Bevan v Bingham

Evidence before the Court

1. The plaintiff relied on the following affidavits: 1. Affidavit of Christopher John Bevan sworn on 19 April 2021 ("Aff Bevan 19/4/21"), together with exhibit CJB-1.
2. The defendant relied on the following affidavits: 1. Affidavit of John David Bingham, sworn on 19 March 2021 ("Aff Bingham 19/3/2021"), together with exhibit JDB-1; 2. Affidavit in reply of John David Bingham, sworn on 27 April 2021 ("Aff Bingham 27/4/2021"), together with exhibit JDB-3; and 3. Affidavit of John David Bingham, sworn on 9 July 2021 ("Aff Bingham 9/7/2021").

Issues

1. At the outset, the defendant noted: 1. The defendant does not agitate that the certificate of the Costs Assessor is binding between the plaintiff and defendant as to the quantum of fair and reasonable costs that are payable in respect of the legal services; 2. The defendant does not argue that the Manager of Costs Assessment was in error in not granting an extension of time; and 3. It is not necessary to resort to any motion or legal doctrine, such as merger of judgment, which was discussed in the written submissions.
2. According to the defendant, there are five issues which required this Court's determination: 1. The proper construction of clauses 4 and 7 of the First and Second Costs Agreements and how they interact; 2. The jurisdiction of the Costs Assessor, that is, whether it is within the remit of a Costs Assessor to determine whether costs are currently payable; 3. Whether the defendant made a binding election to acquiesce in the costs assessment process and to engage on its merits; 4. Whether the defendant has failed to use his best endeavours to recover the money payable to the plaintiff in accordance with cl 7; and 5. What remedy should be given in this case, including any remedy under r 36.15 of the UCPR or this Court's inherent jurisdiction. I note on the outset that counsel for the defendant conceded in oral submissions, properly in my view, that if the judgment of 19 February 2021 is set aside, then the garnishee order should be suspended.
3. The plaintiff submitted that there are three additional issues to be determined: 1. Whether, on a proper determination of the legislation, the assessor had determined the question of liability in arriving at his decision and in issuing the certificates of determination; 2. Whether that determination was on a quantum meruit basis or a contract basis; and 3. Whether it is appropriate that a determination of liability as well as quantum is to be found.
4. In my view, there is some overlap in the issues raised by the parties.
5. I also note that the plaintiff initially raised arguments dealing with the jurisdiction of the Court. Whilst this issue appeared to disappear, it is appropriate that I deal with this question briefly at the outset.

