Hunters Hill Council v Hakim

1. [1]

   The Second Defendant in these proceedings, Yvonne Hakim, was the second defendant in proceedings commenced by the Council (the present Plaintiff) in the Land and Environment Court of NSW. In those proceedings consent orders were made by Payne J on 19 February 2009 by which it was ordered that Mr Hakim (the present First Defendant) and Mrs Hakim pay the costs of the Council as agreed or assessed.

2. [2]

   Subsequently in contempt proceedings brought by the Council in the Land and Environment Court Sheahan J ordered on 28 April 2010 that the Hakims pay the Council’s costs on and from 8 July 2009 on an indemnity basis as agreed or assessed.

3. [3]

   Following the making of the costs order by Sheahan J there were negotiations between the parties concerning the costs orders. Those negotiations led to the execution of a deed although there is no agreement on the present application when that deed was entered into. One copy of the deed is dated 20 September 2013. That copy is signed by both the General Manager of the Council and the Hakims. Another copy of the deed is signed only by the General Manager of the Council and is undated. A third copy of the deed is signed by the General Manager of the Council and the Hakims but is also undated. The forms of the deed are identical.

4. [4]

   The recitals to the deed disclose that it represents a compromise in relation to the costs ordered to be paid. Those recitals are as follows:

5. [5]

   The relevant parts of the deed for present purposes are as follows:

6. [6]

   Mrs Hakim says in her affidavit that when the deed was signed and dated on 20 September 2013 she took the deed and a cheque for $1,900 (a copy of which is annexed to her affidavit) to the Council’s offices and gave them to a member of the Council’s staff.

7. [7]

   For reasons unexplained there is correspondence thereafter which suggests that no deed had been executed. For example, a letter of 3 February 2014 from the Council’s solicitors, HWL Ebsworth, to Stephen Quatermain at New Legal (who had acted for the Hakims) referred to further negotiations in relation to clause 11 of the deed and then enclosed two copies of the deed for execution by the Hakims.

8. [8]

   On 18 June 2014 HWL Ebsworth wrote to the Hakims directly saying that they understood that New Legal was no longer acting for them. They requested the Hakims execute the deed and provide a cheque to pay the first instalment under the deed. They enclosed a copy of the deed for that purpose. The deed enclosed was the form of the deed that had only the signature of the General Manager of the Council on it.

9. [9]

   On 17 July 2014 HWL Ebsworth wrote again to the Hakims referring to the letter of 18 June 2014 and noting that no response had been received. They again requested execution of the Deed of Settlement together with the first instalment cheque. Mrs Hakim said that she executed another copy of the Deed on a later occasion (she could not recall when) and gave it to her husband to send to HWL Ebsworth.

10. [10]

    On 7 May 2015 HWL Ebsworth wrote to Mr Hakim (but not Mrs Hakim) referring to the Deed of Settlement “provided to you for execution in January 2015”. The letter said that no instalment payment had been made from January to April 2015. The letter went on to say:

11. [11]

    On 18 November 2015 the costs assessor issued a Certificate of Determination of Costs. The Assessor found that the amount of fair and reasonable costs were $47,622.40 but the Certificate indicated that a nil balance was payable.

12. [12]

    The Council then applied for a review of the Assessor’s assessment. The Review Panel set aside the Certificate and substituted its own Certificate for the sum of $47,622.40 against both Defendants.

13. [13]

    On 17 August 2016 the Council filed the Certificate in this Court and judgment in the sum of $47,622.40 was entered against the Defendants pursuant to s 368 Legal Profession Act 2004 (NSW). On 30 August 2016 the Council caused to be issued a Bankruptcy Notice against the Defendants.

14. [14]

    Mrs Hakim now seeks by Notice of Motion filed 16 September 2016 a stay of the enforcement of the judgment entered on 17 August 2016, an order that the judgment be set aside, a Declaration that pursuant to clause 2.4 of the Deed that the Plaintiff release her from the payment of costs and an order that the Plaintiff be permanently restrained from enforcing the costs order made by the Land and Environment Court.

