The plaintiff appealed against two decisions of the Local Court of New South Wales relating to costs matters under the Legal Profession Uniform Law (NSW) and the Legal Profession Uniform Law Application Act 2014 (NSW) ("LPULA Act").
On 11 July 2022, I published my judgment where the first appeal against the decision of Milovanovich ALCM was upheld and the second appeal against a decision of van Zuylen LCM was dismissed: Miles v Slack [2022] NSWSC 926.
[3]
THE PRINCIPAL JUDGMENT
On the first appeal, I held that the operation of s 86 of the LPULA Act meant that the force and effect and operation of certificates made by a Costs Assessor (that is, the "Form C3" and "Form C4A" certificates) were suspended when the plaintiff made an application to the Review Panel: at [109]-[111]. This statutory suspension of the Costs Assessor's determination affected the ability to obtain a judgment of a Court by the filing of the costs certificate. I concluded that the judgments entered upon the filing of the certificates were irregular and could have been set aside under r 36.15 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"): at [115]-[118].
I found that the learned Magistrate made two errors of law, namely, that the reasons of the Magistrate were inadequate in circumstances where the issue was real and live, and that the Magistrate erred in finding that there was no utility in setting aside the judgment and thus erred in his exercise of discretion in refusing to set aside the judgment. The relevant parts of my consideration are extracted as follows:
[119] As noted above, the written reasons of the Magistrate stated:
The Court was of the view that the Judgment entered on the 16th October by virtue of the C4A Certificate could be set aside by virtue of Regulation 36.15 of the Uniform Civil Procedure Act, 2005.
[120] The Magistrate did not elaborate further and explain whether he meant by "could be set aside" a general reference to the scope of r 36.15 or that in the circumstances before him, the criterion for the operation of the rule had been met, namely, the "judgment" was irregular, illegal or against good faith. In any event, the Magistrate did not explain the basis for why the judgment could be set aside. Thus, if his Honour was attending upon the criteria for the operation of r 36.15, he did not explain whether the judgment was entered irregularly, illegally or against good faith (or a combination of these grounds). His Honour did not articulate the facts or circumstances that gave rise to the irregularity, illegality or acting against good faith. Although it is conceivable that his Honour likely believed that one of these three grounds were made out on the evidence, a bald conclusion in that respect does not satisfy the duty to give adequate reasons.
…
[123] The fact that my view may accord with the view of the Magistrate - that the judgment could be set aside - does not mean that the failure to give adequate reasons is not made out or should be blindsided. This is because, as Mason P stated in Beale v Government Insurance Office (NSW) (1997) 48 NSWLR 430 at 431, there is a principle that:
[T]here is a miscarriage where what is and is not disclosed involves a breach of the principle that justice must not only be done but must be seen to be done.
…
[126] In my view, the inadequacy of the Magistrate's reasons, in circumstances where the issue as to whether the judgments should be set aside, was real and live resulted in an error of law.
[127] It is true that the power to set aside a judgment or order is not an obligation to exercise that power. Rule 36.15 states that the "judgment or order…may…be set aside if" made irregularly, illegally or against good faith (emphasis added). This language demonstrates that, once it is shown that the judgment or order is irregular, illegal or made against good faith, the power to set aside the judgment or order is discretionary.
[128] In this respect, consideration as to the utility of making the order, as Milovanovich ALCM did, was available. Utility is one of many factors that should be considered when the Court exercises its discretion to set aside a judgment or order.
…
[130] … In circumstances where the amount owed is different, the proper course is to set aside the irregular judgment and allow the parties to seek a judgment that reflects the correct amount owed.
[131] The exercise of a discretion under r 36.15 may evoke a question of law if the exercise of the discretion is produced upon incorrect jurisdictional foundation (Collier v Director of Public Prosecutions [1994] NSWCA 54) or a failure to take into account a relevant consideration (El-Hadi v Australian Timbers (NSW) Pty Ltd [2021] NSWSC 501 at [19] (Rothman J)). However, it is unnecessary to consider that issue. Even if the exercise of the Magistrate's discretion involved mixed questions of fact and law, it is appropriate to grant leave to bring the appeal under s 40 of the Act. This is so because the Magistrate, by eliding over the criteria in r 36.15, appears to have failed to have regard to the significance of the irregularity in the judgment entered which, by virtue of his decision, remained extant.
