John Ljubomir Atanaskovic trading as Atanaskovic Hartnell v Anthony James Robey & Ors

Supreme Court of NSW|2014-02-14|Before: Kunc J

Summary 1By notice of motion filed before me in the Applications List on 14 February 2014, the plaintiff seeks default judgment (both as to a liquidated sum and for possession of land) against the first and second defendants. As between the plaintiff and the third defendant I was invited to make a consent declaration and resolve the question of costs between them. But for one matter, I would have been able to deal with those applications in the course of the list. However, I reserved the matter for further written submissions from the plaintiff. Those submissions have now been provided and I am able to dispose of the motion and the proceedings in favour of the plaintiff, save that I have come to the view that there should be no order as to costs as between the plaintiff and the third defendant.

The parties and the underlying dispute 2The plaintiff is the firm trading as Atanaskovic Hartnell ("AH"). The first and second defendants ("Mr & Mrs Robey") are former clients of AH. The third defendant (NSWT&G) is the trustee of the estate of the late David Edward Bromhead. Mr Bromhead had advanced funds to Mr & Mrs Robey upon the terms set out in a document referred to in these proceedings as the "Bromhead Document". 3In mid 2010 AH succeeded another firm of solicitors to advise Mr Robey in connection with proceedings in the Supreme Court of the Australian Capital Territory between him and Westpac Banking Corporation. By November 2011 Mr Robey owed AH in excess of $580,000 for costs and disbursements incurred in acting for him in the proceedings. In November 2011 Mr & Mrs Robey were the registered proprietors as joint tenants of land in the Canberra suburb of Kambah (the "Kambah property"). By mortgage executed by them on 11 November 2011 (the "AH Mortgage") Mr & Mrs Robey mortgaged the Kambah property to AH to secure all amounts which might at any time be owing by Mr or Mrs Robey to AH. 4Importantly for the position of NSWT&G, the AH Mortgage provided: 3.1 Second Mortgage (a) The Mortgagor acknowledges the existence of the mortgage dated "2011" in relation to the Mortgaged Property (Prior Mortgage) in favour of David Edward Bromhead (Senior Mortgagee) and warrants and represents that the Prior Mortgage is the only other mortgage presently affecting the Mortgaged Property: (b) The Mortgagee: i. acknowledges the existence of the Prior Mortgage in favour of the Senior Mortgagee; ii. acknowledges that the rights of the Senior Mortgagee under the Prior Mortgage have priority over its rights under this mortgage; iii. consents to and approves the existence and subsistence of the Prior Mortgage; and iv. represents that it is prepared to execute a reasonable inter-creditor agreement with the Senior Mortgagee documenting that priority. 5AH filed its Statement of Claim on 22 November 2013 against Mr & Mrs Robey and NSWT&G. As against Mr & Mrs Robey it sought judgment for a liquidated sum and for possession of the Kambah property. As against NSWT&G (as successor to the late Mr Bromhead), AH sought a declaration "that in the events as they happened the AH Mortgage takes priority over that of the third defendant's purported mortgage (being the document described below as the "Bromhead Document")".

Default judgment against Mr & Mrs Robey 6The affidavits of a process server prove that Mr & Mrs Robey were served with the Statement of Claim at the Kambah property on 29 November 2013. Each pleading was served under cover of the requisite notice under the Service and Execution of Process Act 1992 (Cth) informing Mr & Mrs Robey "If you want to contest this claim, you must also file an appearance in the Supreme Court of New South Wales. You have only 28 days after receiving the attached process to do so." 7Under UCPR Part 14 r 14.3 a defence to a statement of claim is to be filed within 28 days after the claim is served on a defendant. Mr & Mrs Robey have filed neither appearances nor defences. They are clearly "in default" as defined in UCPR Part 16 r 16.2(1). AH is therefore entitled to apply for default judgment against Mr & Mrs Robey in accordance with UCPR Part 16 r 16.3(1). Nothing was drawn to my attention during the course of the hearing which would have persuaded me that the usual position should not apply, namely that the application be dealt with in the absence of Mr & Mrs Robey and did not have to be served on them. The application complies with UCPR Part 16, r 16.3 insofar as it is accompanied by an affidavit of service of the Statement of Claim and an affidavit in support of the application, the latter sworn within 14 days before the date on which the application was filed. 8Insofar as judgment for the liquidated sums sought in the Statement of Claim is concerned, the affidavit in support satisfies the Court the amounts claimed are properly due and owing under the AH Mortgage. The evidence discloses that an event of default in accordance with the terms of the AH Mortgage occurred and that the various notices required to be given as prerequisites to enforcing the AH Mortgage were given. 9The only matter which delayed disposition of the proceedings was an issue which I raised with the plaintiff's counsel about the possible application of the Legal Profession Act 2004 (NSW) (the "Act") in circumstances where what was being sued for were legal costs and disbursements. While AH's claim is brought under the AH Mortgage rather than a solicitor's retainer or fee agreement, the sum secured is AH's legal costs. These proceedings are nonetheless "legal proceedings to recover legal costs". Section 331(1) of the Act limits when such proceedings can be commenced (not less than thirty days after a bill and notification have been given to the client). Similarly, s 355 of the Act prevents the commencement or maintenance of such proceedings by the law practice once an application for a costs assessment has been made. Because these proceedings are ex parte, a plaintiff law firm, when making a default judgment application for its fees, should demonstrate in its supporting affidavit that the proceedings do not contravene those provisions of the Act. 10Further evidence has since been filed, pursuant to a direction which I made, which establishes that the requisite engagement letter and fee disclosure were given to Mr Robey, that the relevant bills and notifications were in a suitable form, and that Mr Robey had made no application for an assessment of any of those bills either within the 12 months limited by the Act or since. This demonstrates that there is no impediment to AH commencing or maintaining these proceedings to recover their fees. 11AH is entitled to default judgment on its liquidated claim. The evidence in support also includes calculations of principal and interest to enable the making of final orders. 12Slightly different considerations apply in relation to AH's application for possession of the Kambah property, which is in the Australian Capital Territory. The AH Mortgage is expressed to be governed by the law of the Australian Capital Territory, but each party has expressly submitted to the non-exclusive jurisdiction of the courts of New South Wales. AH has demonstrated, by reference to ss 93 and 94 of the Land Titles Act 1925 (ACT), that the statutory prerequisites for the present proceedings for possession in reliance upon the AH Mortgage have been satisfied. Insofar as I am exercising ACT jurisdiction, that is conferred on this Court by the relevant cross-vesting legislation. The procedure for a default judgment for possession is set out in UCPR Part 16 r 16.4 and the evidence satisfies me that all the relevant provisions of that rule have been satisfied. 13AH is entitled to an order for possession of the Kambah property and understands that further steps will have to be taken to enable this Court's orders to be enforced in the Australian Capital Territory.

