Insights and inspiration
XX & ZZ
17 March 2014
In the recent unimaginatively anonymised decision of XX Firm & ZZ Firm and Ors  Fam CA 1007, the Court looked at how to treat the competing interests of two law firms owed money by the same client, where both firms acted for the client in relation to ongoing family law proceedings.
At the time the first firm of solicitors ("XX") ceased acting, their fees had not yet been assessed, and the proceedings had not been determined by a Court. That firm did however put the second firm ("ZZ") on notice of their outstanding fees, and also notified ZZ of their intention to pursue those fees. XX then successfully intervened in the proceedings, and the client gave an undertaking to notifty XX when the final hearing was to take place. The Court also ordered that the client's entitlement pursuant to s79 of the Act, upon determination by the Court, was to be paid to ZZ's trust account pending finalisation of the assessment of XX's costs.
Ultimately, the client did not notify XX of the final hearing, and ZZ, notwithstanding the order regarding retention of the client's s79 entitlement in ZZ's trust account, ZZ transferred the client's award of $93,000 to their own account in satisfaction of fees owed by the client to ZZ.
The Court found that:
- It had the jurisdiction to make orders in relation to the conduct of solicitors of the court on the basis of its inherent jurisdiction to deal with its own process; and
- It also had power to make orders on the basis of the equitable lien held by XX over the 'fruits of the litigation" - see Twigg v Keady and Keady (1996) and Ex Parte Patience; Makinson v The Minister.
- As both XX AND ZZ had an equitable interest in the clients's s79 entitlement, priority of those equitable interests needed to be determined. Given however, that ZZ was on notice from the outset of their engagement by the client of XX's interest, and of XX's intention to pursue recovery of their costs, XX's interest was held to take priority.
The Court ordered ZZ to return the $93,000 to their Trust Account pending finalisation of assessment of XX's costs, and commented that ZZ acted both unprofessionally, and with impropriety in their conduct and dealings with XX.
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