Reported Decision : (2000) NSW ConvR 55-936 New South Wales Supreme Court CITATION : The Official Trustee in Bankruptcy v Kioussis [2000] NSWSC 248 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 3281/99 HEARING DATE(S) : 09/03/2000 JUDGMENT DATE : 9 March 2000 The Official Trustee in Bankruptcy (P) PARTIES : Angela Kioussis (D1) Harry Kioussis (D2) Leon Nikolaidis (Respondent) JUDGMENT OF : Young J COUNSEL : J Johnson (P) J K Chippindall (for Respondent Solicitor) Sally Nash & Co (P) SOLICITORS : M D Nikolaidis & Co (Respondent) CATCHWORDS : Mortgages [24]- Liens- Solicitor- Documents received for specific purpose- Whether available for lien - Professions [170]- Solicitor- Lien- Documents received for specific purpose- Whether available for lien - Real Property [17]- Co-owners- Deeds held by one co-owner- Solicitor's lien created- Whether solicitor may retain deeds. LEGISLATION CITED : Supreme Court Act 1970, s 74 Abbott v Pegler (1980) 1 BPR 9276 Doulton Potteries Ltd v Bronotte [1971] 1 NSWLR 591 Duke Finance Ltd v Commonwealth Bank of Australia (1990) 22 NSWLR 236 Gibson v May (1853) 4 De GM & G 516 CASES CITED : Leeper & Anor v Primary Producers Bank of Australia Ltd (in liq) (1935) 53 CLR 250 Ex parte Sterling (1809) 16 Ves 258 Stumore v Campbell & Co [1892] 1 QB 314 Warburton v Edge (1839) 9 Sim 508 Young v English (1843) 7 Beav 10 DECISION : See paras 32 and 33. THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION YOUNG J THURSDAY 9 MARCH 2000 3281/99 - THE OFFICIAL TRUSTEE IN BANKRUPTCY v ANGELA KIOUSSIS & ORS JUDGMENT 1 HIS HONOUR: This is a fairly complicated matter, but in view of the urgency of the case there is no time to reserve my decision and I will need to do the best I can. 2 Essentially, the point for decision is, if A and B are co-owners of land, and B, with the acquiescence of A, employs a solicitor, and the solicitor has possession of the title deeds, does any lien created by B operate so that the solicitor is justified in resisting a demand by A and B for the deeds. 3 The plaintiff is the Trustee in Bankruptcy in respect of the bankrupt estate of Harry Kioussis. The bankrupt, together with his wife Angela, were at all material times prior to the bankruptcy the registered proprietors of five pieces of realty. The bankruptcy occurred on 10 July 1998. The title deeds to the realty are held by the respondent solicitor Mr L Nikolaidis, in the circumstances set out below. 4 Following the bankruptcy, the plaintiff became the registered proprietor of a moiety of each piece of land as tenant in common with Angela Kioussis. 5 On 27 August 1999 consent orders were made appointing two people as trustees for sale of the five properties. On 14 October 1999 the trustees were replaced with two other persons. On 6 March 2000, immediately before the filing of the current notice of motion, those orders were set aside. 6 Although cases like Abbott v Pegler (1980) 1 BPR 9267 may have affected the rights of the parties between 27 August 1999 and 6 March 2000, those problems no longer exist and the legal owners of the properties are the plaintiff as to one half, and Angela Kioussis as to the other half. 7 It was alleged that Angela Kioussis had mortgaged her interest to the Australian Competition and Consumer Commission (ACCC). Angela Kioussis said that the mortgage was a forgery so far as she was concerned. However, in connection with the mortgage, the title deeds were lodged with the Australian Competition and Consumer Commission. On 27 October 1999 consent orders were made in other proceedings which seemed to be the result of capitulation by the mortgagee. By those orders, to which the present plaintiff was not a party, the mortgage was declared void as against Angela Kioussis and the ACCC was ordered to deliver the title deeds to Mrs Kioussis' then solicitors, M D Nikolaidis & Co within three days. The ACCC complied with that order and the deeds were delivered to the solicitors by 1 November 1999. 8 At that time there was a series of letters between the relevant parties. On 1 November Angela Kioussis wrote to Mr Nikolaidis that:- "I confirm my instructions to you that you are to hold those Certificates of Title in your safe custody and only deal with those Certificates of Title in accordance with an order of the Court or alternatively in relation to the requirements of a Contract for Sale. I give these instructions to you irrevocably. I also instruct you irrevocably that in the event I demand the return of those Certificates of Title I will provide you with seven (7) days prior notice in writing of my need for return of those documents pursuant to which you may give notice to the Trustees for sale." 9 On 2 November 1999 the solicitors for the trustees for sale wrote to Mr Nikolaidis that: "We have been informed by Sally Nash & Co that you have advised that firm that you have reached 'an agreement' with us as follows ...". 