[132] In that respect, I respectfully do not agree with the learned Magistrate that there was no utility in setting aside the judgment on the basis that the plaintiff was now seeking to enforce a different certificate. If a new judgment is going to be entered for the certificates of the Review Panel, there is, in my view, strong utility to setting aside the judgment given from the Costs Assessor's certificates, particularly when entered irregularly. This is because a judgment of the Court, until set aside, has legal consequences. A judgment allows the party in whose favour the judgment has been given to take advantage of various legal provisions. For example, the party can serve an examination notice to require the person bound by the judgment to provide answers or produce specified documents for inspection: UCPR r 38.1(1).
[133] Further to my earlier finding of legal error, I conclude the Magistrate erred in his exercise of discretion in refusing to set aside the judgment obtained by the defendant with respect to Form C3 and Form C4A.
[134] A conclusion of this character might typically result in a remittal to the Local Court. However, given the expenditure of time and resources on this question and that each party sought a resolution of the r 36.15 issue in this Court, it is appropriate for the Court to resolve the substantive issue. In all the circumstances it is appropriate for an order to be made varying the decision below so as to set aside the judgments entered on 16 October 2020.
On the second appeal, I found that the plaintiff had available the procedural step of seeking examination notices from the costs certificates made by the Review Panel (that is, the "Form C7" and "Form C8" certificates) and to obtain judgment in the Local Court for the amount payable. These certificates did not confront the same difficulties as the Form C3 and Form C4A certificates and there was nothing irregular in filing them. I held at [141]-[145] as follows:
[141] On the earlier factual background set out in this judgment, it is clear in my view that the defendant had available the procedural step of seeking examination notices in the context of Form C7 and Form C8. There is no evidence that the judgment obtained as a result of filing those certificates were irregular or against good faith. There was an entitlement to file the Review Panel's certificates in the Local Court to obtain judgment for the amount payable: LPULA Act ss 70(5), 87(2). The Review Panel's certificates did not confront the same difficulties as Form C3 and Form C4A, which had been suspended under s 86 of the LPULA Act. There is nothing irregular in filing certificates certifying costs that are payable to the person: Bevan v Bingham [2022] NSWSC 863 at [115] and [118]. Once that conclusion is reached then it follows that examination notices may be issued against a judgment by the defendant.
[142] Similarly, I do not consider that the initiation of process available by statute can properly give rise to a conclusion that the defendant is engaged in an abuse of process or, to use the expression within r 36.15, "against good faith".
[143] The application for a set-off arises through a different procedural course under ss 21 and 96 of the CPA. Nothing in those provisions is suggestive of them acting as a stay or limitation upon any of the processes under the LPUL or LPULA. Rather, the opposite is the case. The provisions appear to act in relation to proceedings where there is an action upon a debt as indicated by the text in s 21(1) of the CPA, which states:
If there are mutual debts between a plaintiff and a defendant in any proceedings, the defendant may, by way of defence, set off against the plaintiff's claim any debt that is owed by the plaintiff to the defendant and that was due and payable at the time the defence of set-off was filed, whether or not the mutual debts are different in nature.
[144] It may be noted that, in this case, the defendant contends that the plaintiff did not file a defence which adequately sought a set-off as contemplates by s 21(1) of the CPA.
[145] In these circumstances, I do not consider that the plaintiff has demonstrated legal error in van Zuylen LCM refusing to set aside the examination notices. There was no proper basis, in my view, as a matter of law, for the examination notices to be set aside as an abuse of process or against good faith pursuant to r 36.15 of the UCPR.
In relation to the second basis for the challenge to van Zuylen LCM's decision, I rejected the plaintiff's contention that set-off was available under s 96 of the Civil Procedure Act 2005 (NSW) ("CPA") because there are not "two or more judgments of the same court": at [153].
In relation to set-off under s 21 of the CPA, I found that the requirement in equitable set-off for mutuality was satisfied because the proceedings involve the same parties: at [154]-[156]. However, I concluded that set-off was not available at [156]-[159] as follows:
[156] I am satisfied that there is mutuality because the proceedings involve the same parties. However, there are three difficulties with obtaining relief under s 21 of CPA.
[157] First, it is doubtful from the evidence before me that there is a "debt" within the meaning of s 21(6) of the CPA. Sections 70(4) and (5) of the LPULA Act make clear that there is a difference between recovering a debt, which arises when the amount paid exceeds the amount specified in the certificate, and a judgment, which arises when the amount specified in the certificate has not been fully paid. This demonstrates that the legislature clearly intended that a judgment obtained under s 70(5) of the LPULA Act is distinct from a debt.
[158] Secondly, there is no evidence of the plaintiff (the defendant in the proceedings before Darke J) making a defence to set off the defendant's (the plaintiff in the Darke J proceedings) claim as required by the plain terms in s 21(1) of the CPA.
[159] Lastly, it is difficult to understand how the plaintiff's arguments, if made out, would affect the examination notices. There remains, as I have explained above, valid judgments in the Local Court from the filing of Form C7 and Form C8. Even if the Local Court had the power to set aside the examination notices, I see no reason why it should exercise that power given that they were made pursuant to proper judgments of that Court.
I concluded that the plaintiff had not demonstrated an error of law on the part of van Zuylen LCM's decision and the second appeal should be dismissed.
The issue of costs and proposed orders were reserved and the parties filed written submissions on those issues.
[4]
SUBMISSIONS OF THE PARTIES
The written submissions of the defendant can be summarised as follows:
1. There has effectively been one win and one loss for each party and the most appropriate route is that there be no order as to costs in either appeal, with the intention that each party bear their own costs.
2. On the first appeal, the orders sought were that there be no order as to costs and, in the alternative, any award made to the plaintiff is limited to the plaintiff's costs in the Local Court or otherwise as the Court sees fit. This is because the usual practice that costs follow the event may be departed from if the Court considers it appropriate to do so. There are three reasons for disentitling conduct:
1. The plaintiff's appeal has been prosecuted solely for the purpose of increasing costs recoverable and this is a technical victory.
2. The plaintiff's behaviour during the proceedings and conduct leading up to the proceedings was such that it was disentitling conduct because he has been highly aggressive, threatening or outright abusive in his correspondence to the defendant's solicitor and other parties.
3. The plaintiff has been self-represented and, although they may be entitled to recover reasonably incurred disbursement and expenses, they are not entitled to compensation for their time or skill.
1. On the second appeal, there should be no order as to costs and declarations issued that the Forms C7, C8 and C3 certificates remain extant and are effective or that the defendant is entitled to enforce the examination orders under those certificates.
2. The plaintiff sought a declaration that the "proposed offset amount arising from matter number 2020/00315254 issued in the Local Court of New South Wales in the amount of 24,255.60 is invalid as that certificate is presently the subject of an application for review and therefore its force, effect and operation are suspended and not offset.
The written submissions of the plaintiff can be summarised as follows:
1. The plaintiff is "absolutely and substantially the successful party to the Appeals". This is because the plaintiff "succeeded in eradicating the injustice that the plaintiff suffered in the Court below", "succeeded in eradicating the abuse of the legal process that the defendant and her solicitor deliberately carried out" and "achieved a vital Caselaw" that will "guide decision making in the lower courts to protect the general public from injustice".
2. It was alleged that the defendant's solicitor "unlawfully applying and obtaining judgment against the plaintiff by using unlawful Costs Assessment Certificates with the full knowledge". The plaintiff has personally suffered the consequences of financial burden. Costs should be awarded against the solicitor and the defendant.
3. There should not be a cost order against the plaintiff in the second appeal. The plaintiff acted reasonably in asking the Local Court to set aside the examination orders based on "bad faith".
4. The plaintiff denies the allegations of misconduct. Counsel for the plaintiff should be criticised for being "very abusive in the court room on the day the appeals were heard".
5. The plaintiff was represented by a legal practitioner and incurred substantial legal costs as a result of the defendant's action. An email sent from the plaintiff was attached that showed he requested that he proposed consent orders on 12 July 2022. The proposed consent orders were apparently rejected.
[5]
CONSIDERATION
I turn to the first issue of costs. There is a broad discretion as to costs: CPA s 98. The general rule is that costs follow the event: UCPR r 42.1. However, the Court has a discretionary power to depart from the general rule where there has been disentitling conduct: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at 88 [40] (Gaudron and Gummow JJ).
In Galati v Deans (No 3) [2018] NSWSC 1861, Ward CJ in Eq (as her Honour then was) summarised at [17]:
The power to award costs pursuant to s 98(1) of the Civil Procedure Act 2005 (NSW) is, subject to the rules of court and to statute, discretionary; it is well recognised that the discretion is a very wide one (Oshlack v Richmond River Council (1998) 193 CLR 72; 152 ALR 83; [1998] HCA 11; Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 322), though it must of course be exercised judicially (having regard to its statutory context, established principle and the circumstances of the relevant case; and the overriding statutory context in which this discretion falls to be exercised (that being the need for parties to conduct their proceedings with a view to the just, quick and cheap resolution of the real issues in dispute)). Costs orders are compensatory in nature, to reflect the vindication of the successful claim or defence thereof, not punitive (Latoudis v Casey (1990) 170 CLR 534; 97 ALR 45; [1990] HCA 59; Ohn v Walton (1995) 36 NSWLR 77).
