Tetbury Pty Limited v John Francis Mahony trading as Mahony Law

District Court of NSW|2021-10-20

cie Defendant: Mr A Maroya

Solicitors: Plaintiff: Whitfields Solicitors Defendant: Mahony Law File Number(s): 2020/00355922

The plaintiff's Summons

The plaintiff, by Summons filed on 16 December 2020, both appeals and seeks leave to appeal from a ruling dated 28 February 2020 and a costs assessment dated 27 July 2020 made by Bruce William Bentley, a Costs Assessor.
The appeal grounds set out in the Amended Summons filed on 22 February 2021 revised the original grounds in terms of language, and are summarised in the plaintiff's written submissions of 25 June 2021 as follows: 1. Ground 1: "No costs were in fact in dispute as required by s 361(1) of the LPA 2004 at the time of the costs assessment process" (written submissions, paragraph 47). 2. Ground 2: "Irrespective of whether the defendant's legal costs were determined to be fair and reasonable under s 367(1) of the LPA 2004, no amount of legal costs could be payable to the defendant" (written submissions, paragraph 64). 3. Ground 3: "Failing to have regard to relevant principles of law establishing that there was no dispute as there was no entitlement to costs by the respondent for there to be a costs assessment process" (written submissions, paragraph 67).

The background to the costs assessment and to the seeking of a preliminary determination

The defendant filed an application for costs assessment on 29 August 2019 in relation to work carried out pursuant to a costs agreement entered into by the plaintiff and defendant on 23 April 2013. By reason of the date of the costs agreement, the repealed legislation applies.
The parties agreed that the costs assessor has set out, in his 28 February 2020 determination, in a very concise way, the relevant factual material up to the bringing of proceedings before the District Court (CB 23-25). That summary (which refers to the defendant as "the applicant") is as follows: "7.1 The applicant undertook work for the respondent, Tresedar Pty Ltd ("Tresedar"), Chris Evanian ("CE") and Hovig Evanian ("HE") during the period from April 2013 to September 2015. 7.2 The applicant says that the work was done pursuant to a costs agreement dated 23 April 2013 and sent by email to CE and HE, who were then directors of the respondent ("CA"). Chris Evanian disputes receipt of the costs agreement. There is no evidence before me as to Hovig Avanian's position on the matter. 7.3 The CA provided for acceptance by instruction. Instructions were subsequently given, predominantly by Chris Evanian. 7.4 The tax invoices were issued in the name of Tresedar solely but the applicant maintains that this was shorthand for the four clients. The respondent was the client with the main source of funds and was anticipated to be the payer for all invoices. Although most of the work was undertaken for Tresadar, some work was undertaken for the respondent. 7.5 The applicant provided services in relation to Supreme Court proceedings between Tresedar and Property Builders (Constructions) Pty Ltd ("PB") concerning the construction of commercial premises by PB for Tresedar. The Applicant also provided services in relation to a number of costs disputes with former solicitors, commercial documentation and general advice. 7.6 During or about September 2015 the applicant's retainer was terminated. 7.7 The applicant sought to wind up the respondent by service of a statutory demand dated 6 July 2016 Pursuant to the Corporation Act (Cth) for payment of three invoices and fees due to various counsel. The respondent brought the winding up proceedings to set aside the statutory demand. 7.8 On February 2017 Black J made orders in the winding up proceedings. His Honour reduced the amount of the demand by the amount of the three applicant's invoices claimed ($92,472.32) and a further reduction of in relation to counsels' fees ($3,590.00) but did not set aside the notice. 7.6 The proceedings were commenced by the respondent against the applicant. On 19 September 2017 the applicant filed a cross claim in the proceedings, which were at that time before the Supreme Court of NSW. 7.7 In the cross-claim the applicant sought to recover $320,044.29 made up of the amount of the tax invoices comprised in this application, being $139,478.79 ("applicant's invoices"), $180,565.50 for unpaid disbursement, largely counsel's fee ("Counsels' fees") and $46,234.67 for interest. 7.8 A third party brokered an agreement between the parties pursuant to which the respondent paid to the applicant $170,000.00 by three instalments from 24 October 2017 to 6 November 2017 ("settlement sum"). The basis on which the fund were paid is in dispute. The applicant says that they were first paid to the applicant's invoices and then to part of the counsel's fees pursuant to an agreement with the costs respondent (application p 44 par. [6]). The respondent says they were paid on account of counsel's fee only. The intermediary who brokered the payment was a creditor of the applicant and was paid $90,000 from the funds applied to the applicant's invoices. 7.9 The proceedings were transferred to the District Court and set down for hearing on 20 November 2018. 7.10 On 12 September 2018 the respondent asked the applicant by letter, amongst other things, to confirm that the proceedings were now for the recovery of outstanding counsel's fees, the applicant's invoices having been paid. On 13 September 2018 the applicant replied that it was correct that the applicant's invoices were paid and the applicant sought to recover counsel's fees. The applicant did not amend his pleadings prior to hearing. 7.11 The proceedings were heard over two days, 20 and 21 November 2018, before Judge Russell SC. In essence, the respondent argued that it had paid the counsel's fees with the settlement sum and that these were no longer an outstanding debt. The applicant argued this entitlement to ascribe the payment firstly to his invoices but, on the second day, sought to formally amend the pleadings to seek payment of his invoices in the alternative. Leave to amend was opposed and refused. 7.12 After lunch on the second day both parties agreed to settlement in the following terms: 1. Proceedings stood over until… AND THE COURT NOTES THE FOLLOWING 2. If Tetbury pays the cross claimant the sum of $20,000 by 12 December 2018 the proceedings are dismissed with no order as to costs. 3. If Tetbury does not pay the settlement sum of $20,000 to Mahoney Law by 12 December 2018 Judgment for the cross claimant in the sum of $20,000. 4. The settlement sum is to be paid to the cross-claimant without set-off, counter claim of deduction. 7.13 The respondent paid the sum of $20,000 to the applicant within time provided and the proceedings were dismissed. 7.14 On 29 August 2019 this [costs assessment] application was filed."
This ruling of 28 February 2020 is the first decision appealed from. The issues for preliminary determination were set out at paragraph 5 as being the following: 1. The tax invoices the subject of the application were asserted to have been paid (these were the counsels' fees). 2. A claim of res judicata arising from the dismissal of the proceedings brought by the cost applicant's proceedings in the District Court before Russell SC DCJ being discontinued or dismissed. 3. A similar claim, on the basis of Anshun estoppel. 4. A similar claim, on the basis of estoppel arising from the findings of Black J in the Supreme Court of NSW Equity Division proceedings (referred to by the parties generally as "the winding up proceedings".
The costs assessor, having set out the factual history outlined above, added the principle of finality and "limits on rights of appeal" at paragraph 8.3 of the reasons for determination, and then proceeded to make the following findings: 1. The principle of finality did not prevent the application being brought, as s 91(2) of the Civil Procedure Act required a finding on the merits (at paragraphs 9.2 - 9.6). 2. The principle of limits on rights of appeal was similarly not applicable (at paragraph 9.7). 3. Neither the winding up proceedings nor the proceedings before Russell SC DCJ gave rise to res judicata or issue estoppel. Dismissal did not preclude further action pursuant to s 91 of the Civil Procedure Act and, as the order of the court was neither final nor conclusive as to the ongoing costs issues between the parties, the costs applicant was entitled to bring an application for costs assessment (at paragraphs 9.8 - 9.10). 4. Similarly, the Anshun principle had no application in this matter (at paragraphs 9.11 - 9.15). 5. The costs applicant was not attempting to effect an object not within the scope of the process, namely using the costs assessment process for a purpose for which it was not designed, or seeking a collateral advantage beyond what the law offered to him, and there was therefore no abuse of process (at paragraphs 9.16 - 9.18). 6. There was no misleading and deceptive conduct. In fact the costs respondent's position on the payment of the applicant's invoice was "no less counter-intuitive than the respondent's claim to have paid two debts with the same money" (at paragraph 9.20). While the costs applicant's behaviour, in terms of the evidence he gave before Russell SC DCJ, may be a matter for referral to the appropriate authorities, that did not affect Mr Bentley's determination of the application or of the facts upon which it was based (at paragraphs 9.20 - 9.21). 7. The doctrine of approbate and reprobate did not go to evidence in any determination on the application. Inconsistent statements do not, of themselves, preclude the bringing of a costs application, particularly where the statutory form of the certificate enabled the costs assessor to specify the amount actually owing, which was reached by deducting the lesser amount actually paid (at paragraphs 9.22 - 9.24).
Having made those findings, Mr Bentley then proceeded to a determination, which is recorded in his reasons for determination of 27 July 2020.
In this determination, the costs agreement entered into by the parties was found by Mr Bentley to be valid (paragraph 7.6 of the reasons for determination) and the challenges to disclosures as inadequate were rejected. An application to set aside the costs agreement on the basis of failure to disclose failed, notwithstanding certain breaches being established (paragraphs 8.17 - 8.18 of the reasons for determination). No appeal is brought in relation to these findings.
In his earlier ruling, Mr Bentley had added in the counsels' fees, even though these had been paid, on the basis that "all of these costs are now in dispute" (at paragraph 11.4). Although this was challenged by Mr Gracie in oral submissions, the reality is that it is not uncommon, as Mr Bentley notes, for there to be some amount of costs which is prepaid, or undisputed, or both; what Mr Bentley in fact means, I consider, is that he was looking at the costs issues as between the parties as a totality. This is what he means when he sets out his method at paragraphs 11.8 - 11.11.
The balance of the reasons for determination relates to the assessment of the costs as well as the costs of the assessment pursuant to s 369 of the Legal Profession Act. Mr Bentley repeats that it is not necessary for him to enter into the controversy over whether payments were made on account of the applicant's tax invoices or counsels' tax invoices (at paragraph 12.4). What Mr Bentley determined was that the costs determined were $264,090.00, which left a balance owing of $85,211.32 (at paragraph 15.1). This amount (which would also be the amount on which interest on the determination should be calculated, although Mr Bentley declined to award interest: at paragraphs 14.1 - 14.5) was the amount payable by the costs respondent (at 12.4 and 15.1).

