FEDERAL COURT OF AUSTRALIA
IN THE MATTER OF RUSCA BROS SERVICES PTY LTD ACN 154 554 551
DATE OF ORDER:
THE COURT ORDERS THAT:
1. Pursuant to s 459J(1)(b) of the Corporations Act 2001 (Cth) (Corporations Act) or, in the alternative pursuant to s 459H of the Corporations Act, the statutory demand issued to the plaintiff by the defendant dated 7 May 2018 (Demand) be set aside.
2. The defendant pay the plaintiff’s costs of the application to set aside the Demand.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
1 This is an application made under s 459G of the Corporations Act 2001 (Cth) (Act) to set aside a statutory demand dated 7 May 2018 served on the plaintiff, Rusca Bros Services Pty Ltd (Rusca), by Dlaw Pty Ltd (Demand). Rusca specialises in the delivery of projects in the civil construction and mining industries in remote areas of Queensland, Northern Territory and Western Australia. Dlaw Pty Ltd trades as Doyles Construction Lawyers (referred to as Doyles in these reasons). Doyles are Rusca’s former solicitors.
2 The Demand seeks payment of $191,022.15 from Rusca made up of the net amount owing, after deduction of a sum of money held in trust, for three unpaid invoices for legal fees. The Demand was accompanied by an affidavit sworn on 7 May 2018 by James Doyle, a director of Doyles, who, among other things, deposed that the total amount claimed in the Demand was due and owing and that he believed there was no genuine dispute about the existence or the amount of the debt.
3 In its application to set aside the Demand, Rusca principally relies on ss 459H and 459J of the Act.
4 In about September or October 2017 Rusca engaged Doyles to act for it in respect of a dispute with Lendlease Building Pty Ltd (Lendlease) concerning construction works undertaken by Rusca at RAAF Tindal Northern Territory Military Base (Matter).
5 In September 2017 Doyles issued a copy of its standard retainer agreement and costs disclosure (Costs Agreement) to Rusca. It seems that the Costs Agreement was provided to Rusca under cover of a letter dated 13 September 2017 addressed to Jim Sweeney (13 September Letter). The 13 September Letter relevantly included under the heading “estimate of costs”:
The estimate is based on the information available to us to date. It is an estimate, not a quotation and is subject to change as the matter proceeds.
As it is not possible at this time to provide an accurate estimate of the total costs, often a range of estimates are provided.
The estimate may change depending upon the progression of the case. The major factors which may affect the estimate are:
1. Failure or delay in receiving instructions;
2. The complexity or uncertainty concerning legal issues affecting your matter.
3. Manner in which the opponent responds to the steps taken by us;
4. The duration of negotiations between you and the other party;
5. The extent of the requirement for any expert evidence or involvement of Counsel.
On our present instructions, we estimate that the costs of the work required are as follows:
Description of Initial Works
Review documents and provide initial advice on liability and process
$5,000 - $10,000 plus GST
The above estimate may be used as a guide to future anticipated costs but the figures may change dependent on the works required.
Please note that the costs estimate provided is based on the assumption that the estimated work can be concluded within 3 weeks.
6 The Costs Agreement included the following:
(1) under the heading “Standard costs agreement” at cl 3:
If you accept this offer you will be regarded as having entered into a costs agreement. This means you will be bound by the terms and conditions set out in this document, including being billed in accordance with it. Acceptance may be by any one of the following ways:
• Signing and returning our costs disclosure and estimate
• Giving us instructions after receiving this document;
• Oral acceptance.
Failure to accept our offer within 7 days of dispatch of this document can result in the immediate withdrawal of our offer to act on your behalf.
(2) under the heading “Standard retainer agreement” at cl 20, titled “rights”, that the client has, among other things, a right to receive a bill of costs; request an itemised bill of costs after receipt of a lump-sum bill; and apply for costs to be assessed within 12 months if unhappy with Doyles’ costs;
(3) under the heading “Acknowledgement” at cl 1:
1. In retaining DOYLES to work on this project on the terms of the Costs Agreement, you acknowledge that we have advised you that:
(e) There may be other firms of solicitor who can act for you in respect of this matter and who may charge you scale expenses and professional fees, which are less than our own. You warrant to us that you have to your own satisfaction conducted a tender process to ensure that you have chosen us as an appropriate firm to undertake your project and that you have agreed to the payment of costs on this basis of this Retainer Agreement as a result of that tender process.
