Catchwords: BANKRUPTCY – Creditor’s petition based on judgments (Judgment) entered on the basis of two costs certificates issued purportedly under the Legal Profession Act 2004 (NSW) (LP Act) – going behind judgment – whether it is open to a bankruptcy court to go behind a judgment that has been entered on the basis of a costs certificate issued under the LP Act on the ground there are serious reasons for questioning whether the costs certificate was issued on the basis of a determination of costs affected by jurisdictional error – whether in the circumstances of this case there are substantial reasons for questioning whether the costs certificates were issued on the basis of costs determinations that are affected by jurisdictional error – having determined there are such substantial reasons, whether the creditor has discharged the burden of proving that the costs determinations are not affected by jurisdictional error and that, therefore, there is a true debt behind the Judgment – onus not discharged – finding that costs determinations were made as a result of jurisdictional error – creditor’s petition dismissed.
COURTS AND JUDICIAL SYSTEM – Collateral attack – whether in an application for a sequestration order pursuant to the Bankruptcy Act 1966 (Cth) based on a debt recorded in a costs certificate purportedly issued under the Legal Profession Act 2004 (NSW) it is open to the respondent to challenge the validity of the costs certificate on the ground that it was issued on the basis of a determination of an assessment of costs that was affected by jurisdictional error – whether discretionary considerations that may be available if the certificate of costs was challenged by judicial review are available to prevent bankruptcy court from permitting a collateral challenge – whether such discretionary considerations should prevent collateral attack in the circumstances of this case – collateral challenge available.
JUDICIAL REVIEW – Collateral attack – determination of application for assessment of legal costs by costs assessor purportedly pursuant to Legal Profession Act 2004 (NSW) – whether determination affected by fraud – whether determination made on the basis of a void costs agreement – whether a void costs agreement nevertheless permitted costs assessor to assess costs because the costs assessor was not under a duty to initiate inquiry into validity of costs agreement which costs respondents did not raise as an issue – whether the costs assessor considered the matters he was required to consider when determining the assessment of legal costs.
COSTS – Assessment of costs – nature of duty of costs assessor to consider whether or not it was reasonable to carry out the work to which the legal costs relate – nature duty of costs assessor to consider whether or not the work was carried out in a reasonable manner.
[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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AGLC
Obrart v Grego [2017] FCCA 929
Case
[2017] FCCA 929
Decision Date
CaseChat Overview and Summary
In *Obrart v Grego*, heard by Judge Manousaridis, the applicant, Ms Obrart, sought to enforce a bankruptcy notice based on two judgment debts totalling $341,347.95 entered against Mr Grego in the District Court of New South Wales. These judgment debts arose from two costs certificates issued under the *Legal Profession Act 2004* (NSW), which purportedly assessed costs for legal services and disbursements provided by Ms Obrart to Rosebridge Nominees. Mr Grego did not dispute Ms Obrart's ability to prove the matters specified in section 52(1) of the *Bankruptcy Act 1966* (Cth), but argued that a sequestration order should not be made as the debts underlying the judgment were not true debts.
The central legal issues before the court were whether the debts evidenced by the judgment were valid, and consequently, whether Mr Grego had committed an act of bankruptcy. Mr Grego contended that the debts were not genuine on three grounds: firstly, that the costs agreement underpinning the first costs certificate was void; secondly, that the costs assessor assessed costs for the second certificate based on a costs agreement that was not applicable to the invoice in question; and thirdly, that Ms Obrart had submitted a fabricated costs disclosure letter with her applications for assessment.
Judge Manousaridis considered whether the costs assessor had fallen into jurisdictional error by assuming the work was reasonably performed and the costs reasonable in the absence of objection from Mr Grego. The court also considered Ms Obrart's application to reopen her case to provide evidence of the costs agreements attached to her applications for assessment. The judge invited further submissions on these points and on the implications of any such assumptions by the costs assessor.
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 demanded payment of two judgment debts totalling $341,347.95 (Judgment) that were entered against Mr Grego in the District Court of New South Wales on 9 November 2015. The amount of the Judgment is the sum of two costs determinations that were purportedly made under s.367(1) of the Legal Profession Act 2004 (NSW) (LP Act),[2] and which are recorded in two certificates of determination of costs dated 21 January 2015 (Costs Certificates) that were purportedly issued under s.368(1) of the LP Act. The first Costs Certificate is for $198,026.29,[3] and the second Costs Certificate is for $143,321.66.[4] The Costs Certificates were issued in response to two applications for assessment of costs Ms Obrart made on 10 September 2013 pursuant to s.352 of the LP Act.[5] The applications related to legal services Ms Obrart provided to Rosebridge Nominees, and disbursements Ms Obrart incurred, in connection with proceedings Rosebridge Nominees had commenced in the Supreme Court of Western Australia. The legal services Ms Obrart provided are described in four invoices.[2] The LP Act has been repealed.[3] Affidavit of T Grego 05.10.2016, annexure TG-25 (pages 103 -104)[4] Affidavit of T Grego 05.10.2016, annexure TG-38 (pages 131 -132)[5] Affidavit of T Grego 05.10.2016, annexure TG-21 (pages 90-93) and annexure TG-33 (pages 118-121) Mr Grego, who is not legally represented, does not dispute Ms Obrart is in a position to prove the matters specified in s.52(1) of the Bankruptcy Act 1966 (Cth) (Act). He claims, however, that a sequestration order ought not to be made because the debts the Judgment purports to evidence are not true debts. Mr Grego relies on three grounds for claiming there are, in truth, no debts behind the Judgment:a)First, the costs agreement purportedly pursuant to which Ms Obrart issued three of the four invoices that were assessed, and which resulted in the issue of the first Costs Certificate, is void.b)Second, the costs assessor purported to assess the costs described in the last of Ms Obrart’s four invoices, which resulted in the issue of the second Costs Certificate, on the basis of a costs agreement by reference to which the invoice was stated not to have been issued. c)Third, Ms Obrart supported her applications for assessment of costs with a fabricated costs disclosure letter. After the hearing I invited Mr Orlizki, the solicitor for Ms Obrart, to provide submissions about whether the costs assessor assessed Ms Obrart’s costs on the assumption that, in the absence of any objection from Mr Grego and the other costs respondents, the costs assessor was entitled to assume that the work identified in Ms Obrart’s invoices was reasonably performed and that, if the costs assessor did so assume, whether he fell into jurisdictional error. I also invited Ms Obrart to apply for leave to reopen her case by providing evidence of the costs agreements that were attached to each of the applications for assessment of costs. Mr Orlizki responded to my invitation by providing submissions, and by applying for leave to reopen Ms Obrart’s case by tendering a complete copy of an affidavit only part of which, Mr Orlizki said, was tendered at the hearing. Mr Grego filed submissions in response.