An overview of the parties' claims

It can be seen from the above that the disputes between the parties about costs resulted in the plaintiff making payments for a specific sum of costs (i.e. the barristers' fees, reduced to $170,000 and a further $10,000 towards the defendant's profit costs), but not for all of the fees being sought for the work done by the solicitor. Mr Gracie agreed that if the defendant had simply had those costs assessed in the usual way, "We wouldn't be here" (T 10). Instead, the defendant started proceedings in the District Court, not for his own fees, but for payment of counsels' fees, because he had appropriated the money given to pay counsel towards his own costs. In the course of that hearing, he told the court in his evidence that he was not seeking payment of his own fees, as these had been paid out of the $180,000.
The plaintiff submits that the costs assessor had no jurisdiction to assess the defendant's costs, because these costs were not "disputed" as required by s 361(1) of the Act. This is because there was no dispute about counsel's fees (which the plaintiff paid in full on 19 October 2017) and because of the nature of the defendant's District Court proceedings where he sued, not for his firm's fees, but only for the money owed to counsel, which the plaintiff had not paid to counsel but had instead used to pay himself. This results in what Mr Gracie called a "curious but no less legally binding outcome", the effect of which was to prevent the costs assessor assessing any "disputed" costs, because the defendant's own conduct, "involving a series of deceptions perpetrated by him", meant that his position before the costs assessor was "completely at odds" with the position he had taken in the District Court proceedings before Judge Russell SC (written submissions, paragraphs 6 and 7).
The defendant's written submissions describe Grounds 1 and 2 of the appeal (at set out in paragraph 2 above) proceed on the same footing, namely the plaintiff's assertion that there were no costs actually in dispute (as required by the Act) at the time of the costs assessment process because the defendant had effectively given the rights to the shortfall away because of his conduct of proceedings in the District Court in which, having been paid around one half of his costs (in the form of counsels' fees), he sought to enforce the balance, not by seeking a costs assessment, but by suing for the balance as a species of contract claim. Those proceedings were, however, not resolved but discontinued, on terms which the defendant submits cannot give rise to any form of estoppel, whether by operation of s 91 of the Civil Procedure Act or otherwise.
Mr Maroya notes that the defendant then set about claiming his costs by assessment and the costs assessor, accepting the reality that the plaintiff had only paid about half of the costs and disbursements properly payable, assessed those costs in the traditional manner and ordered the plaintiff to pay the shortfall between the full amount owed and the amount paid on behalf of counsels' fees (plus the $10,000 contribution towards other costs). Mr Maroya also describes Ground 3 as being the claim that the costs assessor erred by failing to have regard to a series of legal principles which would have established that there was no "dispute" and thus no entitlement to costs. He notes that those grounds are, effectively, those set out in paragraphs 4 and 5 of the Amended Summons.

