Weber v Aquaqueen International Pty Ltd
[2013] NSWSC 1181
•05 September 2013
Supreme Court
New South Wales
Medium Neutral Citation: Weber v Aquaqueen International Pty Ltd; Aquaqueen International Pty Ltd v Weber [2013] NSWSC 1181 Hearing dates: 18/06/2013 Decision date: 05 September 2013 Jurisdiction: Common Law Before: Garling J Decision: (1) Notice of Motion filed by Aquaqueen on 11 December 2012 be dismissed.
(2) Application to Set Aside Statutory Demand filed by Aquaqueen on 17 December 2012 be dismissed.
(3) Aquaqueen to pay Mr Weber's costs of both proceedings.
Catchwords: COSTS - cost assessment scheme - enforcement of cost certificates - cost certificates issued under ss 368 and 369 Legal Profession Act 2004 (NSW)
PROCEDURE - perfected final orders - whether judgment was entered irregularly pursuant to Uniform Civil Procedure Rules 2005 - whether there is sufficient cause for judicial discretion to set aside judgment - principle of finality
CORPORATIONS - application under s 459G Corporations Act 2001 (Cth) for order setting aside statutory demand - no matter of general principleLegislation Cited: Corporations Act 2001 (Cth)
District Court Rules 1973
Legal Profession Act 2004
Legal Profession Regulations 2005
Uniform Civil Procedure Rules 2005Cases Cited: Burrell v R [2008] HCA 34; (2008) 238 CLR 128
Kassem & Anor v Koutavas [2012] NSWSC 236
Kendall v Carnegie [2006] NSWCA 302; (2006) 68 NSWLR 193
Perpetual Trustees Australia Ltd v Heperu Pty Ltd (No.2) [2009] NSWCA 387; (2009) 78 NSWLR 190Category: Principal judgment Parties: Wolfgang Weber
Aquaqueen International Pty LtdRepresentation: Counsel:
Ms K Van Munster (Weber)
Ms S Penson (Director of Aquaqueen)
Solicitors:
Leonard Legal (Weber)
File Number(s): 2012/370802 2012/392186
Judgment
On 28 November 2012, Wolfgang Weber registered four Costs Certificates in this Court and thereby obtained a single judgment against Aquaqueen International Pty Ltd ("Aquaqueen") in the sum of $38,484.48.
Aquaqueen, on 11 December 2012, filed a Notice of Motion, which has since been amended, seeking an order to dismiss or set aside the judgment entered on 28 November 2012.
On 30 November 2012, Mr Weber served a Statutory Demand on Aquaqueen pursuant to s 459E of the Corporations Act 2001 (Cth), requiring payment of the judgment sum.
On 18 December 2012, Aquaqueen commenced proceedings in this Court seeking an order pursuant to s 459G of the Corporations Act setting aside the Statutory Demand.
The two originating processes, namely that seeking to set aside the statutory demand in accordance with the Corporations Act, and the Notice of Motion seeking to set aside the judgment, related to the same facts, matters and circumstances. Accordingly, both matters were ordered to be, and were, heard together.
This judgment deals with the relief claimed by Aquaqueen in both proceedings. It will be convenient to first consider the issue of whether the judgment should be set aside.
District Court Proceedings
The genesis of the judgment which is sought to be set aside in the current proceedings, was proceedings in the District Court of NSW.
In 2009, Aquaqueen commenced proceedings in the District Court, naming Titan National Pty Ltd as first defendant, Ms Kathryn Wood-Weber as the second defendant, and Mr Wolfgang Weber as the third defendant.
The dispute before the District Court arose out of a lease entered into between Aquaqueen and Titan National. It was alleged that Mr Weber was liable to Aquaqueen, together with the other defendants, for a variety of causes of action.
The proceedings were heard by Williams DCJ. He dismissed Aquaqueen's claim. In so doing, he said:
'"62. Whilst there is no doubt that the course of the relationship between the plaintiff and the defendants was not always smooth, it does not seem to have been substantially more than the ups and downs sometimes encountered in such matters but, more importantly, it has not been proved to have involved anything that could be regarded as such a departure from acceptable norms as to warrant the claimed damages being awarded to the plaintiff, Aquaqueen. Upsets and nuisances are not actionable unless they breach a specific agreement and/or cause damage that is either foreseeable or consequential. An allegation of fact or damage in a statement of claim, if denied, requires proof before a Court can act on it. Apart from the question of whether or not the damage claims are misguided, the fact is they have not been evidentially established beyond what is stated in the pleadings. That does not amount to proof even on a balance of probabilities.
63. The evidence linking Mr Weber with any of these claims is to say the least, tenuous. Whilst he, at an early time, may have been an agent of the first and second defendants, his principal was always a disclosed principal. However, he is not, and has never been, a director or shareholder of Titan, so how he is said to be liable for any damage or breach of contract between Titan and Aquaqueen is difficult to see or understand. Anything said or done by Mr Weber was not done in a personal capacity, but as agent for Titan and Mrs Wood. Indeed, on a close examination of the Statement of the Claim, one wonders on what basis he was ever joined as a defendant, let alone having a default judgment signed against him shortly before the trial was due to commence. There is no direct pleading as to any damage caused by Mr Weber, or for which he might be even vaguely responsible."
That judgment was delivered on 6 June 2011, at which time Aquaqueen was ordered to pay the costs of each of the defendants.
On 24 June 2011, Williams DCJ made an order that the costs which he had ordered Aquaqueen to pay to the defendants, including Mr Weber, ought be paid on an indemnity basis.
On 4 July 2011, Aquaqueen filed a Notice of Intention to Appeal in the Supreme Court of NSW, Court of Appeal. That Notice indicated that Aquaqueen intended to commence appeal proceedings on or before 6 September 2011. Such a Notice does not constitute an appeal, and does not operate to commence proceedings in the Court of Appeal: r 51.9 Uniform Civil Procedure Rules 2005.
No appeal was filed by Aquaqueen in the Court of Appeal prior to 6 September 2011, and accordingly, the Notice of Intention to Appeal lapsed without any proceedings being commenced. That was now about two years ago.
