Bingham v Bevan

Court of Appeal (NSW)|2023-08-03|Before: Meagher JA, White JA

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

ex tempore JUDGMENT (revised)

By a notice of motion filed on 2 June 2023, the respondent in the appeal proceedings seeks, inter alia, an order staying the enforcement of certain orders made by this Court on 5 May 2023. The stay is sought pending the final determination of the respondent's application for special leave to appeal in the High Court (filed on 30 May 2023) and, if special leave is granted, final determination of that appeal.
The orders the subject of the stay relate to the payment of certain costs by the respondent (orders 2(b) and 4) and an order that the respondent pay to the appellant the amount of $136,525.95 by way of reimbursement of moneys paid to the respondent pursuant to a garnishee order (order 3).

Summary of background

This Court published its reasons for judgment on 5 May 2023 as to why it allowed the appellant's appeal (see Bingham v Bevan [2023] NSWCA 86 (CA judgment)).
The appellant is a solicitor and the respondent is a barrister. They are brothers-in-law. Without disrespect I will refer to them as the Solicitor and the Barrister respectively.
The parties' dispute arose after the Barrister was briefed in February 2019 by the Solicitor to appear for a client of the Solicitor in High Court proceedings. The Barrister was instructed to appear in relation to the then application for special leave and, if successful, in the appeal.
In 2019, the Barrister and Solicitor entered into three separate costs agreements dated 2 February, 6 February, and 3 October respectively. Each had an identical cl 4 as follows: The Solicitor's liability for the 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, [name of respondent], 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 Barrister's fees is not otherwise dependent upon the success of the proceedings which is the subject of this costs agreement.
Each costs agreement had different cost estimates in cl 3. In October 2019, the Barrister invoiced the Solicitor pursuant to the second costs agreement, and they entered into a third costs agreement thereafter. The amount invoiced far surpassed that which had been estimated.
The application for special leave was granted but the appeal was dismissed with costs in December 2019. The Barrister then sought to have his costs assessed and in July 2020 lodged an application for assessment with the Manager, Costs Assessment. On 12 February 2021, the certificate issued by the costs assessor was sent to the parties via the Manager, Costs Assessment along with a statement of reasons. The costs were calculated at $323,715.10.
The costs assessor determined that the Barrister had contravened his disclosure obligations - the cost estimate provided in the second costs agreement was far lower than the amount in the Barrister's invoice. Pursuant to s 178(1)(a) of the Legal Profession Uniform Law 2014 (NSW) (Uniform Law), this costs agreement was declared void. The consequence of this (as determined by the costs assessor and accepted by the primary judge) was that the Barrister was no longer barred from recouping costs from the Solicitor under cl 4.
The effect of this view, therefore, was that because the Barrister's own conduct and contravention of his statutory obligations rendered the costs agreement void, the condition in cl 4 such that the Solicitor was not required to pay the Barrister's fees if the Solicitor had not obtained money from the client (or the other party) fell away. This had the consequence that the full amount of costs assessed on a solicitor-client basis became payable forthwith to the Barrister. It is entirely understandable why this consequence was described by Basten AJA (with whom Meagher and White JJA agreed) as a "somewhat surprising" result (see CA judgment at [30]).
On 15 February 2021 the Barrister filed an application to register the certificate as a judgment of the Court under r 36.10 of the Uniform Civil Procedure Rules (NSW) (UCPR). Four days later, orders were made and entered for the payment of the full amount in the certificate (no notice or copy of the orders were given to any affected party, this not being required under the UCPR). A garnishee order was also made against the client directing payment to the Barrister of the debt due to the Solicitor.
The Solicitor lodged a notice of motion to stay the enforcement of the judgment, suspend the garnishee order and set aside the judgment. He became aware of the judgment 10 days after the review period had ended. The costs assessor dismissed the Solicitor's application for an extension of time to file an application for review of the assessment.
Walton J heard the motion on 27 July 2021 and dismissed it with costs in a judgment handed down on 29 June 2022.
The appeal was heard by this Court on 24 April 2023 and determined on 5 May. The appellant raised two grounds: 1. Despite the costs agreement being void, the Barrister was not entitled to recover costs which would not have been due and payable had the agreement been on foot (i.e., by operation of cl 4); and 2. The trial judge ought to have set aside the costs judgment because it was entered "irregularly".
In summary, the appeal was allowed for the following reasons: 1. The Court had the power to set aside the judgment. While the costs assessor had statutory power to declare an agreement "void", under the Uniform Law this does not mean "void" in the sense that the agreement loses all legal effect. The operation of ss 178 and 185(2) of the Uniform Law were central to this finding. Comprehensive reasons were given in support of the proposition that the word "void" was not used in the Uniform Law to indicate some "absolute absence of legal effect", including with reference to the operation and effect of s 178, and furthermore r 72(a) of the Legal Profession Uniform General Rules 2015 (NSW). The Court explained why these provisions required a purposive approach to be taken to understand the consequence of a contravention of the disclosure obligations. The Court also explained why the terms of s 185(2) of the Uniform Law contradicted the Barrister's submission that, despite the costs agreement being void because of his own failure to comply with statutory disclosure obligations, he was nevertheless entitled to recover costs in circumstances in which the costs could not have been recovered had the costs agreement not been rendered void. 2. The consequence of this finding was that the Barrister remained constrained by the operation of cl 4 of the relevant costs agreement, thus the Barrister had no legal entitlement to the recovery of costs. 3. For the purposes of UCPR r 36.15, the judgment was registered "irregularly" because the basis for the judgment was lacking. Applying Calandra v Murden [2015] NSWCA 231 at [20] (in which it was held a judgment may be entered irregularly if "there was no amount of unpaid costs in respect of which the respondent was entitled to judgment"), the Court unanimously determined that this was a challenge to the entitlement to payment of the assessed costs where those costs would not have been recoverable if the costs agreement had not been void. The Court held that a judgment based upon a certificate could be set aside by the judgment debtor under r 36.15 where it was demonstrated that the liability to pay costs no longer exists or had not arisen (see at CA judgment [69]).

