Taouk v Lawyers Pty Ltd Trading as Yazbeck Law
[2018] FCCA 3390
•7 November 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| TAOUK v LAWYERS PTY LTD TRADING AS YAZBECK LAW | [2018] FCCA 3390 |
| Catchwords: BANKRUPTCY – Application to set aside a bankruptcy notice – applicant debtor asserted that bankruptcy notice should not have been issued due to the judgment debt upon which it was based being the subject of a costs assessment review and therefore stayed at date of issue by s.86 of the Legal Profession Uniform Law Application Act 2014 (NSW) – construction of s.86 of the Legal Profession Uniform Law Application Act 2014 (NSW) and effect of costs assessment review – judgment upon which the bankruptcy notice was issued was stayed under s.41(3)(b) of the Bankruptcy Act 1966 (Cth) – bankruptcy notice should not have issued and set aside. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.30, 41 Legal Profession Uniform Law Application Act 2014 (NSW), ss.47, 70, 71, 82, 83, 86, 93 |
| Cases cited: Khouzame v All Seasons Air Pty Ltd [2014] FCA 1319 Mohareb v Palmer [2018] NSWCA 220 Re Browbank and Miller; Ex Parte Loniplus Pty Ltd (1985) 12 FCR 254 Wiltshire-Smith v Olsson (1995) 57 FCR 572 |
| Applicant: | JOSEPH TAOUK |
| Respondent: | LAWYERS PTY LTD TRADING AS YAZBECK LAW |
| File Number: | SYG 351 of 2018 |
| Judgment of: | Judge Dowdy |
| Hearing date: | 7 November 2018 |
| Delivered at: | Sydney |
| Delivered on: | 7 November 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr D. Allen of Counsel |
| Solicitors for the Applicant: | Gardner Ekes Lawyers |
| Counsel for the Respondent: | Mr P. Yazbeck |
| Solicitors for the Respondent: | Yazbeck Law |
THE ORDERS OF THE COURT ARE AS FOLLOWS:
Bankruptcy Notice No. 220923 issued on 19 January 2018 is set aside.
The Respondent is to pay the Applicant’s costs of and incidental to this proceeding.
Pursuant to Rule 36.03(b) of the Federal Court Rules 2011 (Cth) the Respondent have up to and including 17 December 2018 to file any Notice of Appeal in the Federal Court of Australia from the above orders.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 351 of 2018
| JOSEPH TAOUK |
Applicant
And
| LAWYERS PTY LTD TRADING AS YAZBECK LAW |
Respondent
REASONS FOR JUDGMENT
EX TEMPORE
(Revised from Transcript)
Introduction
By Application filed in this Court on 12 February 2018 the Applicant applies to set aside Bankruptcy Notice No. 220923 issued on 19 January 2018 (Bankruptcy Notice).
Background
From approximately 7 July 2016 to January 2017 the Respondent creditor provided legal services to the Applicant in three separate pieces of litigation. Tax invoices were issued and some moneys were paid to the Respondent, but there was a dispute about fees. Then on 30 November 2017 a Certificate as to Determination of Costs (Certificate of Determination) of the Manager, Costs Assessment (Manager) was issued under s.71 of the Legal Profession Uniform Law Application Act 2014 (NSW) (2014 Act), in which it was determined that the Applicant owed $63,232.70 to the Respondent.
Section 70(5) of the 2014 Act provided that a Certificate of Determination could be filed in the Registry of a New South Wales court which had jurisdiction up to the relevant amount of the Certificate of Determination and would be taken to be a judgment for that amount of that Court:
70 Certificates as to determination of costs to parties
…
(5) In the case of an amount of money specified in a certificate 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 money. The rate of any interest payable in respect of that amount of money is the rate of interest in the court in which the certificate is filed.