No application has been made to the Court of Appeal for leave to file a Notice of Appeal out of time, nor to extend time within which a Notice of Appeal is to be lodged.
On 17 August 2011, Aquaqueen filed a Notice of Motion in the District Court of NSW seeking that the orders against it entered on 6 June 2011, and 24 June 2011 be stayed until further order. On 26 August 2011, Balla DCJ heard that Notice of Motion, and for the reasons which her Honour then gave, dismissed it. Aquaqueen was ordered to pay Mr Weber's costs of that motion on an indemnity basis.
First Costs Assessment
On 15 August 2011, Mr Weber first made application to the Manager, Costs Assessment, for an assessment of his costs. The application noted that the costs which were the subject of it, were costs payable by Aquaqueen as a result of the orders of Williams DCJ in the District Court on 6 June 2011 and 24 June 2011. Annexed to that application was an itemised schedule of costs, which claimed costs on an indemnity basis pursuant to the orders of Williams DCJ. The total claim was $35,936.85.
On 11 October 2011, the Costs Assessor, Mr Richard Gulley, determined that the amount of costs claimed was fair and reasonable and allowed all of the claimed costs.
In the course of his reasons, Mr Gulley said this:
"During the assessment process, and in response to my letter to the costs respondent [Aquaqueen] of 7 September 2011, I was informed by the costs respondent on 19 September 2011 that it was proposed to make objections and submissions in respect to the application. I was requested to await the provision of another application between the parties concerning costs. The costs applicant objected to any delay, and I informed the costs respondent on 21 September 2011, that I required objections to the bill before me by 4 October 2011. I heard nothing further from the costs respondent."
Accompanying those reasons was a Certificate of Determination of Costs ("s 368 Certificate") issued pursuant to s 368 of the Legal Profession Act 2004 ("LP Act") by Mr Gulley on 11 October 2011. In it, he certified:
"1. The application is determined by assessing as a fair and reasonable amount of the costs to be paid to the costs applicant, the sum of $35,936.85.
2. The costs respondent is to pay the costs applicant the sum of $35,936.85."
A note was attached to those orders in the following terms:
"Note: The amount assessed excludes the costs of the costs assessment for which a separate certificate has issued. (s.368(3) of the Act)"
On the same day, Mr Gulley issued a second Certificate, pursuant to s 369 of the LP Act. That Certificate was headed "Certificate of Determination of Costs of Costs Assessment" ("s 369 Certificate"). In relevant part, it contained the following:
"1. The application was determined, and a Certificate of Determination of Costs was issued on 11 October 2011.
2. The costs of the costs assessment (s 369 of the Act) to be paid by the costs respondent are in the sum of $786.08."
At the bottom of this Certificate, there were two notes in the following terms:
"Note 1. The amount of $786.08 includes the sum of $359.37 being the fee paid for the application (s 369 of the Act).
Note 2. The amount of $786.08 includes the costs of the costs assessor paid by the costs applicant/costs respondent to the Manager Costs Assessment to obtain the release of the Certificate of Determination of Costs and this Certificate (s 368(6) of the Act)."
It is not in dispute that Mr Weber paid the amount of $786.08 to the Manager, Costs Assessment, to obtain the release of the two Certificates, which were issued by Mr Gulley. The release of the Certificates necessarily occurred before the obtaining of a judgment.
Aquaqueen has never applied for any review of this first Costs Assessment.
Second Costs Assessment
On 11 November 2011, Mr Weber filed a second Application for an assessment of costs, which related to the order made by Balla DCJ on 26 August 2011, dismissing the Notice of Motion, brought by Aquaqueen, to stay the judgment and orders of Williams DCJ.
On 6 February 2012, the second Costs Assessor, Mr John Bartos, issued two Certificates. The first, a Certificate of Determination of Costs determined that the fair and reasonable amount for costs to be paid was $1,295.80. The form of this Certificate, save for the dollar figures, was identical to the s 368 Certificate issued in October 2011.
On the same day, Mr Bartos also issued a second Certificate, being a Certificate of Determination of Costs of Costs Assessment which was in the sum of $465.75. Again, the Certificate was in identical form to the s 368 Certificate issued in October 2011, but on this occasion it disclosed, in the notes, that the sum of $465.75 comprised an amount of $100.00 being the fee paid for the application, and the amount of $365.75 being the costs of the Costs Assessor.
It is not in dispute that Mr Weber paid the amount of $465.75 to the Manager, Costs Assessment to obtain the Certificate, thereby enabling him to apply for the judgment.
On 22 March 2012, Aquaqueen applied for a Review of the Determination of the second Costs Assessor, Mr Bartos. However, it became apparent that that application for Review had been lodged out of time. It became necessary for Aquaqueen to make an application for an extension of time within which to lodge the application for Review. Ultimately, this application to extend time was filed on 23 May 2012, together with submissions.
The Manager, Costs Assessment, dealt with the application to extend time on 23 July 2012. The Manager determined not to extend the time to lodge a Review. In so doing, the Manager determined that, although the delay was short, the explanation for the delay in lodging the application for review, was not sufficient. He further found that the merits of the Review application were:
"... questionable as the main complaint that there was not procedural fairness to the Review Applicant by the Assessor refusing to grant extensions, mostly due to illness and holidays fails to be persuasive when the amount in question is identified as $1,295.80."
The Manager, Costs Assessment, then determined that it did not appear to him to be just and fair in all the circumstances to extend time. He declined so to do.
No further proceedings have been taken by Aquaqueen with respect to this decision of the Manager, Costs Assessment.
It should be noted with respect to both the first costs application and the second costs application, that the determinations of those applications by each of the Costs Assessor, has not been the subject of any appeal by Aquaqueen to the District Court pursuant to s 384 of the LP Act, nor any application to the District Court for leave to appeal to that Court against the determination of the Costs Assessors pursuant to s 385 of the LP Act.
It is it be observed that if the District Court grants leave to appeal pursuant to s 385 of the LP Act, then any appeal is to be by way of a new hearing and fresh evidence, or evidence in addition to, or in substitution for, the evidence received at the original costs assessment, may be given: s 385(4) LP Act. In short, if leave is granted, there is a full merits review on all questions of fact. Any error of law gives rise to an appeal as of right.
