Adelaide Bank Limited v Phontos

Federal Court of Australia|2016-07-19|Before: Mr P, Robertson J

Counsel for the Applicants: Mr RD Marshall with Mr P Mann

Counsel for the Second Respondent Mr R Roser of Moisson Lawyers

Solicitor for the Second Respondent Moisson Lawyers

BETWEEN: ADELAIDE BANK LIMITED and BENDIGO AND ADELAIDE BANK LIMITED Applicants

AND: MICHAEL PHONTOS First Respondent

JUDGE: ROBERTSON J DATE OF ORDER: 19 JUly 2016

Bendigo and Adelaide Bank Limited (ABN 11 068 049 178) be added as an applicant.
The applicants' application filed on 3 June 2016 be dismissed.
The first respondent's interlocutory application filed on 22 June 2016 be dismissed.
The applicants pay the first respondent's costs of the proceedings, as between party and party, as agreed or taxed.
There be no order as to the second respondent's costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 In 2010 and 2011 there was litigation in the Supreme Court of New South Wales between the applicant, Adelaide Bank Limited (the Adelaide Bank), on the one hand and Property Builders Pty Limited (Property Builders) and Mr Michael Phontos, on the other hand. 2 The Adelaide Bank sought possession of certain properties from Property Builders and a judgment in the monetary sum of $1,550,256.81 from each of Property Builders and Mr Phontos. The claim against Property Builders was based on the covenants contained in a Real Property Act mortgage which had been transferred to the Adelaide Bank and in respect of which there had been default. The claim against Mr Phontos was made pursuant to a guarantee given by him in respect of the debt secured by the mortgage. The Adelaide Bank claimed that the benefit of the guarantee had been assigned to it. 3 On 30 November 2011 the New South Wales Court of Appeal ordered, so far as relevant, that the Adelaide Bank pay Mr Phontos' costs of the proceedings at first instance and on appeal. 4 Mr Phontos is also a solicitor practising on his own account under the name Phontos Legal. 5 On 28 February 2012, Mr Phontos was declared bankrupt. On 2 May 2015, he was discharged from bankruptcy. 6 On 15 April 2013, the second respondent, Mr Bradley Tonks, was appointed as the Trustee in Bankruptcy (the Trustee) of Mr Phontos, the prior trustee in Bankruptcy having been Mr Struthers. 7 In light of a transfer certificate, which came into force on 1 December 2008, made under the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth), I will order that the Bendigo and Adelaide Bank Limited be added as an applicant party. A notice of appearance was filed in Court today by that entity. Hereafter I refer to the Adelaide Bank and the Bendigo and Adelaide Bank as the Bank. 8 On or about 24 February 2016, Mr Phontos served an unfiled Application for Assessment of the costs order on the Bank. The Bank responded by asking for evidence of the Trustee consenting to, and providing his authority for, Mr Phontos to take steps to recover the alleged outstanding costs. The letter raised the question of Mr Phontos' capacity to pursue his claim. 9 There was much further correspondence. 10 By letter dated 16 March 2016, Mr Phontos said that no consent or authority was required to his taking steps to recover the costs ordered to be paid to him by the Court of Appeal. The debt owed to him by the Bank, Mr Phontos wrote, arose from his personal exertions as a lawyer before he was made bankrupt. He conducted his affairs on a cash receipt basis. In his hands the debt when paid would be income since its origin was from the provision of his services. Had that income been received during his bankruptcy for services performed before his bankruptcy, such income would be treated as derived by him during a contribution assessment period and the income would thereby be after acquired income and would not vest in his trustee, subject to his contribution obligations under Part VI Division 4B of the Bankruptcy Act 1966 (Cth). He said that the Trustee could not sue for his income because it did not vest in the Trustee. 11 On 13 April 2016, the Trustee wrote to the solicitors for the Bank stating that the right to recover the costs order was an asset which vested in him as trustee of Mr Phontos' estate. He said that Mr Phontos disclosed the costs order on his Statement of Affairs as a debtor in the amount of $402,322.00. 12 On 14 April 2016, Mr Phontos filed in the Supreme Court of New South Wales an application for assessment of party/party costs (Costs Assessment Application). That application was directed to the Manager, Costs Assessment. The application stated that the amount of costs in dispute was the total amount of costs payable by the Bank as a result of the order of the Court of Appeal on 30 November 2011, in respect of which the costs claimed were in the sum of $402,199.90. 13 On 22 April 2016, the solicitors for the Bank wrote to the Manager, Costs Assessment stating that: "Based on our preliminary review, the Cost Applicant does not have standing to apply for an assessment." That letter requested that the Manager, Costs Assessment either not refer the application to a costs assessor or that the Costs Assessor make a preliminary determination that the Costs Assessment Application was fundamentally flawed and legally incompetent. 14 The Costs Assessment Application was referred to the Costs Assessor, Mr Stephen Lancken. 15 By letter dated 26 April 2016, Mr Phontos wrote to the Manager, Costs Assessment stating that the 22 April 2016 letter from the solicitors for the Bank misconceived the entitlement of the Trustee to the relevant costs order and the role of the Costs Assessor. The letter maintained that the Costs Assessor had no right to stay an assessment process. 16 By email dated 27 April 2016, Mr Lancken wrote to the parties stating that he thought the issue as to whether he could proceed with the assessment should be determined by him as a preliminary issue. Mr Lancken set a timetable for submissions in relation to that preliminary issue. That timetable required submissions by the Costs Respondent and the Trustee by 21 May 2016, submissions by Mr Phontos by 4 June 2016, and any submissions in reply by 11 June 2016. 17 On 16 May 2016, the solicitors for the Bank sent a letter to Mr Phontos enclosing a copy of the Bank's submission sent to Mr Lancken. That letter also invited Mr Phontos to withdraw the Costs Assessment Application and said that if he failed to do so by 18 May 2016 then the solicitors for the Bank were instructed to file an originating application in the Federal Court. A copy of that letter was forwarded to the Trustee by the solicitors for the Bank. 18 On 18 May 2016, Mr Phontos wrote to the solicitors for the Bank and to the Trustee stating, amongst other things, that now that the assessment process had commenced neither the Federal Court or any other court could assess costs in the matter, the Costs Assessor must complete the assessment process and issue a cost assessment certificate and he, Mr Phontos, was precluded from any other course to recover the legal costs until the Costs Assessment had been completed. 19 On 26 May 2016, the solicitors for the Bank wrote to Mr Phontos by email disagreeing with the contents of his letter of 18 May 2016. 20 The Bank and Mr Phontos have served their submissions in respect of the preliminary point identified by Mr Lancken.