The Barrister's application for special leave

The application for special leave to appeal filed on 30 May 2023 relies on the following two grounds: 1. The Court of Appeal erred in concluding that, once the costs agreement between the applicant barrister and respondent solicitor was rendered "void" by s 178(1)(a) of the Legal Profession Uniform Law, the solicitor could still rely on a provision of the costs agreement to the effect that he did not have to pay the barrister unless and until paid by his client. 2. The Court of Appeal erred in concluding that, the certificate as to determination of costs as between the applicant barrister and respondent solicitor issued by a costs assessor having taken effect as a judgment of the Supreme Court pursuant to s 70(5) of the Legal Profession Uniform Law Application Act 2014 (NSW), the judgment could be set aside as having been given or entered "irregularly".
The Barrister claims that the application raises two questions of general importance: 1. If a costs agreement is "void" pursuant to s 178(1)(a) of the Uniform Law can the client still rely on provisions of the agreement which, favourably to the client, determine when and in which circumstances costs are payable? 2. When a certificate as to determination of costs issued by a costs assessor takes effect as a judgment of the Supreme Court pursuant to s 70(5) of the Legal Profession Uniform Law Application Act 2014 (NSW), can the judgment be set aside pursuant to UCPR r 36.15 as having been given or entered "irregularly" if the Court considers there was no costs liability?