The claim between AH and NSWT&G 14When these proceedings came before me, AH and NSWT&G had agreed upon a consent form of declaration reflecting the relief set out in the Statement of Claim (see paragraph [5] above). The only difference between them was as to costs: AH sought its costs against NSWT&G, the latter submitted that no order should be made as to costs. 15I shall deal with the consent declaration first. As AH recognised, the making of a declaration is in the Court's discretion. Notwithstanding it is sought by consent, there must be evidence before the Court supporting the making of such a declaration. Even if there is, the Court will generally not act solely upon the parties' consent but will have to be independently satisfied that the making of the declaration quells a real dispute and that there is utility in making it. 16There is evidence before the Court supporting the making of the declaration. That evidence includes clause 3.2 of the AH Mortgage and various provisions to which I have been referred in the Bromhead Document itself. 17That leaves the question of utility. AH submits there is utility in resolving all the issues as between all parties to the proceedings. In particular, this involves foreclosing the possibility that while NSWT&G might accept that the Bromhead Document does not have priority over the AH Mortgage in relation to the Kambah property, Mr & Mrs Robey might at some later stage seek to assert that it does. While I suspect that even the acceptance of such an assertion by Mr & Mrs Robey would be of no practical help to them, I cannot rule out that they would not do so. The legal and economic reality of the situation as between AH, NSWT&G and Mr & Mrs Robey suggests that there is sufficient interest to achieve finality and certainty as between the parties to warrant such a declaration being made. The Court will do so. 18In relation to costs, NSWT&G's Defence filed 9 January 2014 admitted AH's allegations against it, but went on to say that by reason of such admissions there was no reason for the declaration sought to be made. In particular, NSWT&G's Defence expressly stated that it did "not allege the Bromhead Document is capable of taking priority over the AH Mortgage". It was submitted that while it had now consented to the making of the declaration, the effect of its admissions meant that AH's costs were not properly attributable to NSWT&G. Against the background of those admissions the proceedings as between AH and NSWT&G had otherwise been resolved without the need for a hearing and, in accordance with what is generally said should be the outcome in those circumstances, there should be no order as to costs. 19AH drew attention to its pre-action correspondence with NSWT&G where it had sought concessions concerning the matters now admitted. However, in responding to that correspondence NSWT&G never suggested that it was intending to deny the relevant matters. Rather, it was seeking an opportunity to take legal advice. It seems that NSWT&G were not getting that legal advice as quickly as AH would have liked and, therefore, AH commenced the proceedings. 20There is nothing in the pre-action correspondence that supports the conclusion that NSWT&G was acting unreasonably slowly or otherwise behaved in a way that meant AH had to commence the proceedings. AH accepted in argument that, even if NSWT&G had accepted AH's view of the priorities as between the AH Mortgage and the Bromhead Document before proceedings had been commenced, NSWT&G would nevertheless have been joined as a party in an effort to ensure that any declaration would also be binding on Mr & Mrs Robey. In the events which have happened I am unable to identify any basis upon which NSWT&G's conduct would justify it having any responsibility for AH's costs. I accept NSWT&G's submission that as between it and AH there should be no order as to costs.

Conclusion 21The Court makes orders in accordance with the short minutes of order which I have initialled, dated today and placed with the papers. 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: 28 February 2014

Legal Profession Act 2004(NSW)

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