Jurisdiction of this Court

1. This Court has the power to set aside a judgment pursuant to r 36.15(1) of the UCPR. That rule relevantly reads: 36.15 General power to set aside judgment or order (1) A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith.
2. This Court has the power to suspend a garnishee order pursuant to s 124A of the Civil Procedure Act 2005 (NSW) ("Civil Procedure Act"). Section 124A relevantly reads: 124A Variation, suspension or repayment of payments under garnishee orders The court may, at any time on the application by a judgment debtor, vary or suspend the making of payments by the judgment debtor under a garnishee order, or order the total amount paid by the judgment debtor under the garnishee order to be repaid, if the court is satisfied that it is appropriate to do so.
3. The plaintiff submitted that s 73 of the Legal Profession Uniform Application Act 2014 (NSW) ("LPULA Act") is a privative clause which serves to limit the jurisdiction of the Court. Section 73 provides: "A costs determination is binding on all parties and no appeal or other assessment lies in respect of the determination, except as provided by this Part."
4. The written submissions of the defendant stated that Brezniak v Habib [2014] NSWSC 1730 ("Brezniak") is authority for the principle that "there is no basis for setting aside a judgment based on a Certificate of Determination by reliance on the jurisdiction of rule 36.15 to set aside irregular judgments because of the principle of finality".
5. In Brezniak, Schmidt J stated in obiter that r 36.15 of the UCPR is not intended to provide a mechanism whereby costs assessor's certificates which have been filed in accordance with s 368 of the Legal Profession Act 2004 (NSW) ("the 2004 Act"). Her Honour stated at [66]: "That is because they are not judgments of the Court, but are rather "taken to" be a judgment of the Court. If a certificate is to be challenged, it must be challenged in accordance with the mechanisms established by the Act. The certificate binds the parties and may not otherwise be appealed or reviewed."
6. In the following year, the Court of Appeal decided Calandra v Murden [2015] NSWCA 231 ("Calandra"). In that case, the respondent, Mr Murden, filed in the Local Court a form which was headed "Filing of Certificate of Order" to which was attached two costs assessor's certificates. On the same day, judgment was entered in the Local Court in favour of the respondent against the two applicants: at [2]. The Local Court set aside the judgment under r 36.15 of the UCPR on the basis that it had not been entered in good faith. On appeal to the Supreme Court, the primary judge concluded that the magistrate did not have power to set aside the judgment because the effect of doing so was to set aside the costs assessor's determinations and the Local Court had no power to do that: Murden v Calandra [2015] NSWSC 424.
7. The issue in the appeal before the Court of Appeal was "whether the learned magistrate had power to set aside a Local Court judgment entered on the filing of two costs assessor's certificates issued under Ch 3, Pt 3.2, Div 11 of the Legal Profession Act 2004 (NSW)": at [1]. Those provisions are substantially similar to the framework set out in the Legal Profession Uniform Law (NSW) ("LPUL") and LPULA Act. Relevantly, s 75 of the LPULA Act corresponds with s 368 of the 2004 Act.
8. The Court of Appeal disagreed with the analysis of the primary judge. The Court stated at [20]-[21] (Beazley P, Meagher and Leeming JJA): "[20] The learned magistrate plainly had power to set aside the "judgment" and the filing of the form attaching the costs certificates. The judgment of the Court in the proceedings constituted by the filing of that form (see r 36.10) was, in the language of UCPR, r 36.15, entered "against good faith". That judgment was also entered "irregularly" because there was no amount of unpaid costs in respect of which the respondent was entitled to judgment as provided by s 368(5). In Hughes v Justin [1894] 1 QB 667 at 670 Lopes LJ described as "irregular" a default judgment signed for an amount to which the plaintiff was not entitled. [21] The Local Court has such implied powers as are necessary to enable it properly to exercise its jurisdiction: see Grassby v The Queen [1989] HCA 45; 168 CLR 1. Those powers extend to correcting its record, which in this case required setting aside the judgment entered and the Filing of Certificate of Order form. Authority supporting the existence of that power is to be found in the decisions of this Court in Doyle at [53] and Frumar at [44]. The form should not have been filed and ought not to have been accepted, had the respondent disclosed at the time of its filing that there was no amount of unpaid costs due."
9. It was emphasised at [18] of the Court of Appeal's reasons that orders setting aside the judgment and the Filing of Certificate of Order form did not affect the binding nature of the assessor's determination as to the fair and reasonable amount of the relevant costs.
10. The effect of setting aside a judgment under r 36.15 of the UCPR may deprive the certificate of a "legal foundation": Frumar v The Owners of Strata Plan 36957 [2010] NSWCA 172 at [44] (Handley AJA; Macfarlan JA agreeing). However, it does not amount to an "appeal" or "other assessment" as described in s 73 of the LPULA Act.
11. In my view, Calandra supports the proposition that this Court has power to set aside judgment under r 36.15 of the UCPR and pursuant to the inherent powers of this Court. This is because, although Calandra dealt with powers of the Local Court, the reasoning may be applied by analogy with respect to the powers of this Court under r 36.15 of the UCPR and its inherent jurisdiction. To the extent that there is any conflict between Brezniak and Colandra, I am bound to follow Calandra.
12. The plaintiff accepted, in his further written submissions, that "[u]nless there [is] a positive finding of "irregularity"…or of "against good faith"…there can be no jurisdiction to exercise discretion to set aside a judgment under rule 36.15". I agree that this is consistent with the ordinary and natural reading of r 36.15 and with [20]-[21] of Calandra. It was implicit in the submissions of the plaintiff that other jurisdictional issues raised by him had fallen away.

