The solicitor’s possessory lien

Most practitioners understand the solicitor’s lien well enough: a solicitor can hold a former client’s file as security for payment of the solicitor’s unpaid fees. This can be quite useful security where the solicitor holds a client’s documents, especially original documents that may be required for, say, a trial. But, as with so many aspects of the law, the operation of the solicitor’s lien is more nuanced.

Basic concept

The solicitor’s lien is a species of the common-law possessory lien. Where a person has possession of goods, in some circumstances that possession may be maintained as a form of security for payment of work done in relation to those goods. Halsbury’s Laws of Australia ([295-4625]) expresses the nature of the solicitor’s security very pithily (citations omitted):

A solicitor has a general possessory lien to the extent of the client’s interest over all documents (other than a client’s will) and other property of the client received in the solicitor’s professional capacity and referable to the relationship of the solicitor and client and money held in a client’s account in respect of all taxable costs due to the solicitor in acting on the client’s instructions.

In contrast to a chargee in respect of some property, the possessory lienee does not obtain a proprietary interest in the goods. That said, the solicitor’s lien may still be the subject of other priority interests in the documents and other goods that may be in the solicitor’s possession. Put differently, the solicitor’s right to possession is no better than the former client’s.

The solicitor’s possessory lien, however, is not to be confused with the solicitor’s lien over the proceeds of litigation (whether payment pursuant to a judgment or a settlement agreement) or funds held in the solicitor’s trust account, where the solicitor acquires a proprietary interest in the funds.

Personal Property Securities Act 2009

The solicitor’s lien is security in personal property for payment of fees (and disbursements) incurred in the course of providing services granted by the client. This would, on its face, attract the operation of the Personal Property Securities Act 2009 (Cth). However, section 8(1)(b) of the Act provides that the Act:

does not apply to … a lien, charge, or any other interest in personal property, that is created, arises or is provided for under a law of the Commonwealth (other than this Act), a State or a Territory, unless the person who owns the property in which the interest is granted agrees to the interest.

However, by force of section 8(2), interests of this type are affected by sections 73 (providing for priority of such an interest), 140(2)(a) (order in which money received as a result of enforcement of the interest must be applied) and 148(c) and regulations made thereunder (data that the Personal Property Securities Register is to contain).

Counsel’s brief

Barristers usually receive the client’s instructions through a solicitor. (This is the traditional practice. The Legal Profession Uniform Conduct (Barristers) Rules 2015 have changed – at least in Victoria – the circumstances in which a client may retain a barrister without a solicitor.) For a potted history and reasoning behind this, including an analysis of the legislation which largely survives in the current Legal Profession Uniform Law, see Dimos v Hanos [2001] VSC 173, [39]-[100] (Gillard J).

So, do barristers enjoy a lien over their brief? Usually, the answer is “no”. However, where the barrister enters into a costs agreement with the client directly (rather than with the solicitor, which is the usual practice), the barrister enjoys the same rights as the solicitor: Simpson v Rowe [2011] VSC 149, [6]-[7] (Habersberger J).

When the solicitor retains counsel to perform services for the client’s benefit, counsel’s brief forms part of the solicitor’s file, so that if the client wishes to change solicitors (and perhaps also counsel), counsel’s brief moves with the file. (As a matter of practice and convenience, however, it is not uncommon for counsel to be asked simply to hold on to the brief and wait for further instructions from the new solicitors.) Subject of course to any prior agreement to the contrary, the solicitor has an ethical obligation to pay counsel’s fees regardless of whether the client has put the solicitor in funds, either in response to a bill or by paying in advance into trust. In those circumstances, counsel has no need for a possessory lien.

Production of documents for continuing litigation

Clients usually deliver documents to their solicitors in the course of litigation for the purposes of conducting that litigation. In the first instance, the documents will be the subject of advice about the client’s rights. Next, they may be relied upon for the purposes of pleading the client’s case. Thereafter, those documents (along with, in most cases, many more than have been referred to in the pleadings) will be described in an affidavit of documents for the purposes of discovery. Solicitors often end up storing boxes of clients’ documents – not all of which are merely printouts of electronic documents.

