Miles v Slack

By an amended Summons filed on 5 December 2020 (“the Amended Summons”), the plaintiff, Mr Phillip Jacob Miles, appealed a decision of the Local Court of New South Wales made by Milovanovich ALCM on 4 December 2020 (“the first appeal”).

By a Summons filed on 24 March 2021 (“the Summons”), the plaintiff also appealed the decisions and orders made by van Zuylen LCM of 24 March 2021 (“the second appeal”).

On 30 November 2017, the defendant, Ms Christine Slack, engaged Mr Thomas (then of Jesse Icao Solicitors) to act for her in family law proceedings. A fixed fee costs agreement was entered into for $35,000 (“the fixed fee agreement”).

On 21 August 2019, Mr Baena withdrew as the defendant’s solicitor. On 29 August 2019, the plaintiff communicated to the defendant that Mr Baena had exercised a lien over the defendant’s legal documents. On 3 September 2019, the plaintiff issued an invoice for solicitor/client fees in the amount of $47,360, exclusive of the $5,000 already provided to Mr Baena on 30 November 2017 (“the fees”). This invoice was issued under the letterhead of Baena Legal, despite the defendant’s retainer being with Jesse Icao Solicitors.

On 5 September 2019, the plaintiff became an assignee of the debt of $47,360 purportedly owed by the defendant to Mr Baena.

Mr Baena has at times appeared as the plaintiff’s legal representative and then withdrawn. Mr Baena and the plaintiff operate out of the same office. By way of security for the fees, on 6 September 2019, the plaintiff lodged a caveat over the defendant’s interest in the real property at 10 Orlenton Place, Warrington County NSW (“the caveat”).

On 26 September 2019, the plaintiff advised the defendant that the fixed fee agreement had been superseded. The superseding costs agreement is not in evidence.

In October 2019, the defendant filed a lapsing notice with NSW Land Registry Services.

On 18 November 2019, the plaintiff filed a Statement of Claim seeking an extension of the operation of the caveat.

On 27 November 2019, the plaintiff appeared before Kunc J in ex parte proceedings and obtained an extension of the caveat until 13 December 2019.

On 13 December 2019, Darke J refused the plaintiff’s application for an extension of the caveat and ordered that the plaintiff pay the defendant’s costs of defending the extension application.

On 14 December 2019, the defendants’ solicitors communicated the following tax invoices pursuant to the defence of the extension application to the plaintiff, totalling $11,957:

On the same day, the plaintiff refused to pay the costs awarded and stated:

On 18 March 2020, the defendant filed an application for costs assessment of the costs awarded by Darke J (“the Costs Assessment”).

On 9 July 2020, the Costs Assessor issued two certificates:

These amounts have not been paid by the plaintiff.

The plaintiff filed for a review of that assessment on 16 July 2020 (“the Review”). On 14 September 2020, costs assessor, R.G Webley, wrote to the plaintiff on behalf of the Review Panel to inform him that the Review was complete.

The plaintiff did not pay for the release of the reviewed costs certificates between 14 September and 16 October 2020.

On 16 October 2020, the defendant obtained judgments in the Local Court of NSW for the amounts of $2,194.51 (Form C3, 2020/00297573) and $11,126.61 (Form C4A, 2020/00297566).

On 20 October 2020, Rafton Family Lawyers served on the plaintiff Examination Notices inclusive of sealed certificates as to certificates Form C3 (2020/00297573) and Form C4A (2020/00297566) (“the Examination Notices”).

On 20 October 2020, the defendant’s solicitor received email correspondence from the plaintiff, enclosing sealed Notice of Motions and Affidavits which alleged that the defendant had been “fraudulent… and fraudulently misleading the Court.”

On 22 October 2020, the defendant’s solicitor received email correspondence from the plaintiff which alleged that the defendant’s solicitor:

On 29 October 2020, the plaintiff filed a First Amended Notice of Motion in the Local Court (“the First Amended Motion to set aside Form C3 and Form C4A”) to set aside the judgments made by the Court on 16 October 2020, pursuant to Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”), Rule 36.15, which provides:

On 5 November 2020 a judgment for $24,255.60 was issued in the Local Court of NSW in favour of the plaintiff, as assignee for Mr Baena (file number 2020/00315254).

On 11 November 2020, the Principal of Rafton Family Lawyers authorised payment to be made for the release of the reviewed certificates from the firm’s own funds and billed that amount to the defendant.

Upon Rafton Family Lawyers paying the costs of the Review Panel, the reviewed certificates were released. The certificates provided as follows:

On 2 December 2020, the defendant filed the Registration of Certificate of Judgment Order for the amount of $3,009.60 (Form C8, 2020/00346819) and a Notice of Motion to substitute Form C4A with Form C7 (“the motion to substitute”).

