[2023] NSWCA 86
Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432
[2019] HCA 25
Re Minister for Immigration and Ethnic Affairs
ex parte Lai Qin (1997) 186 CLR 622
[1997] HCA 6
State of Victoria v Sutton (1998) 195 CLR 291
Source
Original judgment source is linked above.
Catchwords
[2023] NSWCA 86
Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432[2019] HCA 25
Re Minister for Immigration and Ethnic Affairsex parte Lai Qin (1997) 186 CLR 622[1997] HCA 6
State of Victoria v Sutton (1998) 195 CLR 291
Judgment (5 paragraphs)
[1]
JUDGMENT
HIS HONOUR: The law has been described as "an ass". The resolution of some justiciable controversies exemplifies that description better than others.
The controversy between the parties has a very long history and concerns costs. The plaintiff, Mr John David Bingham (hereinafter "the Solicitor"), is a Solicitor. The Solicitor briefed the defendant, Mr Christopher Bevan (hereinafter "the Barrister").
On 16 September 2019, the Solicitor entered into a Costs Agreement with Evangelina Kessly (hereinafter "the Client") and the Barrister, whom the Solicitor engaged as Counsel to appear for the Client.
It was an express term of the Costs Agreement that the Solicitor would only become liable for the Barrister's fees once the Solicitor was put into the necessary funds by the Client.
On 29 July 2020, the Barrister filed an application for costs assessment. Costs Certificates were initially issued in November 2020, and on 10 December 2020, the Barrister sought a review of those Costs Certificates.
As a result of the review, two Certificates of Determination of the Barrister's costs were issued on 16 April 2021. Those Certificates of Determination are central to the issue between the parties now before the Court.
The Barrister again sought to challenge the Costs Certificates. The latest challenge was in this Court, and the proceedings were dismissed.
On 9 February 2023, the Barrister notified the Solicitor that he intended to register the Costs Certificates as judgments of the Court for enforcement against the Solicitor.
On 14 February 2023, the Solicitor obtained an interim injunction, restraining the Barrister from taking further action.
On 17 February 2023, the Solicitor filed a Statement of Claim seeking final declarations.
On 16 March 2023, the Barrister filed a Defence.
Relevantly, and concurrently with this matter, a related and similar matter proceeded between the Solicitor and the Barrister regarding costs in another matter in which the client was a Mr Boensch (hereinafter "the Boensch matter").
In relation to the Boensch matter, Walton J of this Court had given Judgment on 12 September 2022, affirming the Barrister's right to register his Costs Certificate. The Solicitor appealed the judgment, and the Court of Appeal upheld the Appeal on 5 May 2023. The Court of Appeal delivered its judgment after the commencement of the proceedings now before the Court.
The Barrister applied for Special Leave to appeal the Judgment of the Court of Appeal to the High Court. Leave was refused on 7 September 2023.
Because of the result of the proceedings, and the determination of the principles associated with the same or almost identical Costs Agreements, many issues otherwise contentious in the Boensch matter were resolved by agreement in the matter now before the Court.
Open offers have been made in which the Barrister, in effect, consented to declaratory relief being granted. The only dispute between the parties was the issue of costs and the terms of the appropriate orders. The issue of the costs order needs more explanation. Further, since the original drafting of these reasons, the Solicitor has received funds from the Client, which has significantly altered the prayers for relief.
The Costs Agreement between the Barrister and Solicitor has two clauses that require reciting, being clauses 4 and 7. They are in the following terms:
"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…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.
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,…, expeditiously, irrespective of the outcome of the proceedings which are the subject of this costs agreement and the Brief." [1]
After an initial costs assessment, a Review Panel determined that neither the Barrister's nor the Solicitor's conduct was in accordance with the Legal Profession Uniform Law Application Act 2014 (NSW). The reason for non-compliance is currently irrelevant.
As a consequence, the Review Panel assessed the costs owing on the basis of that which was fair and reasonable in all the circumstances. [2]
In the Boensch matter, at first instance, the Court registered the Costs Certificates and, pursuant to the legislation, the Costs Certificates became Judgments of the Court.
