Reported Decision : (2002) 55 NSWLR 494 New South Wales Supreme Court CITATION : Firth v Centrelink & Anor (No2) [2002] NSWSC 850 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 1500/02 HEARING DATE(S) : 11 September 2002 JUDGMENT DATE : 11 September 2002 Stephen Paul Firth (Plaintiff) PARTIES : Centrelink (Formerly known as The Department of Social Security) (First Defendant) Commonwealth of Australia (Second Defendant) JUDGMENT OF : Campbell J COUNSEL : R Goodridge (Plaintiff) T Reilly (Defendants) SOLICITORS : Firths The Compensation Lawyers (Plaintiff) Australian Government Solicitor (Defendants) CATCHWORDS : EQUITY - equitable charges and liens - solicitor's "fruits of the action" lien - type of notice of lien necessary before lien can be enforced by equitable claim in personam against someone who has paid away the fund over which the lien exists - type of notice sufficient to enforce lien against someone who presently holds the fund over which the lien exists - PROFESSIONS AND TRADES - lawyers - "fruits of the action" lien - type of notice of lien necessary before lien can be enforced by equitable claim in personam against someone who has paid away the fund over which the lien exists - type of notice sufficient to enforce lien against someone who presently holds the fund over which the lien exists CASES CITED : Firth v Centrelink [2002] NSWSC 564 Twigg v Kung [2002] NSWCA 220 DECISION : Leave to re-open argument refused IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST CAMPBELL J WEDNESDAY 11 SEPTEMBER 2002 1500/02 STEPHEN PAUL FIRTH v CENTRELINK (FKA THE DEPARTMENT OF SOCIAL SECURITY) AND ANOR (No.2) JUDGMENT 1 HIS HONOUR: I gave judgment in this matter on 10 July 2002 (Firth v Centrelink [2002] NSWSC 564). At that time I held that the Commonwealth had received the proceeds of settlement of litigation with notice of the existence of a solicitor's lien, and that consequently the Commonwealth was bound by that lien. I made orders, at the conclusion for my reasons for judgment, that the parties bring in short minutes of order, and gave leave for the matter to be further argued concerning costs. 2 Today, the Commonwealth seeks leave to further argue the case, on the ground that, between the time of publication of my decision and today the Court of Appeal has handed down a decision which bears upon the matter. That decision is Twigg v Kung [2002] NSWCA 220. 3 The decision in Twigg v Kung was one where, in divorce proceedings, Twigg had acted, at one stage, for the wife. During the time Twigg was acting for the wife, the wife gave Twigg, in writing, an irrevocable authority to pay the whole of any settlement for verdict moneys to Twigg. That authority was sent, by Twigg, to Parish Patience who at the time were acting for the husband. 4 The husband and the wife both changed solicitors before the divorce litigation was over. The wife went to Somerville & Co, and the husband went to McGlynn & Partners. There was a settlement of the litigation, the result of which was that a property at Lane Cove belonging to the husband and his mother was sold, and some money which was agreed to be paid in settlement was disbursed by McGlynn & Partners. It was disbursed to a list of recipients, presumably nominated by the wife, which did not include Twigg. 5 The solicitor handling the matter for McGlynn & Partners had been contacted, before that money was disbursed, by Mr Twigg, and the solicitor at McGlynn gave Mr Twigg some information about what was happening with disbursing the money due to be paid to the wife. Mr Twigg did not mention the authority to receive which he had been given by his former client, or say that he was making a claim for a lien for outstanding costs. 6 The solicitor at McGlynn conceded it must have occurred to him that the only remaining interest which Twigg had, at the time of that telephone conversation, concerned costs, and that he would have presumed that they (Twiggs) would be looking to pay their costs out of the proceeds of the sale of the Lane Cove property which McGlynn was handling. There was a finding that McGlynn had no actual knowledge of the authority, or of any claim made by Twigg for a lien before the proceeds of sale had been disbursed. Twigg claimed that, not withstanding this, the husband was liable to pay to Twigg the amount for which Twigg had a lien over the proceeds of litigation. That claim was rejected in the Court of Appeal. 