On 4 December 2020, Milovanovich ALCM dismissed both the motion to substitute filed by the defendant and the First Amended Motion to set aside Form C3 and Form C4A, filed by the plaintiff.

Each party was ordered to bear their own costs. His Honour provided written reasons for his decision after the transcript of the proceedings did not become available. I will return to Milovanovich ALCM’s reasons below.

As mentioned, on 5 December 2020, the plaintiff filed the Amended Summons.

On 7 December 2020, the Local Court of NSW, by Notices of Orders Made, issued judgments for the amounts of $3009.60 and $10,557.13 in favour of the defendant (Forms C8, 2020/00346819 and Forms C7, 2020/00346848 respectively).

On 17 December 2020 and 4 February 2021 Registrar Jones of this Court directed Mr Baena to obtain written reasoning from Milovanovich ALCM from 4 December 2020.

On 3 February 2021, Rafton Family Lawyers commenced process for the Examination Notices for Forms C3 (2020/00297573), C7 (2020/00346848) and C8 (2020/00346819).

On 4 February 2021, the defendant’s solicitor sent email correspondence to Mr Baena, confirming whether Mr Baena had requested written reasons of Milovanovich ALCM. Mr Baena provided the defendant’s solicitor with a copy of the letter received from Registrar Gahan of the Local Court, indicating that the courts recording system had failed during these proceedings.

The same day, the defendant’s solicitor received email correspondence from the plaintiff’s solicitor, Mr Baena, enclosing a sealed copy of the plaintiff’s affidavit sworn 4 January 2021 describing the plaintiff’s version of what happened in the Local Court on 4 December 2020.

On 5 February 2021, Mr Baena requested written reasonings of Milovanovich ALCM from 4 December 2020.

On 10 February 2021, the Local Court Registry issued Examination Notices for Form C8 (2020/00346819), Form C7 (2020/00346848) and Form C3 (2020/00297573) and ordered that the Examination Notices were to be heard at John Maddison Tower on 25 March 2021, at 9:30am.

On 15 February 2021, the defendant served the plaintiff with the Examination Notices for Form C8 (2020/00346819), Form C7 (2020/00346848) and Form C3 (2020/00297573).

On 19 February 2021, the defendant’s solicitor received correspondence from the plaintiff again demanding the withdrawal of the Examination Notices for Form C8 (2020/00346819), Form C7 (2020/00346848) and Form C3 (2020/00297573) filed before the Local Court.

The plaintiff filed two Notices of Motion in the Local Court, the first on 26 February 2021 and the second on 1 March 2021, seeking to have the Examination Notices set aside and that the solicitor (Natasha Speirs) pay the plaintiff’s costs. The Notices of Motion sought to set aside the three Examination Notices for Form C8 (2020/00346819), Form C7 (2020/00346848) and Form C3 (2020/00297573) filed before the Local Court (“the Notices of Motion to set aside the Examination Notices”).

On 4 March 2021, the defendant’s solicitor sent correspondence to Mr Baena seeking to be provided with the plaintiff’s evidence, namely Exhibit PJ-1 and the affidavit of Phillip Jacob Miles dated 26 February 2021.

The Examination Notices were listed for 25 March 2021.

On 17 March 2021, the defendant’s solicitor sent correspondence to the Civil Registry at Sydney Local Court asking for the Court appearance to be vacated and relisted on or after 15 April 2021 because the defendant had not received the plaintiff’s affidavit from 4 December 2020. The plaintiff opposed this request. The court appearance with respect to the Examination Notices was not vacated.

On 24 March 2021, van Zuylen LCM dismissed the Notices of Motion to set aside the Examination Notices and ordered that the plaintiff pay the defendant’s costs of that motion heard on 24 March 2021 for a fixed amount of $3,600, rather than the full amount sought by the defendant.

The plaintiff then brought the second appeal by way of summons and both matters were both subsequently listed to be heard together.

The first appeal relates to a decision by Milovanovich ALCM on 4 December 2020. His Honour considered two Notices of Motion:

The relief sought in the First Amended Motion is as follows

Due to a technical problem, there is no transcript of the decision. However, Milovanovich ALCM provided written reasons of his decision to the parties. The plaintiff’s recollection of his Honour’s reasons is disputed by the defendant and is inconsistent with his Honours written summary. His Honour stated that:

Each Notice of Motion was refused with each party to pay their own costs.

The plaintiff filed affidavits dated 20 October 2020, 9 December 2020, 4 January 2021 and 12 March 2021. All these affidavits relied on s 75A of the Supreme Court Act 1970 (NSW).

The affidavit dated 20 October 2020 was material before the Local Court and as such it was not treated as fresh evidence before the Court. The remaining affidavits were read to the Court, subject to objections.

The plaintiff’s affidavit dated 9 December 2020 recounts his version of events of 4 December 2020. Paragraphs 2, 5 and 6 were admitted on the basis that there was no transcript and as such, this was the best alternative evidence available. Paragraphs 3 and 4 were not read. The objection to paragraph 7 was upheld.

