Supreme Court New South Wales Medium Neutral Citation: Oliveri v P M Sulcs & Associates Pty Limited (in liquidation) [2013] NSWSC 590 Hearing dates: 3 May 2013 Decision date: 20 May 2013 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Declaration that plaintiff entitled to an equitable lien over money recovered under settlement agreement to secure costs owing to the plaintiff. Catchwords: EQUITY - general principles - equitable charges and liens - whether solicitor's lien extends to costs incurred in enforcing right to costs. Legislation Cited: Corporations Act 2001 (Cth) s 500 Legal Profession Act 2004 (NSW) Cases Cited: - Carew Counsel Pty Ltd v French [2002] VSCA 1; (2002) 4 VR 172 - Ex parte Patience; Makinson v The Minister (1940) 40 SR (NSW) 96; (1940) 57 WN (NSW) 65 - Firth v Centrelink [2002] NSWSC 564; (2002) 55 NSWLR 451 - Oliveri v P M Sulcs & Associates Pty Ltd (in liq) [2012] NSWSC 1311 - Re Hill (1886) 33 Ch D 266 Re Meter Cabs Ltd [1911] 2 Ch 557 - Re PM Sulcs & Associates Pty Ltd (in liq) [2012] NSWSC 689 - Simpson v Rowe [2011] VSC 149 Category: Principal judgment Parties: Dominic Oliveri (Plaintiff) P M Sulcs & Associates Pty Limited (in liquidation) (Defendant) Representation: Counsel: M.K. Rollinson (Plaintiff) Solicitors: Purcell Lawyers (Plaintiff) File Number(s): 2012/210690 Judgment 1The Plaintiff, Mr Dominic Oliveri, seeks a declaration, as narrowed somewhat in submissions from that originally sought in his Statement of Claim, that: "Declare that [Mr Oliveri] is entitled to an equitable lien over all the money held by the [PM Sulcs & Associates Pty Ltd (in liq) ("Company")] that represents money recovered by the [Company] from Daustp Pty Ltd (formerly Daihatsu Australia Pty Ltd) (in liquidation) ["Daustp"] in the litigation comprised in proceedings No. 11489/1993 in this Court, or any settlement of the rights of the [Company] against Daustp Pty Ltd under the judgment and costs orders made in that litigation, to secure to [Mr Oliveri] the costs, and any interest on costs, that are owing by the [Company] to him under orders for costs made in [Mr Oliveri's] favour in proceedings No. 3548 of 2004 (now being 2004/184993) in this Court and No. 40315 of 2009 (now being 2009/00298458) in the Court of Appeal." A further order that the Company pay the costs once quantified was not pressed in oral submissions. 2The Company is in voluntary liquidation and Mr Oliveri brings this claim pursuant to leave granted under s 500 of the Corporations Act 2001 (Cth) in my judgment delivered on 15 October 2012 ([2012] NSWSC 1311). The liquidator has not appeared and submits to any order of the Court in this regard. Mr Oliveri has also offered an undertaking to the Court to take steps to bring about a prompt assessment of his claim for costs, if that claim is not settled between the parties, which I will note below. In my view, that undertaking is appropriately given, where a delay in the assessment of Mr Oliveri's claim for costs would otherwise delay finalisation of the Company's liquidation. Factual background 3The background facts are pleaded in Mr Oliveri's Statement of Claim and set out in the affidavit of his solicitor, Ms Penelope Purcell, dated 29 August 2012. Those facts overlap with those set out in my judgments delivered in Re PM Sulcs & Associates Pty Ltd (in liq) [2012] NSWSC 689 and Oliveri v P M Sulcs & Associates Pty Ltd (in liq) [2012] NSWSC 1311. 4In broad summary, Mr Oliveri acted for the Company in proceedings against Daustp ("Daustp Proceedings") in which the Company obtained judgment against Daustp. Dautsp was also ordered to pay a substantial percentage of the Company's costs of the Dautsp Proceedings. Mr Oliveri thereafter claimed substantial costs in respect of the conduct of the Daustp Proceedings. 5The Company subsequently brought proceedings against Mr Oliveri challenging his entitlement to costs and Mr Oliveri cross-claimed to recover those costs ("Costs Proceedings"). Judgment was delivered in the Costs Proceedings in May 2009 and Mr Oliveri was held to be entitled to recover costs on a quantum meruit basis. The Court ordered that the Company pay Mr Oliveri's costs of the Costs Proceedings, partly on an ordinary basis and partly on an indemnity basis ("Costs Order"). The Court of Appeal refused leave to appeal to the Company from that Judgment ("Costs Appeal") and ordered that the Company pay Mr Oliveri's costs of the Costs Appeal. The amount of costs in respect of the Costs Proceedings and the Costs Appeal has not yet been assessed. 