Goldberg v Beckett

1. [1]

   HIS HONOUR: On 24 August 2015 I published my reasons for judgment in Beckett v State of New South Wales [2015] NSWSC 1017. I subsequently made orders in a separate judgment on 10 November 2015 for costs: Beckett v State of New South Wales [2015] NSWSC 1500. The combined effect of my decisions is that Ms Beckett became entitled to judgment for $4,091,717 plus costs, including costs on an indemnity basis from 30 May 2014.

2. [2]

   Until recently, Turner Freeman had at all times since 2009 acted for Ms Beckett in that litigation. Following my decisions, the State of New South Wales became concerned about how or to whom it should pay the judgment sum. That was because the State had received competing and contradictory instructions or directions from Ms Beckett concerning how it should be paid. The State therefore interpleaded and the monies in question were paid into court. The State is yet to pay any amount for costs.

3. [3]

   Those facts are presently unexceptionable. However, since my decisions in her favour, Ms Beckett has terminated the services of Turner Freeman and has employed new solicitors to act for her in defence of the present proceedings. The current dispute in essence concerns whether Ms Beckett is entitled immediately to the fruits of her judgment unaffected by any deduction to meet the costs claimed by Turner Freeman or whether Turner Freeman are entitled immediately to deduct their costs from the judgment pending their delivery to her of a bill of costs or any assessment that takes place, for which costs Ms Beckett will inevitably be substantially reimbursed by the State when it pays them.

4. [4]

   The fact that this litigation has come before me has no necessary or direct connection to the fact that I was the trial judge in the original litigation. I should note, however, that the parties have agreed that I should also determine the single and relatively discrete preliminary issue that has arisen in these proceedings. That issue in simple terms is whether the funds in court should remain there until the costs assessment and the alleged contractual issues between Ms Beckett and Turner Freeman have been determined or whether the funds should in the meantime be paid to one side or the other. Turner Freeman maintain that they are entitled immediately to be paid their outstanding costs and disbursements from judgment monies over which they have an equitable lien on their undertaking to reimburse Ms Beckett for any amount that they might ultimately be assessed temporarily to have been overpaid. Ms Beckett correspondingly maintains that she should receive all of the money and that Turner Freeman can wait to be paid from the costs that the State has been ordered to pay her. Ms Beckett recognises the probability that those costs will not include an as yet unquantified solicitor and client component for the payment of which she accepts Turner Freeman are entitled to remain secured.

Factual background

1. [5]

   On 3 February 2009 Turner Freeman wrote to Ms Beckett acknowledging her instructions to act for her in the original proceedings in which she claimed damages from the State of New South Wales for malicious prosecution. It is uncontroversial that that letter and its schedule constitute Turner Freeman’s costs disclosure and offer to enter into a conditional costs agreement with Ms Beckett and that it included the terms and conditions of the proposed retainer. Ms Beckett executed a client acknowledgment a week later in these terms:

2. [6]

   Some numbered paragraphs of Turner Freeman’s letter have received attention in submissions so far and are in the following terms:

3. [7]

   On 16 October 2015, following a successful conclusion to the principal proceedings, Ms Beckett signed an authority to receive directed to the State of New South Wales in favour of Turner Freeman. Unsurprisingly, that document was in these terms:

4. [8]

   That authority to receive was forwarded to the Crown Solicitor’s Office by Turner Freeman under cover of letter dated 10 November 2015. A copy of the judgment in the original proceedings entered on 11 November 2015 was also forwarded to the Crown Solicitor’s Office six days later.

5. [9]

   Ms Beckett sent an email to Mr Goldberg at 9.48 am on 25 November 2015. It was headed “verdict money” and was as follows:

6. [10]

   On that very same day, Turner Freeman wrote to the Crown Solicitor’s Office. The terms of that letter should be noted in full:

7. [11]

   The assessment of costs and disbursements accompanying that letter runs to almost 100 pages. The total amount of the costs is $3,348,870.