The plaintiff’s affidavit of 4 January 2021 was prepared in response to the Supreme Court Registrar’s direction of 17 December 2020. It is an additional affidavit to that of 9 December 2020, filed following the correspondence which confirmed there was no transcript available of the proceedings of 4 December 2020. It is substantially the same as the affidavit dated 9 December 2020.

The affidavit of 4 January 2021 was taken as read, save for paragraph 2.

The plaintiff’s affidavit dated 11 March 2021 was prepared in response to the written reasons of Milovanovich ALCM and was not read.

In substance, the plaintiff indicated the following differences between his version of events on 4 December 2020 and Milovanovich ALCM’s written reasons:

The defendant submitted that the plaintiff’s affidavit of 4 January 2021, which describes the events of 4 December 2020, is at odds with the written reasoning of Milovanovich ALCM. The defendant submitted that the Court should prefer Milovanovich ALCM’s own recollection of his reasons to that of the plaintiff.

Whilst there may be a debate as to a possible departure between the reasons given ex tempore and the later written reasons for decision, there appears to be no proper basis to refuse to accept the reasons for decision by written Milovanovich ALCM. There was no transcript and as such his Honour published written reasons. More significantly, this issue is ultimately not necessary to resolve to reach a conclusion on the first appeal.

The Second Appeal relates to a decision made by van Zuylen LCM on 24 March 2021.

His Honour was considering Notices of Motion filed by the plaintiff on 26 February 2021 (2020/00346819) and 1 March 2021 (2020/00346848).

The Notices of Motion to set aside the Examination Notices were dismissed. The following are van Zuylen LCM’s reasons for that decision:

Van Zuylen LCM dismissed the Notices of Motion seeking to set aside the Examination Orders and ordered that the plaintiff pay the defendant’s costs of the motion heard 24 March 2021 in the fixed amount of $3,600, rather than the full amount sought by the defendant.

The plaintiff appealed the decision of Milovanovich ALCM made on 4 December 2020 pursuant to s 39 of the Local Court Act 2007 NSW (“the Act”). He also contended that, if leave is required under s 40 of the Act leave be granted.

The relief sought in the first appeal is set out as follows:

The parties in their submissions use the nomenclature, Grounds 1 (a), (b), (c) and (d), Ground 2 and Ground 3 to describe the grounds in the Amended Summons. I will adopt the same approach, notwithstanding the grounds of appeal commencing at paragraph 7.

When adjusted in this fashion, the grounds of the first appeal were:

The second appeal was brought pursuant to s 30 of the Act. Reliance was not placed upon the provisions of s 40 of the Act.

The relief sought in the second appeal is as follows:

The grounds for the second appeal are as follows:

Section 39(1) of the Act provides an appeal is a right to a party who is dissatisfied with a judgment or order of the Local Court to this Court “on a question of law”.

Such an appeal must be predicated upon “an identified question of law” or “an erroneous answer in respect of a question of law”: B & L Linings Pty Ltd v Chief Commissioner of State Revenue (2008) 74 NSWLR 481; [2008] NSWCA 187 at [75] (Allsop P as his Honour then was) and [150] (Basten JA).

An appeal lies to the Supreme Court against a judgment or order of the Local Court sitting in its General Division, by leave, on a ground which involves a question of mixed law and fact (s 40(1)) or which is an interlocutory judgment or order, a consent judgment or order or an order for costs: s 40(2). That provision is in the following terms:

Pursuant to s 41(1) of the Act, the Supreme Court may determine an appeal made under ss 39(1) or 40 by varying the terms of the judgment or order; setting aside the judgment or order; setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court’s directions; or dismissing the appeal.

The plaintiff submitted that this matter involved a “gross abuse” of the Court’s processes by a solicitor and a miscarriage of justice on two occasions, by two Magistrates.

The plaintiff submitted that:

The plaintiff’s submissions with respect to Ground 1 were that:

The plaintiff did not make submissions with respect to grounds 2 and 3.

The plaintiff submitted that the finding that the plaintiff was attempting to re-visit issues already determined by other tribunals in the absence of any evidence, constitutes an error of law.

The plaintiff submitted that there were overwhelming problems with the magistrate’s decision and the court should set aside the decision and uphold the appeal.

With respect to Ground 1, the plaintiff submitted:

With respect to Ground 2, the plaintiff stated:

With respect to Ground 3, the plaintiff submitted that the plaintiff’s notices of motion were supported by strong evidence and backed by legislation and authorities. His Honour erred in awarding costs against the plaintiff when the defendant’s examination orders were obtained in bad faith; this constitutes an error of law.

