Goyal v Battaglia
[2020] FCCA 182
•4 February 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| GOYAL v BATTAGLIA | [2020] FCCA 182 |
| Catchwords: BANKRUPTCY – PRACTICE AND PROCEDURE – Application for order that applicant be permitted to be substituted as petitioning creditor – at the time of act of bankruptcy there had been issued but not registered as a judgment a certificate of costs determining the costs the debtor had been ordered to pay the applicant – whether the amount determined in the costs certificate was a debt payable by the debtor as at the date of the act of bankruptcy – application for substitution granted. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.5(1), 44(1), 49 Legal Profession Act 2004 (NSW), ss.368, 378, 384 |
| Cases cited: ABB Australia Pty Limited v Commissioner of Taxation [2007] FCA 1063 |
| Applicant: | RAHUL GOYAL |
| Respondent: | KAREN BATTAGLIA |
| File Number: | SYG 2141 of 2019 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 17 December 2019 |
| Date of Last Submission: | 17 January 2020 |
| Delivered at: | Sydney |
| Delivered on: | 4 February 2020 |
REPRESENTATION
| No appearance by or on behalf of the Applicant |
| Counsel for the Respondent: | Mr S C Ipp |
| Solicitors for the Respondent: | Mills Oakley Lawyers |
| Counsel for the Supporting Creditor, Peter Hillig: | Mr J T Johnson |
| Solicitors for the Supporting Creditor: | Watson Mangioni Lawyers |
ORDERS
Pursuant to s.49 of the Bankruptcy Act 1966 (Cth) Peter Hillig in his capacity as liquidator of ACN 092 745 330 Pty Limited (in Liquidation) be permitted to be substituted as petitioning creditor.
By 18 February 2020 Mr Hillig file and serve an amended creditor’s petition.
The creditor’s petition be listed for directions at a date and time to be determined.
Costs are reserved.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 2141 of 2019
| RAHUL GOYAL |
Applicant
And
| KAREN BATTAGLIA |
Respondent
REASONS FOR JUDGMENT
Introduction
By an interim application filed on 4 October 2019 Mr Hillig, in his capacity as liquidator of ACN 092 745 330 Pty Limited (in Liquidation), applies for permission to be substituted as the petitioning creditor of a creditor’s petition presented by Mr Goyal against the respondent, Ms Battaglia. Mr Hillig brings his application under s.49 of the Bankruptcy Act 1966 (Cth) (Act), which provides:
Where a creditor’s petition is not prosecuted with due diligence or where for any other reason the Court considers it proper to do so, the Court may permit to be substituted as petitioner or petitioners another creditor or other creditors to whom the debtor is indebted in the amount required by this Act in the case of a petitioning creditor, and the petition may be proceeded with as if the substituted creditor or creditors had been the petitioning creditor.
Question for determination
It is common ground that:
a)Ms Battaglia committed an act of bankruptcy on 2 August 2019 by failing to comply by that day with the requirements of a bankruptcy notice that was issued on the application of Mr Goyal, and served on Ms Battaglia on 12 July 2019 (Act of Bankruptcy);
b)Mr Hillig is the beneficiary of an order for costs made against Ms Battaglia (among others) by the Court of Appeal of the Supreme Court of New South Wales (Court of Appeal) on 10 April 2018 (Costs Order);
c)before 9 November 2018 Mr Hillig applied under s.68 and s.74 of the Legal Profession Uniform Law Application Act 2014 (NSW) (LPULA Act) to the Manager, Costs Assessment, for an assessment of the costs covered by the Costs Order;
d)on 9 November 2018 a costs assessor issued two certificates of determination of costs, one under s.70 and s.78 of the LPULA Act, by which the costs assessor assessed Mr Hillig’s costs to which he was entitled under the Costs Order at $175,236.45 (Relevant Costs Certificate); and one under s.71 of the LPULA Act, by which the costs assessor assessed his remuneration at $2,696.10;
e)on 22 March 2019 the costs assessor released the certificates of costs determination to the parties after Mr Hillig paid the costs assessor’s remuneration of $2,696.10;
f)on or about 18 April 2019 Ms Battaglia filed an application under s.83 of the LPULA Act for review of the determination for costs recorded in the costs certificates referred to in (d); and on 18 July 2019 the review panel issued two certificates, one under s.85(1)(a) of the LPULA Act affirming the costs assessor’s determinations, and one under s.88 of the LPULA Act recording the determination of the review panel’s costs at $2,508; and
g)on 15 August 2019 the District Court of New South Wales (District Court) entered judgment for $175,236.45, and that judgment was entered on the application of Mr Hillig relying on s.71(3) of the LPULA Act.