In Commonwealth of Australia v Gretton [2008] NSWCA 117, Hodgson JA (with whom Mason P agreed) observed at [121] that:
[U]nderlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs.
That observation was cited, with apparent approval, by the Court of Appeal in Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34 at [98] (Gleeson JA with whom Macfarlan and Leeming JJA agreed).
I agree with the submission of the defendant that there has essentially been one "win" for the plaintiff for the first appeal and one "win" for the defendant for the second appeal. However, I reject the submission of the defendant that the plaintiff only had a "technical victory". If the appeals in this case had been heard separately, the general rule would militate that the plaintiff be awarded his costs for the first appeal and the defendant be awarded their costs for the second appeal.
The instant case is distinguishable because the two matters were heard together, represented by the same legal representatives and there is, at the very least, an intertwining of the issues insofar that the "Form C3" certificate was relevant to both appeals.
When I consider the proceedings as a whole, neither party can be said to be successful. There is, therefore, no basis for an order for costs in favour of either party by reference to that event: Sabouni v Revelop Building and Developments Pty Ltd [2021] NSWSC 123 at [8] (Black J). I reject the plaintiff's submission that he has "absolutely and substantially" won the proceedings because I have found that judgments may be enforced against him on the basis of the certificates made by the Review Panel.
I also note that the mere fact that the Court's judgment may possibly guide decision-making for lower courts is not a reason to award costs to a party. This is because it is inherent in the functions of this Court, being an appellate court from decisions of the Local Court, to provide guidance to the Local Court as to questions of law.
Although unnecessary to decide, I wish to make some remarks about the plaintiff's behaviour in his correspondence to the legal representatives of the defendant. The correspondence that is before me and the allegations made by the plaintiff in his written submissions against the defendant's solicitor and counsel are grossly improper, aggressive, abusive and, in some ways, scandalous. They are wholly inappropriate and should be admonished. Had it been necessary to decide, I would have been minded to not award costs or reduce the award of costs to the plaintiff on the basis of his conduct.
I now turn to the appropriate orders to be made. Apart from costs, the only issue contended by the parties were the orders to be made for the second appeal.
In my view, the defendant's submission that this Court should declare "that the three review certificates [Form] C7 2020/00346848, [Form] C8 2020/00346819 and [Form] C3 2020/00297573 remain extant and are effective" or "that…the Defendant is entitled to enforce the Examination Orders 2020/00[3]46848, 2020/00346[4]19 and [Form] C3 2020/00297573" is misconceived.
As I indicated in my judgment at [134], the judgments obtained with respect to Form C3 should be set aside. The Form C3 certificate is not effective. It remains suspended under s 86 of the LPULA Act. There is therefore no basis for examination orders to be made under that certificate. Therefore, there is no basis for those declarations sought in that respect to be made.
The declaration sought by the defendant in relation to matter number 2020/315254 is not a matter that is before this Court on appeal. The defendants did not explain why a declaration should be made in relation to that matter. It is therefore not appropriate to make the declaration sought.
[6]
ORDERS
For these reasons, the Court makes the following orders in relation to the first appeal:
1. Grant leave to appeal.
2. Appeal allowed with respect to the First Amended Notice of Motion dated 29 October 2020 for setting aside the judgments entered upon the filing of Form C3 and Form C4A (as defined by the judgment in Miles v Slack [2022] NSWSC 926) and costs of that motion.
3. Pursuant to s 41(1)(a) of the Local Court Act 2007 (NSW), vary the order of the Local Court to the effect that the judgments entered upon the filing of Form C3 and Form C4A are set aside pursuant to r 36.15(1) of the Uniform Civil Procedure Rules 2005 (NSW).
4. Pursuant to s 41(1)(a) of the Local Court Act 2007 (NSW), vary the order of the Local Court to the effect that there is no order as to costs and each party to pay their own costs in that Court.
5. No order as to costs and each party to pay their own costs on appeal.
In relation to the second appeal, the Court makes the following orders:
1. Appeal dismissed.
2. No order as to costs and each party to pay their own costs.
[7]
Amendments
20 September 2022 - Orders (4) and (5) of the first appeal (at [25]) amended pursuant to r 36.17 of the Uniform Civil Procedure Rules 2005 (NSW).
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Decision last updated: 20 September 2022