The costs assessment process and appeals from costs assessments

Although not stated in the Summons, this costs appeal is brought under s 384 of the Legal Profession Act 2004 (NSW) ("the Act"). (The District Court has jurisdiction to hear s 384 appeals, but not appeals from party/party assessments brought under s 385, unless the hearing the subject of the costs assessment appeal was also conducted in this court). This Act continues to apply to practitioner/client (and third party) assessments and appeals where the client first instructed the law practice before 1 July 2015 (Legal Profession Uniform Law 2014 (NSW), Sch 4, cl 18), and to party/party assessments and appeals where the proceedings to which the costs relate were commenced before 1 July 2015: Legal Profession Uniform Law Application Regulation 2015, reg 59.
Section 384 provides: "384 Appeal against decision of costs assessor as to matter of law (1) A party to an application for a costs assessment who is dissatisfied with a decision of a costs assessor as to a matter of law arising in the proceedings to determine the application may, in accordance with the rules of the District Court, appeal to the Court against the decision. (2) After deciding the question the subject of the appeal, the District Court may, unless it affirms the costs assessor's decision: (a) make such determination in relation to the application as, in its opinion, should have been made by the costs assessor, or (b) remit its decision on the question to the costs assessor and order the costs assessor to re-determine the application. (3) On a re-determination of an application, fresh evidence, or evidence in addition to or in substitution for the evidence received at the original proceedings, may be given."
The costs assessment process is "neither wholly judicial, nor wholly adversarial, as there are strong elements of an inquisitorial nature involved": Bellevarde Constructions Pty Ltd v CPC Energy Pty Ltd [2011] NSWDC 55 at [31].
By reason of "the narrow context of statutory appeal for which s 384(1) of the LPA provides" (Reznitsky v District Court of New South Wales [2015] NSWCA 194 at [43] per McColl JA; Bellevarde Constructions Pty Ltd v CPC Energy Pty Ltd (2011) 12 DCLR (NSW) 304; Gorczynski v AWM Dickinson & Son [2005] NSWSC 277 at [22]), an important factor, in relation to s 384 appeals, is that legal error alone is insufficient.
The interrelationship between the costs assessment process and the bringing of proceedings for relief from the courts is analysed in Branson v Tucker [2012] NSWCA 310. The principles enunciated therein are central to the issues in this appeal.

Grounds 1 and 2

As noted above, Ground 1 is that the costs assessor had no jurisdiction under the Act as the costs were not in dispute, and that the assessment proceeded over this objection. Ground 2 is, effectively, that there could be no assessment of whether the costs were fair and reasonable because no amount of legal costs could be payable to the defendant as none were owed.
As Mr Maroya points out in his submissions (at paragraph 5), in the initial Summons, both Grounds 1 and 2 refer to s 367 and proceed on the same footing, namely that there were no costs in dispute (contrary to the requirements of the Act) at the time of the costs assessment process.
However, s 361(1) of the Act does not prescribe any method for identifying or enunciating a "dispute" about costs that are payable. It is a matter which a costs assessor is to be guided by the material placed before him for assessment, where s 359 of the Act enables the cost assessor to inform himself or herself about such matters as he or she deems fit.
The plaintiff's argument is that there was no "dispute" with respect to counsel's fees of $174,000 (the effect of what Mr Gracie calls the "finding" by Black J: written submissions, paragraph 47), the defendant told Russell SC DCJ that all his fees had been paid, and that therefore, although the single sum is attributed to each of these different sums owing, nothing is really owed. Great weight is placed upon the defendant's "lies" (written submissions, paragraphs 53, 54, 55, 56, 59, 60, 61) having resulted in this situation; the "mischievous machinations of the defendant" and "tissue of lies" which create the "legal fiction" (written submissions, paragraph 65) disentitle the defendant from resiling from these positions. The result is that there is "no utility in an assessment…as to whether the costs of the firm or counsel were fair and reasonable" as they were not merely not in dispute but not even owed.
These grounds misconceive the relationship between the parties' contractual rights and the entitlement to seek an assessment. As is set out in Coshott v Barry [2012] NSWSC 850 at [41] and endorsed in Branson v Tucker, these are not "either/or" rights, but coexisting entitlements. However the payment received by the defendant was to be characterised - whether as being for counsel or for the firm's fees - the total the plaintiff paid was actually only around half of the amount owing, in circumstances where the quantum of the costs and disbursements is now, following the administrative process of costs assessment, not in dispute.
The next stage of the argument takes Appeal Ground 6 into account. Once again, I note the provisions of s 361 do not contain a definition of what "disputed" costs (s 361(1)) may be. The assessor has powers under s 359 to proceed to assessment of all costs, as Mr Bentley himself noted, which I consider gave him the power to enlarge the costs in the manner that he did.
That method was as follows. Mr Bentley dealt with this question of around half of the total costs having been paid by requiring the defendant to file an Amended Application for the whole sum (i.e. not merely solicitors' fees but also counsels' fees), with the result that there is a bill of costs for "all if the legal costs charged to the respondent for the work done pursuant to the applicant's retainer for the period 30 April 2014 to 16 February 2015" (reasons for determination, 27 July 2020, paragraph 11.6). The parties were noted to be in dispute as to how the amount paid was properly to be "ascribed" (paragraph 11.8), but this was irrelevant, because the shortfall between what was paid and what was owed was the sum to which the defendant was entitled. The same sum could not operate to discharge both debts at the same time.

Conclusions concerning Grounds 1 and 2

As to Ground 1, for the reasons set out above, I am satisfied that the costs assessor did have jurisdiction, in that no error of law was made by the costs assessor in assessing the costs, contrary to the plaintiff's asserted basis that "none of those costs were in dispute". The costs assessor correctly identified that there were costs in dispute for the purposes of s 361 and proceeded in accordance with s 359 to enlarge the assessment to enable an accurate assessment of the shortfall between the costs in dispute and the payments towards costs made by the plaintiff.
Grounds 1 and 2 are accordingly not made out and, as is set out in more detail below, Ground 6 is similarly misconceived.