It is also common ground that:
a)the Court can make an order under s.49 of the Act permitting Mr Hillig to be substituted as petitioning creditor only if Ms Battaglia owed a debt to which s.44(1) of the Act applied, namely, a debt for a liquidated sum that had accrued before 2 August 2019, being the day on which she committed the Act of Bankruptcy;[1]
b)the debt Mr Hillig claims Ms Battaglia owed before 2 August 2019 is a debt he claims is recorded in the Relevant Costs Certificate; and
c)the amount recorded in the Relevant Costs Certificate is a debt that was owing from at least 15 August 2019 when the District Court entered judgment for $175,236.45.
[1] See McNamara v Langford [1931] HCA 27; (1931) 45 CLR 267, at page 271, where Gavin Duffy J said: “The Court is of opinion that the person substituted under sec.35 [the equivalent provision to s.49 of the Act under the Bankruptcy Act 1924 (Cth)] must be a person whose debt was in existence at the time of the act of bankruptcy alleged in the petition”.
The question that divides the parties is whether the amount of $175,236.45 recorded in the Relevant Costs Certificate was owing before 2 August 2019, being the date of the Act of Bankruptcy. Ms Battaglia submits the $175,236.45 became owing only on 15 August 2019 when the District Court entered judgment. Mr Hillig, on the other hand, submits that all he needs to establish to be entitled to be substituted as a petitioning creditor is that he is a creditor, and he was a creditor when Ms Battaglia committed the Act of Bankruptcy.
The determination of this question turns, at least in substantial part, on the proper construction of s.44(1) of the Act and a number of provisions of the LPULA Act, including s.70 and s.71. More particularly it turns on whether by the costs assessor issuing the Relevant Costs Certificate there came into being a “debt” for “a liquidated sum due at law or in equity” in the amount of $175,236.45 that was “payable either immediately or at a future time”. Before I consider the parties’ competing contentions it will be necessary to identify the relevant statutory provisions, and consider the meaning of certain expressions in those provisions.
Subsection 44(1) of the Act
Subsection 44(1) of the Act relevantly provides as follows:
A creditor’s petition shall not be presented against a debtor unless:
(a)there is owing by the debtor to the petitioning creditor a debt that amounts to $5,0000 . . . ;
(b) that debt . . .
(i)is a liquidated sum due at law or in equity or partly at law and partly in equity; and
(ii)is payable either immediately or at a certain future time . . .
First I consider the word “debt”. Subsection 5(1) of the Act provides that “debt includes liability”, but “debt” is otherwise not defined in the Act. “Debt”, however, has a well-understood core meaning: it denotes a particular class of obligations, namely, money obligations – obligations to pay money.
