Boensch v Bingham (No 2)
[2022] FedCFamC2G 47
•4 February 2022
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Boensch v Bingham (No 2) [2022] FedCFamC2G 47
File number(s): SYG 1781 of 2021 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 4 February 2022 Catchwords: BANKRUPTCY – Application to set aside a bankruptcy notice based on a judgment entered on the filing of a costs certificate – whether it is open to set aside the bankruptcy notice on the ground that the costs assessor did not determine costs on the basis of what the applicant claimed is the true costs agreement – open to do so on two alternate grounds depending on whether the question whether there exists a costs agreement is a jurisdictional fact – on the assumption that the question whether a costs agreement exists is a jurisdictional fact the bankruptcy notice could be set aside if there are substantial reasons for questioning that what the costs assessor found is the costs agreement is in fact the true costs agreement – substantial reasons exist and moreover the evidence establishes that the true costs agreement is that for which the applicant contends – given the terms of the true costs agreement the applicant is not indebted to the respondent and for that reason the judgment on the basis of which the bankruptcy notice was issued does not in truth represent any debt the applicant owes the respondent – on the assumption that the question whether a costs agreement exists is not a jurisdictional fact the bankruptcy notice could be set aside if there are substantial reasons for questioning whether the costs determination was made without any jurisdictional error – substantial reason found for questioning that the costs determination was made without jurisdictional error – no basis for finding that the costs determination was made without jurisdictional error and for that reason there is no basis for being satisfied that the judgment on the basis of which the bankruptcy notice was issued in truth represents any debt the applicant owes the respondent – bankruptcy notice set aside. Legislation: Bankruptcy Act 1966 (Cth), ss.40(1)(g), 40(3)(b), 58(3)
Legal Profession Uniform Law Application Act 2014 (NSW), ss.70, 71(3), 73, 83(1), 83(1A)
Legal Profession Uniform Law (NSW), ss.6, 172(4), 174(1), 174(2), 180, 184, 195, 198(1), 199, 200(2)
Legal Profession Act 2004 (NSW), s.302Cases cited: Amirbeaggi v Business in Focus (Aust) Pty Ltd [2008] NSWSC 421
Anderson v Hill [2017] NSWSC 1149
Boensch v Pascoe [2019] HCA 49
Boensch v Somerville Legal Pty Ltd [2019] FCCA 868
Boensch v Somerville Legal [2021] FCAFC 79
BTX17 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (No 2) [2020] FCCA 2270
Cheung v Burness (Trustee) [2016] FCA 1381
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Corney v Brien (1951) 84 CLR 343
Corporation of the City of Enfield v Development Assessment Commission [2000] HCA 5
Doyle v Hall Chadwick [2007] NSWCA 159
D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12
Ex parte Chinery; In re Chinery (1884) 12 Q.B.D 342
Franz Boensch as trustee of the Boensch Trust v Pascoe [2019] HCATrans 133
Fraser v Commissioner of Taxation (1996) 69 FCR 99
Frumar v The Owners of Strata Plan 36957 [2010] NSWCA 172
Glew v Harrowell, in the matter of Glew [2003] FCA 373
Gunatillake v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2021] FCA 387
Kirk v Industrial Court of New South Wales [2010] HCA 1
Minister for Immigration and Citizenship v SZRKT [2013] FCA 317
Minister for Immigration and Multicultural Affairs v Bhardwaj [2002] HCA 11
Morgan v Swansea Urban Sanitary Authority (1878) 9 Ch D 582
Olivieri v Stafford (1989) 91 ALR 91
Opie v Opie (1951) 84 CLR 362
Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28
Re Bernard Simon Wolff v Donald Donovan [1991] FCA 222
Re Brink; Ex parte The Commercial Banking Company of Sydney Ltd [1980] FCA 78; (1980) 44 FLR 135
Re John Waymouth Ahern v Deputy Commissioner of Taxation [1987] FCA 312
Re Riviere; Ex parte Original Mont de Piete Ltd (1919) 20 SR (NSW) 77
Re Vernon Arnfield (1925) 25 SR (NSW) 517
Wilkinson v Osborne & Anor (1915) 21 CLR 89
Wren v Mahony (1972) 126 CLR 212
Zepinic v Chateau Constructions (Australia) Ltd (No 2) [2013] NSWCA 227Division: General Number of paragraphs: 95 Date of last submission/s: 19 January 2022 Date of hearing: 14 December 2021 Place: Sydney The Applicant: Appeared in person, by telephone Counsel for the Respondent: Mr M Hazan, by telephone Solicitor for the Respondent: Bicknell & Monteith ORDERS
SYG 1781 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FRANZ BOENSCH
Applicant
AND: JOHN DAVID BINGHAM
Respondent
ORDER MADE BY:
JUDGE MANOUSARIDIS
DATE OF ORDER:
4 FEBRUARY 2022
THE COURT ORDERS THAT:
1.Bankruptcy Notice No. BN253396 issued on 23 June 2021 and served on the applicant on 6 September 2021 is set aside.
2.The respondent pay to the applicant such costs as the applicant is entitled to claim as a self-represented party.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
INTRODUCTION
The applicant, Mr Boensch, applies to set aside a bankruptcy notice issued on 23 June 2021 on the application of the respondent, Mr Bingham, and served on Mr Boensch on 6 September 2021.
The bankruptcy notice demands that Mr Boensch pay $372,674.84 to Mr Bingham. That is the amount of a judgment (Judgment Amount) entered in the District Court of New South Wales (Judgment). The Judgment Amount, in turn, 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 costs assessor (Costs Assessor) who issued the Costs Certificate determined the costs of legal services Mr Bingham and counsel provided to Mr Boensch in connection with an appeal to the High Court (Costs Determination). The other two amounts represent interest on the amount of the Costs Determination, and the filing fee Mr Bingham paid when he lodged his application for the assessment of costs.
Mr Boensch relies on a number of grounds for setting aside the bankruptcy notice; but the central grounds on which Mr Boensch relies are based on the terms of a mortgage he and Mr Bingham executed in March 2019. Mr Boensch claims that his liability, if any, to pay Mr Bingham’s costs and disbursements in relation to the High Court appeal (HC Costs) are regulated, and entirely regulated, by the terms of the mortgage. Mr Boensch submits that, under the terms of the mortgage, any liability to pay the HC Costs would be limited to $100,000; Mr Bingham could enforce such liability only to the extent it can be satisfied out of a property of which Mr Boensch is the trustee; and Mr Bingham cannot enforce the liability until 1 March 2024. In those circumstances, Mr Boensch submits he is not indebted to Mr Bingham for the HC Costs, and, therefore, it was not open to Mr Bingham to apply to have the HC Costs assessed and, on the issue of the Costs Certificate, register the Costs Certificate as a judgment of the District Court. Mr Boensch also submits that the Costs Determination is invalid for a number of reasons, one of which is that the Costs Assessor failed to find that the terms of the mortgage constituted a costs agreement and, for that reason, failed to give effect to its terms. Mr Boensch also claims that it was not competent for Mr Bingham to apply for the assessment of his costs when he did because at that time Mr Boensch was a bankrupt, and s 58(3) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) prevented him from doing so. Finally, Mr Boensch submits he has a counter-claim, set-off, or cross demand against Mr Bingham equal to or exceeding the Judgment Amount based on what Mr Boensch claims is negligence by Mr Bingham and counsel in connection with the litigation that ended in the High Court.
Mr Bingham does not dispute he and Mr Boensch entered into a mortgage; but Mr Bingham makes no submissions about the effect of its terms. Mr Bingham’s principal submission is that the Costs Determination is determinative of the parties’ rights in relation to the HC Costs, and remains so until it is set aside.
BACKGROUND
January 2019 – discussions begin in relation to applying to High Court
In around January 2019 Mr Boensch held discussions with Mr Bingham about Mr Bingham acting, and his retaining counsel, Mr Bevan, to act, for Mr Boensch in an application for special leave to appeal to the High Court from orders the Full Federal Court made on 20 December 2018 dismissing an appeal Mr Boensch had brought to that Court.[1]
[1] Boensch as trustee of the Boensch Trust v Pascoe [2018] FCAFC 234
February - March 2019 - discussions about fee arrangements
By 31 January 2019 Mr Bingham had provided to Mr Bevan proposed terms on which Mr Bevan would be retained to act in the application for special leave. By email sent on 31 January 2019 Mr Bevan confirmed to Mr Bingham that the terms of the retainer were acceptable, subject to a number of matters. These included the following: [2]
The fees - yours and mine including my arrears of fees to date - will be secured by a second mortgage to be granted over the trust property by Franz [Boensch] as trustee (as he is suing as trustee) to you and me jointly as mortgagees as they will be accruing at a faster rate than they are being paid, we suspect.
[2] Exhibit FBBN, page 34
The “property” to which Mr Bevan referred is a property in Rydalmere (Property) of which Mr Boensch was, and, it appears, continues to be the trustee.
On 4 February 2019 Mr Bevan sent the following email to Mr Bingham (emphasis in original):[3]
I confirm that Franz [Boensch] and you are meeting me here at 2.00 pm tomorrow for 2 hours to finalise the fee arrangements with Franz [Boensch], sign off on the High Court documents (I’ll provide sufficient copies for filing and service at the High Court Registry on Level 23 of the Law Courts Building) and agree on who is filing and serving them this week (Franz [Boensch] will probably assist in that area). Maybe you can attend to it together?
[3] Exhibit JDB-1, page 68
On 5 February 2019 Mr Boensch met with Mr Bingham and Mr Bevan. They discussed a proposed mortgage over the Property. That is apparent from an email Mr Bingham sent to Mr Boensch on 8 February 2019 to which Mr Bingham attached what he described as “documentation relating to a mortgage as discussed in meetings with Chris Bevan”.[4]
[4] Exhibit FBBN, page 35
On or shortly after 7 February 2019 Mr Bingham provided to Mr Boensch a document dated 7 February 2019, and titled “Costs Disclosure & Costs Agreement” (Solicitor’s February costs disclosure). Mr Bingham provided this document to Mr Boensch in fulfilment of the obligations imposed by s 174(1) of the Legal Profession Uniform Law (NSW) (LPU Law), which provides:
Main disclosure requirement A law practice -
(a)must, when or as soon as practicable after instructions are initially given in a matter, provide the client with information disclosing the basis on which legal costs will be calculated in the matter and an estimate of the total legal costs; and
(b) must, when or as soon as practicable after there is any significant change to anything previously disclosed under this subsection, provide the client with information disclosing the change, including information about any significant change to the legal costs that will be payable by the client -
together with the information referred to in subsection (2).