On 8 January 2018, the Applicant, under s.83 of the 2014 Act, lodged an application for review (application for review) of the Certificate of Determination with the Manager in the Supreme Court of New South Wales. Section 86 of the 2014 Act provided as follows:
86Effect of review on costs assessor’s determination
(1) If an application is made to a review panel to review a costs assessor’s determination under section 83 or 84, the operation of the determination is suspended.
(2) The review panel may end a suspension:
(a) if it affirms the determination of the costs assessor, or
(b) in such other circumstances as it considers appropriate.
On 18 January 2018, the Respondent had judgment entered against the Applicant in the amount of the Certificate of Determination, namely $63,232.70, in the Local Court at Bankstown, and a form of this judgment was issued on 19 January 2018. On that same date, being 19 January 2018, the Respondent caused the Bankruptcy Notice to be issued based on the judgment debt comprised in the judgment of the Local Court at Bankstown.
Application to this Court
The Respondent seeks to set aside the Bankruptcy Notice on the basis of s.41(3)(b) of the Bankruptcy Act 1966 (Cth) (the Act) which provides as follows:
41 Bankruptcy notices
(3)A bankruptcy notice shall not be issued in relation to a debtor:
…
(b) if, at the time of the application for the issue of the bankruptcy notice, execution of a judgment or order to which it relates has been stayed; …
The Applicant submits that, by force of s.86 of the 2014 Act, as and from the lodging of the review application on 8 January 2014 no bankruptcy notice could be validly issued and that the Bankruptcy Notice in this proceeding is invalid and / or liable to be set aside. I note at this point that the reference to a stay in s.41(3)(b) of the Act is not, on the authorities, restricted to an express formal order staying a judgment, but means and includes more widely situations where the creditor is not in a position to issue immediate execution on the relevant judgment. In Wiltshire-Smith v Olsson (1995) 57 FCR 572 the Full Court of the Federal Court comprised of von Doussa, Moore and Nicholson JJ said at 584 – 585 as follows:
For the purpose of these provisions there need not be an express order of a court staying execution on the particular judgment on which the creditor relies … It was held in Re Solomon … by Beaumont J that the effect of the appointment of a receiver under a Mareva-type order made under the Companies (New South Wales) Code to take control of the debtor’s property was to prevent the petitioning creditor at the time of the issue of the bankruptcy notice from being able to execute against any of the property of the debtor without leave of the Supreme Court and that, as leave had not been obtained, execution should be deemed to have been stayed …
“It is well established that for the purposes of s 41(3)(b), execution is deemed to have been stayed where a judgment creditor is not ‘in a position to issue immediate execution upon it’…”
Mr Yazbeck, who appeared for the Respondent today, relied on the following arguments against a finding that s.86 of the 2014 Act applied to the position in the circumstances of this case and that it did not mean, for the purposes of s.41(3)(b) of the Act, that the judgment was stayed. First, Mr Yazbeck pointed out that the office of the Manager in the Supreme Court had expressly advised him in a letter dated 19 January 2018 that:
The operation of a costs assessment determination is suspended once the manager, costs assessment, has referred an application for review to a panel.
The office of the Manager had further advised by email dated 16 February 2018 that the review application had been assigned to a review panel on 19 January 2018. Mr Yazbeck submitted that this advice was correct by virtue in particular of ss.83 and 93 of the 2014 Act which provided as follows:
83 Application by party for review
(1) A party to a costs assessment may, within 30 days after the certificate of determination by the costs assessor has been forwarded to the parties in accordance with the regulations or the costs assessment rules, apply for a review of the determination.
(1A) The Manager, Costs Assessment may extend the period for lodging an application.
(2) Subject to this section, an application for a review is to be made in accordance with the costs assessment rules.
(3) An application for a review must:
(a) be filed with the Manager, Costs Assessment, and
(b) be accompanied by the fee (if any) prescribed by the local regulations, and
(c) be served on the other parties to the costs assessment concerned in accordance with the costs assessment rules.