10 There was then set out similar provisions to that which were in the letter of 1 November. The solicitors for the trustees said that there was no such agreement but they took the allegations as an undertaking to them that that would be so. Sally Nash & Co are the solicitors for the plaintiff. 11 On 27 September 1999 a costs agreement was entered into between Mr Nikolaidis, Migolin Pty Ltd and Angela Kioussis. The part of the agreement headed "Re Company Dispute" provided in cl 10.2 that the solicitor was:- "to retain possession of your papers while there is money owing to us for our charges and expenses." 12 There is no doubt at all that Nikolaidis & Co did a considerable amount of legal work, and that part of that legal work consisted of arranging for Angela Kioussis to borrow $1.866 million on the security of the properties. The solicitors also did other work in connection with the various pieces of litigation that the Kioussis family was involved in. 13 On 28 February 2000, Angela Kioussis requested that the plaintiff obtain the five certificates of title from Mr Nikolaidis, and that request was sent on to Mr Nikolaidis. He resists handing over the certificates of title on the basis that he has a lien. 14 The amount of the lien is said to be $74,223.09. Details appear in Annexure D to the exhibit PXO1, but as Mr Johnson for the plaintiff says, this is not particularly satisfactory as it is merely a summary of accounts rendered and was not actually prepared by the solicitor himself. However, if one looks at Annexure C, one can see that the bills are put together on a time basis, with litigation matters involving Migolin Pty Ltd and the Kioussis family all put in together, including bills in respect of litigation in this Court. There are also some bills in respect of the litigation against the ACCC. Some of the fees involved in the negotiation of the mortgage would also be included, but looking at the bills in Annexure C of the exhibit, the great bulk of them appear to be for litigation matters. 15 Technically, the matter is a very difficult one. If there are two co-owners, then each has an equal claim to the title deeds. If both claim the title deeds from the person in possession of them, that person usually has no option but to interplead. If, however, one of the co-owners has possession of the title deeds with the knowledge of the other co-owner and whilst those deeds are in possession of that co-owner, the co-owner charges her half with a personal debt, the better view is that the secured creditor of the co-owner who charged the property is entitled to retain the deeds. 16 The present situation is one where, at the time when the deeds were passed over from the ACCC to Mr Nikolaidis, as Mrs Kioussis' solicitor, the plaintiff knew about it, though perhaps was not in a position to do anything about it because there was an order made for the trustees for sale. Those trustees for sale were the only people who had the right to demand the deeds at that time. Although they made some objections in their solicitor's letter, they acquiesced in the deeds being held by Mr Nikolaidis on the basis of the correspondence of 1 and 2 November 1999. 17 Accordingly, in my view if a valid charge was given to Mr Nikolaidis by way of a general or particular lien, then that would be a valid excuse for Mr Nikolaidis not to hand over the deeds, and would defeat the plaintiff's present motion. 18 The Supreme Court Act 1970 lays down a procedure as to how these problems can be resolved. It provides in s 74 that if there is a claim for property and the only defence is a lien, then the Court may order that the party claiming the recovery is at liberty to pay into Court the amount of the lien, and that upon such payment judgment may be given for recovery of the property. 19 Mr Johnson says that this is only a discretionary section and is not the only way in which a person can claim property. That is true. The problem is that if there is a valid lien that is a complete answer to the claim to recover specific property unless the Court applies section 74, or unless equitable relief is given: this was so in Doulton Potteries Ltd v Bronotte [1971] 1 NSWLR 591. 20 Section 74 is not invoked, nor is equitable relief sought, so I need not do any more about it except to say that at least theoretically that is the easiest way in which this problem can be solved. 21 The practical difficulty about it is that Mr Nikolaidis is claiming a lien for the whole of his costs in all matters, whereas it may be that he is only entitled to a lien in respect of a much smaller amount, or an unquantified amount for work done in connection with the proposed contract. It is to that matter that I must now turn. 22 It is commonly said that a solicitor has a lien for his general professional charges upon all documents or other property of a client which comes into his hands while conducting the business of the client (see Fisher and Lightwood, Mortgages, Australian Edition, Butterworths, 1995, p 59). However, when one looks at the cases such as Ex parte Sterling (1809) 16 Ves 258; 33 ER 982, one can see that what is really being said by the Judges in this connection is that one can infer from the client placing into the attorney's hands papers in the course of business, that he has to have a general lien. However, if the circumstances under which the relevant property comes into a solicitor's hands show the solicitor is not to have a lien, then no such lien will be inferred. 