McMillan v AGB Family Settlement & Andrew G Boog t/as Austen Brown Boog Solicitors

Supreme Court of NSW|2021-10-20|Before: Schmidt AJ

Solicitors: The Peoples Solicitors (Plaintiff) Austen Brown, Boog (Defendant) File Number(s): 2021/210749 Decision under appeal Court or tribunal: Local Court Date of Decision: 25 June 2021 Before: Magistrate Olischlager File Number(s): 2021/00051625

Judgment

Mr McMillan and Mr Darch seek to appeal a judgment of the Local Court dismissing their application to set aside a judgment entered in that Court on the application of their former solicitor, Mr Boog. The judgment concerned costs incurred when he appeared for them in proceedings brought in this Court, about a dispute over the operation of a company that owned a residential park where Mr McMillan and Mr Darch reside.
There had been a dispute between the parties over how much of Mr Boog's costs had been paid; whether they were excessive; and the $90,000 he held in trust to cover costs. Mr Boog applied to have the costs assessed under s 69 of the Legal Profession Uniform Law Application Act 2014 (NSW).
In December 2020 the costs assessor had given reasons for the certificate issued. They identified that the assessment concerned a May 2020 bill of costs for $69,620.39, of which Mr Boog claimed $20,406.21 had been paid, with a resulting balance of $49,341.99.
The assessor also explained the objections which Mr McMillan and Mr Darch had taken; their case that the $90,000 which they had already paid was more than enough; and why he had concluded that $48,694.43, plus interest remained unpaid, he having assessed the outstanding costs to be slightly less than Mr Boog had claimed, $69,548.20, including interest. The certificate reflected the assessed sum.

The parties' cases

It was accepted by Mr McMillan and Mr Darch that the Local Court could not review or set aside the costs certificate. But it was contended that it had power to set the judgment which had been entered aside, it having been made in Mr McMillan and Mr Darch's absence: Uniform Civil Procedure Rules 2005 (NSW) r 36.16.
Reliance was placed on Mr Boog's alleged lack of candour when he applied to have the judgment entered, about the dispute still lying between the parties over payment of the fees and the foreshadowed cross claim. His lack of candour was argued to be critical, because Mr Boog had an obligation to disclose facts adverse to his claim: Garrard v Email Furniture Pty Ltd (1993) 32 NSWLR 662 at 676-7.
In the result it was submitted that the appeal had to be upheld, it being unjust to permit the disputed judgment debt to stand, Mr Boog having been aware that there was a live issue between the parties about the payment of what he was owed in full. That had resulted in a material non-disclosure on his part, which required that the judgment be set aside: Northey v Bega Valley Shire Council [2012] NSWCA 28 at [16].
Consideration of r 36.15, which Olischlager LCM had raised in argument, was thus submitted to be irrelevant to the consideration of their motion.
Mr Boog's case was, in short, that the assessor had explained why his accounting of the costs he claimed and what had been paid should be accepted. The assessor had observed that Mr Boog should not seek registration of a judgment for any more, notwithstanding that the certificate issued for the assessed costs was for a greater sum.
Accordingly, having billed total costs and disbursements of over $139,000, of which $90,000 had been paid, Mr Boog had claimed payment of only what was outstanding when judgment was entered in the Local Court. That reflected the assessor's conclusions.
The motion had thus properly been refused, his Honour taking the view that the judgment, resulting as it did from the operation of this administrative scheme, rather than from proceedings between the parties in the Local Court, could not be set aside.
Mr McMillan and Mr Darch had availed themselves of the opportunity which the statutory scheme gave them to defend his assessment application, but they had chosen not to exercise the rights there given to challenge the certificate. On the case they had advanced in support of their motion, the conclusion which his Honour arrived at was thus open.
Mr Boog also argued that the result of granting the motion would have been to wrongly deprive him of the benefit of the assessment which he was entitled to have, in circumstances where there were no proceedings on foot between the parties in which the costs the subject of the certificate were in issue. There were thus no pleadings to which a defence or cross claim could respond, with the result that the appeal thus had to be dismissed, as Olischlager LCM concluded.

Issues

In issue between the parties was thus: 1. what his Honour actually decided; 2. whether leave to appeal was required and if it was, whether it should be granted; 3. whether his Honour erred in his construction of rr 36.15 and 36.16(2)(b) of the Uniform Civil Procedure Rules; 4. whether Mr Boog's claimed lack of candour could provide a basis for the application of the Rules, on the basis that there had been a material nondisclosure of the existence of a live issue; and 5. whether his Honour's conclusions were in the circumstances incorrect.