Submissions

1. [15]

   Despite the correspondence that followed what appears to be the first execution of the Deed on 13 September 2009, both parties appear to accept that at some time a deed had been signed in the form referred to between the parties. The terms of the letter from HWL Ebsworth of 7 May 2015 make this clear and Counsel for the Plaintiff accepted that it was so. The issue between them was the effect on Mrs Hakim of the apparent failure by Mr Hakim to comply with his obligations under the deed.

2. [16]

   Mrs Hakim submitted that the promises and obligations under the deed were separate and not joint. The Deed made clear that the obligation to pay the agreed amount was an obligation of Mr Hakim alone. If Mr Hakim was in breach of his contractual obligations to pay the agreed monthly instalments then it was only he who would become immediately liable to pay the full amount of the agreed costs.

3. [17]

   Mrs Hakim submitted that on the execution of the deed she unconditionally acquired rights including a release of her from all the liability with respect to the costs. Accordingly, even if there was a repudiation of the deed by the failure of Mr Hakim to make the instalment payments that did not render the deed void ab initio. Reference was made to what Dixon J said in McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 476-477.

4. [18]

   Mrs Hakim submitted that she was entitled to have the judgment brought about by the registration of the costs certification set aside as one entered against good faith. This was because the judgment was entered contrary to the terms of the contract contained in the deed. The Council proceeded to assess the costs and then register the judgment knowing that Mrs Hakim had been released from her obligations to pay any amount of the settlement sum or the costs.

5. [19]

   The Council submitted that clause 2.4 of the deed should not be construed narrowly but should be read together with the clause 2.5 of the deed. Clause 2.5 makes it clear that the releases take effect upon the execution of the deed and payment of the settlement sum. In that way Mrs Hakim can only invoke the releases under the deed if it has been completely performed.

6. [20]

   The Council submitted that Mrs Hakim’s challenge to the judgment was too late. If she did not accept the decision of the Review Panel she ought to have appealed against that decision. Nor did she take any steps to enjoin the Council from assessing the costs.

7. [21]

   The Council submitted that there is a fundamental irregularity in seeking final relief, as Mrs Hakim does, on this interlocutory application. The Council submitted that the proceedings themselves are not such as to entitle a party to seek the orders Mrs Hakim seeks. The proceedings were nothing more than a registration process required to be gone through to register the costs certificate pursuant to ss 368 and 369 of the Legal Profession Act 2004 (NSW).

8. [22]

   The Council made reference to what was said in Frumar v The Owners of Strata Plan 36957 [2010] NSWCA 172 at [4] about an agreement being construed objectively according to what a reasonable person would understand by the language. The Council then submitted that it was apparent under the deed that Mrs Hakim had provided no consideration for the benefits that she received under the deed and that no reasonable person could envisage that if there was default under the deed she could escape any liability. In that way clause 2.4 must be read subject to performance by the Hakims under the deed as clause 2.5 envisages. That view, it was submitted, is strengthened by the use of the word “Parties” in clause 2.5. The Council submitted that this was a case of accord and satisfaction with conditions. On condition of the performance of payments by Mr Hakim, Ms Hakim obtains her release.

Construction of the deed

1. [23]

   In Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 Allsop P said at [19]:

2. [24]

   What seems fairly apparent is that clause 2.5 of the deed sits uneasily with some the deed’s other provisions. It seems likely that clause 2.5, being a general release clause, has been inserted in the deed without careful consideration of what was otherwise intended by the deed and the effect of some of the deed’s other clauses. It is necessary to construe the whole of the deed including clause 2.5 in a way that means that all of the provisions of the deed operate as consistently with one another as is possible.

