Bingham v Boensch

Case [2023] FCA 117


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:

  1. 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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AGLC
Bingham v Boensch [2023] FCA 117
Case
[2023] FCA 117
Decision Date

CaseChat Overview and Summary

In the case of Bingham v Boensch, the appellant sought to appeal the decision of the primary judge who ordered that a bankruptcy notice be set aside on the basis that the costs determination did not reflect the debt in truth owed. The primary judge had found that the only costs agreement between the parties was a mortgage executed by the appellant, which regulated the respondent's liability to pay legal costs. The primary judge concluded that the costs determination did not represent a lawful determination, and therefore, the bankruptcy notice was liable to be set aside.

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

Mr Boensch claimed that his liability, if any, to pay Mr Bingham’s costs of the appeal to the High Court were entirely regulated by the terms of a mortgage he and Mr Bingham executed in March 2019. Mr Boensch submitted that, under the terms of that mortgage: any liability to pay the costs would be limited to $100,000; Mr Bingham could enforce such liability only to the extent it could be satisfied out of a property in Rydalmere in which Mr Boensch was the trustee (the Property); and Mr Bingham could not enforce the liability until 1 March 2024. Accordingly, Mr Boensch submitted that he was not indebted to Mr Bingham for the costs, meaning it had not been open to Mr Bingham to apply to have them assessed and to register the Costs Certificate as a judgment of the District Court: see PJ [3]. Factual background The primary judge set out the background as follows. Around January 2019, Mr Boensch and Mr Bingham discussed Mr Bingham and Mr Bevan acting for Mr Boensch in an application for special leave to the High Court: see PJ [5]. On 31 January 2019, by email to Mr Bingham, Mr Bevan confirmed the terms of a retainer previously provided to him subject to, inter alia, both of their fees being secured by a second mortgage to be granted over the Property: see PJ [6]. On 5 February 2019, Mr Bevan and Mr Bingham met with Mr Boensch to finalise fee arrangements. They discussed a proposed mortgage over the Property: see PJ [8]-[9]. On or shortly after 7 February 2019, Mr Bingham provided Mr Boensch a document titled “Costs Disclosure & Costs Agreement” (Solicitor’s February costs disclosure). The primary judge observed that this document was provided in fulfilment of the obligations imposed by s 174(1) of the Legal Profession Uniform Law (NSW) (LPUL) (see below at [46]). The Solicitor’s February costs disclosure set out “General Terms of Business”, including “your right to . . . negotiate a costs agreement with us”. It provided that Mr Bingham would charge at the hourly rate of $360 plus GST. The estimate of the fees was $32,500, which was to cover three anticipated activities: an application for special leave ($7000); resisting a potential application for security for costs ($5,500); and the appeal ($20,000). The estimate of legal fees referred to above did not include counsel’s fees, but under the heading “Disbursements” the disclosure stated: “[w]e may incur disbursements (being money which we pay or are liable to pay to others on your behalf, that is, third party expenses). Disbursements may include … barrister’s fees. Where you instruct us to brief a barrister or other expert and they provide a disclosure and costs agreement we will provide this to you”: see PJ [10] and [15]-[17]. The billing arrangement set out in the “General Terms of Business” of the Solicitor’s February costs disclosure also provided: “[o]ur usual policy is to issue a tax invoice on a monthly basis but we may issue tax invoices on a more frequent basis depending on the nature of the work. All tax invoices are due and payable 30 days from the date of the tax invoice”: see PJ at [16].

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

For the reasons below, the appeal is dismissed. Primary judgment Given the submissions on the appeal, it is appropriate to set out, in some detail, the reasons of the primary judge.Submissions Mr Boensch claimed that his liability, if any, to pay Mr Bingham’s costs of the appeal to the High Court were entirely regulated by the terms of a mortgage he and Mr Bingham executed in March 2019. Mr Boensch submitted that, under the terms of that mortgage: any liability to pay the costs would be limited to $100,000; Mr Bingham could enforce such liability only to the extent it could be satisfied out of a property in Rydalmere in which Mr Boensch was the trustee (the Property); and Mr Bingham could not enforce the liability until 1 March 2024. Accordingly, Mr Boensch submitted that he was not indebted to Mr Bingham for the costs, meaning it had not been open to Mr Bingham to apply to have them assessed and to register the Costs Certificate as a judgment of the District Court: see PJ [3]. Factual background The primary judge set out the background as follows. Around January 2019, Mr Boensch and Mr Bingham discussed Mr Bingham and Mr Bevan acting for Mr Boensch in an application for special leave to the High Court: see PJ [5]. On 31 January 2019, by email to Mr Bingham, Mr Bevan confirmed the terms of a retainer previously provided to him subject to, inter alia, both of their fees being secured by a second mortgage to be granted over the Property: see PJ [6]. On 5 February 2019, Mr Bevan and Mr Bingham met with Mr Boensch to finalise fee arrangements. They discussed a proposed mortgage over the Property: see PJ [8]-[9]. On or shortly after 7 February 2019, Mr Bingham provided Mr Boensch a document titled “Costs Disclosure & Costs Agreement” (Solicitor’s February costs disclosure). The primary judge observed that this document was provided in fulfilment of the obligations imposed by s 174(1) of the Legal Profession Uniform Law (NSW) (LPUL) (see below at [46]). The Solicitor’s February costs disclosure set out “General Terms of Business”, including “your right to . . . negotiate a costs agreement with us”. It provided that Mr Bingham would charge at the hourly rate of $360 plus GST. The estimate of the fees was $32,500, which was to cover three anticipated activities: an application for special leave ($7000); resisting a potential application for security for costs ($5,500); and the appeal ($20,000). The estimate of legal fees referred to above did not include counsel’s fees, but under the heading “Disbursements” the disclosure stated: “[w]e may incur disbursements (being money which we pay or are liable to pay to others on your behalf, that is, third party expenses). Disbursements may include … barrister’s fees. Where you instruct us to brief a barrister or other expert and they provide a disclosure and costs agreement we will provide this to you”: see PJ [10] and [15]-[17]. The billing arrangement set out in the “General Terms of Business” of the Solicitor’s February costs disclosure also provided: “[o]ur usual policy is to issue a tax invoice on a monthly basis but we may issue tax invoices on a more frequent basis depending on the nature of the work. All tax invoices are due and payable 30 days from the date of the tax invoice”: see PJ at [16].

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