FEDERAL COURT OF AUSTRALIA
Adelaide Bank Limited v Phontos [2016] FCA 824
File number: NSD 864 of 2016 Judge: ROBERTSON J Date of judgment: 19 July 2016 Catchwords: HIGH COURT AND FEDERAL COURT – bankruptcy courts – meaning and effect of “jurisdiction in bankruptcy, and that jurisdiction is exclusive” in s 27 of the Bankruptcy Act 1966 (Cth) – whether Court should grant remedies to prevent a party, who was a solicitor, in whose favour a costs order was made in the Supreme Court of New South Wales from pursuing an application for assessment of party/party costs under the Legal Profession Act 2004 (NSW) before a costs assessor because of that party’s subsequent bankruptcy – additional jurisdiction of Supreme Court of New South Wales under s 4 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) where a matter is within the original jurisdiction of the Federal Court by virtue of s 39B of the Judiciary Act 1903 (Cth) and therefore a “special federal matter” as defined in s 3 of that Act
BANKRUPTCY AND INSOLVENCY – where costs order in favour of a party, who was a solicitor, made in the Supreme Court of New South Wales – where that party subsequently became bankrupt – where that party applied for assessment of party/party costs under the Legal Profession Act 2004 (NSW) before a costs assessor –whether Court should grant remedies to prevent that party from pursuing that application
COSTS – purpose and effect of the statutory regime for costs assessment under Division 11 of the Legal Profession Act 2004 (NSW) – status of costs assessors appointed under s 390 of the Legal Profession Act 2004
Legislation: Bankruptcy Act 1966 (Cth) s 27
Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) ss 3, 4, 6
Legal Profession Act 2004 (NSW) ss 353, 355, 356, 390
Legal Profession Uniform Law Application Act 2014 (NSW)
Legal Profession Uniform Law Application Regulation 2015 cl 59
Cases cited: Armour v Mason [2002] NSWSC 464
Barwick v Goodrich [2011] NSWSC 1233; 255 FLR 245
Bobb v Wombat Securities Pty Ltd (No 2) [2013] NSWSC 757
Bobb v Wombat Securities Pty Ltd (No 2) [2014] NSWCA 261
Colbron v Freeman [2014] NSWSC 1210
Coshott v Barry [2012] NSWSC 850
Fewin Pty Ltd v Burke [2015] NSWSC 1411; 302 FLR 32
Jakimowicz v Jacks [2016] VSCA 42; 306 FLR 51
Kison v Papasian (1994) 61 SASR 567
Mateljan v HTT Huntley Heritage Pty Ltd [2016] NSWCA 20; 111 ACSR 277
Re Bankrupt Estate of Sharpe (1998) 80 FCR 536
Re Gillies; Ex parte Official Trustee in Bankruptcy v Gillies (1993) 42 FCR 571
Re Michell (Trustee); Lee (decd) [2012] FCA 1046; 207 FCR 96
Talacko v Talacko [2015] VSC 624; 305 FLR 353
Truthful Endeavour Pty Ltd v Condon (Trustee) Re Rayhill (Bankrupt) [2015] FCAFC 70; 233 FCR 174
Dates of hearing: 27 June, 19 July 2016 Registry: New South Wales Division: General Division National Practice Area: Commercial & Corporations Sub…
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- Case
- [2016] FCA 824
- Decision Date
CaseChat Overview and Summary
The court had to determine whether the Federal Court had jurisdiction to grant the remedies sought by the applicants to prevent Phontos from pursuing the assessment of party/party costs under the Legal Profession Act 2004 (NSW) before a costs assessor. The court also needed to consider the applicability of the Legal Profession Act 2004 (NSW) and the Legal Profession Uniform Law Application Act 2014 (NSW) in this context, as well as the effect of section 27 of the Bankruptcy Act 1966 (Cth) and the additional jurisdiction of the Supreme Court of New South Wales under section 4 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth). The purpose and effect of the statutory regime for costs assessment under Division 11 of the Legal Profession Act 2004 (NSW), as well as the status of costs assessors appointed under section 390 of the Legal Profession Act 2004, were also relevant to the case.