(4) under the heading “Standard cost disclosure”:
(a) at cl 3, titled “Estimate of costs”:
We will provide you with a costs estimate from time to time. The estimate will be based on the information available to us to the date of the estimate. It is an estimate, not a quotation and is subject to change and the total cost may exceed the estimate.
Where it is not possible at this time to provide an accurate estimate of the total costs, a range of estimates is provided instead.
They may, and probably will, change when more information is available to us. They are to be provided on the basis that they are estimates of the future costs in addition to costs already invoiced for previous periods.
The major factors which may affect the estimates are:
• Failure, delay or difficulties in receiving accurate and comprehensive instructions or documentary evidence;
• Manner in which the other party opposes the steps taken by us;
• The issue of the legal proceedings;
• The duration of the matter which may vary according to the number of issues in contention and whether or not legal proceedings are issued;
• The extent of the requirement for expert evidence, if any;
• The extent of the involvement of Counsel, if any.
Each invoice constitutes in lieu of or support of other estimates for estimate of the month or period in which the work invoiced was done and an estimate for the work to be done in the next month or period
(b) at cl 7, titled “Dispute as to legal costs”:
The Act gives you the right to: apply to the Supreme Court to have the bill of costs assessed for its fairness and reasonableness by a Costs Assessor; or to have the dispute mediated; or a costs agreement set aside by the Costs Assessor on the basis that it is not fair, just or reasonable. Applications for assessment should be made before the expiry of 12 months after receipt of the bill of costs, or request for payment of costs made by us, or full payment made to us.
(c) at cl 15 that where the client is a “Commercial or Government Client”, as defined by the Legal Profession Uniform Law (NSW) (LPUL), Pt 4.3 of the LPUL is excluded to the maximum extent permitted by law.
7 Robert Rusca, a director of Rusca, had increasing concerns about Doyles’ costs. On 27 April 2018 Mr Rusca sent an email to Mr Doyle in which he noted that significant fees had been paid, expressed surprise at the size of the bill rendered that month and assured Mr Doyle that “all reasonable costs” would be paid but that they would “have to go through each bill to make sure it is reasonable” as it was already well beyond what was expected. On or about that date Rusca engaged alternate lawyers, Gillis Delaney Lawyers.
8 On 4 May 2018, with Rusca’s authority, Warwick Kerridge, executive director, corporate finance, O’Connell Partners, sent an email to Mr Doyle in which, among other things, he said that, due to the size of Doyles’ invoices, he believed that they should be “assessed quickly”.
9 On 8 May 2018:
(a) Mr Rusca sent an email to Mr Doyle seeking an “itemised bill for [Doyles’] total billings so I can get a result on this payment”; and
(b) Rusca received the Demand. As noted above the Demand seeks payment of $191,022.15. That amount is made up as follows:
invoice 5344 dated 9 February 2018 $43,731.77
invoice 5449 dated 5 March 2018 $69,509.00
invoice 5552 dated 13 April 2018 $87,781.38
less amount held in trust $10,000.00
10 Mr Rusca had been advised by Gillis Delaney that the costs sought by Doyles are significant and that Rusca was entitled to receive an estimate of the costs to be incurred in respect of the Matter. According to Mr Rusca no such estimate was ever received.
11 On 16 May 2018 Gillis Delaney wrote to Doyles noting that at no time did Rusca understand that it would incur costs of the magnitude billed by Doyles and that no disclosure of such costs had ever been made. Gillis Delaney requested certain information in relation to the costs incurred.
12 Doyles responded to Gillis Delaney on the same day providing copies of the Costs Agreement, a trust account statement and nine invoices dated in the period 4 October 2017 to 16 May 2018. Eight of those nine invoices include the following statement:
This invoice is issued as an offer to agree to the costs invoiced as invoiced for the relevant work or disbursement. You may accept that offer by paying the invoice, giving further instructions or by signing and returning the invoice. Alternatively contact us in writing by email to KRuiz@doylesconstruntionlawyers.com to identify any concerns you may have.
This invoice is an estimate of the costs likely to be incurred if the matter continues with similar intensity for a further period equivalent to the period covered by this invoice. Please advise in writing should you require a more detailed estimate.