Aquaqueen has not engaged in any of these avenues for review.
Judgment of this Court of November 2012
On 28 November 2012, Mr Weber registered the four Cost Assessment Certificates as a single judgment of this Court. The judgment issued was one totalling $38,484.48.
It was comprised as follows:
Costs Assessment 2011/262571
Amount of assessment - s 368 Certificate
$35,936.85
Costs of assessment - s 368 Certificate
$786.08
Costs Assessment 2011/360702
Amount of assessment - s 368 Certificate
$1,295.80
Costs of assessment - s 368 Certificate
$465.75
The title of the proceedings in which the judgment was issued recorded Mr Weber as the "First Plaintiff" and Aquaqueen as the "First Defendant". However, notwithstanding the description of each of these parties as being the "First", there were no other persons or corporations recorded as being parties in the proceedings. The document which was filed to achieve the judgment by registration, did not refer to either party as being the "First". That description is clearly erroneous, but it is an error of a kind which is entirely irrelevant to the issues being considered in this judgment.
The judgment, which is in a conventional form, was expressed in these terms:
Judgment: Aquaqueen International Pty Ltd, First Defendant is to pay Wolfgang Weber, First Plaintiff the sum of $38484.48"
As is apparent from the terms of the judgment, it is one between the two parties to the costs assessment process and to the present proceedings, and no other party. It obliges Aquaqueen to pay the designated sum to Mr Weber.
Application to Set Aside Judgment
So far as it appears from the evidence filed in these proceedings, in the District Court proceedings before Williams DCJ and Balla DCJ, and in the costs assessment process, the principal responsibility for the conduct of the proceedings on behalf of Aquaqueen has been assumed by Ms Shirley Penson, who is a director of Aquaqueen. Although Counsel appeared in the proceedings before Williams DCJ for Aquaqueen, it seems that Counsel came into the matter a relatively short time before the proceedings commenced, and was instructed directly by Ms Penson.
There is little doubt that Ms Penson regards herself as the alter-ego of Aquaqueen, and accordingly, as the affidavits in this case disclose, she takes the view that if she is unable to attend to the legal affairs of Aquaqueen, then she is under no obligation to make arrangements for others to do so. In this approach, she exhibits a fundamental misunderstanding about the independent legal identity of a company, when compared with the individuals who are concerned with it. This approach also ignores the effect, in the Supreme Court, of r 7.1(2) of the UCPR, which requires a company to commence and carry on proceedings by a solicitor.
Mr Weber's solicitor did not take any objection to the Court receiving submissions from Ms Penson in these proceedings. Accordingly, notwithstanding the prohibition in the UCPR, Ms Penson represented Aquaqueen, and was permitted to make submissions.
The first Notice of Motion filed on 11 December 2012, by Ms Penson acting for Aquaqueen sought an order to the following effect:
"1. To dismiss or set aside or vary the judgment/order dated 28 November 2012, for payment of $38,484.48 and pending for a final outcome of the costs certificates 2011/262571 and 2011/360702."
By the time the matter came to be heard, Aquaqueen had filed an Amended Notice of Motion. Leave to do so was granted by Bellew J on 23 April 2013.
The orders as finally sought were as follows:
"1. An order to dismiss or set aside the judgment/order entered on 28 November 2012, for payment of $38,484.48.
2. An order for all costs associated with the proceedings to be paid by the plaintiff.
3. Any other orders the Court deems fit."
In her submissions when the matter was heard, Ms Penson on behalf of Aquaqueen submitted that there were three principal bases available each, or all of which, would merit making the orders sought in the Notice of Motion.
Aquaqueen first submitted that, as the judgment was obtained by the e-filing process, without the deposit at the Registry of the original Certificates, the judgment was irregularly entered, and ought to be set aside.
Secondly, Aquaqueen submitted that the title on the form used by Mr Weber to obtain the judgment was erroneous, and accordingly, the judgment was irregular, and ought to be set aside.
Thirdly, Aquaqueen submitted that the judgment should be set aside because the total sum for which the judgment was registered, namely $38,484.48 included components which represented the costs of the costs assessment process which could only be recovered by the Manager, Costs Assessment. It was submitted that accordingly the judgment was irregularly entered in accordance with the principle enunciated in Kassem & Anor v Koutavas [2012] NSWSC 236.
Setting Aside Judgment: Submissions 1 and 2
It is convenient to deal with the first two submissions together.
The first submission is that the original of the Costs Certificates were not filed in the Registry at the time judgment was entered. This submission is based on Ms Penson's surmise derived from observing on the Court file what fees were paid by Mr Weber and when. It is a surmise which is fundamentally wrong.
The record on the Court file discloses that at the time the requisite form was filed seeking judgment, the correct fee was paid. Subsequently, a copy of the judgment was issued for which a further fee was paid. There is no basis for any conclusion as a matter of fact, that the original Certificates of the assessments of costs upon which the judgment would be based, were not filed.
The very fact that judgment has been entered suggests overwhelmingly that the Certificates were filed together with the requisite application. Ms Penson's surmise is not evidence. Aquaqueen has not demonstrated by any evidence that this first submission has any factual basis whatsoever. It does not succeed.
The second submission was an assertion that the title on the requisite form was incorrect.
I do not stay to consider whether the title on the form was, or was not, incorrect. Assuming that it was incorrect, that does not provide any basis at all upon which the Court could find that there was any irregularity in the process giving rise to the entry of judgment. This submission is wholly without merit, and cannot succeed.
Setting Aside Judgment: Submission 3
Aquaqueen finally submits that, by reason of the authority of this Court in Kassem, the judgment in this case has been irregularly entered, and therefore, ex debito justitia, ought to be set aside.
It is to be recalled that the judgment entered in this case includes, as a component, monies paid by Mr Weber to the Manager, Costs Assessment to obtain the Certificates issued by both the first and the second Costs Assessors. The monies paid were in total $1,251.83. Of this total, the Court fees amounted to $459.37, and the costs assessor's remuneration, for both costs assessments was, in total, $729.46.