Sometimes, solicitors will cease acting for clients in the course of litigation. It may be the solicitor who terminates the retainer; it may be the client. The retainer may be terminated for just cause (eg the client has not paid the solicitor’s fees, or perhaps the solicitor has committed an act of professional misconduct). Regardless of the merits behind the termination, the solicitor’s assertion of the lien may place the (former) client’s litigation in peril.

Where a former client has retained a new solicitor and wants access to documents kept out of reach by reason of the former solicitor’s lien, the principles are well settled. Emerton J set them out usefully in Kyriackou v Martin [2014] VSC 122, [8]-[11] (citations omitted):

In Bodycorp Repairers Pty Ltd v Edwards, Hargrave J summarised the principles governing a dispute over the existence and effect of a lien where a solicitor’s retainer related to current litigation. His Honour said:

In summary, where a solicitor’s retainer relates to current litigation, as here, the principles may be distilled as follows. First, where a client discharges the solicitor, the solicitor’s lien continues in force unless the client was entitled to terminate the retainer for breach of contract or misconduct by the solicitor. Second, where the solicitor discharges the client without good cause, the solicitor’s lien comes to an end. Third, where the solicitor discharges the client for good cause, the solicitor’s lien continues, but is subject to the qualification stated by Templeman LJ in Gamlen Chemical that the file must be handed over to the new solicitors, provided that they undertake to return it at the end of the litigation, to save the client’s litigation from catastrophe.

To similar effect, in Cosgriff v Issac Brott & Co, Byrne J said as follows:

Where a solicitor is discharged by the client otherwise than for some breach of conduct or misconduct, the solicitor is entitled to maintain their lien. Where the retainer is determined by the client for misconduct or breach of contract by the solicitor, the lien comes to an end. Where the solicitor discharges the client for good cause, then the lien becomes a qualified one. In this type of case, the normal practice, in England at least, is that the court will then order the solicitor, without prejudice to the lien, to yield up the papers requested for the litigation to the replacement solicitor upon an undertaking by that solicitor to allow the former solicitor access to them, and to return them on the conclusion of the litigation. The position is otherwise where the discharge by the solicitor is not for good cause, in such a case the lien comes to an end.

Justice Byrne further observed that whether it is the client or the solicitor which terminates the relationship is to be resolved “in a practical way”.

In Gamlen Chemical (UK) Ltd v Rochem Ltd, Templeman LJ qualified the simple proposition that where the solicitor has discharged the retainer, the court will normally make a mandatory order obliging the solicitor to hand over the client’s papers against an undertaking by the new solicitor to preserve the lien. An automatic order is inconsistent with the inherent discretion of the court to grant or withhold a remedy which is equitable in character. Whether the discretion should be exercised in favour of the client depends “on the nature of the case, the stage which the litigation has reached, the conduct of the solicitor and the client respectively and the balance of hardship which might result from the order the court is asked to make”. In exceptional circumstances, the court may impose terms where justice so requires.

The client in that case sought access to documents held by a solicitor he had formerly retained but whose incorporated legal practice had been wound up in insolvency. He had two matters before the courts with hearing dates fast approaching. The liquidators sought security for $450,000.00 on account of unpaid fees, some of which were also unbilled. The client’s new solicitor offered to undertake to return the file at the conclusion of the litigation so as not to prejudice the former solicitor’s lien.

Emerton J found in that case that:

  1. without the documents to which access was sought, the client’s litigation would suffer catastrophe;
  2. the solicitor had terminated the retainer when his incorporated legal practice was wound up in insolvency;
  3. the solicitor terminated for reasonable cause because the client had contributed to the insolvency and winding-up of the incorporated legal practice;
  4. the client had had the benefit of large amounts of work done on his behalf without paying much for it, and did not contest over $100,000.00 worth of outstanding fees on an earlier matter not the subject of the application before her Honour.

Her Honour proposed, in the exercise of her discretion and balancing the various interests of justice, to order production of the documents on the condition that the the client pay $100,000.00 to the liquidator, but no further security would be required.

Litigation between the solicitor and former client

Consider the situation where the former client (or sometimes alleged former client) seeks access to the documents in a proceeding between the solicitor and former client. Typically, the solicitor sues for unpaid fees, and the former client denies liability, often on the ground of the solicitor’s negligence sounding in damages. The documents are then, of course, discoverable. (Client legal privilege would not operate in such a dispute: Evidence Act 2008 (Vic), section 121(3).)

