The reason is that the defendant has offered to create a security over a fund that will be greater than 100% of the currently outstanding costs and disbursements claimed by the plaintiff for providing professional services to the defendant under its retainer. 3. In this case, the plaintiff seeks to enforce its lien over its file concerning the defendant's matter both in respect of the remaining fees that it claims and its claim to costs of seeking to recover those fees. There is authority, which I accept, that the lien only extends to protect the debt owed by the client to the solicitor to the extent that the debt has been incurred in the capacity of the solicitor acting for the client under the retainer. In White v Bini [2003] FCA 669, Finkelstein J held: [8] The issue that I must determine is whether Mr Bini's lien extends to the cost of obtaining advice on his right to retain the conveyancing file. Here Mr Bini is not on solid ground. In Re Long [1929] VLR 318, 320-321 Lowe J said that a solicitor has a general lien over his client's papers in respect of "taxable costs, charges and expenses incurred by him as solicitor for his client" (emphasis added). He added (at 321) that the lien does not extend to the recovery of those costs because "the solicitor is not at that stage acting as solicitor towards a client, but as an adverse party to a former client". This is consistent with the view taken in Gray v Graham (1855) 2 Macq 435. There Lord Cranworth (at 440) said: "When the law agent who had this demand, having first constituted his debt, proceeded next to the process of adjudication, there is no doubt that by virtue of that adjudication … he becomes a real creditor upon the lands - but he becomes a real creditor upon the lands not in virtue of his lien, but in virtue of the proceedings which he has instituted". See also Re Taylor, Stileman, & Underwood [1891] 1 Ch 590, 599 where Kaye LJ said that a solicitor's lien does "not extend to general debts, but only to what is due to him in the character of attorney". [9] On the facts it is clear that Mr Bini was, to use the words of Lowe J, a "true adverse party to [the successor of his] former client". Mr Bini's lien does not extend to costs which were incurred for his own benefit and were not on the instructions of his client. 1. See also Strikis v Legal Services Commissioner [2012] NSWADT 68 at [42]-[49]. 2. The result is that the plaintiff is not entitled to maintain the lien that it claims to secure payment by the defendant of the costs incurred by the plaintiff in its attempt to recover the costs that it claims to have incurred in seeking to recover the currently outstanding costs and disbursements owed by the defendant under the plaintiff's retainer. 3. Consequently, an order should be made for the removal of the caveat (or it should be permitted to lapse) and the plaintiff should be ordered to deliver its file to the defendant's current solicitors, provided that the defendant establishes an alternative security in the form of a fund of $45,000. I am not sure whether the parties have agreed as to whether that amount should be paid into court or whether they prefer that the money be held in a solicitor's controlled monies account on appropriate terms. The parties should confer and provide appropriate short minutes of order to my Associate. 4. I will hear the parties as to the appropriate order for the costs of the plaintiff's summons. The defendant has ultimately succeeded, but that is only because he changed his position at the hearing to offer to provide $45,000 in security, rather than the $22,000 that was initially offered. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 September 2023