The court found that all parties agreed that the Federal Court did not have jurisdiction to make, or would make, an assessment of the costs in question. The court also held that the Legal Profession Act 2004 (NSW) applied to the case, as the proceedings to which the costs related commenced before 1 July 2015. The court noted that section 353 of the Legal Profession Act 2004 allowed a person entitled to receive costs as a result of a court order to apply for an assessment of those costs, and that section 355 provided that costs assessment must take place before any proceedings to recover the legal costs could be commenced. The court concluded that it did not have jurisdiction to grant the remedies sought by the applicants to prevent Phontos from pursuing the assessment of party/party costs under the Legal Profession Act 2004 (NSW) before a costs assessor.
The court dismissed the applicants' application and the first respondent's interlocutory application, and ordered that the applicants pay the first respondent's costs of the proceedings, as between party and party, as agreed or taxed. There was no order as to the second respondent's costs.
Orders
Orders of the court
1. Bendigo and Adelaide Bank Limited (ABN 11 068 049 178) be added as an applicant.
2. The applicants’ application filed on 3 June 2016 be dismissed.
3. The first respondent’s interlocutory application filed on 22 June 2016 be dismissed.
4. The applicants pay the first respondent’s costs of the proceedings, as between party and party, as agreed or taxed.
5. There be no order as to the second respondent’s costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
All parties agreed in the submission that this Court did not have jurisdiction to make, or would not make, an assessment of the costs in question.Consideration The first issue is whether the Legal Profession Act 2004 (NSW) or the Legal Profession Uniform Law Application Act 2014 (NSW) applied. Although no party suggested that either statutory scheme was substantially different from the other for the purposes of these proceedings, counsel for the Bank submitted it was the later Act while counsel for Mr Phontos submitted it was the earlier Act. The savings provisions in Schedule 9 to the Legal Profession Uniform Law Application Act provide that the local regulations may contain provisions of a savings or transitional nature consequent on the enactment of that Act. The Legal Profession Uniform Law Application Regulation 2015 provides in clause 59 as follows:59 Ordered costs—transitional provisionThe provisions of the Legal Profession Act 2004 and the Legal Profession Regulation 2005 relating to ordered costs continue to apply to a matter if the proceedings to which the costs relate commenced before 1 July 2015. By s 63 of the Legal Profession Uniform Law Application Act2014 “ordered costs” means costs payable under an order or rule of a court. In my opinion, therefore, the earlier Act continued to apply since the proceedings to which the costs relate commenced before 1 July 2015, whether before the primary judge in the Supreme Court or the Court of Appeal. Section 353 of the Legal Profession Act 2004 provided, so far as relevant:353 Application for assessment of party/party costs(1)A person … who is entitled to receive … costs as a result of an order for the payment of an unspecified amount of costs made by a court … may apply to the Manager, Costs Assessment for an assessment of the whole of, or any part of, those costs.(2)A court … may direct the Manager, Costs Assessment to refer for assessment costs payable as a result of an order made by the court … Any such direction is taken to be an application for assessment duly made under this Division. Section 355 provided:355 Consequences of applicationIf an application for a costs assessment is made in accordance with this Division:(a)the costs assessment must take place without any money being paid into court on account of the legal costs the subject of the application, and(b)the law practice must not commence or maintain any proceedings to recover the legal costs until the costs assessment has been completed. Section 356 provided: 356 Persons to be notified of application(1)The Manager, Costs Assessment is to cause a copy of an application for costs assessment to be given to any law practice or client concerned or any other person whom the Manager thinks it appropriate to notify.(2)A person who is notified by the Manager, Costs Assessment under subsection (1):(a) is entitled to participate in the costs assessment process, and(b) is taken to be a party to the assessment, and(c)if the costs assessor so determines, is bound by the assessment.