Tanilba Beach Pty Limited v JR & JB Pty Limited

Supreme Court of NSW|2018-02-28

Judgment

HER HONOUR: This judgment involves whether leave should be granted to issue a writ of execution.
By notice of motion filed 20 December 2016, the applicants seek an order that leave be granted to issue either a writ for the levy of property or a writ of execution against the judgment debtor.
The applicants on the motion are Reavill Farm Pty Ltd, Champions Quarry Pty Limited, Macabil Pty Limited, Jeffrey Francis Champion and Diana Christine Champion. ("the Champion Interests") The judgment debtor is John Llewellyn Burrell. ("Mr Burrell").
The Champion parties relied upon the affidavit of Jeffrey Francis Champion dated 13 December 2016 and a short affidavit of Diana Champion dated 13 December 2016. Mr Burrell relied upon his affidavits dated 22 December 2017 and 28 February 2018.
I have not addressed the issues raised by the Champion Interests in relation to the notice to produce. Mr Burrell was not given reasonable time to answer it.

Background

This protracted history of litigation is not in dispute. Mr Burrell is a practicing solicitor. His firm is BS Legal Pty Ltd t/as Burrell Solicitors and is an incorporated legal practice. ("BS Legal").

Judgment

On 24 September 2012, this Court entered default judgment against Mr Burrell personally, in favour of the plaintiff ("Tanilba Beach") in the sum of $780,264.32. In 2013, Mr Burrell sold his house and put proceeds towards paying off the judgment debt. The balance owing as at 26 March 2013 was $575,689.58.

The deed of assignment

Mr Burrell does not contest the validity of the deed of assignment. Nor does he dispute that he was provided with the notice of the assignment.
Under the terms of the deed of assignment, Tanilba Beach is the assignor and the Champion Interests are the assignees.
Clause 2.1 of the deed of assignment reads: "2.1 Assignment In consideration of the payment by the Assignees to the Assignor of the sum of $500,000.00 (Assignment Price), the Assignor assigns to the Assignees, jointly and severally, effective on the Effective Date its full, absolute and entire legal and beneficial interest in the Debt together with all interest which has accrued or which may accrue in the future on the Debt."
Clause 4 the deed of assignment provides: "Debt means the total amount owing by the Debtor to the Assignor under: 1. a loan agreement between the parties dated 5 February 2003; 2. a variation to the loan agreement between the parties dated 18 December 2003; and 3. Supreme Court NSW judgment entered on 24 September 2012 in favour of the Assignor against the Debtor in the sum of $780,264.32. The Debt as at 26 November 2013 is $575,689.58. Debtor means John Llewellyn Burrell. Effective Date means the date on which this Deed is fully executed."

Bankruptcy proceedings

In 2013, the Champion Interests sought to enforce the debt by way of bankruptcy proceedings. The history of the bankruptcy proceedings are as follows: 1. On 13 December 2013, the Champion Interests issued a bankruptcy notice to Mr Burrell. 2. Mr Burrell commenced proceedings in the Federal Circuit Court seeking to set aside that bankruptcy notice. 3. In July 2014, Manousaridis J delivered judgment in favour of the Champion Interests. Mr Burrell then appealed to the Federal Court of Australia. 4. In November 2014, the Federal Court made orders setting aside the bankruptcy notice.

Costs orders

Aside from the judgment debt, the Champion Interests are the beneficiaries of certain costs orders made by this Court and the Federal Court. Mr Burrell has personally obtained costs orders against the Champion Interests in proceedings in this Court before White J and the Court of Appeal.

Costs orders in favour of Champion Interests

Mr Burrell estimates that the Champion Interests are the beneficiaries of costs orders made against him in other proceedings totalling $185,000. They are as follows (Aff, Burrell 22 December 2017, [7]): NSWSC #2011/365912 Caveat dismissed 2014/75852 $23,165 FCA #2023-2013 Demand set aside Registrar determined $17,850 NSWSC #2013/386077 Claim withdrawn Estimate without bill $119,985 NSWSC #2016/280534 & 280543 Demand withdrawn Costs Ordered $10,000 NSWSC #2016/304129 & 304154 Demand withdrawn Costs Agreed $14,000

