Bingham v Bevan

Court of Appeal (NSW)|2023-04-24|Before: Meagher JA, White JA, Walton J

Solicitors: Bicknell & Monteith (Appellant) Breene & Breene Solicitors (Respondent) File Number(s): 2022/275823 Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Common Law Citation: [2022] NSWSC 863 Date of Decision: 29 June 2022 Before: Walton J File Number(s): 2021/45279

[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.]

JUDGMENT

MEAGHER JA: I agree with Basten AJA.
WHITE JA: I agree with Basten AJA.
BASTEN AJA: In February 2019, the respondent, Christopher John Bevan, was briefed by the appellant, John David Bingham, to appear for a client of Mr Bingham in proceedings in the High Court of Australia. It is convenient to refer to Mr Bevan as "the Barrister" and Mr Bingham as "the Solicitor".
The Barrister entered into a costs agreement with the Solicitor pursuant to which the Solicitor was responsible for payment of the Barrister's fees. The agreement was said to be entered into pursuant to s 180(1)(c) of the Legal Profession Uniform Law (NSW) ("Uniform Law"). Clause 4 of the agreement, provided that the Solicitor's liability for payment of fees under the agreement be conditional upon him first recovering the fees either from the client or from the respondent to the proposed appeal.
The costs agreement included disclosures, purportedly in accordance with s 175(2) of the Uniform Law, with respect to the basis upon which the Barrister would charge for his services, and an estimate of the total fees payable.
The estimated costs were substantially below (indeed, a small percentage of) the invoices later rendered. The significant change in claimed entitlement was not disclosed to the Solicitor until an invoice was rendered, eight days before the hearing of the appeal in the High Court. The costs assessor held that the Barrister was in contravention of his disclosure obligations in Pt 4.3, Div 3 of the Uniform Law. Section 178(1)(a) of the Uniform Law stated that in such circumstances, "the costs agreement concerned (if any) is void".
Perhaps surprisingly, the Barrister's position was that, because the costs agreement was, as a result of his own contravention of his statutory obligations, "void", the condition in cl 4 that the Solicitor was not required to pay the fees if he had not obtained money from the client (or the other party) fell away, so that the full amount of costs assessed (on a solicitor and client basis) became payable forthwith. That submission was accepted by the primary judge. [1] The issue on the appeal is whether the Barrister's claim was correct.