Money obligations fall into two broad classes – liquidated and unliquidated. A liquidated money obligation is one that binds one person, the debtor, to pay to another person, the creditor, an agreed, established, or ascertainable amount of money; and an unliquidated money obligation is one that binds the debtor to pay to the creditor such amount as will be assessed by a court or by some other agreed or otherwise lawfully constituted person or body.[2] An example of a liquidated money obligation is a term of a contract under which a debtor agrees to pay to the creditor a specific sum of money by a particular day. An example of an unliquidated money obligation is that which arises when a court orders a party to pay the costs of another party.[3]
[2] Proctor, C., Mann on the Legal Aspect of Money, Seventh edition, Oxford University Press, 2012, at [3.04]; Proctor, C., Goode on Payment Obligations in Commercial and Financial Transactions second edition, Sweet & Maxwell 2009, at [1-36]
[3] See, for example, Ex p Ruffle; In re Dummelow (1873) LR 8 Ch App 997
One consequence of the distinction between liquidated and unliquidated money obligations relates to the manner by which such obligations can be discharged. A liquidated money obligation is capable of being discharged by performance, namely, by payment. That is, the debtor may pay the liquidated amount to the creditor, the act of payment consisting of the debtor tendering to the creditor, according to the terms of the contract or other source of the obligation to pay the liquidated amount, the money he or she owes the creditor, and the creditor accepting the tender.[4]
[4] ABB Australia Pty Limited v Commissioner of Taxation [2007] FCA 1063, at [166]
An unliquidated money obligation, on the other hand, cannot be discharged by performance, that is, by payment, because the amount the debtor is liable to pay remains to be ascertained. An unliquidated money claim, however, is capable of being discharged in other ways. One is by accord and satisfaction; that is, by the debtor and creditor agreeing, before the court or other agreed or otherwise lawfully constituted person or body assesses the amount the debtor is to pay to the creditor, the amount the debtor is to pay the creditor, and the debtor paying to the creditor the amount so agreed. [5] An unliquidated money obligation may also be discharged when the court or other agreed or otherwise lawfully constituted person or body assesses the amount the debtor must pay the creditor. Where that occurs, the unliquidated money obligation is replaced by a liquidated obligation to pay the creditor the amount the court or person or body has assessed.
[5] McDermott v Black [1940] HCA 4; (1940) 63 CLR 161 at pages 183-184
The word “debt” is often, perhaps almost always, taken to denote an obligation to pay a fixed or ascertainable amount of money. That, at least for the most part, was the type of money obligation that could have been enforced by the action of debt.[6] For the purposes of the Act, however, the word “debt”, where it appears on its own, unless the context suggests otherwise, includes unliquidated money obligations. That is apparent from s.5(1) of the Act which provides that “debt” includes “liability”. It is also apparent from s.44(1) of the Act which requires that the debt be a liquidated sum, implying that, without that requirement, “debt” would include an obligation to pay an unliquidated sum. [7]
[6] Alexander v Ajax Insurance Co Ltd [1956] VLR 436, at page 445
[7] The authorities support the view that “debt”, as used in the Act, may include unliquidated money obligations: see Bank of Australasia v Hall (1907) 4 CLR 1514; Power v Fryer (2001) SCSA 59, at [62]
Next there is the expression “liquidated sum”. I have not found in any case decided under the Act or any equivalent statute consideration of the meaning of “liquidated sum”. That may be because the meaning of “liquidated”, when used to qualify words such as “claims”, “demands”, “sum”, “amount”, and “damages” is almost uniformly understood, at least by lawyers. At the very least “liquidated sum” includes an amount certain. It may also include an amount that “can be calculated or fixed by any scale of charges or other positive data”.[8] Thus, the requirements of s.44(1) of the Act that there be a “debt”, and that the debt be “for a liquidated sum”, means the debtor must be bound by a liquidated money obligation; that is, an obligation to pay a certain sum of money to a creditor.
[8] Spain v The Union Steamship Co. of New Zealand Ltd (1923) 32 CLR 138, at page 142 (Knox CJ and Starke J)
Third, s.44(1) of the Act requires that the debt be “due”. Considered alone, “due” suggests that the liability to pay the debt must have accrued and, for that reason, must be immediately payable. That, however, is not an easily available construction because s.44(1)(b)(ii) of the Act requires that the debt be “payable either immediately or at a certain future time”. That implies that “due” may not mean “payable”. A reasonable construction may be that “due”, when read with what follows it, namely, “at law or in equity”, simply means “arising” or “based”.
Finally, there is the word “payable” as qualified by the words that immediately follow it, namely, “either immediately or at a certain future time”. “Payable” refers to the “debt” that “is a liquidated sum”. It conveys that which is inherent in the notion of these expressions, namely, an obligation to pay a certain amount of money to the creditor. “Payable”, therefore, at the very least requires that the obligation to pay money has accrued; and the qualification “immediately or at a certain future time” requires that the debtor is liable to pay the money immediately or at some future certain time.
