Recovering costs from clients can sometimes be said to be a second job for many legal practitioners. Having taken on the responsibility of representing a client in what at times can mean brutal battles lasting months if not years, the recovery of well-deserved legal fees can become another battle entirely. The broader view of the community on the status of lawyers in society and whether legal fees have become a sort of wall or barrier to access to justice has been a contentious issue.
Whatever the case maybe in reality, equity has provided a useful and strong tool for the solicitor whose efforts have resulted in seeking the recovery of money from a non-paying client. This is in the form of the equitable lien. The case of Firth v Centrelink (formerly known as Department of Social Security) & Anor (2002) 55 NSWLR 451 is the decision guiding principle in this area of law.
The classical statement of Chief Justice Jordan in Ex Parte Patience; Makinson v Minister (1940) 40 SR (NSW) 96 set out the founding equitable principles further elucidated by Campbell J in Firth. In that case it was found, the solicitor having no common law right or title to receive monies, has an equitable right to have the costs paid from the proceeds of the judgement, award or compromise. If the judgement debtor refuses to pay the solicitor can then approach the court to obtain an order requiring the amount of the costs to be paid by the judgement debtor. One of the more illuminating aspects of the lien is that, as a matter of practice, the court’s assistance is invoked not to create the equitable right but to speedily enforce the right, and a solicitors claim is recognised independently of the right.
In the more modern case of Firth the following principles were enunciated by Campbell J in respect to equitable liens:
- The lien applies to the verdict and judgement or a compromise reached in the client’s favour;
- It covers the judgement sum and any order for costs;
- A lien will attach to monies in the solicitor’s possession, monies in court payable to a client and monies owed to a client but not paid into court;
- Quantum extends to the amount properly owed to the solicitor with reference to a costs agreement, costs assessment or taxation of costs.
- The lien exists immediately upon any of the following through the exertions of the solicitor:
a. Upon payment over of monies pursuant to judgement given in favour of a client;
b. At the point an order for costs is made in favour of a client; or
c. At the point of entry into a settlement agreement.
- It will support an injunction preventing payment to a client without notice to a solicitor until the quantum of costs properly payable to the solicitor is ascertained.
- The lien can be enforced against third parties in certain circumstances.
- A lien can be applied for in numerous bankruptcy contexts.
- Where a solicitor is holding trust monies, and the solicitor is served with a garnishee notice, the garnishee notice is not effective to attach the money in the trust account to the extent of the solicitors lien.
In giving notice of the claim for a lien it is important that the practitioner note several different points that can affect the claim. Notice should be given to all practitioners who are or who have acted for the client in the case and to the respondent practitioner who bears the liability to pay if the client succeeds. Notice should also be given if you have ceased to act because you came to a view that the case lacked reasonable prospects of success. And finally, notice should be given at the earliest practical time.