The defendant seeks the following orders in the first and second appeal:

The defendant submitted that:

The defendant submitted that the considering the plaintiff clearly did not intend to seek to rely upon the Review Costs certificate (then unreleased), despite being aware the review had been completed. The defendant had progressed the matter on the Certificates that she had received. On 16 October 2020, the defendant filed and registered the original costs certificates and instructed Rafton Family Lawyers to send to the Plaintiff the Examination Notices.

The defendant submitted that the plaintiff avoids the fact that the new review certificates were available since 16 September 2020 but he did not pay for their release. It is relevant for the Court to note that no steps were taken whilst the review was underway or before the certificates were available to the plaintiff upon payment by him for a review he sought. The defendant took no steps before the completion of the Review.

The plaintiff’s affidavit from the 12 March 2021, which includes his versions of what happened in the Local Court on 4 December 2020, is not accepted by the defendant.

The defendant submitted that she has acted in “good faith” as there had been a refusal to pay the assessed amounts at every turn by the plaintiff. The plaintiff holds no discernible assets over which enforcement of a judgment could be made. Examination of the plaintiff is the next necessary step in this circumstance, and this remains relevant today.

The defendant submitted that:

With respect to ground 1(a), the defendant submitted:

With respect to Ground 1(b), the defendant submitted:

With respect to Ground 1(c), the defendant submitted:

Ground 1(d) effectively restates ground 1(b) and the same opposition is made.

With respect to ground 2, the defendant submitted that given that his Honour dismissed both parties’ motions, the defendant submitted that it is the ordinary practice of costs that each party to bear their own costs and his Honour did not err in law in failing to award the plaintiffs costs.

With respect to ground 3, the defendant submitted that this ground is a restating of ground 2 and is again opposed as above for ground 2.

The Summons sought to appeal the decision of van Zuylen LCM on 24 March 2021 pursuant to s 39 of the Act.

The defendant submitted that it is clear from the transcript of the proceedings that the Magistrate found there was insufficient evidence that the reviewed amounts in from the cost assessment should be set-off against the solicitor/client costs. There was a lack of evidence to show the “link” referred to in Grant v NZMC Ltd [1989]:

In oral submissions, the defendant submitted that:

With respect to grounds 1(a), (b) and (c) the defendant submitted:

With respect to ground 2 the defendant submitted:

With respect to ground 3 the defendant submitted:

Finally, the defendant submitted that the Examination Orders required to find assets able to meet all the unpaid cost have been stayed pending the Appeal determination by this Court and dates for these orders should now be set. The defendant seeks all outstanding costs be ordered to be paid forthwith. The defendant seeks that the plaintiff be restrained from filing further proceedings against her in respect to these proceedings without leave of the court.

The plaintiff filed a reply to the defendant’s written submissions which largely repeats his original written submissions.

It is necessary to begin by outlining the costs assessment regime under the Legal Profession Uniform Law (NSW) (“LPUL”) and Legal Profession Uniform Law Application Act 2014 (“LPULA Act”).

Applications may be made for an assessment of legal costs payable to a law practice: LPUL s 198(1). On a costs assessment, the costs assessor must determine whether or not a valid costs agreement exists and determine whether legal costs are fair and reasonable and, to the extent they are not fair and reasonable, determine the amount of legal costs (if any) that are to be payable: LPUL s 199(2).

On making a determination of costs, a Costs Assessor is to issue a certificate that sets out the determination: LPULA Act s 70(1). Section 70(5) relevantly provides:

Thus, when Form C3 and Form C4A were filed in the Local Court, the defendant obtained judgments of that Court for the “amount of unpaid money” by the force of the statute.

As part of the costs assessment regime, a party to a costs assessment may apply for a review of the costs assessor’s determination: LPULA Act s 83(1). The review is conducted by a Review Panel, which is constituted by two Costs Assessors: LPULA Act s 82. The Review Panel is tasked with the function of reviewing the determination of the costs assessor and may affirm the Costs Assessor’s determination or set aside that determination and substitute a determination that should have been made by the Costs Assessor: LPULA Act s 85(1). If the Review Panel sets aside the Costs Assessor’s determination and substitutes the determination, the Panel is to issue a certificate that sets out its determination: LPULA Act s 87(1). S 70(5) of the LPULA Act applies to the certificate issued by a Review Panel in the same way that that provision applies for a certificate issued by a Costs Assessor: LPULA Act s 87(2).

Section 86 of the LPULA Act relevantly deals with the operation of the Costs Assessor’s determination if an application is made to a Review Panel. That section provides:

The effect of s 86(1) was considered by Dowdy FCCJ in Taouk v Lawyers Pty Ltd (2018) 342 FLR 121; [2018] FCCA 3390. Although his Honour’s views do not bind me, I respectfully agree with his Honour’s observations at [17] – [19] as follows:

Thus, the effect of the plaintiff’s application for review of the Costs Assessor’s determination was that, on 16 July 2020, the force and effect and “operation” of Form C3 and Form C4A were suspended. The Review Panel may end that suspension if the panel either affirmed the determination of the Costs Assessor or determines that it is appropriate in the circumstances. In this case, the review panel did not, and has not, ended that suspension. Therefore, the suspension began on 16 July 2020 and is ongoing.

