FEDERAL COURT OF AUSTRALIA
Bingham v Boensch [2023] FCA 117
Appeal from: Boensch v Bingham (No 2) [2022] FedCFamC2G 47 File number: NSD 141 of 2022 Judgment of: ABRAHAM J Date of judgment: 22 February 2023 Catchwords: BANKRUPTCY AND INSOLVENCY – appeal from decision of the Federal Circuit and Family Court of Australia – where primary judge ordered bankruptcy notice be set aside on the basis that costs determination did not reflect debt in truth owed – where appellant challenged factual findings of primary judge – whether costs agreements entered into on terms contained in costs disclosures sent to respondent in February and October 2019 – whether liability to pay legal costs regulated by terms of mortgage – appeal dismissed Legislation: Legal Profession Uniform Law (NSW) ss 172, 174, 179, 180, 184, 198, 199
Legal Profession Uniform Law Application Act 2014 (NSW) ss 70, 71
Cases cited: Anderson v Hill [2017] NSWSC 1149
Bevan v Bingham [2022] NSWSC 863
Boensch v Bingham (No 2) [2022] FedCFamC2G 47
Boensch v Bingham [2022] NSWSC 1432
Boensch v Somerville Legal Pty Ltd [2019] FCCA 868
Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337
Colin R Price & Associates Pty Ltd v Four Oaks Pty Ltd [2017] FCAFC 75; (2017) 251 FCR 404
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523
Inspector-General in Bankruptcy v Bradshaw [2006] FCA 22
Maggbury Pty Limited v Hafele Australia Pty Limited [2001] HCA 70; (2001) 210 CLR 181
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 119 Date of last submission/s: 6 February 2023 Date of hearing: 24 October 2022 Counsel for the Appellant: David Robinson SC with Michael Hazan Solicitor for the Appellant: Bicknell & Monteith Lawyers Counsel for the Respondent: Respondent appeared in person ORDERS
NSD 141 of 2022 BETWEEN: JOHN DAVID BINGHAM
Appellant
AND: FRANZ BOENSCH
Respondent
ORDER MADE BY:
ABRAHAM J
DATE OF ORDER:
22 FEBRUARY 2023
THE COURT ORDERS THAT:
1.The appeal is dismissed.
2.The appellant is to pay the costs of the respondent to be agreed or assessed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
ABRAHAM J:
The appellant, Mr Bingham, appeals an order setting aside a bankruptcy notice which was issued on 23 June 2021, on his application. The bankruptcy notice demanded that the respondent, Mr Boensch, pay $372,674.84 to him. That is the amount of a judgment entered in the District Court of New South Wales, which is the sum of three amounts recorded in a Certificate of Determination of Costs (Costs Certificate) issued pursuant to s 70 of the Legal Profession Uniform Law Application Act 2014 (NSW) (LPUL Application Act), and filed with the District Court pursuant to s 71(3) of that Act. The largest of the three amounts, $358,234.71, represents the amount for which the…
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- Bingham v Boensch [2023] FCA 117
- Case
- [2023] FCA 117
- Decision Date
CaseChat Overview and Summary
The court was required to decide whether the costs agreements entered into were on the terms contained in the costs disclosures sent to the respondent and whether the liability to pay legal costs was regulated by the terms of the mortgage. The court also had to determine whether there were substantial reasons for questioning that the costs determination was made free from jurisdictional error.
The court found that the primary judge's findings were supported by substantial reasons, and therefore, the costs determination was not made free from jurisdictional error. The court held that the only costs agreement between the parties was the mortgage executed by the appellant, which regulated the respondent's liability to pay legal costs. The court also held that the primary judge was correct in finding that the costs determination did not represent a lawful determination, and therefore, the bankruptcy notice was liable to be set aside.
The appeal was dismissed, and the appellant was ordered to pay the costs of the respondent to be agreed or assessed.