It may be that “payable” also refers to an obligation to pay money that has not yet accrued, but which is liable to accrue by the creditor making a demand for payment. This construction is supported by the judgment of the Privy Council in Thomas Cook (New Zealand) Limited v. Inland Revenue (New Zealand).[9] In that case the Privy Council considered the construction of “payable” in s.4(1)(e) of the Unclaimed Money Act 1971 (NZ),[10] holding that “payable” “means no more than legally due if demanded, it being quite unnecessary that any demand should actually have been made or that any cause of action should in fact have accrued”.[11]
[9] Thomas Cook (New Zealand) Limited v. Inland Revenue (New Zealand) [2004] UKPC 53
[10] Which provided: “[Unclaimed money shall consist of] (e) Any other money, of any kind whatsoever, which has been owing by any holder for the period of six years immediately following the date on which the money has become payable by the holder.”
[11] Thomas Cook (New Zealand) Limited v. Inland Revenue (New Zealand) [2004] UKPC 5, at [5]
Thus, s.44(1) of the Act applies to a liquidated money obligation that has either accrued and is immediately payable or payable at a certain future time, and, perhaps, to a liquidated money obligation that has not accrued but which is liable to become payable if the creditor makes a demand.
The LPULA Act
The LPULA Act contains provisions for the assessment of a party’s legal costs a court has ordered another party to pay. The starting point is s.74 of the LPULA Act, which relevantly provides:
(1) An application for assessment of the whole or any part of ordered costs may be made by--
(a) a person who has paid or is liable to pay those costs, or
(b) a person who has received or is entitled to receive those costs.
(2) A court or tribunal may refer for assessment costs payable under an order made by the court or tribunal. Such a reference is taken to be an application duly made for assessment of the costs.
Section 63 of the LPULA Act defines “ordered costs” to mean “costs payable under an order or rule of a court or tribunal”.
The application for the assessment of costs is made by filing an application with the Manager, Costs Assessment.[12] Although not stated in the LPULA Act, once filed the application will be assigned to a costs assessor.[13] The costs assessor must assess ordered costs “in accordance with”, among other things, “the terms of the order, rule or award under which the costs are payable”;[14] and, when conducting an assessment of ordered costs, the costs assessor “must determine what is a fair and reasonable amount of costs for the work concerned”.[15]
[12] LPULA Act, s.68
[13] See “information about costs assessment” accessed 2 February 2020
[14] LPULA Act, s.75
[15] LPULA Act, s.76(1)
After the costs assessor has assessed the ordered costs, s.70(1) of the LPULA Act requires the costs assessor to “issue a certificate that sets out the determination” that includes, among other things, “the amount of costs determined”. Finally, there is s.71 of the LPULA Act which requires the costs assessor issue a certificate recording that determination. That section provides as follows:
(1) On making a determination of costs, a costs assessor is to separately determine --
(a) the amount of the costs incurred by the costs assessor and the Manager, Costs Assessment, and
(b) the costs related to the remuneration of the costs assessor, and
(c) by whom those costs are payable and the extent to which they are so payable.
(2) On making a determination under this section, a costs assessor is to issue a certificate that sets out the determined costs.
(3) 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 against the party to the assessment by whom the costs are payable in favour of --
(a) a party to the assessment that has paid some or all of the amount to the Manager, Costs Assessment--for that amount, and
(b) the Manager, Costs Assessment--for any amount of unpaid money.
It is relevant that s.70 and s.71 of the LPULA Act apply not only to a cost assessor’s determination of “ordered costs”, but also to a cost assessor’s determination of “Uniform Law costs”. Section 63 defines that expression to mean, among other things, “legal costs referred to in Division 7 of Part 4.3 of the Legal Profession Uniform Law (NSW)”.[16] Section 196 of that Law provides that Division 7 of Part 4.3 applies to “legal costs payable on a solicitor-client basis”. That means that s.70 and s.71 of the LPULA Act must be read with reference to the class of costs determination a costs assessor has performed. Where, as is the case before me, the determination relates to “ordered costs”, s.70 and s.71 of the LPULA Act must be read with those provisions that relate to ordered costs. The principal provision is s.63, which defines “ordered costs” as “costs payable under an order or rule of a court or tribunal”. Thus, where a costs assessor has determined “ordered costs”, the determination he or she must set out in the certificate issued under s.70 and s.71 is the determination of the “costs payable under an order or rule of a court or tribunal”.