In Mohareb v Palmer [2018] NSWCA 220, Beazley P (as Her Excellency then was) and Macfarlan JA stated at [9] that:

In my view, this passage confirms that the statutory suspension of the Costs Assessor’s determination affects the ability to obtain a judgment of a Court by the filing of a costs certificate.

It follows that there was an inability of the defendant to obtain judgment once the suspension began on 16 July 2020 by force of s 86 of the LPULA Act.

In the matter before Milovanovich ALCM, the principal contention of the plaintiff is that the judgments made pursuant to Form C3 and Form C4A should be set aside pursuant to r 36.15 of the UCPR. Rule 36.15 gives the Court the power to set aside an order or judgment “if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith”. A party seeking relief under r 36.15 must show “sufficient cause”.

In Calandra v Murden [2015] NSWCA 231, it was stated that a judgment may be entered irregularly if “there was no amount of unpaid costs in respect of which the respondent was entitled to judgment”: at [20]. The Court in Calandra cited Hughes v Justin [1894] 1 QB 667 in which Lopes LJ described as “irregular” a default judgment signed for an amount to which the plaintiff was not entitled: at 670.

In my view, the circumstances in this case demonstrate that the judgments given or entered in the Local Court on 16 October 2020, pursuant to Form C3 and Form C4A were filed irregularly. At the time that the judgments were given or entered, the force and effect and “operation” of Form C3 and Form C4A were suspended. Therefore, the defendant was not entitled to judgment.

When the plaintiff sought relief to have the judgments that were entered pursuant to Form C3 and Form C4A set aside in the First Amended Notice of Motion, the Magistrate was obliged to consider whether the judgment obtained by registration of the certificates should be set aside.

As noted above, the written reasons of the Magistrate stated:

The Magistrate did not elaborate further and explain whether he meant by “could be set aside” a general reference to the scope of r 36.15 or that in the circumstances before him, the criterion for the operation of the rule had been met, namely, the “judgment” was irregular, illegal or against good faith. In any event, the Magistrate did not explain the basis for why the judgment could be set aside. Thus, if his Honour was attending upon the criteria for the operation of r 36.15, he did not explain whether the judgment was entered irregularly, illegally or against good faith (or a combination of these grounds). His Honour did not articulate the facts or circumstances that gave rise to the irregularity, illegality or acting against good faith. Although it is conceivable that his Honour likely believed that one of these three grounds were made out on the evidence, a bald conclusion in that respect does not satisfy the duty to give adequate reasons.

In reaching this conclusion, I am mindful that the Magistrate had made an ex tempore judgment in a busy list. In that context, I respectfully agree with the observations of Johnson J in Director of Public Prosecutions (NSW) v Illawarra Cashmart Pty Limited (2006) 67 NSWLR 402; [2006] NSWSC 343 at [15] in relation to an appeal under the Crimes (Appeal and Review) Act 2001 (NSW):

However, in this case, the written reasons were written by Milovanovich ALCM months after the judgment. In circumstances where the learned Magistrate became aware that no transcript was available and the parties would likely have to rely on his written reasons, it can be expected that his Honour’s reasons would identify the basis and facts leading to his decision.

The fact that my view may accord with the view of the Magistrate – that the judgment could be set aside – does not mean that the failure to give adequate reasons is not made out or should be blindsided. This is because, as Mason P stated in Beale v Government Insurance Office (NSW) (1997) 48 NSWLR 430 at 431, there is a principle that:

The judicial obligation to provide reasons was also considered in Young v Cesta-Incani [2007] NSWCA 229, at [54], where Tobias JA (with whom Hoeben and Ipp JJA agreed) cited with approval what had been said in Wiki v Atlantis Relocations (NSW) Pty Ltd [2004] NSWCA 174; [2004] 60 NSWLR 127:

In Stoker v Adecco Gemvale Constructions Pty Ltd [2004] NSWCA 449, Santow JA (Mason P and Sheller JA agreeing) observed, at [41], after referring to a number of authorities, that the failure to give adequate reasons may be an error of law. His Honour referred to Beale v Government Insurance Office of New South Wales (1997) 48 NSWLR 430, in which Meagher JA (at 444) had observed that, in most cases where the provision of inadequate reasons is asserted as constituting an error, it is assumed that such an error is an error of law.

In my view, the inadequacy of the Magistrate’s reasons, in circumstances where the issue as to whether the judgments should be set aside, was real and live resulted in an error of law.

It is true that the power to set aside a judgment or order is not an obligation to exercise that power. Rule 36.15 states that the “judgment or order…may…be set aside if” made irregularly, illegally or against good faith (emphasis added). This language demonstrates that, once it is shown that the judgment or order is irregular, illegal or made against good faith, the power to set aside the judgment or order is discretionary.