The Barrister's affidavits in support of the notice of motion

The Barrister filed two affidavits in support of his notice of motion, dated 2 June and 7 July 2023 respectively.
The relevant features of the first affidavit may be summarised as follows: 1. The Barrister is unaware of any evidence that the granting of the stay will cause the Solicitor any loss (at [8]); 2. The execution of the orders made by the Court on 5 May 2023 will deprive the Barrister of the subject matter of the appeal because: 1. The Solicitor's costs agreement with the client is secured by a mortgage over a commercial property in Rydalmere, second to ANZ Bank which holds the first mortgage. 2. So far as the Barrister is aware, the Solicitor has taken no action to enforce his rights as mortgagee against the Rydalmere property since his retainer ended in late 2019. 3. In December 2020, the Solicitor asked the Barrister to lend him money for a filling fee to the High Court, as he would otherwise breach his costs agreement with his client. This amount was lent by the Barrister on terms that it would be lent interest-free and repayable when the Solicitor paid the Barrister's professional costs. 4. The Barrister is unaware of whether the Solicitor has taken steps to register his own certificate of costs as a judgment to recover costs owed to pay for the Barrister's junior, the Barrister's costs, and the Solicitor's costs. He is also unaware of whether he has exercised his power of sale as mortgagee over the Rydalmere property to this end. 5. The Barrister alleges the Solicitor failed to take all necessary steps at his expense to effect the payment of his fees. 6. The Barrister further submits the Solicitor informed him on several occasions in 2018, 2019 and 2020 that he had very significant financial problems, was indebted to the National Australia Bank, and was having difficulty paying rent to the landlord of his office premises. 7. This suggests the Solicitor is impecunious and the Barrister has significant concerns that the Solicitor lacks the financial capacity to repay the restitution money if the Barrister is successful in the High Court appeal. 1. On balance of convenience, the Barrister raises two points. First, he claims that his financial position has never been an issue in these proceedings. Secondly, he says that he would need to undertake several administrative actions to comply with the orders - which he would be loath to take if special leave is granted and the appeal is subsequently successful. These particular actions include: 1. withdrawing from his beneficiary account from his self-managed superfund; and 2. lodging an amended tax return for the income year ending 30 June 2022 because, as it stands, he has paid the highest marginal rate of 48.5% on the restitution sum as professional income derived from that financial year.
The Barrister's second affidavit was provided after a hearing before Registrar Riznyczok on 26 June 2023. Its key relevant features are as follows: 1. The Barrister is prepared to give an undertaking to the Court as an officer of the Court and co-director of the super fund's corporate trustee during the pendency of the High Court proceedings. This is to the effect that the Court is to procure that the trustee of the super fund will ensure the minimum balance of the cash management account does not fall below $140,000. This takes into account the restitution amount plus an allowance for post-judgment interest. 2. Alternatively, if the undertaking is not acceptable, the Barrister offers to pay the full restitution amount into Court to secure the Solicitor. He notes his preference, however, is to leave the money in his account "to minimise its compliance costs in making a withdrawal from the super fund, as the Solicitor is protected for his post-judgment interest by the Civil Procedure Act 2005". The Barrister would further need a reasonable period to pay this amount such that he may make necessary arrangements with his retained accountants who manage the super fund on behalf of himself and his wife.

The Solicitor's affidavit summarised

The Solicitor relied upon an affidavit dated 20 July 2023, the relevant parts of which may be summarised as follows.
The Solicitor and his wife jointly own a residential property which has been professionally valued as having a current market value of $3,100,000.
The Solicitor has drawn $150,000 down on a mortgage over that property in respect of the payment of legal costs incurred by him in various legal proceedings, including the recent proceedings which are currently the subject of the application for special leave to appeal.
The Solicitor estimated that he has unpaid legal expenses arising out of the litigation between he and the Barrister in the amount of $195,049.
The Solicitor explained how he had been invited by the Barrister to be his instructing solicitor in proceedings involving three separate persons. The Solicitor described the three proceedings as "Sturesteps", "Boensch" and "Kessly".
It is desirable to set out [14]-[22] of the Solicitor's affidavit which describes those matters: 14. I draw attention in the appeal decision as to the circumstances of the execution of the garnishee order by the appellant, the subject of the restitution order. The funds the subject of the garnishee order by Mr Bevan were funds owing to me by Mrs Sturesteps as her solicitor for legal services. 15. In each of the Boensch and Kessly matters, I entered into a costs agreement, containing clauses 4 and 7 with Mr Bevan as set out at pages 1 and 2 in Exhibit CJB-2 to his affidavit of 2 June 2023. As for the Sturesteps matter, I understood that Mr Bevan had a retainer directly with the Sturesteps. 16. I have never been put in funds by either Boensch or Kessly. 17. Mr Bevan has sought to register and enforce judgments against me in each of the Boensch and Kessly matters. 18. I have commenced the following litigation as a consequence: i. proceedings before Justice Walton (Boensch) ([2022] NSWSC 863 ii. application to Court of Appeal for leave to appeal from Justice Walton (Boensch) ([2022] NSWCA 248) iii. appeal to the Court of Appeal (Boensch). ([2023] NSWCA 86) 19. I have defended an action commenced by Mr Bevan against me, also in consequence of the matters in paragraph 17, before Justice Bellew (Kessly) ([2023] NSWSC 19). […] 20. I have been awarded costs in the above 4 actions. I have commenced an assessment of costs for taxation in Kessly to enforce the awarded costs. I have sought the sum of $110,840.81 inclusive of GST. There was no appeal in the Kessly proceedings. The costs assessor has not, at the date of this affidavit, determined that assessment. 21. I have also brought proceedings before Justice Garling for an injunction to restrain Mr Bevan from registering a costs certificate as judgement against me in the Kessly proceedings. At a contested interlocutory hearing, Justice Garling restrained Mr Bevan from registering a costs certificate as a judgement until the determination of the proceedings ([2023] NSWSC 12). The costs of the interlocutory hearing were the plaintiff's costs in the cause. The final hearing of these proceedings is now listed for 31 August 2023. 22. I also have liabilities connected to the above proceedings but not involving Mr Bevan directly as a party to that litigation. These proceedings are related to attempts to enforce, through bankruptcy proceedings, the underlying debts owed by Boensch and Kessly to Mr Bevan and me. I estimate those liabilities at $2,265.00.
In brief, the Solicitor challenged the Barrister's claims concerning the Solicitor's financial position and pointed to the evidence in his affidavit in support of his submission that he was able to repay the restitution order if the Barrister succeeded in having it set aside by the High Court.
The Solicitor submitted that the Barrister had the capacity to make an immediate payment of the restitution order and that he intended to use all or part of any such repayment to pay the legal costs that he had incurred in respect of the three matters described above.

