Batterham v Goldberg Trading as Turner Freeman
[2014] FCCA 302
•13 February 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BATTERHAM v GOLDBERG TRADING AS TURNER FREEMAN & ORS | [2014] FCCA 302 |
| Catchwords: BANKRUPTCY – Bankruptcy notice – application to set aside bankruptcy notice – where applicant involved in prior proceedings – where applicant’s solicitors changed during prior proceedings – where applicant’s second solicitors retained the same counsel – where counsel appeared on behalf of applicant in High Court proceedings – where neither counsel nor solicitors had entered into the form of costs agreement required under the Legal Profession Act 2004 (NSW) with applicant – where an account submitted to applicant by solicitors for disbursement of counsel’s fees – where fees not paid – where costs assessment sought on solicitor client basis – where costs assessor’s decision not disputed and bankruptcy notice issued – whether solicitors were correct creditor for the purpose of the bankruptcy notice – where High Court decision includes the phrase “Appeal dismissed with costs” – whether High Court Rules extend power of that court to taxation of costs on solicitor and own client basis – whether assessment of solicitor and own client costs should be made in High Court – whether costs certificate invalid and judgment obtained in Local Court void – whether provisions of Legal Profession Act and Legal Profession Rules 2004 (NSW) constitute a code – whether provisions of Legal Profession Act and Legal Profession Rules 2004 (NSW) inconsistent with provisions of High Court of Australia Act 1979 (Cth) and High Court Rules 2004 (Cth) and invalid – application dismissed. |
| Legislation: Legal Profession Act2004 (NSW) |
| Abigroup Ltd v Abignano (1992) 112 ALR 497 Batterham v QSR Ltd (2006) 225 CLR 237 Berowra Holdings Propriety Ltd v Gordon (2006) 225 CLR 364 Woolf v Snipe (1933) 48 CLR 677 |
| Applicant: | PETER JAMES BATTERHAM |
| First Respondent: | TERENCE LOUIS GOLDBERG TRADING AS TURNER FREEMAN |
| Second Respondent: | ARMANDO GARDIMAN TRADING AS TURNER FREEMAN |
| Third Respondent: | THADY BLUNDELL TRADING AS TURNER FREEMAN |
| File Number: | SYG 3219 of 2013 |
| Judgment of: | Judge Raphael |
| Hearing date: | 13 February 2014 |
| Date of Last Submission: | 13 February 2014 |
| Delivered at: | Sydney |
| Delivered on: | 13 February 2014 |
REPRESENTATION
| Counsel for the Applicant: | Mr P E King |
| Solicitors for the Applicant: | Robert Balzola and Associates |
| Counsel for the Respondents: | Mr Golledge |
| Solicitors for the Respondents: | Sally Nash & Co |
ORDERS
Application dismissed.
The applicant to pay the respondents’ costs, including any reserved costs, to be taxed if not agreed in accordance with the Federal Circuit Court (Bankruptcy) Rules 2006 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 3219 of 2013
| PETER JAMES BATTERHAM |
Applicant
And
| TERENCE LOUIS GOLDBERG TRADING AS TURNER FREEMAN |
Respondent
| ARMANDO GARDIMAN TRADING AS TURNER FREEMAN |
Respondent
| THADY BLUNDELL TRADING AS TURNER FREEMAN |
Respondent
REASONS FOR JUDGMENT
There comes before the court the hearing of an amended application to set aside bankruptcy notice BN166203 issued on 18 October 2013 and for a declaration that the bankruptcy notice is defective and invalid. Although there are a number of grounds upon which the declarations are sought in the amended application, the matters that exercise the court today were those contained in paragraphs 4, 5 and 6 of the amended application. In paragraph 4 it is requested that the court make a declaration that:
“the costs certificate of Assessor Alexadnra [sic] Hutley dated 23 November 2011, and the judgment of the Local Court of NSW dated 8 October 2013 in proceedings No 68951/13, is equally invalid, ab initio, and of no effect”.
The declaration sought in paragraph 5, is that:
“to the extent of the Legal Profession Act 2004 [NSW] Chapter 3.2 and the Legal Profession Rules [NSW] have authorised the obtaining and making of the costs certificate of Assessor Hutley dated 23 November 2011 and the judgment of the Local Court of NSW made 8 October 2013 the said Act and Rules are invalid as being inconsistent with High Court Act and Rules 2004, pursuant to Constitution section 109”.