Grounds 3, 4 and 5

As the Amended Summons demonstrates, Grounds 3 and 4 and the first sentence of Ground 5 are entirely new. Unfortunately, Mr Gracie did not address Grounds 3, 4 or 5 in his written submissions, but he did speak at some length about the principles of "approbate and reprobate" and the other asserted errors of law in relation to estoppel which are listed in Ground 5.
Ground 3 is to the effect that the costs assessor erred by failing to have regard to the relevant principles of law applicable after the "legal costs had been litigated in District Court proceedings 2017/00136036", the effect of which meant that there was no dispute and thus no entitlement to costs by the defendant for there to be any assessment undertaken. Ground 4 goes on to refer specifically to whether there was a dispute about the shortfall being solicitors' or barristers' fees, in circumstances where the defendant is asserted to have told Russell SC DCJ that solicitors' fees had been paid in full and only barristers' fees were outstanding. Ground 5 is a list of the eight legal principles upon which the plaintiff relies.
Mr Maroya only dealt very briefly (at T 48 and 49 respectively) with Grounds 4 and 5, noting that this grounds assert, for much the same reasons, that the cost assessor erred in finding that the parties were in dispute as to which part of amounts already paid by the plaintiff to the defendant were to be, or should be, properly ascribed as either the defendant's legal costs or counsels' fees and then sought to apply a series of legal principles essentially of an estoppel nature to demonstrate why these costs, although otherwise owed, were not costs which the defendant was entitled to claim because of the manner in which he had gone about enforcing his entitlement to costs.

Determining the legal issues in Grounds 3, 4 and 5

As the parties' written and oral submissions confirm, they both focussed on Grounds 1 and 2, but these other grounds are really where the issues in dispute lie. Given the structure of the grounds of appeal, it is appropriate to deal with each of the asserted errors of law made by the costs assessor as identified in these Grounds together, in relation to Grounds 3, 4 and 5, although it should be noted that these principles are also asserted to be the underpinning for Grounds 1, 2 and 6.
I shall start with the principal challenge raised by the plaintiff during the oral submissions, namely the doctrine of approbate and reprobate and whether, either by reason of this doctrine or the need for election between contract and assessment as to remedy in the event of a claim for payment (asserted to have formed part of the ratio in Branson v Tucker), the plaintiff is estopped or barred from having his costs assessed. Although only item (g) in the list, it dominated Mr Gracie's oral submissions.
My concern about the adequacy of the analysis of the other principles of law listed in Ground 5(g) of the Summons led me to refer the parties to the fuller discussion of them in Tjiong v Tjiong. A summary of those submissions is set out towards the end of my consideration of these three grounds.