On appeal, the Court of Appeal determined that the provisions of the Legal Profession Uniform Law (NSW) did not render the Costs Agreement void for all purposes under s 178(1)(a) of the statute, and that the provisions of s 185(2) of the relevant statute disentitled a practitioner from recovering an amount in excess of the amount it would have been entitled to recover if the Costs Agreement had not been void.
Consequently, the Court of Appeal determined that, because the Costs Agreement did not entitle the Barrister to recover costs from the Solicitor until the Solicitor had received funds from the Client, the Barrister could not obtain Judgment for that which was the subject of the Costs Certificate until such time as the Solicitor had received said funds from the Client. [3]
The Court, as presently constituted, is bound by the determination of the Court of Appeal, which has construed the provisions of s 185 of the Legal Profession Uniform Law to apply not only to the amount that may be owing but also to the conditions upon which payment would otherwise be made. As earlier stated, Special Leave to appeal that Judgment was refused.
[2]
Evidence
The plaintiff relies on the evidence contained in the affidavit of John Bingham of 10 February 2023. As previously stated, Mr Bingham is the Solicitor and plaintiff in the proceedings. The affidavit outlines the entry into the Costs Agreement as particularised in the Statement of Claim, as well as the procedural history that has been summarised above in these reasons.
The Solicitor, in his affidavit, testifies that he has not yet been put into funds by the Client. He has requested the payment of funds pursuant to the certificates.
On 6 August 2024, the Solicitor informed the Court that the Client (or the Trustee in Bankruptcy) had paid funds to the Solicitor.
The defendant relies upon three affidavits of Christopher Bevan dated 16 June 2023, 27 July 2023, and 18 September 2023. The first two affidavits set out the procedural history of the matter and the Barrister's identification of the facts, which, at the time of the affidavits, were sworn, the Barrister believed supported his defence.
In the affidavit of 18 September 2023, which followed the refusal of Special Leave by the High Court, the Barrister deposes that, prior to the refusal of Special Leave, he believed that he had a right to register what he calls "the principal Kessly certificate" for his fees as well as the "subsidiary Kessly certificate", for the amount paid by the Barrister to the manager of the costs assessment against the Solicitor.
The Barrister, in his affidavit, justifies the view held on the basis that, in the Boensch matter, Walton J had dismissed an application by the Solicitor seeking the same relief which was sought in this matter over a Costs Agreement which was in the same terms. The Court of Appeal reversed the Judgment of Walton J in the Boensch matter on 5 May 2023, which was after Garling J had granted the interim injunction in this matter.
The Barrister filed his application for Special Leave in respect of the Judgment of the Court of Appeal on 7 August 2023 and that request was denied on 7 September 2023.
On 12 September 2023, the Barrister, through his solicitors, wrote to the Solicitor's solicitor, indicating that in light of the High Court's decision, he would like to resolve these proceedings. An open offer was made with proposed orders to dispose of the proceedings.
The open offer was the catalyst for an exchange of communication between the parties in which the Barrister sought to "refine" the declaratory orders sought. The only issues that then remained were the terms of the orders to be made and the issue of costs.
[3]
Submissions
The Solicitor submits that the two Costs Certificates, which are currently the subject of dispute, must each be dealt with separately. As to the first certificate issued for the Barrister's fees, the Solicitor says that the Barrister was not entitled to payment of the fees and would not be until such time as the Solicitor is put into funds by the Client. The Solicitor relies on the Court of Appeal Judgment in the Boensch matter to that effect.
As to the second certificate, with respect to the approximately $2,000 paid by the Barrister to the Costs Assessment Review Panel, the Solicitor says that the Barrister is not entitled to register that certificate. The Solicitor says that the certificate is only registerable by the manager of Costs Assessments and relies on the provisions of s 71 of the Legal Profession Uniform Law Application Act 2014 (NSW) and s 133(2) of the Civil Procedure Act 2005 (NSW) together with the Uniform Civil Procedure Rules 2005 (NSW) (hereinafter "UCPR") and, in particular, UCPR rule 36.10.
