Kessly v Benjamin &Khoury Pty Ltd
[2018] FCCA 2918
•16 October 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| KESSLY v BENJAMIN &KHOURY PTY LTD | [2018] FCCA 2918 |
| Catchwords: BANKRUPTCY – Application to set aside Bankruptcy Notice – whether the Bankruptcy Notice met the requirements under the Bankruptcy Act 1966 (Cth) – whether judgment entered irregularly on the basis that money payable under certificate issued pursuant to s.379 of the Legal Profession Act 2004 (NSW) not a debt payable to creditor – whether bankruptcy notice is founded on an irregular judgment – whether bankruptcy notice issued electronically attaches judgment – whether Chorley Exception applies. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.41, 306, Bankruptcy Regulations 1996 (Cth), reg.4.01 |
| Cases cited: Bezina v Stojic [2018] FCCA 1310 |
| Applicant: | EVANGELINA FRANCISCA KESSLY |
| Respondent: | BENJAMIN & KHOURY PTY LTD |
| File Number: | SYG 642 of 2018 |
| Judgment of: | Judge Baird |
| Hearing date: | 29 June 2018 |
| Date of Last Submission: | 29 June 2018 |
| Delivered at: | Sydney |
| Delivered on: | 16 October 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr J Johnson |
| Solicitors for the Applicant: | Teneo Legal |
| Counsel for the Respondent: | Mr M Rollinson |
| Solicitors for the Respondent: | Benjamin & Khoury Solicitors |
ORDERS
The further amended application be dismissed.
By 5pm on 25 October 2018, the parties file any submission on costs, limited to 3 pages.
The time within which the Applicant is required to comply with Bankruptcy Notice 221948 issued on 19 February 2018, be extended up to, and including the expiration of 3 days from the day on which judgment on costs is delivered in this proceeding.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 642 of 2018
| EVANGELINA FRANCISCA KESSLY |
Applicant
And
| BENJAMIN & KHOURY PTY LTD |
Respondent
REASONS FOR JUDGMENT
Applicant’s claim
The Applicant, Ms Evangelina Francisca Kessly, seeks to set aside Bankruptcy Notice number BN221948, issued 19 February 2018 on two alternate grounds:
(a)first, on the ground that the amount described as owing in the Bankruptcy Notice ($84,870.22, excluding interest and costs) is an overstatement because, she submits, one of the two judgments comprising the claimed amount owing (judgment in the sum of $3,669.05 (CA Order)), is a judgment or order that arises by operation of s.369 (sic) of the Legal Profession Act 2004 (NSW) (repealed) (LP Act) in favour of the Manager, Costs Assessment, not a final judgment or order in favour of the Respondent, Benjamin & Khoury Pty Ltd, and the Bankruptcy Notice is, accordingly, a nullity;
(b)secondly, on the ground that the two judgments founding the amount described as owing in the Bankruptcy Notice were not relevantly “attached” for the purposes of compliance with s.41 of the Bankruptcy Act 1966 (Cth), Regulation 4.02 of the Bankruptcy Regulations 1996 (Cth) and the prescribed Form 1, which attachment is necessary for the Bankruptcy Notice to be a bankruptcy notice as contemplated by the legislation, and which non‑attachment is not a matter capable of being cured by the operation of s.306 of the Act, and the Bankruptcy Notice is therefore a nullity or void and of no force or effect, notwithstanding the judgment of the Full Court of the Federal Court of Australia in Curtis v Singtel Optus Pty Ltd [2014] FCAFC 144; (2014) 225 FCR 458.
Additionally, Ms Kessly says that the claim by Benjamin & Khoury for costs for the period 12 March 2018 – 18 May 2018 (excluding 7 and 8 May 2018) is not recoverable because Benjamin & Khoury is an incorporated legal practice, and relevantly, not a “solicitor”, and the “Chorley Exception” does not apply.