The proceedings in this Court 21 By originating application filed in this Court on 3 June 2016 the Bank claimed the following final relief: 1. A declaration pursuant to section 30 of the Bankruptcy Act 1966 (Cth) that the costs order made by the New South Wales Court of Appeal on 30 November 2011 in proceedings numbered 2008/286721 that the Applicant here pay the costs of the First Respondent here of those proceedings at first instance and on appeal (Costs Order) vests in the Second Respondent. 2. A declaration that the First Respondent has no right to bring or prosecute any application for the assessment of the costs payable under the Costs Order. 3. An injunction permanently restraining the First Respondent from proceeding with any application for assessment of the costs payable under the Costs Order. 4. An order that within 7 days the First Respondent withdraw or otherwise discontinue the Application for Assessment of Party/Party Costs filed on 14 April 2016 and allocated number 2016/115003. 5. The First Respondent pay the Applicant's costs of these proceedings on the indemnity basis. 22 The Bank also sought interim relief as follows: 6. Until further order and subject to order 7, the First Respondent be restrained from doing any act or filing any document with the Costs Assessor in cost assessment number 2016/115003; and 7. The First Respondent be directed to make an application in writing within 2 working days to the Costs Assessor in costs Assessment number 2016/115003 to adjourn that costs assessment pending the outcome of these proceedings. 23 Mr Phontos filed on 22 June 2016 an interlocutory application, as follows: Interlocutory orders sought 1. An order pursuant to Rule 13.01 (a) of the Federal Court Rules 2011 (Rules) that the claims sought in paragraphs 2 to 7 of the Originating Application dated 3 June 2016 (Originating Application) be set aside as those claims do not raise a controversy as to what property vested in the Second Respondent as the trustee of the bankrupt estate of the First Respondent by the operation of s 58(1) of the Bankruptcy Act 1966 (Cth) (Act) and divisible among creditors under s 116 of the Act because: a. Pursuant to section 353 of the Legal Profession Act 2004 the First Respondent has a statutory right to apply to the Manager, Costs Assessment for an assessment of the whole of the costs arising from the cost order made in favour of the First Respondent by the New South Wales Court of Appeal on 30 November 2011 (cost order). b. The First Respondent has standing to prosecute the application for party/party costs even if the costs order did vest (which is not admitted) in the Second Respondent when neither the Second Respondent, nor his predecessor, interfered with the party/party applications made by the First Respondent; c. The prosecution of the claims sought in paragraphs 2 to 7 of the Originating Application are an abuse of the process of this Court in circumstances where the Applicant (as costs respondent) sought and obtained from the Costs Assessor in assessment number 2016/115003 that the assessment be prosecuted by first determining the preliminary issue of whether the First Respondent {as the costs applicant) was entitled to maintain the costs application referred to him; and d. The preliminary steps taken by the Costs Assessor in assessment number 2016/115003 do not disclose any error and is not subject to review by this Court to obtain an injunction. 2. An order pursuant to Rule 13.01 (a) of the Rules that the claim sought in paragraph 1 of the Originating Application be set aside because: a. The costs order is characterised as income in the hands of the First Respondent; b. The Second Respondent abandoned the costs order and is now estopped from claiming that the costs order vests in him; c. The amount of money to be recovered from the costs assessment is limited to party/party costs and does not extend to solicitor client costs and therefor the costs payable to those with a fruits of action lien and the income in the hands of the First Respondent will be less than the amount to be recovered from the Applicant; and d. The First Respondent is no longer bankrupt and has been discharged of all provable debts pursuant section 153 (1) of the Act. 3. A declaration that the First Respondent is entitled to apply and maintain an application for assessment of costs of the cost order. 4. In the alternative to the order sought in paragraph 2 above, a declaration that the Second Respondent pay the money recovered from the costs order to the First Respondent. 5. A declaration that Bendigo and Adelaide Bank Ltd ABN 11 068 049 178 is liable to pay the cost order pursuant to the Certificate of Transfer which came into force on 1 December 2008 made pursuant to the Financial Sector (Business Transfer and Group Restructure) Act 1999. 6. Further, an order pursuant to Rule 13.01 (a) of the Rules that the claim sought in paragraphs 1 to 7 of the Originating Application be set aside because the Applicant did not bring its application within 60 days after 31 October 2014 or alternatively within 60 days after 8 December 2014. 7. An order pursuant to section 43(3)(g) of the Federal Court Act 1976 (Act) that the Applicant pay the First Respondent's costs of these proceedings to be assessed on the indemnity basis. 24 The matter came before me on 27 June 2016 for interlocutory relief. There was debate about whether or not the parties wished the hearing to be treated as a final hearing. Counsel for the Bank said that for a final hearing, he wished to put on further evidence in relation to an estoppel claim made by Mr Phontos. 25 It was possible to set the matter down for final hearing today, 19 July 2016. 26 The position of Mr Lancken, communicated by email on 25 June 2016, [Exhibit A] was that he did not propose to proceed with the costs assessment at that stage but that if this Court did not make an interlocutory order he would reluctantly be obliged to undertake his statutory obligation to assess and would proceed with the assessment. I asked the parties to communicate to Mr Lancken that the matter had been stood over in this Court for final hearing on 19 July 2016 and granted liberty to apply if there were any difficulty. No such application was made. I was told by counsel that Mr Lancken was awaiting the outcome of the hearing today. 27 The hearing on 27 June 2016 was limited to the parties' submissions on jurisdictional questions. At the final hearing on 19 July 2016 three affidavits were read, subject to my rulings: the affidavit of Azita Doudman of 31 May 2016; the affidavit of Michael Phontos of 22 June 2016; and the affidavit of Bradley John Tonks dated 15 July 2016.

The parties' submissions 28 The parties, the Bank and the Trustee on the one hand and Mr Phontos on the other hand, were at issue as to whether the costs order was an asset of the bankrupt estate. 29 The Bank submitted that Armour v Mason [2002] NSWSC 464 was directly in point. The Bank submitted that the costs order sought to be assessed was property as defined in the Bankruptcy Act. It was property that vested in the Trustee on 28 February 2012, pursuant to ss 58 and 116 of the Bankruptcy Act. Upon his appointment as Mr Phontos' trustee, the costs order then vested in the Trustee. The costs order became (and remained) an asset of Mr Phontos' bankrupt estate. The fact of Mr Phontos' discharge from bankruptcy in 2015 did not alter the position. A discharge did not annul the bankruptcy nor did it serve to reconvey the property vested in the Trustee back to the bankrupt. 30 The Bank submitted that the costs order must be quantified to be enforced as a debt. Quantification would occur by agreement between the Bank and the Trustee, or failing agreement, by assessment under the provisions of the Legal Profession Act 2004 or the Legal Profession Uniform Law. Armour v Mason established that it was the exclusive domain of the Trustee to file and prosecute the Assessment Application. 31 The Bank took issue with Mr Phontos' reliance on cases such as Barwick v Goodrich [2011] NSWSC 1233; 255 FLR 245 in which a claim for solicitor-client costs or barrister-solicitor costs were held to be income of the bankrupt not an asset of the bankrupt estate. The Bank submitted that the costs assessment here was not by Mr Phontos' against his client. Instead, it was a party/party assessment of costs ordered inter partes by the Supreme Court under s 98 of the Civil Procedure Act 2005 (NSW). This made it property, not income, as Austin J said in Armour v Mason at [20]. The Bank also disputed Mr Phontos' submission that he had a solicitor's fruits of action lien over the costs order in reliance on Kison v Papasian (1994) 61 SASR 567. 32 The Bank submitted it was in the unenviable position of not being certain about whom to pay for the Costs Order. That could only be resolved by agreement of the parties to these proceedings or by this Court deciding the issue. The nub of the controversy was who was entitled to enforce the Costs Order. That involved a determination whether the Costs Order was property of the bankrupt estate. As such, it involved a special federal matter within paragraph (e) of the definition of "special federal matter" in s 3(1) of the Jurisdiction of Courts Cross-vesting Act 1987 (Cth). Any action commenced in the Supreme Court of New South Wales on this subject would render that action liable to be transferred to the Federal Court under s 6 of that legislation, regardless of convenience. This was discussed recently by the Full Court of the Federal Court in Truthful Endeavour Pty Ltd v Condon (Trustee) Re Rayhill (Bankrupt) [2015] FCAFC 70; 233 FCR 174 at [60]. 33 The Bank submitted that Truthful Endeavour had been applied in the New South Wales Supreme Court in Fewin Pty Ltd v Burke [2015] NSWSC 1411; 302 FLR 32 where a common law claim for negligence against a trustee in bankruptcy by a creditor of the bankrupt estate was held by Wilson J to be a special federal matter; see at [22] to [33] of the reasons where her Honour set out the full legislative scheme that underpinned her conclusion. 34 The Bank submitted that the relief it claimed must be sought in the Federal Court or the Federal Circuit Court, s 27 of the Bankruptcy Act referred. (Emphasis added.) 35 The Bank submitted that the objection to jurisdiction contained in Mr Phontos' Interlocutory Application dated 21 June 2016 was therefore without merit. 36 The second respondent, the Trustee, submitted that whether or not the costs order was an asset of the estate was an important issue which should be determined. The Trustee would say to the Costs Assessor that he was not abandoning his claim. It was his position that the costs order was an asset of the estate and it was due to the fact that it was an impecunious bankrupt estate, and there were no funds in the matter, that he did not agitate it himself. But that notwithstanding, there appeared to be the issue of jurisdiction, whether or not the vesting should be heard in this Court. It was the Trustee's position that this Court should hear the issue in terms of whether or not the asset vests and then determining the quantum was obviously a matter for the State court. The Trustee submitted that if the Court decided that the costs order vested in him, it would be for him to either agree to the costs or run the costs assessment himself against the Bank. If this Court gave a judgment that the costs order made by the New South Wales Court of Appeal vested in him as Trustee, then the Trustee would be the proper applicant under the New South Wales costs regime. The Trustee would then, he submitted, definitely get on with the process of making a costs assessment application. 37 On the question whether the costs order was an asset of the bankrupt estate, the first respondent, Mr Phontos, relied principally on Re Bankrupt Estate of Sharpe (1998) 80 FCR 536 per Lockhart J; Re Gillies; Ex parte Official Trustee in Bankruptcy v Gillies (1993) 42 FCR 571 per French J; Barwick v Goodridge per Black J; and Re Michell (Trustee); Lee (decd) [2012] FCA 1046; 207 FCR 96 per Gray J. I was also referred to the definition of "derived" in s 139K of the Bankruptcy Act and the use of that term in s 139M(3) of that Act. 38 On the question of this Court stopping the costs assessment process Mr Phontos submitted that the Costs Assessor had unlimited powers to determine all matters of law and fact on an assessment application: Colbron v Freeman [2014] NSWSC 1210 at [22]-[23]. The preliminary steps taken by Mr Lancken did not disclose any error and were not subject to review by this Court to obtain an injunction. To stop the assessment process now would defeat what the legislature sought to achieve by the assessment scheme. In being required to determine all issues of law and fact an assessor could not refuse to make a determination and if he did, relief in the nature of mandamus would be available to require him to make a determination. The assessment process was an administrative scheme which did not affect the right or title to the amount of costs assessed. The costs assessment process before the Costs Assessor did not put into issue the claims by the Bank and the Trustee that the Trustee owned the costs order and must distribute the amount recovered amongst creditors. Accordingly, neither the costs assessment nor these proceedings owed their existence to federal law and the "exclusive" jurisdiction of the Federal Court was not enlivened. Once begun, the assessment process could not be avoided by the Bank when it first sought to have the issue of vesting determined by the Costs Assessor. There was a bar to curial review until after the assessment was completed, otherwise the unlimited powers of the Costs Assessor to determine all issues of law and fact would be usurped. Any order restraining the costs assessment process would be premature and of no utility. There was utility in completing the costs assessment. The bill of costs was already before the Costs Assessor. It had been prepared by Mr Phontos who was the only person with the knowledge to prepare it. The quantum of the costs would be known. Quantification could serve broader purposes, such as the enforcement of liens and enforcement of rights to indemnity, reimbursement and income. The Bank was not prejudiced by Mr Phontos concluding the assessment to quantify the costs if the Trustee were to commence his own application. The Federal Court was being called upon to interfere in the assessment process and to grant relief by way of declaration where there was already in place an adequate scheme for review available to an aggrieved party. The Bank was in substance seeking to take away from the Supreme Court the ability to determine a vesting issue without first affording the State court the right to decide whether or not it was without power to determine such issues when coupled with many other issues which always remained for determination in the State statutory system of assessment. Upon completion of the assessment and an initial review the limited issue of vesting could be referred for determination by the Federal Court if the Supreme Court so determined that it must be referred. The Legal Profession Act 2004 barred any action to determine rights until the completion of the assessment process, consistently with the policy of the regime providing for a fast and cheap means of arriving at an amount of money to be paid. 39 Mr Phontos submitted that the Bank invoked the powers in the statutory scheme to have the Costs Assessor determine the vesting issue and the Bank should now be estopped from forum shopping to find another jurisdiction to attempt to achieve a different outcome to that set out in the Costs Assessor's preliminary finding. The matters that could not be determined by the Federal Court on the present application were findings of fact which were specifically reserved to the Costs Assessor. Those facts included the matters now raised by the Bank as to the finding that the Trustee abandoned the right or conceded the right to pursue assessment to Mr Phontos. These were matters which could not be determined by a court without them being first determined by the Costs Assessor. Even if the costs order vested in the Trustee that would not avoid Mr Phontos right to commence, maintain and finalise the costs assessment in circumstances where he had been authorised by the Trustee to do so or where the Trustee had abandoned the right to recover and he was now estopped from interfering as that may lead to a multiplicity of proceedings for recovery of the same costs order. All questions of abandonment, authorisation and estoppel were matters solely within the confines of the statutory powers afforded to the Costs Assessor and not the Federal Court. 40 All parties agreed in the submission that this Court did not have jurisdiction to make, or would not make, an assessment of the costs in question.

Consideration 41 The first issue is whether the Legal Profession Act 2004 (NSW) or the Legal Profession Uniform Law Application Act 2014 (NSW) applied. Although no party suggested that either statutory scheme was substantially different from the other for the purposes of these proceedings, counsel for the Bank submitted it was the later Act while counsel for Mr Phontos submitted it was the earlier Act. 42 The savings provisions in Schedule 9 to the Legal Profession Uniform Law Application Act provide that the local regulations may contain provisions of a savings or transitional nature consequent on the enactment of that Act. 43 The Legal Profession Uniform Law Application Regulation 2015 provides in clause 59 as follows: 59 Ordered costs - transitional provision The provisions of the Legal Profession Act 2004 and the Legal Profession Regulation 2005 relating to ordered costs continue to apply to a matter if the proceedings to which the costs relate commenced before 1 July 2015. 44 By s 63 of the Legal Profession Uniform Law Application Act 2014 "ordered costs" means costs payable under an order or rule of a court. 45 In my opinion, therefore, the earlier Act continued to apply since the proceedings to which the costs relate commenced before 1 July 2015, whether before the primary judge in the Supreme Court or the Court of Appeal. 46 Section 353 of the Legal Profession Act 2004 provided, so far as relevant: 353 Application for assessment of party/party costs (1) A person … who is entitled to receive … costs as a result of an order for the payment of an unspecified amount of costs made by a court … may apply to the Manager, Costs Assessment for an assessment of the whole of, or any part of, those costs. (2) A court … may direct the Manager, Costs Assessment to refer for assessment costs payable as a result of an order made by the court … Any such direction is taken to be an application for assessment duly made under this Division. 47 Section 355 provided: 355 Consequences of application If an application for a costs assessment is made in accordance with this Division: (a) the costs assessment must take place without any money being paid into court on account of the legal costs the subject of the application, and (b) the law practice must not commence or maintain any proceedings to recover the legal costs until the costs assessment has been completed. 48 Section 356 provided: 356 Persons to be notified of application (1) The Manager, Costs Assessment is to cause a copy of an application for costs assessment to be given to any law practice or client concerned or any other person whom the Manager thinks it appropriate to notify. (2) A person who is notified by the Manager, Costs Assessment under subsection (1): (a) is entitled to participate in the costs assessment process, and (b) is taken to be a party to the assessment, and (c) if the costs assessor so determines, is bound by the assessment. 49 By s 357, the Manager, Costs Assessment "is to refer each application for costs assessment to a costs assessor" to be dealt with under Division 11. 50 A costs assessor is not an officer of the Supreme Court when acting as a cost assessor: s 390 of the Legal Profession Act 2004. 51 By s 368, on making a determination of costs, a costs assessor is to issue a certificate that sets out the determination. By s 370, a costs assessor must ensure that a certificate so issued that sets out the determination is accompanied by a statement of the reasons for the costs assessor's determination. 52 In Griffith v Australian Broadcasting Corporation [2013] NSWSC 750 Beech-Jones J reviewed the statutory scheme provided for by the Legal Profession Act 2004. At [20] and following his Honour summarised the review process in respect of costs assessors, as follows: [20] Subdivision 5 establishes a scheme for the merits review of a costs assessment by a review panel (see ss 375(1) and (2)). Subdivision 6 provides for appeals. [His Honour then set out ss 384, 385 and 389] [21] Four matters should be noted at this point. First, s 384(1) confers on a party at a costs assessment a right of appeal on a question of law to the District Court … this right arises following "a decision of a costs assessor as to a matter of law" which might embrace decisions that were made by the costs assessor prior to the making of the costs assessment itself (although see Australian Broadcasting Tribunal v Bond [1990] HCA 33; 170 CLR 321 at 336 to 337 per Mason CJ). [22] Second, s 385 enables a party to a costs assessment to seek leave to appeal against the determination of their application for a costs assessment. If leave is granted, then this form of appeal appears to involve a re-agitation of the merits of the assessment. Subsection 385(1) enables the application to be made to the District Court if the costs assessment relates to a bill. In the case of a costs assessment relating to "costs payable as a result of an order made by a court or tribunal", s 385(2) enables the application to be made to the court that made the order. In this case that court is the Supreme Court, at least so far as the costs at first instance and in the Court of Appeal are concerned. [23] Third, taken together, these provisions establish a scheme for the making of applications for costs assessment, a scheme for internal review of the outcome of those applications, a right of judicial review by the District Court and an entitlement to apply for leave to appeal the merits of the assessment to the court or tribunal who made the costs order. [24] Thus, the scheme contemplates that in the ordinary course final decisions on matters of law will be made by the District Court, which in itself is subject to the supervisory jurisdiction of the Court of Appeal. Further, the scheme contemplates that final decisions on matters of fact relating to costs assessment will be made by either the costs assessor or a review panel. It is only if good cause is shown for leave to be granted under s 385 that a court will be able to address matters of fact arising in relation to a costs assessment. [25] Fourthly, leaving aside the operation of s 385(2) in circumstances where a costs order is made by this Court, nothing in this scheme expressly provides for any interference in this process by this Court. Of course the Supreme Court retains its supervisory powers recognised by s 69 of the Supreme Court Act 1970, and also its power to entertain an application for declaratory relief confirmed by s 75 of the Supreme Court Act. However, all of these forms of relief are discretionary. One established case in which such relief will be refused as a matter of discretion is where there is in existence an adequate scheme for review available to the aggrieved party (see Dalgety Wine Estates Pty Ltd v Rizzon (1979) 141 CLR 552 and see Ackroyd v Whitehouse (Director of National Parks & Wildlife Service) [1985] 2 NSWLR 239 at 247 to 248 per Kirby P). In so far as declaratory relief is concerned, another basis for refusing relief on discretionary grounds is that the relief sought is premature or may be futile. 53 I refer also to Bobb v Wombat Securities Pty Ltd (No 2) [2013] NSWSC 757 (appeal dismissed Bobb v Wombat Securities Pty Ltd (No 2) [2014] NSWCA 261) where Beech-Jones J said: [20] It should be apparent from the above that nothing in the statutory regime makes express provision for any interference with that scheme by this court. Equally, however, that scheme does not alter or impede the exercise of this court's supervisory jurisdiction, as confirmed by s 69 of the Supreme Court Act 1970. [22]… The position [the plaintiff] is in simply illustrates the numerous possibilities that have been opened up by the manner of drafting of s 384 and s 385, coupled with the lack of any supervisory jurisdiction being conferred on the District Court. For example, it would also have been open to [the plaintiff] to seek in this court relief in the nature of certiorari to quash the costs assessor's or the review panel's decision, either because they did not provide adequate reasons (see Campbelltown City Council v Vegan [2006] NSWCA 284; 67 NSWLR 372 at [130] per Basten JA), or some other error of law that was apparent on the face of the reasons of the relevant decision maker. [23] However, all the forms of relief available in this court in this context are discretionary. In many cases, the terms and existence of a statutory scheme for appeals will warrant the discretionary rejection of claims for relief which seek to invoke the court's supervisory jurisdiction (see, for example Kennett v Muc (t/as GH Healey & Co) [2013] NSWSC 119; Gorczynski v Leichhardt Council [2007] NSWSC 202 [16] to [25] per Hidden J; and Currabubula Holdings Pty Ltd v State Bank of New South Wales Ltd [2000] NSWSC 232 at [54] to [69] per Einstein J). 54 At the heart of the submissions of the Bank was the proposition that this Court's jurisdiction is exclusive and that the "special reasons" referred to in s 6(3) of the Jurisdiction of Courts (Cross-vesting) Act do not include reasons relevant to the convenience of the parties and therefore the question would inevitably return to this Court at some time. 55 The issue was said to be the standing of Mr Phontos but, in my opinion, it is better expressed as whether Mr Phontos is a person who is entitled to receive costs within the meaning of s 353 of the Legal Profession Act 2004. 56 It appears that the second respondent, the Trustee, has not so far involved himself in the Costs Assessment Application although he has been invited to make submissions on the s 353 question. 57 It seems that it was only in the course of the interlocutory hearing before me on 27 June 2016 that the Trustee indicated his intention to have the costs assessed. So far, however, he has not applied to do so. 58 It is necessary, against the statutory background, to consider first whether or not, and the extent to which, the jurisdiction of this Court is exclusive. 59 In my opinion, contrary to what I understood to be the thrust of the submissions on behalf of the Bank, Truthful Endeavour does not stand for the proposition that the jurisdiction of this Court is exclusive in relation to a "special federal matter" arising under the Bankruptcy Act. Frequent reference is made in that judgment to the operation of the Jurisdiction of Courts (Cross-vesting) Act, see particularly at [23], [34], [45] and [60]. At [34], the Full Court said that s 27 of the Bankruptcy Act must now be read in the light of the Jurisdiction of Courts (Cross-vesting) Act, s 4(1). What the Full Court was at pains to restate was the scope of what was a "special federal matter". 60 Similarly, the reliance by the Bank on Fewin takes the matter no further. It establishes that the claim there under consideration was a "special federal matter". Insofar as the case stands for the proposition that, for that reason, the Supreme Court lacked jurisdiction to determine the proceeding it is, in my respectful opinion, incorrect. I refer here to the statements at [39] and [50]-[51] of the judgment. 61 As explained in Mateljan v HTT Huntley Heritage Pty Ltd [2016] NSWCA 20; 111 ACSR 277 at [27] by the New South Wales Court of Appeal: The Supreme Court is invested with federal jurisdiction under s 4(1) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) in cases where it would not otherwise have jurisdiction. This is significant because under s 6, a special federal matter must be transferred to the Federal Court unless the court is satisfied that there are "special reasons". The foregoing was not the subject of argument (although the question of jurisdiction was raised, briefly, during the course of the hearing). How these provisions work is far from straightforward, and it is neither necessary nor appropriate in these proceedings to determine the question conclusively. However, there is clear authority for the proposition that a matter in bankruptcy is a "special federal matter" within the meaning of s 3(1) of that Act. [Truthful Endeavour Pty Ltd v Condon (Trustee), Re Rayhill (Bankrupt) [2015] FCAFC 70] (Original emphasis.) 62 More recently, in relation to proceedings in a court, in Jakimowicz v Jacks [2016] VSCA 42; 306 FLR 51 the Victorian Court of Appeal said, in a case in the court involving an undischarged bankrupt: 38 In our view, both the County Court and this Court have jurisdiction to determine whether or not Mr Jacks has standing to bring his claim for compensation for breach of Ms Jakimowicz's duties as trustee. Standing is a threshold issue. That is so even where, as here, it is determined at trial rather than at an interlocutory stage. Courts must be in a position to determine whether parties before them have standing to bring any claim. Were it not so, courts would not be able to control their own processes and the proceedings before them. In this regard, if a plaintiff does not have standing in a State court because the property in question has vested in the trustee in bankruptcy, then the proceeding is liable to be dismissed or at least stayed. In such situations, a court is simply giving effect to the provisions of the Act when considering the question of standing. As was pointed out by Branson J in the Federal Court in Meriton Apartments, there is no difficulty with that. 39 The alternative would be that all questions of the standing of undischarged bankrupts and third parties to a bankruptcy to pursue claims commenced in State courts would have to be determined by the Federal Court or the Federal Circuit Court. That would fly in the face of courts controlling their own proceedings. It would involve an impermissible interference by those federal courts which do not have jurisdiction over, nor a supervisory role in respect of, State courts. The Court of Appeal then went on to consider the position when a trustee is a party to litigation in a court and claims the property in dispute has vested in the trustee pursuant to s 58 of the Bankruptcy Act and is divisible property under s 116. 63 In my opinion, there are a number of reasons why this Court should not intervene to prevent the Costs Assessor, Mr Lancken, from carrying out his task. This would be the effect of the claims number 2, 3 and 4 in the originating application. The same reasons make it inappropriate to make the declaration sought in claim number 1. 64 First, it is not known what his decision will be. It also seems to me to be undesirable for this court to prevent Mr Lancken from deciding whether Mr Phontos is a person who is entitled to receive costs, within the meaning of s 353 of the Legal Profession Act 2004. 65 Thus, the application to this Court is premature. 66 Although this is a different statutory context, what the Victorian Court of Appeal said in Jakimowicz v Jacks is applicable here, a costs assessor must be in a position to determine whether parties before him or her are entitled to make an application. Were it not so, the costs assessors would not be able to control their own processes. 67 Secondly, central to the application to this Court by the Bank was that this Court had exclusive jurisdiction in respect of part of what Mr Lancken was to decide. As I have noted, he is not in his present capacity an officer of the court or part of the Supreme Court of New South Wales: see s 390 of the Legal Profession Act 2004. Thus, it seems to me that Mr Lancken is not exercising the jurisdiction of the Supreme Court. If he was, as I have indicated above, the Supreme Court would have jurisdiction by virtue of s 4 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth). I also note the language of s 27 of the Bankruptcy Act which provides that the jurisdiction of the federal courts there referred to is "exclusive of the jurisdiction of all courts other than … " (emphasis added). 68 Contrary to what seemed to underlie the Bank's approach, s 4 of the Jurisdiction of Courts (Cross-vesting) Act means that the Supreme Court of New South Wales is, or will be, invested with federal jurisdiction with respect to the civil matter where this Court has jurisdiction. This is notwithstanding that this matter is within the original jurisdiction of this Court by virtue of s 39B of the Judiciary Act 1903 (Cth) and is thus a "special federal matter" within the meaning of the Jurisdiction of Courts (Cross-vesting) Act. 69 Another aspect of the Jurisdiction of Courts (Cross-vesting) Act which may need to be borne in mind in due course is that, by s 6(1A) of that Act, if the matter for determination in a proceeding that is pending in the Supreme Court is a "special federal matter", the court must only transfer so much of the proceeding as is, in the opinion of the court, within the jurisdiction (including the accrued jurisdiction) of the Federal Court. See further [77] below. 70 Thirdly, the scheme of the Legal Profession Act 2004 was explained by McCallum J in Colbron v Freeman [2014] NSWSC 1210 at [24] where her Honour repeated the view she had earlier expressed in Coshott v Barry [2012] NSWSC 850 at [41] as to the juridical foundation of the costs assessment system. Her Honour said that a solicitor's entitlement to lodge an application for a costs assessment was not a source of right or title in itself. It was an aspect of the regulation of the legal profession under the Legal Profession Act 1987. The Act created an administrative mechanism for quantifying legal costs in a variety of circumstances. Her Honour indicated that the purpose of s 355 of the Legal Profession Act 2004 barring the commencement of proceedings and the maintenance of proceedings where a costs assessment has been commenced was intended to provide a "faster, easier and cheaper system of review of bills of costs". Also relevant, in my opinion, is the statement by Beech-Jones J in Bobb v Wombat Securities Pty Ltd (No 2) that nothing in the statutory regime makes express provision for any interference with that scheme by the Supreme Court. Equally, however, as his Honour added, that scheme does not alter or impede the exercise of that court's supervisory jurisdiction, as confirmed by s 69 of the Supreme Court Act 1970 (NSW). 71 Thus, in my opinion, it would, or would tend to, undermine the purpose of the New South Wales statutory costs assessment scheme to have this Court hear and determine an application on a discrete part of a costs assessment application. As it seems to me, the scheme of that legislation is first to make an administrative assessment of a sum, a monetary figure, in respect of the costs. 72 Fourthly, it seems to me to be very likely that resolution of the issue may ultimately involve a close examination of the litigation in the Supreme Court of New South Wales and the nature of Mr Phontos' claim, including whether or not he has a fruits of action lien for his legal costs in those proceedings. 73 Fifthly, a purpose of the Jurisdiction of Courts (Cross-vesting) Act is to prevent or minimise the fragmentation of civil processes between the specified courts. I see no reason to fragment the administrative process that has so far been engaged under the Legal Profession Act 2004. 74 In my opinion, the Costs Assessor may decide whether or not Mr Phontos is a person who is entitled to receive costs within the meaning of s 353 of the Legal Profession Act 2004 and, as I have indicated, there are avenues of review. That approach is consistent with the scheme of the New South Wales legislation to which I have referred. 75 If and when the matter reaches the Supreme Court, the Supreme Court may need to be satisfied that there were special reasons in the particular circumstances of the proceeding, other than reasons relevant to the convenience of the parties, to order that the proceeding be determined by that court under the Jurisdiction of Courts (Cross-vesting) Act. Contrary to the submissions on behalf of the Bank, it does not follow inevitably that the Supreme Court would be required by s 6 of the Jurisdiction of Courts (Cross-vesting) Act to order that the proceeding be determined by this Court. It may well be relevant that the dispute arose out of a costs order made by the Supreme Court and that the first respondent's claims related to his conduct of those proceedings in the Supreme Court as a solicitor. 76 In that respect, I refer to the views indicated by Sloss J in Talacko v Talacko [2015] VSC 624; 305 FLR 353 at [149] where her Honour said: While the general rule is that special federal matters should be heard by the Federal Court, s 6(3) nevertheless leaves open the prospect that the Supreme Court may proceed to determine the matter where there are special reasons for doing so. Here, the substantive issues raised by the applicants' summonses involve a review of the conduct of the Prothonotary of this court in issuing the first and second certificates pursuant to the Foreign Judgments Act 1991 (Cth) and the Miscellaneous Civil Procedure Rules. In my view, those circumstances would be capable of providing a proper basis for this court to be satisfied that there are special reasons for the proceeding to be determined by this court. 77 If and when the matter reaches the Supreme Court, it may also be relevant that it is common ground between the parties before me that this Court could not, or would not, involve itself in the costs assessment process. Whether the claim would be within this Court's accrued jurisdiction as referred to in s 6(1A) of the Jurisdiction of Courts (Cross-vesting) Act I do not pause to consider. An issue might then be whether the administrative process under the Legal Profession Act 2004 could form part of the accrued jurisdiction of this Court consistently with this Court exercising only judicial power as a Ch III court. In my opinion, it is correct to say that this Court would not ordinarily involve itself in the assessment of costs in the Supreme Court. None of the matters I have referred to in [75]-[77] would seem readily to answer the description of reasons relevant to the convenience of the parties within s 6(3) of that Act. 78 I do not find it necessary to determine the first respondent's interlocutory application since, as I have outlined above, it was possible to set the matter down for final hearing. I do not see that the first respondent's interlocutory application added to the costs of the proceedings as it was largely reflective of the applicant's originating application. I do not decide whether the Bank is estopped from bringing this application; nor whether as a matter of law the costs order is an asset of the bankrupt's estate; nor whether the Trustee is estopped from claiming the costs order vests in him; nor whether he has abandoned the right to claim the costs order vests in him and the right to seek to assess costs.

Orders 79 In my opinion, the application brought by the Bank should be dismissed, the first respondent's interlocutory application should be dismissed and the Bank should pay the costs of the first respondent on a party and party basis. There should be no order as to the Trustee's costs. I certify that the preceding seventy-nine (79) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.

Legal Profession Act 2004(NSW)ss 353, 355, 356, 390

Financial Sector (Business Transfer and Group Restructure) Act 1999(Cth)

Jurisdiction of Courts Cross-vesting Act 1987(Cth)

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