El-Hanania v Vella (No.3)
[2019] FCCA 3287
•15 November 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| EL-HANANIA v VELLA (No.3) | [2019] FCCA 3287 |
| Catchwords: BANKRUPTCY – Application to set aside bankruptcy notice in relation to a judgment purportedly entered on the filing of a costs certificate recording that the fair costs of providing legal services as determined by the costs assessor were substantially less than the amount the solicitor retained on account of those costs – the judgment so entered was in an amount representing the difference between the amount the solicitor retained and the fair costs of the legal services performed as determined by the costs assessor – the judgment was not authorised by the provision of the Act purportedly pursuant to which the costs certificate was issued – the judgment later set aside by consent but judgment for a lesser amount entered – whether judgment so entered was a “final judgment or a final order” within the meaning of s.40(1)(g) of the Bankruptcy Act 1966 (Cth) (Act) – whether the judgment so entered is deemed to be a final judgment under s.40(3)(b) of the Act – judgment is not a “final judgment or a final order” or a deemed final judgment. |
| Legislation: Bankruptcy Act 1924 (Cth), s.52 Bankruptcy Act 1966 (Cth), ss.40(1)(g), 40(3)(b), Legal Profession Act 2004 (NSW), ss.350, 367, 368, 372, 373, 382(1), 384(1) |
| Cases cited: El-Hanania v Vella [2019] NSWCA 167 El-Hanania v Vella (No 2) [2019] NSWCA 212 Opie v Opie (1951) 84 CLR 362 |
| Applicant: | SABA EL-HANANIA |
| Respondent: | ALON JOSEPH VELLA |
| File Number: | SYG 2258 of 2018 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 1 November 2019 |
| Date of Last Submission: | 13 November 2019 |
| Delivered at: | Sydney |
| Delivered on: | 15 November 2019 |
REPRESENTATION
| Counsel for the Applicant: | Mr M Condon SC |
| Solicitors for the Applicant: | Saba El-Hanania Lawyers |
| Solicitors for the Respondent: | Mr T Wallace of Sewell & Kettle Lawyers |
THE COURT DECLARES THAT
The judgment entered in the District Court of New South Wales on 31 May 2018 (Judgment) in relation to which bankruptcy notice no. BN226177 was issued on 26 July 2018 (Bankruptcy Notice) is not a “final judgment or final order” within the meaning of s.40(1)(g) of the Bankruptcy Act 1966 (Cth), and cannot be deemed to be a “final judgment” under s.40(3)(b) of that Act and, for those reasons, the Bankruptcy Notice is liable to be set aside.
THE COURT ORDERS THAT
By 6 December 2019 the applicant and respondent may both file and serve on each other written submissions in relation to the following questions:
(a)Does the Federal Circuit Court of Australia (Court) have jurisdiction to determine in the proceeding constituted by the application to set aside the Bankruptcy Notice whether the $212,765.37 for which the Judgment was given, apart from the Judgment nevertheless represents a debt within the meaning of s.368(4) of the Legal Profession Act 2004 (NSW) (LP Act) and, if it so determines, give judgment in the amount of the debt?
(b)Assuming (a) is answered the affirmative, does the $212,765.37 for which the Judgment was given, apart from the Judgment nevertheless represent a debt for the purposes of s.368(4) of the LP Act and, if so, is it open to the Court to direct the entry of judgment in the amount of the debt, together with interest?
The matter is listed for directions at 9.30 am on 17 December 2019 or at such other time and day as is convenient to the parties and to the Court.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 2258 of 2018
| SABA EL-HANANIA |
Applicant
And
| ALON JOSEPH VELLA |
Respondent
REASONS FOR JUDGMENT
Introduction
The applicant, Mr El-Hanania, applies for an order that a bankruptcy notice issued on 26 July 2018 on the application of the respondent, Mr Vella, be set aside. Mr El-Hanania is a solicitor whom Mr Vella had retained to act in an action for damages for personal injuries.
