A dispute involving more than $91,000 in trust funds has concluded that a solicitor was entitled to retain the money under his general lien, despite repeated demands from his former client for its release.
The Supreme Court of NSW has ruled that a solicitor is entitled to retain more than $91,000 in trust funds under a general lien, ending a protracted legal dispute with his former client over the proceeds of a business sale.
The dispute arose from the 2020 sale of Studio B Hair Design, a hairdressing business formerly operated by director, O’Brien, through trust arrangements.
After the sale, $146,521.60 was deposited into the trust account of business’s then-solicitors before being transferred to the trust account of Kerrison, triggering four years of legal wrangling over who was entitled to the funds and on what terms.
At the time of the business sale, Studio B was embroiled in a dispute with former employee Chick, who claimed a 50 per cent share of the proceeds, with Kerrison retained to act for the studio in the matter.
However, the relationship soon broke down, escalating after Studio B terminated his retainer in December 2020 and instructed him in January 2021 to transfer the funds to its new solicitors, Watson Law.
Kerrison refused to transfer the funds, arguing that Studio B owed him nearly $38,000 in unpaid legal fees and asserting a lien over the money.
Studio B challenged the bill, offering $16,000 in settlement, which Kerrison declined, escalating the dispute into a protracted costs assessment process and further litigation.
By October 2021, the salon instructed Kerrison to pay Chick just under $25,000 in settlement of her claim, which he did. The remainder of the proceeds, however, remained in his trust account while the parties continued to dispute legal costs.
Later that year, Kerrison’s fees were formally assessed at $29,328.81, later increased on review to just over $30,000.
Although he withdrew a portion of the funds to cover these costs, more than $91,000 remained in trust. Studio B pressed for restitution, claiming Kerrison had breached his fiduciary duties by withholding substantially more than what was owed.
At the heart of the dispute was Kerrison’s reliance on the common law principle of a solicitor’s general retaining lien – the right to hold onto a client’s property until outstanding fees are paid.
Studio B argued that Kerrison had overstepped in relying on the lien, particularly since the original dispute involved only a fraction of the withheld funds. The business claimed his actions breached fiduciary duties and were inconsistent with the Legal Profession Uniform Law, which governs solicitor trust accounts.
Kerrison, however, maintained that his lien extended to all funds held in trust until his legal costs – including those incurred in defending the lien – were fully paid. He likened the lien to a mechanic retaining a Ferrari until repair bills were settled, regardless of the car’s value.
The salon’s legal team countered that Kerrison’s Ferrari analogy was “inapt”, noting that the money was not his to treat like a luxury car but rather trust funds, even though he asserted a lien over them.
Justice Schmidt AM ruled in Kerrison’s favour, confirming that a law practice may “exercise a lien, including a general retaining lien, for the amount of legal costs reasonably due and owing by the person to the law practice, where the law practice is otherwise entitled to do so” in relation to trust money held in its general trust account.
The judge noted that although Studio B had provided directions for Kerrison to transfer the funds, section 144 of the Legal Profession Uniform Law allows solicitors to exercise a lien over trust monies “for the amount of legal costs reasonably due and owing”, regardless of those instructions.
As a result, Kerrison is entitled to continue holding the remaining $91,180.38 in trust until Studio B satisfies the outstanding costs orders.