In this respect, consideration as to the utility of making the order, as Milovanovich ALCM did, was available. Utility is one of many factors that should be considered when the Court exercises its discretion to set aside a judgment or order.

An example would illustrate when utility can favour the exercise of the discretion not to set aside a judgment, notwithstanding irregularity in the giving of the judgment. Suppose, as is the case here, that the costs assessor’s certificates were filed after an application for review was made but before the determination of the review panel was known. During that period, the operation of the costs assessor’s determination would be suspended by virtue of s 86 of the LPULA Act. Later, it was discovered that the Review Panel affirmed the Costs Assessor’s determination: LPULA s 85(1)(a). Despite the irregularity in obtaining judgment because, at the time of the filing, the person filing the certificate was not entitled to the amount, there would be no utility in setting aside the judgment only for the same person to file the identical certificate (for the identical amount) later.

However, those are not the circumstances of this case. The distinguishing feature is that the Review Panel had set aside the Costs Assessor’s determination and substituted their determination. In circumstances where the amount owed is different, the proper course is to set aside the irregular judgment and allow the parties to seek a judgment that reflects the correct amount owed.

The exercise of a discretion under r 36.15 may evoke a question of law if the exercise of the discretion is produced upon incorrect jurisdictional foundation (Collier v Director of Public Prosecutions [1994] NSWCA 54) or a failure to take into account a relevant consideration (El-Hadi v Australian Timbers (NSW) Pty Ltd [2021] NSWSC 501 at [19] (Rothman J)). However, it is unnecessary to consider that issue. Even if the exercise of the Magistrate’s discretion involved mixed questions of fact and law, it is appropriate to grant leave to bring the appeal under s 40 of the Act. This is so because the Magistrate, by eliding over the criteria in r 36.15, appears to have failed to have regard to the significance of the irregularity in the judgment entered which, by virtue of his decision, remained extant.

In that respect, I respectfully do not agree with the learned Magistrate that there was no utility in setting aside the judgment on the basis that the plaintiff was now seeking to enforce a different certificate. If a new judgment is going to be entered for the certificates of the Review Panel, there is, in my view, strong utility to setting aside the judgment given from the Costs Assessor’s certificates, particularly when entered irregularly. This is because a judgment of the Court, until set aside, has legal consequences. A judgment allows the party in whose favour the judgment has been given to take advantage of various legal provisions. For example, the party can serve an examination notice to require the person bound by the judgment to provide answers or produce specified documents for inspection: UCPR r 38.1(1).

Further to my earlier finding of legal error, I conclude the Magistrate erred in his exercise of discretion in refusing to set aside the judgment obtained by the defendant with respect to Form C3 and Form C4A.

A conclusion of this character might typically result in a remittal to the Local Court. However, given the expenditure of time and resources on this question and that each party sought a resolution of the r 36.15 issue in this Court, it is appropriate for the Court to resolve the substantive issue. In all the circumstances it is appropriate for an order to be made varying the decision below so as to set aside the judgments entered on 16 October 2020.

Putting aside a contention in relation to the award of costs in the proceeding before van Zuylen LCM, the plaintiff relied upon two substantive grounds to challenge the decision of the Magistrate. Both of those grounds were pursued under s 39(1) of the Act. First, it was submitted that the Magistrate had misapplied r 36.15 of the UCPR in rejecting the motion to set aside the examination notices. Secondly, it was contended that the Magistrate had failed to understand or apply the provisions of ss 21 and 96 of the CPA in refusing to award a set-off against any costs awarded by Darke J.

Both of those propositions raise questions of law as to the proper operation of the rule or statutory provisions in the circumstances of this case. Unlike the first appeal, no part of the second appeal involves a challenge based upon the giving of inadequate reasons.

As the first ground was developed before van Zuylen LCM, the plaintiff relied upon two separate pathways under r 36.15 as the threshold propositions in that rule to set aside the examination notices. As to the motion to set aside the examination notices under Form C3, the plaintiff relied upon the existence of an irregularity, namely, that the examination notice was directed to a judgment which was irregular and was the subject of appeal to this Court. He also relied in that respect upon an abuse of process although it is not entirely clear what was the foundation for that proposition. In substance, the plaintiff contended that the defendant was estopped from obtaining the examination orders because “an appeal was on foot” (that, according to him, relates to 2020/00297573).