8. [12]

   Apparently before any response to that letter was received, Turner Freeman wrote again to the Crown Solicitor’s Office on 27 November 2015. That letter was as follows:

9. [13]

   Ms Beckett had sent a letter by fax to the Crown Solicitor’s Office the previous day. Ms Maamary at the Crown Solicitor’s Office forwarded a copy of that letter to Turner Freeman under cover of her email dated 27 November 2015. Ms Maamary’s email was as follows:

10. [14]

    Ms Beckett’s fax was in these terms:

11. [15]

    Turner Freeman wrote a further letter to the Crown Solicitor’s Office on 27 November 2015, this time as follows:

12. [16]

    This cavalcade of contentious correspondence effectively culminated in Turner Freeman’s 1 December 2015 letter to Ms Beckett in the following relevant terms:

13. [17]

    By arrangement with the Duty Judge on the day, these proceedings came before me on 2 December 2015. It soon emerged that Ms Beckett wished to contend that the costs agreement that she signed with Turner Freeman had been executed in circumstances that entitled her to set it aside or to resist any claim by Turner Freeman to enforce it or to rely upon it. That summary of Ms Beckett’s position concerning that agreement is not intended to be a final or definitive description of what Ms Beckett wishes now, or will in due course wish, to say about it. Indeed, Mr Parker of senior counsel on her behalf has significantly clarified the legal analysis that will presumably and somewhat unfortunately become important as this case proceeds.

14. [18]

    For presently relevant purposes, as I have already indicated, the preliminary issue that emerged on 2 December 2015 concerns whether the judgment monies paid into court by the State of New South Wales on 8 December 2015 should remain there, or should be paid to Ms Beckett, or should be paid to Turner Freeman pending at least Ms Beckett’s challenge to their costs entitlement in general or to the validity or enforceability of the costs agreement in particular. I therefore listed the matter before me on 16 December 2015 and directed that Ms Beckett file and serve any evidence upon which she intended or proposed to rely by no later than 14 December 2015.

15. [19]

    In the events that have occurred, Ms Beckett read an affidavit sworn 14 December 2015. The substance of what she deposes to goes to the circumstances in which she executed the costs agreement, in aid of the contention that it is unenforceable or invalid, or that it was breached or repudiated by Turner Freeman. Those issues are not relevant to my current deliberations and I am not now asked to decide them. Accordingly, Ms Rees of senior counsel for Turner Freeman understandably objected to Ms Beckett’s affidavit on that basis. Mr Parker accepts that particular characterisation of Ms Beckett’s affidavit for present purposes, but has sought to read it on the limited basis that it is at least prima facie evidence of the type of contentions that Ms Beckett will seek at an appropriate time to propound concerning what she maintains with respect to the costs agreement. The affidavit is therefore arguably relevant to the discretionary balancing exercise with which I am presently concerned, as it goes to the issue about whether there exists a proper basis for saying that the costs agreement might ultimately be set aside. In that context it is timely to record that Ms Beckett’s amended second cross-summons seeks an order, among other things, that the verdict monies be paid to her forthwith or alternatively that the proceedings be stayed pending determination of an application by her pursuant to s 328 of the Legal Profession Act 2004 for an order setting aside the 10 February 2009 costs agreement with Turner Freeman.

16. [20]

    Turner Freeman’s own summons was filed in court on 2 December 2015. Among the relief that is sought is a declaration that Turner Freeman has an equitable lien “in the judgment monies to the extent of the unpaid costs.” Despite some irrelevant controversy about the precise scope of the lien, Ms Beckett accepts in general terms that Turner Freeman has an equitable lien that attaches to the funds in court.

17. [21]

    The preliminary issue with which I am concerned is the direct product of the contest generated by prayer 3 in the Turner Freeman summons, which is in the following form:

18. [22]

    By reason of the current location of the judgment sum, that order and the undertaking are now to be taken to refer to the funds in court.

Submissions

1. [23]

   Ms Beckett’s first and fundamental proposition is that she succeeded in the litigation and is entitled to the fruits of her victory. Although that metaphorical terminology is well understood in the context of applications for a stay pending appeal, it does not in my view reliably inform any of the competing principles that ought to regulate the current dispute. The damages to which she has become entitled have been paid. The present dispute concerns the determination of whether or not Turner Freeman as holders of an equitable lien are entitled to payment of their costs from those monies now.