Whilst Benjamin & Khoury takes issue with each of the above grounds, Mr Rollinson, who appears for Benjamin & Khoury, accepts that, should I find that the CA Order is so irregular as to be invalid, then the issue of the Bankruptcy Notice relying upon it is, to that extent, more than a formal defect or irregularity. Mr Rollinson accepts that in that event Ms Kessly has given the required notice pursuant to s.41(5) of the Act, and that the result is that the Bankruptcy Notice is invalidated.
Background
Benjamin & Khoury is an incorporated legal practice operating in terms of the Legal Profession Uniform Law 2014 (NSW).
Ms Kessly retained Benjamin & Khoury to act for her in relation to an appeal to the Supreme Court of New South Wales Court of Appeal, stemming from a finding in the Land & Environment Court that Ms Kessly was in contempt in relation to orders that Court had made. Whilst the Court of Appeal upheld Ms Kessly’s appeal (judgment was handed down on 9 October 2015), it declined to make a costs order in relation to the appeal or certain earlier proceedings.
Subsequently, Benjamin & Khoury applied for and obtained an assessment of their costs payable by Ms Kessly. After various disputes between the parties, further to application by Benjamin & Khoury on 19 February 2018 the Official Receiver issued the Bankruptcy Notice. That day the Australian Financial Security Authority (AFSA) emailed Benjamin & Khoury under the subject line “Bankruptcy Notice Accepted for Evangelina KESSLY Bankruptcy Notice Number: 221948, Issued on 19-Feb-2018” attaching 4 documents listed as:
Attachments: C221948_CORR-BN001R-01_6_1.pdf; BankruptcyNotice.pdf; 2018 02 14 Judgment Order – 001.pdf; 2018 02 15 Judgment Order – 002.pdf
The first document attached to the email, a letter from AFSA dated 19 February 2018, stated:
ISSUE OF A BANKRUPTCY NOTICE
Bankruptcy Notice number: 221948
Debtor/s: Evangelina KESSLY
Your application for the issue of a bankruptcy notice in respect of the debtor/s specified above has been accepted.
The bankruptcy notice 221948 was issued on 19 February 2018.
Please find enclosed the bankruptcy notice that you need to serve on the debtor/s, in addition to any judgments, orders and other documents supporting its issue.
Please contact our National Service Centre on the number below if you have any enquiries or require further information. Please make note of your reference number and ensure you quote it when contacting us.
The other 3 documents attached to the email comprised the Bankruptcy Notice and the 2 “judgments/orders” (as they are each described on their face).
The judgments relied upon for the purpose of founding the Bankruptcy Notice were:
(1)a judgment/order entered 14 February 2018 in the claim amount of $81,201.17, further to the filing in the Supreme Court of a Certificate of Determination of Costs by Costs Review Panel issued by the Costs Review Panel pursuant to ss.375, 377 and 378 of the LP Act; and
(2)the CA Order, being a judgment/order entered 15 February 2018 in the sum of $3,669.05, further to the filing by Benjamin & Khoury in the Supreme Court of a Certificate of Determination of Costs of Review issued by the Panel pursuant to s.379 of the LP Act.
There is no issue raised in connection with the judgment in the amount of $81,201.17.
As to the Certificate of Determination of Costs of Review (the filing of which resulted in the CA Order), in accordance with s.379 of the LP Act, the Panel determined the amount of the costs of the review, and that the review applicant, Ms Kessly, was required to pay the costs. The certificate states it is issued on 22 November 2016 and sent on 19 December 2016 and is stamped with the stamp of the “Manager Costs Assessment”. At paragraph 3 it states that “The costs are to be paid by the review applicant to the manager costs assessment”. The certificate bears a handwritten notation “Note 2: the amount of $3,669.05 was paid by the Respondent [Benjamin & Khoury] to release the Costs Certificates (includes Assessor costs)”. Payment was required in order for the certificate and the certificate under s.369 of the LP Act (see above at [9(1)]) to issue.
First ground: that the CA Order is a nullity
It is appropriate first to clarify the provisions applicable to the first ground on which Ms Kessly seeks to set aside the Bankruptcy Notice.