The bankruptcy notice demands payment of $212,765.37, being the amount of a judgment Mr Vella recovered in the District Court of New South Wales against Mr El-Hanania (Judgment). It is common ground that the $212,765.37 is the difference between the amount Mr El-Hanania retained out of the proceeds of a settlement of Mr Vella’s personal injuries claim on account of his costs for acting for Mr Vella in relation to that claim, and the amount for which Mr El-Hanania’s costs were assessed under the Legal Profession Act 2004 (NSW) (LP Act).
The principal ground on which Mr El-Hanania relies for setting aside the bankruptcy notice is the contention that the Judgment is not “a final judgment or order” within the meaning of s.40(1)(g) of the Bankruptcy Act 1966 (Cth) (Act) because it is null and void; and it is null and void because the Judgment was not authorised by the LP Act. Mr Vella, on the other hand, submits the Judgment was regularly entered, and, for that reason, is not a nullity.
To be in a position to identify and determine the issues that arise from these competing contentions, it will be necessary to set out the circumstances in which the Judgment was entered.
Circumstances in which the Judgment was entered
In 2006 Mr Vella was seriously injured in a motor vehicle accident and, in around 2009, he commenced proceedings for damages (PI claim).
In around January 2014 Mr Vella retained Mr El-Hanania in place of another solicitor to act for him on the PI claim. At a settlement conference Mr Vella attended on 31 August 2015, he accepted an offer of $900,000 inclusive of costs in settlement of his PI claim.
According to Mr Vella, on about 12 December 2015 he met with Mr El-Hanania at Mr El-Hanania’s home. Mr El-Hanania said words to the effect that he had sorted out his legal costs “that are to be deducted from the settlement sum”. By that stage it appears that the settlement sum of $900,000 was paid to Mr El-Hanania, which I assume he paid into his trust account, and that Mr El-Hanania had paid to Mr Vella $400,000 out of the settlement sum. That this is what occurred is to be inferred from Mr Vella’s evidence of what Mr El-Hanania said to him at their meeting. Mr El-Hanania said that the total of his legal costs “are not greater than $250,000, however I will only charge you $250,000”, and that Mr Vella “will now receive a further $100,000 which will amount to a grant total of $500,000 that you have received from the settlement sum”. Mr El-Hanania said he would give Mr Vella $100,000 then but only if Mr Vella were to sign a document. Mr Vella said that was not what he and Mr El-Hanania had agreed, but he signed the document because Mr Vella and his wife wished to buy a house.
On 20 September 2016 Mr Vella received an itemised bill of costs for $297,367.95. The bill of costs recorded that Mr El-Hanania had applied $255,341.10 from the settlement money, and that $42,026.85 remained owing. On 3 May 2017 Mr Vella applied to have the itemised bill of costs assessed. It appears that he did so under s.350(1) of the LP Act which provided that a “client may apply to the Manager, Costs Assessment for an assessment of the whole or any part of legal costs”. Mr Vella was entitled to apply for such a costs assessment even though most of the amount claimed in the itemised bill of costs had been paid. That followed from s.350(3) of the LP Act which provided that “[a]n application for a costs assessment may be made even if the legal costs have been wholly or partly paid”.
Under s.367 of the LP Act, the costs assessor was to determine an application for a costs assessment relating to a bill by confirming the bill or, if the assessor is satisfied that the disputed costs are unfair or unreasonable, by substituting for the amount of the costs an amount that, in the assessor’s opinion, is a fair and reasonable amount. Section 368 of the LP Act relevantly provided as follows:
(1) On making a determination of costs referred to in Subdivision 2 or 3 of this Division, a costs assessor is to issue a certificate that sets out the determination.
(2) A costs assessor may issue more than one certificate in relation to an application for costs assessment. Such certificates may be issued at the same time or at different stages of the assessment process.
(3) However, any such certificate may not set out the costs of the costs assessment within the meaning of section 369.
(4) In the case of an amount of costs that has been paid, the amount (if any) by which the amount paid exceeds the amount specified in any such certificate may be recovered as a debt in a court of competent jurisdiction.
(5) In the case of an amount of costs that has not been paid, the certificate is, on the filing of the certificate in the office or registry of a court having jurisdiction to order the payment of that amount of money, and with no further action, taken to be a judgment of that court for the amount of unpaid costs, and the rate of any interest payable in respect of that amount of costs is the rate of interest in the court in which the certificate is filed.