The expression “law practice” is defined in s 6 of the LPU Law to mean, among other things, a “sole practitioner” which, in turn, is defined in s 6 as “an Australian legal practitioner who engages in legal practice on his or her own account”. An “Australian legal practitioner” is defined in s 6 of the LPU Law to mean “an Australian lawyer who holds a current Australian practising certificate”.
The information referred to in s 174(2) of the LPU Law includes information “about the client’s rights . . . to negotiate a costs agreement with the law practice”. These rights are provided for in Division 4 of Part 4.3 of the LPU Law. Subsection 179(1) of the LPU Law provides that a “client of a law practice has the right to require and to have a negotiated costs agreement with the law practice”. Section 180 of the LPU Law deals with the making of costs agreements:
(1) A costs agreement may be made -
(a) between a client and a law practice retained by the client; or
(b) between a client and a law practice retained on behalf of the client by another law practice; or
(c)between a law practice and another law practice that retained that law practice on behalf of a client; or
(d) between a law practice and an associated third party payer.
(2)A costs agreement must be written or evidenced in writing.
(3)A costs agreement may consist of a written offer that is accepted in writing or (except in the case of a conditional costs agreement) by other conduct.
(4) A costs agreement cannot provide that the legal costs to which it relates are not subject to a costs assessment.
Section 184 of the LPU Law provides that, subject to “this Law, a costs agreement may be enforced in the same way as any other contract”. The word “may” in s 184 of the LPU Law confirms that each party to a costs agreement has the right to enforce the costs agreement as a contract, provided there is nothing in the LPU Law that prevents any of the parties from enforcing the costs agreement as a contract. The right s 184 of the LPU Law confirms is not restricted to enforcing a costs agreement by (contractual) action; s 184 also confirms the right to set up a costs agreement as a bar to an action for legal costs that is purportedly based on a costs agreement that is different from the costs agreement to which s 184 of the LPU Law applies.
Neither the LPU Law nor the LPUL Application Act defines the expression “costs agreement”. That contrasts with the position under the (repealed) Legal Profession Act 2004 (NSW) which, in s 302 of that Act, defined “costs agreement” as “an agreement about the payment of legal costs”. In Anderson v Hill,[5] however, Hallen J said that a “costs agreement” in the LPU Law “simply means an agreement about the payment of legal costs”.
[5] Anderson v Hill [2017] NSWSC 1149, at [35]
In the Solicitor’s February costs disclosure Mr Bingham estimated his legal fees to be $32,500. This did not include counsel’s fees. The estimate of Mr Bingham’s fees covered three anticipated activities – an application for special leave ($7,000), resisting a potential application for security for costs ($5,500), and the appeal ($20,000).[6] The Solicitor’s February costs disclosure provided that Mr Bingham would charge at the hourly rate of $360 plus GST and, under the heading “Disbursements”, stated:
We 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 search fees, court & government authority filing fees, process server fees, expert fees, witness expenses, travel expenses, transcript expenses and 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.
[6] Exhibit JDB-1, page 9
The Solicitor’s February costs disclosure also contains a set of terms that appear under the heading “General Terms of Business” (GTB). Clause 1 provides (emphasis in original):
Billing Arrangements
Our 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. . .
Clause 5 of the GTB provides, among other things, that it is “your right to . . . negotiate a costs agreement with us”.
Mr Bingham also appears to have provided to Mr Boensch a document, signed by Mr Bevan, dated 2 February 2019, and titled “Costs Agreement between a Barrister and Solicitors pursuant to section 180(1)(c) of the Legal Profession Uniform Law (NSW) (‘UL’)” (Barrister’s February costs disclosure).[7] The document provided an estimate of $63,000 to $75,000 in relation to three anticipated activities: an application for special leave to appeal to the High Court ($24,000-$27,000 plus GST); resisting an anticipated application for security for costs ($9,000-$12,000 plus GST); and conducting the appeal in Canberra, preparing all written submissions, chronology, aide memoirs, and advising on the preparation of the appeal books ($30,000-$36,000 plus GST).
[7] Exhibit JDB-1, page 14
At 12:52 pm on 6 March 2019 Mr Boensch sent an email to Mr Bingham and Mr Bevan in which he set out a number of proposed amendments to the draft mortgage.[8] Mr Bingham made a copy of Mr Boensch’s email of 6 March 2019, inserted in that copy his responses to each of Mr Boensch’s suggested amendments, and, at 6:52 pm on the same day,[9] sent to Mr Boensch the copied email with his inserted comments. Mr Boensch’s proposed amendments, and Mr Bingham’s responses (in bold), were as follows:
[8] Affidavit of F Boensch filed 23.11.2021, annexure D2, page 32
[9] Affidavit of F Boensch filed 23.11.2021, annexure D2, page 33
A few things I want to sort out with you regarding the mortgage condition which is to provide a security for the costs involved:
a)An amount with min and Max expected to be nominated – not an open-ended arrangement agreed to limit the amount to the principal sum of $100,000.
b)That the lodgement is after pending current finance or – I’ll allow until 30 March 2019 for you to get a response to your current application. This is given outside the mortgage itself.
c)if an emergency requires to lodge it sooner with a 24 hour prior notification to me so I can notify the fiancé company. Not agreed as it cannot be enforced
d)That the mortgage/security is not used to imitate a sale of the property but to secure the amount. Not agreed as the power of sale is an essential right under a mortgage
e)That the moneys for your and Chris’s work is to be paid when I have it available and the security is to remain on the title till the amount agreed is paid off (as previously discussed with Chris) A time limit is agreed to allow for payment until 30 December 2019 for the deferral of payment.
f)That no interest is charged during the period of paying it off (as previously arranged with Chris) Not agreed as this right is allowed for under the respective legal costs agreements.
That is mainly to avoid bad experiences such as with Somerville.
“Somerville” is a reference to Somerville Legal Pty Ltd (Somerville), a lawyer’s practice whom Mr Boensch had previously retained, and who had served a bankruptcy notice on Mr Boensch on 7 February 2019 based on a costs judgment.[10]
[10] Boensch v Somerville Legal Pty Ltd [2019] FCCA 868
At 8:12 pm on 6 March 2019 Mr Bingham sent an email to Mr Boensch.[11] Mr Bingham referred to the meeting Mr Boensch and Mr Bingham had at Mr Bevan’s chambers towards the end of January 2019 concerning an appeal to the High Court where, Mr Bingham said, it was made clear that a mortgage would be required. Mr Bingham said that the “mortgage as security is needed unless” Mr Boensch can afford to pay Mr Bingham and Mr Bevan along the way.
[11] Affidavit of F Boensch filed 23.11.2021, annexure D2, page 32
At around 3:00 pm on 7 March 2019 Mr Boensch had a telephone conversation with Mr Bevan in which Mr Boensch approved revisions to “Annexure ‘A’” to the draft mortgage. At 4:37 pm on 7 March 2019 Mr Bevan sent an email to Mr Bingham attaching “the revised Annexure ‘A’ to the mortgage which Franz [Boensch] has approved of in a telephone conversation with him at 3:00 pm today”.[12] Mr Bevan requested Mr Bingham send to Mr Boensch “the complete mortgage”, and to “arrange for the independent solicitor to arrange to witness the mortgage between 8.00am and 10.00am tomorrow, which suits Franz [Boensch]”.
[12] Affidavit of F Boensch filed 23.11.2021, annexure D2, page 35
8 March 2019 – Mr Boensch executes Mortgage
On 8 March 2019 Mr Boensch executed the mortgage (Mortgage), and Mr Bingham did so on 12 March 2019.[13] Mr Boensch is named “mortgagor”, and Mr Bingham is named “mortgagee”. The charging provision of the Mortgage is as follows (emphasis in original):
[13] Exhibit JDB-1, pages 126-132
The mortgagor mortgages the estate and/or interest in land specified in this mortgage to the mortgagee as security for the debt or liability described in the terms and conditions set out or referred to in this mortgage, and covenants with the mortgagee to comply with those terms and conditions.
Terms and Conditions of this Mortgage
(a) Document Reference: ANNEXURE ‘A’
(b)Additional terms and conditions
REGISTRATION MEMORANDUM NO Q860000
Annexure ‘A’ to the Mortgage records covenants Mr Boensch made “[i]n consideration of the Mortgagee agreeing to provide or continuing to provide legal services to the Mortgagor or to forbear from obtaining payment of money owing by the Mortgagor”. It would be convenient to set out the following clauses:
2.The power of sale over the secured property of the Mortgagee which shall arise in the event of a default of any of the terms of this Mortgage by the Mortgagor shall be deferred until 1 March 2024 provided that such deferral shall not operate as a waiver of any of the rights of the Mortgagee under this Mortgage other than the Mortgagee’s right to exercise his power of sale.
. . . .
4.The Mortgagor enters this Mortgage in his capacity as trustee of the Boensch Trust and holds the legal estate of the property hereby mortgaged (“secured property”) as trustee. The parties hereby agree that any liability arising under this Mortgage may be enforced against the Mortgagor only to the extent to which it can be satisfied out of the secured property.
. . . .
6.The principal sum for legal costs incurred by the Mortgagor as the client of the Mortgagee and as trustee of the Boensch Trust secured under this Mortgage shall be limited to the sum of one hundred thousand dollars ($100,000).
21 June 2019 – Mr Boensch is granted special leave to appeal
On 21 June 2019 the High Court granted Mr Boensch special leave to appeal from the orders of the Full Federal Court,[14] and the appeal was later set down to be heard on 11 October 2019.[15]
[14] Franz Boensch as trustee of the Boensch Trust v Pascoe [2019] HCATrans 133
[15] Franz Boensch as trustee of the Boensch Trust v Pascoe [2019] HCATrans 198
3 and 4 October 2019 – “updated costs agreements”
On 3 October 2019 Mr Bevan issued to Mr Bingham an invoice for work he performed from January to September 2019. That invoice is not in evidence, but Mr Bevan refers to it in the “Bill of Costs” he submitted in support of an application for assessment of his costs.[16] Mr Bevan there states that the invoice covers “436.25 hours @ $600 per hour over the nine-month period . . . (Jan-Sept 2019) = $261,750.00 plus GST plus $2,856.00 plus GST for photocopying 35,700 pages @ 8 cents per page”.[17]
[16] Exhibit JDB-1, page 46, [6(a)]
[17] Exhibit JDB-1, page 47, [6(a)]
On 4 October 2019 Mr Bingham sent an email to Mr Boensch attaching “updated costs agreements including costs agreements of barristers Chris Bevan & Michael Wells”. The email attached three documents. The first is titled “John D. Bingham, Solicitor Costs Disclosure & Costs Agreement” (Solicitor’s October costs disclosure) which, under the heading “Estimate of Professional Fees, Disbursements and Internal Expenses”, states:
On our present instructions, we estimate the costs of the work, excluding GST, to be:
Solicitor’s fees: $35,000
Barristers’ fees:
Chris Bevan $295,000
Michael Wells $20,000 $315,000
Disbursements . . . $8,500
Internal Expenses . . . $200
TOTAL $358,700
The second document is dated 3 October 2019, signed by Mr Bevan, and headed “Costs Agreement between a Barrister and Solicitors pursuant to section 180(1)(c) of the Legal Profession Uniform Law (NSW) (‘UL’)” (Barrister’s October costs disclosure).[18] Paragraph 3 states that the “Barrister estimates his total fees and out-of-pockets for completion of the Brief incurred from . . . 4 October 2019, to Saturday, 12 October 2019 at $31,000 plus GST (including out-of-pocket expenses in Canberra for the appeal hearing)”. The estimate of $295,000 for Mr Bevan’s fees in the Solicitor’s October costs disclosure is $606 less than the sum of the amounts Mr Bevan claimed in his invoice dated 3 October 2019 and the $31,000 estimate contained in the Barrister’s October costs disclosure.[19] The third document that was attached to Mr Bingham’s emails was a letter dated 26 September 2019 from Mr Wells, barrister, which sets out the basis on which he will charge his fees as junior counsel to Mr Bevan.[20] Mr Wells sets out his hourly rates, and other information, but does not provide an estimate of his costs “because the course proceedings may take is not yet sufficiently certain”.