Consideration and determination

Unsurprisingly, the parties did not dispute the relevant principles concerning the grant of a stay in circumstances where a party has filed an application for special leave to appeal in the High Court. Those principles were helpfully summarised by Kirk JA in a recent judgment in 123 259 932 Pty Ltd v Cessnock City Council (No 2) [2023] NSWCA 89 at [2]-[4]: 2. It was held in Rinehart v Welker (2012) 83 NSWLR 347; [2012] NSWCA 1 that this Court, when considering whether to stay its own orders pending the determination of an application for special leave to the High Court, should apply the principles applied by the High Court itself in resolving such applications. The most commonly quoted statement of principle in that regard is by Brennan J in Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd (No 1) (1986) 161 CLR 681 at 684-685; [1986] HCA 84: A stay to preserve the subject matter of litigation pending an application for special leave to appeal is an extraordinary jurisdiction and exceptional circumstances must be shown before its exercise is warranted. If an order for a stay is made, the respondent is kept out of the benefit of the order of the court in which the matter is pending until the hearing of the application for special leave to appeal. … In exercising the extraordinary jurisdiction to stay, the following factors are material to the exercise of this Court's discretion. In each case when the Court is satisfied that a stay is required to preserve the subject-matter of the litigation, it is relevant to consider: first, whether there is a substantial prospect that special leave to appeal will be granted; secondly, whether the applicant has failed to take whatever steps are necessary to seek a stay from the court in which the matter is pending; thirdly, whether the grant of a stay will cause loss to the respondent; and fourthly, where the balance of convenience lies. 3. Of the four factors, the second is a factor peculiar to consideration by the High Court and is not relevant in this Court. The third factor can be seen as an element of the fourth. The relevant factors identified by Brennan J, thus, are whether there is a substantial prospect that special leave to appeal will be granted and where the balance of convenience lies. The prospects question relates to obtaining special leave, not the prospects of an appeal succeeding if special leave was to be granted: note Gerah Imports Pty Ltd v Duke Group Ltd (1994) 68 ALJR 196 at 197; [1994] HCA 3 per Dawson J. 4. These factors are not to be applied in a mechanical way: note Rinehart v Welker at [49]. Nor are they exhaustive: Obeid v R (2016) 90 ALJR 447; [2016] HCA 9 at [14] per Gageler J. As explained below, the overall issue is whether the grant of a stay (perhaps on terms) is warranted taking account of all the circumstances. A particularly important matter in that regard is whether the absence of a stay may render the special leave application, and any subsequent appeal, nugatory because of the loss of the subject matter of the appeal: see eg in Gerah at 197-198 per Dawson J.
The Solicitor also pointed out that the power to grant a stay has been described as "extraordinary" and that exceptional circumstances must be shown to exist before a stay is warranted, citing Rinehart v Welker (2012) 83 NSWLR 347; [2012] NSWCA 1 and Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd (No 1) (1986) 161 CLR 681; [1986] HCA 84.
In Cessnock City Council (No 2), Kirk JA summarised the position at [10], with which I respectfully agree: 10. In summary, then, exceptional circumstances must be shown to warrant the grant of a stay pending the determination of a special leave application; significant factors in that regard are whether the applicant has substantial prospects of obtaining special leave, where the balance of convenience lies and whether the application for special leave may be rendered nugatory unless a stay is granted; those factors are not exhaustive; "substantial prospects" does not require that the court conclude that a grant of special leave is likely; the overall question is whether, taking account of all the circumstances, there are sufficiently significant prospects of special leave being obtained to warrant a grant of a stay, perhaps on terms designed to protect the interests of the respondent.