Procedural background

The Barrister provided the Solicitor with three separate costs agreements. These were identical except with respect to cl 3 which set out the estimates of fees.
The first agreement was dated 2 February 2019 and included the following cost estimates: "3 The Barrister estimates total fees for the Brief at $63,000-$75,000 plus GST for the three stages of the likely conduct of the proceedings the subject of the Brief, made up as follows: (a) the application for special leave to appeal - $24,000-$27,000 plus GST; (b) any application for security for the costs of the appeal - $9,000-$12,000 plus GST; (c) the conduct of the appeal in Canberra and the preparation of all written submissions, chronology, aides memoire and advising on the preparation of the Appeal Books - $30,000-$36,000 plus GST."
Importantly for present purposes, cl 4 stated: "4 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, 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 Barrister's fees is not otherwise dependent upon the success of the proceedings which is the subject of this costs agreement."
The Solicitor was obliged to take reasonable steps to obtain the requisite funds: "7 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." Before the primary judge, the Barrister argued that the protection accorded the Solicitor under cl 4 was contingent upon his satisfying his obligation under cl 7. That argument was rejected and the rejection was not challenged on the appeal. Clause 7 may therefore be put to one side.
On 6 February 2019, the Barrister provided a second costs agreement. The only relevant change was in cl 3 which varied the estimate of total fees and the fees for the three stages as follows: "3. The Barrister estimates his total fees for the Brief at $60,000 plus GST plus travelling and out-of-pocket expenses for the three likely stages of the proceedings, made up as follows: (a) the application for special leave to appeal - $15,000 plus GST; (b) any application for security for the costs of the appeal - $9,000 plus GST; (c) the conduct of the appeal in Canberra and the preparation of all written submissions, chronology, aides memoire and advising on the preparation of the Appeal Books - $36,000 plus GST plus travelling and out-of-pocket expenses."
Three observations may be made in relation to this (second) costs agreement. First, because it followed so closely on the heels of the first agreement, it may be assumed that the second superseded the first. Secondly, item (b) (referring to a security for costs application) may be disregarded: no such application was made, nor was likely to be made. Thirdly, the first stage (the application for special leave) was significantly reduced from the estimate made four days earlier, to an amount of $15,000. That figure was curious because, as revealed in the Barrister's first invoice dated 3 October 2019, an amount was later claimed for work undertaken prior to 6 February 2019 totalling $26,400 (plus GST).
The special leave application was heard on 21 June 2019, the High Court granting special leave to appeal. [2]
On 3 October 2019, the Barrister issued an invoice in the sum of $291,066.60. On the same day, he provided a third costs agreement to the Solicitor. Again, the terms of the agreement were the same as in the previous agreements, except for cl 3 which now read as follows: "3 The Barrister estimates his total fees and out-of-pockets for the completion of the Brief incurred from tomorrow, 4 October 2019, to Saturday, 12 October 2019 at $31,000 plus GST (including out-of-pocket expenses in Canberra for the appeal hearing), made up as follows: (a) preparation for hearing of the appeal (October 4, 8, 9 and 10) - $24,000 plus GST; (b) hearing of the appeal (October 11) - $6,000 plus GST; (c) accommodation, travelling and out-of-pocket expenses for 3 days travelling to and from Canberra and the stay in Canberra (October 10, 11 and 12) - $1,000 plus GST."
An email to the Solicitor on 3 October 2019 noted: "[t]he amount invoiced well and truly exceeds my original estimate from last February", providing two reasons which purported to explain the changed circumstances. The fresh costs disclosure in cl 3, however, applied only with respect to the period from 4 October to 12 October 2019 (which included the hearing of the appeal on October 11). The total amount was $31,000 (plus GST) which was a reduction of the amount for stage 3 in the second bill (namely $36,000 plus GST) but covered a more limited part of the work in stage 3 (excluding, for example, the preparation of written submissions).
On 13 December 2019 (two months after the hearing of the appeal), the High Court delivered judgment dismissing the appeal with costs. That event removed one possible source of funds from which the Barrister might have been paid, namely an adverse costs order against the respondent to the appeal (Mr Pascoe).
The Barrister stated [3] that, on 29 July 2020, he lodged with the Manager, Costs Assessment an application for assessment of costs, although the certificate of determination identified the bill as having been submitted for assessment on 2 November 2020. [4]
On 12 February 2021, a certificate issued by the costs assessor was sent by the Manager, Costs Assessment to the parties, together with a copy of the assessor's reasons dated 9 December 2020. The certificate identified the amount of the costs as $310,375.39. With interest and filing fee, the total amount specified in the certificate was $323,715.10. (Aspects of the costs assessment process, which are tangentially relevant to the issues before this Court, will be noted below.)
On 15 February 2021, the Barrister filed an application to register the certificate of determination as a judgment of the Court under Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 36.10. The application was accompanied by an affidavit sworn by the Barrister stating: "None of the costs specified in the attached certificate have been paid."
An order for payment of the full amount in the certificate was made and entered on 19 February 2021. There is no requirement in the UCPR for prior notice of the proposed judgment or order to be given to any affected party, nor for a copy of the judgment or order to be served. It appears that the Solicitor became aware of the registration of the judgment on 17 March 2021 when advised by a solicitor acting for another client of the Solicitor that that solicitor had received a letter from the Barrister enclosing a copy of the judgment entered on 19 February 2021 and a garnishee order against the client directing payment to the Barrister of a debt due by the client to the Solicitor.
The Solicitor then took two steps, the first of which was to lodge an application with the Manager, Costs Assessment seeking an extension of time within which to file an application for review of the costs assessment. That application, lodged on 22 March 2021, was rejected by the Manager by letter dated 12 April 2021. Although the application was only ten days late, the Manager refused an extension of time on the basis that the only ground of review was that the costs were not yet payable, pursuant to the terms of the costs agreement. Having regard to s 199 of the Uniform Law, the Manager was of the view that the function of the costs assessor was a "quantification exercise", and the assessor had no power to make a binding determination as to whether the costs, so assessed, were payable, nor when they might become payable. He concluded: "With no statutory power for the costs assessor to determine how, when and on what, if any, conditions are imposed within this costs agreement, regarding payment, a party disputing enforcement instead would appear to need to apply to have any enforcement step or application set aside, arguing their grounds for consideration." By undertaking the "quantification exercise", the costs assessor had completed the statutory role set out in s 199.
On 30 March 2021, the Solicitor filed a notice of motion seeking to set aside the registration of the judgment (and the garnishee order) pursuant to UCPR r 36.15. That motion was heard on 27 July 2021, in the Common Law Division, reasons for judgment being delivered on 29 June 2022. [5] On 12 September 2022, the Court ordered that the notice of motion be dismissed, with costs.