The principles that apply in these circumstances are similar to those discussed above. In Bolster v McCallum [1966] 2 NSWR 660, Asprey JA (with whom Walsh JA) of the NSW Court of Appeal said (emphasis added):

If the costs and fees sued for were owing to the solicitor, the fact that he brought an action in court to recover the amount of them would not determine his lien upon the documents; and judgment in the plaintiff’s favour in that action, and even the issue of an execution upon the judgment, would not of itself destroy the lien (see O’Brien v. Lewis (1863) 4 Giff. 396; 66 E.R. 761; Aff’d 3 De G.J. & S.606; 46 E.R. 772). We were not referred to, and I have been unable to find, authority in consimili casu. However, my reading of a number of decisions which bear upon this type of problem leads me to believe that two principles can be extracted from them; firstly, that, despite the existence of a lien, documents subject thereto, generally speaking, will be ordered to be produced to a court in the course of litigation whenever their production is necessary to do justice in the particular case; secondly, that the solicitor’s claim of a lien will be protected by the court until it is shown that the claim is unfounded. In O’Brien v. Lewis (1863) 4 Giff.; at 398; 66 E.R. at p. 761 Sir John Stuart V.C. said: ‘A solicitor’s lien is a right which is founded on the rules of this Court and on the principles of common sense.’

Perhaps the two stated principles can be boiled down to this: the solicitor is entitled to assert and protect a lien, but the court will make orders in the interests of justice to protect both the asserted lien and the administration of justice between the parties.

In Hammerstone Pty Ltd v Lewis [1994] 2 Qd R 267, Shepherdson J of the Supreme Court of Queensland heard an application for production of a number of the defendant’s discovered documents, which were documents over which he asserted a lien for unpaid fees in the sum of $2,700.00, the defendant having acted as the plaintiff’s solicitors. (The plaintiff’s claim against the defendant was for damages on account of the defendant-solicitor’s negligence.) The existence of the lien was not in issue, but one would expect that the best evidence of the defendant’s alleged negligence was contained in his file.

Shepherdson J referred to a number of authorities, predominantly 19th-century English cases. His Honour said:

It is timely to recall the words of Lord Romilly M.R. in Lord Brougham v. Cauvin (1868) 16 W.R. 688: ‘Everybody knows that a person who has a lien does not lose it by inspection.’

However in Lord v. Wormleighton (1822) 1 Jacob 580; 37 E.R. 969 Lord Eldon the Lord Chancellor held that a solicitor who had been discharged by his client and having a lien upon documents was not bound to give them up or to allow an inspection until the costs were paid. That case is distinguishable from the present where the former client has sued the solicitors in negligence.

His Honour also quoted Lawton LJ, with whom the rest of the Court agreed, in Woodworth v Conroy (1976) 1 QB 884, 891 (emphasis added):

The right of a solicitor to withhold papers from inspection by his client, even in litigation between them, was recognised as long ago as 1822: see Lord v. Wormleighton (1822) Jac. 580. In later cases the limitations upon this right have been discussed (for an example see In re Hawkes (1898) 2 Ch. 1) but the basic right has not been queried.

The defendants, however, in the first action were not content to rest their defence upon their lien: they counter-claimed for their fees and, as already stated, the plaintiffs by way of defence put forward a number of pleas. The first was that there had been an agreement about fees, that they had paid what was due under this agreement and that there were no other fees due to the defendants. This issue could be tried without inspection of the files in question since the court would have to decide what, if anything, had been paid under the agreement. The plaintiffs, however, have gone further. They have exercised their right to put the defendants to proof that work has been done as alleged and that the fees charged are reasonable. In addition they have alleged negligence in the doing of the work. If these defences are put forward in good faith, it would be impossible to try the issues raised without evidence being led as to what work had been done and how it was done. The best evidence of what had been done would be in the files and the court would have to assess their contents in order to decide whether the fees charged were reasonable and whether the work had been done negligently. Unless there is some other element in the case, inspection of the files would be necessary in order to dispose fairly of these issues. Unless there is some other element in the case, inspection of the files would be necessary in order to dispose fairly of these issues.