[18] Exhibit JDB-1, page 22
[19] In his invoice dated 3 October 2019, Mr Bevan claimed $261,750.00 and $2,856.00 (excluding GST). The total of these amounts and the $31,000 estimate is $295,606, which is $606 less that the $295,000 estimate of Mr Bevan’s fees recorded in the Solicitor’s October costs disclosure.
[20] Exhibit JDB-1, page 26
There is no evidence that before 4 October 2019 Mr Bingham had notified Mr Boensch that the fees would be greater than those estimated in the Solicitor’s February costs disclosure or the fees estimated in the Barrister’s February costs disclosure, or that the fees would be greater than the $100,000 provided for in the Mortgage; nor is there evidence that, before 4 October 2019, Mr Bevan notified Mr Bingham that there would be an increase in the estimate of $63,000 to $75,000 Mr Bevan disclosed in the Barrister’s February costs disclosure. According to his “Itemised bill of the fees invoiced”,[21] Mr Bevan had performed at least $76,000 worth of work by 24 June 2019; and he had performed at least $100,000 worth of work by 11 July 2019, almost three months before Mr Bevan issued his invoice of 3 October 2019.
[21] Exhibit JDB-1, page 50
4 October 2019 – Mr Boensch rejects “updated costs agreements”
On 4 October 2019 Mr Boensch sent an email to Mr Bingham, which he copied to Mr Bevan.[22] Mr Boensch’s email refers to two emails, one received on 3 September 2019, and the other “today”, that is, 4 October 2019. There is no email dated 3 September 2019 in evidence. Mr Boensch said (errors in original):
I do not agree to the proposed updated cost agreements, as I am not accepting for myself and on behalf of the trust any financial responsibility additional and over that what we agreed as a maximum and I signed back in Chris’s Office at the outset. That includes the matter with Somerville as it was discussed, included and agreed in the paperwork including the payment terms if I have to pay for that agreed max amount.
You know the paperwork I am referring too as you have registered it.
I made clear at the time and now, that after some 15 plus years of litigation with pretty much is about the same thing, there are no financial means either by me or the trust to finance further appeal proceedings.
You both agreed with me and we signed the paperwork.
I asked at the outset what the proceedings will cost. 2 amounts were floated. When I insisted to deal only with the maximum amount, The average of both floated amounts was doubled and while it was a lot I agreed, since in my estimation enough time was allowed to take care of the payment.
. . . .
Hopefully we don’t need to go through all these arguments after the 11th.
[22] Exhibit FBBN, page 36
Events after 4 October 2019
It would be reasonable to assume that Mr Bingham, and perhaps Mr Bevan, responded to Mr Boensch’s email; but if they did, their responses are not the subject of any evidence, and there is no basis for finding they did respond to Mr Boensch’s email. The evidence only shows that the High Court heard the appeal on 11 October 2019, at the conclusion of which the Justices reserved judgment; and, on 13 December 2019, the High Court dismissed Mr Boensch’s appeal.[23]
[23] Boensch v Pascoe [2019] HCA 49
In the meantime two things happened. First, on 6 December 2019 Mr Bingham issued an invoice to Mr Boensch claiming $391,555.44. [24] That includes as disbursements the amount of $301,636.72 for Mr Bevan’s fees, and $15,452.52 for Mr Wells’ fees. The second thing is that on 12 December 2019 a sequestration order was made against Mr Boensch’s estate.[25] Mr Boensch appealed to the Full Federal Court which, on 26 May 2021, upheld the appeal and set aside the sequestration order.[26] The Full Federal Court also ordered that the creditor’s petition be remitted to this Court, differently constituted, for hearing. Mr Boensch has applied for special leave to appeal to the High Court against the order remitting the creditor’s petition to this Court.[27]
[24] Exhibit JDB-1, page 29
[25] Boensch v Somerville Legal Pty Ltd [2019] FCCA 868
[26] Boensch v Somerville Legal [2021] FCAFC 79
[27] Affidavit of F Boensch filed 05.10.2021, [6]-[8]
Mr Bingham and Mr Bevan apply for an assessment of costs
On 15 October 2020 Mr Bingham lodged an application for assessment of costs pursuant to s 198(1)(c) of the LPU Law,[28] which provides (emphasis added):
Applications for an assessment of the whole or any part of legal costs payable to a law practice may be made by any of the following -
. . .
(c) the law practice . . .
[28] Exhibit JDB-1, page 1
The costs Mr Bingham applied to be assessed are the costs he claimed in his invoice dated 6 December 2019. In response to question 9 of the form of application, Mr Bingham answered that he and Mr Boensch entered into a costs agreement, and that agreement is constituted by the Solicitor’s February costs disclosure. In paragraph 10 of the form of application, Mr Bingham stated that the “work was carried out pursuant to the costs agreement/disclosure referred to at paragraph 7 above”. Mr Bingham also attached the February and October solicitor’s costs disclosures, and the February and October barrister’s costs disclosures.
Mr Boensch did not sign the Solicitor’s February costs disclosure, and Mr Bingham did not, in his application for costs assessment, identify the basis on which that document constituted the costs agreement between him and Mr Boensch. It could not be inferred solely from the Solicitor’s February costs disclosure that it constituted any costs agreement, because, as I have already noted, cl 5 of the GTB provides, among other things, that it is “your right to . . . negotiate a costs agreement with us”. The evidence reveals Mr Boensch, on the one hand, and Mr Bingham and Mr Bevan, on the other, held discussions and exchanged emails in relation to arrangements for the payment of costs which resulted in Mr Boensch and Mr Bingham executing the Mortgage. Mr Bingham apparently did not disclose in his application for a costs assessment these email communications, or the Mortgage.
Mr Bevan also applied for an assessment of his costs naming Mr Bingham as the costs respondent; and it appears he did so at around the time Mr Bingham applied for an assessment of his costs.[29] Mr Bevan applied for an assessment of costs under s 198(1)(d) of the LPU Law, which provides (emphasis added):
Applications for an assessment of the whole or any part of legal costs payable to a law practice may be made by any of the following -
. . .
(d)another law practice, where the other law practice retained the law practice to act on behalf of a client and the law practice has given the other law practice a bill for doing so.
[29] Exhibit JDB-1, page 44. Mr Bevan’s application was assigned assessment no. 2020/222617, while Mr Bingham’s application was assigned assessment no. 2020/296514
There is in evidence a document titled “Bill of Costs” Mr Bevan submitted in support of his application for assessment of costs. That document contains a section headed “Narrative of the Brief”, in which Mr Bevan makes a number of statements, including the following:
(a)Mr Bevan was retained as counsel by the costs respondent (that is, Mr Bingham) on 2 February 2019 to apply for special leave to appeal to the High Court on behalf of the client, Mr Boensch. The terms of the retainer are set out in a “costs agreement dated 2 February 2019”. That appears to be a reference to the Barrister’s February costs disclosure.
(b)The Barrister’s February costs disclosure includes “an initial estimate of fees for the performance of the first stage of the brief (being the preliminary steps in seeking a grant of special leave to appeal from [sic] a [sic] High Court)”.[30]
(c)On 3 October 2019 the parties entered “an updated cost agreement which gave an updated estimate for the completion of the matter including the conduct of the hearing of the appeal [to] the High Court following the grant of special leave several months earlier”.
(d)Mr Bevan referred to the Mortgage in the following, oblique, way (errors in original).
The new cost agreement was sent by email dated 3 October 2019 and Andy confirm the costs respondent’s liability for the fees which cost respondent [that is, Mr Bingham] at secured is liability for as a client disbursement from Mr Boensch acting as trustee of the Boensch Trust by a mortgage in favour of the cost respondent from Mr Boensch acting in that capacity secured over a commercial and residential building at Rydalmere in Sydney which is the trust property.
(e)Success in the appeal “required establishing new principles of law in the areas of both personal bankruptcy by a bankrupt trustee of an express trust and compensation payable for wrongful . . . maintenance of a caveat on Torrens title land”; that “new principles were enunciated in both areas of law but regrettably the facts of Mr Boensch’s case is [sic] found by the High Court did not rise to the level of satisfying both newly-enunciated principles of law”; and that “although the appeal succeeded at a doctrinal level it failed at a strictly factual level”.[31]
[30] Exhibit JDB-1, page 45, [2]
[31] Exhibit JDB-1, page 46, [5]
Mr Bevan concluded the “Narrative of the Brief” with the following (emphasis added):[32]
So far as the costs applicant is aware, there is no dispute about the fairness and reasonableness of his fees.
However, as the costs applicant’s fees, as counsel for the bankrupt applicant in the application for annulment, are payable by the instructing solicitor from the proceeds of sale of trust property as its mortgagee in possession, and as regards any balance remaining owing to him for costs, is payable from the client’s bankrupt estate, the costs applicant, as counsel for the bankrupt client, has lodged with The Manager, Costs Assessment, all his fees for assessment in accordance with the LPU Law. He has done so in order to have the fairness and reasonableness of the fees he billed to costs respondent – for reimbursement from the proceeds of sale of the trust property to be sold under a power of sale and, to the extent of any shortfall, from the bankrupt estate of the client and the remaining trust property – determined as to their fairness and reasonableness under the LPU Law, and have the amount of his fees verified by an independent costs assessor, so that the costs respondent can confidently pay the certified fees from the proceeds of sale of trust property as mortgagee of that property and the client’s trustee in bankruptcy can rely upon the certificate of determination in deciding whether or not to approve payment of any shortfall.