The Solicitor, therefore, submitted at the time of the hearing that the Court should make the declaratory relief sought in the Statement of Claim.
The Barrister submits that he is, subject to some wording changes, content for the orders in Prayer 1 to be granted. The proposed changes relate to funds received not only from the Client, but also paid on her behalf.
The Barrister submits that these changes are necessary to reflect properly the effect of s 185 of the Legal Profession Uniform Law and the Judgment of the Court of Appeal. As to Prayer 2, the Barrister formally abandons his right to seek reimbursement of that amount entirely. The Barrister proposes that the orders made by the Court reflect that undertaking and submits that he accepts that it would be against the provisions of the Civil Procedure Act for him to pursue the Solicitor for a de minimis debt in a superior Court.
As to costs, the Barrister submits that there should be no order as to costs. He states that he has acted reasonably at all times, including promptly conceding the plaintiff's rights following the High Court's refusal of Special Leave. The Barrister relies upon the decision in the Minister for Immigration; ex parte Lai Qin [4] , to the effect that in the absence of a hearing on the merits, the Court should not embark on a hypothetical trial to determine the issue of costs, and if it appears that both parties have acted reasonably, no order as to costs should be made.
In reply, the Solicitor does not accept the additional wording in the orders proposed by the Barrister as being either necessary or appropriate. The Solicitor submits that the effect of Prayer 1 is directed towards the act of registering the Costs Agreement, and that the issue of part payments is not an issue in these proceedings.
As to Prayer 2, the Solicitor submits that the Barrister's proposed undertaking "seems disingenuous". If the Barrister perceives that he has a cause of action open to him, even in respect of any de minimis debt, he would take proceedings to recover it. It is not absolutely clear from the reply whether the Solicitor accepts the written abandonment or seeks the Court to make the order in Prayer 2.
As to costs, the Solicitor submits that the Barrister initially defended the proceedings and has now capitulated. As a consequence, he relies upon the usual authorities but, in particular, the Commonwealth v Gretton [5] to the effect that the Barrister was resisting a claim to which the Solicitor was entitled and, as such, the Barrister should bear the Solicitor's costs.
[4]
Consideration
The issues in these proceedings (and in the Boensch matter) arise as a consequence of the bankruptcy of the Client. It is likely that the Solicitor will be fully "put into funds" to some, albeit possibly minor, effect.
Leaving aside for present purposes the effect of legislation on the Costs Agreements between the parties, Costs Agreements give rise to contractual obligations.
The Court of Appeal stated that the provisions of s 185 of the statute prevented the Barrister from registering a judgment or obtaining a judgment for the whole of the amount owing in circumstances where the condition on payment had not been fulfilled. There is an obvious issue as to the effect of that limitation.
The provisions of clause 4 and clause 7 are recited above. As is clear from the extract, the Solicitor's obligations are personal and are not as agent of the Client. Nevertheless, the Solicitor's liability is conditional, and the Solicitor "will only be liable for the Barrister's fees…to the extent that one…of…the parties has put into the necessary funds".
In other words, the obligation to pay is personal to the Solicitor, and the Solicitor is required to pay as, and when, the Solicitor is put into funds by the Client (or the respondent in the briefed proceedings). The liability does not arise only at the point that the Solicitor is in receipt of sufficient funds to pay all of the fees of the Barrister. Rather, the Solicitor is required to pay, from time to time, on receipt of the funds, referrable to the Barrister's fees.
Neither party has sought to agitate before the Court the circumstance that would apply if an amount were paid to the Solicitor and the amount was referrable to an invoice from the Solicitor that sought payment of fees payable to both the Solicitor and Barrister.
The form of the order referrable to in Prayer 1 is a declaration that the defendant has no entitlement to register the Certificate of Determination as a Judgment until the plaintiff is put into funds and, at least by implication, suggests "sufficient funds". There can be little doubt that the entitlement of the Barrister under the Certificate of Determination of Review of 22 April 2021 to the full amount of over $220,000 does not exist until the amount has been paid into the Solicitor's account to cover the debt.