The final order requested in paragraph 6 is an order:
“for prohibition against the Respondents from taking any steps to enforce or otherwise obtain the benefit of the costs certificate of Assessor Hutley dated 23 November 2011 and the judgment of the Local Court of NSW dated 8 October 2013 in proceedings No 68951/2012”.
The background to this matter is that the applicant debtor, Mr Batterham, was involved in certain court proceedings of an industrial nature. He had been represented by a firm of solicitors, Messrs Clayton Utz. He had taken his dispute against QSR Limited to the High Court. But before the matter was heard, he determined to cease his relationship with Clayton Utz and employ other solicitors. At about that time, it became known to him that the barrister appointed to act on his behalf by Clayton Utz, Mr Stephen Rothman SC, had been elevated to the bench of the New South Wales Supreme Court.
Other counsel was sought and Mr Kenzie QC, who had been retained by Clayton Utz, was retained by the new solicitors, Turner Freeman. Mr Kenzie appeared on behalf of Mr Batterham in the High Court appeal. It was unsuccessful. Thereafter, Mr Kenzie sought payment of his fees for appearing. Unfortunately, neither Mr Kenzie nor, it would appear, Messrs Turner Freeman, entered into the form of costs agreement that is required under the Legal Profession Act2004 (NSW) with Mr Batterham.
An account was submitted to Mr Batterham by Turner Freeman for its disbursement of Mr Kenzie’s fees. Those fees had not been paid by Turner Freemen and, so far as the court understands, have still not been paid. Payment was not forthcoming. Turner Freeman invoked the provisions of the Legal Profession Act, seeking an assessment of these costs. The Legal Profession Act in New South Wales makes provision for costs on what is known as a “solicitor and client” basis or, perhaps more accurately, costs between a solicitor and her or his client to be assessed. Within that legislation there is provision for some review of the assessment, and thereafter, for the registration of a certificate indicating the amount of costs assessed within a relevant court as a judgment of that court.[1]
[1] Legal Profession Act 2004 (NSW) sub-div 5.
In this case, the assessment was to be carried out by Ms Alexandra Hutley. The task was assigned to her by the Manager of Costs Assessment in the Attorney-General’s department. In her statement of reasons, which is part of a document that has been tendered to this court, Ms Hutley sets out the history of the matter and states, at paragraph 1.5:
“The costs respondent does not dispute the amount of fees claimed. However, he argues that senior counsel was instructed by Clayton Utz and that when the costs respondent resolved his professional negligence claim against Clayton Utz, senior counsel’s fees should have been included in the settlement. The costs respondent argues that he has no responsibility of arrangements between senior counsel and Clayton Utz and that any such arrangement should have included senior counsel’s fees while appearing for him after he had withdrawn instructions from that firm. He states that he has no liability for fees as he did not retain him and did not instruct the costs applicant to retain him.”
In fact, the situation is not quite like this. It appears, from the evidence that I have seen in affidavits filed in the matter that after Mr Batterham dispensed of the services of Clayton Utz and took on the services of Turner Freeman, he instructed Turner Freeman to continue to involve Mr Kenzie. He attended the hearing of the matter in the High Court in which Mr Kenzie appeared, and then attended a conference with Mr Kenzie after the hearing. As Ms Hutley says at 3.4 of her decision:
“I did not accept that the costs respondent was not liable to the costs applicant for senior counsel’s fair and reasonable fees. The costs respondent is a sophisticated businessman and would understand if work is performed for him, he is responsible for the costs of that work. The costs respondent did not inform the costs applicant that he was not going to be responsible for senior counsel’s fees. In all the circumstances, it was reasonable for senior counsel to rely on the credit of his instructing solicitors, the costs applicant, who in turn relied on the credit of the costs respondent, the client. I do not accept that senior counsel should look to Clayton Utz for his fees, the subject of this application as they relate solely to the work he performed for the costs respondent after he withdrew instructions from that firm.”
In accordance with the provisions of the Legal Profession Act, a copy of the decision was sent to Mr Batterham. Mr Batterham tells that he did not receive it, and that is the reason why he did not dispute it. Whether this occurred or not is not a matter before the court. What is before the court is that when the statutory period for seeking review of the decision had expired, a judgment was registered. And when that was not paid, a bankruptcy notice was issued.