3. [25]

   The deed, construed as a whole, is intended to reflect a compromise relating to costs twice ordered to be paid by the Hakims to the Council. There is first a compromise in the amount of those costs to the figure of $30,000 described as the Settlement Sum. Secondly, the Settlement Sum is to be paid over a period of 15 months mostly by equal instalments. Thirdly, the arrangement is that the person responsible for paying the Settlement Sum is Mr Hakim and Mrs Hakim is not to have any responsibility for those costs. That the costs are Mr Hakim’s responsibility to the exclusion of Mrs Hakim is apparent from the wording of clauses 2.1, 2.3 and 2.4. Clause 2.4 contains an acknowledgment by the Council when it agrees to the terms in the deed that Mr Hakim is alone responsible for the payment of the Settlement Sum, but at the same time it not only releases Mrs Hakim from responsibility for the payment of those costs but also promises to keep her indemnified from all claims pertaining to the costs orders made in the Land and Environment Court proceedings.

4. [26]

   It is necessary to read clause 2.5 consistently with those provisions. Otherwise clause 2.5 would suggest that Mrs Hakim only obtains a release on payment of the Settlement Sum. That is inconsistent with clause 2.4. Moreover, clause 2.5 read widely is inconsistent with clause 2.3 because a wide reading suggests that if the Settlement Sum is not paid the Council would be free to pursue (at least) Mr Hakim for the whole of the costs ordered in the Land and Environment Court proceedings. Clause 2.3, on the other hand, makes it clear that if there is a failure by Mr Hakim to make any instalment payment by the due date he becomes liable for the whole of the Settlement Sum.

5. [27]

   The Plaintiff drew attention to the discussion in Osborn v McDermott [1998] 3 VR 1 at 9 about the distinction between mere accord executor, and accord and satisfaction. Phillips JA (with whom Winneke P and Charles JA agreed) said:

6. [28]

   The Plaintiff submitted that under the Deed the position was an accord and satisfaction with conditions, that is, there had to be performance under the Deed before the release operated.

7. [29]

   However, the terms of the Deed, particularly clause 2.3 point strongly against that construction. If any payment (which would include the first) is not made, the Plaintiff’s remedy is not to sue on the original agreement but only to sue for the whole of the Settlement Sum. That suggests that the Plaintiff agreed to accept the agreement itself and not the performance of it: Evans v Powis (1847) 1 Exch 601 at 607-8; 154 ER 255 at 258. Clause 2.4 then reinforces that construction both by the words “In accepting these Terms” (that is, accepting the promise in satisfaction) and also by indemnifying Mrs Hakim, something which does not occur under clause 2.5 on both execution and payment.

8. [30]

   In my opinion, clause 2.5 must be construed as a release of Mr Hakim when the Settlement Sum is paid is full. Although the word “Parties” is used at the commencement of clause 2.5 the clause itself is concerned with two parties, not three. That is discernible from the references to “the other party”, “either party” and “against the other”. All of those references in ordinary English usage are speaking of two persons and not more. The use of the term “Parties” at the commencement of clause 2.5 is consistent with the construction of the deed because it is necessary for any release of Mr Hakim that Mrs Hakim executes the deed. Moreover, Mrs Hakim’s position is dealt with in cluse 2.4 – a further matter pointing to clause 2.5 only dealing with the release of Mr Hakim.

9. [31]

   Properly construed, upon execution of the deed Mrs Hakim is released and she obtains an indemnity from the Council against claims (including claims by the Council) whereas Mr Hakim obtains his release under clause 2.5 when he has paid the Settlement Sum.

10. [32]

    It was not clear from the Council’s submissions if it was being asserted that the Council was entitled to accept that the deed had been repudiated because its terms had not been performed at all. In other words, it was not clear if the Council was asserting that clause 2.3 did not operate simply to make the Settlement Sum payable but rather the position reverted to the position of the parties prior to the execution of the deed because there had been no performance of any sort by the Hakims. If that was being asserted there are difficulties with the assertion.

11. [33]

    First, the letter purporting to accept the repudiation was never sent to Mrs Hakim. Secondly, Mrs Hakim had no obligations apart from the execution of the deed and she performed that obligation.