Finally, there is s.372 of the LP Act which provided that a costs assessor’s determination of an application is “binding on all parties to the application and no appeal or other assessment” is available “in respect of the determination, except as provided by” Subdivision 5 of Division 11. That Subdivision allowed the making of an application for review by a panel of two costs assessors.[1] It also provided for an appeal to the District Court of New South Wales from a costs assessor’s or a panel’s determination “as to a matter of law”.[2]
[1] LP Act, s.373(1)
[2] LP Act, s.384(1); s.382(1)
On 10 October 2017 a “Certificate of Determination of Costs” was issued (Costs Certificate) which relevantly certified the following:
1.THE APPLICATION IS DETERMINED BY ASSESSING AS A FAIR AND REASONABLE AMOUNT OF COSTS TO BE PAID TO THE COSTS RESPONDENT THE SUM OF $44,452.85.
Note 1.The amount assessed excludes the costs of the costs assessment for which a separate certificate has issued (Section 368(3) of the Act).
Note 2.The costs applicant has previously paid the sum of $294,671.85
2.THE COSTS RESPONDENT IS TO PAY TO THE COSTS APPLICANT THE SUM OF $250,219.24
On about 2 November 2017 Mr El-Hanania lodged an application for review of the costs assessment, but on 6 December 2017 the costs review panel affirmed the costs assessor’s determination.
In the meantime, on 25 October 2017 Mr Vella, through his solicitors, filed with the District Court the Costs Certificate for the purpose of its being registered as a judgment of that court. That was a mistake because Mr Vella had paid to Mr El-Hanania an amount that exceeded the amount the costs assessor determined was the fair and reasonable amount of costs to be paid to Mr El-Hanania; but, under s.368(4) of the LP Act, where an amount has been paid in excess of the amount that has been determined to be the fair and reasonable amount of the costs that should be paid, the only avenue for recovery of the difference was that provided for by s.368(4), namely, “as a debt”, that is, by civil action in a court of competent jurisdiction. The registration of a Costs Certificate as a judgment of a court is appropriate only where the amount of costs determined to be fair and reasonable have not been paid. The relevant District Court officer did not appreciate the mistake; so, in response to Mr Vella’s filing of the Costs Certificate, the officer registered a judgment in the sum of $250,219.24.
On 2 March 2018 Mr El-Hanania filed a summons with the District Court seeking leave to appeal against the decision of the costs assessor, and also an order that the judgment be set aside. What then followed was described by McCallum JA in El-Hanania v Vella:[3]
It appears that, following the commencement of the District Court appeal proceedings, Mr El-Hanania became aware of the irregularity in the entry of the certificate judgment. On 18 April 2018, a solicitor retained by Mr El-Hanania wrote to Mr Vella pointing out the irregularity and inviting Mr Vella’s consent to set aside that judgment. Mr Vella did not respond to that request.
On 19 April 2018, Mr El-Hanania filed a notice of motion in the District Court at Orange to have the certificate judgment set aside, invoking r 36.15 of the Uniform Civil Procedure Rules 2005 (NSW) or the Court’s inherent jurisdiction. The filed motion does not record a return date for the motion. I will refer to that as the motion in the Orange proceedings.
Two notices of motion were then filed in the District Court appeal proceedings. On 26 April 2018, Mr Vella filed a notice of motion to have the summons in those proceedings dismissed, evidently on the basis that the grounds of appeal did not seek to impugn the operative determination. On 27 April 2018, Mr El-Hanania responded by filing a notice of motion seeking leave to amend the summons to add grounds alleging error in the costs review panel’s determination.
On 31 May 2018, the two notices of motion in the District Court appeal proceedings came before Neilson DCJ. The extant motion in the Orange proceedings was not before his Honour.
[3] [2019] NSWCA 167, at [29]-[32]
McCallum JA also described what occurred at the hearing before Neilson DCJ on 31 May 2018:[4]
[4] El-Hanania v Vella [2019] NSWCA 167, at [29]-[32]
[I]n an understandable attempt to resolve the complexities before him in a simple and pragmatic way, after pressing the parties as to what was the real issue in dispute, the judge turned his attention to the issue raised by that motion.
During the course of argument on those matters, a number of points emerged as common ground. The solicitor appearing for Mr El-Hanania appeared to accept that the original summons in the District Court appeal proceedings, and perhaps also the proposed amended summons, required revision. Separately, both parties accepted that, leaving aside the statutory irregularity of a costs assessment certificate that purported to certify an amount of overpayment, coupled with the further irregularity of the court accepting registration of such a certificate as a judgment against the overpaid solicitor, the certificate of the costs assessor involved an error. As already noted, the costs assessor had identified the amount previously paid by Mr Vella to Mr El‑Hanania as being the sum of $294,671.85. However, as confirmed in an affidavit sworn by Mr Vella in support of the dismissal application, it was only $255,341.10 (according to the itemised bill prepared by Mr El-Hanania).
After being afforded an opportunity to obtain instructions, the legal representatives for both parties acceded to the judge’s suggestion that the error could be addressed by in effect calling up the Orange proceedings and making an order reducing the certificate judgment to $212,765.37. On the part of Mr El-Hanania, consent to that course was given without prejudice to any action Mr El-Hanania may take to obtain prerogative relief “in another place”. An order was made by consent in the Orange proceedings 2017/322206 as follows:
“By consent, I set aside judgment entered on 25/10/17 in the sum of $250,219.24. In lieu thereof, I enter judgment for the plaintiff against the defendant for $212,765.37. Such judgment to take effect from 25/10/17. Therefore, credit to the defendant/judgment debtor for monies recovered on the garnishee order issued on 27/12/17.”
The judge then disposed of the two motions in the appeal proceedings that had been listed before him 2018/68777 by making the following orders:
“Motion filed by the defendant in these proceedings on 26/4/18 is withdrawn and dismissed. Motion filed by the appellant in these proceedings on 27/4/18 is withdrawn and dismissed. I grant leave to the appellant to withdraw the summons which is accordingly dismissed.”
The Judgment was entered as a consequence of Neilson DCJ’s orders.
Mr El-Hanania filed a summons to the Court of Appeal of the Supreme Court of New South Wales for an order extending time and, if time is granted, for an order that the Judgment be quashed. On 10 July 2019 the Court of Appeal ordered on terms that Mr El-Hanania be granted time;[5] but Mr El-Hanania did not comply with those terms. Consequently, his summons was dismissed on 19 August 2019.[6]
[5] El-Hanania v Vella [2019] NSWCA 167
[6] El-Hanania v Vella (No 2) [2019] NSWCA 212
Grounds of application
Mr El-Hanania relies on the grounds stated in the amended application filed on 1 November 2019.[7]
[7] I was informed by the parties that leave to file an amended application was granted by Registrar Wall on 27 November 2018. Registrar Wall did make such an order, but the order referred to the filing of the amended application in Court.
1.The Bankruptcy Notice is to be set aside on the ground that the Applicant has filed a Summons in the Supreme Court of New South Wales, File Number 2018/246352 and that the judgment entered on 25 October 2017 is irregular and unenforceable due to being entered irregular and that the judgment entered is before the Supreme Court to set aside the Orders on a prerogative relief.
2.A declaration that in the circumstances under which a Certificate of Determination was issued by a Costs Assessor under s.368(4) [of] the Legal Profession Act 2004 or confirmed by a Review Panel under s.378 of the Legal Profession Act 2004 requiring the Applicant to refund an amount of money by operation of that legislation cannot, in the manner which has occurred, give rise to a final judgement [sic] or order in terms of that legislation upon it being filed in a court of competent jurisdiction in terms of s.133 of the Civil Procedure Act 2005 (NSW) and Part 36 rule 36.11 of the Uniform Civil Procedure Rules 2005 (NSW).
3.A Declaration that in terms of s.41(1) of the Bankruptcy Act 1966 and s.40(1)(g) of the Bankruptcy Act 1966 there was in respect of Bankruptcy Notice number BN 226177 issued 26 July 2018 no final judgement [sic] or order upon which it could be founded.
4.An Order that the court is entitled to go behind any asserted judgement [sic] or order recorded as being relied upon for the purpose of the issue of Bankruptcy Notice number BN 226177 issued 26 July 2018 to determine whether there is any underlying entitlement to the recorded final judgement [sic] or order relied upon.
5.An order that Bankruptcy Notice number BN 226177 issued 26 July 2018 be set aside.
Ground 1 is no longer relevant because, as I have already noted, the Court of Appeal dismissed Mr El-Hanania’s summons.
Parties’ submissions
In his counsel’s written submissions handed up during the hearing (applicant’s written submissions), Mr El-Hanania submitted the Court has jurisdiction to set aside a bankruptcy notice even after the time required for its compliance has passed. Mr Vella did not submit otherwise, and I have no doubt that the Court has jurisdiction to set aside a bankruptcy notice after the time required for its compliance has passed.
Next, Mr El-Hanania submitted the District Court lacked jurisdiction to enter judgment in favour of Mr Vella on the basis of the lodgement of the Costs Certificate. Mr El-Hanania relies on the following passage from the judgment of McCallum JA in El-Hanania v Vella:[8]
It is common ground that the course of filing the certificate in the form in which it was issued (so as to be taken to be a judgment against Mr El-Hanania) was not available in the circumstances. The dispute was governed by the Legal Profession Act 2004 (NSW) (now repealed). Registration of a certificate of determination of a costs assessor under that Act was the mechanism available to recover costs that had not been paid: s368(5) of the Act. Where costs had been paid in an amount that exceeded the amount assessed, the overpayment could be recovered as a debt: s 368(4) of the Act. There was no statutory authority for the Court to accept a certificate for registration in that circumstance. The appropriate course to recover the overpayment would have been for Mr Vella to file a statement of claim.
[8] [2019] NSWCA 167, at [7]
Because the District Court lacked jurisdiction to enter the $250,219.24 stated in the Costs Certificate as a judgment, the judgment it did enter for that amount on 25 October 2017, and the Judgment that was entered pursuant to the order Neilson DCJ made on 31 May 2018 are nullities. Somewhat inconsistently, Mr El-Hanania says that “[i]n these circumstances, Mr El-Hanania seeks to go behind the judgment and have the judgment set aside”.[9]In his counsel’s supplementary written submissions, Mr El-Hanania submitted that, although the jurisdiction of a court of bankruptcy to go behind a judgment can be properly exercised to inquire into the validity of the alleged debt in certain circumstances, “a judgment can be impugned in other ways”. Mr El-Hanania says that his contention “is simply that no judgment of the kind referred to in s 40(1)(g) existed at the time the bankruptcy notice issued (nor does one now exist)”, and, “regardless of the operation of s.372 of the Legal Profession Act, there is no judgment because the District Court’s judgment is void and a nullity”.[10]
[9] Applicant’s written submissions, [15]
[10] Applicant’s supplementary written submissions, [5], [6]
Mr Vella, on the other hand, submits that any irregularity in the entry of judgment for $250,219.24 that was filed on 25 October 2017 was cured by the order Neilson DCJ made with the consent of the parties on 31 May 2018. Mr Vella submits there was an intervening act of the Mr El-Hanania, namely, the filing of a fresh summons which “created a fresh starting point that alleviated any issue with the alleged failure to commence proceedings to recover the amount owed by the Applicant by way of statement of claim”.[11] Mr Vella in effect submits that the true character of the Judgment was the settlement of a controversy about whether the judgment for $250,219.24 that was entered on 25 October 2017 on the filing of the Costs Certificate was irregular, and the orders that were made on the basis of their agreement constituted the quelling of that controversy.
[11] The Respondent’s Outline Submissions, [11]
Issues
The parties assume that the question whether the Judgment is one on the basis of which the bankruptcy notice could have been issued against Mr El-Hanania turns on whether the Judgment is a nullity. The parties also assume that if a Judgment is a nullity it is not a “final judgment or final order” for the purposes of s.40(1)(g) of the Act. These assumptions may be correct; but there are three anterior questions that must be addressed. First, what, on its proper construction, does the expression “a final judgment or final order” in s.40(1)(g) of the Act mean? Second, what is the true character of the Judgment? Third, is the Judgment, as properly characterised, “a final judgment or final order” within the meaning of s.40(1)(g) of the Act? These, in my opinion, are the principal questions that arise out of the parties’ contentions.
Meaning of “a final judgment or final order”
The starting point is the text of s.40(1)(g) of the Act, which relevantly provides:
A debtor commits an act of bankruptcy in each of the following cases:
. . . .
(g)if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:
(i)where the notice was served in Australia--within the time specified in the notice; or
(ii)where the notice was served elsewhere--within the time fixed for the purpose by the order giving leave to effect the service;
comply with the requirements of the notice or satisfy the Court that he or she has 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 . . .
This paragraph is substantially the same as s.52(j) of the Bankruptcy Act 1924 (Cth) (1924 Act), and the meaning of “final judgment” as that expression appeared in that paragraph was considered by the High Court in Opie v Opie.[12] The question in that case was whether a judgment entered on the basis of a certificate issued by a magistrate stating the amount due under an order for maintenance made under the Deserted Wives and Children Act 1901 (NSW) was a “final judgment” within the meaning of s.52(j) of the 1924 Act. The High Court held that such judgment was not a “final judgment” within the meaning of s.52(j) of the 1924 Act, and that is because “judgment”, as it appeared in s.52(j), meant a “judgment in an action”. Dixon and Williams JJ said:[13]
Section 52(j) includes final judgments and final orders. Before final orders were included it had been held on numerous occasions that a final judgment on which a bankruptcy notice could be founded was a final judgment obtained in an action by which a previously existing liability of the defendant to the plaintiff is ascertained or established - unless there is something to show an intention to use the words in a more extended sense . . . . In their ordinary natural signification the words refer to judgments in actions and orders in proceedings.
[12] (1951) 84 CLR 362
[13] (1951) 84 CLR 362, at pages 372-373
McTiernan J said:[14]
The final judgment of which s. 52 (j) of the Commonwealth Bankruptcy Act speaks is a final judgment in the technical sense. Section 13A provides that judgment entered pursuant to it may be enforced in any manner in which a final judgment in an action may be enforced. When judgment is entered nothing more has to be done and execution can at once issue. That is not sufficient to give the judgment the essential character of a final judgment upon which a bankruptcy notice can be founded. In Ex parte Chinery; In re Chinery . . . Cotton L.J. said: “I think we ought to give to the words ‘final judgment’ in this sub-s. 1 (g) their strict and proper meaning, i.e., a judgment obtained in an action by which a previously existing liability of the defendant to the plaintiff is ascertained or established - unless there is something to show an intention to use the words in a more extended sense. . . .” . . . .
[14] (1951) 84 CLR 362, at pages 374-375
The result in Opie has been reversed by the enactment of s.40(3)(b) of the Act, which provides:[15]
[15] That s.40(3)(b) was enacted to overcome Opie is apparent from the article written by Sir Thomas Clyne in his article “An Outline of Some Recommendations for the Amendment of the Bankruptcy Act”, (1964) Federal Law Review, Vol 1, page 24 at page 30
For the purposes of paragraph (1)(g):
. . . .
(b)a judgment or order that is enforceable as, or in the same manner as, a final judgment obtained in an action shall be deemed to be a final judgment s obtained and the proceedings in which, or in consequence of which, the judgment or order was obtained shall be deemed to be the action in which it was obtained.
Paragraph s.40(3)(d) of the Act is directed to “a judgment or order that is enforceable as, or in the same manner as, a final judgment obtained in an action”. This expression denotes an object that is identifiable as a judgment or order which, although not a final judgment obtained in an action, is nevertheless enforceable as if it were such a judgment. That assumes the existence of some statutory provision that identifies classes of objects that are not in fact final judgments as judgments or orders; and provides that those objects are enforceable as, or in the same manner as, final judgments obtained in an action. Paragraph s.40(3)(b) of the Act provides that an object so identified and treated by a particular statutory provision is to be deemed to be a “final judgment”, and the proceeding in which, or in consequence of which, the judgment or order was obtained shall be deemed to be the action in which it was obtained.
Subsection 368(5) of the LP Act is a statutory provision of the sort contemplated by s.40(3)(b) of the Act. The object s.368(5) of the LP Act identifies as a judgment or order that is enforceable as a final judgment obtained in an action is a costs certificate issued under s.368(1) of the LP Act for an amount that has not been paid; and s.368(5) of the LP Act provides that on the filing of such costs certificate in the office or registry of a court with jurisdiction the costs certificate is to be taken to be a judgment of that court for the amount of the unpaid costs.
Character of the Judgment
It is correct, as Mr Vella submits, that the Judgment was entered pursuant to an order Neilson DCJ made with the agreement of Mr El-Hanania and Mr Vella. The question, however, is what was the subject matter of the agreement; and that is to be determined, at least to a significant extent, by identifying the matter or matters that was or were before his Honour on 31 May 2018. There were at least three matters.
One was Mr El-Hanania’s application to set aside the judgment that was entered when Mr Vella lodged the Costs Certificate. Mr El-Hanania made that application on the ground that the judgment was irregular. The second matter that was before his Honour was a notice of motion filed by Mr Vella seeking to dismiss Mr El-Hanania’s summons to appeal “evidently on the basis that the grounds of appeal did not seek to impugn the operative determination”.[16] And the third matter was a notice of motion Mr El-Hanania filed to amend his summons. The matter was resolved by the parties agreeing that the judgment for $250,219.24 that was entered on 25 October 2017 in response to Mr Vella’s lodging of the Costs Certificate be set aside, and, in its place, there be entered a judgment for $212,765.37 effective on 25 October 2017; and that all other motions and the summons to appeal were to be dismissed. As set out in the passage from the judgment of McCallum JA I have reproduced above, however, Mr El-Hanania’s consent to Neilson DCJ making the orders “was given without prejudice to any action Mr El-Hanania may take to obtain prerogative relief “in another place””.
[16] El-Hanania v Vella [2019] NSWCA 167, at [31]
What, then, is the proper characterisation of the Judgment? In my opinion, the Judgment reflects no more than an agreement between Mr El-Hanania and Mr Vella that the difference between the amounts Mr El-Hanania has withheld on account of his costs for acting for Mr Vella in the PI claim and the $44,452.85 the costs assessor determined as the fair and reasonable amount of the costs of the work Mr El-Hanania performed is $212,765.37, not the $250,219.24 stated in the Costs Certificate for which judgment had originally been entered. Mr El-Hanania expressly reserved his rights to “obtain prerogative relief “in another place””. I find that what Mr El-Hanania intended to convey by his reservation of rights, and what reasonable persons in the position of Mr El-Hanania and, at least, the counsel for Mr Vella would have understood Mr Vella to have intended to convey, is that he intended to challenge the validity of the Judgment by judicial review proceedings in another judicial tribunal. The Judgment, therefore, quelled only part of the controversy between Mr El-Hanania and Mr Vella, and that was the controversy about the amount of the settlement money Mr El-Hanania had withheld in excess of the costs the costs assessor determined to be reasonable costs, but it otherwise kept alive the controversy about the validity of the judgment entered on 25 October 2017, and also signalled a controversy about the validity of the judgment which the parties agreed was to be entered as a consequence of the orders made on 31 May 2018.
It will be apparent, therefore, that I do not accept Mr Vella’s submission that the agreement pursuant to which the Judgment was entered reflects a settlement of Mr El-Hanania’s claim that the judgment that was entered on the lodgement of the Costs Certificate was irregular. Mr El-Hanania reserved his right to maintain his claim, although in another forum, that the judgment was irregular.
Is the Judgment “a final judgment or final order”?
The next question is whether the Judgment is a “final judgment or order” which, according to Opie, is to ask whether the Judgment represents “a final judgment obtained in an action by which a previously existing liability of [Mr El-Hanania] to [Mr Vella] is ascertained or established”. The answer to that question must be “no”. The Judgment is in effect a variation of the amount of the judgment that was entered on 25 October 2017. That judgment did not represent the ascertainment by action of a previously existing liability; it represented “an administrative act done by an officer of” the District Court purportedly, but mistakenly, “under the direction contained in” s.368(5) of the LP Act.[17]
[17] The words in quotation are taken from the judgment of McTiernan J in Opie v Opie ((1951) 84 CLR 362, at page 372) describing the manner in which the judgment in that case was entered.
Nor does the Judgment itself represent the ascertainment by action of a previously existing liability. As I have already found, the Judgment goes no further than reflecting an agreement about the correct amount of the difference between the money Mr El-Hanania retained on account of his costs and the $44,452.85 the costs assessor determined as the fair and reasonable amount of the costs of the work Mr El-Hanania performed for Mr Vella.
That a judgment is not a “final judgment or final order” within the meaning of s.40(1)(g) of the Act does not necessarily mean that a bankruptcy notice cannot be issued in relation to it because a judgment that is enforceable as, or in the same manner as, “a final judgment” is capable of being deemed to be a final judgment under s.40(3)(b) of the Act. But the Judgment does not fall within s.40(3)(b) of the Act. That is so because the only circumstances in which a certificate issued under s.368(1) of the LP Act could have been treated as if it were a judgment of the court in which it is filed is where the determination of costs as recorded in such certificate is for an amount that has not been paid. Thus, although the Costs Certificate represents that $250,219.24 has not been paid, that does not represent as the amount that has not been paid the amount the costs assessor determined to be the fair and reasonable amount of costs to be paid, namely, $44,452.85. Thus, the filing of the Costs Certificate cannot be deemed to be a “final judgment” by the operation of s.40(3)(b) of the Act; and nor can the entry of the Judgment be so regarded because that Judgment, in substance, is no more than a variation of the amount of the judgment that was registered for the amount stated in the Costs Certificate as having been overpaid by Mr Vella.
Conclusion and further progress
It follows, therefore, that the Judgment is not, and cannot be deemed to be a “final judgment or a final order” within the meaning, or for the purpose, of s.40(1)(g) of the Act and, for that reason, a bankruptcy notice could not have been issued in relation to the Judgment. That means that the bankruptcy notice that has been issued against Mr El-Hanania should be set aside. That, however, is not the end of the matter.
In his amended application Mr El-Hanania seeks an order that the Court is entitled to go behind the Judgment “to determine whether there is any underlying entitlement to the recorded final judgment or order relied upon”. At the hearing before me, submissions were made about whether, apart from the Judgment, Mr El-Hanania owed to Mr Vella an amount equal to the Judgment. Counsel for Mr El-Hanania submitted the determination recorded in the Costs Certificate was not binding on Mr El-Hanania.
In these circumstances, I am of the opinion that it is arguable that there arose as part of the single controversy that is before me, not only the question whether the bankruptcy notice should be set aside, but also whether the $212,765.37 – which represents what Mr El-Hanania and Mr Vella agreed before Neilson DCJ is the difference between the amount Mr El-Hanania retained on account of his costs and the $44,452.85 the costs assessor determined as the fair and reasonable amount of the costs of the work Mr El-Hanania performed for Mr Vella – is a debt that is recoverable in a court of competent jurisdiction pursuant to s.368(4) of the LP Act; and that it is arguable that this Court has jurisdiction, in this proceeding, to determine that question and, if that question is answered in the affirmative, to give judgment for that amount (together with interest) against Mr El-Hanania.
Although I am satisfied that the bankruptcy notice is liable to be set aside, I do not at this stage propose to set aside the bankruptcy. Instead I propose to:
a)make a declaration to the effect that the Judgment is not a judgment in relation to which a bankruptcy notice could be issued and, for that reason, the bankruptcy notice that was issued against Mr El-Hanania is liable to be set aside;
b)order that within three weeks of my pronouncing my orders the parties may file and serve written submissions that address the following questions:
i)does this Court have jurisdiction to determine whether the $212,765.37 for which the Judgment was given, apart from the Judgment nevertheless represents a debt for the purposes of s.368(4) of the LP Act and, if it so determines, give judgment in the amount of the debt?
ii)assuming (i) is answered the affirmative, does the $212,765.37 for which Judgment was given, apart from the Judgment nevertheless represent a debt for the purposes of s.368(4) of the LP Act and, if so, is it open to this Court to direct the entry of a judgment for the debt, together with interest? and
c)list the matter for directions at 9:30 am on 17 December 2019.
I certify that the preceding forty-one (41) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Associate:
Date: 15 November 2019
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