Whilst in paragraph 1 of the Further Amended Application Ms Kessly seeks a declaration that the CA Order is a nullity “in that any judgment arising by virtue of the filing of a certificate under s.369 of the [LP Act] is a final judgment or order in favour of the [Manager], in terms of that section, and not [Benjamin & Khoury]” (my emphasis), and the written submissions of Mr Johnson, who appears for Ms Kessly, were also directed to s.369 of the LP Act, it is apparent that Ms Kessly (and Mr Johnson) intended to refer to s.379 of the LP Act, as the relevant certificate upon which the CA Order issued was issued further to the Panel’s review pursuant to s.379 of a costs assessor’s assessment under s.369 of the LP Act, which review had been initiated by Ms Kessly.
In relevant respects the provisions of s.369 and s.379 of the LP Act are in substantially similar terms. Accordingly, and given that the CA Order arises from Benjamin & Khoury’s filing of the s.379 certificate, I have read and understood paragraph 1 of the Further Amended Application and Mr Johnson’s submissions to apply to and be made in respect of s.379 of the LP Act.
Section 379 applies where a panel conducts a review of a costs assessor’s determination. It provides, relevantly:
(1) A panel that conducts a review of a costs assessor’s determination under this Subdivision is to determine the costs of the review and may, subject to this section, determine by whom and to what extent those costs are to be paid.
(2) If the panel affirms the determination of the costs assessor, the panel is to require the party who applied for the review to pay the costs of the review.
(3) If the panel sets aside the determination of the costs assessor, and makes a determination in favour of the party who applied for review, the panel is to require the party who applied for the review to pay the costs of the review if the determination of the panel increases or decreases the total costs payable (as assessed by the costs assessor) by an amount that is less than 15 per cent (or such other percentage as may be prescribed by the regulations) of the total costs payable as assessed by the costs assessor.
(4) Subject to subsections (2) and (3), the panel may require any party to the assessment that is reviewed to pay the costs of the review or may determine that the costs of the review are to be shared between the parties in any manner that the panel considers appropriate.
(5) The panel is to issue to each party and the Manager, Costs Assessment, a certificate that sets out the panel’s determination under this section.
(6) The certificate is, on 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 of the review.
(7) The costs of the review are to be paid to the Manager, Costs Assessment.
(8) The Manager, Costs Assessment may take action to recover the costs of a review.
Mr Johnson submits that a fair reading of the regime provided by s.369 (and thus also s.379) of the LP Act reveals that the CA Order is not to be made in favour of Benjamin & Khoury, rather it is to be made in favour of the Manager: see ss.369(8) and 379(7) of the LP Act.
He submits that what has occurred in the present circumstances is the filing of the s.379 certificate payable and recoverable to the Manager, in terms of s.133(2)(b) of the Civil Procedure Act 2005 (NSW), and Part 36, r.36.11 of the Uniform Civil Procedure Rules 2005 (NSW). I note that those provisions together have the effect, relevantly, that a judgment (which by s.133(2)(b) extends to an award or adjudication made by a person having authority to do so) may be enforced when it is taken to have been entered by recording in the computerised record system of the court.
As a consequence, Mr Johnson submits, the judgment for the amount of the costs of the costs assessment (and under s.379, the costs of the review) by statute is a judgment in favour of the Manager, and not Benjamin & Khoury, and to the extent that the CA Order is recorded as being a judgment in favour of Benjamin & Khoury (as it states on its face), it is an irregularity. He submits that the recording does not involve any justiciable act of the Supreme Court, and therefore it can achieve no higher level than as provided for under ss.369 or 379 of the LP Act: c.f. Opie v Opie [1951] HCA 47; (1951) 84 CLR 362. I note that in that case the judgment entered was found to be a final judgment.
Mr Johnson submits that the CA Order relied upon, not being an order pronounced or a judgment given by a superior court of record, is invalid and of no effect, and that the registration is a nullity: relying on Croker v Commissioner of Taxation [2003] FCAFC 23; (2003) 52 ATR 226, [10], applied by Hely J in Croker v Commissioner of Taxation [2005] FCA 127; (2005) 145 FCR 150, [13]. He submits that any entitlement for recovery of the amount of the costs said to be capable of recovery by Benjamin & Khoury constitute a right of restitution only, and are not able to be the subject of a judgment arising from the filing of the relevant certificate of determination in the Supreme Court.
