Culloton v Rowe Bristol Lawyers Pty Ltd
[2017] WASC 153
•6 JUNE 2017
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: CULLOTON -v- ROWE BRISTOL LAWYERS PTY LTD [2017] WASC 153
CORAM: ACTING MASTER STRK
HEARD: 11 JANUARY 2017
DELIVERED : 6 JUNE 2017
FILE NO/S: CIV 2790 of 2016
BETWEEN: JEFFREY MICHAEL CULLOTON
Plaintiff
AND
ROWE BRISTOL LAWYERS PTY LTD
Defendant
Catchwords:
Practice and procedure - Application by a defendant to set aside an originating process where the originating process concerns an application to set aside costs agreements - Plaintiff an undischarged bankrupt - Plaintiff not a party to one of the costs agreements - No consent by the bankruptcy trustee to the proceedings - No financial interest in the outcome - Abuse of process
Legislation:
Bankruptcy Act 1966 (Cth)
Legal Profession Act 2008 (WA)
Rules of the Supreme Court 1971 (WA)
Result:
Application granted
Category: B
Representation:
Counsel:
Plaintiff: Mr J G Kitto
Defendant: Mr M Mirzai
Solicitors:
Plaintiff: Kitto & Kitto
Defendant: Rowe Bristol Lawyers
Case(s) referred to in judgment(s):
Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485
Cooper v Moloney (No 5) [2012] SASC 211
Cummings v Claremont Petroleum NL [1996] HCA 19; (1996) 185 CLR 124
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89
Geia v Palm Island Aboriginal Council [2001] QCA 389; [2001] 1 Qd R 245
Macchia v The Public Trustee [2008] WASCA 241
Meriton Apartments Pty Ltd v Industrial Court of New South Wales [2008] FCAFC 172; (2008) 171 FCR 380
Westpac Banking Corporation v The Bell Group Ltd (in liq) [No 3] [2012] WASCA 157; (2012) 89 ACSR 1
ACTING MASTER STRK: By chamber summons and pursuant to O 12 r 7 of the Rules of the Supreme Court 1971 (WA), the defendant applies to set aside the originating summons filed by the plaintiff on 14 October 2016.
The originating summons was lodged by the plaintiff Mr Jeffrey Michael Culloton against the defendant, Rowe Bristol Lawyers Pty Ltd (Rowe Bristol), by which Mr Culloton seeks the following relief:[1]
1.An order that the cost agreement between the plaintiff and defendant (undated and bearing the practitioner's reference number AGR:MM:1852:002:001) be set aside pursuant to s.288 (2) Legal Profession Act.
2.An order that the purported cost agreement between Mrs Cherylle Kaye Culloton, Screenlink Pty Ltd and the defendant (signed on or about 29 June 2015 and bearing the practitioner's reference number AGR:MM:1852:002:001A) be set aside pursuant to s.288 (2) Legal Profession Act.
3.A declaration that the document referred to in order 2 is a nullity.
4.An order that any monies paid to the defendant pursuant to the document referred to in order 2 above be repaid to Mrs Culloton and Screenlink Pty Ltd.
5.The defendant pay the plaintiffs costs of the application.
[1] Originating summons dated 14 October 2016 [1] ‑ [15].
Background
The background to the chamber summons is conveniently set out in Rowe Bristol's submissions and list of authorities filed on 12 December 2016 and is acknowledged by Mr Culloton's counsel to be largely uncontroversial.
Mr Culloton was made bankrupt on 30 May 2016 and Mr Malcolm Field of Ferrier Hodgson was appointed as trustee in bankruptcy pursuant to s 181A of the Bankruptcy Act 1966 (Cth). Prior to Mr Culloton's bankruptcy, Rowe Bristol entered into two costs agreements:
(a)the first, with Mr Culloton on or about 18 November 2014 (the Culloton Agreement); and
(b)the second, with Mrs Cherylle Kay Culloton and Screenlink Pty Ltd (Screenlink) on or about 26 June 2016 (the Screenlink Agreement).
The costs agreements are in similar terms.