Power to set aside judgment

The Solicitor accepted that the determination of the costs assessor became or was taken to be a judgment of the Supreme Court either upon the filing of the certificate by the Barrister, or by the Court entering the amount of the certificate in the Court's records. With respect to the filing of the certificate, s 70 of the Legal Profession Uniform Law Application Act 2014 (NSW) ("Application Act") provides: 70 Certificate as to determination of costs to parties … (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 ….
UCPR r 36.10 provides that a costs assessor's certificate may be filed, relevantly, in the Supreme Court. The rule further provides: 36.10 Filing of costs assessors' certificates … (3) The certificate … must be accompanied by an affidavit, sworn not more than 14 days before the certificate [is] filed, stating: (a) if some of the costs specified in the certificate … have been paid - the amount of the costs that have been paid, or (b) that none of the costs specified in the certificate [has] been paid.
Section 133(1) of the Civil Procedure Act 2005 (NSW), which expressly extends to the adjudications and awards "of which a certificate may be filed or registered in the court", states that a judgment or order is not enforceable until it has been entered in accordance with the Uniform Rules. The order was therefore enforceable when it was entered on 19 February 2021
The jurisdiction of the Court (including this Court on appeal) relied upon by the appellant to set aside the judgment is to be found in r 36.15, which relevantly provides: 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.
While r 36.16(1) permits the Court to set aside or vary a judgment or order if a notice of motion seeking such relief is filed "before entry of the judgment or order", the power to set aside a judgment or order after it is entered is confined by the requirement that a notice of motion seeking such relief must be filed within 14 days after the judgment or order is entered: s 36.16(3A). However, that limitation does not apply to r 36.16(2), which permits a court to set aside or vary a judgment or order after it has been entered if "it has been given or made in the absence of a party": r 36.16(2)(b). It seems that no consideration was given in the present proceeding as to whether the appellant was entitled to invoke r 36.16(2), without the need to invoke one of the criteria specified in r 36.15.
In circumstances where the general power to vary a judgment before entry may be lost without knowledge of the parties, by the automatic entry of judgments by the court without notice to the parties, procedural fairness requires that the party adversely affected by the judgment must have some notice of the form of the judgment and time within which to seek to have it set aside. In earlier times, entry occurred on application by one party with notice to the other. It is at least arguable, in the case of a judgment entered by one party without notice to a party affected, that such a party's rights are preserved by r 36.16(2).