The Proper Construction of Clauses 4 and 7

1. An issue which occupied significant attention of the parties' submissions was the construction of two clauses in the First and Second Costs Agreements. Clause 4 reads: The Solicitor's liability for payment of fees under this agreement is conditional upon him recovering the Barrister's fees from either the client or the respondent to the appeal, Scott Darren Pascoe, to the intent that the Solicitor will only be liable for the Barrister's fees under this agreement to the extent that one or more of those parties has put him into the necessary funds to pay the Barrister's fees. However, liability to pay the Barristers [sic] fees is not otherwise dependent upon the success of the proceedings which is the subject of this costs agreement.
2. Clause 7 reads: Subject to paragraph 4 above, the Solicitor's obligations under this agreement are personal to him. The Solicitor is liable to the Barrister for his fees rather than the client being liable. The Solicitor will use his best endeavours at his expense to recover the Barrister's fees from either the Client or the respondent to the appeal, Scott Darren Pascoe, expeditiously, irrespective of the outcome of the proceedings which are the subject of this costs agreement and the Brief.
3. Furthermore, cl 2 of the First and Second Costs Agreements provides that "The Solicitor shall pay the Barrister: …" and sets out rates.
4. According to the further written submissions of the defendant, this issue is not now in dispute and there is common ground that cl 4 contains the contingency that the defendant will only be liable to pay the plaintiff's fees if the solicitor has been put in funds. Given the submissions of the parties on this issue, I make some general observations about the interaction between cll 4 and 7.
5. The Costs Agreements should be read as a whole. It is evident that, insofar that the Agreements relate to the payment of barrister's fees, the Agreements envisage a chain of events and obligations.
6. The first chain is between the solicitor and barrister. The barrister is to provide legal services in relation to the application for special leave to appeal and appeal in the High Court proceedings. From time to time, the barrister "shall" send invoices for the payment of fees: cl 6. Clause 2, which opens with the words "The Solicitor shall pay the Barrister…", imposes an obligation on the solicitor to pay the barrister his fees at the rates set out in that provision. However, cl 4 qualifies that obligation by making the solicitor being liable "only…to the extent that one or more of those parties have put him into the necessary funds to pay the Barrister's fees" (emphasis added).
7. The second chain is between the solicitor and either the client (who was the appellant to the appeal) or respondent to the appeal (or both). The client or respondent to the appeal, who are not parties to the agreement, are clearly envisaged by the agreement as to put the "necessary funds" into the solicitor. To ensure that this occurs, cl 7 places the solicitor under an obligation to use his best endeavours to recover the barrister's fees from either the client or respondent to the appeal. This is to be done expeditiously and at the solicitor's expense.
8. In my view, the proper construction of the phrase "Subject to paragraph 4 above" is to alter the circumstances under which the solicitor's personal obligation to pay the barrister's fees is enlivened. The requirements of cl 7 are conditional on those in cl 4. The effect is that the solicitor's obligation begins "only" when funds have been paid to the solicitor to pay the barrister's fees. It does not have the effect of exempting the solicitor's obligation to pay the barrister's fees from being a personal obligation. This is because the obligation to pay the fees is derived from cl 2, not cl 4, and the subsequent sentence - "The Solicitor is liable to the Barrister for his fees rather than the Client being liable" - reinforces that it is the solicitor who bears the liability of paying the barrister's fees.
9. On the other hand, the opening words of cl 4 do not limit the first sentence of cl 7, which places an obligation on the solicitor to use his best endeavours and act expeditiously to recover the barrister's fees is personal to the solicitor. Nothing in cl 4 varies or alters this.
10. When understood in this context, it is clear that the plaintiff's entitlement to receive funds is not conditional on the defendant fulfilling their best endeavour promise. I agree with the defendant that, if the plaintiff establishes the defendant has not fulfilled the defendant's obligation under cl 7, there may be a breach of contract. Without expressing any concluded view, there is merit to the defendant's submission that, if the breach is made out, damages would be assessed as a loss of chance to recover the fees from the client. There may also be issues arising as to repudiation.
11. I emphasise that these observations are dependent on there being a valid costs agreement, not one that is void, and subject to statutory provisions contained in the LPUL that prevent the recovery of legal costs in certain circumstances (see, eg, LPUL ss 194, 198(7)(b)).