As to the arguable merits of the application for special leave to appeal, I do not accept the Barrister's submission that there are substantial prospects that special leave to appeal will be granted. The primary issue is whether, despite a costs agreement being rendered void because of the Barrister's non-compliance with a statutory disclosure obligation, the Barrister is nevertheless entitled to recover costs which would not have been due and payable if the costs agreement had remained on foot.
When explaining why leave to appeal (if required) ought to be granted, that issue was described by this Court previously in Bingham v Bevan [2022] NSWCA 248 at [6] as being "one of considerable importance in the regulation of the legal profession in Australia", a matter upon which the Barrister has placed particular emphasis. That alone does not mean, however, that there is a substantial prospect that the High Court will grant special leave to appeal. The issues turn on questions of statutory construction and the Court was unanimous in allowing the Solicitor's appeal. As the Solicitor correctly pointed out, there is no contrary determination by any intermediate lower Court of Appeal. The Court gave comprehensive reasons for resolving the primary issues in the manner in which it did. I have also taken into account the force of the arguments raised by the respondent in its response to the special leave application. I am not persuaded that the Barrister has substantial prospects of persuading the High Court that he should be granted special leave to appeal on either of the two primary grounds.
As to the subject matter of the appeal being lost if a stay is not granted, based on the Solicitor's affidavit evidence, I do not accept that there is a real risk he will be unable to pay the restitution sum if order 3 is enforced. On the contrary, I am satisfied on the basis of that evidence that he is in a position to repay the restitution sum if he is ordered to do so.
Nor do I accept the Barrister's submission that there is no evidence that a stay of order 3 would cause the Solicitor any loss. I accept the Solicitor's evidence that he intends to use all or part of the repayment of the restitution sum to pay legal costs which he has incurred in various proceedings as described above.
As to balance of convenience, I reject the Barrister's contention that this consideration weighs heavily in his favour. That submission was largely predicated on the basis that if a stay is refused the Barrister would suffer a grave injustice by being exposed to a real risk that the Solicitor will be unable to repay the restitution sum in the event that the Barrister is successful in his High Court proceeding. As I explained above, the evidence indicates that although the Solicitor does not have significant funds readily available at hand, the Solicitor should be in a position to repay the restitution sum if ordered to do so, having regard to the equity in the residential home owned by the Solicitor and his wife.
I acknowledge that this may require the respondent to enforce a judgment debt with reference to a jointly owned residential home, which could raise practical difficulties and also involve some delay. I do not consider, however, that these practical matters outweigh the desirability of the Solicitor immediately being able to enjoy the fruits of his victory in this Court.
I have also taken into account the Barrister's willingness, if required, to pay the restitution sum into Court as a condition of the grant of a stay. I do not consider this to be a satisfactory arrangement because it necessarily involves a further delay in the Solicitor enjoying the fruits of his victory in the appeal.
I consider, however, that it is appropriate that the Solicitor give an undertaking to the Court that he will not take any steps to enforce orders 2(b) and 4 made on 5 May 2023 before the final determination of the pending proceedings in the High Court. Through his senior counsel, the Solicitor has now given that undertaking.
Taking these matters into account and considering the case as a whole I am not persuaded the enforcement of order 3 should be stayed.

Conclusion

For these reasons, the notice of motion will be dismissed with costs.
The formal orders are: 1. On the giving of an undertaking to the Court through his senior counsel that the respondent to the notice of motion will not take any steps to enforce orders 2(b) and 4 of the orders made on 5 May 2023 pending the final determination of the proceedings in the High Court, the notice of motion filed on 2 June 2023 is dismissed. 2. The applicant on the notice of motion pay the respondent's costs of the notice of motion.

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: 08 August 2023

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