[16] Under s.4 of the LPULA Act, the expression “Legal Profession Uniform Law (NSW)” may be taken to refer to the Legal Profession Uniform Law set out in Schedule 1 to the Legal Profession Uniform Law Application Act 2014 (Vic) which, by s.4(1)(a) of the LPULA Act applies as a law of “this jurisdiction”, namely, New South Wales
If analysis were confined to the text of the provisions I have set out, there would be available a strong argument that by the issue of a certificate under s.70 and s.71 of the LPULA Act recording the determination of “ordered costs” – that is, the determination of the “costs payable under an order or rule of a court or tribunal” – an unliquidated obligation to pay such “ordered costs” would be discharged and replaced by a liquidated obligation to pay the determined “ordered costs” as recorded in the certificate; and, for that reason, the amount recorded in the certificate would be a “debt” to which s.44(1) of the Act, as I have construed it, applies. If this analysis is correct, the Relevant Costs Certificate, on its issue, would have recorded a debt of $175,236.45 that is a liquidated sum that was immediately payable by Ms Battaglia.
Parties’ submissions
As I have already noted, Ms Battaglia submits that the amount of $175,236.45 recorded in the Relevant Costs Certificate did not become a debt to which s.44(1) applied until 15 August 2019 when, as a consequence of its being registered with the District Court under s.71(3) of the LPULA Act, judgment was entered for this amount. Counsel for Ms Battaglia relies on the legal effect of the Relevant Costs Certificate, as counsel submits Beazley ACJ held in Wende v Horwath (No.2).[17] It will therefore be necessary to consider the relevant part of her Honour’s judgment in that case on which counsel for Ms Battaglia relies.
[17] Wende v Horwath (No.2) [2015] NSWCA 416
Wende concerned an application for judicial review of the exercise or purported exercise of the power conferred on the District Court by s.384 of the Legal Profession Act 2004 (NSW) (2004 LP Act). The District Court orders of which the applicant sought judicial review had been made on remittal after the Court of Appeal had previously set aside orders the District Court had made under s.384 of the 2004 LP Act. When setting aside the District Court’s earlier orders, the Court of Appeal had also set aside the costs certificates that had been issued by the review panel purportedly pursuant to s.378 of the 2004 LP Act, and by the costs assessor purportedly pursuant to s.368 of the 2004 LP Act.
The applicant in Wende relied on a number of contentions. One was that s.384 of the 2004 LP Act required an extant decision of a costs assessor but, because the Court of Appeal had previously set aside the costs certificates, there remained no such decision and, therefore, the District Court no longer had any power under s.384 in relation to the costs determinations other than to determine the question of costs of the appeal to the District Court, and to remit the matter to a costs assessor for redetermination. The basis of that contention was the submission that the costs determination made by the costs assessor, as varied by the review panel, had “merged in the certificate”. Beazley ACJ considered that these submissions raised as a question “the effect accorded by statue to the issue of a costs certificate”. Beazley ACJ said (emphasis added): [18]
[18] Wende v Horwath (No.2) [2015] NSWCA 416, at [37]
Pursuant to s 367 of the 2004 Act, a costs assessor was required to determine an application for costs assessment. Of its own, that determination created no enforceable right. Section 368 directed the costs assessor to issue a costs certificate. The certificate was a statement of the costs assessor’s determination, relevantly in this case, of the fair and reasonable amount of the party/party costs of the proceedings subject of the costs order. The issue of the certificate was thus a statutory act, which again, of itself is of no force and effect beyond being a statement of the determination.
Operative effect was given to the certificate, and thus to the underlying determination by s 368(5), which provided:
“368 Certificate as to determination
. . .
(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.”
After setting out a passage from the judgment of the Court of Appeal in Calandra v Murden,[19] Beazley ACJ continued:[20]
As is apparent from this passage, nothing ‘merged’ in the costs certificate. The certificate was a statement of the fair and reasonable costs ordered to be paid by one party to another. It did not, of itself, determine the amount that one party presently owed to another pursuant to a costs order. At the time of filing, the enforcing party was required, in accordance with District Court Form 45, to state any amounts paid or credits accrued in respect of such costs. Upon filing, there was a deemed judgment for the amount that was thereby due. That may or may not have been the amount of the determination specified in the costs certificate. It was only upon the entry of judgment, following the filing of the certificate and Form 45, that there could be said to be a merger of the amount of costs that was owing pursuant to this process in the deemed judgment of the court.