2. [24]

   In more technical terms, Ms Beckett contended first that if I were to order payment out to Turner Freeman as sought in paragraph 3 of the summons I could only do so if I were persuaded on a final basis that Turner Freeman had a legal or equitable entitlement that trumped Ms Beckett's rights as owner of the fund. Secondly, if I were on the contrary only persuaded to delay payment out to Ms Beckett, I would have to be satisfied, presumably on an interlocutory basis, that Turner Freeman had a sufficiently arguable case that the monies should be retained and that the balance of convenience favoured their retention. Ms Beckett argued that an order that the funds remain in court would be the equivalent of Turner Freeman obtaining an interlocutory injunction restraining distribution pending the determination of her claims.

3. [25]

   Underpinning these submissions, Ms Beckett argued that Turner Freeman has no present right to payment of the amounts claimed in their lump sum bill, because of their alleged manifold failures to comply with the terms of the Legal Profession Act and in particular their failure to make the appropriate costs disclosures that it requires. The asserted consequence is that Ms Beckett has no present obligation to pay any costs and that Turner Freeman carried the onus to apply for an assessment of the costs as a necessary precondition to any such entitlement.

4. [26]

   Next, Ms Beckett submitted that clause 21 of the costs agreement was unenforceable because Turner Freeman’s retainer had been terminated by Ms Beckett for breach. Although Turner Freeman purported to terminate the agreement, Ms Beckett maintains that it was invalid. As a result the costs agreement had come to an end. Ms Beckett accepted Turner Freeman’s wrongful termination as a repudiation with the result that they lost any contractual entitlement they would otherwise have had to the monies. In the alternative to that argument, Ms Beckett contended that if clause 21 entitled Turner Freeman to receive the money now, she will be applying in the assessment proceedings to set aside the costs agreement or at least that particular clause.

5. [27]

   Finally, whereas Ms Beckett accepts that Turner Freeman has an equitable lien over the fruits of the action, being both the judgment sum and the costs, the mere possibility that there will be a future amount paid or payable following completion of the assessment process, corresponding to what is understood as solicitor and client costs, is an insufficient basis for in effect restraining the payout of the money to Ms Beckett now. That was said to be so because there is no good evidence that there will be any difference between the costs payable by the State and the total costs for which Ms Beckett would be liable.

6. [28]

   Turner Freeman disputed the proposition that the costs agreement had been repudiated by them or terminated by Ms Beckett for breach. Those contentions were neither pleaded nor based upon any acceptable construction of the facts. On the contrary, Turner Freeman has the benefit of a conditional costs agreement and the authority to receive, each signed and delivered by Ms Beckett and provided to the Crown Solicitor's Office before any issue had been raised. In such circumstances Ms Beckett is in clear breach of her obligations under the agreement and has wrongfully and inappropriately purported to circumvent her obligations by stealth.

7. [29]

   An equitable lien undoubtedly attaches to the whole, not just some, of the judgment monies to the extent of Turner Freeman’s unpaid costs. Ms Beckett’s proposition about retention of a sum sufficient only to meet the prospect of a solicitor and client costs differential should be disregarded as incompatible with principle.

8. [30]

   Ms Rees predictably referred me to the instructive and thorough analysis of the relevant principles provided by Campbell J in Firth v Centrelink [2002] NSWSC 564; (2002) 55 NSWLR 451 at [35] relevantly as follows:

9. [31]

   Turner Freeman contended that even if Ms Beckett persuaded somebody that they had not complied with some relevant obligation of disclosure, they would nevertheless still be entitled to be paid the costs once assessed. Nothing in s 317 of the Legal Profession Act derogated from Turner Freeman’s entitlement to maintain its lien in accordance with the principles enunciated by Campbell J in Firth. Even based upon the contested assumption that the costs agreement was set aside, Turner Freeman would be entitled to maintain its lien while the assessment process to determine their costs entitlement proceeded.

10. [32]

    In this last respect, Turner Freeman referred to and relied upon what was said by James J in Salvatore Blanda v Kemp Strang Lawyers Pty Ltd [2006] NSWSC 48 at [55] – [56], dealing with the equivalent provision to s 317, as follows:

11. [33]

    In further support of their position Turner Freeman observed that when their summons was filed there was no indication of any of the matters that Ms Beckett has since complained of in her cross-summons, prior to which the validity of the costs agreement had never been raised as an issue. As will be apparent, Turner Freeman has been working without payment for many years, a fact that ought to favour the payment of the funds in court to them so that they can be remunerated for the work they have done and importantly enable them to discharge obligations to counsel and pay other disbursements.

12. [34]

    In response to the suggestion that Turner Freeman could not rely upon the costs agreement once it had come to an end either by termination or following its repudiation, Ms Rees emphasised that neither formulation of what transpired would have any effect on accrued rights. Turner Freeman’s equitable lien was in effect an accrued right for the purposes of this analysis.

Consideration

1. [35]

   There can be no doubt that Ms Beckett is obliged to pay Turner Freeman for the fees earned and disbursements incurred by them in successfully representing her since 2009 in what was very difficult and protracted litigation. Only the quantum of those fees remains to be determined. It is regrettable in the extreme, having regard to the emotions and consequences generated by the original proceedings, and the apparently close and harmonious relationship between Ms Beckett and Turner Freeman forged in single-minded cooperation over many years, that this current dispute has emerged. It effectively concerns no more and no less than the dual questions of whether or not Turner Freeman’s bill will or will not be varied following an assessment, and secondly who as between Ms Beckett and Turner Freeman should be out of pocket pending assessment of their costs, and the quantification and receipt of the costs of the proceedings payable by the State of New South Wales. Both parties appear to be operating upon the not unreasonable assumption that Turner Freeman’s costs will exceed the costs for which the State will eventually agree or be found liable to pay. Having regard to the fact that a considerable proportion of those costs are to be assessed on an indemnity basis, including the costs of the final hearing before me, the difference between the two sums is unlikely to be significant. Be all that as it may, Ms Beckett contends that it is Turner Freeman who must wait to be paid, whereas Turner Freeman insist that Ms Beckett agreed long ago and recently confirmed that they should not have to.

2. [36]

   It is clear from authority that in relation to those situations where an assessment is necessary to ascertain the quantum owing to the solicitor, the solicitor’s right created by the lien exists in the fund prior to the occurrence of the assessment. It is not, however, clear that a solicitor is correspondingly entitled to pay himself or herself from funds over which a lien exists before the amount that is payable has been ascertained by assessment or otherwise. The very nature of the lien suggests that its fundamental characteristic is that of a security, not a device for effecting satisfaction of an outstanding account whose precise quantification remains in doubt.

3. [37]

   In support of the proposition that the whole of the fund should be paid to them now, Turner Freeman have proffered an undertaking to restore so much of the fund that they may be permitted to utilise in payment of their fees as may exceed their entitlement when ultimately determined. One presumable consequence of that proposal would also see the presently anticipated differential between the costs claimed by Turner Freeman and the total amount of the fund immediately released to Ms Beckett. The proposal seems to me to be eminently sensible. It would coincidentally discharge Ms Beckett’s extant and undiminished (albeit lately contested) contractual obligation to permit Turner Freeman to deduct their costs from the judgment sum in accordance with the terms of the costs agreement and thereby staunch the flow of accruing interest on unpaid disbursements and accounts rendered by those entitled or determined to charge it.

4. [38]

   However, Ms Beckett is not prepared to agree to any such regime, despite what seem to me to be the obvious advantages of doing so. In the absence of any such agreement, I do not consider that I can authorise the payment of the funds in court to Turner Freeman for disbursement by them in accordance with their bill of costs. There is little utility in doing so if the funds only remain untouched in their trust account, particularly as they attract interest in their present location where Turner Freeman’s lien is also not imperilled. Correspondingly I consider that it would be wholly inimical to the security provided by their equitable lien to direct the payment of the judgment amount to Ms Beckett upon the basis of some equivalent undertaking.

5. [39]

   In this context the several alleged breaches of the costs agreement by Turner Freeman, or their alleged failures to disclose matters concerning their costs, or the ultimate enforceability of their costs agreement, are all for present purposes entirely beside the point. None of these matters has any effect upon the existence, validity or enforceability of Turner Freeman’s equitable lien. By the same token, Turner Freeman does not seem to me to be entitled to receive the secured costs in specie until such time as the quantum of those costs has been determined and Ms Beckett’s corresponding and undoubted obligation to pay them has crystallised.

Conclusion and orders

1. [40]

   In these circumstances I consider that the funds in court should remain there pending the assessment of Turner Freeman’s bill of costs. The costs of this application should be Turner Freeman’s costs in these proceedings.