[32] Exhibit JDB-1, page 48, [9], [10]
There are a number of matters that may be noted about statements Mr Bevan made in the “Narrative of the Brief”.
(a)Mr Bingham did not sign the Barrister’s February costs disclosure; yet Mr Bevan does not identify the grounds on which he claimed that that document records the terms of a costs agreement. At most, the Barrister’s February costs disclosure could constitute an offer by Mr Bevan to undertake work on the terms it contains; but before those terms can be found to form part of a costs agreement, s 180 of the LPU Law makes it clear that it is necessary to identify some writing or conduct that constitutes an acceptance of such offer. Mr Bevan does not identify any writing or conduct that he stated constituted the acceptance of the terms contained in the Barrister’s February costs disclosure.
(b)Mr Bingham did not sign the Barrister’s October costs disclosure; yet Mr Bevan does not identify the grounds on which he claimed that it constituted the terms of an “updated cost agreement”. Mr Bevan does not disclose in the “Narrative of the Brief” the email Mr Boensch sent to Mr Bingham and to Mr Bevan on 4 October 2019 in which he stated: “I do not agree to the proposed updated cost agreements”; and it is difficult, in the light of that email, to see how it was open to Mr Bevan to assert in the “Narrative of the Brief” that the terms of the Barrister’s October costs disclosure constituted an “updated cost agreement”.
(c)The statements Mr Bevan makes in the passage I have quoted suggest that he and Mr Bingham agreed that Mr Bingham’s liability to pay Mr Bevan’s fees was conditional on Mr Bingham recovering money out of the proceeds of sale of the Property in the exercise of his power of sale as mortgagee under the Mortgage, and, to the extent of any shortfall, from any dividend that would be paid out of Mr Boensch’s bankrupt estate. Mr Bevan, however, does not identify any document that records such agreement, or any other basis for claiming that he and Mr Bingham had made such an agreement. He does not appear to have referred to the Mortgage, the terms of which he personally negotiated with Mr Boensch. In particular, Mr Bevan does not refer to clauses 2, 4, and 6 of Annexure ‘A’ to the Mortgage. Further, given that Mr Bevan appears to accept that his fees are only payable conditionally, it is not apparent on what basis he considered he was entitled to apply for the assessment of his legal costs, given that s 198(1) of the LPU Law provides that an application for the assessment of legal costs may be made where the whole or any part of the legal costs are “payable” to a law practice.
(d)The “Narrative of the Brief” assumes that Mr Bingham would be entitled to apply all of the proceeds of sale he may recover from the Property in the exercise of his power of sale as mortgagee and, to the extent such proceeds are insufficient to pay the legal fees, Mr Boensch would be personally liable to pay the balance; but Mr Bevan does not refer to cl 2 of Annexure ‘A’ to the Mortgage (which appears to provide for the deferral of the exercise of the power of sale until 1 March 2024), cl 4 (which appears to limit Mr Boensch’s liability to the extent it can be satisfied out of the proceeds of sale of the Property), or cl 6 (which appears to limit Mr Boensch’s liability under the Mortgage to $100,000).
(e)Mr Bevan’s statement that the Barrister’s February costs disclosure included “an initial estimate of fees for the performance of the first stage of the brief (being the preliminary steps in seeking a grant of special leave to appeal from [sic] a [sic] High Court”, is incorrect. The estimate Mr Bevan gave in the Barrister’s February costs disclosure cannot reasonably be characterised as an estimate for performing the “first stage of the brief”; it was an estimate of fees right up to the hearing of the appeal, assuming the High Court were to grant special leave; and the estimate was for between $63,000 - $75,000.
(f)Mr Bevan did not in the “Narrative of the Brief” identify the “new principles of law” on which, so he stated, the success of Mr Boensch’s appeal to the High Court depended; nor did he identify the “new principles of law” the High Court enunciated. It is apparent from the two sets of reasons of the High Court that Mr Boensch did not rely on any “new principles of law” on his appeal; and the High Court did not enunciate, or otherwise dispose of the appeal, on the basis of any new principles of law. Mr Boensch appears to have relied on a principle of law all 7 justices of the High Court found had been declared by Sir George Jessel in 1878,[33] namely, that “under the Bankruptcy Act where a trustee has no beneficial interest, the legal estate does not pass; but where he has, it does pass”.[34] Mr Boensch failed in his appeal, not because the High Court did not accept any “new principles” Mr Boensch urged the High Court to adopt, or because the High Court enunciated new principles which on the facts Mr Boensch could not satisfy; Mr Boensch failed because he did not discharge the burden of proving a state of affairs it was necessary for him to prove to bring himself within the operation of a long established principle of law. That state of affairs Mr Boensch was required, but failed to prove, was that the trust had offsetting claims that exceeded the quantum of Mr Boensch’s right as trustee to be indemnified out of the trust property.[35]
[33] Morgan v Swansea Urban Sanitary Authority (1878) 9 Ch D 582, at page 585
[34] Boensch v Pascoe [2019] HCA 49, at [4] (Kiefel CJ, Gageler, and Keane JJ), and [92] (Bell, Nettle, Gordon, Edelman JJ)
[35] Boensch v Pascoe [2019] HCA 49, at [9] (Kiefel CJ, Gageler, and Keane JJ), and [100] (Bell, Nettle, Gordon, Edelman JJ)
26 November 2020 – Mr Boensch lodges objections
On 26 November 2020 Mr Boensch submitted a letter to the Costs Assessor setting out his objections to Mr Bingham’s application.[36] Mr Boensch submitted that “the statements made by the Cost Applicant are at best misleading and in the worst case they are false and a fraud”, and there “is “no contract” between the parties over the falsely claimed amount in this application”. Mr Boensch relied on submissions that included the following:
(a)A “special agreement was drawn up between the parties to address and limit the principle [sic] sum to a maximum of $100,000. See (Annex A). This agreement has not been disclosed by the Cost applicant!” Mr Boensch annexed Annexure ‘A’ to the Mortgage.
(b)The email Mr Bevan sent to Mr Bingham on 4 February 2019 (which Mr Boensch identifies as annexure “B”, and which is reproduced above) “shows it was clear between the parties that all services will be covered with such fixed agreement”.
(c)To his surprise, by email received on 4 October 2019 Mr Boensch was provided with an amended costs estimate of an additional $358,700. Mr Boensch “instantaneously refused to accept such additional cost agreement with any amount over and above the agreed fixed amount of $100,000, on the same day”.
[36] Exhibit JDB-1, pages 65-66
From the Costs Assessor’s statement of reasons (to which I will shortly refer), it appears that on 4 December 2020 Mr Bingham lodged a response to Mr Boensch’s objections.[37] The response, however, is not in evidence. It appears from the Costs Assessor’s statement of reasons, however, that one of the submissions Mr Bingham made is that “the mortgage was merely a security for the Solicitor’s costs and was not a costs agreement in itself”.[38]
[37] Exhibit FBBN, page 23, [3]
[38] Exhibit FBBN, page 25, [5(3)]
The tasks of a costs assessor
Once Mr Bingham’s and Mr Bevan’s applications for the assessment of costs had been allocated to the Costs Assessor, s 199(2) of the LPU Law required the Costs Assessor to do two things.
Determine whether valid costs agreement exists
The first was “to determine whether or not a valid costs agreement exists”. It is relevant to what I say later in these reasons to consider at this point the nature of a finding a costs assessor makes when determining “whether or not a valid costs agreement exists”. More particularly, is it within the sole power of a costs assessor to determine “whether or not a valid costs agreement exists” so that, if the power is exercised without any jurisdictional error, it is conclusive as between the parties to a costs assessment? Or is the question whether there is a valid costs agreement a “jurisdictional fact”, so that whether a valid costs agreement exists is a question that cannot be conclusively determined by a costs assessor, but may be determined by a court with jurisdiction.[39]
[39] I have considered elsewhere the nature of the distinction between jurisdictional and non-jurisdictional facts, and the principles for distinguishing between them – see BTX17 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (No 2) [2020] FCCA 2270, at [24]-[36]
The determination of these questions turns on the proper construction of the LPU Law; and, in my opinion, whether or not a valid costs agreement exists is a jurisdictional fact. First, there is s 180 of the LPU Law. It identifies who may make a costs agreement; it requires that a costs agreement be in writing, or be evidenced in writing; and prohibits a costs agreement from containing a provision to the effect that the legal costs that are the subject of the costs agreement are not subject to a costs assessment. Section 180 does not condition the matters with which it deals by reference to the existence of the opinion, satisfaction, or any other state of mind of a costs assessor. Second, there is s 184 of the LPU Law, which provides that subject to “this Law, a costs agreement may be enforced in the same way as any other contract”. The “costs agreement” to which s 184 of the LPU Law refers is stated as an objective fact, wholly unconnected to any opinion or other state of mind of a costs assessor. Third, s 172(4) of the LPU Law provides that a “costs agreement is prima facie evidence that legal costs disclosed in the agreement are fair and reasonable if” the provisions dealing with costs disclosure have been complied with and if “the costs agreement does not contravene, and was not entered into in contravention of, any provision of Division 4”. Again, these are matters that are stated without reference to any opinion or state of mind of a costs assessor.
The consequence of the question whether or not there exists a costs agreement is a jurisdictional fact, is that it would be open to a party to a costs assessment to apply to a court with jurisdiction for the court to determine whether a costs agreement exists or does not exist. And, as the plurality in Corporation of the City of Enfield said, where “the question is whether the tribunal acted within jurisdiction, it must be for the court to determine independently for itself whether that is the case”.[40]
[40] Corporation of the City of Enfield v Development Assessment Commission [2000] HCA 5, at [48]
There is one other matter that is a jurisdictional fact; and that is whether, at the time an application for assessment of legal costs is made under s 198 of the LPU Law, “the whole or any part of legal costs [are] payable to a law practice”. Whether legal costs are payable is an objective matter, not conditioned by the costs assessor’s satisfaction, opinion, or other state of mind.
Determine whether legal costs fair and reasonable
The second task s 199(2) of the LPU Law required of the Costs Assessor was “to determine whether” the legal costs of Mr Bingham and Mr Bevan are “fair and reasonable and, to the extent they are not fair and reasonable, determine the amount of legal costs (if any) that are to be payable”. Subsection 200(1) of the LPU Law required the Costs Assessor, in “considering whether” Mr Bingham’s and Mr Bevan’s legal costs are fair and reasonable, to “apply the principles in section 172 so far as they are applicable”. Section 172 of the LPU Law is as follows:
(1)A law practice must, in charging legal costs, charge costs that are no more than fair and reasonable in all the circumstances and that in particular are –
(a)proportionately and reasonably incurred; and
(b)proportionate and reasonable in amount.
(2)In considering whether legal costs satisfy subsection (1), regard must be had to whether the legal costs reasonably reflect –
(a)the level of skill, experience, specialisation and seniority of the lawyers concerned; and
(b)the level of complexity, novelty or difficulty of the issues involved, and the extent to which the matter involved a matter of public interest; and
(c)the labour and responsibility involved; and
(d)the circumstances in acting on the matter, including (for example) any or all of the following –
(i)the urgency of the matter;
(ii)the time spent on the matter;
(iii)the time when business was transacted in the matter;
(iv)the place where business was transacted in the matter;
(v)the number and importance of any documents involved; and
(e)the quality of the work done; and
(f)the retainer and the instructions (express or implied) given in the matter.
(3)In considering whether legal costs are fair and reasonable, regard must also be had to whether the legal costs conform to any applicable requirements of this Part, the Uniform Rules and any fixed costs legislative provisions.
(4)A costs agreement is prima facie evidence that legal costs disclosed in the agreement are fair and reasonable if –
(a)the provisions of Division 3 relating to costs disclosure have been complied with; and
(b)the costs agreement does not contravene, and was not entered into in contravention of, any provision of Division 4.
Also relevant is s 200(2) of the LPU Law, which provides:
In considering whether legal costs for legal work are fair and reasonable, the costs assessor may have regard to the following matters –
(a)whether the law practice and any legal practitioner associate or foreign lawyer associate involved in the work complied with this Law and the Uniform Rules;
(b)any disclosures made, including whether it would have been reasonably practicable for the law practice to disclose the total costs of the work at the outset (rather than simply disclosing charging rates);
(c)any relevant advertisement as to the law practice’s costs or the skills of the law practice or any legal practitioner associate or foreign lawyer associate involved in the work;
(d)any other relevant matter.
Costs Assessor’s reasons
It appears that the Costs Assessor found there was a valid costs agreement between Mr Boensch and Mr Bingham, and also a valid costs agreement between Mr Bingham and Mr Bevan; and that the terms of each costs agreements are those recorded in the Solicitor’s February and October costs disclosures and in the Barrister’s February and October costs disclosures respectively, and Mr Well’s costs disclosure. The Costs Assessor’s reasons for so finding are contained in the section headed “Costs Agreement contained in Mortgage Agreement”. The Costs Assessor there refers to Mr Boensch submitting that “the amount of costs was limited to a mortgage agreement for $100,000”, and Mr Boensch’s submission “in part relies on a meeting which occurred on 5th of February 2020”. The Costs Assessor further notes that Mr Boensch “relies on the conversations which took place at that conference as a basis for some kind of agreement”. The Costs Assessor rejected this submission “on the basis that s 195 LPU Law requires any costs agreement to be in writing so that conversation [sic] may not be relied on”.
The Costs Assessor continued:
The Cost Respondent’s submission demonstrates a misconception that in order to be a valid costs agreement it has to comply with Division 3 of the LPUL. The Costs Respondent sent a number of emails claiming the mortgage was a costs agreement. One could deduce that he was trying to unilaterally cap costs at $100,000 because his method does not fall within an accepted method under the legislation. The Costs Respondent purported to make a mortgage a costs agreement and make it binding on the Costs Applicant however, by continuing to engage the Costs Applicant without his agreement to cap costs at $100,000 he is deemed to have accepted the Costs Agreement of the Costs Applicant.
The Costs Applicant also stated that the mortgage was merely a security for the Solicitor’s costs and was not a costs agreement in itself. I agree with this submission.
There are a number of observations that may be made about this part of the Costs Assessor’s statement of reasons.
(a)The Costs Assessor incorrectly records Mr Boensch’s principal submission. Mr Boensch did not submit that the agreement to limit legal costs to $100,000 was made in conversations in a meeting. Mr Boensch submitted that “[a]t the outset a special agreement was drawn up between the parties to address and limit the principle [sic] sum to a maximum of $100,000. See (Annex A)”’; and he submitted to the Costs Assessor a copy of Annexure “A” to the Mortgage.
(b)The Costs Assessor found that the Mortgage “was not a costs agreement in itself”. The Costs Assessor, however, did not specify what he understands the expression “costs agreement” to mean; and he does not explain why a written agreement that contains terms that expressly secure a principal sum for the payment of legal costs not exceeding $100,000 cannot be characterised as a costs agreement, that is, as “an agreement about the payment of legal costs”.[41] More particularly, the Costs Assessor does not explain why the covenants contained in Annexure ‘A’ to the Mortgage that are expressly given in consideration of Mr Bingham’s providing or continuing to provide legal services to Mr Boensch cannot be characterised as a “costs agreement”.
(c)By finding that the Mortgage “was merely a security for the Solicitor’s costs” the Costs Assessor appears to have found that Mr Boensch granted the Mortgage to secure the costs identified in the Solicitor’s February and October costs disclosures. That implies the Costs Assessor found that the Mortgage secured all of those costs. That may not be a surprising finding if the Costs Assessor did not read or understand the Mortgage, but instead simply adopted Mr Bingham’s submission, and accepted Mr Bevan’s statement that his fees “are payable by the instructing solicitor from the proceeds of sale of trust property as its mortgagee in possession, and as regards any balance remaining owing to him for costs, is payable from the client’s bankrupt estate”. That is an untenable representation of the effect of the terms contained in Annexure ‘A’ to the Mortgage. The only liability Annexure ‘A’ to the Mortgage can reasonably be construed to describe is the liability described in cl 6, namely, the “principal sum for legal costs incurred by” Mr Boensch as a client of Mr Bingham, and in his capacity of trustee of the Property, which would have to be read with cl 6, which provides that the liability so incurred “shall be limited to” $100,000.
(d)The Costs Assessor’s statement that “s 195 LPUL requires any costs agreement to be in writing so that conversation [sic] may not be relied on” is incorrect. Section 195 of the LPU Law is directed to the ability of a law practice to charge interest; and it may be taken the Costs Assessor intended to refer to s 180 of the LPU Law. Even so, the Costs Assessor’s statement does not correctly state the effect of s 180. Subsection 180(2) of the LPU Law requires that a costs agreement “be written or evidenced in writing”; but s 180(3) provides that a costs agreement (other than a conditional costs agreement) “may consist of a written offer that is accepted in writing or . . . by other conduct”, which would include a conversation. The Costs Assessor in effect found that the terms of the Solicitor’s February and the Barrister’s February costs disclosures constitute the terms of costs agreements because the Costs Assessor found that Mr Boensch continued “to engage the Costs Applicant without” Mr Bingham’s “agreement to cap costs”. But even here, the Costs Assessor does not identify the acts he considered constituted Mr Boensch’s continuing to engage Mr Bingham, or the acts by which Mr Bingham resisted any attempt by Mr Boensch to cap legal fees.
[41] Anderson v Hill [2017] NSWSC 1149, at [35]
The Costs Assessor also assessed Mr Bingham’s and Mr Bevan’s legal costs. The entirety of the reasons the Costs Assessor devoted to that task is contained in the following passage:[42]
Hourly Rates
Having regard to the seniority and experience of the Costs Applicant, I found his hourly rate of $360 plus GST to be fair and reasonable for a matter of this nature in accordance with s.172 of the LPUL.
Having regard to the seniority and experience of Mr Bevan, I found that the brief of hearing fee of $6,000 to be fair and reasonable, and the alternative hourly rates of either $300 per hour or $600 per hour to be fair and reasonable pursuant to s.172. He also charged a minimal rate of $3,600 per day for all appearances in court occupying less than 6 hours. Although this item does include interlocutory hearings, it could also apply to mentions in which case it would not be fair and reasonable according to s.172 of LPUL. However, Mr Bevan only charged $3,600 for the short hearing requesting special leave to appeal the High Court. In those circumstances I found the charge to be fair and reasonable.
I also found the hourly rates of Mr Wells to be fair and reasonable having regard to his level of seniority and the difficulty of the matter he was dealing at the time for the Costs Applicant.
Items reduced
Having regard to the complexity and general nature of the matter, I formed the view that the time allowed for performance of certain of the items should be reduced so that they represented in my opinion a, “fair and reasonable amount of costs for the work”.
[42] Exhibit JDB-1, pages 65-66
In section 10 of his statement of reasons, the Costs Assessor allowed $26,694 of the $30,600 legal fees Mr Bingham claimed,[43] $269,550 of the $334,795.39 (including GST) Mr Bevan claimed,[44] and $10,575 of the $16,997.77 Mr Wells claimed.[45]
[43] Exhibit JDB-1, page 29
[44] Exhibit JDB-1, page 64 ($304,631.72 fees charged + $30,163.67 GST)
[45] Exhibit JDB-1, page 39
The Costs Assessor does not address whether Mr Bevan or Mr Bingham complied with s 174(1)(b) of the LPU Law. On the face of the evidence, however, there would appear to be a strong basis for finding that at the very least Mr Bevan did not comply with s 174(1)(b) of the LPU Law. If there had been any non-compliance with s 174(1)(b), that would have been a matter s 200(2)(a) of the LPU Law would have required the Costs Assessor to consider when assessing the reasonableness of the legal costs claimed by Mr Bevan. Further, the Costs Assessor would have had to consider whether s 178(1)(a) of the LPU Law applied to render void what he found to be the costs agreement between Mr Boensch and Mr Bingham.
12 May 2021 – Costs Certificate issued
On 12 May 2021 the Costs Assessor issued the Costs Certificate that sets out his determination of the amount of legal costs he had determined ($358, 234.71), interest on that amount ($10,524.58), and the application fee ($3,915.55).[46]
[46] Exhibit JDB-1, pages 107-108
Under s 83(1) of the LPUL Application Act Mr Boensch had the right to apply for a review of the Costs Assessor’s determination “within 30 days after the certificate of determination by the costs assessor has been forwarded to the parties in accordance with the regulations or the costs assessment rules”. Under s 83(1A) of the LPUL Application Act the Manager, Costs Assessment, may extend the period for lodging an application under s 83(1).
Mr Boensch did not apply for a review of the Costs Assessor’s determination within the time provided for by s 83(1) of the LPUL Application Act. In the meantime on 4 June 2021 Mr Bingham lodged the Costs Certificate for registration with the District Court; and on the same day the Judgment was entered by the District Court.