Avoidance of cl 4 of the costs agreement

There followed two interrelated questions, one of which fell away during the appeal. The substantive issue was whether the failure of the Barrister to make proper disclosure of costs estimates in accordance with Pt 4.3, Div 3 of the Uniform Law, resulted in the avoidance of the whole of each of the second and third costs agreement, including cl 4, thus depriving the Solicitor of the right to rely on the non-satisfaction of the condition in that clause. If that were the case, the failure of the Barrister to fulfil his legal obligation resulted in his obtaining an unconditional right to payment of his costs by the Solicitor, being a right which did not arise under the costs agreement which he had proposed and voluntarily entered into. That somewhat surprising result was adopted by the primary judge. [6] In this Court, the Barrister supported that conclusion and the reasoning underlying it.
The second issue was procedural: it involved two sub-issues, namely, (i) whether the costs assessor had power to determine that the assessed costs were due and payable, and (ii) whether he in fact reached that conclusion, despite the terms of cl 4 of the agreement.
There is no doubt that the costs assessor found that at least the third costs agreement (of 3 October 2019) involved a contravention of the disclosure requirements of the Uniform Law. [7] There are passages in the costs assessor's reasons which suggest that he considered that the February costs agreements also involved contraventions of the disclosure requirements. [8] The Solicitor was content to accept that the Barrister had relevantly contravened the disclosure provisions, as found by the costs assessor, but denied that the costs assessor had jurisdiction (or power) to determine the contractual consequences of that finding.
The costs assessor gave no reasons for his conclusion that the Barrister had failed to comply with his disclosure obligations. It might have been considered that the costs estimate in the 6 February costs agreement was a fair and reasonable figure. The fact that invoices were rendered for more than five times that figure (claiming some 550 hours of work) could have been seen to demonstrate that the days and hours claimed were grossly excessive. The assessor, however, reduced the amount payable by less than 7% and deemed the disclosures not to have reflected the fair and reasonable costs of the services provided by the Barrister.
There was no doubt that, in accordance with Pt 4.3, Div 7 of the Uniform Law, the costs assessor was required to "determine whether or not a valid costs agreement exists" (s 199(2)(a)). That was necessary for the purpose of determining whether the charges were "fair and reasonable" (s 199(2)(b)), because a costs agreement constitutes "prima facie evidence that legal costs disclosed in the agreement are fair and reasonable": s 172(4). However, that evidential provision only operates if the provisions of Div 3 concerning cost disclosures have been complied with: s 172(4)(a).
In the course of the appeal, this procedural issue fell away. The Barrister conceded that it was for the primary judge "to give independent consideration to the question whether the contingency in cl 4 had force and effect in the face of s 178(1)(a) of the [Uniform Law] for the purposes of UCPR r 36.1". [9] As explained below, that concession was clearly correct and should be accepted.
In principle, there is no doubt that the costs assessor, like any tribunal, has power to determine whether a criterion of engagement of a statutory power has been fulfilled. However, it does not follow that the view formed by the costs assessor will be determinative for other purposes. If the effect of the ruling by the assessor as to whether costs were due and payable were to be determinative, it would effectively deprive a court of jurisdiction to determine contractual issues between the parties. While it might be open to the legislature to remove such a right of access to the ordinary courts, as a matter of statutory construction, such an intended outcome should only be accepted where expressed in clear terms. In circumstances where a costs assessor has no power to take evidence or conduct adversarial proceedings in relation to contractual issues, that would be a startling outcome. In fact, the Application Act, in Pt 7, Div 8, expressly denies such an outcome, no doubt from an abundance of caution: [10] 93C Costs assessors … (2) A costs assessor has the functions that are conferred on the costs assessor by or under this or any other Act or the Legal Profession Uniform Law (NSW). (3) For the purpose of determining an application for assessment or exercising any other function as a costs assessor, a costs assessor may determine any anterior or incidental question of fact or law, but not so as to establish an issue estoppel for that question for the purpose of any other proceedings.
Accordingly, the Uniform Law should not be construed as having that effect.
Once the concession is accepted, the real issue is reduced to the substantive question, which turns primarily on the effect of s 178 of the Uniform Law: 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 (b) the client or an associated third party payer is not required to pay the legal costs until they have been assessed…; 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…; and (d) the contravention is capable of constituting unsatisfactory professional conduct or professional misconduct….
The primary judge considered that a contravention of the disclosure provisions in Pt 4.3, Div 3 rendered the second costs agreement legally "non-existent" and incapable of being the source of rights and obligations between the parties. [11] Support for that conclusion was found in Wentworth v Rogers at first instance, [12] and Wentworth v Rogers in this Court. [13]
Before considering the authorities, it is convenient to address the question of statutory construction. Terms such as "void", "invalid" and "null" do not deny the existence of something, whether it be a thing, an agreement or a decision. Rather, they deny the legal effect or consequences of the thing, the agreement or the decision, but usually for a purpose consistent with the statutory context. The immediate question is, therefore, whether such a characterisation denies all legal consequences, or whether the statute itself gives effect to what would otherwise have been contractual rights and obligations.
It is clear that the word "void" is not used in the Uniform Law to indicate some absolute absence of legal effect. Section 178 itself demonstrates the truth of that proposition. First, subs (2) states that where two persons are liable to pay costs and there is no disclosure to one, the liability of the other under the costs agreement will not be affected. Secondly, s 178(1) itself identifies specific consequences of contravention of the disclosure obligations, which may arise in circumstances where there is a void costs agreement, namely that the affected party is not required to pay the legal costs until they have been assessed and the law practice must not commence or maintain proceedings for recovery of any or all of the legal costs until they have been assessed. The liability of a person to pay legal costs will ordinarily be sourced in a contract. Thirdly, s 178 expressly permits disapplication or modification by the Uniform Rules.
The Legal Profession Uniform General Rules 2015 (NSW) relevantly provide: 72A Non-compliance with disclosure obligations - disapplication of section 178(1) and (2) of the Uniform Law (1) This rule applies where a law practice has contravened the disclosure obligations of Part 4.3 of the Uniform Law in relation to a particular matter. (2) Section 178(1) and (2) of the Uniform Law do not apply in relation to the law practice (so far as they would otherwise apply to the matter concerned) in circumstances where the relevant authority, a costs assessor, a court or a tribunal is satisfied that - (a) the law practice took reasonable steps to comply with the disclosure obligations of Part 4.3 of the Uniform Law before becoming aware of the contravention, and (b) the law practice, no later than 14 days after the date on which it became aware of the contravention, rectified the contravention, as far as practicable, by providing the client with the necessary information required to be disclosed under Division 3 of Part 4.3 of the Uniform Law (including, where relevant, an estimate or revised estimate of the costs), and (c) the contravention was not substantial and it would not be reasonable to expect that the client would have made a different decision in any relevant respect. (3) Subrule (2)(b) applies even though the information or estimate is not provided at the times required by the disclosure obligations of Part 4.3 of the Uniform Law.
These provisions contradict the proposition that a costs agreement is "non-existent" where there has been a failure of disclosure. First, the statutory statement that the costs agreement is, in certain circumstances, "void" is only engaged where a court or other authority considering the operation of a costs agreement, or assessing the proper amount of recoverable costs, is satisfied that the circumstances have been established. So much is expressly required by r 72A, but is implicit in s 178(1) and (2). Secondly, as was noted in argument, there is a temporal issue to be determined. Different consequences may apply where the initial disclosure is inadequate and where the initial disclosure is adequate, but there is a significant change in circumstances which requires a fresh disclosure, which is not made. In the latter case, is the costs agreement operative and effective prior to the change in circumstances, or does the failure to make a fresh disclosure in changed circumstances render the agreement void from the moment it was entered into? [14] It must also be noted that disclosure will not be contemporaneous with the creation of a costs agreement: disclosure must include information about the client's rights to negotiate a costs agreement with the law practice: s 174(2)(a).
A third matter revealed by these statutory provisions and rules is that the specific removal of the obligation to pay costs in the case of a contravention of the disclosure obligations is expressed by reference to the obligations of "the client or an associated third party payer". [15] A second law practice retained by the first practice on behalf of a client, whilst subject to separate non-disclosure obligations under s 175(2) is not the "client" and is not by the fact of that retainer alone an "associated third party payer": s 171(1) and (3). Similarly, r 72A(2) envisages a breach which may be rectified by providing the client with the necessary information required to be disclosed (presumably to the client) under Pt 4.3, Div 3. Further, r 72A(2)(c) requires that for the rule to be disapplied, the contravention must be "not substantial" as to which "it would not be reasonable to expect that the client would have made a different decision in any relevant respect".
These provisions invite a purposive approach to the understanding of the consequence of a contravention of the disclosure obligations. As stated in Pt 4.3, Div 1 of the Uniform Law (Introduction) Pt 4.3 has three specific objectives identified as follows: 169 Objectives The objectives of this Part are - (a) to ensure that clients of law practices are able to make informed choices about their legal options and the costs associated with pursuing those options; and (b) to provide that law practices must not charge more than fair and reasonable amounts for legal costs; and (c) to provide a framework for assessment of legal costs.
It is evident that the purpose of the disclosure obligations is to ensure that the client of a law practice is able to make an informed choice about available legal options and the costs associated with them. That purpose or objective is promoted by avoiding a costs agreement based on inadequate disclosure. However, it is not advanced by avoiding provisions in a costs agreement which, favourably to the client, determine when and in what circumstances costs are payable. The purpose is also not advanced by avoiding a costs agreement which requires that charges be made at a rate below that which would otherwise be identified as fair and reasonable. The latter issue does not arise in the present case, but, significantly for present purposes, the effect of inadequate disclosure is not to terminate the retainer, but to allow that the services may yet be provided (or have been provided) on the basis that the practitioner can only recover fair and reasonable costs for those services. (It is possible that a client might have other relief available in circumstances where a substantial underestimation of the likely costs of a proposed course led to the client adopting a course which would not otherwise have been pursued.)
The means by which the objectives of Pt 4.3 are pursued are set out in Div 2, titled "Legal costs generally". Section 172 provides that a law practice must not charge costs that are "more than fair and reasonable in all the circumstances": s 172(1). Section 172(2) identifies the factors to which "regard must be had" in considering whether legal costs are fair and reasonable. Those factors are, by necessary implication, matters which must be taken into account by a costs assessor undertaking a costs assessment. Section 172(3) provides that regard must also be had to whether the legal costs "conform to any applicable requirements of this Part [and] the Uniform Rules". Finally, s 172(4) reads as follows: 172 Legal costs must be fair and reasonable … (4) A costs agreement is prima facie evidence that legal costs disclosed in the agreement are fair and reasonable if - (a) the provisions of Division 3 relating to costs disclosures have been complied with; and (b) the costs agreement does not contravene, and was not entered into in contravention of, any provision of Division 4.
Division 4 deals with costs agreements and provides that a client of a law practice "has the right to require and to have a negotiated costs agreement with the law practice": s 179. Section 180(1)(c) provides that a costs agreement may be made (relevantly) between a barrister retained by a solicitor on behalf of a client, and that solicitor. Further, a costs agreement "must be written or evidenced in writing": s 180(2).
Section 181 deals with conditional costs agreements, which are costs agreements that condition the payment of some or all of the legal costs on the successful outcome of the matter to which the costs relate: s 181(1). Such agreements must also be in writing or evidenced in writing, but are subject to further constraints. Section 182 provides that a conditional costs agreement may provide for payment of an "uplift fee", but a contingency fee calculated by reference to the amount of any award or settlement or the value of any property that may be recovered in any proceeding is forbidden: s 183. The agreement between the Barrister and the Solicitor was not a "conditional costs agreement" for the purposes of s 181 or 182 and did not contravene s 183.