One of the matters contained in the amended application is a declaration that the notice was defective and invalid, based upon the decision of Abigroup Ltd v Abignano (1992) 112 ALR 497. It is argued that the creditor is not a proper party to the bankruptcy notice. I propose to deal with that point very shortly. Although Mr Kenzie is the person who performed the work and although that work was performed for Mr Batterham, in the absence of a negotiated agreement between Mr Batterham and Mr Kenzie, either evidenced by a costs agreement and disclosure statement or in some other way that would establish a contract between them directly, the usual situation that has applied in excess of 100 years would apply in this case. Namely, counsel looks to the solicitor for payment of his fees and the solicitor looks to his client. In that way the Abignano decision is not relevant to these proceedings.
Mr King, who appears on behalf of Mr Batterham, put forward to the court an interesting and well-researched argument. He claimed that there was a constitutional issue involved. He argued that the proper place for an assessment of the solicitor and own client costs between Mr Kenzie and Mr Batterham is in the High Court. He argued that as that matter is in the High Court, any judgment obtained in a Local Court is void because of the provisions of section 119 of the Constitution of Australia.
Mr King commences his argument by taking the court to the final part of the judgment in Batterham v QSR Ltd (2006) 225 CLR 237 at [273]. After the final paragraph of the judgment, there appears the words, “Appeal dismissed with costs”. This phraseology is not unique to that case. One only has to look at another case in the same volume of the CLRs, Berowra Holdings Propriety Ltd v Gordon (2006) 225 CLR 364 at [401]. It is the common form of order made by the High Court.
Mr King then takes the court to Chapter 5 of the High Court Rules2004 (Cth), which commences with Rule 50. Rule 50.01 is in the following form,
“Costs in the discretion of the Court
Subject to the provisions of any law of the Commonwealth and to these Rules, the costs of and incidental to all proceedings in the Court are in the discretion of the Court or a Justice.”
Rule 50.02 is also relevant:
“Methods of assessment
50.02.1 The Court or a Justice may order that costs:
(a) be taxed;
(b) be fixed in an amount specified in the order or by these Rules; or
(c) be assessed by such other method as the Court or a Justice directs.
50.02.2 Unless the Court or a Justice orders that costs be fixed or assessed, a party entitled to costs shall be entitled:
(a) to costs taxed in accordance with these Rules; and
(b) to tax those costs without an order for taxation.”
Mr King then refers to rule 40, which is an interpretation section, and defines parties in the following way:
““Parties”, in relation to an application, means an applicant and any respondent who has filed an appearance.”
Mr King then refers to rule 55.01 which is headed “General principle”. That rule is in the following form:
“On every taxation, the Taxing Officer shall allow all such costs, charges and expenses as appear to the Taxing Officer to have been necessary or proper for the attainment of justice or for maintaining or defending the rights of a party, but, except as against the party who incurred them, costs shall not be allowed which appear to the Taxing Officer to have been incurred or increased:
(a) through overcaution, negligence or mistake;
(b) by payment of special fees to counsel or special charges or expenses whether to witnesses or others; or
(c) by other unusual expenses.”
Mr King then refers to rule 56, and in particular, to rule 56.09.3:
“Subject to rules 56.09.4, 56.09.5 and 56.09.6, no disbursement, whether as a fee to counsel or otherwise, shall be allowed unless:
(a) it has been paid before the filing of the bill of costs; and
(b) unconditional payment of the disbursement is proved to the satisfaction of the Taxing Officer.”
He also made reference to rule 56.09.5:
“56.09.3 Subject to rules 56.09.4, 56.09.5 and 56.09.6, no disbursement, whether as a fee to counsel or otherwise, shall be allowed unless:
(a) it has been paid before the filing of the bill of costs; and
(b) unconditional payment of the disbursement is proved to the satisfaction of the Taxing Officer.
And to what he calls the default position in rule 53.04.2:
“53.04.2 Where a party entitled to costs refuses or neglects to have those costs taxed, and thereby prejudices another party, the Taxing Officer may, so as to prevent another party being prejudiced by that refusal or neglect:
(a) certify the costs of the other party and the refusal or neglect; or
(b) allow a nominal or other sum to the party refusing or neglecting to have that party's costs taxed.”
He also refers the court to rule 57, which states how an assessment of costs is to be carried out by the taxing officer.
Mr King argued that these sections of the Rules allow for an interpretation of the powers of the court extending not just to the taxation of costs as between parties, but to the taxation of costs on solicitor and own client basis. He does this by use of the wording of rule 55.01 which gives the taxing officer power to allow all such costs, charges and expenses that are “necessary or proper for the attainment of justice or for maintaining or defending the rights of a party”. He noted that in rule 50.01 the ability to award costs is a matter in the discretion of the court or a justice, and thus it would include, he says, a registrar acting as taxing officer. He argued that in these circumstances the power to assess costs on a party and party basis lies with the High Court and that power should be utilised by a solicitor rather than the powers that come from the Legal Profession Act in New South Wales or any other State.
