Martinez v Morris  FMCA 478 will be enjoyed by those who take pleasure in the suffering of lawyers. A well known national law firm with over 500 staff acted for a man. They had a low opinion of him, and so required that his wife promise to pay his fees. Since her promise was made directly to the law firm, she was an ‘associated third party payer’ to whom disclosure obligations in relation to costs estimates and the manner of charging and so on were owed. The obligations were not satisfied though. Sure enough, the husband did not pay the firm’s fees. So they sued his wife. She did not defend, ignorant of s. 317(1) of the Legal Profession Act, 2004 (NSW) which said that by virtue of the disclosure defaults, she need not pay the fees until there had been what used to be known as a solicitor-client taxation at the solicitors’ expense. Default judgment was obtained and no attempt was made to set it aside. And then the firm set out to bankrupt her. A creditor’s petition resulted in a sequestration order. It was the end of the road; they’d got their pound of flesh and could move a trustee in bankruptcy in to scoop up her worldly possessions, and take away any income she might earn, to restore the hole in their profits.
Then some bright spark alerted the wife to the solicitors’ problem. ‘Too late!’ you might say to yourself diving for a statement of res judicata, if you have not been reading my blog properly (see this post and this one about Quaresmini v Crouch & Lindon (a firm)  FMCA 750 and Chadwick Lawyers v McMullen  FMCA 992, both Queensland cases to which no reference was made in the NSW case at hand). But no, not too late: Federal Magistrate Driver set aside the sequestration order — that is he unbankrupted the wife — and completely sicked the solicitors on costs for good measure. In the process, he looked beyond the default judgment, rendering it worthless for the purposes of bankrupting the wife without it having been set aside. And now, no doubt, the wife has a right to set aside the default judgment ex debito justitiae (as of right), so the firm cannot substitute the Sheriff for the trustee in bankruptcy. The wife may still have to pay her husband’s legal fees; whether she does or not will depend on whether the firm can be bothered having the NSW equivalent of a taxation at which the taxed bills may be reduced on account of the wholesale costs disclosure defaults. Whatever the case, she won’t have to pay them for some time, and there must be a real issue about whether the lawyers are entitled to interest since the bills were originally given.
The costs order was that the law firm pay the costs of the creditors’ petition in which they were successful as well as in the application to set aside the sequestration order in which they were unsuccessful. His Honour reasoned as follows at  to :