Coshott v Commonwealth Bank of Australia

Primary judge's reasons

1. The primary judge gave two independent reasons for summarily dismissing the proceedings exercising his discretion pursuant to UCPR, r 13.4 on the grounds that the summons did not disclose a reasonable cause of action and was doomed to fail. First, the declaration sought was contrary to the common law of Australia, referring to Bell. Second, the declaration only raised a hypothetical or academic question such that the Court would never exercise its discretion to grant declaratory relief.
2. As to the first reason, the dispositive reasoning is summarised at J [37]: [37] Having regard to the foregoing analysis of Bell, the Court accepts the Bank's submissions that the declaration sought by the plaintiffs would never be made and the summons is bound to fail for three reasons: (1) It is part of the ratio decidendi of Bell that the abolition of the Exception leaves the entitlement to Employed Solicitor Costs as part of the law of Australia; (2) If the preceding conclusion is wrong, then this Court is nevertheless bound by those parts of the decision in Bell which discuss the continued entitlement to Employed Solicitor Costs as seriously considered dicta of a majority of the High Court; and (3) Assuming in favour of the plaintiffs that the issue that they actually wish to address is how Employed Solicitor Costs are to be assessed, then the Declaration does not invite an answer to that question.
3. His Honour said of (1) and (2), at J [40]-[43]: [40] It is apparent from the analysis of Bell set out above, that in reaching their conclusion that the Exception should not be part of the common law of Australia, five judges of the High Court (the plurality and Gageler J) expressly considered and approved as a necessary step in reaching that conclusion the proposition that abolition of the Exception would have no effect upon the entitlement to Employed Solicitor Costs. This might also be put as the proposition that the abolition of the Exception did not mean or require that the entitlement to Employed Solicitor Costs was also abolished. [41] However it might be expressed, having regard to the definition of ratio decidendi set out in the paragraph [39] above, it is clear that the continuation of the existence of the entitlement to Employed Solicitor Costs is part of the ratio decidendi of Bell and binding on all courts in Australia. The Declaration is therefore contrary to the common law of Australia and would never be made. [42] It follows, and insofar as it may be necessary the Court finds, that the law in this State remains as set out in the decision of Davies A-J (as it happens, concerning the Bank) in Commonwealth Bank of Australia v Hattersley [2001] NSWSC 60; (2001) 51 NSWLR 333. It is sufficient to quote the headnote that "Corporate employed solicitors are entitled to have their costs assessed on the same basis as that of independent solicitors exercising comparable skills in the performance of comparable work". [43] Second, if the conclusion expressed in the preceding two paragraphs is wrong, I alternatively determine that this Court is bound by the conclusion of five of the seven judges of the High Court that Employed Solicitor Costs continue to be recoverable despite the abolition of the Exception as "seriously considered dicta" by a majority of that Court and therefore binding on this Court: Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 at [134] and [158]. [44] I should add that either of the conclusions I have just expressed means that this is not an example of a case where the claim should be permitted to continue because while a single judge may be bound to rule against it, it would be open to a higher court to find otherwise. On the view that I have taken of Bell, the Court of Appeal is also bound and, given the detailed consideration by the High Court, it is fanciful to think that Court would depart from its conclusions on Employed Solicitor Costs were special leave to be granted for an appeal from the Court of Appeal.
4. As to (3), his Honour said at [45]-[47]: [45] Finally, if I correctly understand the plaintiffs' argument set out in paragraphs [28] and [29] above to be that the issue which the plaintiffs in fact wish to agitate is how, after Bell, Employed Solicitor Costs are to be assessed or calculated, then I do not see how proceedings for the Declaration will give rise to a determination of that issue. There are at least two reasons for this. [46] First, argument about how Employed Solicitor Costs are to be assessed necessarily assumes an entitlement to such costs. That assumption is contrary to the terms of the Declaration. [47] Second, the plaintiffs have not demonstrated, and I cannot see how it could be so in any event, how these proceedings could be the vehicle for determining - directly or incidentally - how such costs are to be assessed or calculated. As the plaintiffs' submissions accept, there has been no assessment of those costs. Nor have they demonstrated how, after all this time, any such assessment could occur. There is no evidence that the Bank or anyone else is about to precipitate anything that would require such an assessment and, by reason of the Bank's Undertaking, there is clear evidence to the contrary in relation to Mrs Coshott.
