Damodar Das v. Morgan & Co.

JUDGMENT

1. This is a suit transferred from the Small Cause Court, on the application of the defendants, under the provisions of Section 39 of the Presidency Small Cause Courts Act, 1882. The circumstances which have occasioned the suit are as follows: On 9th January 1923, one John Marchmont Gregory obtained a decree for Rs. 16,307 with interest and costs against three persons, of whom one was the plaintiff, and another a gentleman named Lala Raghumal. As security for his claim in that suit, Gregory held the title-deeds of a property, belonging to Lala Raghumal, known as 132, Harrison Road, Calcutta. After the decree, Gregory gave a warrant of attorney to the defendants, authorising them to act as his attorneys in the execution proceedings. On 14th May 1924, Lala Raghumal filed a suit, namely suit No. 1302 of 1924, to set aside the decree obtained by Gregory and to obtain the return of the title deeds. In June 1924, the defendants filed a warrant of attorney on behalf of Gregory. Writing to the plaintiff on 29th August 1928, the defendants state that they entered appearance in the suit on the plaintiff's instructions and on the plaintiff's undertaking to pay the costs. In subsequent correspondence, the plaintiff states that he does not agree with the defendants' version of the circumstances, in which they entered appearance on Gregory's behalf. On 6th February 1925 the parties to Suit No. 1302 arrived at a compromise, and, in a letter of that date, Gregory informed the defendants of its terms. The letter is as follows:

6th February 1925.

Messrs Morgan & Co.,

Solicitors, Calcutta.

Dear Sirs,

Suit No. 1802 of 1926 O.O.C Jn. Calcutta H.C

Lala Raghumal Khandelwall

Myself and Ray Bahadur Damodar Das

A settlement has been made between me and Lala Raghumal in this case on the following terms:

Lala Raghumal will pay my costs and any amount still due on account of interest and obtain a discharge from Ray Rahadur Damodar Pas on my behalf in Suit No. 8629 of 1921: Myself v. Lila Raghumal.

On Ray Rahadur Damodar Das certifying the payment of costs to me, etc., by Lala Raghumal, as mentioned above, on my behalf, the title-deeds of 132, Harrison Road, which I have sent to you, will be made over to Lala Raghumal, who will withdraw this case, each party bearing his own costs.

Ray Rahadur Damodar Das will pay you the cost incurred by you on my account in this case, and I request you to give effect to this settlement.

Yours faithfully,

(Sd.) John M. Gregory.

2. On 18th February 1925 Gregory was adjudicated an insolvent When he was subsequently asked by the Official Assignee as to the settlement, Gregory stated that he had no interest whatever in either of the suits between himself and Raghumal, and that they had been settled long ago and certainly prior to his insolvency. At the end of March 1925 the position with regard to the decree obtained by Gregory in January 1923 was as follows: the balance of the taxed costs payable by the defendants in that suit had been deposited in Court, and there was still due a sum of Rupees 1,741 in respect of interest payable on the decretal amount. On 31st August 1928 a settlement was arrived at between the defendants and Messrs Khaitan & Co., who were acting for the legal representatives of Lala Raghumal, who had died in the meantime. Under the settlement the defendants received a sum of Rs. 1,300 in full satisfaction of Gregory's claim for costs and otherwise under the decree of 1923, and made over the title deeds of No. 132, Harrison Road, free from any claim by way of lien. It was also agreed that the suit filed by Lala Raghumal in 1924 should be struck off, each party bearing his own costs. It is not clear what instructions, if any, the defendants had when they agreed to settle the outstanding claims under Gregory's decree on the terms I have stated. It is however admitted that the settlement was made without reference to the present plaintiff.

3. This suit was instituted in the Small Cause Court on 1st August 1930. In his plaint, the plaintiff states that, in settling the suit for Rs. 1,300 without his consent or authority, the defendants acted wrongfully and illegally, and thereby caused him loss to the extent of Rs. 400, being the difference between the amount due under the decree and Rupees 1,300. He also states that the defendants admit their liability to account for this difference, and that he is willing to set off his claim for this sum against a similar sum due from him in respect of costs payable to the defendants in terms of the letter of 6th February 1925. On the basis of this set-off, he claims the sum of Rs. 1,300 paid to the defendants on 31st August 1928. The case for the defendants is set out in para. 3 of their written statement. Therein they admit having received the sum of Rupees 1,300, but deny that they are liable to pay it to the plaintiff. They go on to say that the sum was appropriated by them towards their general balance of account, and that they made the appropriation as the plaintiff's solicitors having a lien on the money and/or as creditors of the plaintiff. They further allege that the plaintiff accepted the appropriation. They admit having offered to give credit to the plaintiff for the sum of Rs. 400, but they state that they did so purely with a view to arrive at an amicable settlement and deny the it liability to account for it. They say that, on the balance of account, there is now Rs. 775 owing, for which they ask for a decree.

