Consideration
60 As set out at [15] above, the Costs Judgment is for the sum of $282,686.93, which is the combined amount of the Costs Certificate (being $277,582.02) and Mr Jones' portion of the amount specified in the Costs Assessor Costs Certificate which was paid by Purnell (being $5,104.91). In the judgment's terms, it refers to s 368 and s 369 of the LP Act. The gravamen of the issue raised by the proposed grounds of appeal is that it was incorrect to include in the Costs Judgment the amount included in the Costs Assessor Costs Certificate which was to be paid by Mr Jones because that was not an amount due to Purnell. It is said that its inclusion makes the Costs Judgment irregular or fraudulently obtained or renders the Bankruptcy Notice a nullity because a fact essential to its validity did not in fact exist.
61 Sections 368 and 369 of the LP Act, as it was at the date of the issue of the Costs Certificate and the Costs Assessment Costs Certificate (ie 2 September 2011), relevantly provided:
368 Certificate as to determination
(1) On making a determination of costs referred to in Subdivision 2 or 3 of this Division, a costs assessor is to issue a certificate that sets out the determination.
(2) A costs assessor may issue more than one certificate in relation to an application for costs assessment. Such certificates may be issued at the same time or at different stages of the assessment process.
(3) However, any such certificate may not set out the costs of the costs assessment within the meaning of section 369.
Note. Section 369 makes provision for the recovery of the costs of costs assessments relating to costs to which either section 317 (Effect of failure to disclose) or 364 (Assessment of costs - costs ordered by court or tribunal) applies. The section requires a costs assessor to issue a separate certificate setting out the costs of such costs assessments. That section also makes provision for the effect of such a certificate.
(4) In the case of an amount of costs that has not 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.
(5) 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.
(5A) The costs assessor must forward the certificate or a copy of the certificate to:
(a) the Manager, Costs Assessment, and
(b) each party to the assessment, unless subsection (6) applies.
(6) If the costs of the costs assessor are payable by a party to the assessment as referred to in section 369, the costs assessor must:
(a) forward a copy of the certificate to the Manager, Costs Assessment only, and
(b) advise the parties that the certificate has been so forwarded and will be available to the parties on payment of the costs of the costs assessor.
…
369 Costs of costs assessment
(1) This section applies to the costs of a costs assessment in relation to:
(a) costs to which section 317 (Effect of failure to disclose) applies, and
(b) costs to which section 364 (Assessment of costs - costs ordered by court or tribunal) applies, and
(c) costs that on assessment are reduced by 15% or more.
(2) A costs assessor is, subject to this section, to determine the costs of a costs assessment to which this section applies.
(2A) Subject to any order of or the rules of the relevant court or tribunal, the costs assessor may determine by whom and to what extent the costs of an assessment referred to in section 364 (Assessment of costs - costs ordered by court or tribunal) are payable and include the determination in the certificate issued under this section in relation to the assessment.
(3) The costs of a costs assessment to which this section applies are payable:
(a) for a costs assessment in relation to costs to which section 317 (Effect of failure to disclose) applies - by the law practice that provided the legal services concerned, or
(b) for a costs assessment in relation to costs to which section 364 (Assessment of costs - costs ordered by court or tribunal) applies - by such persons, and to such extent, as may be determined by the costs assessor, or
(c) for a costs assessment in relation to costs that on assessment are reduced by 15% or more - by the law practice that provided the legal services concerned or, if the costs assessor so determines, by such persons, and to such extent, as may be determined by the costs assessor.
…
(5) On making a determination, a costs assessor may issue and forward to each party and the Manager, Costs Assessment a certificate that sets out the costs of the costs assessment.
…
(7) 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.
(8) The costs of the costs assessor are to be paid to the Manager, Costs Assessment.
(9) The Manager, Costs Assessment may take action to recover the costs of a costs assessor or Manager, Costs Assessment.
(10) In this section:
costs of the costs assessment includes the costs incurred by the costs assessor or the Manager, Costs Assessment in the course of a costs assessment under this Division, and also includes the costs related to the remuneration of the costs assessor.
62 Part 36, r 36.10 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) provides that:
(1) A cost assessor's certificate:
(a) may be filed in the proceedings to which it relates, or
(b) may be filed in fresh proceedings, whether in the same court or another court.
(2) A number of certificates may be filed together under subrule (1) if each of the certificates:
(a) relates to the same costs assessment, and
(b) requires the same person or persons to pay costs.
(3) The certificate or certificates must be accompanied by an affidavit, sworn not more than 14 days before the certificate or certificates are filed, stating:
(a) if some of the costs specified in the certificate or certificates have been paid - the amount of the costs that have been paid, or
(b) that none of the costs specified in the certificate or certificates have been paid.
…
63 Mr Jones relies on the decision in Kassem & Seccatore as joint liquidators of Pan Pacific Age Care Services Pty Ltd (in liq) & Anor v Koutavas [2012] NSWSC 236 (Kassem). In that case Ward J (as her Honour then was) considered whether she should exercise her discretion to set aside a judgment entered in respect of costs (as assessed under the applicable costs assessment procedures) of both a costs order made in other proceedings in favour of the plaintiffs and the costs of the assessment of those costs. The applicant on the application submitted that it was not possible for a party, other than the Manager, Costs Assessment, to have the benefit of a certificate of judgment arising from the filing of a s 369 certificate such that it is not possible for costs certificates under s 368 and s 369 to be filed together and become one judgment: Kassem at [26].
64 Ward J referred to the decision in Dennis v Miller (2012) 257 FLR 64; [2012] FMCA 25, in which Smith FM considered the same issue as was before her Honour. At [40] of Kassem Ward J accepted the observation by Smith FM therein that s 369(9) did not preclude the party identified in the costs certificate as entitled to the certified costs of the assessment from filing a certificate under s 369(7) of the LP Act. However, Ward J's concern was with the proposition that the costs judgment which would automatically arise from the filing of a s 369 costs of costs assessment certificate could of itself impose an obligation on the party against whom the assessment was made to pay those costs to the party in whose favour the assessment was made (as opposed to being liable to pay the Manager, Costs Assessment): see Kassem at [41].
65 While her Honour accepted that there was nothing in s 369(9) of the LP Act to prevent the filing by the party certified as entitled to the costs of a s 369 certificate, she considered that the real issue was the manner in which a judgment that arose as a result of the filing of such a certificate was to be enforced. Ward J concluded that the effect of s 369(8) was that any such judgment requires the costs to be paid to the Manager, Costs Assessment because if that were not so, there could be conflicting claims for costs by both the recipient of the costs certificate and the Manager, Costs Assessment: Kassem at [42]-[43].
66 After considering the operation of her construction of s 369 of the LP Act on the facts of the case before her, Ward J said that, while she accepted that the judgment arising on the filing of the s 369 certificate was not of itself a judgment for the payment of the costs of the costs assessment to the plaintiffs, she did not accept that that necessarily meant that the judgment that had been entered in favour of the plaintiffs should be set aside as an irregularity. Her Honour noted that "[t]he purpose of the entry of the judgment in the Court's records as a judgment of the court … is to give effect to and record the judgment arising by operation of the statute (and to permit its enforcement)": Kassem at [45].
67 Justice Ward saw the solution to the problem that arose was to have the terms of any judgment entered record that the primary obligation on the party liable under the s 369 certificate was to the Manager, Costs Assessment: Kassem at [46].
68 Justice Ward accepted that practical difficulties flowed from her construction of s 369 of the LP Act but said that those difficulties could be met by the application of the principles of restitution and consequently made orders that reflected the use of those principles and did justice between the parties. Her Honour made an order that required the defendant (the applicant on the application) to pay the plaintiffs by way of reimbursement the amount they had paid to the Manager, Costs Assessment to obtain release of the relevant costs certificates.
69 In Weber v Aquaqueen International Pty Ltd; Aquaqueen International Pty Ltd v Weber [2013] NSWSC 1181 (Aquaqueen) Mr Weber registered four costs certificates in the Supreme Court and obtained a single judgment against Aquaqueen International Pty Ltd (Aquaqueen). Among other things, Aquaqueen subsequently sought to dismiss or set aside the judgment entered against it on three bases, including because the total sum for which the judgment was registered included components which represented the costs of the costs assessment process which could only be recovered by the Manager, Costs Assessment: Aquaqueen at [51]. Accordingly, Aquaqueen contended that the judgment was irregularly entered in accordance with the principles enunciated in Kassem.
70 In addressing that argument Garling J considered the decision in Kassem. At [94] his Honour observed that Ward J must have accepted the submission made that the effect of s 369(8) of the LP Act was a substantive one which had the consequence of overriding the provisions of s 369(2A) of the LP Act, at least to the extent that the costs which were being determined included costs which were payable for the costs assessment. His Honour then noted that no submission had seemingly been made in Kassem that there was an alternative construction of s 369(8) available, namely that the subsection was susceptible to a facilitatory, rather than substantive, construction which, if adopted, would not override s 369(2A) but would have a coherent effect. At [96] Garling J continued:
In other words, the Costs Assessor acting in accordance with s 369(2A) of the LP Act determines what sum is to be paid which include both the costs assessor's fees, and the application fees which are payable to the Court. The provisions of s 369(8) of the LP Act are facilitatory in the sense that there is no room for the payment of the costs assessor's costs by a party directly to the costs assessor himself or herself. It is to be remembered that the costs assessor is an independent officer undertaking a specified task under the legislation. Although the costs assessor renders a tax invoice to the Manager, Costs Assessment for their own fees, the costs assessor is not an employee of the Manager, Costs Assessment. The Manager, Costs Assessment, whose role is to administer the Costs Assessment Scheme, would not, but for the provisions of s 369(8) of the LP Act, otherwise have any right to collect the fees of the various costs assessors which are ordered to be paid by one party or another. It seems, to me, that the preferable interpretation of this subsection is that it merely facilitates the operation of the scheme by making the costs of costs assessors payable by one or other party to the Manager, Costs Assessment, rather than directly to individual costs assessors.
71 His Honour was of the opinion that s 369(9) gives the Manager, Costs Assessment the right to take action to recover costs, a right which is co-relative to the facilitatory obligation in s 369(8) of the LP Act. His Honour said that without that provision, the Manager, Costs Assessment would have no legal right to claim the costs assessor's costs. His Honour observed that that right of action only existed where the costs remained unpaid but that the subsection does not dictate from which party the costs assessor's costs are to be recovered. Garling J found that there was no reason why an action for recovery could not be taken against either the costs applicant or the costs respondent, at the election of the Manager, Costs Assessment. However, his Honour noted that as a practical matter, such an action would not ordinarily need to be taken because costs certificates are not released until the costs are paid: Aquaqueen at [97]-[98].
72 Contrary to the conclusion reached in Kassem, Garling J did not accept that the judgment entered in the case before him was irregular because of the inclusion in it of a sum payable for the costs of the costs assessor and, in particular, the cost assessor's costs: Aquaqueen at [104]. His Honour set out his reasons for reaching that conclusion at [106]-[114] as follows:
106 First, the fees (or costs) charged by a Costs Assessor are included within the definition of the term "costs" of the costs assessment in s 369(10) of the LP Act. Accordingly, it is expected that they will form a part of the assessment process which is initiated by one party or another, in order to obtain a determination of the fair and reasonable amount of costs as between the parties.
107 Secondly, at the conclusion of the costs assessment process, the LP Act gives to the Costs Assessor the obligation to determine in what sum, and by whom, the costs of the costs assessment ought be paid: s 369(2), and s 369(2A) of the LP Act;
108 Thirdly, that determination is to be recorded in a Certificate: s 369(2A) of the LP Act.
109 Fourthly, that Certificate, consequent upon being filed in a court of competent jurisdiction, becomes a judgment which determines that one of the parties to the costs assessment process is obliged to pay to the other party, the sum which the costs assessor has determined. The party determined by the Certificate to be liable, and obliged by the judgment, to pay the sum so determined, is the party who has had a right under the LP Act to participate in the costs assessment process, to put arguments and objections to the costs assessor, and who has the right under the LP Act to challenge in the ways there permitted, the contents of the Certificate.
110 Fifthly, the Manager, Costs Assessment does not have any right to participate in the costs assessment process, nor to make any submissions as to the outcome of that process. The Manager is not named as, nor is he or she in fact, a party to the matter. No obligation is created in favour of, or against, the Manager, by the issue of a determination, and then a Certificate under the LP Act. In fact, rather than being a party, the Manager, Costs Assessment is the person given the responsibility for the effective operation of the costs assessment scheme: see LP Act, Pt II Subdivisions 1, 2, 4 and 5.
111 Sixthly, it is clear that the judgment once entered, is then enforceable as a judgment of the Court in the terms which it is entered. That is a judgment by one party against the other party named in the Certificate as liable for a fixed and identified sum. Again, the Manager is not a party to the judgment. The judgment is not expressed to be in favour of (or against) the Manager. There is no requirement under the UCPR, for the Manager to be joined as a party when the Certificates are registered. Nor would the Manager be a necessary party to those proceedings.
112 Seventhly, the fact that the legislation provides a mechanism by which the Manager, Costs Assessment is entitled to be paid the costs of the costs assessor, and that the Manager may be entitled to exercise a right to collect those costs, does not seem to me to make a judgment in the sum determined in accordance with the legislation between the parties to the costs assessment matter to be irregular. On the contrary, the judgment so entered is a regular one, entered just as the UCPR permits.
113 Lastly, this construction means that it remains open, at all times, where the costs of the costs assessment have not been paid, for the Manager, Costs Assessment to take action to recover those costs. In those circumstances, the Manager would be party to the recovery action, as the plaintiff, and if successful, would obtain a judgment in his or her favour, upon which enforcement action could then be taken in the same way as for any other debt.
114 I appreciate that this conclusion differs from that reached by Ward J in Kassem. However, to the extent that it is necessary for me to disagree with her Honour's central finding, which I have described above, I do so with the utmost respect. However, I do so because it seems that her Honour's view, that a judgment entered against a party to the proceedings, in consequence of the filing and registration of a s 369 Certificate, is one which takes effect in favour of a person who is not a party to the proceedings (the Manager, Costs Assessment), and not in favour of the party filing the judgment, in whose favour it is expressed to be, is in the absence of any specific provision in the LP Act which enables this to occur, erroneous.
73 The decision in Aquaqueen was the subject of an application for leave to appeal which was dismissed without consideration of Garling J's construction of s 369 of the LP Act: see Aquaqueen International Pty Ltd v Weber [2014] NSWCA 101.
74 In Ritson v Commissioner of Police, New South Wales Police Force (2018) 332 FLR 182; [2018] FCCA 916 Judge Smith considered the same issue raised by Mr Jones in his proposed grounds of appeal, namely whether a bankruptcy notice was liable to be set aside because it was based on an irregular judgment. The irregularity was said to be, as is the case here, the inclusion in the judgment of the costs of the costs assessment and issuing the repayment of those costs to someone other than the Manager, Costs Assessment.
75 After referring to the decisions in Kassem and Aquaqueen, Judge Smith concluded at [60] as follows:
With great respect to Ward J, I disagree with her Honour's reasoning except to the extent that she agreed with Smith FM and I agree with, and adopt the reasoning of Garling J. I would only add that I would give no weight to one of the central concerns that led Ward J to her conclusion, that is that there would be conflicting claims for the costs of an assessment. I consider that that possibility is remote given that, by operation of ss 368(5) and (6), the certificate of the assessed costs need only be given to a party if the Manager, Costs Assessment has been sent the certificate and the parties notified that it will not be given to them unless the costs of the costs assessor have been paid. The practical operation of those provisions, in the context, was that the party in whose favour a costs assessment was made would pay the costs of the assessment, obtain certificates for that assessment and for the costs of the assessment and proceed to judgment against the costs respondent in respect of both. Where the costs applicant did not pay, however, the Manager, Costs Assessment could take steps to recover the amount of the costs under s 369(9) of the LPA.
76 I too, with respect, consider that the better view of the operation of s 369 of the Act to be that which is set out in Aquaqueen and I adopt Garling J's reasoning in that regard. Applied to the facts of this case that means that:
(1) the costs assessor's costs were "costs" of the cost assessment as defined in s 369(10) of the LP Act;
(2) the costs assessor was obliged pursuant to s 369(2) and s 369(2A) of the LP Act to determine the amount and by whom the costs of the costs assessment were to be paid. He did so by determining first, a total amount of $9,275.74 payable as costs of the costs assessment which included $5,104.91 for the application fee; and secondly, that one half of that amount was to be paid by Purnell, the costs applicant, and the other half, by Mr Jones, the costs respondent. That determination was included in the Costs Assessor Costs Certificate; and
(3) the Costs Assessor Costs Certificate was filed and became a judgment which once entered was enforceable as a judgment of the District Court on the terms on which it was entered, namely for Mr Jones to pay Purnell the amount identified therein. As Garling J said in Aquaqueen at [111] the Manager, Costs Assessment is not a party to the judgment; the judgment is not expressed to be in favour of that Manager; there was no requirement under the UCPR for the Manager, Costs Assessment to be joined as a party when the certificates were registered; nor would the Manager, Costs Assessment be a necessary party to those proceedings.
77 As Garling J noted at [112] of Aquaqueen that the Manager, Costs Assessment is entitled by reason of the operation of s 369(8) and (9) of the LP Act to be paid the costs of the costs assessor and to take steps to recover those costs does not make the Costs Judgment, which is for a sum determined in accordance with the LP Act, irregular. The Costs Judgment is regular having been entered in accordance with the requirements of the UCPR.
78 For those reasons there is no merit in Mr Jones' proposed grounds of appeal.