Khan & anor v Jenni Mattila & Co Lawyers

The Application to Extend Time 20On 10 December 2010, by letter from Senat & Associates, the Khans' then solicitors, an application was made to the Manager, Costs Assessment in these terms: "We hereby apply on the Respondents' behalf for further time pursuant to section 373(1) of the Legal Profession Act 2004 to apply for a review of the determination issued in respect of the abovementioned case" 21Section 373(1) of the Legal Profession Act is in the following form: "(1) A party to a costs assessment who is dissatisfied with a determination of a costs assessor may, within 30 days after the certificate under section 368 (Certificate as to Determination) or 369 (Recovery of Costs Assessment) has been forwarded to the parties that sets out the determination of the costs assessor or within such further time as the Manager, Costs Assessment may allow, apply to the Manager, Costs Assessment for a review of the determination." 22The grounds for the making of that application for further time were then set out. Those grounds were in these terms: "1. The Respondents first found out about the determination when they were served on 7 November 2010 with the Bankruptcy Notice issued by the Official Receiver on 26 October 2010 ... . 2. The Certificate of Determination of Costs which the costs assessor issued on 17 May 2010 and which your office posted ... in late June 2010 was returned to your office undelivered ... . 3. On or about 12 November 2010, the Respondents asked your office to make available to them a copy of the Assessor's determinations and reasons for determinations. They were advised that the file papers had gone missing. The papers were eventually made available to the Respondents on 26 November 2010. 4. The Respondents have presented an arguable case for review on the merits (see the Application for Review attached hereto) and would have applied for review on time if they had received the determinations on time. 5 The Respondents will be denied justice of this application for further time is declined." 23At the time the costs assessor issued the Certificates of Determination, he also delivered reasons for his determination. Included as part of the application made to the Manager, Costs Assessment, was a statement of the grounds upon which the Khans made an application for review of the determination and the reasons. It is only necessary for the purposes of this judgment to record two of these grounds namely: "3. ... the Review Applicant contends that the Assessor's conclusion that the work performed by the Review Respondent was performed in a reasonable fashion is not correct as it appears to be based solely on the Review Respondent's self serving statement in their bill of costs and not on a proper examination and evaluation by the Assessor of the work actually performed by the Review Respondent in respect of the SA Farmers Fuel matter. 4. The Review Applicant contends that, contrary to the Assessor's finding, the Review Respondent's fees ($14,695.50) were disproportionate to the claim ($11,458.56). The Review Applicant further contends that the Assessor, in reaching his conclusion regarding proportionality, failed to have regard to the question of whether the instructions given by the Review Applicant to the Review Respondent were instructions based on adequate legal advice provided to the Review Applicant by the Review Respondent as to the legal work reasonably required for the conduct of the matter in a timely, efficient and cost effective manner." 24By letter dated 15 December 2001, Mr Dean Bosman, a solicitor of Mercantile Legal, who was acting for Ms Mattila, wrote to the Manager, Costs Assessment putting a number of submissions in opposition to the application made for an extension of time. 25That letter included the following submissions: "We are instructed to strenuously oppose any extension of time on the basis that the respondents have deliberately delayed this matter since first receiving the invoices from our client. ... 3. Decision based on opinion As advised above, our client provided the entire file to the assessor. Consequently this ground is invalid as the decision was based on first hand inspection of the file, not opinion. 4. Proportionality The argument for proportionality is irrelevant for a debt of such a small amount. For the work that was done, the proportionality is irrelevant as a certain amount of work must be done in order to comply with instructions. Whether something is proportionate returns to the reasonability argument and whether the work was fair and reasonable. It is invalid to claim that work was not proportional on the basis of proportionality alone." 26Additional submissions were made which were to the effect below. It is necessary to remark that these submissions, with one exception, namely the date upon which knowledge of the determinations came to the attention of the company, are largely irrelevant to the issues to be determined by the Manager, Costs Assessment. These submissions were: "Our position remains that the respondents, by virtue of the statutory demand dated 30 June 2010, were aware of the decision of the assessor from this date. The Respondents did nothing about this notice save for filing an application to set aside the bankruptcy notice on grounds that they did not receive notification of the decision. Despite clearly having legal advice, or at least access to legal advice, the respondents filed an application with insufficient grounds for setting aside the bankruptcy notice, and sought, on the day the application was returnable, to have the matter adjourned on the basis that they did not have legal advice and could not get a barrister to appear before some time in January or February of 2011. When it became clear that this was unacceptable to the court, they instructed counsel to appear on 7 December 2010 in the Federal Magistrates Court, where he indicated the he had in fact been briefed before that day, however the brief was withdrawn. Potential divesting of assets We refer to the statutory demand served on KFCS, and note that there was no response to the statutory demand. Our investigations have shown that the service station owned by KFCS was sold this year. The fact that there was no response to the statutory demand suggests that the respondents would be content to allow the company to be wound up to avoid this debt. A property search of Irmi Khan shows that Ms Khan does not own any property in NSW. We believe that the Respondents' intent is to delay the proceedings in order to force our client to incur unnecessary costs of these proceedings. Finally, we note that the respondents have filed an application to set aside a bankruptcy notice based on the costs assessment. The matter has been adjourned and is to be heard on 21 December 2010. We request that a decision be made prior to this date so that the matter need not be further adjourned."

The Impugned Decision 27The Manager, Costs Assessment rejected the application for an extension of time for filing the application for review. By letter dated 17 December 2010, he said: " Request for Extension Review

1. I have the costs respondent's facsimile of 10 December 2010 and the costs applicant's submissions dated 15 December 2010.
2. It is clear that costs respondent has been duly notified of the outcome of the assessment, either by the notification at its registered office or to its solicitors, at least since June 2010.
3. Ordinarily when considering a request for an extension I have regard to the delay, the explanation for the delay and what is just and fair in the circumstances. I do not consider prioritising other matters or seeking reviews in order to obtain stays on judgments or other proceedings. Further, I do not consider the merits of any application.
4. In this circumstance it is apparent that the main purpose of seeking a review is to obtain a stay on bankruptcy proceedings.
5. Accordingly, the request is declined. Manager, Costs Assessment." 28It is convenient to note that the reference in this decision to "costs respondents" is to the Khans and to the "costs applicant" is to Ms Mattila.

Present Proceedings 29On 20 December 2010, the Khans brought proceedings in this Court by a summons seeking the following relief: "To set aside the decision made by the Manager, Costs Assessment [not] to grant further time for review of costs assessment, to process our application for review of determinations and allow an appeal." 30On that day, the matter came before Justice Adams when his Honour was asked, on an interlocutory and ex parte basis, to make, and did make, orders which had the effect of staying the determination of costs until further order and providing for service of the summons. 31As a consequence of his Honour's orders, and two directions hearings, the matter came on before me for hearing, in the duty list, on 9 February 2011.

The Case for the Khans 32The case for the Khans is that the Manager, Costs Assessment had a discretion to extend time within which their application for review could be filed, that the exercise of his discretion has miscarried, and the decision should be set aside. 33Section 4 of the Legal Profession Act defines the term Manager, Costs Assessment when used in Division 11 of Part 3.2 as: " ... the person holding office as Manager, Costs Assessment in the Attorney General's Department, and includes a delegate of that person." It is relevant to note that the Manager, Costs Assessment is not, in that capacity, an officer of, nor a part of, the Supreme Court. He is not a judicial officer. 34The Manager, Costs Assessment is engaged in an administrative task when deciding whether to extend time to lodge an application for review. 35Although s 373 of the Legal Profession Act makes provision for an extension of time to be granted, the legislation does not give to any party adversely affected by the exercise of the discretion of the Manager, Costs Assessment to grant, or refuse the grant of an extension of time, any right of appeal from that decision. 36However, the Supreme Court of NSW has jurisdiction to engage in judicial review. That jurisdiction is derived from the Third Charter of Justice of 1824 in which the Court was granted the same powers, including inherent powers, as the Royal Courts of Justice, which were the superior courts in England, to engage in such judicial review as derived from the common law. The existence of that jurisdiction was confirmed by the continuation of this Court by s 22 of the Supreme Court Act 1970 and is reaffirmed by s 23 of the Supreme Court Act : John Fairfax Publications Pty Ltd v District Court of NSW (2004) 61 NSWLR 344 at [25] per Spigelman CJ (Handley JA and M. Campbell AJA agreeing). 37The jurisdiction to engage in judicial review was traditionally exercised by the issue of writs of prohibition, certiorari, mandamus and the like. Section 69 of the Supreme Court Act now requires the Court to proceed by way of judgment or order and not by writ. 38The summons which was drafted by the Khans without the assistance of any lawyer did not clearly articulate the basis upon which relief was being sought. 39However, having regard to the terms of the Legal Profession Act, which does not provide any appeal mechanism, and the words which introduced the claim for relief, namely seeking that the decision be " set aside" , it is sufficiently clear that the relief sought by the Khans in the summons was grounded in judicial review and it is appropriate to proceed in this judgment on that basis. That was the basis upon which counsel for Ms Mattila approached the proceedings before the Court. 40The Khans argued that the decision of the Manager, Costs Assessment of 17 December 2010 was flawed and should be set aside because the decision-maker took into account irrelevant matters and failed to consider relevant matters. As well, the effect of the Khans' submissions was that the decision not to extend time was irrational or wholly unreasonable, because it was based upon an irrational and erroneous finding of fact.

Judicial Review 41It is convenient to state, relevantly for these proceedings and in a summary form, the principles relevant to judicial review of an administrative decision: (a) In principle, judicial review is quite different from an appeal. Judicial review is concerned with the legality of, rather than the merits of, the decision, with the decision maker and the process followed by that decision maker, rather than whether the decision was, on the merits, a correct one: Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue of the State of Victoria (2001) 207 CLR 72 at [19] per Gaudron, Gummow, Hayne and Callinan JJ, Kemper Reinsurance Co v Minister of Finance [2000] 1 AC 1 at 14-15 per Lord Hoffman; (b) The Court in undertaking a review of an administrative decision has a limited role. It is not the function of the Court to exercise the discretion vested in the administrator. Its role is to set limits on the exercise of that discretion, and an administrative decision made within the set boundaries cannot be impugned: Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 40-41 per Mason J; Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 at 228 per Lord Greene MR; (c) The proper construction of the relevant statute will determine what factors a decision maker is bound to consider, or else, may take into account. If the factors are not expressly stated, they must be determined from the subject-matter, scope and purpose of the legislation: Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at 505 per Dixon J; The Queen v Australian Broadcasting Tribunal; Ex Parte 2HD Pty Ltd (1979) 144 CLR 45 at 49-50 per curiam; Peko-Wallsend at 39 per Mason J; (d) The failure of a decision-maker to take into account a relevant consideration can only be made out as a ground for judicial review if the decision-maker is bound to have regard to that consideration: Peko-Wallsend at 39 per Mason J; (e) The fact that a decision-maker took into account an irrelevant consideration may also be a ground for judicial review. However, this ground will only arise if the decision maker was bound to disregard this consideration: See Ballantyne v Workcover Authority (NSW) [2007] NSWCA 239 at [113] per Basten JA; Peko-Wallsend at 40 per Mason J; Sean Investments v Mackellar (1981) 38 ALR 363 at 375 per Deane J. If the consideration of an irrelevant factor was insignificant in the context of the decision, a court will not necessarily be justified in setting aside the impugned decision: Peko-Wallsend at 40 per Mason J; R v Rochdale Metropolitan Borough Council; Ex Parte Cromer Ring Mill Ltd [1982] 3 All ER 761 at 769-770 per Forbes J; (f) Even if no particular consideration to which the decision maker had regard can be identified as erroneous, if the decision is, in the result, one which is so unreasonable that no reasonable decision maker could have made the decision, then the decision can be set aside: Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353 at 360 per Dixon J; Wednesbury at 229-230 per Lord Greene MR. In essence, an unreasonable decision is one for which there is no logical basis: Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611 at 640 [101] per Gaudron and Kirby JJ and at 654 [138]ff per Gummow J; (g) The question of whether, and the extent to which, illogical findings of fact can amount to a basis for judicial review, and if so, the foundational principle, and its boundaries, upon which review can occur remains unclear. However, it seems tolerably clear that demonstrably irrational fact finding can be a basis for judicial review: Re Minister for Immigration and Multicultural Affairs; Ex Parte Applicant S20/2002 (2003) 198 ALR 59 at [9] per Gleeson CJ, [54] per McHugh and Gummow JJ, [116], [127] per Kirby J; Australian Gas Light Co v Valuer- General (1940) 40 SR(NSW) 126 at 138 per Jordan CJ.

Discernment 42The Legal Profession Act does not make explicit any consideration which the decision maker must take into account, nor does it exclude from consideration any particular consideration. 43What the legislation does provide is a discretion which is at large and unfettered. In those circumstances, caution ought be exercised by this court in placing any fetter on the exercise of that discretion: See Klein v Domus Pty Ltd (1963) 109 CLR 467 at 473 per Dixon CJ; Pambula District Hospital v Herriman (1988) 14 NSWLR 387 at 400-402 per Kirby P. However, it is axiomatic, in the circumstances, that the exercise of the discretion must attend to the interests of justice. 44There are a number of features of the decision which, in light of the submissions of the Khans, merit comment: (a) Paragraph 2 : The Manager makes a finding articulated in this paragraph, which must depend upon the drawing of an inference that Mrs Khan (as opposed to the company) was duly served with, or else notified of, the decision of the costs assessor by the mailing of the documents to the registered office of the company. Even if this is deemed to be proper service under the Corporations Law, that law does not extend to deeming the service as being effective on a director, here, Mrs Khan. But, more particularly, in light of the fact that correspondence addressed to Mrs Khan and the company remained in the file returned and undelivered, and the statement of Mrs Khan that she had not received copies of the relevant documents until very shortly before the application was made, the finding of fact that Mrs Khan had been served with the document was not open to the Manager, Costs Assessment to make. There was no factual basis to support it, and the only factual material was against it. It was a wholly irrational finding of fact. There is also mention made of copies of the Certificates being sent to the solicitor for the Khans. But there was no material before the Manger, Costs Assessment to support that finding. (b) Paragraph 3 : The Manager, Costs Assessment says in this paragraph that he or she: " ... does not consider the merits of any application ..." . This is a clear indication that he has not considered the merits of the application made by the Khans when coming to his decision. Long accumulated case law on the question of an extension of time has always regarded the issue, of whether the applicant for an extension of time would have an arguably meritorious claim (or defence) if time were extended, as constituting one essential element for considering whether the extension ought be granted. In the circumstances of this matter, I would hold that this disregard of the merits of the application amounts to a failure to consider a relevant matter. An obvious example of what attention to the merits of the matter would have demonstrated is the error which I have identified earlier with the content of the second Certificate, which made a finding, contrary to the statute, that the Khans should pay the costs of the costs assessment. (c) Paragraph 3: As well in paragraph 3, the Manager, Costs Assessment expresses no conclusion, or even a view, as to what the interests of justice require in the circumstances of the application. His failure to articulate that principle and what the application of that principle warranted in this case is a demonstrated failure to consider a relevant factor. The mere reference to " what is just and fair ... " is wholly insufficient to address this factor. 45One of the submissions made by the Khans was that the impugned decision was " Wednesbury unreasonable". This unappealing, but regrettably all too commonly used, short hand description refers to the well known ground of judicial review for setting aside an unreasonable decision on the basis discussed earlier in this judgment. The Khans, in effect, submit that, having regard to the fact that the application was made, in the circumstances, promptly after Mrs Khan was notified of the costs assessor's reasons and decision, the fact that the application for review which was lodged, albeit out of time, included some grounds which were arguably of substance and merit, the fact that there was demonstrated prejudice to the Khans if the Certificates were allowed to stand and could be enforced without a review of the original decision, and the fact that there was no claimed or demonstrated prejudice to Ms Mattila in granting the extension of time, a decision to refuse the extension was so unreasonable as to justify the decision being wholly set aside. 46Ms Mattila submits that, on the contrary, the decision was within the limits of reasonableness. She submits that she will suffer prejudice because the enforcement steps which she has taken will be wasted and that the application for an extension of time was not bona fide. 47The enforcement proceedings which have been taken were based, at least in part, on an erroneous Certificate. No prejudice can flow from losing the benefit of those enforcement proceedings. To the extent that there may be other prejudice, that can be addressed by orders for costs, and the accumulation of interest which will flow from the circumstances of the application for review. Such prejudice could not, even if identified, be sufficient to justify the decision which was actually made, when proper regard is had to the interests of justice of both parties to the application. 48In light of my earlier findings, which are sufficient to lead to the decision being set aside, it is unnecessary for me to finally determine this submission. However, I do note that on the facts and the material available to be properly considered, I could find no rational argument which was put, and could be accepted, against the grant of an extension of time. 49As well, the Manager, Costs Assessment has held that the motivation of the Khans in making the application for review was solely, and unreasonably so, to delay the enforcement of the Costs Certificates by Ms Mattila. The Khans submit that this was not an available finding. They deny any such motivation. It does seem clearly to be the fact that the consequence of the late application for review was to delay the enforcement process. But that consequence alone does not permit of a rational inference that there was an intention to achieve that result. Such an inference, without more, and in the face of denials by the Khans, was arguably not soundly based and was arguably irrational. Again, it is unnecessary to finally determine this issue, in light of my earlier findings. 50In all of the circumstances, the decision cannot stand, and the Khans' application for judicial review must be upheld. The decision must be set aside.

Conclusion 51It is appropriate to draw together the conclusions to which I have come. (a) The decision of the Manager, Costs Assessment of 17 December 2010, in refusing to extend time for the lodging of an Application for Review, is an administrative exercise of a discretion against which there is no right of appeal, but in respect of which the Court can exercise its power of judicial review; (b) The Manager, Costs Assessment based the decision on a finding of fact, namely that the Khans had notice of the outcome of the costs assessment in June 2010 at the latest. I have determined that there was no basis for this finding of fact and that it was an irrational one. (c) The Manager, Costs Assessment failed to consider a relevant matter, namely what the merits of the underlying application for review were. If he had, he would have found that in one material respect, namely that the Certificate relating to the costs of the assessment was issued contrary both to the legislation and to the costs assessor's reasons for decision, with the result that there was a high likelihood that it would be set aside on a review. As well, he would have found that, at least, some of the grounds of the application for review were arguable; (d) The Manager, Costs Assessment failed to consider what the interests of justice required in all of the circumstances of the application for extension. This failure was a significant one, because had he done so, he would have found a very strong case in favour of an extension of time and no prejudice to Ms Mattila if the extension had been granted. 52On these bases, it is appropriate that the decision be set aside and that the Manager, Costs Assessment be ordered, in the light of these reasons, to reconsider the application of the Kahns for an extension of time to lodge their application for a review, in accordance with the law. 53I propose that the following orders be made: (a) Order that the decision of the Manager, Costs Assessment dated 17 December 2010 be, and hereby is, set aside. (b) Order the Manager, Costs Assessment reconsider the Application to extend time for lodging an Application for Review by the plaintiffs in accordance with law. (c) The defendant to pay the plaintiff's costs.

Procedural Irregularity 54After argument concluded, and prior to judgment, I formed the view that the Manager, Costs Assessment was a necessary party to the proceedings. 55Customarily, in a suit seeking judicial review, the decision maker is made a party to the proceedings. Ordinarily, the decision maker will submit to any order of the court and not take any active role in the determination of the suit: In this case, the Manager Costs Assessment has not been joined by the Khans. Counsel for Ms Mattila did not submit that this failure constituted an irregularity of a kind which would preclude the granting of any relief. 56Rule 6.24 of the Uniform Civil Procedure Rules 2005 permits the Court of its own motion to order the joinder of a party, where that person or body is a necessary party to enable the determination of all matters in dispute. 57Accordingly, on 15 February 2011, I listed the matter to ascertain the attitude of the parties. Neither objected and on that day I made orders which had the effect of joining the Manager, Costs Assessment as the second defendant.

Orders (1) Order that the decision of the Manager, Costs Assessment dated 17 December 2010 be, and hereby is, set aside. (2) Order the Manager, Costs Assessment reconsider the Application to extend time for lodging an Application for Review by the plaintiffs in accordance with law. (3) The first defendant to pay the plaintiff's costs.

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: 24 February 2011