Based on the fact that the judgment includes these monies, Aquaqueen submits that the judgment is irregular because it includes components which the LP Act requires to be paid to the Manager, Costs Assessment, and provides that only the Manager, Costs Assessment can take action to recover these monies.
The sole legal authority upon which Aquaqueen relies is the decision of Kassem. In Kassem, there was an application brought by a Notice of Motion by the defendant to vary, or to set aside, a costs judgment entered against the defendant as an irregularity.
It is necessary, in order to consider the submission by Aquaqueen, to first consider what power the Court is being asked to exercise, and to identify the relevant rules of Court, and legislation.
Relevant Rules of Court
The primary rule which provides for the process whereby costs certificates become judgments of the Court is r 36.10 of the UCPR. It is in this form:
"36.10 Filing of cost assessors' certificates
(1) A cost assessor's certificate:
(a) may be filed in the proceedings to which it relates, or
(b) may be filed in fresh proceedings, whether in the same court or another court.
(2) A number of certificates may be filed together under subrule (1) if each of the certificates:
(a) relates to the same costs assessment, and
(b) requires the same person or persons to pay costs.
(3) If some of the costs specified in the certificate or certificates have been paid, the certificate or certificates must be accompanied by an affidavit, sworn not earlier than 14 days before the certificate or certificates are filed, stating the amount of the costs that have been paid."
The Dictionary for the UCPR defines "costs assessors certificate" in a way which includes a certificate issued under either ss 368 or 369 of the LP Act.
The note which is added to r 36.10 is instructive. It is in this form:
"Note: The certificate or certificates will, from the date of filing, be taken to be a judgment of the court under Division 11 of Part 3.2 of the Legal Profession Act 2004 for:
(a) if the certificate or certificates are not accompanied by an affidavit under subrule (3)-the total amount of costs specified in the certificate or certificates, or
(b) if the certificate or certificates are accompanied by an affidavit under subrule (3)-the amount of costs that have not been paid."
No affidavit under r 36.10(3), and as referred to in the Note, was filed in this matter. Accordingly, the judgment which was entered reflected the full amount of the Certificates.
Rule 36.15 of the UCPR is the general power to set aside a judgment or order. It provides that:
"36.15 General power to set aside judgment order
(1) A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith.
(2) A judgment or order of the court in any proceedings may be set aside by order of the court if the parties to the proceedings consent."
Rule 36.16 is also relevant. It provides a further power, in limited and defined circumstances, to set aside or vary a judgment or order of the Court. It is in the following form:
"36.16 Further power to set aside or vary judgment or order
(1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order.
(2) The court may set aside or vary a judgment or order after it has been entered if:
(a) it is a default judgment (other than a default judgment given in open court), or
(b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or
...
(3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1) as if the judgment or order had not been entered.
(3B) Within 14 days after a judgment or order is entered, the court may of its own motion set aside or vary the judgment or order as if the judgment or order had not been entered.
(3C) Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B).
(4) Nothing in this rule affects any other power of the court to set aside or vary a judgment or order."
It was not absolutely clear from Aquaqueen's submissions whether the Notice of Motion was brought in reliance upon the Court's power in r 36.15 of the UCPR, which would require the Court to be satisfied that "... sufficient cause ..." had been shown by Aquaqueen, or else whether Aquaqueen was relying on r 36.16(3A) of the UCPR, which would enable the Court to set aside the judgment "... if appropriate ...".
In the absence of clarity on this issue, it will be convenient to highlight the facts and submissions, and then to determine whether Aquaqueen has discharged its onus in accordance with either of the rules identified.
The Costs Assessment Legislative Regime
It is necessary to understand the legislative regime for the costs assessment process. It is contained in Part 3.2, Division 11 of the LP Act.
Relevantly for these proceedings, the costs assessment process was being carried out on the application of Mr Weber, because of the orders for costs made in his favour by Williams DCJ and Balla DCJ in the District Court. As a result, the provisions of s 364 of the LP Act have effect. The use of the term "costs" in this and other relevant provisions of the LP Act, calls up the definition which is to be found in s 302 of the LP Act. It is to this effect:
"Costs includes fees, charges, disbursements, expenses, and remuneration."
Both of the applications for costs assessments made by Mr Weber, were made under s 353(1) of the LP Act. Once an application is made, then the costs assessor to whom it has been referred, is required to determine the application, either by confirming the Bill of Costs, or else by fixing a fair and reasonable amount for the costs: s 367(1) of the LP Act.
Importantly, having regard to the nature of the submissions in this case, and the definition of costs in s 302 of the LP Act as including fees, s 367(2) of the LP Act provides:
"(2) The costs assessor may include an allowance for any fee paid or payable for the application by the applicant." (Emphasis added)
This section specifically contemplates that the costs assessor may include in the determination, and the certificate subsequently issued, an allowance for a fee which is payable, but which at the time the certificate is issued, has not yet been paid. Such a description is apt to include the fees charged by the Manager, Costs Assessment in accordance with the Legal Profession Regulations 2005.
Once the process of the costs assessment has finished with the determination, the costs assessor is obliged to issue a certificate which sets out the determination. In so doing, the costs assessor is acting in accordance with s 368 of the LP Act. That section is, relevantly, in these terms:
"368 Certificate as to determination
(1) On making a determination of costs referred to in Subdivision 2 or 3 of this Division, a costs assessor is to issue a certificate that sets out the determination.
(2) A costs assessor may issue more than one certificate in relation to an application for costs assessment. Such certificates may be issued at the same time or at different stages of the assessment process.
(3) However, any such certificate may not set out the costs of the costs assessment within the meaning of section 369.
Note. Section 369 makes provision for the recovery of the costs of costs assessments relating to costs to which either section 317 (Effect of failure to disclose) or 364 (Assessment of costs-costs ordered by court or tribunal) applies. The section requires a costs assessor to issue a separate certificate setting out the costs of such costs assessments. That section also makes provision for the effect of such a certificate.
(4) In the case of an amount of costs that has been paid, the amount (if any) by which the amount paid exceeds the amount specified in any such certificate may be recovered as a debt in a court of competent jurisdiction.