The reference to “good faith” is an interesting one. What appears to have been meant is whether the allegation has merit or presents a serious question to be tried. In practical terms, this means that where a former client who (until it is demonstrated otherwise) owes money to a solicitor seeks production of documents the subject of a lien asserted by that solicitor, the former client will need to put on evidence as to the merits of the allegations giving rise to the need for the documents.

Another party subpoenas the solicitor for the former client’s documents

What about where another party to the former client’s litigation seeks to inspect the documents held subject to a solicitor’s lien? On the assumed facts, the former client, who discovered the documents on the basis of being in his or her possession, custody or power, no longer has possession or custody of or (unconditional) power over those documents. In the absence of co-operation from the solicitor asserting the lien, the other party could serve a subpoena on the solicitor to produce those documents.

The following appears in Halsbury’s Laws of Australia ([295-4625]):

A solicitor is required, notwithstanding the existence of a possessory lien, to answer a subpoena to produce documents in court proceedings where the court can ensure that the possessory lien will continue at the conclusion of the proceedings, although the court will not order production of documents subject to a solicitor’s possessory lien where the client is a party to the relevant proceedings and has been instrumental in issuing the subpoena.

The authorities cited for that proposition are Bolster v McCallum, Hammerstone Pty Ltd v Lewis and Chester v Cassidy Gibson Howlin (1994) 18 Fam LR 463. Chester was a case of a former client seeking orders for her former solicitors, to whom she still owed a debt for their services, to deliver up her files and documents in respect of pending family law litigation. None of the authorities cited involved a subpoena or a stranger to the solicitor-client relationship, although there is authority for the proposition that the lien is enforceable against third parties – which must be so in order for the lien to be effective as a security interest.

In Elders Rural Finance Ltd v Tapp (1993) 113 FLR 351, both the plaintiffs and the defendants subpoenaed the former solicitors of a deceased person, Charles William Tapp. (It is unclear from the judgment whether the executor of Mr Tapp’s estate was a defendant, but it is clear from Elders Rural Finance Ltd v Tapp [1993] NTSC 130 that he was.) His Honour said that the parties had said that privilege was not in issue in that case, but it later became an issue. The solicitors to whom the subpoena had been addressed sought orders that the subpoenas be set aside or, alternatively, directions be made with respect to the subpoenas. Part of the solicitors’ case was that the deceased owed money to the solicitors on account of their professional costs, some billed and some not, and accordingly asserted a lien over some of the subpoenaed documents. Martin CJ said (emphasis added):

A solicitor who has a lien upon documents has no better right to retain them when ordered to produce them to a court than his client would have if they were in the possession of the client. The right can not be asserted against third parties who would be entitled to production as against the client: Re Hawkes; Ackerman v Lockhart [1898] 2 Ch 1 at 6-7 per Lindley MR; Re Aveling Barford Ltd [1989] 1 WLR 360; [1988] 3 All ER 1019; Andersen v Lockhart [1991] 1 Qd R 501 at 504 per Ryan J.

The lien does not avail the solicitors from obeying the plaintiffs’ subpoena to produce the documents the property of the deceased. Of course, in so far as the files contain documents which are not the property of the deceased then the lien has no effect.

(Footnote of curiosity: the solicitors in Elders were a firm called Cridlands. The solicitor in Re Hawkes, referred to by Martin CJ, was a Mr Cridland.)

This is an important point about the nature of the security interest. As stated above, the solicitor’s right to possession – and thus to refuse production to a third party – is only as good as the former client’s right. Accordingly, if a client hands discovered or discoverable documents to a solicitor and those documents are later held subject to a lien, the solicitor will be required, if subpoenaed, to produce them to other parties in the former client’s litigation to the same extent that the former client would be required to produce them.

Production of the documents in those circumstances does not mean, however, that the lien is completely destroyed. The solicitor may still require that the documents be returned at the conclusion of the litigation. Under a subpoena, the documents are produced to the court, not to the parties, but the parties may inspect those documents and, if they so desire, make copies. (It would still be possible, I think, for a solicitor answering a subpoena to seek an order that the former client not be permitted to make copies of documents, and the nature of the documents and the nature of the case would be determinative of such an application.) Further, the documents may be released in the course of a trial for the purposes of being tendered. But the documents remain with the court, and in that way – for whatever it is worth – the solicitor’s lien remains intact.

%d bloggers like this: