Bell v Hartnett - [2022] NSWCA 42 - NSWCA 2022 case summary — Zoe

Bell v Hartnett - [2022] NSWCA 42 - NSWCA 2022 case summary — Zoe

Judgment

BASTEN JA: On 7 December 2021 the respondent, Beau Timothy John Hartnett, filed a motion in proceedings in the Equity Division in which he was the defendant, seeking to have the matter removed into the Court of Appeal. The motion was not determined in the Equity Division but, appropriately, was itself transferred to this Court so that this Court could determine whether the removal order should be made.
The circumstances of the application are curious. They result from the working out of orders made by consent in the Possession List in the Common Law Division by Davies J on 29 April 2016. The judge made an order for possession of a property in Ballina on the north coast of New South Wales. The property was formerly owned by Mabel Deakin-Bell, who had been married to Robert Deakin-Bell. When the marriage ended, a property settlement in November 1994 gave ownership of the property to Mabel, subject to a registered first mortgage to Robert securing a debt of $30,000. Robert had a second marriage, to Gwendoline Deakin-Bell. On their separation, Robert assigned the debt and transferred the mortgage securing the debt to Gwendoline.
The mortgagor, Mabel Deakin-Bell, died in September 2013 leaving her son Robert Anthony Bell (the plaintiff) as the executor and beneficiary of her will. He obtained probate in the New South Wales Supreme Court, but not until 29 November 2016.
In the meantime, Gwendoline Deakin-Bell commenced proceedings to enforce the mortgage and obtained a judgment for the debt of $30,000 plus interest and was granted possession of the property under a power of sale. Following settlement of the possession proceedings the property was sold, with settlement occurring on 31 October 2016. The net proceeds of sale were paid into Mr Hartnett's trust account on that date, as solicitor for the mortgagee. The current proceedings concern the disbursement of that amount. Apart from some insignificant amounts, and in round figures, $39,000 was paid to Gwendoline on 18 November 2016, an amount of $288,000 was withdrawn by Mr Hartnett, apparently on account of legal fees, leaving a balance of $33,800 in his trust account, in the name of Gwendoline as mortgagee. (This history is largely drawn from a judgment of Slattery J in the Equity Division - Applications List delivered on 26 February 2021. [1] )
Gwendoline Deakin-Bell died on 31 May 2018.
As noted above, the plaintiff did not obtain probate of Mabel's estate until November 2016, one month after the settlement of the sale of the property. The plaintiff apparently did not learn of the sale until 2 July 2018, a month after the death of Gwendoline. On 1 September 2020 he commenced proceedings in the Equity Division seeking a declaration that Mr Hartnett held the amount of $287,551 "as trustee for the plaintiff." He sought an order that the amount be paid to him. By way of interlocutory relief, he sought an order that the defendant not remove from Australia or in any way dispose of, deal with or diminish the value of his assets up to the unencumbered value of $319,412. (The figure was said to comprise the original amount held on trust together with interest.)
On the application of the plaintiff, there was a costs assessment undertaken in relation to the costs of the possession proceedings in New South Wales, either as costs payable under the mortgage or as costs payable pursuant to the order of Davies J. The parties to the assessment were the two estates, being the estates of the mortgagor (Mabel) and the mortgagee (Gwendoline). Mr Hartnett was aware of the assessment, but did not join in the proceedings, on the basis that he did not act for Gwendoline's estate, but only for Gwendoline. He appears not to have provided papers sought for the purposes of the assessment to the assessor. The scope of the assessment is not clear from the material available on this motion, but it resulted in costs being allowed in an amount of some $40,000.
The determination of the summons filed in September 2020 has been delayed by various interlocutory steps, including challenges by Mr Hartnett to steps taken to serve the summons.
On 7 April 2021 the plaintiff filed a statement of claim seeking the same relief as in the summons. The statement of claim identified (par 47) the claim for $285,047.99, "being money payable by the defendant to the plaintiff for money had and received by the defendant for the use of the plaintiff." The amount was that retained by Mr Hartnett, taking into account amounts received by the plaintiff and the amount of costs assessed by the costs assessor, Mr Wall, in his certificate of determination of 24 May 2018.
On 26 October 2021 an amended statement of claim was filed seeking, amongst other orders, a declaration that the plaintiff had "an equity of redemption" in the proceeds of sale of the property. That claim may or may not take the matter further. However, it appears that a claim was made to property which could be the subject of tracing. However, the amended statement of claim also relied upon terms of a "disclosure and costs agreement" entered into by Hartnett Lawyers and the mortgagee on 12 February 2014. It removed a request for alternative relief by way of a referral to further costs assessment. It pleaded further alternative causes of action in unjust enrichment and restitution.
On 5 November 2021 Mr Hartnett filed a detailed defence including an assertion that he was not a party to the costs assessment and therefore was not bound by it.
On 11 November 2021, Slattery J ordered the plaintiff to prepare "points of claim". Their purpose was for the plaintiff to identify how he said the Supreme Court's inherent supervisory jurisdiction and jurisdiction under s 99 of the Civil Procedure Act 2005 (NSW) were said to be engaged. Order 3 in the points of claim responded by identifying what was, in effect, an incidental exercise if it were established that unnecessary costs had been incurred by the mortgagor's estate by action of the solicitor for the mortgagee.
It appears that a straightforward claim that Mr Hartnett appropriated moneys from his trust account without authority or in an excessive amount has been complicated by successive attempts to plead the claim on different bases. The exercise of the supervisory jurisdiction, identified by Lord Wright in Myers v Elman, [2] is a jurisdiction to order "costs against a legal practitioner" who has misconducted himself or herself in the course of proceedings. So far as appears from the pleadings, with the possible exception of the incidental claim in the points of claim, that has nothing to do with this case: this is not an action requiring that the practitioner pay another party's costs. Rather, it is an action that Mr Hartnett disgorge an amount in excess of the costs to which he was entitled. Similarly, s 99 of the Civil Procedure Act confers on the court (including any judge of the court in a proceeding) power to deprive a practitioner of costs to which he or she might otherwise be entitled, and to order a practitioner to pay costs.
The relevance of that power to this case is obscure. The plaintiff's argument appears to be that Mr Hartnett was not entitled to the moneys he retained; not that he should be deprived of moneys to which he was entitled. However, supposing it did have relevance, it is nevertheless a power which can be exercised by a judge in any court to which s 99 of the Civil Procedure Act applies. There are no relevant exclusions in respect of a judge of the Supreme Court under Sch 1 to the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"). So far as the general law power is concerned, as explained by White JA in Newell; Muriniti v De Costi, [3] and assumed by other members of the Court, it is a power to be exercised by the trial judge. [4]
The proposition that the plaintiff is seeking to have the Equity Division exercise disciplinary powers against Mr Hartnett was misconceived. The pleaded case involved no such proposition.
Mr Hartnett submits that, if some supervisory jurisdiction is engaged, by virtue of s 48(2)(k) of the Supreme Court Act 1970 (NSW) and Pt 65A of the Supreme Court Rules 1970 (NSW) the proceedings are assigned to the Court of Appeal. Part 65A, r 2 provides as follows: 2 Assignment of business (1) There are assigned to the Court of Appeal proceedings in the Court in the exercise of the disciplinary powers of the Court with respect to legal practitioners and interstate legal practitioners.
As explained above, this case involves a dispute as to the costs to which Mr Hartnett is entitled as a result of acting for Gwendoline Deakin-Bell in the possession proceedings and in enforcing the mortgage. There is no relevant engagement of the disciplinary powers of the Court. The power to award costs in accordance with general law principles and in accordance with s 99 of the Civil Procedure Act does not invoke the kind of "disciplinary powers of the court" referred to in Pt 65A, r 2. The costs power arises incidentally in any proceedings. The disciplinary powers referred to in r 2 are those invoked separately and for the purpose of disciplining legal practitioners who are not fit and proper persons to carry on practice, or have committed professional misconduct, or unprofessional conduct. The purpose of Pt 65A, r 2 was not to require the transfer to the Court of Appeal of any proceedings in which the costs might be awarded against a legal practitioner, incidentally, in determining those proceedings.
There is a degree of confusion arising from the use in different contexts of the phrase "inherent supervisory jurisdiction over legal practitioners". In noting the plaintiff's submissions in his judgment of 12 October 2021, Slattery J referred noted that the supervisory jurisdiction was relied on as a basis for ordering the defendant's solicitor to pay "any costs differential" to the plaintiff. [5] He referred to Council of the NSW Bar Association v Siggins, [6] which, while not elucidating the proposition, suggested that the plaintiff had been invoking the conventional disciplinary jurisdiction. The judge then identified the supervisory jurisdiction and s 99 of the Civil Procedure Act as "quite a sufficient basis" for the order sought.
It is not clear why, if the Court is entitled (as the judge accepted) to fix the costs recoverable by the mortgagee from the mortgagor, it would not be able to make an order for disgorgement of any additional costs obtained from the mortgagee by her solicitor, being an amount which she was obliged to pay to the mortgagor out of the proceeds of sale. Any such remedy would involve the inherent jurisdiction with respect to legal practitioners, or simply a form of equitable relief by tracing the proceeds of sale into the solicitor's hands. It does not involve the exercise of any disciplinary jurisdiction.
Although counsel for the plaintiff may have set the hare running, even if the relevant jurisdiction to order costs against a legal practitioner had been invoked, that would not require removal to this Court. Absent a necessary removal, it would be quite inappropriate to remove proceedings to this Court where they are properly to be determined in the Division and should be determined expeditiously. Mr Hartnett's notice of motion must be dismissed.
It appears from judgments already delivered, that the current intention of the primary judge is to make a gross sum costs assessment under s 98 of the Civil Procedure Act, with the balance of any fees after deduction of that amount to be payable to Mr Bell, as executor of Mabel Deakin-Bell's estate.
Given the straightforward nature of the proceedings in which the costs were incurred, that may well be the appropriate course. However, it may also be necessary to consider whether due account should be given to the assessment made by the costs assessor. Although the matter has now proceeded to a stage where it should be finally determined as soon as possible, without further complication or interlocutory steps, there might have been good reason to order that the solicitor pay into court a sum which constituted the balance taken from the trust account over and above the costs assessment of some $40,000.
In these circumstances, Mr Hartnett says that each party should pay his own costs. That was because the plaintiff had invited the Court to place reliance on its disciplinary powers and appeared to invoke a disciplinary jurisdiction. On the other hand, the plaintiff asserted that he should obtain his costs, to be paid forthwith, assessed on an indemnity basis. He handed up a letter which had been sent on 7 December 2021 to Mr Hartnett, setting out in terms why the removal application was bound to fail and giving notice of his intention to claim indemnity costs if the motion were pursued and failed.
Costs should follow the event, but should not be awarded on an indemnity basis. While it is correct to say that the letter of 7 December explained a proper basis on which the removal application should be rejected, and stated that the plaintiff would seek indemnity costs if the motion were pursued, it is also true that his submissions filed in this Court on 1 March 2022, whilst again noting the grounds on which the motion should be refused, stated that the plaintiff neither consented to nor opposed the proposed removal. The costs should be payable forthwith.
It is sufficient for present purposes to make the following orders: 1. Dismiss the notice of motion filed on 7 December 2021 by Mr Hartnett. 2. Order that Mr Hartnett pay the plaintiff's costs of the motion forthwith.