Lien on me: a quick guide to solicitor’s liens

As a lawyer, it’s easy to focus on providing the best possible service to your clients. We have a duty to the court and a duty to our client. But what happens when your client refuses to pay your bill? There are different paths a solicitor may take to recover unpaid fees. You may choose to file a Costs Assessment Application seeking determination as to the quantum of costs you are able to recover pursuant to your invoice. If you have complied with the Uniform Law disclosure obligations, you may opt to simply commence debt recovery proceedings.

However, there may be a quicker way to get paid. It is important to be aware of all the available tools that may assist in recovering unpaid fees.

What is a solicitor’s lien?

There are two types of solicitor’s liens which may be used depending on the situation. The first is a possessory lien, which is a solicitor’s legal right to retain a client’s property until fees are paid. This usually means the client’s file.

The second type is an equitable lien, commonly referred to as a “fruits of the action” lien. This type of lien applies where a solicitor’s work results in the recovery of money due to the client (for example, from another party to proceedings by way of a judgment) and it is the solicitor’s equitable right to have their unpaid costs and disbursements paid from the recovered monies.

How to claim a lien (and when)

Possessory liens usually arise when a client (with an unpaid invoice) terminates a retainer, retains new legal representation, and requests a copy of the file to pass to their new solicitor.

Rule 14.1 of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 (NSW) (Solicitor’s Conduct Rules) provides that a solicitor with designated responsibility for a client’s matter must ensure that, upon completion or termination of a law practice’s engagement, the client is given any documents (including electronic documents), as soon as reasonably possible when requested to do so by the client “unless there is an effective lien.”

A possessory lien means that the solicitor can refuse to provide the file to the client, or their new solicitor, while the previous solicitor’s invoices (the party claiming the lien) remains unpaid. To exercise this type of lien, a solicitor can simply inform the client (or their new solicitor) that they are exercising their solicitor’s lien and retaining possession of the file pending payment of their outstanding invoice. In circumstances where the matter is continuing, this can be an effective mechanism to encourage a client to pay any unpaid fees.

Equitable liens are usually utilised to recover payment of unpaid invoices from monies to be paid to the client, for example, damages payable to the client by another party to the proceedings. In this case, it is important to give notice of the lien to the party liable to pay the monies as soon as possible. It may also be necessary to make an application to the court to protect these costs.

Considerations when exercising a solicitor’s lien

With respect to the exercise of possessory liens, there are a few important considerations solicitors should be aware of:

• Rule 15 of the Solicitor’s Conduct Rules outlines the situations where, despite exercising a lien for unpaid legal costs, you may need to provide the file to the client or their new solicitors. This includes situations where the client (or the new solicitor) has provided reasonable security for your fees, or where you enter into a tripartite deed with the client and the new solicitor. The Law Society of NSW provides helpful precedent tripartite deeds for practitioners on its website.
• In other circumstances, the client may apply to the Supreme Court for an order to release the documents.
• If the solicitor terminates the client’s retainer (or it is terminated due to the solicitor’s misconduct) a valid solicitor’s lien may not be able to be maintained. Where the exercise of the lien has the potential to impact current proceedings, it is important to ensure that the lien is valid and is claimed in accordance with the relevant rules.
• Documents, files, and other items may be retained under a solicitor’s lien, but wills cannot be retained.

Practical tips for young lawyers

When exercising a lien:

• Be aware that if reasonable security is offered, you may need to deliver the file to the client or their new solicitor.
• Consider whether a tripartite deed would satisfy any concern about payment being made at the conclusion of the matter.
• Remember that wills cannot be held under a solicitor’s lien.
• Consider your firm’s policy as to solicitor’s liens. Their use can affect a continuing relationship with a client which should be a consideration as to whether it is in the firm’s interest to exercise the lien.
• Give notice that you are enforcing a lien as soon as possible. If it is a possessory lien, provide the notice to the client or their new solicitor. In the case of an equitable lien, give notice to the party liable to pay monies to the subject of the lien.
• Take appropriate care of the client’s property over which the lien is exercised. Do not damage (or lose) the property or documents.

Conclusion

Communication with the client regarding their costs is such an important factor in ensuring payment of fees. Ensuring that cost disclosure is made to the client at the commencement of the proceedings, updating the costs estimate throughout the matter, keeping good records of the work done and the fees billed, will assist in the payment of legal costs as and when they are due. When all else fails, exercising a solicitor’s lien can be an extremely helpful tool in encouraging a former client to pay unpaid fees.