[19] Calandra v Murden [2015] NSWCA 231
[20] Wende v Horwath (No.2) [2015] NSWCA 416, at [40]
On the basis of these passages, counsel for Ms Battaglia submits that “it is only on the filing of the certificate in the registry of a court having jurisdiction that the certificate is taken to be a judgment: s.71(3) of the LPULA Act”; and that, until then, “the certificate creates no enforceable right and in particular, does not determine the amount owed pursuant to a costs order”.[21] Counsel submits that the judgments of Conti J in Australia & New Zealand Banking Group v Coutts,[22] and Sackville J in NSW Insurance Ministerial Corp v Abualfoul,[23] support Ms Battaglia’s contentions.[24] Counsel for the respondent also relies[25] on the following passage from the judgment of Lander J (with whom Siopis and Gilmour JJ agreed) in McCracken v Phoenix Constructions (Queensland) Pty Ltd:[26]
Because s 52(1) refers back to the debts in s 44, it follows that a sequestration order cannot be made against a debtor without there being owing a debt for a liquidated sum of more than $5,000 which existed at the time of the act of bankruptcy. Phoenix could not rely upon the Court of Appeal’s order in any event because it was not a debt for a liquidated sum. The debt could not become a debt for a liquidated sum until the procedures in the UCPR had been finalised and the Registrar had, pursuant to r 740 of the UCPR, made an order reflecting the assessor’s certificate.
[21] Respondent’s Outline Submissions in Opposition to the Interim Application, [27]
[22] Australia & New Zealand Banking Group v Coutts [2003] FCA 968
[23] NSW Insurance Ministerial Corp v Abualfoul [1999] FCA 433
[24] Respondent’s Outline Submissions in Opposition to the Interim Application, [32]-[33]
[25] Respondent’s Supplementary Outline Submissions in Opposition to the Interim Application, [13]
[26] McCracken v Phoenix Constructions (Queensland) Pty Ltd [2013] FCAFC 41, at [94]
Counsel for Mr Hillig, on the other hand, submits that all he needs to establish to be entitled to be substituted as the petitioning creditor is that he was a creditor, and he was a creditor when Ms Battaglia committed the Act of Bankruptcy. Counsel for Mr Hillig, however, has made no submission about whether the $175,236.45 recorded in the Relevant Costs Certificate constitutes a “debt” to which s.44(1) of the Act applied at the date of the Act of Bankruptcy. Nor has counsel for the respondent engaged with the submissions counsel for Ms Battaglia made, and in particular, counsel’s reliance on the judgment of Beazley ACJ in Wende.
The submissions counsel for Ms Battaglia has made give rise to two issues. Did Beazley ACJ in fact hold in Wende that a costs certificate issued under the 2004 LP Act had no legal effect until it was registered as a judgment? If so, should I follow her Honour’s holding?
Did Beazley ACJ hold that a costs certificate is of no effect until registered as a judgment?
To understand what Beazley ACJ held in Wende it is necessary to have in mind the question her Honour was addressing when her Honour made observations about the legal effect of a costs certificate issued under the 2004 LP Act. That question was whether, as the applicant in that case submitted, the costs determination made by the costs assessor, as varied by the review panel, had “merged in the certificate”. Her Honour answered that question by holding that a costs certificate did not bear the attributes of a judgment and, for that reason, costs determinations were incapable of merging in the costs certificates. They could only merge into the judgment that was entered when the certificate was registered with the court. Thus, when concluding that the issuing of a costs certificate had no legal effect, her Honour meant nothing more than that the issuing of a costs certificate under the 2004 LP Act did not have the force and effect of a judgment. That is particularly apparent from the last sentence of the passage I have set out in paragraph 26 of these reasons where her Honour said that it was “only upon the entry of judgment, following the filing of the certificate and Form 45, that there could be said to be a merger of the amount of costs that was owing pursuant to this process in the deemed judgment of the court”. In my opinion, therefore, Beazley ACJ did not hold that the issuing of a costs judgment had no legal effect until it was registered as a judgment.