6The Company was placed into administration in December 2009 and a resolution was subsequently passed for the voluntary winding up. 7A costs assessment in respect of the Daustp Proceedings was determined in the amount of $639,808 on 9 February 2010 and confirmed on appeal on 31 January 2011. In September 2010, Mr Oliveri brought proceedings ("Lien Proceedings") to enforce an entitlement to a solicitor's lien in respect of the costs in the Dautsp Proceedings, which were settled by the Deed of Settlement ("Settlement Deed") with Daustp and the Company (approved by the Court in June 2012) which reserved Mr Oliveri's right to bring proceedings against the Company in relation to the costs orders made in the Costs Proceedings and the Costs Appeal. Whether Mr Oliveri's lien extends to the costs ordered in the Costs Proceedings and the Costs Appeal 8Mr Oliveri contends that his lien extends to amounts received by the Company from Daustp, to the extent of his costs incurred in defending the litigation brought the Company in which his retainer and right to costs were challenged and primarily relies on the judgment in Firth v Centrelink [2002] NSWSC 564; (2002) 55 NSWLR 451 in that regard. 9The nature of a solicitor's lien was noted in Ex parte Patience; Makinson v The Minister (1940) 40 SR (NSW) 96; (1940) 57 WN (NSW) 65, where Jordan CJ observed (at 100-101) that: "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 ...If the person liable to pay refuses, after notice, to pay the costs of the solicitor, the solicitor may obtain a rule of Court directing that the amount of his costs be paid to him and not to the client; and payment by the judgment debtor to the client after notice of the solicitor's claim is no answer to an application for such a rule: .... Further, if the client and a judgment debtor make a collusive arrangement for the purpose of defeating the solicitor's right, the Court will enforce that right against the judgment debtor notwithstanding the arrangement and notwithstanding that no notice of the solicitor's claim had been given to the judgment debtor prior to the arrangement: .... These special rights have no resemblance to a solicitor's general possessory lien, although they are sometimes miscalled liens." [citations omitted] 10In Carew Counsel Pty Ltd v French [2002] VSCA 1, (2002) 4 VR 172 at [33], Winneke P (with whom Buchanan and Vincent JJA agreed) observed that: "The essence of the solicitor's "particular" or "non-possessory" costs lien is that the solicitor has been instrumental in recovering the judgment sum (whether by way of compromise or otherwise) or, put another way, that the monies have been recovered as a result of his exertions. Thus the fund in respect of which the lien arises is the fund represented by the fruits of the labours exercised by the solicitor in recovering it. The charge on the fund represented by the "particular" lien arises immediately upon the recovery of the monies through the exertions of the solicitor and should be distinguished from rights which might arise through a solicitor's exertions in respect of other matters. However, for the right to arise, it must be shown that there is a sufficient causal link between the solicitor's exertions and the recovery of the fund. In each case, that is a question of fact. The costs which are protected by the lien will not only include the costs incurred in recovering the judgment, but also those "immediately incidental thereto". [citations omitted] 11The applicable principles were summarised in Firth v Centrelink above at [35] as follows: "(a) The solicitor's right exists over money recovered through obtaining judgment in litigation, and also over money recovered through the settlement of litigation ... (b) The solicitor's right exists over both the amount of a judgment in favour of the client, and the amount of an order for costs in favour of the client ... (c) It exists over money which is in the possession of the solicitor, and also over money which is in court ... and money which is owed to the client but not paid into court... (d) The solicitor need not be still acting for the client at the time that the money was recovered ... (e) For the right to arise it must be shown that there is a sufficient causal link between solicitor's exertions and the recovery of the fund of money ... (f) The quantum of money for which the solicitor has the equitable right is the amount which is properly owing to the solicitor by the client, whether that amount be ascertained by taxation of a bill of costs, or assessment, or pursuant to a costs agreement ... In relation to those situations where taxation is necessary to ascertain the quantum owing to the solicitor, the solicitor's right exists in the fund prior to the occurrence of the taxation ... (g) The solicitor's equitable right exists before the court is asked to intervene to protect it; it "arises immediately upon the recovery of monies through the exertions of the solicitor": ... if the lien is over the proceeds of an order for