The registration of the Judgment and issue of the bankruptcy notice prompted Mr Boensch to take a number of actions. On 17 October 2021 Mr Boensch filed a notice of motion with the District Court to set aside the Judgment. The District Court heard and dismissed that notice of motion on 22 November 2021.[47] On 23 November 2021 Mr Boensch applied for review of the Costs Assessor’s determination, but on 3 December 2021 the Manager, Costs Assessment, refused to extend time for Mr Boensch to apply for review.[48] 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, but also in relation to the agreement Mr Boensch claims he entered into with Mr Bingham in relation to the appeal to the High Court.[49] Finally, on 13 December 2021 Mr Boensch filed another notice of motion in the District Court seeking an order that the enforcement of the Judgment be stayed, or in the alternative, that the Judgment be set aside.[50]
[47] Affidavit of J D Bingham 22.11.2021, [4]
[48] Affidavit of J D Bingham 13.12.2021, [4]
[49] Exhibit A
[50] Exhibit B
GROUNDS ON WHICH MR BOENSCH RELIES
Mr Boensch, who is not legally represented, has stated the grounds on which he relies for setting aside the bankruptcy notice in a number of documents. First there is paragraph 4 of the application by which Mr Boensch commenced this proceeding (errors in original):
The Applicant seeks to have the Bankruptcy Notice BN253396 set aside or to extend the time on “other grounds” under s 41(6A((b) of the Bankruptcy Act 1966:
a) The amount claimed in the Bankruptcy Notice BN253396 is overstated
b)The Applicant does not owe the debt alleged in the Bankruptcy Notice BN253396
c)The Bankruptcy Notice BN253396 is based on a default judgment which in turn is based on an erroneous and unlawful (errors in law) Cost assessment process which is in contrary to the UCPR requirements. The cost assessment also included consideration of proceedings where the Respondent was not involved or prior representing the Applicant!
d)The Respondent included in the cost assessment, legal cost that are not contractual, and other cost based on unprofessional, negligent conduct and conduct unbecoming as a Solicitor and officer of the Court. The respondent has legally represented the Applicant and failed to act and include facts instructed. this to Judgements lost, wanting instructed information in proceedings leading to judgements called without merits and or incompetent.
e)The Respondent was made aware of the disappointment by the Applicant and was informed of the preparation of a claim of negligent professional conduct and professional miss conduct against him. The Respondent tries to stifle this claim against him by making the Applicant bankrupt.
f)The Respondent has dishonoured the written contractual agreement with the Applicant.
The second document in which Mr Boensch sets out his grounds is his affidavit made on 23 September 2021, and filed on 5 October 2021. Mr Boensch makes the following claims:
(a)It was not open to Mr Bingham to apply for an assessment of his costs at the time he did because Mr Boensch was a bankrupt. Although on 26 May 2021 the Full Federal Court set aside the sequestration order by which Mr Boensch was made bankrupt, and Mr Boensch has applied for special leave to appeal against the Full Federal Court’s order to remit the hearing of Somerville’s creditor’s petition, there is the possibility that a sequestration order will be made on the rehearing of Somerville’s creditor’s petition.[51]
(b)The Costs Assessment on the basis of which the Costs Certificate was issued “is flawed”, because:
(i)The parties had a fixed capped and signed agreement with a capped ““principle sum” [sic] of $100,000 for all legal proceedings”. The Costs Assessor ignored that agreement as a costs agreement because it was secured by a mortgage.[52]
(ii)The liability under the agreement referred to in (i) was deferred to be paid by 1 March 2024.[53]
(iii)Given (i) and (ii) “the claim in the BN253396” is illegal and an abuse of process.[54]
(iv)The Costs Assessor “did not do a proper assessment in compliance with the rules” because, first, the Costs Assessor “found the sum demanded by the respondnet [sic] to be “Reasonable” based on alleged expertise of the Respondnet [sic] instead of checking the hours invoiced and performance, ignoring that the respondent failed in its representation of the Appliocant [sic] in all court areanas [sic]”.[55]
(c)Mr Bingham acted negligently in connection with the matters that led to Mr Boensch being made bankrupt.[56]
(d)Mr Bingham acted negligently in the proceedings that ended up in the High Court by not putting on evidence to show that the trust had an offset against Mr Boensch’s claim for indemnity that exceeded that claim.[57]
[51] Affidavit of F Boensch 23.09.2020, filed 05.10.2021, [2]-[9]
[52] Affidavit of F Boensch 23.09.2020, filed 05.10.2021, [11]. Mr Boensch records #6, which I take to be a reference to cl 6 of Annexure ‘A’ to the Mortgage
[53] Affidavit of F Boensch 23.09.2020, filed 05.10.2021, [12]. Mr Boensch records “#2”, which I take to be a reference to cl 2 of Annexure ‘A’ to the Mortgage
[54] Affidavit of F Boensch 23.09.2020, filed 05.10.2021, [12]
[55] Affidavit of F Boensch 23.09.2020, filed 05.10.2021, [15]
[56] Affidavit of F Boensch 23.09.2020, filed 05.10.2021, [17]-[27]
[57] Affidavit of F Boensch 23.09.2020, filed 05.10.2021, [29]-[40]
The third document on which Mr Boensch relies is the summons he filed in the Supreme Court on 13 December 2021 in which he claims orders that include the following (formatting and errors in original):[58]
[58] Exhibit A
1.A declaration that a signed agreement executed in about March 2019 between the parties is a contract and therefore a legally binding document to an agreement.
2.A declaration that the signed agreement executed in about March 2019 between the parties is a contract and agreement to regulate legal services/costs and payment of legal services/costs and is under, but not limited to, LPUL(NSW) 2014, a costs agreement.
3 A declaration, that the singed agreement of March 2019 negotiated under s174(2)(a)(i) LPUL (NSW) 2014, was about an primary sum for all legal services with an amount up to but limited to $100,000 with payment deferred to 2024.
4 A declaration that a Costs assessor is bound, but failed its duties, to asses such a costs agreement as signed on about March 2019 between the parties.
5 A declaration that the plaintiff is not liable to the defendant for any amount over $100,000 for legal services and or legal work provided during the 2019 engagement under the signed capped costs agreement of about March 2019
6 A declaration that the plaintiff is not liable to pay to the defendant, under the signed agreement of about March 2019 any amount up to $100,000 for legal services and or legal work provided before March 2024.
7 The defendant is not entitled to any amount over $100,000 for legal services and or legal work provided during the 2019 engagement, under the signed capped costs agreement of about March 2019.
8 A declaration that the defendant is not entitled to be paid by the Plaintiff any amount up to $100,000 for legal services and or legal work provided before March 2024, under the signed agreement of about March 2019
9 A declaration that a proposed, but rejected (by the Plaintiff) Disclosure and Costs agreement (“late offer”) dated 2 Oct 2019 and emailed to the plaintiff about 4 October 2019 in the proposed amount of alleging some $358,700 was not a legally binding document/ contract/ costs agreement.
10A declaration that the rejected proposal for a Disclosure and Costs agreement (“late offer”) dated 2 Oct 2019 and emailed to the plaintiff about 4 October 2019, only 4 clear working days before the hearing (11 Oct 2019) for consideration/legal advice of options regarding such late offer, cannot form the bases of an “agreed” Costs assessment under LPUL(NSW) 2014.
11 A declaration that only the last legally binding costs agreement or contract “agreed” can be assessed, or
12 if void under conditions required to be disclosed and listed in LPUL (NSW) 2014 can and must be assessed under s185(2) LPUA (NSW) 2014, up to but not exceeding the maximum amount of costs for legal services/work agreed, as if it was not void.
13 A declaration that a Costs assessor is bound, but failed its duties, to see such a rejected proposal for what it is, and erred in using such a rejected proposal dated 2 Oct 2019, emailed on 4 October, only 4 days before the hearing for consideration, as the bases for a “Costs Assessment”, in particular were a legally binding and capped costs agreement exists.
14 A declaration, that the assessor instead should have relied on the capped costs agreement signed in about March 2019, under the LPUL and the Contract review ACT 1980 NSW
15 Declare the “Certificate of Determination of Costs”, certificate C 1 No 2020/296514, void and not enforceable.
The fourth document in which Mr Boensch identified the grounds on which he relies to set aside the bankruptcy notice is the “Submission” Mr Boensch filed with the Court on 29 December 2021 pursuant to leave I granted at the hearing on 14 December 2021. In that document Mr Boensch makes a number of claims which include the following:
(a)It was not open to Mr Bingham to initiate the application for costs assessment at the time he did because Mr Boensch was then a bankrupt.[59]
(b)The rights of the parties in relation to legal costs were regulated by the terms of the Mortgage.[60]The Mortgage constituted a costs agreement.[61] The Costs Assessor “focused on the wrong paperwork”;[62] and he “ignored/discarded this agreement [that is, Annexure ‘A’] which was attached to a mortgage”.[63]
(c)Mr Bingham and Mr Bevan were negligent in not having taken steps to adduce evidence that the trust’s offsetting claims exceeded Mr Boensch’s right as trustee to be indemnified out of the Property.
(d)The focus of the Costs Assessor was “distracted by deceiving comments by the Creditor to gain unlawful benefits by deception”.[64]
[59] [Mr Boensch’s] Submission, [1(a)-(y)]
[60] [Mr Boensch’s] Submission, [2(aa)-(tt)]
[61] [Mr Boensch’s] Submission, [3(ccc)]. Mr Boensch refers to the judgment of Brereton J in Amirbeaggi v Business in Focus (Aust) Pty Ltd [2008] NSWSC 421, particularly at [27]
[62] [Mr Boensch’s] Submission, [3(uu)]
[63] [Mr Boensch’s] Submission, [3(vv)]
[64] [Mr Boensch’s] Submission, [3(zz)]
Mr Boensch also made submissions at the hearing which in substance reflected the grounds he has articulated in the documents I have identified.
MR BINGHAM’S SUBMISSIONS
At the hearing counsel for Mr Bingham submitted that Mr Boensch’s application, properly interpreted, relied on three grounds: Mr Boensch has a counter-claim against Mr Bingham that exceeds the amount demanded by the bankruptcy notice; the costs assessment is invalid; and Mr Bingham’s applying for a costs assessment after Mr Boensch was declared bankrupt did not constitute the enforcement of any remedy in respect of a provable debt within the meaning of s 58(3)(a) of the Bankruptcy Act. Counsel for Mr Bingham also understood that Mr Boensch intended to submit that Mr Bingham had made some election. The basis of counsel’s understanding was Mr Boensch’s referring to the first report to creditors issued by the trustee in bankruptcy who was appointed pursuant to the sequestration order made on 12 December 2019 which noted that Mr Bingham claimed he was a secured creditor in the amount of $100,000, and an unsecured creditor for $450,355.46.[65] I do not understand Mr Boensch to make any claim based on election.
[65] The report to creditors is exhibit C
Counsel for Mr Bingham submitted that Mr Boensch’s asserted counter-claim based on negligence is answered entirely by advocate’s immunity; it is not open to Mr Boensch to impugn the Costs Determination because he participated in the assessment of those costs and has failed in his attempt to have the Costs Determination reviewed; and applying for an assessment of costs does not constitute the enforcement of any remedy in respect of a provable debt within the meaning of s 58(3)(a) of the Bankruptcy Act.