The difficulty is that the amount now owed, or which will be owed, no longer arises under contract. Rather, the condition precedent to the liability to pay the Barrister's fees applies to the Solicitor, on the view expressed by the Court of Appeal, as a result of the application of s 185 and not as a result of the contractual obligation and/or limitation on any contractual obligation. Technically, there is no contractual obligation to pay any amount as a result of the effect of the legislative scheme.
Nevertheless, as the Court of Appeal made clear, the description of a Costs Agreement in circumstances where there has been no or insufficient disclosure as "void" does not render the Costs Agreement void for all purposes, as if it never existed. As the terms of s 178(1)(b) and (c) make clear, the Costs Agreement is enforceable even though void up to and including the amount that has been assessed fair and reasonable.
On the other hand, if the Costs Certificate is registered as a Judgment of the Court, it is enforceable as a Judgment and does not depend upon contractual obligations. The term "void" was referred to by Windeyer J as a word that "has never been an easy word" and commented that the use of the term does not necessarily mean that which is described as "void" has no legal effect. [6] The Judgment of Basten AJ in Bingham v Bevan, supra, is to the same effect.
As a consequence, the Solicitor as the obligor is under a continuing obligation to the obligee, the Barrister, to pay that which is due and payable under the Costs Agreement, as, and when the Solicitor is "put into funds" in relation to the fees owing and to the extent that such funds are not greater than which has been certified as fair and reasonable. The law of contracts, it has been said, relates to the source of obligations, the basic principle of which is that the law of contracts seeks to enforce a promise to another in certain circumstances, e.g., under seal or with consideration.
I have little doubt that, if or when the Solicitor were "put into funds" in relation to the Barrister's fees, the Solicitor would pay the amount to the Barrister. This is the obligation, subject to the statutory regime, to which he obliged himself. [7]
On the other hand, a declaration of the kind sought by the Solicitor would require, in its terms, that the Solicitor receive the entirety of the amount under the Certificate of Determination of Review before the Barrister could register the Certificate of Determination of Review. The difficulty with altering the provision is that a Certificate of Determination of Review (or a Costs Certificate), once registered, is a Judgment of the Court and, as earlier stated, can be enforced as such.
The Costs Certificate does not seem to allow for registration of an amount less than that which has been certified. Further, once the Certificate of Determination of Review, or any Costs Certificate is registered, the amount certified therein, which forms part of the Judgment, creates a situation where any amount owing or debt would merge in the Judgment. This creates difficulties.
First, it means that the Barrister cannot register the Certificate of Determination of Review in parts. Secondly, it means subject to the view that the statutory regime in describing the Costs Agreement as "void" does not have the effect of disentitling a legal practitioner from suing under the Costs Agreement up to the amount certified as fair and reasonable. The latter construction seems to accord best with the purpose of the legislation and harmonious operation of s 185 of the Legal Profession Uniform Act with the other provisions of the statute.
The Barrister did not oppose the making of a declaration. The Barrister opposes a declaration in the form proposed. In those circumstances, a declaration would have been issued, but not in the terms proposed for the reasons already outlined. However, as explained, the Solicitor is now "in funds" and does not, after 6 August 2024, seek the first declaration.
I turn to the issues associated with Prayer 2. The Barrister suggests that the amount owing of $2,000 is de minimis. For the Barrister and the Solicitor, compared to the $220,000 otherwise owing, this may be so.
It is difficult to suggest that $2,000 is de minimis in any other sense. Nevertheless, the Barrister has warranted that he would "waive" or "withdraw" the claim. It is a claim for the fees paid by the Barrister to the Costs Assessor on behalf of the Solicitor. The Solicitor describes the "waiver" or "warranty" as "disingenuous".
