Cufurovic v Coshott

(c) On 2 November 1994 the defendant obtained judgment in the sum of $17,211.05 in the Local Court against the plaintiff, which judgment included the costs allegedly due and owing to the defendant in respect of the proceedings against the employer;

(d) On 23 January 1995 the plaintiff became bankrupt on a debtor's petition. The defendant was included in the list of creditors but did not lodge a proof of debt in the bankruptcy. The plaintiff was discharged from bankruptcy on 24 January 1998;

(e) On 5 August 2004 the defendant served a bankruptcy notice on the plaintiff. The debt upon which the notice was founded was the judgment obtained on 2 November 1994 plus interest. The defendant did not present a creditor's petition based on the bankruptcy notice;

(f) On 28 December 2006 the plaintiff received an assessment of costs from the defendant;

(g) On 3 April 2007 the plaintiff received notice an application for a costs assessment had been filed that day by the defendant. A costs assessor was appointed to assess the costs.

(h) The plaintiff lodged a written objection to the application for the costs assessment. The objection, in effect, was that the defendant, by reason of the plaintiff's bankruptcy, could not enforce any remedy in respect of the defendant's costs against her;

(i) The costs assessor stated in correspondence "…the prohibition in section 58(3)(a) of the Bankruptcy Act 1966 in respect of enforcing any remedy against the person or property of the bankrupt in respect of a provable debt would prevent a Certificate of Determination from issuing". He declined to proceed with the assessment;

(j) The application for an assessment was then referred to another costs assessor. He referred to the written objection in correspondence and concluded "I consider that I am able to proceed with the Assessment but that may be of little use if you are unable to recover the monies as a result of the bankruptcy";

(k) On 27 March 2008, the assessor issued a certificate as to determination of costs and a statement of reasons. As appears from those documents the assessment was made pursuant to the provisions of the Legal Profession Act 1987 ("the 1987 Act"). The assessor, in his statement of reasons, noted: "3(v) It appears that the Costs Respondent was declared bankrupt (proceedings NSW 5039/95/0) pursuant to a Debtor's Petition accepted 23 January 1995"; and "3(ix) The Costs Applicant points out that an Application for Assessment are not curial proceedings and are not affected by the Limitation Act 1969 ( Lenin v Coshott Supreme Court of NSW Common Law Proceedings 10588 of 2007). He did not otherwise refer to the plaintiff's objection in his statement of reasons.

(l) On 8 April 2008 the certificate as to the determination of costs was registered as a judgment in Waverley Local Court; (m) On 22 September 2008 the Local Court proceedings were stayed pending the outcome of these proceedings;

The Submissions 4 The plaintiff's primary submissions were that the plaintiff initially was indebted to the defendant for his costs; the defendant's cause of action against the plaintiff for his costs merged in the Local Court judgment dated 2 November 1994 - Blair v Curran (1939) 62 CLR 464 at 532 thus destroying the independent existence of the defendant's cause of action; as a result of the plaintiff's bankruptcy the judgment became a debt provable in the plaintiff's bankruptcy; the plaintiff was released from all debts provable in the bankruptcy by operation of s 153 of the Bankruptcy Act (Cth) upon her discharge from bankruptcy; there was a threshold issue to the right to apply for an assessment of costs under s 201 of the Legal Profession Act 1987 namely were there costs which were capable of assessment; by reason of the 1994 judgment and the subsequent bankruptcy and discharge there were no costs to assess; there was thus no jurisdiction to invoke the costs assessment process; an error of law had occurred in permitting that process to proceed which error should be corrected by granting the administrative law relief sought. 5 The defendant accepted that at the time of the assessment there was no debt which could be enforced by action in the court and that a debt would have been extinguished by the plaintiff's bankruptcy and subsequent discharge. However, he submitted that "costs assessments are not curial proceedings. They are an administrative function. It is not an enforcement of a cause of action because it is not a cause of action. It is not an action on debt. It is a statutory administrative function which gives rise to certain rights upon the conclusion thereof." As is apparent from the terms of s 352 of the Legal Profession Act 2004 ("the 2004 Act") there was no precondition that there be an existing debt. Section 372 of the 2004 Act (s 208K of the 1987 Act) is a privative clause. It prevents the plaintiff from obtaining administrative law remedies. Furthermore the administrative law remedies are discretionary and the discretion should not be exercised in favour of the plaintiff. The only relief available to the plaintiff, if any, is to be found in the appeal provisions of the 2004 Act. 6 The plaintiff accepted that s 208K was a privative clause. Her counsel submitted that: "If there had been a valid determination then I would be stuck with the privative clause. My point is there cannot be a valid determination because there are no costs to assess because they were extinguished some years earlier".

This Court has clearly held that an administrative decision which involves jurisdictional error is "regarded, in law, as no decision at all"…such a decision is, not affected by a privative clause- Plaintiff S157/2002 v Commonwealth of Australia (2003) CLR 476 at [76]. 7 Additionally he submitted that a situation where, as here, the defendant had effectively 2 judgments 14 years apart for the same costs was "quite a ridiculous situation".

8 The 2004 Act repealed the 1987 Act. Section 737 of the 2004 Act provides: "Schedule 9 has effect". 9 Schedule 9 cl 18 of the 2004 Act provides: "Subject to subclauses (2) and (3), Pt 3.2 of this Act applies to a matter if the client first instructs the law practice on or after the commencement day, and Pt 11 of the old [1987] Act continues to apply to a matter if the client first instructed the law practice in the matter before that day".

Subclauses (2) and (3) have no application in this case. The commencement day was 1 October 2005. The plaintiff first instructed the defendant in the matter before the commencement day. Accordingly Pt 11 (ss 173 -208V) of the 1987 Act is applicable. 10 Section 201(1) of the 1987 Act provides: "A barrister or solicitor who has given a bill of costs in accordance with this Part may apply to the Manager, Costs Assessment for an assessment of the whole of, or any part of, those costs."

Costs are defined in s 3 as: "includes fees, charges, disbursements, expenses and remuneration"; Bill of costs is defined in s 173(1) as: "means a bill of costs for providing legal services, and includes a memorandum of fees" and Legal services is defined in s 173(1) as: "means work done, or business transacted, in the capacity of a barrister or solicitor".

11 Sections 192 to 195 provide for the giving of a bill of costs. 12 Section 203 of the 1987 Act provides: "An application for assessment is to be made in accordance with the regulations".

13 Section 206(1) of the 1987 Act provides: "The Manager, Costs Assessment is to refer each application for assessment to a costs assessor to be dealt with under this Division." 14 Section 208A of the 1987 Act provides: "(1) When considering an application relating to a bill of costs, the costs assessor must consider: (a) whether or not it was reasonable to carry out the work to which the costs relate, and (b) whether or not the work was carried out in a reasonable manner, and (c) the fairness and reasonableness of the amount of the costs in relation to that work. (2) A costs assessor is to determine the application by confirming the bill of costs or, if the assessor is satisfied that the disputed costs are unfair or unreasonable, by substituting for the amount of the costs an amount that, in his or her opinion, is a fair and reasonable amount." 15 Section 208K of the 1987 Act provides; "A costs assessor's determination of an application is binding on all parties to the application and no appeal or other review lies in respect of the determination, except as provided by this Division."

The Division is Div 6. Division 6 provides for an appeal as to a matter of law (s 208L), otherwise by leave (s 208M). In Currabubula v State Bank of NSW [2000] NSWSC 232 Einstein J held at [60] and [61]: "…jurisdiction is given to this Court under s208L and s208M and the question must be whether the effect of s208K is to make those the exclusive means of pursuing an appeal from the costs assessor and to exclude the Court's declaratory jurisdiction 'in respect of a determination'. [61] Despite the strength of the presumption against this Court being deprived of its declaratory jurisdiction, I see no escape from the conclusion that this is the effect of s208K…" 16 In Minerals Corp Ltd v Abbot [2004] NSWSC 246 Bell J held that the assessment of costs under Pt 11 Div 6 of the 1987 Act was not a proceeding in this Court. A costs assessor was not an officer of the court when acting as a costs assessor but was carrying out an administrative function under the Act. His determination was not a judicial one. 17 In Lenin v Coshott [2007] NSWSC 630 an application was made to Bell J to restrain the defendant from proceeding with applications for the assessment of professional costs incurred some fourteen years before. Declaratory and injunctive relief was claimed. In her judgment her Honour referred to the decision in Currabubula v State Bank of NSW but proceeded to determine the application on the basis of submissions that the course taken by the defendant constituted an abuse of process. Reference was made to the judgment of McHugh J in Rogers v R (1994) 181 CLR 251 at 286 in which his Honour described three categories of abuse of procedure namely "(1) the court's procedures are invoked for an illegitimate purpose; (2) the use of the court's procedures is unjustifiably oppressive to one of the parties; (3) the use of the procedures would bring the administration of justice into disrepute." In Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; 80 ALJR 1100 at 1104-1106 the High Court stated that it appeared that the procedures of non-curial bodies may attract the "abuse of process" doctrines.

Her Honour concluded at [31]: "Upon the assumption for present purposes that the Court has power to make orders having the effect of staying the assessment of the costs the subject of the first and second assessments (and restraining Mr Coshott from filing the proposed application), in the absence of any evidence of prejudice, oppression and/or ulterior purpose in bringing the applications no basis has been made out to do so."

18 Section 208J of the 1987 Act provides: "(1) On making a determination, a costs assessor is to issue to each party a certificate that sets out the determination.

(2) In the case of an amount of costs that has been paid, the amount (if any) by which the amount paid exceeds the amount specified in any such certificate may be recovered as a debt in a court of competent jurisdiction. (3) In the case of an amount of costs 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 costs, and the rate of any interest payable in respect of that amount of costs is the rate of interest in the court in which the certificate is filed." Determination

19 The plaintiff incurred a liability to the defendant for legal costs. She was released from that liability upon her discharge from bankruptcy in 2005. 20 The defendant, in effect, has sought to reinstate that liability by using the administrative process of costs assessment under the Legal Profession Act 1987 to obtain a fresh judgment against the plaintiff for the liability in respect of which she was released, and then to enforce that judgment. 21 In my opinion such a course of action is an abuse of process. It is prejudicial and oppressive to the plaintiff as it seeks to reimpose a liability from which she had been lawfully released and thereby to set at nought the purposes and protections of the discharge provisions of the bankruptcy legislation. Were it not for the relief otherwise granted to the plaintiff I would have imposed a permanent stay of execution of the judgment of the Local Court dated 8 April 2008. 22 It is apparent from the terms of s 201 of the 1987 Act that it is a prerequisite to the application of the section that there must be costs to be assessed. The purpose of the assessment provisions are generally to enable costs to be independently assessed and, if the costs are less than the amount already paid to permit the difference to be recovered in a court of competent jurisdiction (s 208J(2)) or, to recover by way of judgment the balance of costs outstanding (s 208J(3)). 23 Unlike s 352 of the 2004 Act upon which the defendant sought to rely s 201 does not contain a provision that if any legal costs have been paid without a bill, the law practice may nevertheless apply for a costs assessment and an application for a costs assessment may be made even if the legal costs have been wholly or partly paid. This contrasts with s 199 of the 1987 Act which deals with a client's application for assessment and contains such a provision. 24 In Clyne v The Deputy Commissioner of Taxation (1984) 154 CLR 589 at 594 it was held in respect of debts provable in the bankruptcy: "they are debts from which the bankrupt is not released until he is discharged from bankruptcy. However in our opinion, they are no longer debts 'still owing' within the meaning of s 52(1)(c). Although, as was rightly observed in the Federal Court one dictionary meaning of 'owing' is that 'that is yet to be paid', the word connotes a sense of obligation to make the payment. The effect of the bankruptcy however is that the debtor is no longer obliged to pay its creditors; indeed he is disabled from doing so." 25 The discharge of the plaintiff from bankruptcy released her from all liability in respect of the costs which initially have been due to the defendant. 26 The plaintiff took the objection that by reason of the above matters there were no costs to be assessed. She was right to do so. The second costs assessor did not determine this question but proceeded upon the assessment process. This constituted a jurisdictional error - Craig v South Australia (1995) 184 CLR 163 at [176] by reason of which error the resultant "decision" is to be regarded as no decision at all.

27 In my opinion the plaintiff has established an entitlement to the relief sought in paragraphs 2 and 6 of her summons and I propose to make orders in the terms of those paragraphs.

28 I assume that the orders proposed render it unnecessary for the plaintiff to pursue the appeal or application for leave to appeal. However I make the following comments as to that issue. 29 The 2004 Act provided for appeal to the Supreme Court as to a matter of law (s 384) or otherwise by leave (s 385). The 1987 Act contained similar provisions. The 2004 Act was amended by the Courts and Crimes Legislation Amendment Act 2008 ("the Amendment Act") Sch 14 which substituted "District Court" for "Supreme Court" in ss 384 and 385. The Amendment Act commenced on 1 September 2008. It added the following provision to Sch 9 Pt 4 of the 2004 Act. " 34 Pending appeals An appeal to the Supreme Court for which a hearing date had been allocated before the commencement of Schedule 14 to the Courts and Crimes Legislation Amendment Act 2008 is to be determined as if that Act had not been in enacted."

The summons stated, underneath the heading "Hearing Details", "This summons is listed at 9.00am 21/8/08".

30 The defendant submitted that the effect of the amendment was that any appeal by the plaintiff lay to the District Court and not to the Supreme Court by reason of the application of the Amendment Act and the general transitional provisions contained in cl 3 of Sch 9 of the 2004 Act. 31 The plaintiff submitted that the appeal (or leave application) was pursuant to the 1987 Act by reason of the transitional provisions contained in Sch 9 cl 18 of the 2004 Act. The Courts and Crimes Legislation Amendment Act 2008 had no application to the 1987 Act and accordingly the appeal was, as provided by ss 208L and 208M of the 1987 Act, to the Supreme Court. 32 In my opinion the specific provision in Sch 9 cl 18 of the 2004 Act prevails over the general provision in cl 3. I note that in CSR Ltd v Eddy (2008) 70 NSWLR 725 at [17] Basten J held: "Pursuant to cl 22A, in Sch 9 of the Legal Profession Act 2004, an appeal could be made under either the Legal Profession Act 1987 or the Legal Profession Act 2004, in relation to a matter arising under the Legal Profession Act 1987."

Costs 33 The plaintiff submitted costs should follow the event. The defendant submitted "if the plaintiff is granted the primary relief sought, each party should pay their own costs. If the plaintiff had exercised the statutory right of appeal these proceedings would not have been necessary. The relief sought is discretionary. The amount in question is diminimus." 34 The usual rule is that costs follow the event and I propose to apply that rule in this case. I do not consider that the amount in issue or that the relief sought is discretionary should determine who should pay the costs. If the plaintiff had exercised the statutory right of appeal there would still have been the costs of hearing an appeal.

1. An order in the nature of certiorari quashing the determination of the costs assessor in file 2007/469 dated 27 March 2008.

2. An order permanently restraining the defendant from seeking to recover, by any means, any costs from the plaintiff for work done in the period 1985 - 1988.

3. The defendant to pay the plaintiff's costs. **********

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