12. [34]

    Thirdly, and significantly, the only evidence that is before the Court is that the first instalment was paid when Mrs Hakim returned the executed deed to the Council. There is no evidence from the Council contradicting her evidence in that regard. I cannot accept mere assertions in correspondence from the Council’s solicitors at a later time as demonstrating that no instalments have been paid. The letters are, in any event, mistaken inasmuch as they assert that no deed was executed on or about 20 September 2013.

13. [35]

    Accordingly, the evidence does not support the assertion that the Hakims, or at least Mr Hakim, have repudiated the deed entitling the Council to assess the costs as they have done. Even if no payment at all was capable (on acceptance of a repudiation) of restoring the parties to the status quo ante, once a payment was made clause 2.3 clearly operated. That is entirely consistent with what Dixon J said in McDonald v Dennys Lascelles at 476-477.

14. [36]

    On execution of the deed Mrs Hakim was released from all claims (as defined) pertaining to the costs orders made in the Land and Environment Court.

Can the judgment be set aside?

1. [37]

   Section 368 of the Legal Profession Act 2004 relevantly provides:

2. [38]

   In the present case the Certificate of the Costs Review Panel was registered in the Court on 17 August 2016. The effect of that registration was that the present proceedings came into being on that day. The effect of s 368(5) is that the amount of costs in the Certificate, $47,622.40, became a judgment of the Court for that sum. The issue is whether the provisions of Pt 36 Uniform Civil Procedure Rules 2005 (NSW) and in particular r 36.15, apply to such a judgment. If they do not, does the inherent power of the Court extend to the setting aside of a judgment brought about by the registration of the costs certificate under s 368 of the Legal Profession Act 2004?

3. [39]

   In Doyle v Hall Chadwick [2007] NSWCA 159 a costs assessor issued a certificate under s 208J of the Legal Profession Act 1987 (NSW) (the equivalent of s 368 in the 2004 Act). The certificate was registered and became a judgment of this Court. The judgment debtor then appealed to this Court to have the costs re-determined on grounds of errors of law. At first instance the appeal was allowed with the certificate and the judgment being set aside. The judgment creditor then appealed to the Court of Appeal. One of the issues to be determined on the appeal was whether the appeal itself was incompetent because the judgment came about by the filing of the certificate – a ministerial act: Frumar at [42].

4. [40]

   Justice Hodgson (with whom Mason P and Campbell JA agreed) said:

5. [41]

   It is apparent, therefore, that a judgment brought about by the registration of the certificate is capable of being set aside or varied at least in the circumstances that the certificate on which it is based is set aside or varied. The problem in the present case is that there may well be no basis for setting aside the certificate because the costs assessor and the review panel were asked to determine what costs were properly payable by the Hakims to the Council pursuant to the Court orders made. Although in Doyle Hodgson JA held that a costs assessor “assessing costs between a lawyer and client, can determine disputes as to the terms of the costs agreement”, he went on to say at [61]:

6. [42]

   Justice Hodgson made reference to the litigation in Muriniti v Lyons [2000] NSWSC 680 heard by Davies AJ. There was a dispute as to the terms of an agreement between a solicitor and a barrister where the agreement was apparently not in writing and the barrister was deceased. The solicitor objected to the costs assessor proceeding given the dispute, and commenced proceedings in this Court seeking a declaration to the effect that any agreement with the barrister was subject to a condition that had not been fulfilled. Davies AJ dismissed those proceedings, holding that any questions as to the terms of the agreement were to be determined by the costs assessor, not the Court. Hodgson JA said that that approach was correct except to the extent that there would need to be a hearing involving evidence about the terms of the dispute. In those circumstances Hodgson JA said it would have been open and reasonable for the terms of the dispute to have been resolved in the declaration proceedings brought in this Court.

7. [43]

   In the present case the dispute is not over the terms of a costs agreement which the costs assessor might have resolved, following Doyle. The real issue is whether there should have been any costs assessment against Mrs Hakim by reason of the Deed of Settlement which, as I have determined, released her from any obligation to pay costs to the Council. That was not a matter which the costs assessor should have resolved. The review panel was correct in that regard in saying that the costs assessor should not have held that the costs assessed were not payable.