4. The first point that has been raised by the defendants is that the plaint discloses no cause of action. The defendant's counsel points out that there had been no assignment of the proceeds of Gregory's decree in favour of the plaintiff, and also that the warrant of attorney held by the defendants was throughout a warrant of attorney to act on behalf of Gregory and not of the plaintiff. It is said that although Gregory may have intended, or even instructed, the defendants, to make over the fruits of the decree to the plaintiff, that is a matter purely between themselves and Gregory, and gives rise to no claim on the plaintiff's part. I am of opinion that the defendants, in view of their conduct throughout, cannot take up this position. In the words of the plaintiff's counsel, they have always recognised the Rs. 1,300 as being the plaintiff's money. From time to time, statements of general account have been submitted to the plaintiff, in which, as in the correspondence, the claim of the plaintiff subject to the cross claims of the defendants, to the sum of Rs. 1,300 has been conceded. Indeed, their substantive defence, namely that they are entitled to apply this Rs. 1,300 in liquidation of the plaintiff's general liability to them, to my mind, clearly involves recognition of the fact that the money paid in August 1928, was money to which prima facie the plaintiff was entitled.

5. It will be convenient here to consider the question of the sum of Rs. 400, which stands in a different position to the other part of the plaintiff's claim. The plaintiff claims this sum on the ground of a breach of duty on the part of the defendants to him as his attorneys. Although, as I have said, it is clear that both parties recognised the plaintiff's title to the sums recovered under Gregory's decree, I do not think that it has been established that, with regard to the litigation, the plaintiff had stepped into the shoes of Gregory. In other words, I do not think that, as regards the actual steps in the litigation, it has been show a that the defendants were acting as the plaintiff's attorneys, and owed a duty to him to do nothing without his instructions. The warrant of attorney still stood in the name of Gregory, and I do not find that the plaint alleges any agreement between the parties concerned, whereby the duty, which the defendants owed to Gregory as his attorneys, had become a duty which they owed to the plaintiff. On the correspondence, I accept the case of the defendants as regards the admission. It appears quite clear that the offer to give the plaintiff credit for Rs. 400 was merely made in order to arrive at an amicable settlement, and was, in fact, without prejudice to the defendants' right to dispute their liability to the plaintiff in respect of this sum.

6. I now have to consider the claim of the defendants to be entitled to retain this sum of Rs. 1,330 as against the general balance of the plaintiff's account. Although, in the plaint the defendants claim to retain that sum as the plaintiff's attorneys or alternatively as his creditors, the latter aspect of their relationship has not been pressed. Learned counsel for the plaintiff states that the defendant's claim had become barred by limitation when the written statement was filed. Looking into the statement of account, that prima facie appears to be so, and the defendants have not sought to argue that their claims as creditors were not then barred by limitation. It must therefore be kept in mind that the defendants' claim to the money is based purely on their rights as attorneys, and I need not consider their position as creditors either under O. 8, R. 6 of the CPC, or from the point of view of equitable set-off. Now, the position of attorneys in this country with regard to lien has recently been exhaustively dealt with by Marten, C.J, in Tyabji Dayabhai & Co.… v. Jetha Devji & Co.…* . AIR 1927 Bom 542 (at 865 of 51 Bom.). The learned Chief Justice observes as follows:

“In the first place it must be clearly understood that the rights and duties of attorneys are in no way part of the indigenous law or practice in India. Their profession originates from England; it grew up under the English common law; and it is clear that it was the common law which governed their rights and duties in the King's Courts established by the Supreme Court Charter of 1823, to which Courts our present High Court is the successor.”

7. Mutatis mutandis those words appear to me to apply to the Calcutta High Court. I take the learned Chief Justice's words as amounting to a statement that the rights of an attorney in India are the same as the rights of a solicitor in England, except in so far as the latter have been diminished or increased by statute. As to the solicitor's right of lien, the learned Chief Justice adopts the statement of the law to be found in Halsbury's Laws of England, Vol. 26, Title: “Solicitors,” para. 1384. It is there stated as follows:

“A solicitor is entitled to three kinds of lien to protect his right to recover his costs from his client, namely (1) a passive or retaining lien; (2) a common law lien on property recovered or preserved by his efforts; (3) a statutory lien enforceable by a charging order.”

8. With regard to the last mentioned, or statutory, lien it need only be said that it is a creation of the Solicitors Act, 1860, (23 & 24 Vic c. 127). Indian statute law contains no similar provision, nor would such a statutory lien have any application to the facts of this case. I must now consider what, in the passage I have quoted, is called the common law lien on property recovered or preserved by the solicitor's efforts. This lien, is admittedly a particular lien and not a general lien, and it is therefore not available for the general balance of account between the attorney and his client, but extends only to the costs of recovering or preserving the property in suit. The difficulties with regard to this type of lien usually arise when the interests of parties other than the solicitor and his client are involved. Most of the reported cases are concerned with the solicitor's right to his lien, either over a fund paid into Court, or property in the hands of a Sheriff. It is clear that this particular lien is of no assistance to the defendants in the present case, because, as regards sums which were due in respect of the two suits, to which Gregory was a party when the Rs. 1,300 was paid to the defendants, the plaintiff admits that the must give them credit by reason of the terms of the letter of 6th February 1925. It is immaterial whether the solicitors acquired their rights under their particular lien or under the terms of the letter.

9. There remains to be considered the third lien, namely, the passive or retaining lien. Mr. Sinha first argued that this lien has never existed in India. I do not agree with this submission, because I consider that the judgment of Marten, C.J, to which I have referred, lays down that an attorney in India has all the rights as regards lien which a solicitor has in England except those rights which depend on statute. It seems to me that the attorneys, who practised before the Supreme Court, had this right of passive or retaining lien, as much as solicitors practising in England. I do not think that the fact, that the particular lien on property recovered is referred to as a Common law lien, means that the passive or retaining lien is not a right recognized at Common law.

10. Mr. Sinha then submitted that if the passive or retaining lien had originally existed it had been taken away by Section 171 of the Contract Act. If this view were correct, a solicitor's general lien would only extend to property held under a contract of bailment, and would therefore not apply, in my judgment, to a fund paid to him as the result of the settlement of a suit. Whatever be the meaning of Section 171 of the Contract Act, I am convinced that it has not the effect of depriving attorneys of the passive or retaining lien which they possessed prior to the passing of the Contract Act. I hold therefore that attorneys are entitled to a passive or retaining lien. It only remains to consider what property is subject to that lien. Mr. Sinha points out that in Halsbury's Laws of England, it is said:

“The retaining lien enures in the solicitor's favour in respect of all deeds, papers, or other personal chattels which come into his possession in the coarse of his professional employment including bills of exchange, letters patent, policies of assurance, letters of administration, documents contained in a drawer of which the solicitor is given the key, and applications for shares.”

11. Nothing is said with regard to the money of the client which comes into the hands of the solicitor I have been referred to a textbook entitled. The Law and Practice Relating to Solicitors' Liens and Charging Orders by Mr. Atkinson, a solicitor of the Supreme Court in England, published in 1905. At pp. 43 and 44 the author uses these words:

“In addition to this particular or special lien, which extends to his costs in the particular action or proceeding only, a solicitor has a general lien available for his costs in all matters on any moneys of his clients coming into his possession, unless paid to him by the client for a specific purpose; and this lien may be asserted even against the client's trustee in banckruptcy. This general lien however is merely passive, and practically amounts to a ??? right of set-off by the solicitor of the amount of his general costs against his client's monyes in his hands.”