Costs orders in favour of Mr Burrell personally

On 24 March 2016, White J delivered reasons for judgment and made orders in proceedings 2011/365912 dismissing all of the Champion Interests' claims, other than an award of nominal damages ($20), against Mr Burrell and Burrell Solicitors Pty Ltd. On 21 April 2016, White J made a costs order that the Champion Interests pay 90% of Mr Burrell and Burrell Solicitors Pty Ltd's costs. Those proceedings had been on foot since 2011 and culminated in a final hearing extending over six days at which Mr Burrell was represented by both senior counsel and junior counsel: see Burrell Solicitors Pty Limited v Reavill Farm Pty Ltd [2016] NSWSC 303. ("the primary proceedings"). The Champion Interests appealed the decision in the primary proceedings.
On 28 June 2017, the Court of Appeal (Leeming JA and Emmett AJA with Bathurst CJ agreeing) dismissed firstly, the Champion Interests' application for an extension of time to appeal; and secondly, their appeal. Costs orders were made in favour of Burrell solicitors and Mr Burrell in both proceedings: see Reavill Farm Pty Ltd v Burrell Solicitors Pty Ltd [2017] NSWCA 156. ("the Court of Appeal proceedings").

Leave to issue a writ for the levy of the property or writ of execution

Rule 39.1 of the Uniform Civil Procedure Rules (2005) NSW ("UCPR") refers to the circumstances in which the issue of a writ requires leave. It is common ground that leave is required for the Champion Interests to issue a writ of execution. UCPR 39.1 reads as follows: "39.1 Circumstances in which issue of writ requires leave (cf SCR Part 44, rule 2) (1) A writ of execution may not be issued in the following circumstances except by leave of the court: (a) if there has been any change in the persons entitled or liable to execution under the judgment, whether by assignment, …, … (2) If leave is required, it may be applied for in the notice of motion for the issue of the writ of execution. (3) The motion for leave must be supported by the following evidence: (a) evidence that the applicant is entitled to proceed to execution on the judgment, (b) evidence that the person against whom execution is sought to be issued is liable to execution on the judgment, (c) if the judgment is for the payment of money, evidence as to the amount due on the date of the motion, (d) if subrule (1) (a) applies, evidence as to the change which has taken place, (e) if subrule (1) (b) or (c) applies, evidence that a demand to satisfy the judgment has been made on the person liable to satisfy it and that the person has not satisfied it. (4) Subrule (1) does not limit the operation of any other Act or law that requires leave for the issue of a writ of execution."
Mr Champion in his affidavit dated 13 December 2016, addressed and satisfied all the requirements set out in UCPR 39.3.

Whether or not leave is granted to issue a writ of execution is discretionary

Mr Burrell submitted that it is appropriate for the exercise of the discretion to refuse leave to issue the writ. The Champion Interests submitted that it is appropriate for this Court to exercise its discretion to grant leave to issue the writ.
Both parties referred to ss 56, 57 and 58(2) of the Civil Procedure Act 2005 (NSW) in support of their arguments that I should exercise my discretion in their favour. Section 58(2) relevantly reads: "58 Court to follow dictates of justice … (2) For the purpose of determining what are the dictates of justice in a particular case, the court: (a) must have regard to the provisions of sections 56 and 57, and (b) may have regard to the following matters to the extent to which it considers them relevant: (i) … (ii) the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities, (iii) the degree to which any lack of expedition in approaching the proceedings has arisen from circumstances beyond the control of the respective parties, (iv) the degree to which the respective parties have fulfilled their duties under section 56 (3), (v) the use that any party has made, or could have made, of any opportunity that has been available to the party in the course of the proceedings, whether under rules of court, the practice of the court or any direction of a procedural nature given in the proceedings, (vi) the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction, (vii) such other matters as the court considers relevant in the circumstances of the case. …"

Set off

Counsel for the Champion Interests referred to Kayley v Hothersall [1925] 1 KB 607 at 615 and 616, where the English Court of Appeal (Pollock MR, Warrington and Scrutton LJJ) held in exercising its discretion to issue a writ of execution that it may consider the state of accounts between the parties, including the existence of any cross claim or off setting liability which will extinguish the judgment debt.
Mr Burrell has prepared and served a party/party bill of costs in the sum of $253,610 for the Court of Appeal proceedings. It has been served on the Champion Interests.
BS Legal has issued an invoice dated 27 February 2018 to Mr Burrell for costs of the Court of Appeal proceedings, the final paragraph of that invoice says: "We confirm our agreement that a tax invoice will be issued to you, upon equivalent terms, for payment of the party/party bill of costs for the first instance proceedings before White J, once that party/party bill of costs is finalized."
So far as the primary proceedings are concerned, Mr Burrell estimates his costs to be approximately $680,000 against the Champion Interests. Mr Burrell estimates it will take him two weeks to prepare a bill of costs in relation to counsels' fees only in the Court of Appeal proceedings. He says that these costs are substantial given it was a six day hearing with both junior and senior counsel. He estimates that it will take him 12 weeks to prepare a bill of costs in relation to his costs and other disbursements given the complexity and length of the hearing. Mr Burrell is a sole practitioner and is not in the financial position to refer this matter to an experienced costs consultant for the preparation of the party/party bill of the primary proceedings.
The Champion Interest referred to Coshott v Barry & Board [2017] NSWSC 1435, where Fagan J stated at [19] that in assessing costs of a solicitor who has acted for himself, the court must take care not to allow items which would be irrecoverable if the solicitor and the client were separate, such as time which is in reality spent on the function of giving evidence as witness. I accept that if these costs are assessed, the total sum payable by the Champion Interests may be somewhat reduced.