While I accept that the attitude of the Barrister may be arrived at reluctantly, the Court is not prepared to suggest that the Barrister would do otherwise than abide by the waiver or warranty proffered. The Barrister is an officer of the Court.
Nothing in these proceedings has suggested that either the Barrister or the Solicitor is unaware of their obligations to the Court as officers of the Court. The second declaration will not be made.
The last issue is the question of costs. Costs are not a punishment. Costs are intended to be compensation for the expense of enforcing one's rights or defending one's rights.
In this case, there is significant agreement. The proceedings commenced with a controversy as to the law, but because of the history of the Boensch matter, the legal controversies dissipated. It cannot be said that either party behaved unreasonably. Nevertheless, the Solicitor has sought to enforce rights and has expended money in the process.
The Court has a wide discretion in relation to costs. Ordinarily, costs will follow the event. Where a matter is settled, the Court does not engage in a mini trial to determine who would have won or where the merits of the proceedings lie. At the same time, when a party capitulates on the claim, then there is good reason to award costs to follow the event, being the result of the proceedings. [8]
The proper exercise of the discretion reposed in the Court requires an analysis of the facts of a particular case. The circumstances that have given rise to a plaintiff abandoning its proceedings or to a defendant capitulating in relation to orders need to be examined, and the discretion of the Court needs to reflect the compensatory principle, the overriding purpose of the Civil Procedure Act and, to the extent not otherwise covered, justice between the parties. [9]
The Court, prior to 6 August 2024, was intending to amend the terms of the declarations sought and do so to take account of the issues raised by the Barrister. If those circumstances were to have prevailed, the Solicitor would have largely succeeded in the declaration initially sought. However, the initial proceedings were, in the view of the Court, unnecessary.
Once the Certificate of Determination had been issued, the Solicitor could have resisted any attempt to register the Certificate of Determination of Review and/or Costs Certificate on the basis of the law as ultimately determined. Instead, the Solicitor obtained interlocutory injunctions preventing the registration of the Costs Certificate and instituted the proceedings for declarations.
It is unfortunate that the liability to pay costs and/or the amount of them has resulted in the amount of litigation that has transpired both in these proceedings and the Boensch matter. To some extent, at least, litigation about costs is like a dog chasing its tail - it may be never ending and rarely brings about a result with which either party is satisfied.
Assuming that the Solicitor was entitled to commence the proceedings in the way that he did, by the time the matter came for hearing before the Court as presently constituted, the need for the proceedings to insist upon the declaration in the terms sought was certainly unnecessary. The Court could, were it so minded, have divided the costs between the earlier costs and the costs of the hearing.
Since 6 August 2024, as noted earlier, the Solicitor no longer seeks the first declaration. Such is a sensible and appropriate approach. I continue to hold the view that there should be no order for costs.
For the foregoing reasons, the Court makes the following orders:
1. The Court notes that, by an undertaking given through his solicitor to the Court, the defendant will not register the Certificate of Determination of Review dated 22 April 2021 in the amount of $2,100.45, relating to the costs of the Review Panel, or otherwise pursue the amount of that Certificate against the plaintiff;
2. The Summons is otherwise dismissed;
3. Each party shall bear their own costs.
[5]
Endnotes
Costs Agreement, Ex CB1, p 21-22.
Legal Profession Uniform Law (NSW), s 172(1).
Bingham v Bevan (2023) 111 NSWLR 287; [2023] NSWCA 86 (Basten AJA, Meagher and White JJA agreeing)
Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 (McHugh J).
Commonwealth v Gretton [2008] NSWCA 117
Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432 at 459; cited in the State of Victoria v Sutton (1998) 195 CLR 291; [1998] HCA 56 at [38].
Moschi v Lep Air Services Ltd [1973] AC 331 at 346-7, per Lord Diplock.
Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 625; [1997] HCA 6; Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25 at [25].
Nadilo v Eagleton [2021] NSWCA 232; Calokerinos, Executor of the Estate of the late George Sclavos v Aantcorp Pty Ltd [2023] NSWSC 148 (Robb J).
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Decision last updated: 20 August 2024