12. I was inclined at one time to take the view that, whereas with regard to funds in Court and the like, a solicitor has only a particular lien, the position is different when the solicitor has obtained possession of the fund, and that once possession has been obtained, the solicitor is entitled to treat the money in his possession in the same way as documents belonging to his client, and can refuse to pay it over to his client as long as any amount is owing to him. This would of course in fact amount to applying the money in liquidation of the general account. However a reference to one of the cases referred to by the author of the text-book, to which reference has just been made, has convinced me that this view is erroneous, and that a solicitor has no greater rights over money which is the fruit of his exertions when he obtains possession of it, than he has when it is still in the silage of being on deposit in Court. The case in Mackenzie v. Mackintosh . 1891 64 LT ch 318 on appeal 706. and the proceedings in the Court of the first instance are reported in 64 L.T (Ch.) 318. In that case the plaintiff had a charge over the proceeds of three policies of marine insurance. The assured, who had created a charge in the plaintiff's favour, instructed a firm of solicitors to take steps to realize the amounts claimed on all three policies. There was some correspondence between the parties in connexion with the charge, which included a letter addressed to the plaintiff by the solicitors. A sum of money in respect of one of the policies was under the terms of a compromise paid by the insurance society concerned to the solicitors. The plaintiff called upon the solicitors to pay this sum to him less their charges incurred in respect of the particular claim, but the solicitors maintained that they were entitled to a lien on the money, not only for their charges in respect of that claim, but in respect of costs incurred in respect of claims against other insurance societies under the other policies. The case came before Kekewich, J., and in the course of his judgment, dealing with the general question of lien, he observed as follows:

“There are really no modern cases (not one has been cited) going to show that there is a charge on the fund in the way of a general lien for all of the costs due from the client to the solicitor; whereas it has been settled—beyond the time of legal memory I might almost say—that a solicitor has a lien on the deeds, documents and papers in his hands. The distinction between the two liens (they are both called “liens”) is that one is passive and the other an active lien. In one case he can only retain his papers, and in the other he cm enforce his lien as a charge and recover it and he can do so indipendently of the statute which enabled the solicitor to proceed in the Court of Chancery by petition and obtain a charging order. That certainly seems to me to have been long established—at any rite to be laid dow ???—I will not say established, in the case of Bizon v. Bolland . 1846 9 Beav 177, where the subject is elaborately created. The doctrine is also recognized in the case cited by Mr. Renshaw, in reply, of. Lucas v. Peacock . 1839 4 My & C 354., where Lord Langdale says: “The solicitor's lien on a fund is not a general lien; it extends only to costs in the cause or costs immediately connected with the costs of the cause.” And Bozon v. Bolland is referred to. It is true that in that case, as in many others, the fund was a fund in Court. But there are cases which applied the direction to funds not in Court and on principle it seems to me that the rule must be the same.”

13. It is clear therefore that Kekewich, J., thought that there was no difference between a fund in Court and a fund of which the solicitors had obtained possession. However he then proceeded to consider the correspondence in the case, and came to the conclusion that, on the correspondence, the solicitors were entitled to a general lien. It is clear that, apart from the correspondence, he would have held that the solicitors were only entitled to retain the costs arising out of the particular claim in respect of which the money had been paid to them. Against the decision in favour of the solicitors the plaintiff appealed. The judgment of the Court of appeal does not suggest that the statement of law in the Court below is incorrect, but the Lord Justices, taking a different view of the correspondence, reversed the order of Kekewich, J., holding that the Solicitors were entitled to a particular lien on the funds in their hands. I do not think it necessary to cite passages from their judgments, which are to be found in the same volume of the Law Times at p. 706, except in so far as to refer to the following observations of Lindley, L.J:

“He (the solicitor) has a general lien upon deeds and papers in his hands for all costs however arising. But he has no such general right of lien against moneys which he recovers for his client. Whether he gets them or does not, his lien or right to be paid out of those funds is to be confined to the costs incurred in respect of those funds, subject, of course, only to this: that he has the ordinary rights of set-off which one creditor has as against another, and which I need not further refer to.”

14. For the reasons I have given, I do not consider that the defendants here can claim in the capacity of creditors. It follows, from what I have said, that, in my judgment, their claim to retain the sum of Rs. 1,300 against the balance of their account is not tenable. I have held that the plaintiff has no claim in respect of the sum of Rs. 400. His claim must, therefore, be reduced by the amount of the two bills outstanding against him in respect of the two suits to which the present suit has reference. Those bills amount to Rs. 328-8-0. There will, therefore, be a decree in favour of the plaintiff for Rs. 971-8-0 with interest on judgment at 6 percent, and costs as in an ordinary defended suit in the High, Court.

K.S

15. Order accordingly.