Orders
Orders of the court
1. The appeal is dismissed.
2. The appellant is to pay the costs of the respondent to be agreed or assessed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
On 13 December 2021, Mr Boensch filed: a summons in the Supreme Court of New South Wales seeking various orders in relation to the Costs Assessor’s determination and the agreement he claimed he entered into with Mr Bingham in relation to the appeal to the High Court; and another notice of motion in the District Court seeking that the judgment referred to at [34] above be stayed or set aside: see PJ [58]. Consideration The primary judge set out the parties’ submissions at PJ [59]-[68], determining at PJ [69] that three questions arose. Relevantly, the first question was:(a)Is it open to Mr Boensch to rely as a ground for setting aside the bankruptcy notice on the contention that the Judgment Amount does not reflect any debt that he in truth owes to Mr Bingham because, first, the Costs Assessor ignored the Mortgage and, second, the Costs Assessor did not in any event conduct a proper costs determination? If so, does Mr Boensch succeed in his contention? Accordingly, the primary judge considered whether the judgment amount represented a true debt. His Honour noted that the court’s power to inquire into whether a judgment arising from the filing of a costs certificate (pursuant to s 71(3) of the LPUL Application Act) represents a true debt, is directed to the costs determination that is recorded in the costs certificate that is filed. The question therefore became “whether there are substantial reasons for questioning that the costs determination represents a lawful determination. More particularly … whether there are substantial reasons for questioning that the costs determination was made without any jurisdictional error”: see PJ [80]. It is appropriate, given the submissions on the appeal, that his Honour’s answer to that question be recited in full: [83]The Costs Determination on the basis of which the Costs Certificate was issued was premised on the Cost Assessor’s finding that Mr Boensch and Mr Bingham entered into costs agreements on the terms contained in the Solicitor’s February and October costs disclosures. The evidence before me, however, not only gives rise to a substantial reason for questioning that finding; it leads me to conclude that Mr Boensch and Mr Bingham did not enter into any such costs agreements, and that the only costs agreement they entered into in relation to the payment of the HC Costs is the agreement constituted by the Mortgage.[84]I rely on the following findings and conclusions: (a)In February 2019 Mr Bingham provided to Mr Boensch the Solicitor’s February and the Barrister’s February costs disclosures; and Mr Boensch and Mr Bevan informed Mr Boensch they would require a mortgage over the Property as security for the payment of their costs.(b)The Solicitor’s February costs disclosure cannot by itself evidence the terms of a costs agreement. At most it evidences an offer by Mr Bingham to provide legal services to Mr Boensch on the terms set out in the Solicitor’s February costs disclosure. Before such offer can be found to have been converted into a costs agreement, however, there must be evidence that Mr Boensch engaged in conduct that could be taken to constitute an unqualified acceptance by him of the terms contained in the Solicitor’s February costs disclosure.(c)There is no evidence Mr Boensch engaged in any conduct that could be characterised as the unqualified acceptance by him of the offer constituted by the Solicitor’s February costs disclosure. On the contrary, the evidence shows Mr Boensch, on the one hand, and Mr Bingham and Mr Bevan, on the other, held discussions and exchanged emails that led to Mr Boensch and Mr Bingham executing the Mortgage.(d)The effect of the Mortgage is as follows:(i)Mr Boensch granted a mortgage over the Property as security for the “debt or liability described in the terms and conditions set out or referred to in this mortgage”, the terms and conditions being those identified in Annexure ‘A’ to the Mortgage.(ii)The only clause in Annexure ‘A’ to the Mortgage that is capable of being construed as describing a debt or liability is cl 6, which refers to the “legal costs incurred by the Mortgagor (that is, Mr Boensch) as the client of the Mortgagee and as trustee of the Boensch Trust”. The Mortgage itself does not further identify the “legal costs incurred by the Mortgagor”. Given that this constitutes one of the subject matters of the Mortgage, extrinsic evidence is admissible to identify the incurring of legal costs to which cl 6 refers. That evidence would at the very least include the Solicitor’s February costs disclosure, and in particular that part which identifies the legal work Mr Bingham would perform, and the rates at which he would perform the work.(iii)In addition to describing the debt or liability, Annexure ‘A’ to the Mortgage identifies the capacity in which Mr Boensch is to assume the debt or liability, namely as “trustee of the Boensch Trust” (cl 4); it limits the extent of the debt or liability “to the sum of one hundred thousand dollars ($100,000)” (cl 6); it limits the means by which Mr Bingham can enforce such debt or liability, namely, “only to the extent which it [that is, Mr Boensch’s debt or liability under the Mortgage] can be satisfied out of the secured property” (cl 4); and it defers the time the liability or debt may be so enforced “until 1 March 2024” (cl 2).(e)Given the terms of Annexure ‘A’ to the Mortgage I identify in (d), the Mortgage constitutes “an agreement about the payment of legal costs”. It is therefore a “costs agreement” for the purposes of the LPU Law; and, being a “costs agreement”, s 184 of the LPU Law provides that, subject to “this Law,” the Mortgage “may be enforced in the same way as any other contract”. That includes the right Mr Boensch has to set up the terms of the Mortgage as a defence to a claim for the payment of the HC Costs that purports to be based on an asserted costs agreement other than the agreement that is constituted by the Mortgage.(f)The Solicitor’s October costs disclosure is incapable of constituting the terms of any costs agreement or updated costs agreement. Mr Boensch communicated his rejection of those terms as being contrary to what had been agreed in March 2019; and Mr Boensch did so on the same day he received the Solicitor’s October costs disclosure.(g)The Costs Assessor did not purport to set aside or vary the Mortgage, or otherwise find the Mortgage to be unfair or contrary to the LPU Law. That means that, on the evidence, the Mortgage is the only agreement between Mr Boensch and Mr Bingham about the payment of legal costs; and Mr Boensch’s liability to pay the HC Costs is to be determined by reference to the terms of the Mortgage.(h)The right the Mortgage gives to Mr Bingham to recover “out of the secured property” no more than $100,000 has not accrued, because 1 March 2024 has not arrived. For this reason alone, and assuming such right can properly be characterised as a liability by Mr Boensch to pay anything to Mr Bingham, Mr Boensch is not, and, when Mr Bingham issued his invoice dated 6 December 2019 Mr Boensch was not, liable to pay Mr Bingham any amount on account of the HC Costs. Thus, at the time Mr Bingham lodged his application for assessment of his costs, no legal costs were payable to him, and the Costs Assessor had no authority to undertake any costs assessment of Mr Bingham’s or Mr Bevan’s costs.(i)Given the terms I identify in (d), it cannot be said Mr Boensch assumed any personal liability to pay any amount to Mr Bingham in relation to the HC Costs. Mr Bingham’s rights are restricted to seeking satisfaction “out of the secured property”, not by a personal action for judgment against Mr Boensch.[85]The Judgment Amount, therefore, does not represent any debt that is payable by Mr Boensch to Mr Bingham. In truth Mr Boensch owes no debt to Mr Bingham in relation to the HC Costs; and no legal costs were payable to Mr Bingham at the time he applied for the assessment of his costs. The Costs Assessor, therefore, purported to embark on an assessment of legal costs he had no authority to undertake, and he therefore purported to make a costs determination in relation to the HC Costs he had no jurisdiction to make. The Costs Determination, therefore, is incapable of having any legal effect. Further, given the Mortgage is a “costs agreement” which Mr Boensch has the right to enforce, and Mr Boensch enforced his rights under the Mortgage by relying on its terms before the Costs Assessor as an answer to Mr Bingham’s application for the assessment of legal costs, it was not open to the Costs Assessor to ignore, as he did, the terms of the Mortgage; and his having ignored the terms of the Mortgage is incapable of altering the rights and obligations Mr Boensch and Mr Bingham have in relation to the HC Costs as provided for by the terms of the Mortgage.[86]What I say in paragraphs 83, 84, and 85 of these reasons is premised on the view that whether there exists a costs agreement within the meaning of s 180 of the LPU Law is a jurisdictional fact. Even if, contrary to this premise, the question whether there is a costs agreement is not a jurisdictional fact, but is a question for a costs assessor to determine, there are substantial reasons for questioning that the Costs Determination was made free from jurisdictional error. Each of the following matters separately constitutes a reason to so question the Costs Determination:(a)For the reasons stated in paragraph 51(a) above, the Costs Assessor incorrectly understood, and therefore did not consider, the grounds on which Mr Boensch claimed that the Mortgage regulated the parties’ rights in relation to the payment of legal fees.(b)The Costs Assessor does not set out the terms of the Mortgage, or otherwise manifest any acquaintance with or understanding of those terms; he does not explain in what sense the Mortgage “was merely a security for the Solicitor’s cost” and, for that reason, was not a costs agreement; and he gives no reasons for that conclusion. These matters afford a rational basis for inferring either that the Costs Assessor did not consider the terms of the Mortgage (thus committing a jurisdictional error of the sort identified in Minister for Immigration and Citizenship v SZRKT), or, if he did, the Costs Assessor did not genuinely consider the Mortgage (thus making a jurisdictional error of the sort found in Gunatillake v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs), or, if the Costs Assessor did genuinely consider the Mortgage, the Costs Assessor’s conclusion that it did not constitute a costs agreement is a conclusion that no reasonable costs assessor in the position of the Costs Assessor could reasonably or rationally have arrived at.(c)The Costs Assessor does not refer to Mr Boensch’s email of 4 October 2019 to which I refer in paragraph 30 of these reasons. That affords a rational basis for inferring either that the Costs Assessor did not consider Mr Boensch’s email (thus committing a jurisdictional error of the sort identified in SZRKT), of, if he did, the Costs Assessor did not genuinely consider it (thus making a jurisdictional error of the sort found in Gunatillake), or, if the Costs Assessor did genuinely consider it, his finding that Mr Boensch had agreed to the terms contained in the Solicitor’s February and October costs disclosures is a finding that no person in the position of the Costs Assessor could reasonably have made.(d)The Costs Assessor does not identify any evidence on which he relied in finding that Mr Boensch became party to a costs agreement on the terms set out in the Solicitor’s February and October costs disclosures. The material that was before the Costs Assessor, including Annexure ‘A’ to the Mortgage and Mr Boensch’s email of 4 October 2019, affords a rational basis for inferring that the Costs Assessor’s finding Mr Boensch became so bound was made without evidence, or was otherwise a conclusion that no reasonable costs assessor could have arrived at.[87]Each of these matters, considered alone, raises a substantial reason for questioning that the Costs Determination was made free from jurisdictional error. The onus, therefore, rests on Mr Bingham to prove that the Costs Determination was made free from jurisdictional error, or is otherwise binding on Mr Boensch. Mr Bingham has not attempted to discharge any such burden. In those circumstances, I am not satisfied that the Costs Determination on the basis of which the Judgment was entered in truth represents a debt Mr Boensch owes to Mr Bingham. For those reasons, the bankruptcy notice is liable to be set aside.(Citations omitted) Costs Assessment