(5) In the case of an amount of costs 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 costs, and the rate of any interest payable in respect of that amount of costs is the rate of interest in the court in which the certificate is filed.
(5A) The costs assessor must forward the certificate or a copy of the certificate to:
(a) the Manager, Costs Assessment, and
(b) each party to the assessment, unless subsection (6) applies.
(6) If the costs of the costs assessor are payable by a party to the assessment as referred to in section 369, the costs assessor must:
(a) forward a copy of the certificate to the Manager, Costs Assessment only, and
(b) advise the parties that the certificate has been so forwarded and will be available to the parties on payment of the costs of the costs assessor.
(7) Subsection (6) does not apply:
(a) in respect of a certificate issued before the completion of the assessment process under subsection (2), or
(b) in such circumstances as may be prescribed by the regulations."
It is relevant to note that subsection (3) of s 368 of the LP Act precludes the costs assessor from including in the s 368 Certificate, the costs of the costs assessment, which are dealt with under s 369 of the LP Act.
The first s 368 Certificate which was in fact issued in this matter recorded the specific "Case Number" which had been allocated when the Application was filed. It recorded Mr Weber as the "Costs Applicant", and Aquaqueen as the "Costs Respondent". In terms, it announced the Costs Assessor's determination as being:
"1. The application is determined by assessing as a fair and reasonable amount of costs to be paid to the Costs Applicant the sum of $35,936.85.
2. The Costs Respondent is to pay the Costs Applicant the sum of $35,936.85"
The second s 368 Certificate was in identical terms, but for the case number and the sum of money specified.
Section 369 of the LP Act is, relevantly, in the following form:
"369 Costs of costs assessment
(1) This section applies to the costs of a costs assessment in relation to:
(a) ...
(b) costs to which section 364 (Assessment of costs-costs ordered by court or tribunal) applies, and
(c) ...
(2) A costs assessor is, subject to this section, to determine the costs of a costs assessment to which this section applies.
(2A) Subject to any order of or the rules of the relevant court or tribunal, the costs assessor may determine by whom and to what extent the costs of an assessment referred to in section 364 (Assessment of costs-costs ordered by court or tribunal) are payable and include the determination in the certificate issued under this section in relation to the assessment.
(3) The costs of a costs assessment to which this section applies are payable:
(a) ...
(b) for a costs assessment in relation to costs to which section 364 (Assessment of costs-costs ordered by court or tribunal) applies-by such persons, and to such extent, as may be determined by the costs assessor, or
(c) ...
(4) The costs assessor may refer to the Supreme Court any special circumstances relating to a costs assessment and the Court may make any order it thinks fit concerning the costs of the costs assessment.
(5) On making a determination, a costs assessor may issue and forward to each party and the Manager, Costs Assessment a certificate that sets out the costs of the costs assessment.
(6) If the application for a costs assessment has been dealt with by more than one costs assessor, a certificate issued can set out the costs of any other costs assessor.
(7) 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 costs.
(8) The costs of the costs assessor are to be paid to the Manager, Costs Assessment.
(9) The Manager, Costs Assessment may take action to recover the costs of a costs assessor or Manager, Costs Assessment.
(10) In this section:
costs of the costs assessment includes the costs incurred by the costs assessor or the Manager, Costs Assessment in the course of a costs assessment under this Division, and also includes the costs related to the remuneration of the costs assessor."
This section enables a Costs Assessor to determine as between the parties to the costs assessment (that is, the costs applicant or the costs respondent), by whom, and to what extent the costs of a costs assessment are payable, and to include that determination in the Certificate (s 369(2A) of the LP Act), where, as here, the assessment was being conducted as a result of a costs order made by a court under s 364 of the LP Act.
The first s 369 Certificate which was issued in this matter recorded the specific "Case Number" which had been allocated when the Application was filed, which was the same as the case number recorded on the s 368 Certificate. It also recorded Mr Weber as the "Costs Applicant", and Aquaqueen as the "Costs Respondent". In terms which differed from the s 368 Certificate in the same matter, it announced the Costs Assessor's determination as being:
"1. The application was determined and a Certificate of Determination of Costs was issued on 11 October 2011.
2. The costs of the costs assessment (Section 369 of the Act) to be paid by the Costs Respondent are in the sum of seven hundred and eighty six dollars and eight cents ($786.08)"
The second s 369 Certificate was also in the same form but for the case number and the dollar figure.
It is convenient to reflect here on what costs are included in the costs of a costs assessment which is being determined by an assessor under s 369 of the LP Act. So far as appears from the legislation, the costs will include two components, namely the application fee and a sum which reflects the costs charged by the Costs Assessor for the time spent on carrying out the costs assessment. It is possible that the costs to the successful party of the process of costs assessment, such as for a costs consultant to prepare the bill of costs, could be included in a s 369 Certificate. From time to time, although the practice is by no means a universal one, these costs will be included in a s 369 Certificate. Clearly because these are costs which are challengeable by the party against whom they are claimed, it is preferable if they are considered and dealt with as part of the s 368 assessment process, and to the extent that they are allowed, included in the s 368 Certificate.
The clear contemplation of the legislation is that a s 369 Certificate issued by the Costs Assessor will have two functions:
(a) to record the assessor's determination as between the parties as to how much is to be paid and by which party: s 369(2A) of the LP Act; and
(b) to form the basis of a judgment for the amount of unpaid costs as so determined: s 369(7) of the LP Act.
It is relevant to note that a s 369 Certificate only forms the basis of a judgment to the extent of the unpaid component of the costs which have been determined. The mechanism by which that unpaid component is determined, is set out in r 36.10 of the UCPR, in particular by r 36.10(3) to which earlier reference has been made.
In the circumstances here, Mr Weber submits that what has happened is precisely what the legislation provides for, and hence the proposition advanced by Aquaqueen, that the judgment issued by the Court is irregular, is, or else would be, a surprising result, and one contrary to the clear intention of the legislation.
Aquaqueen on the other hand, submits that this is the result dictated by the authority of this Court's decision in Kassem. Accordingly, it is necessary to consider that decision, and examine its central findings. In so doing, I accept that I should not depart from any principle found in the judgment in Kassem, unless I am satisfied that it is plainly wrong.
Kassem & Anor v Koutavas [2012] NSWSC 236
In this matter, the Court was obliged to deal with a submission that the judgment which had been entered was irregular because it included costs of the Costs Assessor, which upon the proper interpretation of the LP Act could only be collected by the Manager Costs Assessments.
Ward J held in her central finding, that the judgment which had been entered consequent upon the filing of a number of costs certificates including a certificate under s 369 of the LP Act "... is not in itself a judgment for the payment of those costs to the plaintiffs."
Her Honour went on to say at [46]:
"It seems to me that, strictly speaking, the judgment that should be entered to record and give effect to the judgment arising by virtue of the statutory provisions on the filing of a s 369 Certificate in circumstances such as the present (where the certificate is filed, as is administratively permissible, together with a s 368 Certificate and where the party filing the certificate has, as recorded on the s 369 Certificate, met the costs of the costs assessment but was not liable under the terms of the cost assessment to do so) should be in terms that record the primary obligation on the party liable under the s 369 Certificate to pay to the Manager, Costs Assessment the costs of that costs assessment as determined."
Her Honour held that, for purposes of regularity and compliance with the LP Act, in circumstances where two certificates, one under s 368 of the LP Act, and one under s 369 of the LP Act, were filed together, there should be not one, but two judgments. The first judgment would deal with the s 368 Certificate, thereby recording the judgment against the party liable for costs and in favour of the other party. Her Honour held that the second judgment, which would also be against the party liable for the costs, would be in favour of the Manager, Costs Assessment. This judgment would reflect the s 369 Certificate. Her Honour envisaged that the Manager, Costs Assessment would then enforce such judgment. Her Honour contemplated that where, as here, the costs applicant, had paid the costs to the Manager, Costs Assessment, then an assignment of the judgment debt would be possible, so as to enable the costs applicant to recover those costs in reliance on the assigned judgment.
Although her Honour accepted that practical difficulties were created by such a construction of the legislation, she favoured the view that the solution to this practical dilemma was to be found in the principles of restitution. The orders that her Honour made reflected the use of the principles of restitution to effect a result which did justice between the parties by ordering the costs respondent to pay the plaintiffs the sum which they had paid, to the Manager, Costs Assessment to obtain the release of the costs Certificate.
It seems, with respect, that her Honour must have accepted the submission made that the effect of the provisions of s 369(8) of the LP Act was a substantive one, which had the consequence, by necessary implication, of overriding the provisions of s 369(2A) of the LP Act, at least to the extent that costs which were being determined included costs which were payable for the costs assessment.
It seems that no submission was made to her Honour that there was an alternative construction to be placed upon the provisions of s 369(8) of the LP Act. One such alternative is that the subsection is susceptible to a construction that is a facilitatory one, rather than a substantive one. In those circumstances, it would not override the earlier provisions of s 369(2A) of the LP Act, but would rather have a coherent effect.
In other words, the Costs Assessor acting in accordance with s 369(2A) of the LP Act determines what sum is to be paid which include both the costs assessor's fees, and the application fees which are payable to the Court. The provisions of s 369(8) of the LP Act are facilitatory in the sense that there is no room for the payment of the costs assessor's costs by a party directly to the costs assessor himself or herself. It is to be remembered that the costs assessor is an independent officer undertaking a specified task under the legislation. Although the costs assessor renders a tax invoice to the Manager, Costs Assessment for their own fees, the costs assessor is not an employee of the Manager, Costs Assessment. The Manager, Costs Assessment, whose role is to administer the Costs Assessment Scheme, would not, but for the provisions of s 369(8) of the LP Act, otherwise have any right to collect the fees of the various costs assessors which are ordered to be paid by one party or another. It seems, to me, that the preferable interpretation of this subsection is that it merely facilitates the operation of the scheme by making the costs of costs assessors payable by one or other party to the Manager, Costs Assessment, rather than directly to individual costs assessors.
Section 369(9) gives to the Manager, Costs Assessment, the right to take action to recover the costs. This is a right, which is co-relative to the facilitatory obligation in s 369(8) of the LP Act. But for this provision, the Manager, Costs Assessment would not have any legal right to claim the costs of the costs assessor.
The right of action only exists where the costs remained unpaid, and then after an appropriate time has elapsed for their payment. The subsection does not dictate from whom the costs of the costs assessor are to be recovered. There is no reason why an action could not be taken against either the costs applicant or the costs respondent, at the election of the Manager, Costs Assessment. It is appropriate to note, however, that as a matter of the usual operation of the costs assessment scheme, one would ordinarily expect that action would not need to be taken, because costs certificates are not released until the costs are paid: see s 368(6) of the LP Act.
This is unsurprising. Section 353 of the LP Act provides that an application may be made to the Manager, Costs Assessment for the assessment of the whole or any part of costs ordered to be paid by a Court, either by the person who has paid or is liable to pay those costs, or alternatively, by the person who is entitled to receive or who has received those costs. In other words, the entitlement to apply for a costs assessment is not limited to the person in whose favour the costs order has been made.
There are many reasons why a party ordered to pay costs will seek an assessment of the costs which it has been ordered to pay. Not the least would be where that party had received in its favour, other orders for costs in the course of the litigation, and wished to arrive at a position of knowing whether he or she owes money arising from the various costs orders to the other party, or whether the other party owed them money. As well, where parties are in dispute as to the quantum of costs which may be payable, s 353(1) of the LP Act provides the mechanism by which such a dispute between parties can be resolved by the making of an application for a determination of the fair and reasonable amount of those costs. Where such determination has been made, it may be in the interests of the costs respondent to, having asked for the determination, collect the Costs Certificate for enforcement purposes. After all, some monies may already have been paid, and the party may be entitled to a refund.
Section 354(1) of the LP Act provides that an application for costs assessment must, unless the application fee has been waived or postponed wholly or in part, be accompanied by the fee prescribed by the regulations. Thus, the obligation to pay the application fee, at least in the first instance, falls on the costs applicant.