Mr Bingham also filed written submissions in response to Mr Boensch’s Submission. In that document Mr Bingham interprets Mr Boensch as relying on nine grounds for setting aside the bankruptcy notice, these being the following (emphasis in original):[66]
[66] Respondent’s Written Submissions in Reply, [1]
(a)The existence of a counter-claim equal to or exceeding the amount of the judgment debt pursuant to s 40(1)(g) Bankruptcy Act 1996 (Cth) (First Ground);
(b)The application for costs assessment number 2020/296514 (the Costs Assessment), claimed legal costs that ‘[were] not contractual’ (Second Ground);
(c)Mr Bingham was negligent in the conduct of proceedings, including but not limited to those the costs of which were the subject of the Costs Assessment (Third Ground);
(d) Mr Bingham has ‘dishonoured the written contractual agreement with the Applicant’ (Fourth Ground);
(e)An ‘appeal’ of the certificate of determination of the costs assessor, issued in respect of the Costs Assessment (the Certificate of Determination), (Fifth Ground);
(f)The conduct of the Costs Assessment, in respect of which the Certificate of Determination was issued and upon which the District Court of New South Wales judgment that underlies the Bankruptcy Notice is based (the Judgment), was ‘erroneous and unlawful’ (Sixth Ground);
(g)The setting aside of the Judgment (Seventh Ground);
(h)The amount claimed in the Bankruptcy Notice is overstated (Eighth Ground); and
(i) Mr Boensch does not owe the debt alleged in the Bankruptcy Notice (Ninth Ground).
Mr Bingham then makes the following submissions:
(a)In relation to the first, second, third, and fourth grounds, Mr Bingham submits, among other things, that Mr Boensch has not identified any prima facie case of negligence against Mr Bingham or Mr Bevan, and, given s 73 of the LPUL Application Act, it is not open to Mr Boensch to challenge the Costs Determination.
(b)In relation to the fifth and sixth grounds, it is not open to Mr Boensch to challenge the Costs Determination. Mr Boensch has no right to appeal the Costs Assessor’s determination; and, other than identifying that it is open to Mr Boensch to apply for judicial review of the Manager, Costs Assessment’s decision, Mr Boensch has led no evidence that he intends to make any such application.
(c)In relation to the seventh ground, the District Court has already dismissed a notice of motion to set aside the Judgment, and there is no prospect that the District Court will set aside the Judgment on the filing of a new application.
(d)In relation to the eighth and ninth grounds, the amount stated in the bankruptcy notice does not overstate the Judgment Amount.
Mr Bingham repeated the submissions his counsel made at the hearing to the effect that the lodging of an application for an assessment of costs did not fall within s 58(3)(a) of the Bankruptcy Act, but he referred to an additional authority.
ISSUES
From these competing grounds and submissions, the following questions arise.
(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?
(b)Does Mr Boensch have a counter-claim against Mr Bingham of the nature identified in s 40(1)(g) of the Bankruptcy Act?
(c)Did Mr Boensch’s status as a bankrupt preclude Mr Bingham from lodging an application for the assessment of his costs?
DOES THE JUDGMENT AMOUNT REPRESENT A TRUE DEBT?
The Judgment on the basis of which the bankruptcy notice was issued is evidence that Mr Boensch is indebted to Mr Bingham for the Judgment Amount. A judgment, however, “is never conclusive in bankruptcy”; it “does not always represent itself as the relevant debt of the petitioning creditor, even though under the general law, the prior existing debt has merged in a judgment”.[67] Further, the “circumstance that under the general law a prior existing debt is taken to merge in a judgment has not been regarded as in some way operating to relieve a Bankruptcy Court of the paramount need to have satisfactory proof of the petitioning creditor’s debt”.[68]
[67] Wren v Mahony (1972) 126 CLR 212, at page 224 (Barwick CJ)
[68] Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28, at [58]
Courts of bankruptcy, therefore, hold in reserve the power to inquire into whether the judgment debt on which a creditor relies is in fact based on a true debt. This power is often referred to as the power “to go behind a judgment”; and courts of bankruptcy may exercise this power, not only on the hearing of the creditor’s petition, but also on an application to set aside a bankruptcy notice.[69]
[69] Olivieri v Stafford (1989) 91 ALR 91, at pages 107-109 and in particular the discussion by Gummow J of Wilkinson v Osborne & Anor (1915) 21 CLR 89, Re Vernon Arnfield (1925) 25 SR (NSW) 517 and Re Riviere; Ex parte Original Mont de Piete Ltd (1919) 20 SR (NSW) 77.
Going “behind a judgment”
The nature of the power to go behind a judgment, and the reasons for its exercise, were described in Corney v Brien as follows:[70]
Section 56 (2) (a) of the Bankruptcy Act 1924-1950 provides that the court at the hearing shall require proof of the debt of the petitioning creditor. Under this provision the Court of Bankruptcy has undoubted jurisdiction to go behind a judgment obtained by default or compromise or where fraud or collusion is alleged and inquire whether the judgment is founded on a real debt. In Ex parte Kibble . . . Sir W.M. James L.J. said: “It is the settled rule of the Court of Bankruptcy, on which we have always acted, that the Court of Bankruptcy can inquire into the consideration for a judgment debt”. Sir G. Mellish L.J. said: “It is quite clear that in the Court of Bankruptcy the consideration for a judgment may be investigated, particularly when the judgment has gone by default” . . . . This case was discussed and followed in Ex parte Lennox . . . where the reasons why the Court of Bankruptcy will go behind a judgment debt are fully discussed. Lindley L.J. said that “the Court of Bankruptcy will not allow itself to be put in motion at the instance of a person who is not a real creditor” . . . In In re Fraser . . . Kay L.J. said: “It is old law in bankruptcy that, neither upon an attempt to prove a debt, nor upon a petition for an adjudication of bankruptcy or a receiving order against a debtor, is a judgment against him for the debt conclusive. In Ex parte Bryant . . . Lord Eldon said: ‘Proof upon a Judgment will not stand merely upon that, if there is not a Debt due in Truth and Reality, for which the Consideration must be looked to’.” In In re Gooch . . . Scrutton L.J. said: “The county court registrar held quite correctly that he was at liberty to go behind the judgment, and see whether there was a good debt to support it”. In In re a Debtor . . . Astbury J. said “True it is that the Bankruptcy Court may, upon a prima-facie case being shown, go behind a judgment for the purpose of satisfying itself that the debt enforceable thereunder was a real debt.” In Petrie v. Redmond, a case in this Court . . . Latham C.J. said: “The court (that is, the Court of Bankruptcy) is entitled to go behind the judgment and inquire into the validity of the debt where there has been fraud, collusion or miscarriage of justice. . . . Also the court looks with suspicion on consent judgments and default judgments.”
[70] Corney v Brien (1951) 84 CLR 343, at pages 347-348 (Dixon, Williams, Webb, and Kitto JJ)
A court of bankruptcy will not, however, go behind a judgment as a matter of course; and the circumstances in which it will do so have been described in different ways. The plurality in Corney v Brien referred to the “undoubted jurisdiction to go behind a judgment obtained by default or compromise or where fraud or collusion is alleged and inquire whether the judgment is founded on a real debt”;[71] and in Wren v Mahony Barwick CJ (with whose judgment Windeyer and Owen JJ agreed) said:[72]
Circumstances tending to show fraud or collusion or miscarriage of justice or that a compromise was not a fair and reasonable one, in the sense that even if not fraudulent it was foolish, absurd and improper, or resulted from an unequal position of the parties . . . offer occasions for the exercise by the Court of Bankruptcy of its power to inquire into the consideration for the judgment.
[71] Corney v Brien (1951) 84 CLR 343, at page 347
[72] Wren v Mahony (1972) 126 CLR 212, at page 223
In the same judgment Barwick CJ stated in broader terms the circumstances in which a court of bankruptcy may go behind a judgment:[73]
The judgment is never conclusive in bankruptcy. . . . But the Bankruptcy Court may accept the judgment as satisfactory proof of the petitioning creditor’s debt. In that sense that court has a discretion. It may or may not so accept the judgment. But it has been made quite clear by the decisions of the past that where reason is shown for questioning whether behind the judgment or as it is said, as the consideration for it, there was in truth and reality a debt due to the petitioning creditor, the Court of Bankruptcy can no longer accept the judgment as such satisfactory proof. It must then exercise its power, or if you will, its discretion to look at what is behind the judgment. . . . The Court’s discretion in my opinion is a discretion to accept the judgment as satisfactory proof of that debt. That discretion is not well exercised where substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner.
[73] Wren v Mahony (1972) 126 CLR 212, at pages 224-225
The cases that recognise the power of a bankruptcy court to go behind a judgment:[74]
. . . rest on the broad principle that before a person can be made bankrupt the court must be satisfied that the debt on which the petitioning creditor relies is due by the debtor and that if any genuine dispute exists as to the liability of the debtor to the petitioning creditor it ought to be investigated before he is made bankrupt. Bankruptcy is not mere inter partes litigation. It involves change of status and has quasi-penal consequences.
[74] Re John Waymouth Ahern v Deputy Commissioner of Taxation [1987] FCA 312, at [40] (Davies, Lockhart, and Neaves JJ)
These authorities, and in particular the judgment of Barwick CJ in Wren v Mahony, must be viewed in the light of the plurality’s judgment in Ramsay Health Care Australia Pty Ltd v Compton, [75] a case on which Mr Boensch relies.[76] The principal question in that case was whether the principles stated by Barwick CJ in Wren v Mahony apply to a judgment that was entered after a fully contested hearing. The majority of the High Court answered that question in the affirmative.[77]
[75] Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28
[76] [Mr Boensch’s] Submission, last page
[77] Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28, at [38]
The principles relating to the power of a bankruptcy court to go behind a judgment have been applied to a “final judgment” in the sense of “a judgment obtained in an action by which a previously existing liability of the defendant to the plaintiff is ascertained or established”.[78] A judgment in this sense “creates an obligation of its own force” where the “pre-existing obligation, which the judgment is intended to enforce, merges in the new obligation so created”.[79] This, however, does not reflect the nature of a judgment that is entered on the filing of a costs certificate pursuant to s 71(3) of the LPUL Application Act.[80] Such judgment does not create “an obligation of its own force”; it derives its legal effect from the LPUL Application Act itself. That is the effect of a number of authorities that have considered equivalent provisions to s 71(3) of the LPUL Application Act. So, in Doyle v Hall Chadwick Hodgson JA said: [81]
It is well recognised that there are judgments that are not based on any decision of the Court of which they are taken to be judgments, but have some other basis; and such judgments may be set aside or varied if that basis is defeated or varied. . . . A judgment arising from a certificate pursuant to s.208J(3) of the 1987 Act is this kind of judgment; and is liable to be set aside or varied if the certificate on which it is based is set aside or varied . . . .