That Beazley ACJ did not hold that the issuing of a costs judgment had no legal effect until it was registered as a judgment is supported by the existence of observations made by judges of the Court of Appeal in other cases that costs certificates did have legal effect, quite apart from the effect that is given to them when they are registered as judgments of a court; and that their legal effect is to be determined by the statutory provisions pursuant to which they have been issued. I referred to these observations in Obrart v Grego.[27] One set of observations is to be found in Frumar v The Owners of Strata Plan 36957.[28] Speaking of a certificate issued by a panel under s.208KF of the Legal Profession Act 1987 (Cth), Handley AJA said:[29]
Once entered the certificate may be enforced, but entry does not otherwise alter its legal effect and the section does not make it a judgment of the Court.
[27] Obrart v Grego [2017] FCCA 929, at [60]-[63]
[28] Frumar v The Owners of Strata Plan 36957 [2010] NSWCA 172
[29] Frumar v The Owners of Strata Plan 36957 [2010] NSWCA 172, at [40]
In the same case Giles JA said (emphasis added):[30]
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 s208KF(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.
[30] Frumar v The Owners of Strata Plan 36957 [2010] NSWCA 172, at [8]
Also relevant is Zepinic v Chateau Constructions (Australia) Ltd (No.2) where McColl JA said:[31]
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 . . .
[31] Zepinic v Chateau Constructions (Australia) Ltd (No.2) [2013] NSWCA 227 at [76]
It is not lightly to be inferred that Beazley ACJ was unaware of these observations; and I am not prepared to infer her Honour was so unaware. For that reason, it is unlikely that her Honour would have intended to make a holding inconsistent with these observations without addressing them.
During the hearing before me I referred counsel to my reasons for judgment in Obrart v Grego and, in particular, to that part of my reasons that set out the passages from the judgments of Handley AJA, and Giles JA in Frumar, and McColl JA in Zepinic. I granted the parties leave to file further submissions. In submissions filed after the hearing, counsel for Ms Battaglia submitted that the finding I made in Obrart that the judgment in that case reflected a debt was distinguishable from the facts of the case before me because in Obrart the judgment was entered before the act of bankruptcy. Counsel, however, did not address the observations Handley AJA and Giles JA made in Frumar, and McColl JA made in Zepinic that I set out in Obrart. In my opinion, those observations are inconsistent with what counsel for Ms Battaglia submitted Beazley ACJ held in Wende, namely, that the issuing of a costs certificate has no legal effect until it is registered as a judgment. The passages from the judgments Handley AJA and Giles JA in Frumar, and McColl JA in Zepinic, show that their Honours were of the view that the issuing of costs certificates do have legal effect, and their legal effect is to be ascertained from the statutory provisions pursuant to which costs certificates have been issued.
Thus, on the basis of the observations Handley AJA and Giles JA made in Frumar, and McColl JA made in Zepinic, the Relevant Costs Certificate did have legal effect even before it was registered as judgment with the District Court, and the legal effect it did have is to be determined by the relevant provisions of the LPULA Act I have already identified. As I concluded in Obrart, their Honours’ observations support the proposition that the issue of a costs certificate under the 2004 LP Act, assuming it has been issued lawfully, records a debt that has been created as a consequence of a determination a costs assessor had made in the exercise of a power conferred by the 2004 LP Act; and that the judgment that is entered on the basis of such costs certificates does not alter the character of that debt.[32]
Position if Beazley ACJ did hold that a costs certificate is of no effect until registered as a judgment
[32] Obrart v Grego [2017] FCCA 929, at [64]
If, contrary to what I have held, Beazley ACJ in Wende did hold that the issue of a costs certificate does not have any legal effect until it is registered as a judgment, I would respectfully decline to follow that holding. I have already found there are observations made by other judges of the Court of Appeal in other cases which are to the effect that costs certificates do have legal effect quite apart from the effect they have when they are registered as judgments, and that their legal effect is determined by the statutes pursuant to which they are issued.