Mr Rollinson, appearing for Benjamin & Khoury, submits that the CA Order is an authorised and valid judgment. He submits that Benjamin & Khoury, the creditor, has issued the Bankruptcy Notice in substantial conformity with the judgment that has been recorded, the notice therefore complies with s.41(5) of the Act, and unless the Court’s discretion is enlivened to go behind the CA Order and hold that, notwithstanding the amount, in fact, due is not the amount stated to be due in the judgment, s.41(5) is not triggered. He contends that Ms Kessly’s case is an application to the Court to go behind the judgment, and find that the amount in fact due is not the amount claimed from the judgment, and in order to do so, Ms Kessly has to satisfy the requirements of the Act and law in going behind a judgment, which she has not done.
Mr Rollinson further submits, in any event, that s.379(7) provides that the certificate may be filed in the Supreme Court and on filing is taken to be a judgment for the amount certified. The section does not provide for the party in whose favour the judgment is to be given. The identity of that person will depend on who has in the first instance borne the costs incurred by the costs assessor (relevantly, the Panel). The Manager is not given the right to record judgment in their favour, but merely power “to take action to recover the costs of review”: s.379(8), LP Act.
In the present case, Benjamin & Khoury bore the costs by paying the amount certified to the Manager in order to obtain the release of the certificate. The certificate was endorsed to that effect (see above at [11]), and judgment given by the Supreme Court in Benjamin & Khoury’s favour for the certified costs amount.
Consideration
The 2 decisions of the Federal Court of Australia in Croker sought to be relied on by Mr Johnson (see above at [19]) are distinguishable. They are each concerned with judgments of the Local Court, not the Supreme Court, under different legislation than the LP Act; in the case of the decision of the Full Court, a judgment issued by a registrar of the Local Court upon a registration of a certificate of taxation issued by the High Court of Australia, and in the case of the subsequent decision of Hely J, a judgment issued by the Local Court upon a certificate of a costs assessor under the Legal Profession Act 1987 (NSW). Unlike the present case, in each case the judgments included an amount for registering the respective certificate in the Local Court, and thus did not reflect the underlying amount certified.
The Full Court in Croker held that the lodging in the Local Court of the certificate of taxation of the High Court was not authorised by s.105 of the Service and Execution of Process Act 1992 (Cth), as the High Court was not a court of rendition for the purposes of that legislation, and the purported registration of such a certificate as a judgment by the registrar of the Local Court was a “mere clerical entry in the records of that court. It is not an order pronounced or a judgment given by a superior court of record”. Whilst Hely J cited with approval this passage from the Full Court decision, the issue before him was whether or not the records of the Local Court correctly reflected the operation of the relevant provision of the Legal Profession Act1987 (NSW), or not, in the circumstances of the case (see at [14]). The amount of the judgment being a different amount than the certificate, the issue of the “certificate of judgment” was devoid of any legal effect. In the present case, the amount of the certificate is the amount of the CA Order.
The operation of both sub-ss.369(7) and 379(6) of the LP Act is that, on filing of a costs certificate in the office or registry of a court with jurisdiction to order payment of the amount of money the subject of that costs assessment, that certificate is taken to be a judgment of the court with no further action. As Ward J observed in Kassem & Secatore v Koutavas [2012] NSWSC 236 at [21] such a judgment is recognised as taking its force from the statute; it is not a judgment of the Court in the sense that there has been an adjudication of the claim:. Whilst taken on filing to be a judgment of the court, under the Civil Procedure Act the judgment is not enforceable until the judgment or order has formally been entered in accordance with the Uniform Civil Procedure Rules. The formal order having been taken out, it is enforceable.
The CA Order thus records the judgment constituted by the filing of the s.379 certificate, which certificate recorded, on its face, that Benjamin & Khoury had paid the costs assessed payable by Ms Kessly. The costs assessed payable by Ms Kessly, having being paid by Benjamin & Kessly, is a sum now owed to Benjamin & Kessly by Ms Kessly. The CA Order accords with this circumstance.
Unlike the present case, the judgment sought to be set aside in Kassem was a single judgment issued for the composite sum of two certificates – one issued under s.368 of the LP Act, the second under s.369 of the LP Act. The costs of the costs assessor (the s.369 costs) had been paid by the plaintiffs in order for the certificates to be formally issued. At [41] Ward J expressed difficulty with the proposition that the costs judgment arising automatically from the filing of a s.369 certificate “of itself imposes an obligation on the party against whom the assessment is made to pay those costs to the party in whose favour the assessment is made (as opposed to being liable to pay those costs to the Manager), where that seems to be contradicted by the express provision that the costs of the costs assessment are to be paid to the Manager …”.
Her Honour was of the view that the real issue before her was the manner in which the judgment was to be enforced, which question turned on what in essence is the judgment that arises on filing of the s.369 certificate. The s.369 certificate before her Honour stated that the costs were to be paid by the costs respondent. At [45] her Honour accepted that the judgment arising on filing of the certificate “is not in itself a judgment for the payment of the costs assessed to the plaintiffs [the liquidators]” (her Honour’s emphasis). She continued, “However, I do not accept that this necessarily means that the judgment that has been entered in favour of the plaintiffs in this case should be set aside as an irregularity. The purpose of the entry of the judgment in the Court’s records as a judgment of the court (as opposite to a judgment arising by operation of the relevant statutory provision) is to give effect to and record the judgment arising by operation of the statute (and to permit its enforcement).”
Observing that the power to set aside judgments entered irregularly is discretionary, and one that must be exercised having regard to all the circumstances of the case, her Honour set aside the judgment entered, and in its place, ordered that judgment be entered in favour of the plaintiffs (the liquidators) by making 2 orders (totalling the same amount as the order set aside), relevantly in respect of the s.369 certificate, by way of reimbursement of the costs of the costs assessor for the same amount (at [63]).
The same issue arose before Garling J in Weber v Aquaqueen International Pty Ltd [2013] NSWSC 1181. His Honour expressly disagreed with Ward J in Kassem and held that the judgment sought to be impugned before him had not been entered irregularly, From [105] through to [114], his Honour explains why, construing the relevant provisions of the LP Act, and concluding that Kassem was incorrect to the extent that the filing of a certificate issued under s.369 of the LP Act (and it follows s.379) took effect in favour of a person, namely, the Manager, who was not a party to the proceeding in which the order for costs was made (at [114]).
His Honour reasoned, inter alia, that (a) the Manager does not have any right to participate in the costs assessment process, and no obligation is created in favour of, or against, the Manager by the issue of a determination and then a certificate under the LP Act, (b) it is clear that the judgment once entered is then enforceable as a judgment of the court in the terms it is entered, (c) there is no requirement under the uniform rules for the Manager to be joined as a party when the certificate is registered, nor would the Manager be a necessary party to the proceedings, and (d) it remains open where the costs of the costs assessment have not been paid, for the Manager to take action to recover those costs, in which case the Manager would be the plaintiff in the recovery action, and if successful would then obtain judgment which could be enforced in the same way as any other debt.
Two judges of this Court have recently considered Kassem and Weber in the context of applications to set aside bankruptcy notices as invalid for substantially the same reasons as argued before me, expressly adopting the reasoning of Garling J in Weber: the judgment of Judge Smith in Ritson v Commissioner of Police, New South Wales Police Force [2018] FCCA 916 (see at [55]-[61]), and the judgment of Judge Manousaridis in Bezina v Stojic [2018] FCCA 1310 (see at [21]-[28]).
In Bezina Judge Manousaridis also referred to Ward J’s consideration in Kassem at [41] and [45]. His Honour considered that Ward J had held that in the circumstances of the case before her the entry of the judgment was not a nullity; he observed that her Honour had set aside the judgment because she was of the view that the judgment did not appropriately recognise and give effect to the costs determinations that had been made: the judgment ordered payment of the sum of the amounts stated in two certificates. As Judge Manousaridis explained at [27] (as I have summarised above at [29]), Ward J’s orders made in lieu were to the same effect as the judgment set aside, ordering that the costs debtor pay two amounts to the plaintiffs, one on account of each certificate.
I respectfully adopt the reasoning of Judge Smith in Ritson and Judge Manousaridis in Bezina. For the reasons explained by Garling J concerning the provisions of s.369 of the LP Act, which I consider apply equally to s.379, I conclude that the CA Order is not invalid, and the Bankruptcy Notice does not overstate the amount due to the creditor, Benjamin & Khoury.
Thus, I do not accept Mr Johnson’s submission that the provisions of s.369 of the LP Act (and, it follows, s.379) provides that the judgment or order must necessarily be in favour of the Manager. I do not read s.379(7) as so requiring. I accept Mr Rollinson’s submission that s.379 is silent on the question of in whose favour the judgment arising under s.379(6) is to be. That will depend on the circumstances of the case.
The intention of s.379 as revealed by its structure also suggests to the contrary. Subsections 379(1)-(5) provide a regime pursuant to which the review panel is to determine who is liable to pay the costs of the review, and that determination is required to be communicated (at least) by the issuance of the certificate under s.379(5). Independently of the determination of who is liable to pay the costs of the review, and independently of the statutory deeming of judgment pursuant to s.379(6) upon the filing of the issued certificate in the office or registry of a relevant court, s.379(7) provides that the costs of the review are to be paid to the Manager. Thus, independently of judgment arising pursuant to s.379(6) upon filing of the certificate, ss.379(8) and (9) provide for a right of the Manager, although not a party to the costs assessment/ review process, to take recovery action where there is non‑payment of the amount payable to the Manager under s.379(7). It does not follow that the judgment arising under s.379(6) is required to be issued in favour of the Manager, nor that the statute requires judgment be issued in favour of the Manager where the Manager’s costs have been paid.
In the present case, the Manager has been paid by the respondent, Benjamin & Khoury, and the CA Order arose on filing of a certificate that on its face recorded that payment (see above at [11]). It has not been suggested that Ms Kessly is not the party whom the costs assessor, and on review, the Panel, found liable for payment of the costs of assessment and review. Ms Kessly has shown no substantial reason (indeed, no reason) for questioning whether behind the judgment of $3,669.05, there is in truth and reality a debt due to Benjamin & Khoury in that amount. Having regard to these circumstances, should I have concluded that the CA Order was entered irregularly (and I have not), in the exercise of my discretion I would have declined to set aside the judgment.
Ground 2: whether the Bankruptcy Notice attaches the judgments
Compliance with s.41 of the Act, Regulation 4.02 of the Regulations and the prescribed Form 1, requires that the judgment or final order be attached to the Bankruptcy Notice. Form 1 expressly uses the wording to identify the claim of debt owed “amount as per the attached final judgment/s or final order/s (note A)”, whilst note A again refers to an “attached final judgment or order”.
Mr Johnson submits that the requirement that the judgments be attached is a matter made essential by the Act, non-compliance with which matter results in the Bankruptcy Notice being a nullity, and not in a form capable of being cured by the operation of s.306 of the Act.
He submits that the judgments were not attached to the Bankruptcy Notice as required, rather each of the AFSA letter, Bankruptcy Notice, and each judgment was separately attached to the cover email sent by AFSA on 19 February 2018. He relies on the paragraph in AFSA’s letter (see above at [7]) stating “Please find enclosed the bankruptcy notice that you need to serve on the debtor/s, in addition to any judgments, orders and other documents supporting its issue”.
Mr Johnson submits that the above express statement by AFSA reflects its acknowledgment that it is necessary to serve the final judgment(s) or order(s) with the Bankruptcy Notice, and gives rise to the clear inference that the AFSA (and thus the Official Receiver) was aware that the judgments/orders were not relevantly “attached”. It follows that there was non‑compliance with a matter made essential by the Act and Regulations.