[78] Ex parte Chinery; In re Chinery (1884) 12 Q.B.D 342, at page 346
[79] Corney v Brien (1951) 84 CLR 343, at page 353 (Fullagar J)
[80] Before the introduction of s 40(3)(b) of the Bankruptcy Act, a judgment that arose from the filing of a certificate was not a “final judgment” for the purposes of the predecessor of s 40(1)(g) of the Bankruptcy Act –Opie v Opie (1951) 84 CLR 362
[81] Doyle v Hall Chadwick [2007] NSWCA 159, at [49], [52] (Mason P and Campbell JA agreeing)
In Frumar v The Owners of Strata Plan 36957 Giles JA said:[82]
First, as Handley AJA has explained, under s 208KF(2) of the Legal Profession Act 1987 (since repealed, see now s 368(5) of the Legal Profession Act 2004) on the filing of the review panel’s certificate it was taken to be a judgment of the District Court. In truth, there was no District Court judgment. So-called judgments under s 208J(3) of the 1987 Act, which is relevantly replicated in s 208KF(2), have been considered in Doyle v Hall Chadwick [2007] NSWCA 159 at[47]–[54] and cases there mentioned, with recognition of their distinct nature, and while reference to them as judgments is convenient . . . they take their force from the statute and are not judgments of the court.
[82] Frumar v The Owners of Strata Plan 36957 [2010] NSWCA 172, at [8]
And in Zepinic v Chateau Constructions (Australia) Ltd (No 2) McColl JA said:[83]
The entry of judgment on a filed certificate of a costs assessor or a review panel is a ministerial act, which makes the certificate enforceable as a judgment but otherwise does not alter its legal effect and does not make it a judgment of the Court . . .
[83] Zepinic v Chateau Constructions (Australia) Ltd (No 2) [2013] NSWCA 227, at [76]
In the case, therefore, of a judgment arising from the filing of a costs certificate pursuant to s 71(3) of the LPUL Application Act, the power of a court of bankruptcy to inquire into whether such judgment represents a true debt is directed to the costs determination that is recorded in the costs certificate that is filed; and the question becomes whether there are substantial reasons for questioning that the costs determination represents a lawful determination. More particularly, the question is whether there are substantial reasons for questioning that the costs determination was made without any jurisdictional error. That is so because a “decision that involves jurisdictional error is a decision that lacks legal foundation and is properly regarded, in law, as no decision at all”;;[84] and no exercise of administrative power under the law of a State, including the exercise of power conferred on a costs assessor under the LPU Law and the LPUL Application Act, is immune from the supervisory jurisdiction of a State Supreme Court for jurisdictional error.[85]
[84] Minister for Immigration and Multicultural Affairs v Bhardwaj [2002] HCA 11, at [51]
[85] Kirk v Industrial Court of New South Wales [2010] HCA 1
Finally, there is the question of onus of proof. In Cheung v Burness (Trustee) Moshinsky J noted that in “circumstances where the bankruptcy court decides to ‘go behind’ a judgment, the onus of proof in relation to the underlying issue falls on the party claiming to be a creditor”.[86] His Honour referred[87] to the following passage from the judgment of Fullagar J in Corney v Brien:[88]
The question whether the judgment is to be reopened or “gone behind” at all will, of course, often involve some preliminary investigation of the merits of the attack on the judgment. But, when once the court decides that it will “go behind” the judgment, the cases which I have cited show, in my opinion, that the whole matter is open. When once it is considered proper to “reopen”, the only question will be whether there was, in fact and in law, a debt which could legally found the judgment—whether there was in “Truth and Reality” an obligation not of record before there was an obligation of record. If the case should be one of those rare cases (I have not actually found one in the Reports since 1888, when Fry L.J. said that he knew of none) where it is legitimate to “go behind” a judgment entered after trial in court, there would be, I think, no alternative but to re-try the whole case. The matter to be decided is the existence or non-existence of a debt antecedent to the judgment. It has been said on several occasions that the judgment is prima-facie evidence of the antecedent debt. But, when once the inquiry is undertaken, I think that the ultimate burden of proof rests on the person claiming to be a creditor. As Lord Esher M.R. said in In re Fraser; Ex parte Central Bank of London: “The existence of the judgment is no doubt prima-facie evidence of the existence of a debt; but still the Court of Bankruptcy is entitled to inquire whether there really is a debt due to the petitioning creditor”.
[86] Cheung v Burness (Trustee) [2016] FCA 1381, at [79]
[87] Cheung v Burness (Trustee) [2016] FCA 1381, at [79]
[88] Corney v Brien (1951) 84 CLR 343, at page 358
Moshinsky J also referred[89] to Re Bernard Simon Wolff v Donald Donovan where Lee and Hill JJ (with whom Davies J agreed) said:[90]
The joint judgment of Dixon, Williams, Webb and Kitto JJ [in Corney v Brien] contains no discussion of onus of proof at all. No doubt, however, the true position is that there is a shifting onus. Once the judgment is proved, and it is prima facie evidence of the existence of the underlying debt there is a tactical onus on the debtor to show that there are circumstances which make it appropriate to go behind the debt to see whether the judgment was in truth and reality a true debt. The overall onus of proof of the existence of a real debt underlying a judgment, however, remains always with the petitioning creditor.
[89] Cheung v Burness (Trustee) [2016] FCA 1381, at [79]
[90] Re Bernard Simon Wolff v Donald Donovan [1991] FCA 222, at [20]
Substantial reasons for questioning whether behind the Judgment there is a real debt?
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.
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.[91] 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”.[92] 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.
[91] Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, at page 349
[92] Anderson v Hill [2017] NSWSC 1149, at [35]
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.
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[93]), 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[94]), 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.
[93] Minister for Immigration and Citizenship v SZRKT [2013] FCA 317, at [111]
[94] Gunatillake v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2021] FCA 387. At [74] Murphy J said: “Lawful decision-making by an administrative decision-maker must be based on the evidence and it requires genuine consideration of the evidence.”
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.
COUNTER-CLAIM?
A judgment debtor on whom a bankruptcy notice is served does not commit an act of bankruptcy if he or she satisfies the Court that he or she has:[95]
a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained.
[95] Bankruptcy Act, s 40(1)(g)(ii)
The matters of which a Court must be satisfied before it can be satisfied that a debtor has a counter-claim, set-off, or cross demand against the creditor have been stated in different ways, and in ways that sometimes overlap. The various statements were summarised by Lindgren J in Glew v Harrowell, in the matter of Glew.[96] In broad terms, a debtor must satisfy the Court that the counter-claim, set-off, or cross demand is made in good faith, and there is sufficient substance to the counter-claim, set-off or cross demand asserted to make it one which the debtor should, in justice, be permitted to have heard and determined in the usual way, rather than be forced to comply with the bankruptcy notice by payment or to commit an act of bankruptcy.
[96] Glew v Harrowell, in the matter of Glew [2003] FCA 373, at [9]
That the judgment debtor may have a “counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt” is relevant to whether a bankruptcy notice can be set aside only if the counter-claim, set-off, or cross demand “could not have been set up” by the judgment debtor “in the action or proceeding” in which the judgment was obtained. The expression “could not have been set up in the action or proceeding” has been construed narrowly:[97]
The words “that he could not have set up in the action or proceeding in which the judgment or order was obtained” mean “which he could not by law set up in the action.”: see Re Jocumsen (1929) 1 A.B.C., at p. 85; Re A Debtor per Avory J. [1914] 3 K.B., at p. 730 and Re Stockvis (1934) 7 A.B.C. 53 especially per Lukin J. where his Honour said: “I take a counter claim, set off, or cross demand which could not be set up as one which, from the point of time, or from its nature, or from absence of empowering provisions, or from positive inhibition so to do, could not be set up in the particular case in which judgment was obtained . . . Mere failure to take advantage of the opportunity can hardly be said to be inability” (1934) 7 A.B.C., at p. 57.
[97] Re Brink; Ex parte The Commercial Banking Company of Sydney Ltd [1980] FCA 78; (1980) 44 FLR 135, at page 139 (Lockhart J)
Mr Boensch has made extensive submissions about the nature of the claims he says he has against Mr Bingham and Mr Bevan. There are two difficulties. One is Mr Boensch does not support his claim with evidence on the basis of which it can be found that Mr Boensch’s claims are bona fide, and of sufficient substance to warrant those claims being litigated in the ordinary course, rather than compelling Mr Boensch to comply with the requirements of the bankruptcy notice. Secondly, Mr Boensch does not explain how his claims are maintainable, given the existence of advocate’s immunity, as upheld by the High Court in D'Orta-Ekenaike v Victoria Legal Aid.[98]
[98] D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12
This part of Mr Boensch’s claims fails.
NOT OPEN TO LODGE APPLICATION FOR COSTS ASSESSMENT?
Whether Mr Bingham’s lodging an application for costs assessment at the time Mr Boensch was bankrupt was barred by s 58(3) of the Bankruptcy Act turns on whether the lodgement of an application for a costs assessment is “to enforce any remedy” within the meaning of s 58(3)(a) of that Act. That, in turn, depends on the proper construction of s 58(3) of the Bankruptcy Act; and here, the following passage from the judgment of Beaumont J (with whose reasons Black CJ and Tamberlin J agreed) in Fraser v Commissioner of Taxation is relevant:[99]
[T]he absolute bar imposed by s 58(3)(a) should be construed so as to apply only to the enforcement of remedies, including extra-curial remedies, as distinct from the institution of legal proceedings and their maintenance up to the point of recovery of judgment. The institution and maintenance of such proceedings will, of course, be subject to the different constraints imposed by s 58(3)(b), unless leave be granted under that provision.
[99] Fraser v Commissioner of Taxation (1996) 69 FCR 99, at pages 111-112
Mr Bingham’s lodging an application for the assessment of costs was not an enforcement of any remedy within the meaning of s 58(3)(a) of the Bankruptcy Act; nor did it constitute the commencement of any “legal proceeding” within the meaning of s 58(3)(b) of that Act. This part of Mr Boensch’s claims, therefore, also fails.
DISPOSITION
In the light of my alternative conclusions in paragraphs 85 and 87 of these reasons, I propose to order that the bankruptcy notice be set aside. I also propose to order that Mr Bingham pay to Mr Boensch such costs to which Mr Boensch is entitled as a self-represented party.
I certify that the preceding ninety-five (95) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 4 February 2022
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