El-Hanania v Vella (No.3) - [2019] FCCA 3287

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…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2019] FCCA 3287
Decision Date: 15 November 2019

CaseChat Overview and Summary

In the District Court of New South Wales, Mr El-Hanania sought to set aside a bankruptcy notice issued by Mr Vella. The bankruptcy notice was based on a judgment of $212,765.37, representing the difference between the amount Mr El-Hanania retained on account of his legal costs and the amount ultimately assessed as fair costs for his services. Mr El-Hanania contended that this judgment was not a "final judgment or order" for the purposes of the *Bankruptcy Act 1966* (Cth) because it was void, as it was not authorised by the relevant provisions of the *Legal Profession Act 2004* (NSW). Mr Vella argued that the judgment was regularly entered and therefore not a nullity.

The court was required to determine whether the judgment obtained by Mr Vella against Mr El-Hanania constituted a "final judgment or a final order" within the meaning of s.40(1)(g) of the *Bankruptcy Act 1966* (Cth), or if it was deemed to be a final judgment under s.40(3)(b) of the Act. This involved examining the circumstances under which the judgment was entered, specifically whether it was authorised by the *Legal Profession Act 2004* (NSW).

The court found that the judgment was not a "final judgment or order" nor a deemed final judgment under the *Bankruptcy Act 1966* (Cth). The reasoning was that the judgment entered was not authorised by the *Legal Profession Act 2004* (NSW), rendering it a nullity. The judgment was based on a costs certificate that recorded the difference between the amount Mr El-Hanania retained and the fair costs as determined by a costs assessor. However, the court determined that the specific provision of the *Legal Profession Act 2004* (NSW) under which the costs certificate was purportedly issued did not authorise the entry of a judgment for this difference. Although the judgment was later set aside by consent and a judgment for a lesser amount entered, the initial judgment, which formed the basis of the bankruptcy notice, was found to be void.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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. 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”.

Ratio Decidendi

Legal Principle Established

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