Approbate and reprobate

Mr Bentley (at paragraphs 9.22 - 9.23) sets out that the principle of "approbate and reprobate" is not a principle of law as such, but relevant to evidence in determination of the facts, adding that "inconsistent statements do not, of themselves, preclude the applicant from making this application". He goes on to note that this is supported by the statutory form of the certificate, which requires the assessor to state that, "Subject to allowance for amounts paid in respect of the relevant costs, the total amount specified in this certificate is payable", with an optional provision (not forming part of the certificate) for the costs assessor to state the amount that he or she has treated as paid. The costs assessor could, technically, determine the costs but make no finding as to the amount treated as having been paid, but that would simply lead the parties to further litigation when the judgment was registered in the court for enforcement, which was hardly a desirable situation and contrary to s 56 of the Civil Procedure Act (although noting that he was not subject to that legislation). This is why (as is challenged in Ground 6 of the appeal) a costs assessor may widen the ambit of the costs under assessment to include all costs, even those which the parties are not disputing, in order to arrive at a result which reflects the true position between the parties as to what is owing and what has been paid.
Mr Gracie submitted that the defendant was not entitled to have his costs assessed, for two reasons. The first of these was that it was not possible to sue in contract for fees and, after losing, to bring a costs assessment, because "[t]he process is not designed for that" (T 10), citing Branson v Tucker. The second is because it would amount to an "approbate and reprobate" situation. The result was that "[the defendant] chose to circumvent the process that is there on the base that people do the right thing, not the wrong thing" (T 60) and was not entitled to any assessment of his costs at all.
What does the term "approbate and reprobate" mean, and is it a doctrine recognised in the Australian courts? In Grundt v Great Boulder Pty Gold Mines Limited [1937] 59 CLR 641 (at 657), Latham CJ stated: "Where a person obtains advantages by relying upon rights which can exist only upon the basis of an assumed state of facts, he is not permitted thereafter to rely upon other rights in relation to the same person which are inconsistent with the existence of the rights formerly asserted."
This is because a person cannot say at one time that a transaction is valid, and thereby obtain some advantage because it gives an advantage he would not otherwise have, and then say, for example, that the transaction is void, for the purpose of securing some other advantage. "That is to approbate and reprobate the transaction", Latham CJ added, going on to explain that this is the general principle upon which estoppel is based (Thompson v Palmer (1933) 49 CLR 507 at 547 per Dixon J). The object of estoppel in pais is to prevent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission which, unless the assumption be adhered to, would operate to that other's detriment.
As Mr Maroya noted in his submissions, the doctrine of approbation and reprobation was initially part of Scottish law (the English equivalent was the doctrine of equitable election between estates: see Elder's Trustee and Executor Co Ltd v Commonwealth Homes and Investment Co Ltd (1941) 65 CLR 603, 617 - 618). It is, however, a doctrine which has been considered in Australia, although the judgments which do so generally refer to concepts of approbation and reprobation interchangeably with election, waiver and estoppel, so identifying the material elements of any independent doctrine of approbation and reprobation is not a straightforward task.
The different forms of estoppel which may arise are helpfully set out in Quanta Software International Pty Ltd v Quanta Systems Ltd [2004] FCA 1182 at [84] - [93]. There are, however, essential requirements for these principles to come into play; as the assessor correctly pointed out, it is not sufficient for there to be conflicting statements, even if one of them is made in evidence in court proceedings, to argue that these amount to "approbate and reprobate".
The first of these is that, whether one is speaking of estoppel at common law, in equity, or under a single overarching doctrine, evidence of "detriment" or "material disadvantage" is an indispensable requirement, as Beaumont J notes in Quanta Software International Pty Ltd v Quanta Systems Ltd at [93]. Another requirement is that there be a choice between two inconsistent courses of conduct or claims: Mandurah Enterprises Pty Ltd v Western Australian Planning Commission (2008) 38 WAR 276 at [118] (this decision was set aside on appeal to the High Court, but for unrelated grounds).
Mr Gracie submits that all that is necessary is the inconsistent statements. He argues here, as he did to Mr Bentley, that the court order dismissing the District Court proceedings (following the settlement between the parties) and/or the conduct of the defendant generally provide a bar to the entitlement to costs on the basis of a series of legal concepts, of which "approbate and reprobate" and estoppel in all its forms constitute the most significant.
The grounds of appeal reliant upon the doctrine or principle of approbate and reprobate are misconceived, for the following reasons: 1. First, there is no detriment. Mr Gracie's acknowledgement that the plaintiff "wouldn't be here" if the solicitors' costs had been assessed in the usual way is an acknowledgement that the plaintiff does in fact owe not only counsels' fees but also (subject to adjustments as to quantum because of the $10,000 part payment) the professional fees claimed by the defendant. The proceedings in the District Court were for recovery of unpaid sums, by way of breach of contract. After the District Court proceedings were resolved (on terms which did not include any deed or other compromise of liability), the defendant remained entitled to commence the administrative procedure of costs assessment to claim all the fees owing, whether these were his own fees or those of counsel, as long as he did not claim more than 100% of what was in his bills (and if he had claimed more than 100%, that would not be recoverable, although for other reasons). Any claim of estoppel on the basis of approbate and reprobate requires detriment, or material disadvantage of some kind. Clearly, that is not the case here (in fact, Mr Gracie acknowledges as much by describing the "windfall" to his client by being able to pay two debts with one sum as "anomalous"). 2. Second, there is no election between inconsistent rights. There are no inconsistent rights in the common law sense, in terms of bringing proceedings for breach of contract as opposed to seeking a costs assessment. Nor is there any provision in the Act requiring that a party select one or the other method of costs recovery (this is set out in more detail below, in terms of the discussion of the relationship between contract and assessment claims in Branson v Tucker). 3. Third, the assertion that the defendant "chose to circumvent the process that is there [namely not simply having the costs assessed in the usual way], on the base that people do the right thing, not the wrong thing" (T 12), which includes insinuations that Russell SC DCJ made findings about the impropriety of what the defendant had done, misconceives the circumstances in which a court would deny a remedy to a person because of lies or other inconsistent (and thus dishonest) conduct in relation to the same subject matter. This is a not uncommon problem in Family Court proceedings (Weldon v Levitt [2017] FCCA 3702 at [115] - [127]; see R Chisholm, "Exclusion of evidence inconsistent with earlier statements: the rise and fall of the Elias principle", (2001) 15 A J Family Law 1) and personal injury claims (Morvatjou v Moradkhani [2013] NSWCA 157), if one party has lied in court proceedings or to a tax authority about income. Courts nevertheless look at all the evidence, including the asserted false evidence, in order to assess the facts in all of the circumstances. 4. Fourth, for the reasons set out in more detail below, the principles concerning the various forms of estoppel are not applicable because there is no concluded court order or deed standing in the path of subsequent assessment of the balance of costs outstanding, a path remaining open for the reasons explained by the Court of Appeal in Branson v Tucker. 5. Fifth, for the reasons set out in more detail below, the concept of finality in litigation (which in my view forms no part of any doctrine of approbate and reprobate in any event) is not applicable. 6. Sixth, Mr Gracie's submissions fail to take into account the statutory framework in which the conduct asserted to amount to "approbate and reprobate" occurred, and in particular the provisions of s 91 of the Civil Procedure Act. While Tjiong v Tjiong does take this provision a little further along the lines he advocates, the longstanding reluctance of courts to interpret s 91 in a broad brush manner as constituting a final order is a significant barrier.
The next issue is whether, by reason of the Act or its interpretation in Branson v Tucker, there is some form of statutory recognition that the defendant was either forced to elect between an action for contract and the assessment of costs, or otherwise prevented from having his costs assessed at all by reason of the applicability of the Act to the steps he in fact took.

Branson v Tucker and the relationship between costs assessments and court proceedings

In Branson v Tucker, the Court of Appeal was considering a submission that might be seen as the reverse of that made here, namely that the costs assessment process effectively covered the field, and that there was no entitlement, where no assessment had been sought, to bring a claim in contract.
The facts in this case were as follows. The plaintiff, a barrister, sued for his fees in the District Court. It was too late for the defendant to have the fees assessed by the costs assessor, but the defendant filed a defence and cross-claim asserting, inter alia, overcharging. The plaintiff brought an application to strike out the defence and cross-claim, on the basis that Division 11 of the Act provided an exclusive scheme for costs to be assessed and that these claims could not be raised other than by assessment. This was rejected by the court, with Barrett JA noting (at [106]) that the Act did not provide an exclusive means by which costs could be challenged.
Barrett JA explained the relationship between the costs assessment process and the bringing of proceedings based in contract as follows: "126 A lawyer suing on a costs agreement to recover his or her remuneration brings an action in debt in the conventional way. The lawyer must plead the contract, including any implied terms for which he or she contends; and the defendant will likewise plead any appropriate defence - such as, for example, that the billed work was not done (so that a condition essential to the entitlement to be paid was not satisfied) or that the billed sum does not accord with the terms of the agreement. There is no reason why such proceedings should not incorporate a cross claim for alleged deficiencies in the work done of for some other relevant liability to which the person billed considers the lawyer to be subject. 127 The assessment process created by the Legal Profession Act, as it applies in a case of this kind, is no more than a means of quantification made available to the billing practitioner and the person billed. Either of them may resort to it or not as he or she chooses. The objective is to provide an efficient method of objective quantification by experienced practitioners and, in that way, to protect those upon whom lawyers impose charges and to regulate the conduct of lawyers. 128 If advantage is taken of the assessment procedure, the quantification it produces may, by the simple procedural step of filing the assessor's certificate of assessment in a court registry, be translated into a deemed judgment debt under s 368(5); and such a deemed judgment debt will supersede or operate to satisfy the contractual entitlement. Once a deemed judgment debt arises, there no longer exists any possibility of an action in contract to recover the lawyer's fees. 129 If, on the other hand, there is, for any reason, no quantification by means of the statutory assessment process, the matter falls to be dealt with in the same way as any other contractual claim or, if there is no costs agreement, on the basis of the statutory form of quantum meruit created by s 319(1)(c). 130 In the recent case of Coshott v Barry [2012] NSWSC 850, McCallum J succinctly described the interaction of the assessment system with contractual rights and obligations. She said (at [41]): "A solicitor's entitlement to lodge an application for a costs assessment is not a source of right or title in itself. It is an aspect of the regulation of the legal profession under the Legal Profession Act 1987. The Act creates an administrative mechanism for quantifying legal costs in a variety of circumstances . . . To the extent that it provides for the assessment of costs payable under contract, I do not think it alters the fundamental nature of the right and title to those costs."
The costs assessment regime under the Act is not the exclusive means to ascertain the reasonableness of solicitors' costs, which can also be addressed by a court if necessary: WKA Legal Pty Ltd v Gleeson [2018] NSWDC 73 at [31].
As Mr Maroya points out in his oral and written submissions (at paragraph 21), no findings of fact were made in the proceedings before Russell SC DCJ, the question of the defendant's entitlement to his unpaid professional fees was not determined, a cross-claim was rejected on case management grounds and the terms of settlement contained no bar to further action. In those circumstances, as the decision in Branson v Tucker clearly contemplates, it remained open to the defendant to avail himself of the costs assessment procedure.
Mr Bentley came to a similar conclusion (at 9.14 and 9.21), although not referring to Branson v Tucker. I see no error in law in his analysis of the plaintiff's entitlement to bring proceedings. The correctness of his view is confirmed by the principles enunciated in Branson v Tucker.