In the challenge to the remaining two examination notices concerning Form C7 and C8 (2020/00346848 and 2020/00346819 respectively), the plaintiff took a different tact, no doubt in recognition of the fact that the examination orders sought in those respects derived from judgments entered from the review panel’s certificates. In that case, it was submitted that the examination orders were sought in bad faith because they constituted an abuse of process. The abuse of process was said to derive from the fact that the plaintiff was owed a debt identified through a “Certificate of Determination” which could be set-off having regard to the provisions of s 21 of the CPA. Here it was suggested that the bad faith arose because the defendant owed the plaintiff “a large sum of money” and was seeking the examination orders because she was impoverished. Reliance was placed in the proceedings below upon Chand v Zurich Australian Insurance Limited [2013] NSWSC 102; Perpetual Trustees Australia Ltd v Heperu Pty Ltd (No 2) (2009) 78 NSWLR 190; [2009] NSWCA 387 at [16]; Slater & Gordon Ltd v Sellars [2020] NSWSC 1793 at [30].

As to the first of those bases to set aside the examination notices, van Zuylen LCM essentially concluded that the issue was caught by the appeal and should be determined in this Court. Whatever the merits of that conclusion, the plaintiff was ultimately correct in his contention that one of the examination orders was not available because the judgment with respect to Form C3 had been entered irregularly. That conclusion derives from the conclusions that I have reached as to the first appeal.

As to the remaining basis for the challenge to the application for examination orders, van Zuylen LCM in substance concluded that the process adopted by the defendant in seeking the examination orders was available to the defendant, there was no prejudice to the plaintiff in the examination proceedings continuing and there was an absence of proof before the Court as to the nature of the judgment debt asserted by the plaintiff. The Magistrate also referred to the giving of examination notices as a procedural step and that the actual hearing of the examination notices was the next day.

On the earlier factual background set out in this judgment, it is clear in my view that the defendant had available the procedural step of seeking examination notices in the context of Form C7 and Form C8. There is no evidence that the judgment obtained as a result of filing those certificates were irregular or against good faith. There was an entitlement to file the Review Panel’s certificates in the Local Court to obtain judgment for the amount payable: LPULA Act ss 70(5), 87(2). The Review Panel’s certificates did not confront the same difficulties as Form C3 and Form C4A, which had been suspended under s 86 of the LPULA Act. There is nothing irregular in filing certificates certifying costs that are payable to the person: Bevan v Bingham [2022] NSWSC 863 at [115] and [118]. Once that conclusion is reached then it follows that examination notices may be issued against a judgment by the defendant.

Similarly, I do not consider that the initiation of process available by statute can properly give rise to a conclusion that the defendant is engaged in an abuse of process or, to use the expression within r 36.15, “against good faith”.

The application for a set-off arises through a different procedural course under ss 21 and 96 of the CPA. Nothing in those provisions is suggestive of them acting as a stay or limitation upon any of the processes under the LPUL or LPULA. Rather, the opposite is the case. The provisions appear to act in relation to proceedings where there is an action upon a debt as indicated by the text in s 21(1) of the CPA, which states:

It may be noted that, in this case, the defendant contends that the plaintiff did not file a defence which adequately sought a set-off as contemplates by s 21(1) of the CPA.

In these circumstances, I do not consider that the plaintiff has demonstrated legal error in van Zuylen LCM refusing to set aside the examination notices. There was no proper basis, in my view, as a matter of law, for the examination notices to be set aside as an abuse of process or against good faith pursuant to r 36.15 of the UCPR.

One further observation may be made. Neither party addressed the question of whether the provisions of r 36.15 were available to set aside examination notices, as distinct from examination orders. It is sufficient for me to observe, having regard to the above conclusion, that I have considerable doubts that r 36.15 may be employed to that end. This is because an examination notice is merely a “notice in writing” that one person (“the person in whose favour a judgment or order has been given or made”) has served on another person (“the person bound by the judgment or order”) requiring them to do certain things within a specified period: UCPR r 38.1. It is not a step taken by a Court, let alone a “judgment or order of the court” that was “given”, “entered” or “made” as described in r 36.15 of the UCPR. I note, in contrast, that an order for examination is properly an order that “[t]he court may…make” (CPA s 108(1); see also UCPR r 38.3) and one that is capable of being set aside under the provisions of r 36.15 of the UCPR.

The second basis for the challenge to van Zuylen LCM’s decision was his failure to order a set-off against the defendant’s claim for a debt owed to the defendant in consequence of the costs orders made by Darke J. I have earlier mentioned that it was intended that the set-off was the costs for the fees as assessed from the family law proceedings.

At the outset, I recap by noting that the fees in question were assigned to the plaintiff from Mr Baena. The plaintiff had lodged in that respect a caveat over the defendant’s property. The defendant had issued a lapsing notice and the plaintiff had then sought to extend the operation of the caveat pursuant to the Real Property Act 1900 (NSW). Ultimately, Darke J dismissed that application and ordered the plaintiff to pay the defendant’s costs which were initially assessed under Form C3 and Form C4A, and ultimately in the form of the Review Panel’s certificates.