(4) The Manager, Costs Assessment may waive or postpone payment of the application fee either wholly or in part if satisfied that the applicant is in such circumstances that payment of the fee would result in serious hardship to the applicant or his or her dependants.
(5) The Manager, Costs Assessment may refund the application fee either wholly or in part if satisfied that it is appropriate because the application is not proceeded with.
…
93 Costs assessment rules
(1) The Costs Assessment Rules Committee may make rules (costs assessment rules), not inconsistent with this Act or the Legal Profession Uniform Law (NSW) , for or with respect to costs assessments and reviews, including without limitation:
(a) the making, timing and processing of applications for costs assessments and reviews, and
(b) the conduct of costs assessments and reviews, including:
(i) the practice and procedure for costs assessments and reviews, and
(ia) conferring power on costs assessors to take evidence orally or in writing and to examine witnesses and administer oaths, and
(ii) the appointment of costs assessors to conduct costs assessments, and
(iii) the establishment of review panels and the appointment of costs assessors to review panels, and
(iv) matters relating to the interests of costs assessors in particular matters, and
(v) the determination and payment of the costs of costs assessments and reviews, and
(vi) the issue of certificates of determinations and the forwarding of such certificates (or copies of such certificates):
(A) by the costs assessor to the parties to the costs assessment or the Manager, Costs Assessment or both, and
(B) by the Manager, Costs Assessment to the parties to the costs assessment, and
(vii) the giving of reasons for determinations and the provision of supplementary information to accompany the reasons, and
(viii) the suspension of a costs determination in the event of an application for a costs review, and
(c) requiring a person (including an applicant, the law practice concerned, any other law practice or client, or a costs assessor) to produce documents, to provide information (verified by statutory declaration if the requirement so states), or otherwise to assist in, or co-operate with, the determination or finalisation of an assessment or review, and
(d) requiring documents produced in response to a requirement referred to in paragraph (c) to be returned or otherwise disposed of within a period specified in or determined in accordance with the rules, and
(e) the correction of errors in a determination.
(2) A rule may do any of the following:
(a) apply generally or be limited in its application by reference to specified exceptions or factors,
(b) apply differently according to different factors of a specified kind,
(c) authorise any matter or thing to be from time to time determined, applied or regulated by any specified person or body.
(3) The rules must be published on the NSW legislation website.
(4) Sections 40 and 41 of the Interpretation Act1987 apply to the rules in the same way as they apply to a statutory rule.
(5) The local regulations prevail over the rules in the event of an inconsistency.
I note at this point that the parties are agreed that no costs assessment rules have, in fact, been made under s.93 of the 2014 Act. As a subset of his first argument, Mr Yazbeck pointed out that s.86 speaks of an application being made “to a review panel”. Review panels are established under s.82, and under reg.47 of the Legal Profession Uniform Law Application Regulation2015 (NSW) (the Regulations) the Manager “is to refer” an application for review under s.83 of the 2014 Act to a review panel.
Therefore, so the argument appeared to be, s.86 of the 2014 Act refers to the Manager’s referral to a panel review (which, in this case, occurred on 19 January 2018) and not to the review application filed on 8 January 2018.
However, in my view, this argument is not sound. Section 86 of the 2014 Act perhaps inappropriately does refer to an application “to a review panel”, but that is in all likelihood because there is an assumption, and indeed a correct assumption, that a review application under s.86 must be referred to a review panel by the Manager under reg.47 of the Regulations. In my view, the application for review of 8 January 2018 was clearly made under s.83 of the 2014 Act and, accordingly, in its terms s.86 applies to the review application.
Second, Mr Yazbeck submitted that documents issued by the Supreme Court of New South Wales publicly advised that costs determinations of which a review is sought are only suspended when the Manager has referred the review application to a review panel which, as I have said, in this case appears to have been on 19 January 2018. That is indeed the case and the document is in evidence before me, but it is fair to say, with respect to the Supreme Court of New South Wales, that it is expressly noted on the first page of this document, and a caveat is there given, “that any information contained in the document is intended to provide you with notice of the review process and should not be construed as a substitute for legal advice. You must read the relevant Act and Regulations”.