Regulation 124 of the Legal Profession Regulation 2005, provides that the prescribed fee is determined in the following way:
"124(2) For the purpose of s 354(1)(b) of the Act, the prescribed fee that is to accompany such an application is the greatest of the following amounts:
(a) $100,
(b) 1 per cent of the amount of costs remaining unpaid at the time the application is made,
(c) 1 per cent of the amount of costs in dispute at the time the application is made."
The applicant may, or may not, be entitled to recover that fee from another party depending upon the determination made by the costs assessor. However, the applicant will already have paid that fee. Hence the certificate issued by the costs assessor under s 369 of the LP Act, will determine that entitlement. In the circumstances of the present case, the judgment which has been entered includes such fees.
Was the Judgment Irregular?
For my part, I cannot accept that the judgment entered in these proceedings was irregular by reason of the inclusion in the judgment of a sum payable for the costs of the costs assessment, and, in particular, the costs assessor's costs component, because the judgment included sums contained on a s 369 Certificate.
I have formed that conclusion because I am satisfied of the following propositions dealing with a s 369 Certificate.
First, the fees (or costs) charged by a Costs Assessor are included within the definition of the term "costs" of the costs assessment in s 369(10) of the LP Act. Accordingly, it is expected that they will form a part of the assessment process which is initiated by one party or another, in order to obtain a determination of the fair and reasonable amount of costs as between the parties.
Secondly, at the conclusion of the costs assessment process, the LP Act gives to the Costs Assessor the obligation to determine in what sum, and by whom, the costs of the costs assessment ought be paid: s 369(2), and s 369(2A) of the LP Act;
Thirdly, that determination is to be recorded in a Certificate: s 369(2A) of the LP Act.
Fourthly, that Certificate, consequent upon being filed in a court of competent jurisdiction, becomes a judgment which determines that one of the parties to the costs assessment process is obliged to pay to the other party, the sum which the costs assessor has determined. The party determined by the Certificate to be liable, and obliged by the judgment, to pay the sum so determined, is the party who has had a right under the LP Act to participate in the costs assessment process, to put arguments and objections to the costs assessor, and who has the right under the LP Act to challenge in the ways there permitted, the contents of the Certificate.
Fifthly, the Manager, Costs Assessment does not have any right to participate in the costs assessment process, nor to make any submissions as to the outcome of that process. The Manager is not named as, nor is he or she in fact, a party to the matter. 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. In fact, rather than being a party, the Manager, Costs Assessment is the person given the responsibility for the effective operation of the costs assessment scheme: see LP Act, Part II Subdivisions 1, 2, 4 and 5.
Sixthly, it is clear that the judgment once entered, is then enforceable as a judgment of the Court in the terms which it is entered. That is a judgment by one party against the other party named in the Certificate as liable for a fixed and identified sum. Again, the Manager is not a party to the judgment. The judgment is not expressed to be in favour of (or against) the Manager. There is no requirement under the UCPR, for the Manager to be joined as a party when the Certificates are registered. Nor would the Manager be a necessary party to those proceedings.
Seventhly, the fact that the legislation provides a mechanism by which the Manager, Costs Assessment is entitled to be paid the costs of the costs assessor, and that the Manager may be entitled to exercise a right to collect those costs, does not seem to me to make a judgment in the sum determined in accordance with the legislation between the parties to the costs assessment matter to be irregular. On the contrary, the judgment so entered is a regular one, entered just as the UCPR permits.
Lastly, this construction means that it remains open, at all times, where the costs of the costs assessment have not been paid, for the Manager, Costs Assessment to take action to recover those costs. In those circumstances, the Manager would be party to the recovery action, as the plaintiff, and if successful, would obtain a judgment in his or her favour, upon which enforcement action could then be taken in the same way as for any other debt.
I appreciate that this conclusion differs from that reached by Ward J in Kassem. However, to the extent that it is necessary for me to disagree with her Honour's central finding, which I have described above, I do so with the utmost respect. However, I do so because it seems that her Honour's view, that a judgment entered against a party to the proceedings, in consequence of the filing and registration of a s 369 Certificate, is one which takes effect in favour of a person who is not a party to the proceedings (the Manager, Costs Assessment), and not in favour of the party filing the judgment, in whose favour it is expressed to be, is in the absence of any specific provision in the LP Act which enables this to occur, erroneous.
Discretionary Relief
Even if I were in error in reaching this conclusion and that, for the reasons expressed by Ward J in Kassem, the judgment entered on 28 November 2012, is irregular because it includes the sum of a few hundred dollars, representing the costs of the Costs Assessor, then setting aside that judgment as an irregularity remains a matter of discretion. It is clear that minor or trivial irregularities do not oblige a court, thereby, to set aside such a judgment as an irregularity.
The exercise of a discretionary power to set aside a judgment or order, whether under rr 36.15 or 36.16 of the UCPR, must necessarily pay attention to the important principle of finality of litigation.
As the High Court of Australia has said in Burrell v R [2008] HCA 34; (2008) 238 CLR 128 at [15]-[16]:
"15. Secondly, it is important to recognise that underpinning consideration of the issues presented in this matter are fundamental principles about finality of litigation. As was said in D'Orta-Ekenaike v Victoria Legal Aid ...: "A central and pervading tenet of the judicial system is that controversies, once resolved, are not to be reopened except in a few, narrowly defined, circumstances." That tenet finds reflection in rules concerning the bringing of an action to set aside a final judgment on the ground that it was procured by fraud ... and in doctrines of res judicata and issue estoppel. The principal qualification to the general principle of finality is provided by the appellate system. But in courts other than the court of final resort, the tenet also finds reflection in the restrictions upon reopening of final orders after they have been formally recorded.
16. The third consideration of principle which it is necessary to state at the outset is related to the second. It is that the principle of finality serves not only to protect parties to litigation from attempts to re-agitate what has been decided, but also has wider purposes. In particular, the principle of finality serves as the sharpest spur to all participants in the judicial process, judges, parties and lawyers alike, to get it right the first time. Later correction of error is not always possible. If it is possible, it is often difficult and time-consuming, and it is almost always costly."
In considering whether to exercise the discretion to set aside a judgment, this principle must be kept firmly in mind.