In rejecting this aspect of the plaintiff’s case, van Zuylen LCM stated:

A good deal of the defendant’s submissions on this issue were devoted to propositions relevant to the notion of an equitable set-off. Thus, reliance was placed upon considerations as to the relevant connection between proceedings or, more generally, notions of interconnectedness.

There is a requirement in equitable set-off that the claims be connected in some manner although the case law is yet to develop a consistent, clear test by which that connection can be tested: AWA Ltd v Exicom Australia Pty Ltd (1990) 19 NSWLR 705 at 710–714 (Giles JA). Generally, this requires consideration of facts including, amongst other things, the nature of the connection between the claims, how close they are and whether set-off would be unjust: Signature Resorts Pty Ltd v DHD Constructions Pty Ltd (1995) 18 ACSR 627 at 635 (Bryson J).

However, the plaintiff’s contentions in this respect were not directed to the notion of an equitable set-off, which as Ward J (as her Honour then was) found in Lahoud v Lahoud [2012] NSWSC 284 at [75] arose in this Court’s inherent jurisdiction. Instead, the plaintiff relied upon ss 21 and 96 of the CPA.

Section 96 allows orders to be made setting off costs ordered in the same or separate set of proceedings: Ryan v South Sydney Junior Rugby League Club Ltd [1975] 2 NSWLR 660, especially 664D (Bowen CJ in Eq). However, it is clear that s 96 of the CPA is not applicable between a judgment by Darke J of this Court and judgments entered into the Local Court. That is because s 96(1) makes clear that the section applies to “two or more judgments of the same court”.

I turn next to consider s 21 of the CPA. In Jim’s Group Pty Ltd v Quindar Pty Ltd [2014] NSWSC 647, Beech-Jones J (as his Honour then was) makes clear debts may be “mutual” when they are between the same parties: at [66]. Therefore, statutory set-off, as distinct from equitable set-off, can operate in circumstances where judgments sought to be set-off are from different courts provided that they are between the same parties: at [66] – [68].

In Ritchie's Uniform Civil Procedure New South Wales, the authors cited Beech-Jones J’s judgment for the proposition that “[t]his comparatively undemanding criterion of ‘mutuality’ permits a defendant to set off against the plaintiff’s claim any judgment debt, including a debt arising from a judgment in another court or jurisdiction”.

I am satisfied that there is mutuality because the proceedings involve the same parties. However, there are three difficulties with obtaining relief under s 21 of CPA.

First, it is doubtful from the evidence before me that there is a “debt” within the meaning of s 21(6) of the CPA. Sections 70(4) and (5) of the LPULA Act make clear that there is a difference between recovering a debt, which arises when the amount paid exceeds the amount specified in the certificate, and a judgment, which arises when the amount specified in the certificate has not been fully paid. This demonstrates that the legislature clearly intended that a judgment obtained under s 70(5) of the LPULA Act is distinct from a debt.

Secondly, there is no evidence of the plaintiff (the defendant in the proceedings before Darke J) making a defence to set off the defendant’s (the plaintiff in the Darke J proceedings) claim as required by the plain terms in s 21(1) of the CPA.

Lastly, it is difficult to understand how the plaintiff’s arguments, if made out, would affect the examination notices. There remains, as I have explained above, valid judgments in the Local Court from the filing of Form C7 and Form C8. Even if the Local Court had the power to set aside the examination notices, I see no reason why it should exercise that power given that they were made pursuant to proper judgments of that Court.

For these reasons, the plaintiff has not demonstrated an error of law on the part of van Zuylen LCM’s decision and the second appeal should be dismissed.

In the circumstances, I have concluded that the plaintiff should be granted leave to appeal with respect to the first appeal and the appeal allowed with respect to the decision Milovanovich ALCM. It is appropriate that the decision below be varied pursuant to s 41(1)(a) of the Act so as to set aside the judgments entered with respect to Forms C3 and C4A.

The defendant has been successful in resisting the second appeal which will result in orders being made dismissing the appeal. It should be noted in that respect, that the second appeal overlapped with the first appeal so far as the examination orders were issued with respect to Form C3. The orders made with respect to the first appeal should be sufficient to extinguish the examination notice issued in that respect. However, if there be any doubt about that matter, I will contemplate the making of a declaration.

In the respective appeals, the plaintiff sought costs in various forms which preceded upon the basis of the success of the appeal in this Court. Various submissions were also made about costs in the Local Court. Given that the plaintiff has not been successful with respect to the second appeal, then the question of costs will need to be reserved so that the parties submissions with respect to costs may be developed in the light of this judgment. I therefore propose to reserve the question of costs.

The Court will hereunder propose various orders for the final disposition of the appeals and then direct the parties to make submissions about the form of the orders and costs within the time specified in those orders.

In relation to the first appeal, the proposed orders are as follows:

In relation to the second appeal, the proposed orders are as follows:

The Court makes the following orders:

It is proposed that the final orders and costs are to be determined on the papers unless an application is received for a further hearing.