Both costs agreements set out the terms and conditions upon which the 'Client' retains the 'Law Practice' to act for the 'Client' in relation to the 'Subject Matter' specified in Schedule 1.
Under the Culloton Agreement, Mr Culloton is the 'Client' and the 'Subject Matter' specified in Schedule 1 is the 'Appeal against decision in Geoffrey Grant Cosgrove v Jeffrey Michael Culloton [2014] WADC 146'.[2]
[2] Affidavit of Jeffery Michael Culloton in support of Originating Summons filed 14 October 2016, 'JMC1', page 20.
Under the Screenlink Agreement, Mrs Culloton and Screenlink are the 'Client' and the 'Subject Matter' specified in Schedule 1 is:
a.Advice and related work in relation to appeals against decisions in:
i.Geoffrey Grant Cosgrove v Jeffrey Michael Culloton [2014] WADC 146; and
ii.Geoffrey Grant Cosgrove v Jeffrey Michael Culloton [No 2] [2015] WADC 63;
(together referred to as 'Proceedings')
b.Advice and related work in relation to taxation of costs with respect to Proceedings and appeals from the Proceedings, including instructing costs counsel; and
c.Advice and related work in relation to claims against Jeffrey Michael Culloton, his solvency and effects of enforcement of judgement.[3]
[3] Affidavit of Jeffery Michael Culloton in support of Originating Summons filed 14 October 2016, 'JMC2', pages 48 ‑ 49.
Further, both operate retrospectively by way of cl 1.2, which states:
This Agreement applies to all work performed and costs incurred by the Law Practice in relation to, or incidental to, the Subject Matter as set out at Schedule 1 of this Agreement, including in relation to:
(a)work to be performed and costs to be incurred by the Law Practice until this Agreement is terminated or replaced by another agreement; and
(b)work that has been performed or costs that have been incurred by the Law Practice before the signing of this Agreement that are not the subject of another agreement between the Law Practice and the Client.
Both costs agreements relate to invoices disputed by Mr Culloton, Mrs Culloton and Screenlink in separate proceedings for the assessment of costs, being Supreme Court proceedings LPA 8 of 2016 between Rowe Bristol and Mr Culloton, Screenlink and Mrs Culloton (the Taxation Proceedings).
Mrs Culloton is Mr Culloton's wife and Screenlink is a related entity to Mr Culloton, by which Mr and Mrs Culloton conduct their family businesses.
Mr Culloton is not a party to the Screenlink Agreement and is not named as a 'Client' for the purpose of that agreement, but by email dated 30 June 2015, Mrs Culloton instructed Rowe Bristol to take its instructions from Mr Culloton with respect to the Screenlink Agreement.
On 3 March 2015, Rowe Bristol commenced the Taxation Proceedings for the assessment of fees and disbursements incurred pursuant to the Culloton Agreement and the Screenlink Agreement. Rowe Bristol filed the taxation application upon request by Mr Culloton, in his own capacity and on behalf of Mrs Culloton and Screenlink. Fees in the amount of approximately $26,000 remain outstanding with respect to the relevant work, excluding interest and additional costs incurred by Rowe Bristol during the Taxation Proceedings and these proceedings.
As explained above, Mr Culloton was made bankrupt on 30 May 2016. It appears that after 30 May 2016, Mr Culloton's trustee authorised Mr Culloton to continue to participate in the Taxation Proceedings personally.[4]
[4] Affidavit of Makan Mirzai in support of application to set aside originating summons sworn on 10 November 2016 [11].
On 14 October 2016, Mr Culloton commenced these proceedings pursuant to s 288 of the Legal Profession Act 2008 (WA), being:
(a)some seven months after the commencement of the Taxation Proceedings;
(b)after the completion of the inspection of Rowe Bristol's files by Mr Culloton's solicitors Kitto & Kitto (who also act for Mrs Culloton and Screenlink with respect to the Taxation Proceedings);
(c)after Kitto & Kitto filed and served the objections of Mr and Mrs Culloton and Screenlink to Rowe Bristol's bill of costs and Rowe Bristol filed and served its responses to those objections; and
(d)after the court requested that Mr Culloton provide his available dates for a final hearing of the Taxation Proceedings.