costs, it comes into existence at the time of making of that order for cost .... If the lien is over the proceeds of a settlement, it arises when the settlement agreement is entered into .... (These statements concern when the lien comes into existence as an item of present property - they are not concerned with the ability of the solicitor to deal with the rights under the lien as future property before the fund is in existence.) (h) The right of the solicitor is one which the solicitor can enforce against the client, entitling the solicitor to an injunction to prevent the payment of the fund to the client without notice to the solicitor until such time as the quantum of the solicitor's entitlement to be paid from the fund is ascertained ... If the quantum of the solicitor's entitlement has been ascertained, the solicitor is entitled to an order that the amount of his entitlement be paid to him from the fund, notwithstanding opposition from the client ... (i) The right can also be enforced against people other than the client, in certain circumstances. When the money recovered takes the form of a debt owed to the client, which has been assigned, the right of the solicitor will prevail over the rights of an assignee of the debt, save where the assignee is a bona fide purchaser for value without notice: ... (j) If the client is a company which goes into liquidation, the solicitor is entitled, in relation to costs arising from work done before the start of the liquidation, to claim the full amount of the costs from the fund, and is not required to prove in the liquidation .... This has the same practical effect as enforcing the right against the other creditors of the company. The solicitor's lien attaches to property recovered through his exertions, even if the actual recovery occurs after the client goes into liquidation" [citations omitted]. 12It seems to me that the requirements for Mr Oliveri to establish his lien are satisfied in respect of the monies received by the Company (by its liquidator) in accordance with the Settlement Agreement. Those monies were recovered in respect of the judgment in the Dautsp Proceedings, albeit payment was made in the manner provided in the Settlement Agreement and the lien arose at the time the relevant amount was owed by Dautsp to the Company. Mr Oliveri could have obtained an injunction to prevent the payment by Dautsp of those monies to the Company, but instead entered the Settlement Deed which expressly reserved his right to bring proceedings against the Company in relation to the costs orders made in the Costs Proceedings and the Costs Appeal, and the Company (by its liquidator) were on notice of his claim at the time they received the monies under the Settlement Agreement. So far as the Company is in liquidation, the authorities to which the Court referred in Firth v Centrelink above recognise Mr Oliveri's right to claim the full amount of those costs rather than to prove in the liquidation. As I noted in my judgment in respect of the leave application ([2012] NSWSC 1311), a solicitor's lien extends to the costs incurred in enforcing his or her right to costs against the client's denial of that right, including a denial of the retainer: Re Hill (1886) 33 Ch D 266; Re Meter Cabs Ltd [1911] 2 Ch 557; Firth v Centrelink above at [113]; Simpson v Rowe [2011] VSC 149 at [26]. As emerges from the summary above, it is not necessary to the existence of such a lien that those costs have been assessed: Firth v Centrelink above at [117]. Orders 13Accordingly, I make the following orders: 1. Declare that the Plaintiff is entitled to an equitable lien over all money held by the Defendant that represents money recovered by the Defendant from Daustp Pty Ltd (formerly Daihatsu Australia Pty Ltd) (in liquidation) in the litigation comprised in proceedings number 11489/1993 in this Court, or any settlement of the rights of the Defendant against Daustp Pty Ltd under the judgment and costs orders made in that litigation, to secure to the Plaintiff the costs, and any interest on costs, that are owing by the Defendant to him under orders for costs made in the Plaintiff's favour in proceedings number 3548 of 2004 (now being 2004/184993) in this Court and in proceedings number 40315 of 2009 (now being 2009/00298458) in the Court of Appeal. 2. Note the Plaintiff's undertaking that, failing settlement of the matter between the parties within four months after the date of the Court's orders in these proceedings, he will within that period lodge for party/party assessment under the Legal Profession Act 2004 (NSW) the bills of costs the subject of these proceedings, and will diligently prosecute the assessment to its conclusion. ********** 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: 28 May 2013