The Legal Profession Uniform Law

1. A costs agreement is governed by the LPUL. Relevantly, as is the case here, a costs agreement may be made "between a law practice and another law practice that retained that law practice on behalf of a client": LPUL s 180(1)(c). The costs agreement "may be enforced in the same way as any other contract" but this, importantly, is "[s]ubject to [the LPUL]": LPUL s 184.
2. It is relevant to note the disclosure requirements imposed by the LPUL. Section 174 of the LPUL imposes disclosure obligations on law practices to clients. However, where a law practice retains or intends to retain another law practice on behalf of a client, the latter law practice is not required to make a disclosure to the client under s 174 of the LPUL but must disclose certain information to the former law practice: LPUL s 175(2).
3. Section 178(1) of the LPUL relevantly provides: 178 Non-compliance with disclosure obligations (1) If a law practice contravenes the disclosure obligations of this Part - (a) the costs agreement concerned (if any) is void; and … (c) the law practice must not commence or maintain proceedings for the recovery of any or all of the legal costs until they have been assessed or any costs dispute has been determined by the designated local regulatory authority or under jurisdictional legislation;
4. Part 4.3 div 7 of the LPUL provides a regime for costs assessments. Section 198(1)(d) relevantly provides for applications for costs assessments between two law practices as follows: 198 Applications for costs assessment (1) Applications for an assessment of the whole or any part of legal costs payable to a law practice may be made by any of the following - … (d) another law practice, where the other law practice retained the law practice to act on behalf of a client and the law practice has given the other law practice a bill for doing so.
5. Section 199(2) of the LPUL provides the mandatory determinations to be made by a costs assessor when conducting a costs assessment as follows: 199 Costs assessment … (2) On a costs assessment, the costs assessor must - (a) determine whether or not a valid costs agreement exists; and (b) determine whether legal costs are fair and reasonable and, to the extent they are not fair and reasonable, determine the amount of legal costs (if any) that are to be payable.
6. In my view, s 199(2)(a) makes clear that a costs assessor has an obligation to form a view about the existence of a valid costs agreement. This language emphasises that the effect of ss 178(1)(a) and 185(1) of the LPUL is to make a costs agreement that contravenes the specified provisions or obligations void by the force of the statute rather than being voidable upon any declaration or order of a costs assessor.
7. In determining whether legal costs are fair and reasonable under s 199(2)(b), the costs assessor "must" apply the principles in s 172 of the LPUL: LPUL s 200(1). The costs assessor "may" have regard to further matters provided in s 200(2) of the LPUL.
8. Section 172 of the LPUL provides detailed considerations in determining whether legal costs charged are "no more than fair and reasonable in all the circumstances".
9. Relevantly, s 172(4) of the LPUL provides that a costs agreement is "prima facie evidence that legal costs disclosed in the agreement are fair and reasonable" if the provisions in divs 3 and 4 of pt 4.3 of the LPUL have been complied with or not contravened. It appears to me to be clear that, if the provisions in divs 3 and 4 of pt 4.3 of the LPUL are not complied with, the costs agreement is not prima facie evidence of fair and reasonable costs.
10. On making a determination of costs, a costs assessor is to issue a certificate that sets out the determination (LPULA Act s 70(1)) and give reasons for the costs assessment (LPUL s 201).
11. Section 70(5) of the LPUL provides: (5) In the case of an amount of money specified in a certificate that has not been paid, the certificate is, on the filing of the certificate in the office or registry of a court having jurisdiction to order the payment of that amount of money, and with no further action, taken to be a judgment of that court for the amount of unpaid money. The rate of any interest payable in respect of that amount of money is the rate of interest in the court in which the certificate is filed.

The Determination by the Costs Assessor

1. As noted above, the plaintiff applied for a costs assessment on 29 July 2020.
2. In relation to the First Costs Agreement, the Costs Assessor found "this agreement to satisfy the requirements of s 175 of the LPUL in so far as it gave the Costs Applicant sufficient information to make the requisite disclosure to the client".
3. In relation to the Second Costs Agreement, the Costs Assessor found that the adding of a further $31,000 plus GST for estimated costs were "grossly exceeded in the Costs Applicant's invoices so that neither cost agreement could be said to properly inform the Costs Respondent of the potential liability for costs which the Costs Applicant seeks to have assessed". The Costs Assessor concluded that the Second Costs Agreement was "in breach" of s 175 of the LPUL "as the estimate given was inadequate for the Costs Applicant to give to the Costs Respondent an estimate of what the Counsel's costs would be". The parties before me did not take issue with this finding.
4. I agree with the submission of counsel for the plaintiff that the consequence of the Costs Assessor's finding that the Second Costs Agreement contravened a disclosure obligation is that the Second Costs Agreement is void (LPUL s 178(1)(a)). The words of that provision are plain in their effect of rendering the costs agreement void,
5. The Costs Assessor then proceeded to determine the amount of legal costs that are to be payable on the basis that the Second Costs Agreement was not a valid costs agreement.

Did the Costs Assessor have Jurisdiction to Determine Whether the Costs are Payable?

1. The defendant submitted, in their pre-hearing written submissions, that the Costs Assessor should not have completed the assessment by issuing a certificate unless satisfied that the costs were, in fact, payable. The defendant submitted that cl 4 of the Costs Agreement meant that the defendant's liability for the plaintiff's fees was conditional upon the defendant recovering those fees from Mr Boesnch. The defendant submitted that legal costs were not payable, and, at the time, the plaintiff was not entitled to receive payment.
2. In oral submissions, the defendant appears to have modified his position. Counsel for the defendant submitted that the Costs Assessor has no jurisdiction to determine whether the costs are presently payable. This is, in the defendant's submission, because s 6 of the LPUL defines the term "legal costs" as follows: "Legal costs means - (a) amounts that a person has been or may be charged by, or is or may become liable to pay to, a law practice for the provision of legal services; or (b) without limitation, amounts that a person has been or may be charged, or is or may become liable to pay, as a third party payer in respect of the provision of legal services by a law practice to another person - " (emphasis added).
3. The plaintiff submitted: 1. The costs assessor was under a statutory duty to determine whether legal costs were payable; 2. Sections 198(1) and 199(2) of the LPUL concern the determination of the costs that are "payable". The definition of "payable" in the Macquarie Dictionary (3rd ed) is "owed; to be paid; due"; and 3. The definition of "legal costs" in s 6 of the LPUL cannot override the operative provisions of the statute: Stevens v Colonial Sugar Refining Co Ltd (1920) 28 CLR 330 at 340D; Brown v Brook (1971) 125 CLR 275 at 282B.
4. In my view, the ordinary and natural meaning of the text, as well as the structure and context, of the LPUL and LPULA Act favours the interpretation advanced by the plaintiff.
5. The references in ss 198(1) and 199(2)(b) to legal costs that are "payable" has the effect of referring to only those amounts within the meaning of "legal costs" that, at the time of the assessment, are liable to be paid. I agree with the plaintiff that the ordinary and natural meaning of "payable" is a reference to amounts that are owed and due but have not yet been paid.
6. Although the term "legal costs" is defined to include amounts that "may be charged" or "may become liable to [be paid]", the meaning of those expressions need to be considered in the light of the surrounding provisions. Relevantly, s 198(1) refers to "an assessment of the whole or any part of the legal costs payable" (emphasis added). And s 199(2)(b) states that the costs assessor must "determine the amount of legal costs (if any) that are to be payable" (emphasis added). The emphasised words by italics demonstrate that the word "payable" has the effect of referring to the class of "legal costs" that are due and owed. The proper construction of the role of the costs assessor is not to determine all the legal costs (including those that may potentially be owed at some point in time after the assessment) but rather only those legal costs that are owed at the time of assessment.
7. I recognise that that the words "are to be payable" in s 199(2)(b) have two competing constructions. One construction is that they refer to amounts that are not owed and due at the time of assessment, but will be owed and due in the future. Another construction is that they refer to amounts that are owed and due at the time of the assessment and are to be paid after the assessment.
8. The structure of the costs assessment regime in the LPUL and LPULA Act supports the second construction and the proposition that a costs assessor is inquiring into amounts of legal costs that are owed and payable at the time of the assessment. As I noted above, after a costs assessment is completed, a certificate is issued. The amount of money stated in the certificate (which under s 70(1) of the LPULA Act, includes the amount of costs determined, the amount of any costs of the costs assessment and any interest on those amounts) is significant because it may either be recovered as a debt in a Court or, on filing of the Certificate, becomes a judgment of the Court. The fact that the costs determination would have that effect emphasises that the costs assessment is only concerned with costs which are, at the time of the assessment, payable.
9. This is made clear by the use of the word "payable" in s 70(1)(a) of the LPULA Act, which states: "(1) On making a determination of costs, a costs assessor is to issue a certificate that sets out the determination and includes - (a) the amount of costs determined (including any GST component the costs assessor determines is payable)" (emphasis added)
10. The term "payable" in that provision is clearly referable to GST amounts that are owed and due to be paid immediately. This is because, by including the amount on the certificate, the amount becomes recoverable in a court upon the filing of the certificate. I see no reason why the term "payable" in s 70(1)(a) of the LPULA Act should take on a different meaning from that same term in the LPUL. Although they are separate statutes, it is evident from Parliament's intent that their operation, at least insofar that they concern costs assessments, are complementary.
11. This construction is consistent with the judgment of Hodgson JA in Doyle v Hall Chadwick [2007] NSWCA 159 at [61], which states: "[61] In my opinion, Davies AJ was correct to say that a costs assessor, assessing costs between a lawyer and client, can determine disputes as to the terms of the costs agreement, and Dunford J was wrong to say otherwise. However, where the existence of the terms of the agreement are in dispute in a way that would require the hearing of evidence to resolve, it may be appropriate for the costs assessor to decline to resolve the dispute; and in the Muriniti litigation, it would in my opinion have been open and reasonable for Davies AJ to have permitted the question to have been determined in the proceedings before him. As it turned out, the costs assessor did decline to resolve this question; and in my opinion, in those circumstances, the costs assessor should not have issued a certificate which could be converted into a judgment. That is, in a case where there is a real dispute on substantial grounds as to whether any costs are payable, a costs assessor should not complete an assessment by issuing a certificate unless satisfied that the costs are payable, because the certificate can be filed so as to take effect as a judgment." (emphasis added)
12. I acknowledge that there is an alternative construction that the term "payable" has a wider meaning, namely, that it means able or capable to be paid, not merely owed or due.
13. The dictionary definitions are consistent with both the above construction and the alternative view. In the Shorter Oxford Dictionary (Oxford University Press, 6th ed, 2007) which defines "payable" as: "1 Of a sum of money, a bill, etc; that is to be paid; falling due … 2 Able to be paid."
14. In the Macquarie Dictionary (Macquarie Dictionary Publishers, 8th ed, 2020), "payable" is defined as: "1. owed; to be paid; due. 2. capable of being paid. … 4. Law imposing an immediate obligation on the debtor."
15. However, for the reasons I have given, I prefer the construction that "payable" in the LPUL and LPULA Act means "owed; to be paid; due". Even if a wider meaning is given, for the reasons stated below, I am satisfied that the Costs Assessor had determined the legal costs that were owed and due at the time of the costs assessment.