Current position

Currently, the amount of the assigned judgment debt claimed by the Champion Interests, including interest and costs to 13 December 2016 and payable by Mr Burrell, is for the sum of $691,272.32.
The net amount payable by the Champion Interests to Mr Burrell in the primary and Court of Appeal proceedings is $680,000 plus $253,610. That totals $933,610. The net amount payable by Mr Burrell to the Champion Interests is $876,272.32.
If the amounts owing by each party are set off, then Mr Burrell comes out ahead in the sum $57,337.68 albeit it will probably turn out somewhat less.
The Court has inherent power to set off costs orders against other costs orders: see Australian Beverage Distributors v Evans & Tate Premium Wines Pty Limited [2006] NSWSC 560, White J at [68]; Lahoud v Lahoud [2012] NSWSC 284, Ward J at [79] ("Lahoud"); Deputy Commissioner of Taxation v Frangieh [2017] NSWSC 252, Harrison AsJ at [797] ("Frangieh"); Watkins Limited v Caicaria Pty Limited (1983) 78 FLR 417, Nader J at 430-431 ("Caicaria"); Gertig v Davies (2003) 85 SASR 226, Doyle CJ at 231-232 (with Mullighan J agreeing) ("Gertig"); Dodds v Premier Sports Australia Pty Limited (No 2) [2004] NSWSC 389, Palmer J at [38] ("Dodds"); Australian Beverage Distributors v Evans & Tate Premium Wines Pty Limited [2006] NSWSC 560, White J at [68]; and Lahoud at [72] and [79]. These cases establish that a set off of costs orders can be made against a judgment sum. However, not all of these costs and the judgment sum arise in the same proceedings so set offs may not be appropriate here. However, this Court may consider the state of accounts between the parties.

The Champion Interests' submissions

Relevantly, an issue in the hearing of this notice of motion is whether leave should be given to the Champion Interests to enforce an assigned debt against Mr Burrell personally.
The Champion Interests submitted that the effect of the terms of the deed of assignment is that they hold an existing proprietary right (being the entitlement to the fruits of the judgment) from Tanilba Beach. Assuming this existing proprietary right is vested in the Champion Interests immediately upon entry into the deed of assignment, to then deprive the Champion Interests the benefit of their interest under the deed of assignment is akin to depriving a judgment creditor of the fruits of a judgment debt obtained in its favour.
The Champion Interests submitted that, in line with the overriding purpose in s 56 of the Civil Procedure Act, the Court should not readily deny the Champion Interests their entitlement to the fruits of the judgment in favour of Tanilba Beach by refusing leave under UCPR 38.1(a) without a solid evidentiary basis to do so.
If Mr Burrell's bills of costs are assessed, the parties may owe each other almost the same amount. The issue here is whether I should exercise my discretion to issue the writ forthwith or, give Mr Burrell an opportunity to have his bills of costs assessed, assuming that he and the Champion Interests do not agree on amounts payable.
While it is true that the deed of assignment was executed on or around 26 November 2013, the Champion Interests say Mr Burrell's submission cannot be accepted when viewed against the background of what can only be described as long running and hard fought proceedings between the parties and the steps taken by the Champion Interests to seek to enforce the judgment debts assigned to them under the terms of the deed of assignment.