7 It appears that the submissions that were made concentrated on questions of imputed notice – that is, notice said to exist in McGlynn, which was then imputed to the husband. There was a submission, recorded at paragraph 27 of the judgment, that there was an analogy in that situation to notice of equitable assignment of debts or equitable interests, in which case constructive notice was not enough. The cases that were the basis of that submission were referred to by Hodgson JA (who gave a judgment that Stein JA and Foster AJA agreed with) at paragraph 35. His Honour said: "In my opinion, the cases of Lloyd v Banks (1863) LR 3 Ch App 488 , William Brandt's Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454 at 462 and James Talcott Limited v John Lewis & Co Ltd [1940] 3 All ER 592 at 595, 599], referred to by Mr Whittle, do confirm that notice of an assignment should be such as to convey to the recipient, not merely the possibility that an assignment may have occurred, but the fact that it has. In relation to a solicitor's lien, in my opinion the notice must, in all the circumstances occurring up to the time of the dealing with the affected property be such as to convey to the recipient as at that time that a lien is being asserted in respect of costs incurred in the relevant matter and unpaid. It is not sufficient that it merely raise a possibility that such is the case." 8 Hodgson JA then went on to consider whether there was sufficient clarity in the state of knowledge which McGlynn had, as at the time they paid away the money, to fix them with notice of the lien. His Honour recognised that circumstances which could be sufficient to give notice at one time could, through the effluxion of time or change of circumstances, become insufficient for that notice to continue as at a later time. 9 Most importantly for present purposes, however, is that the structure of the equitable claim which was made in Twigg v Kung is fundamentally different to the structure of the equitable claim to enforce a lien which is made in the present case. The claim in Twigg v Kung was a claim made by a lien holder against someone who had once had, but no longer has, the property which was the subject of the lien. To fix such a person with an obligation to pay, again, money which he has already paid to someone else, does require there to be clarity in the notice which he has of the existence of the lien at the time of making the payment away. After all, the effect of asserting the lien against such a person is that he is treated as a wrongdoer for not having acted contrary to the instructions of the legal owner of the money. For it to be unconscionable for such a person to have paid away the money, on the instructions of the legal owner of the money, the fund-holder needs to have been given clear notice that a lien is actually claimed. That is a different situation to the situation which arises here. 10 Here, the Commonwealth still has the money which it received. The equities which bind the Commonwealth need to be judged as at the present time, not as at some earlier time. The question in the present case is whether it is in accordance with conscionable behavior for the Commonwealth, now, to keep all the money it received, and still has. The Commonwealth would be free of any equitable claim if it had been a bona fide purchaser without value for notice of the money subject of the claim. The doctrine of bona fide purchaser without value for notice forms a limit beyond which equities cannot be asserted against someone who has acquired property. The type of notice which suffices for the doctrine of bona fide purchaser for value without notice, includes constructive notice. 11 The unconscientiousness of the Commonwealth retaining this money, which is in part the fruit of Mr Firth's efforts, is, in my view, in no way cut down by the decision in Twigg v Kung. Being directed to a different structure in which an equitable lien is asserted, and to notice of a different type to that involved in the doctrine of bona fide purchaser for value without notice, that decision provides no basis for reopening the argument concerning the decision I gave on 10 July. The application to re-open the argument on that question is rejected. 12 Concerning costs of the proceedings, the Commonwealth argues that there should be no order for costs. It points to the fact that the plaintiff sued two defendants, yet its claim against Centrelink was one which it had been informed, before the commencement of the hearing, was misguided, and at the hearing it readily accepted that no claim against Centrelink could succeed. As well, the plaintiff came to court seeking relief on some administrative law grounds which were not available in this court. 13 It is, in my view, appropriate that some recognition be given to these factors. 14 For the plaintiff, it is urged that costs should follow the event, and that it is important for a costs order to be made, when such a small sum is at stake. 15 That last argument is one which cuts two ways. There is provision in the rules for reduction of costs when a small sum is ultimately recovered in the Supreme Court, unless the court is of the view that the importance of the questions involved, or other matters, justified the bringing of proceedings in the Supreme Court. This is a case where the complexities of the issues justify the bringing of the proceedings in the Supreme Court. 16 In my view, it is appropriate to give the greater weight, in assessing these matters, to the fact that the plaintiff has ultimately succeeded. I order the second defendant to pay 75 per cent of the costs of the plaintiff. Otherwise, I make orders in accordance with short minutes of order which I initial, date with today's date and shall place with the papers. ********** Last Modified: 09/17/2002 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.