What was the effect of the Costs Assessor's Determination?

The Entirety of the Costs Agreement was Void

1. The conclusion of the Costs Assessor that the Second Costs Agreement was not a valid costs agreement was not contested by the parties. It is not necessary for me to determine whether this was conclusion was correctly reached although there would seem to be an adequate basis for the common ground based upon alleged contravention of disclosure obligations.
2. The result is that the whole of the Second Costs Agreement was void pursuant to s 178(1)(a) of the LPUL.
3. I note that a different result could be reached if the "costs agreement" in the LPUL referred to only a part of the Second Costs Agreement but neither party argued for that construction, which in any event would potentially require a reading down of the provision.
4. Neither the LPUL or LPULA Act defines the expression "costs agreement" in contrast to s 302 of the 2004 Act, which had defined "cost agreement" as "an agreement about the payment of legal costs". In Anderson v Hill [2017] NSWSC 1149, Hallen J said at [35] that a "costs agreement" in the LPUL "simply means an agreement about the payment of legal costs".
5. In my view, the text "the costs agreement concerned" (s 178(1)(a)) and "[a] cost agreement that contravenes" (s 185(1)) is a reference to the entirety of the costs agreement that deals with the setting of legal costs for legal work and matters connected to or incidental to the setting of legal costs for legal work. Nothing suggests that costs agreement should be read down to exclude clauses providing for a contingency of payment.
6. It might be noted that a former provision, s 184(5) of the Legal Profession Act 1984 (NSW), stated that "[a] costs agreement may form part of a contract for the provision of legal services". No such identical or substantially similar provision exists in the LPUL or LPULA Act. But even under the former provision, there does not seem anything to suggest that a contingency clause can be treated separately to a costs agreement.

The Rights and Obligations under the Costs Agreement are Non-Existent

1. The effect of a costs agreement being "void" through the operation a statute was explained by Barrett J (as his Honour then was) in Wentworth v Rogers [2002] NSWSC 709. That matter concerned an unwritten costs agreement. Section 184(4) of the Legal Profession Act 1987 (NSW) provided that "[a] costs agreement is void if it is not in writing or evidenced in writing". His Honour stated at [29]: "[29] It is important to emphasise that the only effect of s.184(4) is to obliterate an agreement, which is unwritten, and not evidenced in writing. Because the law regards it as non-existent, the agreement itself cannot be the source of rights and obligations."
2. On appeal, Santow JA agreed with the observations of Barrett J that the effect of providing that a costs agreement is void is that "any agreement should be treated as non-existent and rights and obligations on the subject of the lawyer's remuneration should be determined without regard to the supposed agreement": Wentworth v Rogers (2006) 66 NSWLR 474; [2006] NSWCA 145 at 484 [33] (Santow JA, Hislop J agreeing at 522 [215]).
3. Consistently with the Costs Assessor's determination that the Second Costs Agreement was not a valid costs agreement, the agreement must be treated as non-existent. The rights and obligations of the plaintiff and defendant in the costs agreement, including the contingency clause, were to be treated as non-existent as a matter of law.
4. In determining that the costs were now "payable", the Costs Assessor was, in effect, creating new rights and obligations between the parties.

The Certificate Created New Rights and Obligations

1. The reasons of the Costs Assessor acknowledged that the contingency clauses in the Costs Agreements but then expressed in the certificate that the amount was "payable". That is because he considered the failure to meet the disclosure obligations make the Second Costs Agreement invalid.
2. In my view, the Costs Assessor was not merely quantifying the amount that may fall due at some point in the future subject to some contingency of a Costs Agreement that the Costs Assessor found was not valid. Rather, the Costs Assessor, in issuing the certificate, made a positive finding that the amount was payable and could be recovered.
3. The defendant submitted, in his written submissions that the "costs assessment mechanism is a means of quantification only. It … does not alter the nature of the contractual rights to payment for legal services rendered and billed". The defendant cites Branson v Tucker [2012] NSWCA 310 at [127] (Barrett JA) ("Branson") and Coshott v Barry [2012] NSWSC 850 at [41] (McCallum J) ("Coshott") as authority for this proposition.
4. In my view, neither authority, when understood in context, supports the defendant's submission.
5. In Branson, Barrett JA stated at [127] and [128] as follows: "[127] The assessment process created by the Legal Profession Act, as it applies in a case of this kind, is no more than a means of quantification made available to the billing practitioner and the person billed. Either of them may resort to it or not as he or she chooses. The objective is to provide an efficient method of objective quantification by experienced practitioners and, in that way, to protect those upon whom lawyers impose charges and to regulate the conduct of lawyers. [128] If advantage is taken of the assessment procedure, the quantification it produces may, by the simple procedural step of filing the assessor's certificate of assessment in a court registry, be translated into a deemed judgment debt under s 368(5); and such a deemed judgment debt will supersede or operate to satisfy the contractual entitlement. Once a deemed judgment debt arises, there no longer exists any possibility of an action in contract to recover the lawyer's fees."
6. In my view, his Honour's statement that the filing of the certificate was to "supersede" or "satisfy" a contractual entitlement and give rise to a "judgment debt" makes clear that the role of a costs assessor was to determine the amount that, at the time of the assessment, was due.
7. In Coshott, McCallum J stated at [41]: A solicitor's entitlement to lodge an application for a costs assessment is not a source of right or title in itself. It is an aspect of the regulation of the legal profession under the Legal Profession Act 1987. The Act creates an administrative mechanism for quantifying legal costs in a variety of circumstances, some of which raise no limitation issue (such as costs ordered by a court). To the extent that it provides for the assessment of costs payable under contract, I do not think it alters the fundamental nature of the right and title to those costs.
8. However, Coshott was not a case where the costs agreement was void or not valid. The extinguishment of rights and obligations in this case arises from the Second Costs Agreement being void. Thus, I do not discern any inconsistency between McCallum J's reasons and my views above.
9. I note that no party submitted that the Costs Assessor had committed jurisdictional error in his determination and it is not necessary then to resolve any issues concerning whether the Costs Assessor had exceeded the jurisdiction conferred upon him by statute.

Was there any good faith or irregularity?

1. As noted above, the Court may exercise a discretion under r 36.15 of the UCPR to set aside a judgment or order of the Court if "sufficient cause" is shown that the judgment or order was given, entered or made "irregularly, illegally or against good faith".
2. In Kendall v Carnegie (2006) 68 NSWLR 193; [2006] NSWCA 302, Bryson JA, (with whom Hodgson and McColl JJA agreed) said at [45], that the phrase "sufficient cause" recognised the need for finality in judgments of the Court by protecting those judgments from being set aside "... for slight or uncertain causes".
3. In Weber v Aquaqueen International Pty Ltd [2013] NSWSC 1181, Garling J stated that, in resolving an application under r 36.15 of the UCPR, the Court should have regard to: "[T]he principles discussed by the Court of Appeal in Perpetual Trustees Australia Ltd v Heperu Pty Ltd (No.2) [2009] NSWCA 387; (2009) 78 NSWLR 190, namely: - that controversies once resolved are not be re-opened except in a few narrowly defined circumstances: [32]; - a power to re-open proceedings such as that conferred by UCPR r 36.15, is to be narrowly confined and sparingly exercised: [33], [45]; - the power provided for in r 36.15 is based upon an irregularity in the steps which resulted in the entry of the judgment itself, and not on the merits of the judgment or irregularities in the anterior conduct of the proceedings: [16]; and - rule 31.15 of the UPCR can only have limited application to judgments and orders made or entered after a hearing on the merits, or else where the parties had the opportunity to be heard on the merits: [17]."
4. The defendant relied only on the grounds that the judgment was entered irregularly or against good faith.
5. In Calandra, it was stated that a judgment may be entered irregularly if "there was no amount of unpaid costs in respect of which the respondent was entitled to judgment": at [20]. The Court in Calandra noted that Lopes LJ in Hughes v Justin [1894] 1 QB 667 at 670 described as "irregular" a default judgment signed for an amount to which the plaintiff was not entitled.
6. In my view, there is no irregularity in the entering of the judgment, upon filing the certificate, in these proceedings. I agree with the submissions for the plaintiff that it was reasonable to register the certificate in light of the certificate certifying that the costs were "payable" and creating a positive liability for the costs determined by the Costs Assessor.
7. The defendant argued that the judgment was entered irregularly because there was no "unpaid money" in s 70(5) of the LPULA Act. This submission was predicated on the continued existence of the contingency clause which did not operate upon the circumstances of the certificate because the Second Costs Agreement was void.
8. Calandra can be distinguished because there was a valid Deed of Release and Indemnity that released the respondent in that case from paying costs and thus there was no "unpaid money". Here, there is no explanation provided by the defendant for how the contingency survived after the Costs Agreement was found as not valid.
9. In my view, it was also not entered against good faith at the date of entry of judgment. There is no lack of good faith in the plaintiff filing a certificate certifying costs "payable" to him.
10. The meaning of "against good faith" was considered in Kendell v Carnegie (2006) 68 NSWLR 193; [2006] NSWCA 302 where Bryson JA (with whom Hodgson and McColl JJA agreed) stated at [60]: "[60] There is not and could not, I would think, ever be an exhaustive judicial definition of what is against good faith; only very broad limits are set by proceeding by analogy from circumstances in which judicial remedies are based on good faith, unconscionability, or other concepts closely related to good faith. I would include the passage cited from Taylor v Johnson among the many conceivably available sources from which to proceed by analogy. "Against good faith" is an expression which requires the impeachment of the intention or behaviour of the person whose good faith is impugned."
11. There may be an argument that the plaintiff may be estopped, notwithstanding the void costs agreement, from filing the certificate. However, no such argument was advanced by the parties and it is not appropriate to consider it here.
12. In Industry Funds Management (Nominees 2) Pty Limited v James Nicholas Panagopoulos and Anor [2013] NSWSC 868, Sackar J stated at [40]: "In addition to the power conferred on the court by r 36.15, the court possesses inherent power to set aside a consent judgment if it could be suggested that it was entered as the result of illegality, misrepresentation, non-disclosure of a material fact or where disclosure was required. Further if there was duress, mistake, undue influence or an abuse of confidence or the like, such circumstances may well provide a basis for invoking the inherent jurisdiction. In other words there should be a basis upon which the agreement to enter the consent judgment could invalidated (Harvey v Phillips (1956) 95 CLR 235 at 243-244)."
13. In my view, the factors identified by Sackar J apply, not only to a consent judgment, but a judgment arising from the filing of a certificate from a costs assessment.
14. In this case, I do not consider any of those factors have been made out. In particular, I do not consider that the judgment should be set aside for "non-disclosure of a material fact or where disclosure was required" because there is no requirement in s 70(5) to disclose that a costs agreement that was found to be void contained a contingency clause.

Conclusion

1. In conclusion, the defendant has not demonstrated "sufficient cause" that the judgment was entered irregularly or against good faith for the purpose of r 36.15 or to establish a proper basis for the exercise of this Court's inherent jurisdiction. It follows that the third prayer of relief of the Notice of Motion should be dismissed and there should be costs awarded to the plaintiff.
2. The parties should have an opportunity to consider the form of orders which should be made to reflect these conclusions. Short Minutes of Order should be filed. Those Short Minutes may also include, by consent, any consequential orders with respect to the interlocutory orders made by Davies J or other aspects of the Notice of Motion.

Amendments 03 July 2022 - 3 July 2022 - Typographical error in coversheet DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 03 July 2022