Mr Johnson accepts that, apart from this sentence in the AFSA cover letter, the present facts are relevantly the same as those before the Full Court of the Federal Court in Curtis v Singtel. He says the above sentence enables this Court to distinguish that judgment.
Consideration
I do not accept that the additional paragraph of the AFSA’s letter suffices to distinguish Curtis v Singtel. In context, the paragraph does no more than act as a reminder that all of the named documents need to be served. It does not change the fact of the one electronic communication (email and attachments) being sent, nor the character of the documents, the manner and circumstances of issue, or make not-attached what the Full Court held was attached for the purposes of reg.4.02 and Form 1: see the Full Court’s discussion of the meaning of “attached” at [50].
The documents and circumstances of issue with which the Full Court was concerned in Curtis v Singtel are the same as the documents and circumstances of issue before me: a cover email from AFSA with portable document files accompanying the email and identified as attachments - comprising a cover letter from AFSA, the form of bankruptcy notice, and copy order(s) of the Supreme Court (see Curtis v Singtel at [17], and above at [6]). The cover emails are in the same terms.
The Full Court held that the act of issue of the bankruptcy notice was the sending of the email by AFSA with the attachments. The email and portable document files were delivered as the one transmission. At [51]‑[52] the Full Court stated that at the time of electronic issue the bankruptcy notice and copy of judgment were together and not separated, they were electronically “glued” together, they were electronically “fastened” together, short of being in one pdf, they were as close electronically as they could be, noting that if they had been constituted in the one pdf the argument may have been put that they were one and the same document. At [53], the Full Court held that at the time of issue the copy judgment was attached to bankruptcy notice. This satisfied the legislation (at [43]‑[53]), alternatively, strict compliance was not required, there was substantial compliance, and that was all that was required (at [54]-[56]).
Curtis v Singtel was concerned with almost precisely similar facts. I consider that it is indistinguishable, and I am not convinced or persuaded that it is wrong. It follows that this Court is bound by it, and that Ms Kessly’s ground 2 fails.
As I have concluded that each of ground 1 and ground 2 fails, it follows that the further amended application will be dismissed.
Costs and the Chorley exception
I do not take there to be any dispute that had Benjamin & Khoury been represented by a third party legal practitioner, as the successful party it would be entitled to its costs of the proceeding. As the successful respondent, Benjamin & Khoury seeks to recover its costs under the Chorley exception to the general rule that a successful litigant in person is entitled to recover disbursements but is not entitled to claim costs for time spent in the conduct of litigation.
The Corley exception (from London Scottish Benefit Society v Chorley, Crawford and Chester (1884) 13 QBD 872) is that where a solicitor who is in their personal capacity a litigant, and who acts for themselves without the benefit of another solicitor in the litigation, gets the benefit of a costs order, they are entitled to recover costs on the basis that they may have their costs according to what they may charge for their professional time – i.e., what they may charge for their legal services - as well as the reimbursement of out-of-pocket expenses, subject to the restriction that no costs which are really unnecessary can be recovered.
The authorities have been usefully gathered and considered by President Beazley (McColl & Gleeson JA agreeing) in Wilkie v Brown [2016] NSWCA 128. The Court of Appeal in Wilkie held that where a statute provides a general power to award costs, and that power as framed does not limit or define it in any relevant way, there is binding High Court authority that costs may be awarded to solicitors appearing for themselves. The position of an incorporated legal practice was not before the Court of appeal in Wilkie.
Benjamin & Khoury claims costs in respect of the period 12 March 2018 to 18 May 2018 (excluding 7 and 8 May 2018, for which a costs order in its favour was made by District Registrar Wall on 18 May 2018). It seeks it costs on an indemnity basis. Although the evidence before me goes only to those costs, I do not understand Benjamin & Khoury to waive its claim to costs for the period after 18 May 2018.
Mr Johnson submits that as an incorporated legal practice incorporated under the Corporations Act 2001 (Cth), and operating under the Legal Profession Uniform Law 2014 (NSW) applicable in New South Wales under the Legal Profession Uniform Application Act 2014 (NSW), Benjamin & Khoury is not an Australian legal practitioner – relevantly, a solicitor, and so is not able to rely on the Chorley exception. Rather, he submits, Benjamin & Khoury is a litigant in person subject to the general rule, and so is not entitled to recover amounts for time spent in the course of conduct of the proceeding. There is a clear distinction between independent representation on behalf of a party to a proceeding, and that party representing itself, which exists in the present case.
Mr Rollinson submits that whether the Chorley exception applies is to be considered as a matter of substance. Legal practitioners, under the umbrella of the incorporated legal practice that is Benjamin & Khoury, are conducting the litigation on behalf of the company which is, itself, the creditor.
Although the issue of the recoverability of costs by an incorporated legal practice was briefly adverted to in oral argument before the High Court of Australia in Coshott v Spencer [2018] HCATrans 81 (10 May 2018), special leave was revoked at the conclusion of the hearing, and the observations of counsel and the High Court during argument do not constitute any authority on the point. Neither counsel was able to point to any direct authority.
Consideration and conclusion
Part 13, rule 13.01(1) of the Federal Circuit Court (Bankruptcy) Rules 2016 (Cth) provides that “Subject to Division 13.2, a person who is entitled to costs in a proceeding to which the Bankruptcy Act applies is entitled to costs in accordance with Part 40 of the Federal Court Rules 2011 unless the Court otherwise orders.” The Dictionary in Schedule 1 of the Federal Court Rules 2011 (Cth) defines “costs” as “unless the context otherwise provides, means costs as between party and party” which in turn is defined as “means only the costs that have been fairly and reasonably incurred by the party in the conduct of the litigation.”
I have concluded that Benjamin & Khoury are entitled to their costs. I am not persuaded that the Chorley exception is not applicable to an incorporated legal practice which acts on their own behalf, at least in the circumstances of the present proceeding. The position of an incorporated legal practice utilising the legal services of its employee solicitors or director legal practitioners in substance seems to me to be analogous to that of a legal practice constituted as a partnership of individual legal practitioners using the legal services of the firm’s employed solicitors or legal practitioner partners. In that latter case, the legal practice is entitled to rely on the Chorley exception, notwithstanding that the partner or partners in whose name the costs claim may be raised may not be the individual legal practitioners who undertook or supervised the provision of legal services for which costs are claimed.
In each case the legal practice, whatever the form of its legal structure, uses the legal services provided by its legal practitioners (whether they be employees, partners, or members) for the conduct of litigation in which the practice entity is a party. In each case, legal practitioners who could otherwise have been gainfully employed in providing legal services on behalf of the legal practice entity to third party clients for reward are employed by the practice for the conduct of its own litigation, be the practice and the litigation that conducted by an individual legal practitioner (as in Wilkie), a partnership of legal practitioners, or an incorporated legal practice.
The Chorley exception recognises the practical import of the use of legal practitioners’ legal services in conducting litigation on their own account. Whether or not that is good reason for the Chorley exception, I am not persuaded it is appropriate to distinguish the applicability of the Chorley exception on the grounds of the incorporation, or non-incorporation, of the legal practitioner litigant. That the Legal Profession Uniform Law draws a distinction between individual legal practitioners – who hold practising certificates as solicitors or barristers – and legal practice entities, one example of which is an incorporated legal practice, does not provide a basis to do so either.
Whilst a “Summary of Memorandum of Costs from 12 March 2018 – 18 May 2018 excluding 7 and 8 May” under the letterhead of Benjamin & Khoury is in evidence, I propose to give the parties a short time to make limited submissions on costs for that period, and on the application (including the further amended application) as a whole.
I have concluded that the further amended application is dismissed, and that the respondent, Benjamin & Khoury, is entitled to the Chorley exception. I will allow the parties until 5pm on 25 October 2018 to file any written submissions on costs, limited to 3 pages.
I certify that the preceding sixty (60) paragraphs are a true copy of the reasons for judgment of Judge Baird
Date: 16 October 2018
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