Mr Burrell's submissions

Mr Burrell submitted that the evidence established that, after considering the set off liabilities pursuant to the various costs orders, the net amount owed by the Champion Interests to Mr Burrell exceeds the amount of the assigned judgment debt. In the interests of justice and the overriding purpose pursuant to s 56 of the Civil Procedure Act, the Court should not permit the Champion Interests to enforce an assigned judgment debt the amount of which is wholly exceeded by sums they owe to Mr Burrell from costs orders.
It was argued that the enforcement of the assigned judgment debt in these circumstances would result in fruitless expenditure, a diversion of resources and further delay for both the parties and the Court. It would also be likely to provoke further applications to the Court, including an application for a stay upon the execution of any writ pending the finalisation of costs assessments (if agreement as to the amount of costs cannot be reached) and payment of the costs liabilities. It would also continue the dispute between the parties regarding enforcement and satellite litigation which is of little to no practical benefit between parties who have already been in litigation for many years. This is particularly unsuitable given there remains only one relevant issue between them, being the satisfaction of the costs orders already made.
The refusal, rather than the grant, of leave would therefore advance the objects of case management identified in s 57 of the Civil Procedure Act, being the just determination of the proceedings (s 57(l)(a)), the efficient disposal of the business of the Court (s 57(l)(b)), the efficient use of available judicial and administrative resources (s 57(l)(c)), and the timely disposal of these proceedings at a cost affordable to the parties (s 57(1 )(d)).
Mr Burrell says that the Champion Interests have not approached this application or the question of enforcement of the assigned judgment debt with the appropriate degree of expedition or in a timely manner (s 58(2)(b)(ii)). The assignment occurred in November 2013, yet the application for leave was not filed until December 2016 and has not been prosecuted with any degree of expedition. However, I think that the same can be said for Mr Burrell in that he has not acted expeditiously in preparing his bills of costs for assessment.
Mr Burrell submitted that the degree of injustice he would suffer if leave was granted exceeds that which would be suffered by the Champion Interests (s 58(2)(b)(vi)).
Mr Burrell says that no relevant prejudice would be suffered by the Champion Interests and that they do not or could not contend that the costs orders in their favour against Mr Burrell exceed the amount of costs payable by them to him. Mr Burrell submitted that if, contrary to the present estimates, the net amount of costs payable by the Champion Interests to him does not exceed the amount of the assigned judgment debt, the Champion Interests would be at liberty to make a fresh application for leave pursuant to UCPR 39.1. In the meantime, interest continues to accrue on the Champion Interests' judgment debt pursuant to s 101 of the Civil Procedure Act.

Consideration

I accept that the Champion Interests are owed the judgment debt. Mr Burrell sold his home to pay off some of that debt. If the judgment sum is paid later in time, the Champion Interests will be entitled to interest in the intervening period. I am satisfied that if I granted leave to issue the writ of execution now, Mr Burrell would suffer immediate injustice of enforcement against him of a judgment debt which will most likely be met by the costs orders made against the Champion Interests; and that injustice would be especially grave in circumstances where the timing of satisfaction of those costs orders is, of its nature, likely to be, to a significant degree, in the hands of the Champion Interests.
In the exercise of my discretion, I would allow Mr Burrell time to prepare his bills of costs for assessment. I allow Mr Burrell two weeks for the preparation and service bill of costs involving counsels' fees in the primary proceedings and 12 weeks for the preparation and service of the bill of costs comprising of the solicitor's costs and disbursements incurred in the primary proceedings. This will give the parties time to consider the state of accounts before taking any further court proceedings which will incur further costs to parties and occupy further court resources. I will stand the notice of motion over to 12 June 2018 and if Mr Burrell has not served the bills of costs for assessment by the specific dates, I may consider the issuing of the writ of execution forthwith. I note that Mr Burrell has consented to undergo mediation but at this stage, the Champion Interests have not.
Neither party was entirely successful in their application. Costs of the notice of motion filed 20 December 2016 to date are reserved.

The Court orders that: (1) Mr Burrell is to serve a bill of costs concerning counsels' fees in the primary proceedings on the Champion Interests by 23 March 2018. (2) Mr Burrell or BS Legal is to serve a bill of costs comprising of the solicitor's costs and disbursements incurred in the primary proceedings on the Champion Interests by 1 June 2018. (3) Costs of the Champion Interests' notice of motion filed 20 December 2016 to date are reserved. (4) The notice of motion filed 20 December 2016 is stood over to 12 June 2018 at 10.00 am for mention before Harrison AsJ for mention.

Amendments 06 August 2018 - Para [27] amended to read "... by the Champion Interests to Mr Burrell"

Para [42] amended by adding the word "not" after "has" and "served" 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: 06 August 2018

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Judgment (18 paragraphs)

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