Third, Mr Yazbeck relied on a judgment of a Magistrate of the Local Court at Bankstown dated 27 September 2018 where the learned Magistrate refused to set aside the judgment of 18 January 2018 and had opined at [26] as follows:
[26] Despite the language of s 86, when considering the Cost Rules found in s 93 together, it is evident that a suspension of a cost determination does not occur automatically upon the filing of the application to review but only after the manager fulfils a number of practice and procedural functions before referring an application to a properly constituted panel.
Fourth, Mr Yazbeck submitted that the Respondent has the benefit of the judgment entered on 18 January 2018 and that it has not been stayed or affected by s.86 of the 2014 Act because that section only suspends “the operation of the determination”, namely the Certificate of Determination, and not the judgment of 18 January 2018.
I have considered Mr Yazbeck’s arguments but, in my view, they fail. I must decide this case on my own view of the legal force and effect of s.86 of the 2014 Act and the relevant legal principles pertaining to s.41(3)(b) of the Act. I have considered and taken into account the advice and opinions of the officer of the Supreme Court of New South Wales and of the Magistrate of the Local Court at Bankstown, but their views cannot bind me.
In my view, s.86 of the 2014 Act in the circumstances of this case meant that as and from the lodging of the application for review on 8 January 2018 the force and effect and “operation” of the Certificate of Determination was temporarily suspended.
The word “operation” found in s.86 is a plain English word and, according to the Oxford English Dictionary (2nd Ed, online), means:
(1)(a) The exertion of force or influence … the way in which a thing works…
…
(3)(a) Power to operate or produce effects; efficacy, force.
Suspension is also a plain English word and means temporarily being kept from doing something or deprived of something.
There was, in my view, after 8 January 2018 an inability of the Respondent to enter judgment, and so the judgment entered on 18 January was probably irregularly entered and therefore, on that basis alone, liable to be set aside under s.41(3)(b) of the Act, as was done by Beaumont J in Re Browbank and Miller; Ex Parte Loniplus Pty Ltd (1985) 12 FCR 254.
However, in any event, accepting for present purposes that the judgment was entered on 18 January 2018 in the Bankstown Local Court, the Respondent, by force of s.86 of the 2014 Act, was not entitled to execute on it. This inability to execute fell within the implied prohibition contained in s.41(3)(b) of the Act.
I had referred the parties at the hearing to the decision of the New South Wales Supreme Court of Appeal in Mohareb v Palmer [2018] NSWCA 220 (Mohareb) of 4 October 2018 when the Court of Appeal was comprised of Beazley P and Macfarlan JA. In that case, their Honours expressed the following view which, whilst it is not determinative of the matter, I consider accords with the proper construction of s.86 of the 2014 Act and affords some support to my view of s.86 expressed in this judgment. The relevant paragraph in Mohareb is [9], where their Honours said as follows:
[9] A fortnight later, on 15 November 2017, District Registrar Wall of the Federal Court set aside Mr Palmer’s bankruptcy notice on the basis that the judgment said to found it was subject to a statutory suspension by reason of section 86 of the Legal Profession Uniform Law Application Act 2014 (NSW), which it undoubtedly was.
Accordingly, it follows that in my view the Bankruptcy Notice should not have been issued on 19 January 2018. While there is no express power in the Act to set aside a bankruptcy notice, such a power rises by necessary implication and is within the general powers of the Court conferred by s.30(1) of the Act: see generally the decision of Flick J in Khouzame v All Seasons Air Pty Ltd [2014] FCA 1319.
Conclusion
The result of the case is not one that any Judge would regard as desirable, but the relevant principles and statutes, in my mind, militate that this be the result. Accordingly, I will order that the Bankruptcy Notice be set aside.
I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of Judge Dowdy
Associate:
Date: 26 November 2018
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