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Getting Paid: Part 1

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As a part of the ongoing enhancement project for Quick on Costs, the first part of the Remedies for Costs chapter has been released with Update 93 in August.

The framework of Part 1 is set out below. In the full version of the first part of this chapter, each of six essentially extra judicial remedies is considered in detail and with reference to applicable legislation across all Australian jurisdictions as well as authoritative case law and guidance notes.

A solicitor can help effect recovery of costs by:

1. Taking security for Solicitor and Client costs

2. The operation of a trust account

Since the introduction of client accounts or trust accounts the solicitor has generally been considered to hold the client's money as trustee for the client though the concept of a trust is qualified both by the possessory lien or general lien and by the solicitor's right to transfer money from the client account or trust account in payment of her or his fees by complying with specified statutory procedures.

3. The use of an irrevocable authority

Although often used in an attempt to secure costs, irrevocable authorities are not irrevocable and used alone are a fragile and potentially ineffective means of securing costs.

The text considers some controversial case law on irrevocable authorities to make these comments such as Bechara t/as Bechara & Co v Atie [2005] NSWCA 268 (Bechara).

Bechara is a case which considers at least these matters; the distinctions  between the protection afforded by the courts to both the possessory lien and the "fruits of the action" lien and where a retainer is in the form of a conditional fee agreement that the possessory lien can protect the contingent right to  remuneration.

It is also a case that enables us to see two other points.

The first is that the solicitor's undertaking has a place in the cocktail of possible claims required to deal successfully with the former client reneging on the so called irrevocable authority.

The second is that the decision itself is an instance of the courts seeming to be unable to look broadly enough at a contemporary costs problem to solve it either because of the narrowness of the claims before them that they can legitimately decide or because the law of costs itself is impenetrable by superficial analysis or because of both these things.

There are four lessons to be learnt from the case law: (1) record in your retainer/costs agreement the basis on which you are prepared to act for a client; (2) a successful claim on an irrevocable authority, assumes an overt or positive acknowledgement by an agent of the obligation to pay or hold money (silence in response to an assertion by the third party that the agent holds the fund on behalf of the third party will not ground liability); (3) act quickly in asserting your claim; and (4) do not rely on the authority alone.

4. A tripartite agreement

Since the enactment of LPA2004 (NSW) the New South Wales Law Society's Tripartite Deed has frequently been used by solicitors whenever a client changes solicitors to provide satisfactory security for a former solicitor’s costs.

Although reminiscent of a novation the tripartite deed is not a novation but simply an agreement with three parties.

The possibility of a retainer containing a carefully drafted express unilateral right to novate in the future without the client having to participate in the execution of a future tripartite agreement is considered in the text at the heading "Selling or Buying Files".

5. The payment of interest

There is no right at common law to interest on costs. A solicitor's entitlement to interest arises either from (1) an agreement with the client; or (2) a statutory provision either allowing interest to be charged on a bill, enabling a court or taxing officer to allow interest on disbursements, or allowing post-judgment interest to be awarded in an action for recovery of the amount of the bill.

6. The enforcement of a lien whether a retaining or general lien, a particular charging lien or a valid equitable assignment is the subject of the Online Insider article "Getting Paid: Part 2" which will be released with Update 94 in November of this year.

Esther Rath
By Esther Rath

Esther is a Senior Editor and Publishing Co-ordinator for the Analytical Law teams at Thomson Reuters, Sydney. Esther is currently the Editor for Australasian Dispute Resolution, Commercial Contract Clauses, Foreign Investment in Australia, Employee Relations Manual, Costs Guide NSW, NSW Administrative Law, Quick on Costs, Victorian Administrative Law, and Victorian Courts.

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