Rowe Bristol says that Mr Culloton's trustee has expressed his view that he does not consider these proceedings to have sufficient prospects of success and has not authorised for Mr Culloton to commence these proceedings.[5] Mr Culloton says that the correspondence referred to by Rowe Bristol does not show the trustee in bankruptcy did not authorise Mr Culloton to apply to set aside the Culloton Agreement. However, Mr Culloton concedes that nothing turns on this because it is now clear that the trustee in bankruptcy does not consent to the application made by Mr Culloton to set aside the Culloton Agreement.
[5] See affidavit of Makan Mirzai dated 10 November 2016, MM17 (page 460) and MM18 (page 463), sworn in support of the application to set aside originating summons, for the position of Mr Culloton's trustee in bankruptcy.
The court has suspended the Taxation Proceedings pending the resolution of these proceedings.
Grounds for setting aside the originating summons
Rowe Bristol submits that these proceedings must be set aside or dismissed for the following reasons:[6]
[6] Defendant's submissions dated 14 October 2016 [8].
8.1To the extent that these proceedings relate to the Screenlink Agreement, Mr Culloton has no standing to commence these proceedings as he is not a party to the Screenlink Agreement;
8.2To the extent that these proceedings relate to the Culloton Agreement, if this Honourable Court finds that the statutory right under section 288 of the LPA is proprietary in nature, that right would have vested in Mr Culloton's trustee upon his bankruptcy;
8.3To the extent that these proceedings relate to the Culloton Agreement, regardless of whether the statutory right under section 288 of the LPA is proprietary in nature, Mr Culloton does not have the requisite standing to commence these proceedings because he does not have any personal financial interest in the outcome of these proceedings;
8.4To the extent that these proceedings relate to the Culloton Agreement, the remedy sought by Mr Culloton is an abuse of process of the Court as it seeks to put funds, in the event that they were recovered, beyond the reach of the creditors of Mr Culloton, including [Rowe Bristol], and transfer them to related entities of Mr Culloton, being his wife and his family business; and
8.5To the extent that these proceedings relate to the Culloton Agreement, these proceedings constitute an abuse of process (among other things) due to the following:
8.5.1Mr Culloton has no financial interest in the outcome of these proceedings;
8.5.2Mr Culloton's prior conduct indicates that he seeks to delay the resolution of the Taxation Proceedings; and
8.5.3The fact that Mr Culloton is the only plaintiff in these proceedings indicates that he seeks to put [Rowe Bristol] to costs without [Rowe Bristol] being able to obtain an adverse costs order against Mr Culloton. (footnotes omitted)
I will now deal with each of the grounds in turn.
Part A - Mr Culloton's standing to set aside the Screenlink Agreement
It is Rowe Bristol's position that given that Mr Culloton is not a party to the Screenlink Agreement, he does not have standing to commence proceedings to enforce or set it aside. Rowe Bristol argues that by operation of the doctrine of privity of contract, the only appropriate parties to commence such an action would be Mrs Culloton and/or Screenlink, the parties to the Screenlink Agreement.
In response, Mr Culloton asserts that s 288 of the Legal Profession Act expressly displaces the common law by conferring an unequivocal right of Mr Culloton to apply to set aside the Screenlink Agreement on the basis that:
(a)Mr Culloton is a 'client' pursuant to s 288(1);
(b)the Screenlink Agreement is, or is asserted by Rowe Bristol to be, a costs agreement pursuant to s 282(1)(d) by which Rowe Bristol asserts Mrs Culloton and Screenlink are third party payers; and
(c)Mr Culloton has made an application to set aside the Screenlink Agreement pursuant to s 288(2) and that he has the statutory prerequisites to do so.
Mr Culloton seeks to set aside the costs agreement by which he was provided legal services, paid for by his wife and Screenlink. Mr Culloton further expands upon its submission as follows:[7]
[7] Plaintiff's outline of submissions dated 23 December 2016 [14] ‑ [15].