Of importance for present purposes are the final two provisions in Div 4: 184 Effect of costs agreement Subject to this Law, a costs agreement may be enforced in the same way as any other contract. 185 Certain costs agreements are void (1) A costs agreement that contravenes, or is entered into in contravention of, any provision of this Division is void. Note If a costs agreement is void due to a failure to comply with the disclosure obligations of this Part, the costs must be assessed before the law practice can seek to recover them (see section 178(1)). (2) A law practice is not entitled to recover any amount in excess of the amount that the law practice would have been entitled to recover if the costs agreement had not been void and must repay any excess amount received. (3) A law practice that has entered into a costs agreement in contravention of section 182 is not entitled to recover the whole or any part of the uplift fee and must repay the amount received in respect of the uplift fee to the person from whom it was received. (4) A law practice that has entered into a costs agreement in contravention of section 183 is not entitled to recover any amount in respect of the provision of legal services in the matter to which the costs agreement related and must repay any amount received in respect of those services to the person from whom it was received. (5) If a law practice does not repay an amount required by subsection (2), (3) or (4) to be repaid, the person entitled to be repaid may recover the amount from the law practice as a debt in a court of competent jurisdiction.
There are important similarities (and differences) between these provisions and s 178 (in Div 3), dealing with non-compliance with disclosure obligations. Importantly, the Barrister's submission that if the costs agreement were void for failure to comply with the disclosure obligations, he was nevertheless entitled to recover costs in circumstances in which he could not have recovered the costs had the agreement not been void, appears to be contradicted by s 185(2). The Barrister's response was that the absence of any equivalent to s 185(2) in s 178 was telling in favour of a contrary conclusion because s 185 applies only to a contravention of Div 4 and not to a contravention of s 178, which is in Div 3. That is, the unqualified avoidance of the contract pursuant to s 178(1)(a) permitted him to recover costs in circumstances where the agreement would not have permitted that.
As a matter of statutory construction, that submission should not be accepted. First, it involves reading into s 185(2) a limitation, namely that it only applies to a costs agreement which was void for non-compliance with the requirements of Div 4. While s 185(1) is concerned only with costs agreements which do not comply with Div 4, subs (2) contains no such express constraint. To imply such a constraint would tend to subvert the purpose of the legislation and introduce an element of incoherence. In accordance with s 35(a) of the Interpretation of Legislation Act 1984 (Vic), [16] the Court should adopt a construction that would promote the purpose or object underlying the Act in preference to a construction which would not promote that purpose or object. However, before turning to explain the force of a purposive construction in the present circumstances, it is convenient to identify a number of textual factors which tell against the proposed reading down of s 185(2).
First, Div 4 is concerned with the making of costs agreements, including certain conditional costs agreements, whereas Div 3 is concerned only with costs disclosure obligations. Accordingly, it is in Div 4 that one would expect to find provisions relating to costs agreements generally. Section 184 answers that description, providing that subject to the Uniform Law, a costs agreement may be enforced in the same way as any other contract. A reading of s 185(2) as applying to a costs agreement made "void" by any provision of Pt 4.3 accords with the structure of the Uniform Law.
Secondly, consistently with that construction, the note following s 185(1) refers to the effect of s 178(1). The note forms part of the legislation and is not merely extrinsic material. [17] The note explains why it was not necessary to address in subs (1) cost agreements void for non-disclosure. It also excludes the possibility that, through inadvertence, the drafter of s 185(2) intended to restrict that provision to agreements which were void because of a breach of Div 4.
Finally, with respect to the text, s 178(1) is engaged in circumstances where "a law practice contravenes the disclosure obligations of this Part". That may have an effect on a costs agreement, but the costs agreement itself does not contravene any provision of Div 3 by reason of a failure by the law practice to make proper disclosure. Section 185 identifies the costs agreement itself as that which contravenes a provision of Div 4, but, in the remainder of the section, identifies the consequences for the law practice and its entitlements including where the amount of costs recoverable exceeds the amount which would have been recoverable if "the costs agreement had not been void".
It is this last textual point which leads to the potential for incoherence implicit in the Barrister's submission.
The most general requirement of Div 4 is that the costs agreement be in writing (or evidenced in writing). That that provision was primarily intended to be protective of the client (or the payer) is demonstrated by the fact that adverse consequences for a failure to comply with that provision are visited on the law practice. A breach of s 180, imposing that requirement, does not open the law practice to a charge of unprofessional conduct or professional misconduct. By contrast, a breach of the disclosure obligations imposed on the law practice under Div 3 does expose the law practice to such disciplinary proceedings, and irrespective of whether there is a costs agreement: s 178(1)(d). Thus, while the law practice could not obtain an entitlement to costs from the avoidance of a costs agreement under Div 4, on the Barrister's construction, it could obtain such a benefit as a result of its own misconduct under Div 3. This result would involve incoherence between the effects of Div 3 and Div 4. Indeed, quite apart from s 185(2), the Court would not, in the absence of a clear expression, construe a legislative provision protective of one party to allow the party in breach of that provision to obtain a benefit from its own wrongful conduct at the expense of the protected party.
It follows that s 178(1) does not have the effect of preventing the Solicitor from defending a claim for a judgment with respect to the costs incurred by the Barrister in circumstances where cl 4 of the costs agreement would have precluded that claim had the agreement not been void. That outcome is the result of the application of s 185(2), making it unnecessary to consider whether the same outcome would result from the application to the Barrister's claim of restitutionary principles.

