Citation: Abed v State of New South Wales & Ors [2013] NSWDC 179
Court: District Court of New South Wales
Date: 8 August 2013
Judge(s): Neilson DCJ
Background
The plaintiff brought proceedings against the State of New South Wales and two other defendants (her former husband and his new wife) alleging wrongful arrest, false imprisonment, and malicious prosecution. The allegations arose from a 2006 complaint to police by the second defendant, which resulted in the plaintiff being charged with breaking and entering with intent to commit murder. The plaintiff was held in custody for over six months before the charge was withdrawn.
The second and third defendants had previously lived with the plaintiff on a shared market garden property at Austral. Following Family Law proceedings, a court ordered the property to be sold, with 40 per cent of the proceeds going to the plaintiff and 30 per cent each to the second and third defendants. By order of the District Court, the second and third defendants' share of the proceeds ($437,154.54) was paid into court.
The substantive proceedings were heard by Judge Sorby over twelve days in mid-2013, but judgment was reserved. While those funds remained in court, the second and third defendants sought release of $45,000 to meet further legal costs incurred in defending the action. A prior application for $95,000 had been granted by Judge Balla in May 2013, but a subsequent application for the additional $45,000 was dismissed by Judge Lakatos in June 2013 as premature. The defendants renewed that application before Neilson DCJ.
Legal Issues
- Whether the second and third defendants were entitled to access funds held in court (and subject to a freezing order) to pay their legal costs in defending the proceedings.
- Whether the costs and disbursements claimed were reasonable, particularly where the amount charged by counsel appeared to exceed the amount quoted in the costs agreement.
- What the appropriate order for costs of the notice of motion should be.
Decision
The court confirmed the applicable principle, drawing on Frigo v Culhaci, Anglo-Eastern Trust Limited v Kermanshahchi, and Westpac Banking Corporation v McArthur, that a freezing order is not intended to prevent a defendant from defending the very proceedings that gave rise to it. The funds, until judgment is given, remain the property of the second and third defendants. Their prospects of success in the litigation, and the plaintiff's possible inability to recover on any judgment, were not relevant considerations.
The court accepted that the second and third defendants were entitled to release of funds to cover reasonable legal costs. However, a discrepancy emerged in the costs claimed: counsel's fee on the final day of hearing ($11,000) was higher than the amount quoted in the costs agreement for a daily hearing fee. Neilson DCJ held that, absent evidence explaining or justifying the increase and showing the defendants had consented to that change, the higher amount could not be treated as reasonable.
The court offered the defendants' representatives two options: proceed on a reduced figure (deducting the $11,000 excess), or provide formal evidence of the arrangement with counsel and the clients' consent to the variation. Counsel elected to proceed on the reduced figure. Accordingly, the court ordered release of $31,072.86, rather than the full $45,000 sought, to the defendants' solicitors' trust account, to be applied only toward legal costs and disbursements in the proceedings.
On the costs of the motion itself, the court noted that the application would have been necessary regardless of whether the plaintiff opposed it. The primary issue was whether the defendants' costs were reasonable, and that question was largely independent of the plaintiff's opposition. Each party was therefore ordered to bear their own costs of the motion.
Orders Made
- The sum of $31,072.86, being part of the funds held in an interest-bearing account by the Registrar, is to be paid forthwith to the trust account of Stojanovic Solicitors on account of the second and third defendants' further costs of the substantive proceedings.
- The funds paid to that trust account are to be applied only to the legal costs and disbursements of the second and third defendants in these proceedings.
- Each party is to pay their own costs of the notice of motion filed on 12 July 2013.
- Exhibits to be returned on the receipt of solicitors for the second and third defendants and for the plaintiff.
Key Takeaways
- A freezing order, or an order requiring funds to be paid into court, is not a form of de facto security for a plaintiff. Until judgment is given, frozen or court-held funds remain the property of the defendant, who retains a prima facie entitlement to use reasonable amounts for legal costs.
- The District Court confirmed that a defendant's prospects of success in the underlying litigation, and the plaintiff's potential inability to satisfy a judgment debt, are irrelevant when determining whether to release funds for legal costs.
- Reasonableness of costs is the operative constraint. Where a fee charged by counsel exceeds what was quoted in the costs agreement, a court may decline to treat the excess as reasonable unless there is evidence explaining the variation and demonstrating the client's informed consent.
- In assessing whether costs are reasonable in this context, the court applied the principle from Anglo-Eastern Trust that it is ordinarily sufficient for a defendant's solicitors to provide a self-certificate of reasonable costs, without requiring formal taxation or giving the plaintiff a role in scrutinising the solicitor-client relationship.
- Costs of an application to release funds for legal costs may be borne by each party where the substantive question (reasonableness of costs) would have required court resolution regardless of the plaintiff's opposition.
Legislation and Cases Referenced
Legislation
- Family Law Act 1975 (Cth)
Cases
- Frigo v Culhaci [1998] NSWCA 88
- Anglo-Eastern Trust Limited v Kermanshahchi [2002] EWHC 3152
- Westpac Banking Corporation v McArthur [2007] NSWSC 1347
- Clark Equipment Credit of Australia Limited v Como Factors Pty Limited (1988) 14 NSWLR 552
- Glenwood Management Group Pty Limited v Mayo [1991] 2 VR 49
- Polly Peck International plc v Nadir (No.2) [1992] 4 All ER 769