Third party payers such as insurers, parent corporations, family members etc are typically 'funders' of litigation. They do not receive the benefit of the legal services directly and in many instances do not know whether the legal practitioner is complying with the agreement, and will not have the information necessary to decide whether to apply for costs assessment or to set aside the agreement. Further, the third party payer often enters into a funding agreement with the client, and if the liability of the client to the third party payer is increased or decreased as a consequence of a cost assessment or agreement being set aside, it is equitable and commercially logical that the client have the right to apply to the court pursuant to section 288 (to set aside the costs agreement), or section 295 (for assessment of costs).
It is this nexus between the third party payer and client which underpins the statutory right of the client to seek the court's review of the legal practitioner's fees:
'It is not essential that there be a contractual or other relationship between the person who is under a legally enforceable personal obligation to pay or reimburse the legal fees, or whose property may lawfully be applied in paying or reimbursing the legal fees, on the one hand, and the legal practitioner in question, on the other. Where a person's property may lawfully be applied in paying the legal fees in a bill of costs etc, that person will in substance be "liable to pay" costs in a bill, within s 228(2)(a)(iii). It would be inconsistent with the evident intention of the Parliament and with the remedial character of s 228(2)(a) to hold that such a person was not "liable to pay". The reasoning in Debney, at 394, 396 - 397, is, with respect, persuasive and should be applied, by analogy, in the present case. Also see Parramatta River Lodge at 12,040. The examples I have given of a person who will be "liable to pay" costs in a bill, within s 228(2)(a)(iii), are not intended to be exhaustive.'
Huntingdale Village Pty Ltd (Receivers and Managers Appointed) -v- Corrs Chambers Westgarth (A Firm) [No 3] [2016] WASC 366
Para 91
[counsel's note: the above references to section 228 (2) of the Legal Practice Act 2003, are most analogous to section 295 of the current LPA]
Determination
Under s 288(2), the Supreme Court's jurisdiction to set aside a costs agreement is enlivened by an application made 'by a client'. Section 288(1) provides that for the purpose of s 288, a client means a person to whom or for whom legal services are provided. Further, s 282(6) provides that:
(6)A reference in section 288 and in any prescribed provision of this Part to a client is, in relation to a costs agreement that is entered into between a law practice and an associated third party payer as referred to in subsection (1)(d) and to which a client of the law practice is not a party, a reference to the associated third party payer.
For the purposes of pt 10 of the Legal Profession Act:[8]
[8] Legal Profession Act 2008 (WA), s 253(1).
(a)a person is a third party payer, in relation to a client of a law practice, if the person is not the client and -
(i)is under a legal obligation to pay all or any part of the legal costs for legal services provided to the client; or
(ii)being under that obligation, has already paid all or a part of those legal costs;
and
(b)a third party payer is an associated third party payer if the legal obligation referred to in paragraph (a) is owed to the law practice, whether or not it is also owed to the client or another person; and
(c)a third party payer is a non associated third party payer if the legal obligation referred to in paragraph (a) is owed to the client or another person but not to the law practice.
It would appear to be beyond doubt that Mrs Culloton and Screenlink would have standing to bring an application under s 288, by operation of s 288(1), alternatively s 282(6).
The argument for standing under s 282(1) might be framed as follows. The terms of the Screenlink Agreement are clear. Mrs Culloton and Screenlink are the named 'Client' for the purpose of that costs agreement. They are persons to whom legal services were provided, despite Mrs Culloton's instruction to Rowe Bristol to take its instructions from Mr Culloton with respect to the Screenlink Agreement. They are also be persons for whom legal services were provided, as the advice was provided at their request.
Alternatively, they would be entitled to bring an application under s 288 by operation of s 282(6), on the basis that the Screenlink Agreement, properly construed, is an agreement as between a law practice and an associated third party payer under s 282(1)(d).
The question is whether Mr Culloton might also be a client for the purpose of s 288 by operation of s 288(1), as a person who, in all of the circumstances, was one to whom or for whom legal services were provided.