The Rules

It is convenient to begin with what the Uniform Civil Procedure Rules provide. Relevantly: 36.15 General power to set aside judgment or order (1) A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith. (2) … 36.16 Further power to set aside or vary judgment or order (1) … (2) The court may set aside or vary a judgment or order after it has been entered if - (a) it is a default judgment (other than a default judgment given in open court), or (b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or (c) in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order. (3) … (3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered. (3B) Within 14 days after a judgment or order is entered, the court may of its own motion set aside or vary the judgment or order as if the judgment or order had not been entered. (3C) Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B). (4) Nothing in this rule affects any other power of the court to set aside or vary a judgment or order.

What was decided?

In written submissions below it was complained that Mr Boog had lacked candour when filing for the default judgment, his affidavit not having disclosed the dispute over payment of the fees and that even if the costs he had charged were reasonable, the money was wasted because they had been wrongly advised and the service Mr Boog provided was never likely to achieve the result they wanted.
His Honour raised with Mr Vogel, who appeared for Mr McMillan and Mr Darch, his concerns with the case so advanced under r 36.16.
He explained his concern, the judgment having been entered not as a default judgment of the Court, but as the result of the administrative process provided by the Legal Profession Uniform Law Application Act. He also noted that Mr McMillan's affidavit had not advanced any documents which established the claimed payment of all outstanding costs, with the result that there was no basis for the exercise of any discretion.
His Honour also raised the possibility of the judgment being stayed, or directions being given in relation to enforcement, under s 135 of the Civil Procedure Act 2005 (NSW). But he indicated a concern with setting aside a judgment based on a costs certificate which was final, unless challenged before a review panel or the District Court. He also explained that he could not see what any defence could respond to, there being no triable issue in the Local Court, it having no jurisdiction in relation to the certificate.
In response to submissions about the Court's powers to set the judgment aside under r 36.16, his Honour also raised the need for evidence to be led of full payment of the costs, to establish that no debt was owed.
He also suggested that the more appropriate source of power in such a case would be r 36.15, because the complaint advanced was "probably a matter of procedural irregularity that a person issue a certificate in circumstances where the debt has been extinguished by payment". He was of the view, however, that the burden fell on the applicant to show that there was a basis for setting aside the judgment, in this case by the payment in full which Mr McMillan and Mr Darch claimed they had made.
The submission advanced for Mr McMillan and Mr Darch in response to these concerns was that what the Court rather had to consider under r 36.16 was Mr Boog's lack of candour when applying for registration of the certificate, given the parties' ongoing dispute. This was not accepted.
His Honour finally shortly held: "All right well in terms of the matter the Court is of the view that in respect of these matters the appropriate rule would have been 36(15). Ultimately it would only be on the basis the Court had clear evidence to indicate that the debt had been extinguished before it was registered. In those circumstances it would be contrary to bona fide on the part of the applicant to register such a certificate. Here, the Court has nothing other than a suggestion in evidence by Mr McMillan in his affidavit that he believes that there was payment. Of course however it would be if the case was that payment had been made the capacity to provide documentary material in support of such payment or bank records or some other detail of the fact that the payment had been made and made prior to the registration of the certificate with the Court. That evidence is not available. If I was turning my mind to 36(15) I would not be satisfied that there was any basis in terms of irregularity or lack of bona fides in terms the obtaining of the judgment in terms of 36(16). The Court notes that no decision was made by the Court, it is not a default judgment and in those circumstances there is no basis in terms of the interests of justice to set aside the judgment because ultimately there is nothing for the Court to determine in respect to the matters that are the subject of a costs certificate. In terms of any issues of cross-claims that are raised in the affidavit of Mr McMillan the Court is of the view that nothing in terms of the Court's orders today would prevent Mr McMillan from initiating his own statement of claim if he believed that he had an action against the respondent in separate proceedings rather than by way of cross-claim. That again, does not form any basis for the Court to be setting aside a judgment that has been recorded in the Court as registered. IN MY VIEW NEITHER UNDER S 36(15) OR 36(16) HAVE GROUNDS BEEN SHOWN FOR THE BASIS UPON WHICH THE COURT SHOULD SET ASIDE ANY JUDGMENT REGISTERED IN THE COURT. ON THAT BASIS, THE MOTION IS DISMISSED."

Is leave to appeal necessary and should it be granted?