In Kendall v Carnegie [2006] NSWCA 302; (2006) 68 NSWLR 193, Bryson JA, with whom Hodgson and McColl JJA agreed, said at [45], that the phrase "sufficient cause" recognised the need for finality in judgments of the Court by protecting those judgments from being set aside "... for slight or uncertain causes". Although this case was dealing with Part 31 Rule 12A of the District Court Rules 1973, the terms of that rule are identical to r 36.15 of the UCPR. The remarks of Bryson JA are apposite here.
In determining whether "sufficient cause" has been shown, as required by r 36.15, or else whether it is "appropriate" in accordance with r 36.16 to exercise the Court's discretion to set aside a judgment, it is necessary to look at the whole of the relevant circumstances.
In so doing I have regard to the principles discussed by the Court of Appeal in Perpetual Trustees Australia Ltd v Heperu Pty Ltd (No.2) [2009] NSWCA 387; (2009) 78 NSWLR 190, namely:
- that controversies once resolved are not be re-opened except in a few narrowly defined circumstances: [32];
- a power to re-open proceedings such as that conferred by UCPR r 36.15, is to be narrowly confined and sparingly exercised: [33], [45];
- the power provided for in r 36.15 is based upon an irregularity in the steps which resulted in the entry of the judgment itself, and not on the merits of the judgment or irregularities in the anterior conduct of the proceedings: [16]; and
- rule 31.15 of the UPCR can only have limited application to judgments and orders made or entered after a hearing on the merits, or else where the parties had the opportunity to be heard on the merits: [17].
Here, it is clear that the basis upon which Aquaqueen submits that the judgment should be set aside as irregular, if otherwise legally correct, raises only a technicality, and not a point of any substantial merit which reflects the substantive rights of the parties.
The overwhelming majority of the judgment sum comprises monies owed by Aquaqueen to Mr Weber for the costs of unsuccessful proceedings which it brought against him in the District Court. Those proceedings were finally decided over two years ago. Although Aquaqueen foreshadowed an intention to appeal to the Court of Appeal, no such appeal has ever been lodged. There is now no proper basis available to Aquaqueen to support any submission that the orders for costs made in the District Court by Williams DCJ or Balla DCJ, were in some way or other inappropriate orders.
Both the costs orders made by Williams DCJ and by Balla DCJ were for costs to be payable on an indemnity basis. The costs assessment process which was carried out recognised that basis, and each Costs Assessor determined that none of the costs claimed were unreasonable. Accordingly, both Costs Assessors proceeded to issue Certificates which properly determined the amount of costs payable to Mr Weber.
Nothing has been put forward in the evidence before this Court, which in any way casts any doubt upon the reasonableness of the costs that were allowed by the Costs Assessors. Having regard to the length of the time which the proceedings in the District Court took, and the nature of those proceedings, there is nothing about the sums assessed by the Costs Assessors which appear on their face to be untoward.
Even were Aquaqueen to be able to be persuade a Court that it should be allowed to challenge those costs assessments, and I am far from convinced that Aquaqueen has any rational basis for so doing, Aquaqueen has not demonstrated that it has any reasonable prospects of success in challenging the assessments of the Costs Assessors as a matter of the merits of the matter. In any event, it has not lodged any application for review of these costs assessments.
The fact is that an entirely proper costs assessment process has been rationally followed to arrive at sums which on their face appears reasonable, and in respect of which Aquaqueen cannot point to any good basis to mount any challenge to those amounts.
As well, it is not suggested that the costs of the Costs Assessors have not been paid by Mr Weber, nor is it suggested that those costs are in some way unreasonable and able to be challenged. It is not suggested that Aquaqueen has not been ordered by the Costs Assessors, as part of the Certificates, to pay those costs.
In short, there is no argument of any merit whatsoever advanced by Aquaqueen to suggest that the interests of justice would require this Court to set aside the judgment which has been entered against it on the basis that such judgment was irregular. On the contrary, the interests of justice manifestly favour refusing to grant the relief sought by Aquaqueen.
Ultimately, the principle of finality of litigation weighs heavily in the exercise of the discretionary power of the Court to set aside any judgment. In the absence of any meritorious basis, and in the exercise of the discretion which the Court has, I am not persuaded that it is appropriate to make an order under either r 36.15 or r 36.16 of the UCPR, setting aside the judgment of this Court dated 28 November 2012.
Corporations Act 2001 Proceedings
The statutory demand was based upon the judgment of the Court dated 28 November 2012.
In the Originating Process seeking to set aside the Statutory Demand, Aquaqueen made the following assertions:
The costs assessment process had not come to an end;
Aquaqueen did not admit owing the debt;
Aquaqueen was seeking to set aside, by Notice of Motion, the judgment of 28 November 2012;
Aquaqueen intended to take further action including any appeals which may be appropriate to challenge the original District Court orders.
An analysis of these asserted bases demonstrates that they are without merit. Notwithstanding the assertion by Aquaqueen, the fact is that the costs assessment process has been finalised. The Costs Assessors have made their determinations, Certificates have issued, and no proceedings have been taken to set the Certificates aside.
So long as the judgment stands, there is no question that Aquaqueen owes the judgment amount. It is entirely beside the point that it does not admit owing the amount. In so far as Aquaqueen asserts that it intends to take further action about the District Court orders, the chronology of those orders, and the absence of any action being taken, which I have referred to earlier in these reasons, demonstrates that, Aquaqueen has conducted itself to date, intentionally, in a way which does not suggest that this assertion is anything more than an idle threat. A statement of intended action of this kind, is entirely unpersuasive as a basis to set aside a statutory demand based upon a properly entered judgment.
There is no basis demonstrated by Aquaqueen to set aside the statutory demand. That is because it was a demand that was properly made, based upon a judgment of the Court which is not irregular and which has not been set aside, varied or otherwise changed.
In those circumstances, it follows that the application to set aside the statutory demand ought be dismissed.
Orders
I make the following orders:
(1) Notice of Motion filed by Aquaqueen on 11 December 2012 be dismissed.
(2) Application to Set Aside Statutory Demand filed by Aquaqueen on 17 December 2012 be dismissed.
(3) Aquaqueen to pay Mr Weber's costs of both proceedings.
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Decision last updated: 05 September 2013
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