Other authorities on which Ms Battaglia relies
The judgment of Conti J in Australia & New Zealand Banking Group v Coutts[33] does not assist Ms Battaglia. In that case Conti J refused the creditor leave to amend the creditor’s petition because the debt the creditor had sought to add to the petition had not crystallised or been quantified before the act of bankruptcy. In the case before me, however, both the Costs Order and the determination of those costs by the costs assessor were made before the Act of Bankruptcy. That is, Ms Battaglia’s unliquidated money obligation under the Costs Order to pay Mr Hillig’s costs, and the replacement of the unliquidated money obligation by the liquidated obligation to pay those costs as determined by the costs assessor and recorded in the Relevant Costs Certificate, accrued or occurred before the Act of Bankruptcy.
[33] Australia & New Zealand Banking Group v Coutts [2003] FCA 968
The judgment of Sackville J in NSW Insurance Ministerial Corp v Abualfoul[34] also does not assist Ms Battaglia. The question in that case was whether a person who had commenced proceedings as his son’s next friend and remained on the record as his son’s next friend after his son attained majority was liable to pay the costs ordered against the son. Sackville J held there was no evidence that the next friend actively participated in the proceedings after his son attained majority and that, in the absence of such evidence, the inescapable inference was that the son adopted the proceedings and the next of friend was not liable for the costs. Abualfoul appears to say little about the legal effect of a costs certificate issued under statutes such as the LPULA Act.
[34] NSW Insurance Ministerial Corp v Abualfoul [1999] FCA 433
Finally, there is the passage from the judgment of Lander J in McCracken v Phoenix Constructions (Queensland) Pty Ltd.[35] That, too, does not assist Ms Battaglia. The passage is directed to an order for costs that had not been assessed. As I have already noted, however, both the Costs Order and the determination of those costs by the costs assessor were made before the Act of Bankruptcy. The passage, however, is relevant to the extent it refers to r.740 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR). That is contained in Chapter 17A, Part 3 of the UCPR which deals with the assessment of costs other than under the Legal Profession Act 2007 (QLD). Under r.737(2) costs assessor must file the costs certificate with the court in question within fourteen days after the end of the assessment; and under r.740(1) of the UCPR the registrar of the court must make the appropriate order having regard to the certificate. Further, r.740(3) provides that such order is not enforceable until at least fourteen days after it is made. The scheme of the UCPR, unlike that provided under LPULA, requires the certificate to be filed; and, again unlike the LPULA Act, its legal effect depends on the registrar of the court making an order having regard to the certificate.
[35] McCracken v Phoenix Constructions (Queensland) Pty Ltd [2013] FCAFC 41, at [94]
Conclusion and disposition
By issuing the Relevant Costs Certificate, the costs assessor determined the amount of the costs payable under the Costs Order. The issue of the Relevant Costs Certificate operated to discharge the unliquidated obligation Ms Battaglia had to pay the Costs Order, and replaced that obligation with a liquidated obligation to pay the amount recorded in the Relevant Costs certificate, namely, $175,236.45. This occurred before the Act of Bankruptcy. Ms Battaglia’s liability to pay the $175,236.45 recorded in the Relevant Costs Certificate did not depend on either Mr Hillig or Ms Battaglia registering the certificate with a court and obtaining judgment for the amount recorded in it. It was open to Ms Battaglia to pay to Mr Hillig the amount of $175,236.45 without the Relevant Costs Certificate being registered as a judgment, and such payment by itself would have operated as a discharge of her obligation to pay the Costs Order as assessed in the amount of $175,236.45.
That the issue of the Relevant Costs Certificate gave rise to a liquidated obligation on the part of Ms Battaglia to pay Mr Hillig $175,236.45 can be illustrated this way. Assume that, on the issue of the Relevant Costs Certificate Ms Battaglia tendered to Mr Hillig payment of $175,236.45, but Mr Hillig refused the tender, and instead proceeded to register the certificate and obtain judgment. By analogy with the defence of tender, Ms Battaglia, on paying the $175,236.45 into court, would have been entitled to an order setting aside the judgment and any costs order associated with the registration of the judgment, and would herself have been entitled to her costs of applying to set aside the judgment.
I propose, therefore, to grant to Mr Hillig relief substantially in the terms he seeks in the interlocutory application he filed on 4 October 2019. I will reserve the question of costs.
I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Associate:
Date: 4 February 2020
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