Tidy little fruits of litigation lien judgment

In Khoury v Gonvales [2006] NSWSC 1290, Mr Khoury, a solicitor, got from Justice Barrett of the NSW Supreme Court a declaration that he was entitled to a fruits of litigation lien. He had acted for Mr Sef Gonzales in a suit against the executrix of the will of Teddy Gonzales, and won. Sef got an order for costs too, and the Court ordered the executrix to pay the costs out of the estate. There was a taxation and that resulted in a judgment against the executrix in favour of the client for the sum of $107,032 in costs. The solicitor wrote to the executrix and asked for the money, but she said she needed the consent of the judgment creditor — Sef Gonzales — before she would pay it to anyone other than him, and that consent was not forthcoming. So the solicitor did the sensible thing and applied to the Supreme Court for a declaration that he was entitled to an equitable lien over the estate to the extent of the judgment debt since it was only through his exertions on behalf of Sef Gonzales that Sef had got the judgment at all. The Court obliged, and provided some neat summaries of the relevant law along the way.

Barrett J said:

10 The lien asserted by the plaintiff is a “fruits of the action” lien of the kind comprehensively discussed by Campbell J in Firth v Centrelink (2002) 55 NSWLR 451. The essence of that decision, as well as other pertinent observations, appears from the following passage in the recent judgment of Bergin J in Abbott v Pilot Development Corporation Pty Ltd [2006] NSWSC 1178:

“[5] In Firth v Centrelink (2002) 55 NSWLR 451 Campbell J reviewed the authorities and set out the principles applicable in relation to a solicitors’ lien in respect of costs. His Honour summarised the principles, at 463, relevantly to this case as:

(1) the solicitors’ right exists over money recovered through obtaining judgment in litigation and also over money recovered through the settlement of litigation;

(2) such 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;

(3) it exists over the money which is in the possession of the solicitor and also over money which is in court;

(4) the solicitor need not be retained at the time that the money is recovered; and

(5) for the right to arise it must be shown that there is a sufficient causal link between solicitors’ exertions and the recovery of the fund of money; see also pages 464 and 465.

[6] In Roam Australia Pty Limited v Telstra Corporation Limited [1997] FCA 980 Lehane J said:

‘The questions seem to be, first, did the proceeding result in a judgment award or compromise under which money is payable to the party for whom the solicitors acted; and secondly, was the part played by the solicitors sufficient to justify the conclusion that there is a sufficient causal link between the solicitors’ efforts and the result so that the solicitors may be regarded as having been instrumental in obtaining the result?’

[7] In Doyles Construction Lawyers v Harsands Pty Limited & Others, unreported 24 December 1996, McLelland CJ in Eq said:

‘It is sufficient to give rise to the equitable right that the settlement resulting in payment to the client came about as a result of the legal proceedings and that the solicitor had acted for the client in those proceedings, this being treated as a sufficient causal link.'”

The form of the declarations was:

“1. Declare that the [solicitor] has an equitable lien over the judgment debt evidenced by Certificate of Judgment dated 13 September 2006 …, such equitable lien being security for payment to the [solicitor] by the [client] of all costs and disbursements of and incidental to professional services rendered by the plaintiff as solicitor to the defendant in Supreme Court proceedings 2260/03, being costs and disbursements due but unpaid.

2. Declare that the [solicitor] is entitled to have the said costs and disbursements due but unpaid satisfied out of the said judgment debt in priority to payment of the judgment debt to the [client] as judgment creditor.”

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