Proctor Phair Lawyers Pty Ltd v Poon, in the matter of Poon
[2024] FedCFamC2G 705
•6 August 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Proctor Phair Lawyers Pty Ltd v Poon, in the matter of Poon [2024] FedCFamC2G 705
File number(s): SYG 140 of 2024 Judgment of: JUDGE CAMERON Date of judgment: 6 August 2024 Catchwords: BANKRUPTCY – Registrar’s sequestration order – Application for review. Legislation: Bankruptcy Act 1966 (Cth) s 52
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) r 7.05
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) rr 21.02, 21.04
Division: General Number of paragraphs: 19 Date of hearing: 23 July 2024 Place: Sydney Counsel for the Applicant: Mr A. Bailey Solicitor for the Applicant: Proctor Phair Lawyers Counsel for the Respondent: The respondent appeared in person ORDERS
SYG 140 of 2024 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF KALINA POON
BETWEEN: PROCTOR PHAIR LAWYERS PTY LTD
Applicant
AND: KALINA POON
Respondent
ORDER MADE BY:
JUDGE CAMERON
DATE OF ORDER:
6 AUGUST 2024
THE COURT ORDERS THAT:
1.The application for review of the sequestration order made by a registrar on 9 May 2024 be dismissed.
2.The registrar’s orders made on 9 May 2024 be confirmed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE CAMERON
INTRODUCTION
On 1 February 2024, Proctor Phair Lawyers Pty Ltd (Proctor Phair) presented a creditor’s petition following the failure of the respondent debtor, Ms Poon to comply with a bankruptcy notice (Bankruptcy Notice) issued on 26 April 2023. On 5 April 2024, Proctor Phair filed an amended creditor’s petition alleging a debt of $54,389.45. That debt arises out of a judgment of the Local Court of New South Wales for $54,719.72 in respect of a costs assessment for professional fees owed by Ms Poon to Proctor Phair.
On 9 May 2024 a registrar ordered that Ms Poon’s estate be sequestrated, noting that the act of bankruptcy occurred on 1 June 2023. On 29 May 2024, Ms Poon filed an application for review of the registrar’s decision and alleges that she does not owe the debt claimed by Proctor Phair. It is that application that is presently before the Court.
Proctor Phair’s evidence satisfies me that the statutory and regulatory requirements for the making of a sequestration order have been met. The question raised by Ms Poon is whether, nevertheless, one should be.
LEGISLATION AND RULES
Rule 21.04(1) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (Rules) provides that a review of a registrar's decision must proceed as a hearing de novo. Rule 21.02(1) of the Rules provides that an application for such a review is to be made within seven days of the decision in issue. It appears that that was not the case in this matter, but I dispense with compliance with that rule.
Rule 7.05 of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) relevantly provides:
Review of Registrar's decision
(1)This rule applies in relation to an application under subsection 256(1) of the Act for review of a decision by a Registrar to make a sequestration order against the estate of a debtor (the bankrupt).
(2) The application must be served on the trustee at least 7 days before the date fixed for the hearing of the application.
(3) The applicant must give notice of the application to each person known to the applicant to be a creditor of the bankrupt.
(4) The notice must be in accordance with Form B12
(5) The applicant must serve the notice on each creditor at least 7 days before the date fixed for the hearing of the application.
The Bankruptcy Act 1966 (Cth) (Act) relevantly provides:
52 Proceedings and order on creditor’s petition
(1) At the hearing of a creditor’s petition, the Court shall require proof of:
(a) the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);
(b) service of the petition; and
(c) the fact that the debt or debts on which the petitioning creditor relies is or are still owing;
and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.
…
(1B) Subsection (1A) is an offence of strict liability.
(2) If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:
(a) that he or she is able to pay his or her debts; or
(b) that for other sufficient cause a sequestration order ought not to be made;
it may dismiss the petition.
(3) The Court may, if it thinks fit, upon such terms and conditions as it thinks proper, stay all proceedings under a sequestration order for a period not exceeding 21 days.
…
PROCEEDING IN THIS COURT
Pleadings
Creditor’s petition
Proctor Phair’s amended creditor’s petition alleged:
1.The respondent debtor owes the applicant creditor the amount of $54,389.45 being the amount recorded in Bankruptcy Notice BN 259694 for $54,719.72 issued by the Official Receiver and dated 26 April 2023 accompanied by a copy of a certificate judgment of the Local Court of New South Wales issued in Matter No. 2023/00088703 (Local Court proceedings) by the applicant creditor against the respondent debtor for $58,560.09 as a result of a costs assessor's determination payable by the respondent debtor to the applicant creditor less an amount of $3,840.37 being costs of costs assessment paid by the respondent debtor that should have been paid by the applicant creditor (Bankruptcy Notice) and less an amount of $330.27 obtained by the applicant creditor from the respondent debtor pursuant to a garnishee order in the Local Court proceedings prior to presentation of the petition.