Setting aside the judgment

The final matter to be determined is whether, in circumstances where the Barrister had no legal entitlement to payment of the costs, there is any impediment to this Court setting aside the judgment obtained by registration of the certificate of determination of costs. Although there may be a broader power to set aside a judgment so obtained, the case was run on the basis that the Solicitor was entitled to have the judgment set aside as one given or entered "irregularly, illegally or against good faith", pursuant to UCPR, r 36.15.
There was, as senior counsel for the Barrister observed, an apparent reliance in the submissions for the Solicitor on a lack of good faith on the part of the Barrister. That inference was derived from two propositions. The first was that in the "narrative of the brief" (which appeared as Part 1 of the Barrister's application for assessment of his fees), the Barrister stated that the fairness and reasonableness of the fees should be determined "so that the [Solicitor] can confidently pay the certified fees from the proceeds of sale of trust property as mortgagee of that property and the client's trustee in bankruptcy can rely upon the certificate of determination in deciding whether or not to approve payment of any shortfall". This statement, the Solicitor submitted, acknowledged that the fees were not presently payable, and that recovery of the fees (or part thereof) depended upon a contingency, namely the Solicitor obtaining funds from the sale of the client's property under mortgage to the Solicitor or by proving a debt in the client's bankruptcy and receiving a distribution (or both).
For the Barrister then to file the certificate provided by the costs assessor, with an affidavit stating that no amount had yet been paid, was to contradict, without notice to the Solicitor, the express basis upon which the costs assessment had been sought and undertaken. The case run before the primary judge on behalf of the Barrister was that the costs assessor had found that the costs agreement was void and of no effect, and accordingly cl 4 no longer constrained recovery of the fees. Further, the costs assessor had arguably made a finding that the fees were presently due and payable, although the language used was that the Solicitor "is liable for the full amount of the costs assessed". [18]
Although the Barrister, in his affidavit in the proceedings in the Common Law Division gave no indication as to his belief as to his entitlement to immediate recovery of the amount of the fees as assessed, counsel submitted on the appeal that, in the absence of cross-examination on the affidavit, no inference should be drawn adverse to the Barrister in that regard.
To the extent that the Solicitor sought an inference that the Barrister, in registering the certificate, acted "against good faith", that inference should not be drawn. Whether that phrase is limited to a case of proven bad faith may be doubted but need not be resolved. It should be accepted that this Court should not make a finding, expressly or by implication, of actual bad faith on the part of the Barrister. The question is, therefore, whether the judgment was registered "irregularly".
In Calandra v Murden, [19] this Court considered an appeal from a decision of a single judge holding that a magistrate in the Local Court had been in error in setting aside a judgment based on a certificate of determination of costs. The reason the judgment had been set aside was that, pursuant to a deed of release, the judgment debtor had no liability to pay the costs. This Court upheld the power of the Local Court to set aside a costs judgment on that basis.
For the reasons identified above, there was no contractual entitlement on the part of the Barrister to payment by the Solicitor in circumstances where cl 4 of the costs agreement was not satisfied. It was common ground that cl 4 had not been satisfied at the date the judgment was registered. However, notwithstanding that cl 4 no longer had application as a matter of contract, it nevertheless engaged the operation of s 185(2), with the consequence that the Barrister was not entitled to recover any part of the amount certified by the costs assessor.
As in Calandra, this was not a case where there was a challenge to the validity of the certificate of determination of costs, otherwise than by exercise of the statutory right of appeal. Rather, it was a challenge to the entitlement to payment of the assessed costs where those costs would not have been recoverable if the costs agreements had not been void. In those circumstances, s 185(2) provides that the Barrister was not entitled to recover that amount. In the result, the basis for the judgment was lacking.
In Calandra, in considering the effect of the deemed judgment provided in s 368(5) of the Legal Profession Act 2004 (NSW), as then in force, the Court noted [20] that s 368(5) "provides that there is taken to be a judgment for 'the amount of unpaid costs' as distinct from the amount of the costs as assessed". The reasoning continued: "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."
As now provided by the Application Act, Pt 7, Div 2, the certificate issued by the costs assessor is to include "the amount of costs determined" and any interest on that amount: s 70(1). Section 70 then continues: 70 Certificate as to determination of costs to parties … (4) In the case of an amount of money specified in a certificate that has been paid, the amount (if any) by which the amount paid exceeds the amount specified in the certificate may be recovered as a debt in a court of competent jurisdiction. (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.
Three points may be made with respect to the current statutory scheme. First, as was held in Calandra with respect to the predecessors to the current provisions, that which was taken to be a judgment of the Court was "the amount of unpaid money", and not the "amounts specified in the certificate". The deemed judgment thus took into account any amount which had been paid in diminution of the costs assessed. Indeed, where the amount paid exceeded the costs specified in the certificate, the excess could be recovered as a debt: s 70(4). The form to be filed with the certificate required that the party filing the certificate swear an affidavit stating how much, if any, of the assessed costs had been paid. These provisions assume that there was a legal liability to pay the costs as determined by the costs assessor. Accordingly, consistently with Calandra, a judgment based upon a certificate may be set aside upon the judgment debtor demonstrating that the liability to pay costs no longer exists, or has not arisen. In such circumstances, it is appropriate to describe the judgment as having been entered "irregularly".
It may be thought unfortunate that (i) a judgment may be entered based upon a certificate when the time for filing an application for review of the certificate has not expired; (ii) there is no requirement that the judgment debtor be served with a copy of the judgment as entered, and (iii) the affidavit accompanying the filing of the certificate does not require a statement that the costs are presently due and owing.