5. As to the second reason, the dispositive reasoning is contained at J [55] - [58]: [55] The Court accepts the Bank's submissions in relation to both plaintiffs. The Coshotts do not have the requisite interest in the determination of the question posed by the Declaration. As a corollary, the Declaration raises a purely hypothetical or academic question. The Court is therefore satisfied to the standard of certainty required for summary dismissal, that even if it reflected the law (which the Court does not accept), the Declaration would never be made. [56] Before turning to the plaintiffs' specific submissions, there are two general reasons why the Court has reached this conclusion. [57] First, the plaintiffs' submissions in answer to the Bank's arguments of lack of standing and hypotheticality have an overwhelming quality of unreality and speculation. If the Bank or someone else (most likely the Trustee or his successor) was in fact taking, or had even just threatened, steps of any kind against either of the plaintiffs that would require determination of the Declaration, the plaintiffs would undoubtedly have filed evidence about it. The fact that they have not filed any such evidence is the primary basis on which the Court finds that there is no actual extant controversy, or even a foreseeable prospect of such a controversy, relating to either of the plaintiffs that is required to be quelled by the making of the Declaration. That conclusion is also supported by the lack of any consequential relief in the summons; that only the Bank and not, for example, the Trustee or his successor is joined; and, that nearly five years have passed since Mr Coshott's discharge from bankruptcy. In relation to Mrs Coshott that finding is also made in reliance on the Bank's Undertaking. [58] Second, what I have said in paragraphs [45] to [47] above applies equally to this part of the argument as reasons why the Declaration would never be made, even if the plaintiffs had standing and the question was not hypothetical.
6. His Honour then addressed and rejected various arguments advanced by the Coshotts as to why there is nothing hypothetical about the "resolution of the legal dispute between the parties in this case". As the Coshotts repeat these arguments on the present application, it is convenient to reproduce his Honour's reasons at J [60]-[61] and [64]-[67]: [60] … As I have already said, the difficulty for the plaintiffs is that they have advanced no evidence of any extant legal dispute between them and the Bank which requires resolution, let alone a resolution which will be achieved by making the Declaration. [61] In paragraph 27 of their submissions, the plaintiffs then referred to "The question as to the appropriate legal basis upon which the [Bank] can quantify the debt of the Plaintiffs' owed jointly and severally to it pursuant to extant orders of the District Court and Court of Appeal, which have not been compromised or otherwise discharged, are obviously not purely hypothetical". Again, however, there is no basis on which the Court can conclude as a matter of fact that the Bank or anyone else wants to, or needs to, quantify the debt of the plaintiffs in the way they suggest so as to create a legally cognisable dispute. … [64] In relation to Mrs Coshott, the plaintiffs submitted (plaintiffs' submissions, paragraph 30) that "the consequences of the appropriate legal method for the quantification of the Court orders provides the basis for indebtedness to the [Bank]. Regardless of whether steps are taken to enforce that debt, it will hang over her and remain an obligation imposed on her by a court order". She was thereby said still to have an interest. I accept that the Bank's Undertaking is complete answer to this submission. Furthermore, these proceedings do not challenge either the "basis for indebtedness" or the "court order" in question. [65] Next, the plaintiffs submitted that what they referred to in paragraph 31 of their submissions as "the clarification of the legal basis for the debt" would be necessary for any later claim by Mr Coshott's trustee in bankruptcy against Mrs Coshott, based on her joint indebtedness to the Bank. This argument does not demonstrate any sufficient legal interest in the Declaration or lack of hypotheticality when there is no evidence that any claim by the Trustee or his successor against Mrs Coshott is in contemplation or even likely. [66] Finally, the plaintiffs referred in paragraphs 32 and 33 of their submissions to the desirability of the "correction" of the basis of the claim submitted by the Bank to the Trustee which remains unsatisfied from Mr Coshott's bankrupt estate both as a matter as between the Bank and Mr Coshott, and in relation to the subsequent entitlement of Mr Coshott to any residue from his bankrupt estate after the declaration and payment of dividends to his creditors. However, again, there is no evidence concerning the administration of Mr Coshott's bankrupt estate including whether or not a dividend has been declared and whether or not the debts remain unsatisfied. [67] For these reasons, the Court concludes that even if the Declaration represented the law, the plaintiffs have failed to demonstrate a legally cognisable interest in its resolution which rises above academic or theoretical, or that the Declaration is required to quell a legal controversy that is actual or in prospect. The Declaration is hypothetical, such that in accordance with the principles set out in paragraph [49] above, it is not a declaration which in the exercise of its discretion the Court would ever make.

Leave to appeal

1. Only if the decision is attended with sufficient doubt to warrant its reconsideration on appeal will leave be granted. Ordinarily, it is only appropriate to grant leave where there is an issue of principle, a question of general public importance, or an injustice which is reasonably clear, in the sense of going beyond what is merely arguable. It is not sufficient merely to show that the trial judge was arguably wrong: Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206 at [28], citing among others, Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 at [46]; Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164 at [32].
2. In the present case, the proposed appeal raises no issue of principle or question of general public importance. The question determined by Kunc J was whether he should exercise his discretion to dismiss the proceedings under UCPR, r 13.4. The order of Kunc J was interlocutory, and as explained in Macatangay v State of New South Wales (No 2) at [11]: It was not final in legal effect because there was no triable issue, and it did not finally determine the rights of the parties or create res judicata estoppel.
3. The sole ground of appeal challenging that order is: The primary judge erred in summarily dismissing the proceedings on the ground that it was doomed to fail.
4. That ground as expressed does not identify any error.
5. The Coshotts' written submissions asserted that the primary judge made three errors: first, that his Honour incorrectly interpreted the declaration sought; second, that his Honour erred in finding that the decision in Bell entitled a corporation to recover under a party / party costs order for work done by in-house lawyers and staff in the conduct of litigation; third, that his Honour erred in finding that the question sought to be determined by the declaration was hypothetical.

The terms of the declaration

1. The first asserted error involves a misreading by the Coshotts of the declaration sought. As the Coshotts submitted in writing (par 6), the declaration seeks an answer to the question as to whether the Bank "is entitled under the party / party costs orders to recover professional legal costs for work performed by its in-house (employed) lawyers and staff" [emphasis added]. His Honour did not misinterpret the declaration.
2. In oral argument, Mr Coshott complained that his Honour had misunderstood the declaration as also raising an argument about how employed solicitor costs are to be assessed or calculated, which his Honour addressed at J [45]-[47] (see [21] above). I do not agree. The assessment or calculation argument was directly raised by the Coshotts' submissions below at pars 15 and 18, where it was argued that Bell has changed the way in which self-represented parties can claim costs for work done by lawyers employed by them.

Bell

1. As to the second asserted error, whether or not the remarks in the joint judgment in Bell at [50] and Gageler J at [68] (see [14] and [15] above) are properly read as part of the ratio or constituted seriously considered dicta of the High Court binding on his Honour and any intermediate appeal court, the primary judge was not arguably wrong in finding that the terms of the declaration sought were contrary to law. Nothing in Bell casts doubt on the entitlement of a party using an employed solicitor to recover costs under a party / party costs order.

The declaration was hypothetical

1. As to the third asserted error that the declaration sought is hypothetical, the Coshotts have not established any injustice. As indicated this was an independent reason for his Honour's decision.
2. Counsel for the Bank emphasised that there was no challenge to his Honour's factual finding at J [57] that there is no actual extant controversy, or even a foreseeable prospect of such a controversy, relating to either of the Coshotts that is required to be quelled by the making of the declaration. Given that unchallenged finding, there is no injustice to the Coshotts in dismissing the proceedings on the basis that the declaration is hypothetical: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581-582; [1992] HCA 10; JN Taylor Holdings Ltd (in liq) v Bond (1993) 59 SASR 432 at 466 (King CJ).
3. In their written submissions (pars 16-23), the Coshotts repeated their submissions advanced below that the declaration sought is not hypothetical. Each of those matters was answered by his Honour's reasons at J [60]-[61] and [64]-[67], which are set out above at [23]. None of the reasons given by his Honour for rejecting the Coshotts' submissions have been shown to be arguably wrong.
4. I would add the following observations in relation to the individual positions of Ms Coshott and Mr Coshott.
5. As to Ms Coshott, the declaration sought did not challenge the basis for liability or the costs orders made by the District Court and this Court. What was sought to be impugned was the quantum of that liability, which is contingent on an assessment of the costs orders. Given that the Bank has not taken any step with respect to assessment of the costs orders and has also given an undertaking not to enforce the costs orders against Ms Coshott, the declaration is hypothetical.
6. As to Mr Coshott, there is no challenge to his Honour's finding concerning the combined effect of the discharge from his bankruptcy by operation of law under the Bankruptcy Act 1966 (Cth), ss 149 and 149A, and the costs orders being provable debts in his bankruptcy (with no revocation of the trustee's decision or appeal from the decision of Rares J): J [51(5)], [55]. Given that Mr Coshott was released from the debts created by the costs order by operation of s 153 of the Bankruptcy Act again the declaration is hypothetical.
7. One further matter should be mentioned relating to Mr Coshott's position. The primary judge did not find it necessary to address the Bank's additional submission that there is an issue estoppel or an Anshun estoppel arising from the dismissal by the Federal Court of Mr Coshott's challenge to the trustee's decision to admit the Bank's proof of debt for costs in the sum of $201,529.19.
8. As to issue estoppel, the judicial decision of Rares J dismissing Mr Coshott's challenge to the decision of his trustee-in-bankruptcy to partially admit the Bank's proof of debt based on the costs orders was final and the parties to that decision, Mr Coshott and the Bank, are the same persons as the parties to the declaratory proceedings in which the estoppel is raised: Ekes v Commonwealth Bank of Australia [2014] NSWCA 336 at [110] (Bathurst CJ).
9. Prima facie, there is no injustice in not permitting Mr Coshott to make a collateral attack in the Supreme Court on the final decision of Rares J in the Federal Court. Not having appealed against the decision of Rares J, the quantum of Mr Coshott's liability to the Bank under the costs orders is established for the purposes of the administration of his bankrupt estate. The declaration sought below would directly conflict with the decision of Rares J. However, it is not necessary to express any concluded view on the question of issue estoppel as this point was not relied upon by the Bank in this Court by way of a foreshadowed notice of contention.
10. I conclude that leave to appeal should be refused.

Costs

1. As to costs, the Bank did not seek any order for costs of the summons for leave to appeal. The position taken by the Bank reflects a generous attitude in dealing with the Coshotts as litigants in person; it was also consistent with the approach of the Bank in giving Ms Coshott the undertaking referred to above not to enforce the costs orders.

Notice of appeal

1. UCPR, r 51.41 provides: 51.41 Objections to competency of appeal (cf SCR Part 51, rule 25) (1) A respondent who objects to the competency of an appeal must, by notice of motion filed and served on all other parties to the appeal within 28 days after service on the respondent of the notice of appeal, apply to the Court for an order dismissing the appeal as incompetent. (2) If the respondent fails to comply with subrule (1) and the appeal is nevertheless dismissed as incompetent - (a) the respondent is not entitled to costs of the appeal unless the Court otherwise orders, and (b) the Court may order the respondent to pay the appellant any costs of the appeal proving useless or unnecessary.
2. Given that leave to appeal is required and should be refused, the purported appeal is incompetent and should be dismissed on that basis.

Costs

1. As to costs of the appeal, the Bank's objection to the competency of the appeal by notice of motion filed 9 October 2020 was not made within 28 days after service on the Bank of the notice of appeal. In these circumstances the Bank is not entitled to costs of the appeal unless the Court orders otherwise: UCPR, r 51.41(2)(a). It is not necessary to address whether a different order should be made, because the Bank did not seek an order for costs of the appeal or the motion filed 9 October 2020.
2. Accordingly, no order should be made as to the costs of the appeal or the Bank's notice of motion filed 9 October 2020.
3. SIMPSON AJA: The reasons given by Gleeson JA also express my reasons for joining in the orders of 3 November 2020.

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