Grass v Bradley Allen Love Lawyers

This matter concerned an application by Mr Grass to set aside a bankruptcy notice issued by Williams Love & Nicol Lawyers Pty Limited (WLN). The bankruptcy notice was based on a default judgment WLN had obtained against Mr Grass in the Magistrates Court of the Australian Capital Territory for legal fees. Mr Grass contended that the judgment was a nullity and did not represent a genuine debt because WLN had failed to comply with section 269 of the *Legal Profession Act 2006* (ACT) by not disclosing certain matters regarding the legal costs, which consequently prohibited WLN from commencing the recovery proceedings under section 277(2) of the same Act.

The court was required to determine two principal issues. Firstly, whether Mr Grass had provided substantial reasons to question whether the judgment debt was, in truth and reality, a debt due to WLN, given his arguments regarding the alleged non-compliance with disclosure requirements under the *Legal Profession Act 2006* (ACT). Secondly, if substantial reasons were found, whether the bankruptcy notice should be set aside. The court acknowledged its power to "go behind" a judgment debt in bankruptcy proceedings to ascertain if it represents a true debt, a power not exercised as a matter of course but only when substantial grounds for doubt are presented.

The court noted that a bankruptcy court has the jurisdiction to inquire into the validity of a debt underlying a judgment, even though the debt may have merged with the judgment at general law. This power is exercised to ensure that the bankruptcy notice is based on a genuine debt. Mr Grass’s argument hinged on WLN’s alleged failure to provide the disclosures mandated by section 269 of the *Legal Profession Act 2006* (ACT) in relation to the legal costs for which judgment was obtained. He asserted that this failure rendered the judgment void and thus the debt unenforceable for the purpose of bankruptcy proceedings. The court indicated it would first consider the construction and scope of the relevant provisions of the *Legal Profession Act 2006* (ACT) before addressing the substantive issues raised by Mr Grass.