Conclusions

It follows that the appeal must be allowed and the judgment in the Common Law Division set aside. As has been noted, immediately following the filing of the judgment, a garnishee order was obtained by the Barrister and served on a client of the Solicitor who owed the Solicitor money. In the notice of appeal, the Solicitor sought an order for restitution of moneys paid pursuant to the garnishee. In the appellant's written submissions, there was a statement that on 12 September 2022, an amount of $131,485 was paid to the Barrister pursuant to the garnishee order. In the event of success, the appellant sought an order that that amount be repaid together with interest from 12 September 2022 calculated in accordance with s 101 of the Civil Procedure Act 2005 (NSW). The Barrister accepted that he received that amount on 14 September 2022. [21]
In fact, the interest is payable pursuant to s 100, being interest up to the date of judgment. That will be calculated at the rate of 4.85% from 15 September until 31 December 2022 and thereafter at the rate of 7.10% until the date of this judgment. Interest calculated accordingly is $5,040.95 (to 5 May 2023), giving a total reimbursement of $136,525.95.

Orders

The Court should make the following orders: 1. Allow the appeal and set aside the judgment delivered on 29 June 2022 in the Common Law Division and the orders entered on 12 September 2022. 2. In place thereof: 1. set aside the judgment entered in favour of the plaintiff on 19 February 2021; and 2. order that the plaintiff (Christopher Bevan) pay the costs of the defendant (John David Bingham) of the proceedings on the notice of motion of 30 March 2021. 1. 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. 2. Order that the respondent pay the appellant's costs of the proceedings in this Court.

Endnotes

Bevan v Bingham [2022] NSWSC 863 (Walton J).
Boensch v Pascoe [2019] HCA Trans 133.
Affidavit, 19 April 2021, par 11.
The intervening three months involved procedural negotiations with the costs assessor as to preliminary issues.
See fn 1 above.
Bevan v Bingham at [74], [92], [95], [99].
Statement of reasons, 9 December 2020, par 4 (last sentence).
Statement of reasons, par 4 at p 3.8.
Written submissions for respondent, 1 April 2023, par 39.
Birketu v Castagnet [2022] NSWSC 1435 at [16] (Brereton JA).
Bevan v Bingham [97]-[99].
[2002] NSWSC 709 at [19], [25], [29]. (Barrett J).
(2006) 66 NSWLR 474; [2006] NSWCA 145 at [33] (Santow JA, Hislop J agreeing at [215]).
See Wills v Woolworths Group Ltd [2022] FCA 1545 at [28]-[31] (Beach J).
Section 178(1)(b) and (2).
Applied by s 7(1) of the Uniform Law to the exclusion of the Interpretation Act 1987 (NSW): Application Act, s 5(1)(a).
Interpretation of Legislation Act 1984 (Vic), s 36(2A)(b), (c); Uniform Law, s 6(6).
Costs assessor, statement of reasons, par 12.
[2015] NSWCA 231 (Beazley P, Meagher JA and Leeming JA).
Calandra at [19].
Respondent's chronology, filed 1 April 2023. 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: 05 May 2023

Legal Profession Act 2004(NSW)

At a glance

Court

Decision date

Before

Source

Judgment (11 paragraphs)

Parties

Legislation Cited (7)

Cases Cited (7)

Cited By (8)