There was no issue about what has to be established, in order for leave to be granted, if a grant of leave be necessary.
As explained in Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164 at [32]-[36], albeit in another statutory context, what must be established includes that an applicant must demonstrate something more than that the trial judge was arguably wrong in the conclusion arrived at. Ordinarily, leave to appeal is only granted in respect of matters that involve issues of principle, questions of general public importance or an injustice which is reasonably clear, in the sense of going beyond the merely arguable.
Further, ss 56 and 58 of the Civil Procedure Act require the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction made, to be considered, as part of the overriding purpose of that Act. That is, facilitating the just, quick and cheap resolution of the real issues in dispute.
The Local Court Act 2007(NSW) gives parties to proceedings before the Court in its General Division, who are dissatisfied with a judgment or order, a right of appeal to this Court on a question of law: s 39(1). In the case of an appeal on a ground that involves a question of mixed law and fact, or from an interlocutory judgment or order, however, leave of this Court is required: s 40.
Given his Honour's reasons for refusing the application and the issues which are raised by this appeal as a result, I am satisfied that leave is not necessary, but even if it were, it would have to be granted.

His Honour was correct in refusing the motion

I am also satisfied that Mr McMillan and Mr Darch did not establish a just basis for the orders which they sought, although they were correct in pursuing their application under r 36.16.
Rule 36.15 is concerned with a judgment or order made by a court "in any proceedings". As his Honour observed, Mr Boog had brought no proceedings in the Local Court. Under the Uniform Civil Procedure Rules proceedings can only be commenced by filing a statement of claim or summons: r 6.2. Mr Boog had filed neither. Nor had Mr McMillan and Mr Darch.
Judgment had rather been entered as the result of the administrative process provided for by the Legal Profession Uniform Law Application Act which Mr Boog triggered by his application for entry of the judgment. Accordingly, it was that process which arose for consideration on the motion.
Mr Boog's application had also not resulted in the giving of a default judgment.
Rule 36.16(2)(a) permitted an application to have a default judgment set aside. "Default judgment" is, however, defined in the Dictionary to be a judgment "given under Part 16".
Part 16 of the Rules is concerned with proceedings commenced by statement of claim and circumstances where a defendant is in default. That is defined in r 16.2 to be: (a) if the defendant fails to file a defence within the time limited by rule 14.3(1) or within such further time as the court allows, or (b) if the defendant fails to file any affidavit verifying his or her defence in accordance with any requirement of these rules, or (c) if, the defendant having duly filed a defence, the court orders the defence to be struck out.
It follows that the judgment entered was not a default judgment, there being no proceedings between the parties in the Local Court in which a statement of claim had been filed, to which any defence could respond.
Rule 36.16(2)(b), however, also empowered a judgment to be set aside when given or made in the absence of a party, whether or not the party had notice of the application for judgment. In the case of an application for entry of a judgment to enforce a costs certificate, there was no requirement to give notice of the application and no opportunity to file any defence to that application.
If such a judgment is to be challenged, it must be by way of an application under r 36.16.
In Calandra v Murden [2015] NSWCA 231, it was thus considered that it would be an appropriate exercise of the Local Court's discretion under r 36.16 to set aside such a judgment, after the certificate on which it was based was successfully challenged, either before a review panel or in the District Court. That was because the judgment would thereupon no longer have a legal foundation: at [19].
It was there also held that setting aside such a judgment would also accord with the exercise of the Local Court's implied power to properly to exercise its jurisdiction and to correct its record, which is acknowledged by r 36.16(4): at [21].
It follows that in this case the Local Court also had power to set the judgment entered on Mr Boog's application aside, either under r 36.16 or in exercise of the Court's inherent power, if a basis for the exercise of that power was established.
On their motion the onus thus fell on Mr McMillan and Mr Darch, as applicants, to establish a basis for the just exercise of that power.
As his Honour observed below, the Legal Profession Uniform Law Application Act specifies how an assessor's certificate can be challenged, namely, by an application for review made within 30 days: s 83(1). A certificate then issued by a review panel can also be challenged, with leave, to either the District Court or this Court: s 89.
If not so challenged the assessment is binding on the parties and no appeal or other assessment lies in respect of the determination: s 73. Accordingly, a party bound by an assessor's certificate has no right to challenge the certificate in the Local Court, after entry of judgment.
It follows that if the certificate has not been successfully challenged by the pursuit of an application under the Legal Profession Uniform Law Application Act, a just basis for the exercise of the power given by r 36.16 to set aside a judgment entered in order to enforce the assessment, cannot rest on the fact that there has been no opportunity for the parties to join issue over an ongoing dispute about whether all costs have been paid. That is an opportunity not contemplated by the statutory scheme.
But an application to set aside such a judgment can be made to the Local Court, on the basis that the requirements of s 70(5) of the Legal Profession Uniform Law Application Act had not been satisfied, touching as that also would on the legal foundation of the judgment.
That costs remained unpaid was a matter, it appears from the submissions below, which Mr Boog had addressed in his supporting affidavit, when he applied to have judgment entered, although his affidavit was also not in evidence. On this appeal there was no issue that then he deposed that the amount for which judgment had been entered had not been paid. That reflected the conclusions which the assessor had reached, but he did not disclose that Mr McMillan and Mr Darch still disagreed with the assessor's conclusions.
Ordinarily it may be for a solicitor seeking payment of outstanding fees to prove that they have not been paid. But on an application to set aside a judgment entered in the Local Court, which gives effect to an assessor's certificate, which is supported by an affidavit as to the costs remaining unpaid, his Honour was correct in concluding that the onus then lies on the applicant to establish a just basis upon which that discretion can be exercised.
In this case, that onus could have been met by evidence which established that contrary to what was deposed in Mr Boog's affidavit, the amount specified in the judgment had already been paid, s 70(5) only permitting entry of a judgment for "an amount of money specified in a certificate that has not been paid". Such evidence would also have established that there was no legal foundation for the judgment which had been entered.
In discussion his Honour pointed out that Mr McMillan's affidavit did not seek to establish this. That was not challenged in submissions below or on this appeal, nor was his affidavit in evidence in these proceedings, although affidavits which Mr Boog swore addressed such matters. While they were not objected to, they were strictly not relevant to what here arises to be determined. That is because the matters Mr Boog there dealt with were not in evidence in the Local Court.
His Honour thus considered that Mr McMillan's affidavit not attempting to establish the claimed payment of all of Mr Boog's costs, there was no basis for the orders sought. There was no error in that conclusion.
That situation seems to have been the result of a view that Mr Boog's claimed lack of candour about the dispute over whether all of his costs had been paid, was a sufficient foundation for the orders sought. What was being proposed, it appears, by the case advanced was that the evidence which would establish the payment in full, which it was claimed had been made, would only be advanced later, by way of the proposed defence and cross claim.
The motion, so advanced, was misconceived.
The onus fell on Mr McMillan and Mr Darch to establish an evidentiary basis for the making of all of the orders which they sought. They did not meet that onus, not having attempted to establish a basis for their claim that the costs the subject of the judgment entered to enforce the certificate had been paid, which would have established that there was no proper legal foundation for the judgment.
It could also not be overlooked that there were no proceedings on foot in the Local Court between the parties over Mr Boog's costs, payments Mr McMillan and Mr Darch claimed had made, or Mr Boog's alleged negligence. There had certainly been no statement of claim filed in the Local Court to which their proposed defence or cross claim could respond.
Accordingly, his Honour was also correct in concluding that the leave sought to file such pleadings could not be granted, with the result that the motion had to be dismissed.
It follows that this appeal must also fail.

An unidentified problem

I also note that while not raised by the cases which the parties advanced, it is pertinent that under the Uniform Civil Procedure Rules there is also a limited time within which an application to set aside a judgment after it is entered can be made. There is also no power to extend that time: r 36.16(3A) and (3C).
No consideration was given to this below, or in the submissions which the parties advanced on the appeal, even though the certificate had been issued in December 2020; there was no challenge by way of an application for review of the certificate, which had to be made within 30 days of its issue; judgment had been entered in February 2021; but the motion was filed only in April 2021, seemingly outside the time limit.
This appeal does not turn on this apparent difficulty, but it appears to be another reason why it could not succeed.

Costs

The usual order as to costs under the Rules is that they must follow the event. In this case that is an order that Mr McMillan and Mr Darch bear Mr Boog's costs, as agreed or assessed. Unless the parties' approach to be heard within 7 days, that will be the Court's order.

Orders

For the reasons given, I order that: 1. Leave to appeal be granted; 2. The appeal be dismissed; 3. Unless the parties' approach to be heard within 7 days, Mr McMillan and Mr Darch must bear Mr Boog's costs, as agreed or assessed.

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: 27 October 2021

Uniform Civil Procedure Rules 2005(NSW)rr 6.2, 16.2, 36.15, 36.16, Pt, r 36.16.

Civil Procedure Act 2005(NSW)s 56, 58, 135

Local Court Act 2007(NSW)s 39(1), 40

At a glance

Court

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Judgment (12 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (4)