…
Notice of grounds of opposition
On 27 March 2024 Ms Poon filed a notice stating grounds of opposition to the petition. She asserted the following:
1.The assessor found the applicant had contravened his disclosure obligations. A consequence of that finding was that pursuant to s178(1)(a) of the Legal Profession Uniform Law, the costs agreement was void.
2.Despite the cost agreement being void, the applicant was not entitled to recover costs which would not have been due and payable had the agreement been on foot. That pursuant to s185 (2) of the Legal Profession Uniform Law.
3. The invoices rendered by the applicant claimed to the respondent amount of $285,419.44, According to s178(1)(b) of the Legal Profession Uniform Law the respondent is not liable to pay this amount as the applicant has not assessed this amount. Despite so, the respondent had already paid $226,859.3 to the applicant. Pursuant to s185 (1) of the Legal Profession Uniform Law, the applicant is not allowed to claim this money from the respondent as it has not been assessed. This is misconduct. The applicant only applied for costs assessment on the amount of $58,560.09 in this case.
4. This was grossly more than his $100,000 costs plus Counsel fee and disbursements estimate. Hence, the applicant must repay the excess of the estimate to the respondent that pursuant to s185 (2)(5) of the Legal Profession Uniform Law.
Evidence
Affidavits of Russell Phair
On 23 April 2024, Mr Phair, the principal of the petitioning creditor, swore a 33 paragraph affidavit in which he summarised the history of the proceeding. He deposed that:
(a)on or about 5 November 2018, Ms Poon retained Proctor Phair to act for her in a proceeding in the Supreme Court of New South Wales (Supreme Court Proceeding). Annexed to Mr Phair’s affidavit and marked “RGP-1” is a copy of the costs disclosure document signed by Ms Poon;
(b)Proctor Phair acted for Ms Poon in the Supreme Court Proceeding between 5 November 2018 and November 2021; and
(c)on 19 February 2021, Mr Phair filed a notice of ceasing to act and served a copy on Ms Poon.
Mr Phair deposed to fees owed by Ms Poon to Proctor Phair and to a related a costs assessment. He deposed that:
(a)two tax invoices, one of 23 July 2021 and another of 26 July 2021, totalling $68,284.41 had not been paid;
(b)on 5 May 2022, Proctor Phair sought a solicitor and client costs assessment in respect of those unpaid fees;
(c)the costs assessor assessed the costs payable by Ms Poon and on 9 March 2023 issued a certificate of assessment for $58,560.09 and a statement of reasons;
(d)the costs assessor also determined that Proctor Phair was to pay her costs of the assessment of $3,840.37 but in fact Ms Poon paid that sum;
(e)[at the time of swearing] Ms Poon had not filed an appeal from the costs determination; and
(f)on 17 March 2023, Proctor Phair registered the $58,560.09 costs assessment in the Local Court of New South Wales which, later that day, entered judgment for Proctor Phair against Ms Poon in that amount.
Exhibited to Mr Phair at the time he swore that affidavit were the documents which are now ex.2. Amongst them were the following tax invoices that Proctor Phair issued to Ms Poon:
(a)20 January 2019 for $28,419.35 less amounts paid on account, leaving a balance of $18,419.35 owing;
(b)29 August 2019, for $90,024.00, less amounts paid on account, leaving a balance of $88,443.35 owing;
(c)17 July 2020, for $25,801.90;
(d)23 July 2021 for $134,255.01, less amounts paid on account, leaving a balance of $66,056.91 owing; and
(e)26 July 2021 for $2,227.50 plus $66,056.914 unpaid from the 23 July 2021 account, leaving a total of $68,284.41 owing.
Also part of ex.2 are redacted bank statements that record that Ms Poon made the following payments to Proctor Phair:
6 November 2018 $10,000.00 8 February 2019 $5,000.00 12 February 2019 $15,000.00 8 October 2019 $20,000.00 5 December 2019 $20,000.00 6 December 2019 $20,000.00 9 December 2019 $20,000.00 10 December 2019 $8,443.35 2 August 2020 $4,000.00 16 August 2020 $10,000.00 17 August 2020 $20,000.00 31 August 2020 $20,000.00 1 September 2020 $20,000.00 2 September 2020 $20,000.00
Subject to one mistake in relation to February 2019, where two payments are recorded as one, those invoices and payments were set out in tabular form in Mr Phair’s 33 paragraph affidavit as follows:
Date Amount of invoice Amount received from Poon Amount received from Poon 06/11/2018 $10,000.00 Memorandum of costs and disbursements to Poon 20/01/2019 $28,419.35 Amount received from Poon 12/02/2019 $20,000.00 Memorandum of costs and disbursements to Poon 29/08/2019 $90,024.00 Amount received from Poon 08/10/2019 $20,000.00 Amount received from Poon 05/12/2019 $20,000.00 Amount received from Poon 06/12/2019 $20,000.00 Amount received from Poon 09/12/2019 $20,000.00 Amount received from Poon 10/12/2019 $8,443.35 Memorandum of costs and disbursements to Poon 17/07/2020 $25,801.90 Amount received from Poon 02/08/2020 $4,000.00 Amount received from Poon 16/08/2020 $10,000.00 Amount received from Poon 17/08/2020 $20,000.00 Amount received from Poon 31/08/2020 $20,000.00 Amount received from Poon 01/09/2020 $20,000.00 Amount received from Poon 02/09/2020 $20,000.00 Memorandum of costs and disbursements to Poon 23/07/2021 $134,255.01 Memorandum of costs and disbursements to Poon 26/07/2021 $2,227.50 TOTAL $280,727.76 $212,443.35 AMOUNT OUTSTANDING $68,284.41 Ms Poon’s Affidavits
Ms Poon filed two affidavits in this proceeding both dated 15 April 2024. She annexed to one of them a document she described as “grounds of opposition to the applicant’s application”. She alleged, among other things, that there was no amount due and payable by her to Proctor Phair.