The applicant prays in aid of his argument a decision that fell from Dixon J in the High Court, Woolf v Snipe (1933) 48 CLR 677, but my reading of that decision would tend to a view quite contrary. The first point that he made about that decision, which related to an application by a solicitor to tax a bill of costs rendered against his own client in respect of business transacted in the High Court in a case pending therein, is that the provision of the High Court Rules that were then in existence stated:
“The fees payable to barristers and solicitors, whether entitled or admitted to practice by virtue of the Judiciary Act 1903-1926 or otherwise, in respect of business transacted by them in the Court or the offices thereof, in causes or matters pending at the date these Rules come into operation, or commenced after that date shall as well between party and party as between solicitor and client, unless otherwise ordered, be taxed allowed and certified by the Registrar or a Deputy Registrar or some other officer duly appointed for the purpose …”
The important words are clearly those “as between solicitor and client”. It is immediately obvious from the extracts from the current High Court Rules that no such words appear today. In any event, Dixon J refused to order taxation of the solicitor and own client bill in that case.
Mr King appreciates that the words “appeal dismissed with costs” found in the reported decision does not constitute an order particularising which costs are referred to but tells the court that no order is necessary because of the provisions of Rule 50.02(2). So, he says, that it was open for Mr Kenzie or Turner Freedman to apply to the registrar for an order for taxation.
This court has considerable difficulty in reading into the definitions and rules an extension of the ability to tax costs beyond costs incurred on a party and party basis. It is certainly not found in specific wording, as was the case when Dixon J looked at the matter, and the very fact that those words no longer appear would seem to indicate that the provision made for taxation of solicitor and own client costs by the various Law Societies in the States of Australia were considered to be preferable to placing a further burden on the High Court. Mr King needs the court to come to the conclusion that there is power in the High Court to tax costs as between a solicitor and own client because he then relies upon the requirement that any disbursements in a bill must be paid before an allocator or certificate of taxation is forthcoming. Mr Kenzie has not been paid, and so no certificate would be forthcoming.
The creditors argued, firstly, that the provisions of the New South Wales Legal Profession Act constituted a code under which the assessment of costs as between a solicitor and client was regulated. The general view of codes is that they are exclusive in regulating the matters with which they deal. Given the nature of the inherent jurisdiction of courts, both in the States and in the federal system, this description of the provisions of the Legal Profession Act cannot be right because there is power in those courts to make orders which may well encroach upon the taxation provisions of the Legal Profession Act. In any event, I accept the submission made by Mr King that if the proper place for adjudicating the assessment of costs as between solicitor and client in respect of matters heard in the High Court was the High Court, then that would trump the provisions of the Act in New South Wales by virtue of section 109 of the Constitution.
But I have not made that finding. I do not believe that the Rules of the High Court have the effect of giving to that court those powers. In fact, my view is to the contrary; that everything in those rules tends to a view that they are designed for party and party costs. I mention only Rule 56.09.5. This is a rule which deals with the situation where counsel is appearing pro bono without a fee but is successful. The rule allows some award of costs to counsel in those circumstances, even though he or she has not rendered a bill or had it paid. This could not possibly be the case with respect to solicitor and own client matters because the agreement between the practitioner and her or his client excluded payment by the client. The other provisions of Rule 56 are, in my view, similarly consistent with a view that they refer only to party and party costs.
Having come to the conclusion set out above, it follows that the application, which is entirely dependent upon those arguments, must be dismissed. Payment will be due under the bankruptcy notice, which has been extended until today. The applicant must also pay the respondent’s costs to be taxed, if not agreed, in accordance with the Federal Circuit Court (Bankruptcy) Rules 2001 (Cth).
The applicant seeks a stay for 21 days of my order to dismiss the application. This he does so that it cannot be said against him that he did not take every step available to him in this court to prevent an act of bankruptcy being committed. This court is of the view that the act of bankruptcy will take effect by virtue of the provisions of the Bankruptcy Act 1966 (Cth) and that a stay of the order dismissing an application would not provide him with the comfort that he seeks. Therefore the court is not prepared to grant that indulgence. However, it should be made clear that it was requested and that, if this matter goes further, it should not be said against him that he did not attempt to place his client in the best possible position prior to making any appeal.
I certify that the preceding twenty-two (22) paragraphs are a true copy of the reasons for judgment of Judge Raphael
Associate:
Date: 21 February 2014
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