23 The High Court said in Leeper & Anor v Primary Producers Bank of Australia Limited (in liq) (1935) 53 CLR 250 at 256-7:- "A solicitor's general lien extends to documents which have come into his possession in his professional capacity even for a particular purpose, at any rate after that purpose has been served. But the undertaking to redeliver the instrument to the bank after completion of the registration of the transfer, and the limitation imposed by the word 'sole' (in that particular case) upon the purposes of the bailment are together inconsistent with the retention of the certificate under a general lien." 24 So the High Court seems to be saying that even if documents come into a solicitor's hands for a particular purpose, he may still have a lien while the particular purpose is still current. However, other facts and circumstances may show on the whole that there is no such lien. 25 In Duke Finance Limited v Commonwealth Bank of Australia (1990) 22 NSWLR 236 at 245-246, Giles J reviewed a series of the cases in this area of law and noted that it was rather hard to justify their reasoning logically. He then said:- "The cases can be explained as finding such particular purposes - the purpose of keeping the securities in safe custody and not otherwise dealing with them; the purpose of holding the securities as security on a specific advance and not otherwise and ... must have been such as to lead to the conclusion that the ... possession was so confined to the particular purpose as to exclude the implication of a lien." 26 That case dealt with bankers' liens, but the same sort of consideration applies in the instant case. 27 The cases tend to suggest that where documents are given to solicitors for a specific purpose, then ordinarily the Court will not infer a general lien. A good illustration is Gibson v May (1853) 4 De G M & G 516; 43 ER 607. 28 Other cases referred to in Fisher and Lightwood at paragraph 2.34 are cases where that principle was espoused in more or less detail, or were cases where the property which the solicitor had was for all intents and purposes trust property so that he could not have a lien. An illustration is Stumore v Campbell & Co [1892] 1QB 314. 29 So then, one must examine all the facts and circumstances to see whether a lien should be inferred in this particular case and, if it is, whether it should be for all the costs or only the costs that are applicable to the purpose for which the solicitor had the documents. If the latter is the situation, one must also work out what that purpose was. There are cases where the lien has been held to be restricted to the costs for the purpose of which the documents were held. One such example is Young v English (1843) 7 Beav 10; 49 ER 965. 30 In this case, the documents came into the solicitor's possession through the ACCC. The legal situation was that there were trustees for sale and that the co-owner was bankrupt. Mr Nikolaidis undertook to deliver up the deeds under a Court order, or where there was a sale. However, in actuality the refinancing of the Kioussis empire was the purpose for which Mr Nikolaidis had the deeds. 31 In his submissions, Mr Chippindall for the solicitor, put that cases such as Warburton v Edge (1839) 9 Sim 508; 59 ER 454, suggest that where documents come into a solicitor's possession for a series of purposes, then a general lien would apply. I think, with great respect, that this is reading more into the cases than there is. Where documents come into a solicitor's hands for one or more purposes and the client incurs liabilities to the solicitor in respect of those matters and others, then if the solicitor has the documents on a restricted basis, the lien is restricted to the costs for the purposes for which the documents are held. In the current circumstances the lien is for the costs of the mortgage only. 32 In my view, Mr Nikolaidis has a lien on the documents, but only for the proper costs of the negotiation of the mortgage and ancillary matters, and not in connection with various pieces of litigation. The fact that Mr Nikolaidis has any lien at all is sufficient to defeat the plaintiff's claim as s 74 has not been invoked. Accordingly, the current motion should be dismissed with costs. 33 I would imagine, although it is a matter for the parties, that Mr Nikolaidis should be called upon to quantify the costs which support the lien, and if the plaintiff feels so inclined to either pay those costs or, alternatively, take advantage of s 74. It may be that deeper aspects of this case will mean that that is impractical. oOo Last Modified: 09/25/2000 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.