I find that properly construed, the Screenlink Agreement is an agreement as between a law practice and a client, alternatively an associated third party payer under s 282(1)(d) and s 253(1)(b). If Screenlink and Mrs Culloton are the 'client' then they have exclusive standing for the purpose of s 288. Alternatively, I find that on a plain reading, s 282(6) gives an associated third party payer (in this case, Mrs Culloton and Screenlink) exclusive standing as a client for the purpose of s 288. This is because by operation of s 288(6), a reference to a client in s 288 is a reference to the associated third party payer.
This court's jurisdiction to set aside the Screenlink Agreement is therefore not enlivened by Mr Culloton's application, as it is not an application made 'by a client'.
Part B - Mr Culloton's standing to set aside the Culloton Agreement by reason of bankruptcy
Rowe Bristol also assert that to the extent that these proceedings relate to the Culloton Agreement, if the statutory right under s 288 of the Legal Profession Act is proprietary in nature, that right would have vested in Mr Culloton's trustee upon his bankruptcy.
In response, Mr Culloton asserts that this court has no jurisdiction to rule on the question of whether his statutory right is property within the meaning of the Bankruptcy Act, or whether the trustee in bankruptcy could or should assign it to him by operation of s 27 of the Bankruptcy Act which provides as follows:
27Bankruptcy courts
(1)The Federal Court and the Federal Circuit Court have concurrent jurisdiction in bankruptcy, and that jurisdiction is exclusive of the jurisdiction of all courts other than:
(a)the jurisdiction of the High Court under section 75 of the Constitution; or
(b)the jurisdiction of the Family Court under section 35 or 35A of this Act.
(2)To avoid doubt, subsection (1) does not:
(a)confer jurisdiction in a criminal matter; or
(b)exclude the jurisdiction of a court of a State or Territory under the Judiciary Act 1903 in a criminal matter relating to this Act.
Preliminary question - jurisdiction of this court
During the course of the hearing, counsel for Rowe Bristol referred me to the decision of Blue J in Cooper v Moloney (No 5).[9]
[9] Cooper v Moloney (No 5) [2012] SASC 211.
That decision concerned a number of proceedings to which Mr Cooper, an undischarged bankrupt, was a party. The Moloneys contended that Mr Cooper had no standing to bring a claim to recover a debt, nor a counterclaim in separate trespass proceedings before the court, because he was an undischarged bankrupt and the choses in action and any lease (the subject of the trespass proceeding) vested in his bankruptcy trustee. In response, Mr Cooper contended that the Federal Court of Australia and the Federal Magistrates Court held exclusive jurisdiction to determine his standing and that the Supreme Court of South Australia did not have jurisdiction to decide that question and hence to determine the action. His Honour Justice Blue was invited to determine the issue of jurisdiction by a separate preliminary trial.[10]
[10] Cooper v Moloney (No 5) [4] ‑ [5].
The position of the bankruptcy trustee in Cooper v Moloney (No 5) was as follows:[11]
On 17 October 2012, the bankruptcy trustee wrote to the solicitors for the Moloneys. He said that:
'1.he had been aware that Mr Cooper was conducting a business from which he derived income and had been provided by Mr Cooper with statements regarding his income derived from the business for various periods after the commencement of his bankruptcy;
2.Mr Cooper had notified him that he had instructed his solicitors to recover monies owed to him for his business activities conducted during his bankruptcy and that he had taken debt recovery action against Mr Moloney for work performed by him after commencement of his bankruptcy;
3.he had not authorised Mr Cooper to commence the Debt Action or seek to enforce the lease, but considered that Mr Cooper was permitted to conduct a business in his own name and that he was entitled to take debt recovery action in his own name.'
[11] Cooper v Moloney (No 5) [31] (footnotes omitted).
The bankruptcy trustee did not seek to intervene in the actions nor did the bankruptcy trustee appear at the hearing.[12]
[12] Cooper v Moloney (No 5) [32].
In his reasons, his Honour Justice Blue observed that by a combination of s 27, s 35 and s 35A, exclusive jurisdiction in bankruptcy is vested in the Federal Court of Australia, the Federal Magistrates Court of Australia and in certain circumstances the Family Court (collectively 'the Federal Courts'), subject to the High Court's constitutional original jurisdiction (which could be ignored for the purposes before him).[13] His Honour noted that s 5 of the Bankruptcy Act defines bankruptcy in relation to jurisdiction to mean, 'jurisdiction … under or by virtue of this Act',[14] and noted as follows:[15]
[13] Cooper v Moloney (No 5) [43].
[14] Cooper v Moloney (No 5) [44].
[15] Cooper v Moloney (No 5) [45] ‑ [47] (footnotes omitted).
Section 31(1) of the Bankruptcy Act provides guidance as to what may be regarded as jurisdiction under or by virtue of the Act. Section 31 identifies which matters, when a court is exercising jurisdiction under the Bankruptcy Act, must be heard and determined in open court and which may be heard in chambers. While s 31 does not itself confer jurisdiction, it provides a guide to what is bankruptcy jurisdiction within the meaning of s 27. As it may be expected that the more important forms of jurisdiction would be determined in open court, the matters enumerated in s 31(1) may be regarded as the more important aspects of jurisdiction in bankruptcy.
Section 31(1) provides:
'In exercising jurisdiction under this Act, the Court shall hear and determine the following matters in open Court:
(a)creditors' petitions;
(b)examinations under this Act;
(c)Proceedings in connection with the consideration of an annulment of a bankruptcy under section 153B;
(d)applications under:
(i)section 222 (as applied by section 76B); or
(ii)section 222C (as applied by section 76B);
for an order setting aside or terminating a composition or scheme of arrangement under Division 6 of Part IV;
(e)applications to set aside or avoid a charge, charging order, settlement, disposition, conveyance, transfer security or payment;
(ea)applications under section 139A;
(f)applications to declare for or against the title of the trustee to any property;
(g)applications for the committal of a person to prison or for the release from prison of a person committed to prison;
(i)applications for the trial of questions of fact with a jury and the trial of those questions;
(j)applications under Part X:
(i)for an order setting aside or terminating a personal insolvency agreement; or
(ii)for a sequestration order against the estate of a debtor;
(ja)applications for an order of annulment of the administration of the estate of a deceased person under Part XI; and
(k)summary trials under Part XIV.'
Both Mr Cooper and the Moloneys accept that this court would have jurisdiction to hear and determine the actions but for the raising by the Moloneys of the issue of standing of Mr Cooper as an undischarged bankrupt. Mr Cooper contends that the issue of his standing can only be determined by the federal courts pursuant to s 27 and accordingly this court does not have jurisdiction to hear and determine the actions because that would involve determining the issue of standing. By contrast, the Moloneys contend that the issue of standing is purely a matter between Mr Cooper and the Moloneys and not an issue between Mr Cooper and his bankruptcy trustee, and accordingly the federal courts do not have exclusive jurisdiction to determine that issue as part of the actions.
In the decision, his Honour went on to describe the statutory history, the statutory jurisdiction regime and the applicable established principles.[16]
[16] Cooper v Moloney (No 5) [48] ‑ [67].
Ultimately, his Honour was influenced by the fact that Mr Cooper's bankruptcy trustee was not a party to the relevant actions. There being no issue between Mr Cooper and the trustee in relation to the entitlement of Mr Cooper to pursue the claims, his Honour found that no question of jurisdiction under or by virtue of the Bankruptcy Act arose. His Honour found that '[t]his court has jurisdiction to hear and determine the actions, including the question of standing which arises incidentally therein as between Mr Cooper and the Moloneys',[17] being bound by decisions of intermediate courts of appeal in other jurisdictions.[18] His Honour referred to the decisions of Geia v Palm Island Aboriginal Council;[19] Meriton Apartments Pty Ltd v Industrial Court of New South Wales;[20] and Macchia v The Public Trustee.[21]
Determination of preliminary question
[17] Cooper v Moloney (No 5) [70].
[18] Cooper v Moloney (No 5) [71], where his Honour relied upon Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485, 492 (Mason CJ, Brennan, Dawson, Toohey & Gaudron JJ); and Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 [135] (Gleeson CJ, Gummow, Callinan, Hayden & Crennan JJ).
[19] Geia v Palm Island Aboriginal Council [2001] QCA 389; [2001] 1 Qd R 245 [19] (Pincus & Thomas JJA & Jones J).
[20] Meriton Apartments Pty Ltd v Industrial Court of New South Wales [2008] FCAFC 172; (2008) 171 FCR 380 [3], [8], [18] (Branson J), [88] (Greenwood J), cf [194] ‑ [209] (Perram J).
[21] Macchia v The Public Trustee [2008] WASCA 241 [21] (Steytler P, Le Miere AJA agreeing).
The proceedings before this court are not proceedings 'under or by virtue of' the Bankruptcy Act. They are proceedings within the ordinary jurisdiction of the Supreme Court. Further, the trustee in bankruptcy is not a party to the proceedings. He could consequently not be bound by anything decided in the course of determining Mr Culloton's standing under s 288 of the Legal Profession Act.
In all of the circumstances, I find that this court has jurisdiction to determine whether or not Mr Culloton has standing to seek to set aside the Culloton Agreement.
Proprietary nature of the right under s 288 of the Legal Profession Act
The term 'property' is defined at s 5 of the Bankruptcy Act to mean 'real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property'.
Section 116 of the Bankruptcy Act sets out property divisible among creditors as being (among other things):
(a)all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge;[22] and
(b)the capacity to exercise and to take proceedings for exercising all such powers in, over or in respect of property as might have been exercised by the bankrupt for his or her own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his or her discharge.[23]
[22] Bankruptcy Act, s 116(1)(a).
[23] Bankruptcy Act, s 116(1)(b).
A chose in action is property for the purposes of s 5 and s 116 of the Bankruptcy Act. The definition of a chose in action was discussed by Lee, Drummond and Carr AJJA in Westpac Banking Corporation v The Bell Group Ltd (in liq) [No 3],[24] as being property:
'A chose in action is a species of property': Spellman v Spellman [1961] 2 All ER 498, 501 (Danckwerts LJ). 'The meaning of the expression "chose in action" or "thing in action" has expanded over time, and is now used to describe all personal rights of property which can only be claimed or enforced by action and not by taking physical possession': 13 Halsbury's Laws of England (5th ed) [1]. Choses in action include rights arising under contracts and the benefits of contracts: Halsbury [4] and [6].
[24] Westpac Banking Corporation v The Bell Group Ltd (in liq) [No 3] [2012] WASCA 157; (2012) 89 ACSR 1, 2157.
Further, some rights created by statute can constitute property.[25]
[25] Cummings v Claremont Petroleum NL [1996] HCA 19; (1996) 185 CLR 124, 6, although their Honours did not consider the right of appeal under consideration constituted property.
In these proceedings, Rowe Bristol contends that the contractual rights under the Culloton Agreement constitute a chose in action that vests in Mr Culloton's trustee in bankruptcy. Further, any statutory rights that supplement or affect the exercise of those contractual rights must also vest in the trustee, as to hold otherwise would mean that a bankrupt would be able to disgorge his trustee from the contractual rights that have vested in the trustee without the trustee's consent. It is Rowe Bristol's position that the statutory right to commence an action under s 288 of the Legal Profession Act must be proprietary in nature and vests with the trustee in bankruptcy due to its connection and effects on the rights in choses of action available to the trustee under the relevant costs agreements.
Neither party were able to refer to an authority that considered a bankrupt's standing under s 288 of the Legal Profession Act. However, the standing of a bankrupt to exercise a statutory right was considered by the High Court in Cummings v Claremont Petroleum NL - where a bankrupt appellant sought to appeal an adverse decision of the Full Court of the Federal Court pursuant to s 24 of the Federal Court of Australia Act 1976 (Cth). The decision of the Full Court had been reserved before he had become bankrupt and subsequently delivered against him after his bankruptcy had commenced. The respondents to the bankrupt's appeal applied for orders that the notices of appeal be set aside or dismissed.
In the Full Court by majority (Gummow & Whitlam JJ, Hill J dissenting) dismissed the appeals as incompetent.
On appeal, the High Court in the majority judgment of Brennan CJ, Gaudron and McHugh JJ, held that the statutory right of appeal against a liability created by a judgment did not constitute property. Their Honour's stated:[26]
A right to appeal may be a substantive right, but it is another question whether such a right has the character of property. Some rights created by statute can constitute property, but a right to appeal does not have the character of property merely because it is the creature of statute. A chose in action may be the property of the person entitled to enforce it, but a liability to satisfy a judgment enforcing a chose in action is not property of the person against whom the judgment is entered. A liability is not property of the person liable. Nor is a right to appeal against a money judgment property of the judgment debtor. Nor does such a right to appeal answer the description of property divisible among creditors defined by s116(1)(b), namely, 'the capacity to exercise, and to take proceedings for exercising all such powers in, over or in respect of property as might have been exercised by the bankrupt for his own benefit'. The powers referred to are powers 'which are familiar to all conveyancers and are powers properly so called', as Farwell J pointed out in In re Rose; Trustee of the Property of E T Rose v Rose. In other words, the powers referred to are authorities to dispose of property or interests in property for the benefit of the donee of the power or of some other person. In this case, there is no property 'over or in respect of' which the bankrupt is or would have been capable of exercising a power. As a matter of ordinary language, a judgment debtor's right to appeal against the judgment is not property.
[26] Cummings v Claremont Petroleum NL (6).
The High Court did however acknowledge that there may be cases where a right to appeal might constitute property. For example, 'If the postulated appeal relates to property that became vested in the trustee on the bankruptcy, or if the postulated appeal relates to a claim by the bankrupt for money or property that would be vested on recovery in the trustee the right to appeal is vested in the trustee'.[27]
Determination
[27] Cummings v Claremont Petroleum NL (8).
If successful, these proceedings might ultimately result in property that would be vested on recovery in the trustee. I therefore find that the cause of action is vested in the trustee. Mr Culloton has no right to bring or prosecute proceedings to protect, enhance or add to the property of which he has been divested on bankruptcy.
Furthermore, regardless of whether the statutory right under s 288 of the Legal Profession Act is proprietary in nature, I find that Mr Culloton does not have the requisite standing to commence these proceedings because he does not have any personal financial interest in the outcome of these proceedings. In coming to this conclusion, I follow and apply the analysis of the High Court in Cummings v Claremont Petroleum NL.[28] The claim by Rowe Bristol under the Culloton Agreement creates a provable debt against the estate of Mr Culloton. If the Culloton Agreement were to be set aside and, as a consequence, the debt was diminished and there was an increase in the amount of funds in the estate, Mr Culloton would have no financial interest in the same.
[28] Cummings v Claremont Petroleum NL [13] ‑ [14].
Part C - abuse of process
In all of the circumstances of this case, I find that Mr Culloton's predominant purpose in bringing these proceedings is an illegitimate one.
I have had regard to the fact that Mr Culloton seeks to prosecute proceedings:
(a)to set aside the Culloton Agreement in circumstances where his trustee has declined to do so;
(b)to set aside the Screenlink Agreement in circumstances where the parties to that agreement have declined or failed to do so (thereby shielding them from any adverse cost order); and
(c)where he lacks a financial interest in the outcome should either costs agreement be set aside.
Although not determinative of the question of abuse, I note that there was significant delay in the commencement of these proceedings. The proceedings were issued when the parties were at the point of fixing a date for the final hearing in the Taxation Proceedings.[29]
[29] Affidavit of Makan Mirzai dated 10 November 2016 [10] ‑ [28].
As a matter separate to the findings at Parts A and B above, I am persuaded to exercise the court's inherent jurisdiction to protect its own functions and to set aside the originating process as an abuse of this court's process.
Conclusion
For the reasons set out above, I find that:
1.This court's jurisdiction to set aside the Screenlink Agreement is not enlivened by Mr Culloton's application under s 288;
2.As an undischarged bankrupt, Mr Culloton does not have standing to bring an application to set aside the Culloton Agreement; and
3.In any event, the originating summons should be set aside as an abuse of this court's process.
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