CONSIDERATION
Ms Poon’s case was that her costs agreement had been void and that Proctor Phair had not been entitled to recover fees that had not been assessed by a costs assessor. With respect, that is not to the point because Ms Poon has already paid all that was asked of her apart from the unpaid $66,056.91 portion of the 23 July 2021 invoice for $134,255.01 and the 26 July 2021 invoice for $2,227.50. More significantly, as far as the Court is aware she has not challenged any of Proctor Phair’s tax invoices by seeking their assessment and so no amount has been identified by which the total fees Ms Poon has paid might be reduced. Absent such an assessment, Ms Poon’s argument that Proctor Phair’s total fees for the entirety of the matter were “grossly in excess of costs agreement” and that the “hours claimed were grossly excessive” does not, with respect, take the matter anywhere.
The only question before the Court therefore is whether Ms Poon owes Proctor Phair the amount they claim based on the fees that they had assessed as a step preliminary to them being enforceable by way of a court order.
A significant part of Ms Poon’s disagreement with the fees invoiced by Proctor Phair arises out of the fact that she had been advised on 20 July 2020 that the forthcoming hearing in the Supreme Court Proceeding would cost approximately $81,600, for which she was asked to pay $65,000 on account, but she subsequently received an invoice dated 23 July 2021 seeking a further $66,056.91, being the balance owing after sums paid on account were offset against fees and disbursements of $134,255.01. Undoubtedly it came as a shock that the hearing cost more than half again what had been estimated, but the propriety and enforceability of Proctor Phair’s fees was, it seems, not challenged by Ms Poon prior to this proceeding and the only fees that were subjected to costs assessment were the $66,056.91 remaining of the 23 July 2021 invoice for $134,255.01 after amounts paid on account were applied, and the 26 July 2021 invoice for $2,227.50.
Ms Poon has also argued that money she had paid on account and which had been applied in part payment of the 23 July 2021 invoice had been paid by her to cover counsel’s fees and half of Proctor Phair’s professional fees but was instead applied to the Proctor Phair’s fees, in effect leaving her to pay for counsel’s fees a second time. As Ms Poon has not sought assessment of the 23 July 2021 invoice, the fees to which the amounts she had paid on account were applied have not been assessed and found to be too great. In any event, it has not been demonstrated that Proctor Phair could not apply the funds paid on account in the manner in which they did.
Although the costs assessor determined that Ms Poon’s costs agreement was void, she also explained that that did not mean that Proctor Phair was not entitled to any of the costs they claimed. As the costs assessor said:
4.18, The costs claimed are recoverable under the quantum meruit principles established in the decision of Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221: Wentworth v Rogers; Wentworth & Russo v Rogers [2006] NSWCA 145 (7 June 2006) Per Santow J.A. At pgh [sic] 56. The principles of a quantum meruit were recently confirmed and restated in Mann v Paterson Constructions Pty Ltd [2019] HCA 32 (9 October 2019),
4.19. The Applicant is only entitled to the fair and reasonable value for the legal services provided.
4.20. The costs claimed must be fair, reasonable and proportionate: Section 172 of the LPUL. Furthermore, a law practice must not act in a way that unnecessarily increases legal costs: Section 173 of the LPUL.
The assessment of Proctor Phair’s professional fees was based on those principles and the remainder of the assessment concerned disbursements. Consequently, Ms Poon’s argument that if there were no contractual liability to pay the costs determined by the costs assessor, the judgment based upon the costs assessment certificate may be set aside as having been entered “irregularly” is misconceived.
CONCLUSION
Ms Poon has not demonstrated sufficient cause why a sequestration order ought not have been made.
Consequently, the application for review of the registrar’s decision will be dismissed and the registrar’s decision confirmed.
I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Cameron. Associate:
Dated: 6 August 2024
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