8. [44]

   If Mrs Hakim had been given notice that the Council intended to have the costs assessed against her she could, if the Council could not be dissuaded from pursuing that course, have sought relief in this Court for a declaration that she was not liable to pay any costs pursuant to the Settlement Deed or for an order staying the costs assessment process against her.

9. [45]

   No notice was given to Mrs Hakim to enable her to take that course of action. The costs assessment should not have proceeded against her. No notice was given to her pursuant to s 368(6)(b) of the Act. The Council should not have registered the certificate to bring about the position where there was a judgment against Mrs Hakim. There can be little doubt in those circumstances that the judgment entered by the Council by the registration of the certificate was entered against good faith.

10. [46]

    In Cash v Wells (1830) 109 ER 826 a judgment by default was entered against the terms of an arrangement that the parties had that restrained the plaintiff from signing judgment unless there was default made in payment of a bill of exchange. The payment of the bill was punctually made. The obtaining of the judgment was against good faith. The correctness of that decision was affirmed in Roach v B & W Steel Pty Ltd (1991) 23 NSWLR 110 at 113. Although doubt has been cast upon the Court’s statement in Roach that it would be contrary to good faith for a client to attempt to retain the benefit of an order innocently obtained by his legal practitioner (see Shirriff v Nominal Defendant [1999] NSWCA 152 at [19] and Kendell v Carnegie (2006) 68 NSWLR 193; [2006] NSWCA 302 at [52], the correctness of the decision in Roach was not doubted. As those later judgments explained the ratio of the decision in Roach was that it would be against good faith for a legal practitioner to obtain judgment contrary to an earlier promise or representation even if the legal practitioner was not aware that his or her conduct was contrary to that agreement.

11. [47]

    Although the Court of Appeal in Doyle accepted that a judgment registered under the provisions of the Legal Profession Act was one from which an appeal could be brought and was one liable to be set aside or varied, the Court did not suggest that setting aside or variation was possible unless the underlying basis for the judgment was also set aside or varied – see at [49], [51] and [52]. Similarly, the Court said that there was no ground on which an appeal from the judgment could be upheld unless the underlying certificate was set aside. In addition, the limited nature of this type of judgment was discussed by the Court of Appeal in the later case of Frumar at [38] to [50].

12. [48]

    Accordingly, in my view, the provisions of r 36.15 Uniform Civil Procedure Rules 2005 (NSW) do not apply to the judgment unless the underlying certificate is also liable to be set aside. In the present case I do not consider that there is any basis upon which the underlying certificate could be set aside if an appeal was taken under sub-div 6 of div 11 of the 2004 Act. In any event, that appeal must be determined by the District Court pursuant to s 384. No error is identified in the assessment and determination of the review panel.

13. [49]

    Nevertheless, this Court is a superior court of record, it has inherent jurisdiction, and it has power to make appropriate orders in relation to its judgments: Doyle at [53].

14. [50]

    In my opinion, the appropriate relief at the stage the matter has now reached is to stay permanently the judgment that has been registered in the Court. Mrs Hakim seeks in her Notice of Motion a declaration that she has been released from her obligation to pay the costs ordered by the Land and Environment Court. Ordinarily such a declaration should be sought in substantive proceedings rather than in the proceedings brought into existence by virtue of the registration of the certificate. On the other hand, I do not see any irregularity in seeking a stay on enforcement of the judgment in the proceedings in which the judgment is entered. If it had been possible to set aside or vary the judgment there is nothing in the Court of Appeal’s judgment in Doyle that suggests separate proceedings ought to have been taken to do that. If, as Doyle accepts, a judgment obtained by registration can be affected in a variety of ways, it is appropriate that taking action to affect that judgment should be in those proceedings.

15. [51]

    If I am wrong in relation to this I consider that s 56 of the Civil Procedure Act 2005 (NSW) brings about the result that form should not triumph over substance and that both the declaration and any consequential orders should be made in the present proceedings.

Conclusion

1. [52]

   Accordingly, I make the following declaration and orders: