Khoury & Anor v Hiar & Anor

Khoury & Anor v Hiar & Anor - [2006] NSWCA 47 - NSWCA 2006 case summary — Zoe

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Facts 3 On 30 August 2002 Mr Hiar brought proceedings against Ms Khoury claiming relief under the Property (Relationships) Act 1984. Ms Khoury's solicitors applied to the Legal Aid Commission ("the Commission") for legal aid under the Legal Aid Commission Act 1979 ("the Act"), and on 13 September 2002 legal aid was granted from 30 August 2002. 4 The proceedings were heard in the District Court over a number of days in the period January-June 2004. Walmsley DCJ delivered judgment on 10 June 2004, holding in favour of Mr Hiar, and invited submissions on the orders which should be made to reflect his findings. His Honour heard submissions, and on 23 June 2004 made orders which included that Ms Khoury pay Mr Hiar's costs of the proceedings on a solicitor and client basis save in respect of two of the days, as to which his Honour made no order for costs. The costs were on a solicitor and client basis because on 19 September 2003 Mr Hiar had served an offer of compromise which he had bettered in the result and Pt 39A r 25(4) of the District Court Rules applied unless the judge otherwise ordered, which he declined to do. 5 By a letter dated 14 September 2004 Mr Hiar's solicitors provided an assessment of costs to the Commission. The assessment was not in evidence, but from the later bill of costs must have been well in excess of $15,000 and of the order of $50,000. 6 The Commission replied by a letter dated 24 September 2004 - "The grant of aid was effective from 5 September 2002. The Commission is not liable for costs incurred prior to that date. The provisions of section 47 of the Legal Aid Commission Act 1979 provide an indemnity for costs ordered against legally assisted persons. The Commission is liable to pay those costs subject to a maximum which has been revised by resolution of the Commission from time to time. The maximum application to the order in this matter is $15,000.00. Please confirm that your client will accept $15,000 in full and final satisfaction of their [sic] claim for costs against the Commission." 7 It was agreed before us that the correct date was 30 August 2002, not 5 September 2002. 8 The Commission's position was founded on s 47 of the Act, to be considered later in these reasons and conveniently now set out as it then stood - " 47 Payment of costs awarded against legally assisted persons (1) Where a court or tribunal makes an order as to costs against a legally assisted person: (a) except as provided by subsections (2), (3), (3A), (4) and (4A), the Commission shall pay the whole of those costs, and

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We confirm that our client will accept $15,000 in full and final satisfaction of its claim for costs against the Commission, but reserves his rights in relation to the balance of the costs payable by Ms Khoury under the indemnity costs order granted by Warmsley DCJ [sic]. We shall now seek an assessment of those costs in the Supreme Court of NSW." 11 On 3 November 2004 Mr Hiar's solicitors applied for an assessment of costs under the regime in Div 6 of Pt 11 of the Legal Profession Act 1987 ("the LP Act", since repealed; see now Div 11 of Pt 3.2 of the Legal Profession Act 2004). The bill of costs was for $53,281.16. Its items commenced on 4 July 2002. The charges to 30 August 2002 totalled $6,151 and disbursements attributed to dates prior to 30 August 2002 totalled $2,008.75, but the bill was for the whole of Mr Hiar's costs and the assessor was not asked to assess costs separately for any period for which Ms Khoury was not a legally assisted person. 12 By the application for an assessment of costs, if not otherwise, Mr Khoury's solicitors were made aware of the intention to recover costs from Ms Khoury. They submitted to the assessor that he should assess the bill at $15,000, as the maximum amount payable by the Commission pursuant to s 47 of the Act. He did not agree, by a letter of 21 January 2005 saying that he was assessing costs and s 47 was not concerned with assessment but with payment; further, s 47 had a number of exceptions and he did not know whether they applied. 13 The Commission must have been kept informed by Ms Khoury's solicitors. It wrote to Mr Hiar's solicitors on 10 February 2005, referring to its letter of 24 September 2004 and continuing - "I confirm that Ms Khoury, the legally assisted person in this matter, is given statutory protection by s47(1)(b) of the Legal Aid Commission Act 1979 (the Act) against paying costs ordered against her in this matter. The Commission is liable to pay those costs subject to a maximum which has been revised by resolution of the Commission from time to time. The maximum applicable to the order in this matter is $15,000.00. The Commission may exercise discretion and decline to pay those costs pursuant to s 47(4) or (4A) of the Act. The Commission has considered whether it is appropriate to decline to pay any part of Ms Khoury's costs, but has determined that this is not an appropriate case for the exercise of its discretion under s 47 (4A) and will pay the full maximum amount of $15,000. I am concerned to hear from Ms Khoury's solicitor that, despite the clear effect of section 47, you have indicated that you intend to recover the balance of your costs from Ms Khoury. I note that you have had your costs assessed by a Costs Assessor. Please confirm, in writing within 14 days of receipt of this letter, that you do not intend to take any action to enforce a costs order against Ms Khoury personally. Ms Khoury is indemnified by statute and is not liable for the balance of the costs. Once the Commission has confirmation that you do not intend to enforce a costs order against Ms Khoury and that your client will accept $15,000 in full and final satisfaction of their claim for costs against the Commission and Ms Khoury then the cheque can be drawn and forwarded to your firm." 14 The costs had not yet been assessed, but that is of no moment. Payment of the $15,000 was now required to be in satisfaction of the claim for costs against Ms Khoury as well as against the Commission. Mr Hiar's solicitors did not reply to the letter. 15 Some comments are appropriate at this point. First, the letter of 28 September 2004 from Mr Hiar's solicitors did not explain why they thought costs could be recovered from Ms Khoury. From the reference to indemnity costs there is a suggestion that they relied on s 47(4A), but without apparent attention to "those costs that the Commission has declined to pay" in s 47(4A)(b). Secondly, the Commission did take into account the operation of s 47(4A) - I will come to consideration of what its letter conveyed - but it does not seem to have given separate attention to costs incurred when Ms Khoury was not a legally assisted person. Thirdly, it is not easy to see how the Commission was entitled to make payment of the $15,000 conditional upon Mr Hiar giving up any claim against Ms Khoury for costs. There may have been a claim for costs incurred when Ms Khoury was not a legally assisted person, and in any event the Commission was not the arbiter of any entitlement to recover costs from her. 16 The assessor assessed the costs at $48,532.87. On 21 February 2005 he issued a certificate in that amount, in accordance with s 208J(1) of the LP Act. The effect of a certificate filed pursuant to s 208J(3) will also be considered later in these reasons, and the provision can conveniently now be set out so far as relevant (see now s 368 of the Legal Profession Act 2004) - "208J Certificate as to determination

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(4) … " 17 Ms Khoury's solicitors had written to the assessor on 14 February 2005, asking that the certificate include a reference to s 47 of the Act to the effect that the amount assessed was subject to its operation. The solicitors' letter foresaw that the effect of the certificate "would be to create a Certificate of Judgment which on its face (without reference to the operation of Section 47 to the Legal Aid Commission Act) would create a liability for a payment by my client"; that is one of the matters for later consideration. 18 The assessor did not include a reference to s 47 in the certificate, but in his letter sending the certificate to the parties said - "The Applicant should be aware of the operation of the Legal Aid Act [sic] and that the issue of the Certificates does not limit the operation of Section 47. THERE MAY BE RESTRICTIONS ON THE RECOVERY OF THE AMOUNT OF THE CERTIFICATE BY REASON OF THE OPERATION OF SECTION 47 OF THE LEGAL AID COMMISSION ACT." 19 On 24 February 2005 Mr Hiar's solicitors filed the certificate in the District Court, in accordance with s 208J(3) of the LP Act. No record of the judgment taken to have been entered was before us, but from other materials there was entry of judgment on that date for $48,532.87. 20 On 10 June 2005 Mr Hiar's solicitors obtained from the District Court the issue of a writ of execution against Ms Khoury's property. The writ of execution was obtained on a solicitor's affidavit stating that there had been no "[p]ayments made by or credits accrued due to, the judgment debtor in reduction of the judgment debt … "; it did not refer to the contingent payment of $15,000. By a letter dated 16 June 2005, received on 28 June 2005, the Office of the Sheriff advised Ms Khoury of the writ of execution, now for an amount (with costs and interest) of $50,160.90. It appears that Ms Khoury was not made aware of the judgment of 24 February 2005 prior to this time. 21 Ms Khoury's solicitors immediately approached the Commission, suggesting in a letter dated 29 June 2005 that "this matter should be brought to a head by approaching the District Court for Injunctive Orders in relation to the Enforcement of the Judgment Debt"; they said that it was "not tenable" for there to be a judgment "which on the face of it, is Enforceable in circumstances where your Legislation prevents same". 22 To this time the $15,000 had not been paid. We were informed that it was paid on the morning of the hearing in this Court.

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(a) Entitlement apart from the effect of the judgment 27 Mr Hiar submitted that s 47 of the Act was concerned with the relationship between the Commission and the legally assisted person, here Ms Khoury, and not with the relationship between the legally assisted person and the other party or parties in the litigation; he said that it did not affect his entitlement to recover costs from Ms Khoury. In this connection, and perhaps more widely, he submitted that his entitlement to costs was a fundamental right enlivening the principle that its curtailment by the legislature had to be "clearly manifested by unmistakeable and unambiguous language": Coco v The Queen (1994) 179 CLR 427 at 437; see also Board of Fire Commissioners v Ardouin (1961) 109 CLR 105 at 116. 28 The submission, which was made orally and despite recognition of s 47(1)(b) in the written submissions, can not be accepted. Section 47(1)(b) expressly provided that, except as provided by the enumerated subsections, the legally assisted person "shall not be liable for the payment of the whole or any part of those costs". "Those costs" were the costs in the opening words of s 47(1), the costs the subject of the order made against the legally assisted person. They were the same as the "those costs" the whole of which was to be paid by the Commission pursuant to s 47(1)(a). The Commission's obligation was then capped in amount in s 47(2), but it remained that the costs which the legally assisted person was not liable to pay were the costs the subject of the order. I doubt that Mr Hiar had a fundamental right to costs within the principle on which he relied - in many other jurisdictions costs are not awarded, and the order for costs was the discretionary exercise of a statutory power - but in any event the legislature made its intention very clear. 29 Mr Hiar's written submissions included that, while s 47(1)(b) "operates to discharge the liability of the legally assisted person", s 47(1) did not operate "to set aside that liability"; rather, it creates "a legal fiction concerning the payment of that liability". The submission appears to have been directed to identifying a liability for the purposes of an assessment of costs, or perhaps a liability underlying the judgment taken to have been entered on the filing of a certificate pursuant to s 208J(3) of the LP Act. As relied on by Mr Hiar, it appeared to contemplate a continuing liability, in conjunction with statutory relief from having to discharge the liability because the Commission was to discharge it. 30 The assessment was not challenged and, whether or not it was within the assessor's powers to determine that Mr Hiar was not entitled to recover from Ms Khoury costs in excess of the $15,000 and assess the costs at that amount, he did not do so. As will appear, in my view the words in s 47(1)(b), "not be liable for the payment of the whole or any part of those costs", were used in a slightly qualified way, but not with the consequence that the judgment taken to have been entered on the filing of a certificate pursuant to s 208J(3) of the LP Act negated the statutory prescript that the legally assisted person was not liable to pay the costs; and certainly not with the consequence that they had no effect as between the legally assisted person and the other party or parties to the litigation. 31 Unless one of the exceptions applied, Mr Hiar was not entitled to recover from Ms Khoury the costs ordered against her. On the facts, the two exceptions for consideration were s 47(3) and s 47(4A). 32 Section 47(3) brought a temporal limitation to the definition of a legally assisted person in the Act as "a person to whom legal aid is provided". It came to be accepted at the hearing that Ms Khoury was liable for the payment of the costs incurred when she was not a legally assisted person. The legal aid was granted on 13 September 2002, but it was not disputed that the "period during which [Ms Khoury] was not a legally assisted person" was the period prior to the date from which legal aid was granted, 30 August 2002. 33 Section 47(4A) came into play because the order for costs on a solicitor and client basis was made as a result of an offer of compromise made on 19 September 2003. There was enlivened a discretion in the Commission to decline to pay the costs to the extent identified in s 47(4A)(a). If it did so, by s 47(4A)(b) Ms Khoury would be liable to pay the costs the Commission had declined to pay. 34 Mr Hiar's submissions at one point included that Ms Khoury's liability would be for all the costs the subject of the order, not just such of the costs as the Commission had declined to pay. The submissions may also have included that the liability in s 47(4A)(b) was independent of an exercise by the Commission of its discretion to decline to pay costs, and was triggered only by the offer of compromise and consequent costs on a solicitor and client basis. I do not think either submission is correct. Section 47(4A) enabled the Commission to decline to pay, and to leave the legally assisted person to pay, costs which acceptance of the offer of compromise would have avoided, for example if the legally assisted person unreasonably declined to accept the offer of compromise. The costs involved were not all the costs the subject of the order. The legally assisted person's liability to pay costs was triggered by the Commission declining to pay all or part of the costs which acceptance of the offer of compromise would have avoided, and in the amount of the costs it declined to pay. 35 In accordance with Pt 39A r 25(4) of the Rules, the solicitor and client costs ordered by Walmsley DCJ were for the whole of the proceedings, not costs from the day on which the offer of compromise was made. The Commission could nonetheless decline to pay only costs incurred by Mr Hiar after the day on which the offer of compromise was made. Did it do so? By its letter of 10 February 2005 it conveyed that it did not decline to pay any part of Ms Khoury's costs and would pay the full $15,000. The expression "Ms Khoury's costs" in context meant Mr Hiar's costs as against Ms Khoury, which the Commission was obliged to pay up to the $15,000. The Commission did not decline to pay anything, and it was not suggested that it gave to Ms Khoury the notice or the information to which s 47(5) and (6) refer. There was no trigger for Ms Khoury's liability to pay costs; because there were no costs which, pursuant to s 47(4A)(a), the Commission had declined to pay. 36 Apart from the effect of the judgment, then, Mr Hiar was entitled to recover from Ms Khoury only the costs incurred prior to 30 August 2002.

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(b) The effect of the judgment 37 Mr Hiar submitted that s 208J(3) of the LP Act had primacy, and that because he had a judgment against Ms Khoury he could enforce it notwithstanding s 47 of the Act. This was the obverse of the submission by Ms Khoury and the Commission for the purposes of the orders in the nature of certiorari claimed in the summons. They submitted that s 47 prevailed over s 208J(3), so that there was no liability in Ms Khoury which could found a judgment, and that the judgment purportedly founded on her liability and the writ of execution to enforce that judgment were therefore both in excess of jurisdiction. 38 In my opinion, neither of the two extremes is correct. The LP Act enabled Mr Hiar to obtain a judgment through an assessment of costs and filing the assessor's certificate, but the judgment was subject to the statutory prescript that Ms Khoury was not liable to pay the costs. They may have stood a little uncomfortably, but the judgment and the non-liability stood together. 39 The starting-point was s 42 of the Act, providing that where a legally assisted person was a party to proceedings, an order as to costs in respect of the legally assisted person should be made "as if he or she were not a legally assisted person". The order for costs made by Walmsley DCJ was properly made, and his Honour was not thrust into excess of jurisdiction by the operation of s 47 so far as Ms Khoury was not liable to pay the costs. That is, s 42 not only contemplated, but also required, that the court make against a party an order for costs for which, by s 47, the party was not liable. 40 The order might not have been for costs to be assessed. His Honour could have ordered that Ms Khoury pay a gross sum instead of costs to be assessed (see Pt 39A r 3(2)(c) of the District Court Rules). Superimposed on the order would be the operation of s 47 so far as Ms Khoury was not liable to pay the costs. Quite apart from any judgment entered on the filing of a certificate pursuant to s 208J(3) of the LP Act, the court's order and the non-liability stood together. Thus, as earlier foreshadowed, the words in s 47(1)(b), "not liable for the payment of the whole or any of those costs", were used in a slightly qualified way. There could be an order for payment of the costs, but the words meant that the legally assisted person was not liable to pay them; the non-liability was qualified in that the words permitted the co-existence of the order for payment of the costs. 41 In the same way, the judgment taken to have been entered on the filing of the certificate was subject to the statutory prescript that Ms Khoury was not liable for the costs, and the judgment and the non-liability stood together. The effect of s 47 was superimposed on the judgment, which had no greater force than the order for costs which enabled the assessment of costs. The judgment did not make Ms Khoury liable, and enable enforcement, notwithstanding s 47 of the Act. But equally, s 47 did not negate the judgment (or the order for payment of costs), which remained effective so far as Ms Khoury was liable for the costs incurred prior to 30 August 2002. 42 What was the position of a legally assisted person if the party with the benefit of the order for costs proceeded as if there was liability for the whole of the costs? 43 I do not think s 47 precluded an assessment of the whole of the costs. Assessment of costs was concerned with quantification, not with liability. Depending on the various exceptions in s 47(3)(3A), (4) and (4A) of the Act, the legally assisted person might have been liable for some or all of the costs. An assessor could assess "the whole of or any part of the costs" (LP Act s 202(1)), but if the claiming party asked for assessment of the whole of the costs the assessor would assess the whole, including the part for which the legally assisted person might not be liable. The assessor might or might not have been entitled to decide whether or not the claiming party was liable to pay that party's legal representatives the costs claimed, see Wentworth v Rogers [2005] NSWSC 1431 at [20]-[29] and the cases there considered, but that would be part of assessment. I do not think the assessor had to, or could, enter into whether one or more of the exceptions applied, or decline to assess costs on the ground that the legally assisted person was not liable to pay them to the claiming party. 44 The legally assisted person, however, could resist any attempt to enforce payment of a gross sum ordered as costs or of assessed costs, or to enforce a s 208J(3) judgment. By statute or rules of court application could be made to stay execution of a judgment, including a costs order. At the material time a stay could be granted pursuant to Pt 44 r 5 of the Supreme Court Rules, s 136 of the District Court Act 1973 read with s 4(5), and s 57 of the Local Courts Act 1982; see now ss 67 and 135(2)(c) of the Civil Procedure Act 2005. That the legally assisted person was not liable for the payment of costs the subject of the order or the s 208J(3) judgment would have been a sound ground for a stay; and on the application for a stay any issue of the exceptions or otherwise as to liability for the costs could be determined, in the proper forum of a court. The non-liability would similarly have been an answer to any reliance on the costs order or the judgment in bankruptcy proceedings. Perhaps exceptionally, an injunction could have been granted to restrain action contrary to s 47 of the Act. 45 It might be seen as unsatisfactory that a judgment entered on the filing of a certificate pursuant to s 208J(3) of the LP Act did not carry the liability to pay which one would have expected of such a curial act. A purported judgment can also have effects on credit rating or in public estimation. But an order for costs which does not carry the liability to pay which would normally be expected was in-built in the Act. Disconformity between a court's order and liability to pay was accepted in the Act's approach, by which the liability of a legally assisted person to pay costs was not worked out when the court made its costs order, but was left for the superimposition of s 47. 46 The judgment, then, did not add to Mr Hiar's entitlement. He was still entitled to recover from Ms Khoury only the costs incurred prior to 30 August 2002.

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Relief by way of declarations and an injunction 48 Counsel appearing for the claimants resisted modification of the claim to an injunction by adding words to the effect "save so far as the costs were incurred prior to 30 August 2002", on the ground that the writ of execution was wholly bad because in excess of jurisdiction. I have not accepted that position, and I see no reason why, subject to what follows, the Court should not fashion an injunction qualified in that manner in order to give effect to its decision. 49 Mr Hiar submitted, in relation to the claims for orders in the nature of certiorari, that relief should be refused on discretionary grounds. He submitted that the Commission had no standing to claim the relief, so as to confine the discretion to Ms Khoury, and then that, when it became apparent in September or November 2004 that Mr Hiar was minded to recover costs from her, Ms Khoury "should have done something"; he said that she should be denied the orders because she had delayed in seeking relief. The submission was not expressly translated to the declaratory and injunctive relief, but Mr Hiar made clear his position that Ms Khoury should be left to apply in the District Court. 50 If an administrative procedure does not provide an opportunity for a party to establish and the court to give effect to a legal right, the court can more readily turn to its armoury of relief. In authorising entry of judgment on an assessor's certificate, without service of District Court process or any other opportunity for the judgment debtor to oppose its entry or to raise any legal ground why it should not be entered, the LP Act should not be understood as intended to preclude relief recognising the legal rights for which the registration procedure provides no opportunity. Mr Hiar came to accept that Ms Khoury could claim injunctive relief, and in my view his enforcement of the judgment can be controlled by an injunction so framed as to permit him to enforce it to the extent of his entitlement but no further. 51 I am content to assume that the Commission did not have standing to claim declaratory and injunctive relief (see Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd for the "special interest" requirement), but make plain that it is only an assumption. No doubt Ms Khoury could have acted more forcefully and earlier than she did, and when she did act (in practice, through the Commission) by bringing these proceedings she took what I have held to be a misconceived course. However, she made plain from the time of the application for assessment of costs her position that Mr Hiar was not entitled to recover costs from her, albeit without desirable attention to costs incurred prior to 30 August 2002. I do not think she so acted that injunctive relief should be refused on discretionary grounds. 52 It would be unattractive to send Ms Khoury away from this Court, and make the parties spend more money in an application in the District Court; it would contrary to the intent of s 63 of the Supreme Court Act that "all matters in controversy between the parties [should] be completely and finally determined and all multiplicity of legal proceedings concerning any of those matters avoided". An arguable case that the judgment and the writ of execution were in excess of jurisdiction explained the application to this Court for orders in the nature of certiorari, notwithstanding that I have not upheld that case. Although an application for declaratory and injunctive relief would ordinarily not be brought directly in this Court, it was understandably added at the hearing to the relief claimed, and this Court can grant the relief notwithstanding that the application would ordinarily have come before a single judge (see in particular s 51(2) of the Supreme Court Act). In the circumstances of this case, I do not think the discretion should be exercised against the grant of injunctive relief. 53 My reasons explain the grant of injunctive relief, however, which fully gives effect to the position between the parties. There is no need for the declarations.

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Judgment (52 paragraphs)

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Cases Cited (5)