Res judicata, Anshun and estoppel

As noted above, Mr Bentley set out (at paragraphs 9.8 - 9.15) his reasons for rejecting the plaintiff's submissions on res judicata, issue estoppel and the Anshun principle (Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589)
Mr Gracie's written submissions do not refer to these principles beyond giving a page number (CB 331 ff) for his submissions to the costs assessor. As indicated above, his submissions to the costs assessor were put on the most general level and would have been of as little assistance to Mr Bentley as they were to me.
There is a helpful summary of the common law doctrine of estoppel in Clayton v Brant (2020) 95 ALJR 34 at [34], where Kiefel, Bell and Gageler JJ explain that the twin requirements of finality as well as fairness for litigants mean that the focus of the doctrine is on "substance rather than form". Absolute identity is not necessary; what must be demonstrated is a substantial correspondence between those rights. That is achieved if the rights are of a substantially equivalent nature and cover substantially the same subject matter. For example, a common law right to damages for personal injury has been held not to correspond to a common law right to damages for property damage arising from the same negligent conduct. These principles have not only been correctly outlined by Mr Bentley but, in my view, correctly applied.
However, this statement, although helpful, refers only to the common law; the proceedings in Clayton v Brant dealt with estoppel in Family Court proceedings. A relevant issue in these proceedings, in relation to res judicata and issue estoppel, is the applicability of s 91 of the Civil Procedure Act 2005 (NSW). This provision is relevant both to the proceedings before Judge Russell SC and to the winding up proceedings before Black J, where Mr Bentley (correctly, in my view) notes (at 9.10) that no findings are made that would bind another tribunal. (I also note the helpful analysis of these estoppel principles (interwoven with consideration of the principle of approbate and reprobate) set out in VACC Insurance v BP Australia [1999] NSWCA 427; (1997) 47 NSWLR 716.)
The parties did not refer to s 91 in their written or oral submissions, or to decisions which have considered its relationship with res judicata. There are relatively few such decisions because, as Darke J notes in Cannuli v Cannuli [2018] NSWSC 937 at [35]: "There does not appear to be any decision which deals comprehensively with the question of whether, and if so the extent to which, s 91 on its true construction applies to consent dismissals made pursuant to settlements of proceedings."
Darke J was considering a summary dismissal application and was not prepared, given the absence of authority, to hold that such a construction was untenable. His Honour noted that it remains the case today that the interpretation of s 91 as some form of res judicata is at best the subject of dicta (see also Livingstone v Mitchell [2020] NSWSC 1464 at [94] per Adamson J). In the absence of submissions from the parties as to these complex issues (and I note that Mr Bentley was not given this assistance either), I can do little more than note the absence of authority and endeavour to interpret s 91 as meaning what it says, although fortunately with the benefit of being able to draw upon the helpful observations of Parker J in Tjiong v Tjiong, an authority to which I referred the parties for this purpose.
While consent orders may set up a res judicata, the nature of those orders will determine whether that is the case. In the present circumstances, all that the consent orders provided was that, if payment of $20,000 was made by the due date, the proceedings would be dismissed with no order as to costs. That does not amount to a "determination of the merits" for the purpose of s 91(2) and does not suggest that the parties intended this order to finalise the proceedings between them.
As to Anshun, Mr Bentley noted that the test is one of reasonableness and sets out s 352 of the Act , which permits the assessment of the whole or any part of the legal costs, whether paid or not. He goes on to set out, at paragraph 9.14, the four reasons why he considers the Anshun principle has no application in this matter, adding (at 9.15) that quantification was not put in issue.
It is correct to say (as Adamson J did in Livingstone v Mitchell at [95]), that s 91 is subject to the principle in Anshun. However, I consider Mr Bentley's determination that Anshun had no application in this matter (at paragraph 9.15 of his determination) is correct, as costs quantification was not an issue in the proceedings before Russell SC DCJ; nor, Mr Maroya adds, did his Honour permit the cross-claim on this issue to go forward (for case management purposes, as opposed to lack of merit).
I am accordingly satisfied that the costs assessor correctly stated the principles of law in relation to Grounds 5(b) - (e) and correctly interpreted the effect of the dismissal of proceedings in accordance with the terms of settlement.

Finality

Mr Bentley considered the issue of finality at paragraphs 9.2 to 9.6. He noted the provisions of s 91 of the Civil Procedure Act 2005 (NSW) and, in particular, s 91(2), which required a determination on the merits, which had not occurred. Nothing in that provision, or in the terms of settlement, precluded the defendant from bringing fresh proceedings for the same relief, namely the recovery of the applicant's invoices and counsel's fees. The proceedings were dismissed conditionally upon the payment of $20,000, the purpose for which was unstated. Judge Russell SC was careful to say that some views he expressed did not represent "any concluded or event tentative view".
Mr Gracie submitted (T 54) that this was not the case, and that Judge Russell SC "clearly did form a view".
I do not accept this submission. No findings of fact were made and, perhaps more importantly, the terms of the settlement entered into did not seek to protect any right to such findings of fact. The terms of settlement left the door open for the defendant to take the course that he should have taken, namely the assessment of the whole of the fees. Mr Bentley did not err in his determination of this issue of law.

Abuse of process

The claim for abuse of process put before the assessor was that the application for assessment should be refused as an abuse of process (at 9.16).
Mr Gracie submitted to me that the conduct of the defendant was so disgraceful that, even if he were legally entitled to the amount assessed, he should not be permitted to claim it (T 24). I assume, from this brief description, that the species of abuse of process that he refers to is that I should quell the controversy between the parties according to law on the basis that this is some kind of "second bite at the cherry" (Batistatos v Roads and Traffic Authority (NSW) (2006) 226 CLR 256 at [59] - [61]).
This is essentially a restatement of the other arguments to the effect that the defendant had to elect whether to sue for breach of contract or have his costs assessed. As is made clear in Branson v Tucker, no such election exists; the entitlement to sue for breach of contract and to seek an assessment are not alternatives.

Other grounds

Ground 5(h) refers to "limits on the rights of appeal". Mr Bentley dismissed this ground on the basis that the need to exhaust appeal avenues is not applicable in circumstances where the Civil Procedure Act expressly allows the applicant to claim the same relief in fresh proceedings. Mr Gracie did not address on this issue.
This is a variant on the concept that the commencement of an application for costs assessment was not possible because of the proceedings before Russell SC DCJ, which had been concluded by a settlement which barred further action. For the reasons set out above, and conformably with Branson v Tucker, I do not accept that argument. Mr Bentley did not make an error of law in his findings on this principle.
One of the grounds of estoppel by representation referred to above included a claim of misleading and deceptive conduct (which the costs assessor rejected at 9.20 - 9.21). I have treated this ground as being a restatement of the estoppel by representation principles set out above.

Tjiong v Tjiong

After I had reserved judgment, Parker J handed down Tjiong v Tjiong [2021] NSWSC 1389, which helpfully summarises the relevant legal principles rather more fully than was the case in the application before Mr Bentley and the appeal before myself. I accordingly invited the parties to address me on the principles of law set out in this decision.
The factual situation described in Tjiong v Tjiong arose in very different circumstances to the present. Two children of a deceased person had substantially succeeded in an action against the executor, who was their uncle, in 2010. An appeal was dismissed in 2012. In 2021, the executor brought an application to set aside the judgment and appeal on the basis that they were tainted by fraud. An application to strike out the proceedings on three bases, one of which was res judicata, was successfully brought. The relevant portion, in terms of these proceedings, is the consideration of the effect of entry of orders for discontinuance or dismissal pursuant to s 91 of the Civil Procedure Act (at [164] - [181]).

The parties' submissions on Tjiong v Tjiong

Mr Gracie submits that this decision supports the propositions he made to the costs assessor at CB 330 - 333, "most notably the principle of finality and res judicata" (at paragraph 2). Examination of pages CB 330 - 333 reveals that these are the four pages of written submissions supplied to the costs assessor by Mr Gracie which, apart from referring to D'Orta-Ekenaike v Victoria Legal Aid, do not refer to any other decisions on these principles or to s 91 of the Civil Procedure Act at all. Mr Gracie then goes on to set out what his previous submissions were, and to repeat his assertion that Tjiong v Tjiong does not support the submissions made by the defendant.
Mr Gracie asserts that Tjiong v Tjiong is authority that a judgment by consent is final, particularly where there has been a settlement. This is particularly the case here, as the settlement involved the payment of money; non-payment of the settlement sum of $20,000 would have given a right to the Mahony Law to enter judgment for that sum against the plaintiff.
Mr Maroya submits that the fundamental difference was that the orders made in the District Court (and, for that matter, the winding up proceedings) did not amount to any determination about the defendant's entitlement to bring a claim for his unpaid professional fees as an administrative procedure, as opposed to bringing a claim in the court. Mr Maroya submits that an integral part of this was the consequence of Russell SC DCJ's disallowance, on case management grounds, of the amendment sought to be made by the defendant to his cross-claim, which had the consequence of preventing the defendant (for the District Court proceedings) from agitating his entitlement to his own professional fees (as opposed to the payment of counsels' fees). This means that the subject matter of the amendment cannot be res judicata, because the court did not permit this amendment even to be made, let alone litigated (compare Parker J's analysis in Tjiong v Tjiong at [168] - [181]). There never was a decision, let alone a final decision, about the defendant's entitlement to his unpaid professional fees.
As there was nothing in the consent orders demonstrating that these operated in diminution of the defendant's rights to avail himself of the costs assessment procedure, s 91(1) applies.
Mr Maroya further notes that the plaintiff's claims on all three species of estoppel are negatives by the long-established principle that there can be no estoppel against a statutory right if that runs counter to the social policy of the statute. The entitlement of a practitioner to have his costs assessed under the Legal Profession Act cannot be estopped because a solicitor went about it the wrong way (for example, starting proceedings for enforcement of a bill which had not been assessed).
Nor was it the case that the defendant's application for the assessment of his costs amounted to abuse of process. Mr Mahony's entitlement to his fees had not been disposed of, because the entitlement which he claimed was not the subject of determination before Russell SC DCJ, in that it was not permitted to be so (submissions, paragraph 17).
The cautiousness expressed in earlier decisions concerning s 91 remains a part of the reasoning in Tjiong v Tjiong. The proceedings leading to the res judicata must be clearly intended to dispose of the proceedings in their entirety, as Parker J notes at [167].
In addition, the dismissal of proceedings must be more than merely a dismissal on procedural grounds or even by consent, because the question then arises as to what the parties were in fact consenting to. The nature of that consent must be closely examined. In the present case, what was consented to was the end of proceedings and costs claims in relation to what appears to have been an aborted attempt to enforce a costs agreement by commencing proceedings in the District Court rather than having the bill assessed in the usual way (which, if it had occurred, would have meant that the plaintiff would not have raised these issues, as Mr Gracie stated more than once).
I have been greatly assisted by the careful consideration of s 91 by Parker J, as well as by the observations of Darke J in Cannuli v Cannuli and by Adamson J in Livingstone v Mitchell as set out above. There really must be orders which clearly intend to dispose of proceedings in their entirety for s 91 to be read in this broader way.
Mr Gracie also notes the references by Parker J to a party being legal represented (written submissions, paragraph 23). That cuts both ways. The plaintiff was represented in the proceedings as well. If he wanted to ensure that the settlement of the District Court proceedings brought finality, in the sense that he now did not have to pay the solicitors' legal costs which would be owing if the moneys paid for counsels' fees had not been appropriated to pay them, he could have sought appropriate orders at the time.

Conclusions concerning Grounds 3, 4 and 5

I am satisfied that no findings of fact were made in either the District Court or the winding up proceedings, and that the subject matter of this claim (namely whether a lawyer had a valid costs agreement for his own costs and if so, what was the amount on assessment) was not before either of those courts for determination. As the defendant's entitlement to his unpaid professional fees was not determined in those proceedings, by settlement or otherwise, then the costs applicant was still able, for the reasons explained by Barrett JA in Branson v Tucker at [127] - [130], to commence the appropriate administrative procedure for the assessment of those costs, and my reading of s 91 in the facts as found by Mr Bentley is that it does not assist the plaintiff.

Ground 6

Neither party referred to Ground 6 in their written or oral submissions, although Mr Gracie briefly referred to the costs assessor erroneously enlarging the costs assessment from the solicitors' costs initially claimed to include all costs and disbursements and in particular barristers' fees, even though these had been paid, as indicating that the costs assessor had misapplied the law in relation to estoppel generally.
As Mr Bentley set out in paragraphs 9.20 and 9.21 of the 28 February 2020 ruling, the costs respondent was effectively trying to argue that he had "paid two debts with the same money". Mr Mahony's firm's application for costs assessment came out of "convoluted" prior proceedings which included the payments of part of the disbursements, principally the barristers' fees. Mr Bentley was satisfied that the firm had made "considerable efforts" to explain the basis on which the payment of his invoices was in a state of controversy, adding that he did not ignore the comments of Judge Russell SC but that these did not affect the determination of either the facts or the law relevant to the costs assessment.
In paragraph 11.11 of his final assessment, (CB:9), Mr Bentley adds: "I refer to my comments at paragraphs 9.20 and 9.21 of my ruling of 28 February 2020 and state again that the consequence of the positions taken by the respondent across the course of the litigation over these fees is that it has paid both the applicant's invoices and counsel's fees with the same money, a position which I said was counterintuitive and which I reject."
It is common, where costs fall to be assessed, that some or even all of the costs have been paid and, in particular, that it is clear from those payments that what has been paid has been a specific sum for a specific cost or disbursement; that is the reason for permitting the assessment of costs to include amounts already paid or the subject of agreement, as set out in s 352 of the Act. In doing so, Mr Bentley was carrying out his functions as a costs assessor conformably with s 359 of the Act.
In those circumstances, there was no error of law by the assessor and Ground 6 of the appeal fails.

Conclusions concerning the six grounds of appeal

All six grounds of appeal have failed and, although an extension of time for the filing of the Summons should be granted, the Summons must be dismissed.

Legal error alone is insufficient

For the purpose of s 384, which is a narrow form of relief, legal error alone is insufficient; the error must be material to the determination. In Bellevarde Constructions Pty Ltd v CPC Energy Pty Ltd, Johnstone DCJ stated at [16]: "[16] Not only must a party who is appealing under s 384(1) establish an error of law, that party must also demonstrate that the error made justifies disturbing the assessment: Gorczynski v AWM Dickinson & Son [2005] NSWSC 277 at [22]. Thus it has been said by Associate Justice Malpass: "The onus borne by the plaintiff is not merely to demonstrate error as to a matter of law arising in the proceedings to determine the application but also to demonstrate that any such error is material to the determination": Honest Remark Pty Ltd v Allstate Explorations NL [2008] NSWSC 439 at [24]. ... [whilst there has been an attack on the expression of the reasoning process, it has not been shown that the determination itself was erroneous and should be disturbed ... The onus borne by [the plaintiffs] has not been discharged": Skalkos v Assaf [2002] NSWSC 1221 at [17]-[18]."
The defendant submits that it would not be in the interests of justice for the court to intervene in circumstances where there can be no doubt that the work was done in a proper fashion, in accordance with a valid costs agreement, in circumstances where there is no challenge to the quality of that work or the quantum as assessed by the costs assessor. Whatever the rights and wrongs of the defendant's attempt to enforce payment as a contractual claim, the plaintiff, who had the benefit of that work, should not be entitled to have it for free because of asserted misconduct or sharp practice.
This raises the question of whether the funds paid in relation to counsels' fees were the subject of fraudulent misappropriation (in that they were applied to the solicitors' fees instead) as claimed by Mr Gracie (paragraphs 23 - 25 of his submissions; CB 227 - 233). As indicated above, I accept Mr Maroya's submission that there was no Quistclose trust, deed, terms of settlement or other agreement the breach of which rendered the application of these funds to other outstanding payments an act of fraudulent misappropriation.
Accordingly, if the plaintiff had made out any (or all) of the grounds in the Summons, I would nevertheless have held that the error(s) made would not justify disturbing the assessment. The work was performed pursuant to a valid costs agreement and it is only the earlier attempted method of assessment of those costs which is asserted to amount to a bar to the recovery of costs which the plaintiff acknowledges would otherwise be payable for the assessed amount.

Costs

Costs should follow the event. I have granted liberty to apply.

Order: 1. Pursuant to UCPR r 50.12(2), extend time to the plaintiff to appeal under s 384 of the Legal Profession Act 2004 (NSW) from the determination of Bruce William Bentley dated 26 February 2020 and the costs assessment of Bruce William Bentley dated 27 July 2020. 2. Judgment for the defendant. 3. Plaintiff pay defendant's costs, with liberty to apply.

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: 17 December 2021

Legal Profession Act 2004(NSW)ss 352, 359, 361(1), 384

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