13 On 17 May 2018 Gillis Delaney again wrote to Doyles, this time expressly in relation to the Demand. Among other things, those lawyers asserted that there was no debt due and payable because, contrary to the requirements of the LPUL, in effect Doyles did not provide Rusca with an estimate of the total costs and/or information disclosing any significant change to the legal costs that would be payable by Rusca in relation to the Matter. Accordingly, it was asserted that Rusca was not required to pay the costs and Doyles was not entitled to commence or maintain proceedings for the recovery of any legal costs, including the costs the subject of the Demand, until they had been assessed or any costs dispute had been determined by the Costs Assessment Section of the Supreme Court of New South Wales (Supreme Court).
14 By email dated 17 May 2018 Mr Doyle responded to Gillis Delaney’s letter noting, among other things, that:
We consider that your letter is misconceived in expecting in the circumstances estimates as may be available for simple disputes or property matters. Such estimates were not required and monthly estimates were given in accordance with our cost agreement.
15 On 25 May 2018 Rusca filed a costs assessment application in the Supreme Court (Assessment Application) seeking assessment of nine bills rendered by Doyles to it in the period 4 October 2017 to 16 May 2018, including the three bills the subject of the Demand. The total amount of the costs the subject of the Assessment Application is $500,529.79.
16 On 28 May 2018 Rusca lodged its application to set aside the Demand with the Court.
17 The Assessment Application was assigned to Maurice Castagnet as costs assessor.
18 By letter dated 28 June 2018 Doyles requested Mr Castagnet to determine, as a preliminary point “in order that there is an enforceable determination”, whether Rusca is a commercial client under s 170 of the LPUL either as a large proprietary company within the meaning of s 170(2)(b)(i) or because it agreed to the payment of costs on a basis that is the result of a tender process pursuant to s 170(2)(f).
19 By email dated 25 July 2018 Mr Castagnet made directions for the further conduct of the Assessment Application.
20 By email dated 1 September 2018 Mr Castagnet relevantly informed the parties that:
In order to progress this matter, I have made a preliminary determination in relation to the section 170 issue.
The costs applicant does not accept that it is a commercial client. The costs respondent contends that the costs applicant is a commercial client on two alternative bases which are referred to below.
I have considered all the submissions made by the parties on the issue.
Based on the material before me, in particular, the standard retainer agreement issued by the costs respondent to the costs applicant on 13 September 2017 and the notes attached to 8 of the 9 invoices issued for the payment of costs applicant during the period of the retainer, I have come to the conclusion, as a matter of construction, that the costs applicant is not a commercial client within the meaning of section 170(2)(d)(i) of the Legal Profession Uniform Law (NSW) (the LPUL).
The costs respondent contends in the alternative, that the costs applicant is a commercial-client under section 170(2)(f) of the LPUL, having agreed to the payment of costs on the basis that is the result of a tender process.
The costs applicant says that there was no tender process resulting in the engagement of the costs respondent. The costs respondent has not provided me with any evidence of its involvement in a tender process that secured its engagement. I therefore do not accept the costs respondent’s contention that the costs applicant is a commercial client on this basis.
In my view, the issue of whether or not the costs applicant was a commercial client should have been canvassed at the time that instructions were received and prior to the issue of a retainer agreement. That would have eliminated any ambiguity. An appropriate retainer in clear terms could then have been issued.
More detailed reasons for my decision will be provided in my final determination.
21 By letter dated 21 June 2019 addressed to Rusca and Doyles (21 June Letter), Mr Castagnet informed the parties that in accordance with ss 70 and 71 of the Legal Profession Uniform Law Application Act 2014 (NSW) (LPUL Application Act), s 201 of the LPUL and reg 41 of the Legal Profession Uniform Law Application Regulation 2015 (NSW) (LPUL Regulation), he had forwarded to the Manager, Costs Assessment (Manager), the Certificate of Determination of Costs, the Certificate of Determination of Manager’s Assessment and the Costs Assessment Reasons (collectively Costs Determination) and that the Manager would send out those documents on payment of the costs of the Costs Assessor, amounting to $11,165. Mr Castagnet concluded his letter by noting that his “task has now been completed” and that any further correspondence in relation to the Assessment Application should be directed to the Manager.
22 As at the date of the hearing before me neither party had taken steps to obtain the Costs Determination.
rusca’s application to set aside the demand
23 As noted above Rusca relies on ss 459H and 459J of the Act as the bases upon which the Demand should be set aside.
24 In particular it contends that:
(1) the costs comprising the debt the subject of the Demand are the subject of the Assessment Application. Thus pursuant to s 194 of the LPUL there is a statutory prohibition on proceedings to recover those costs so that the debt the subject of the Demand is not presently due and payable or, in the alternative, the Demand is an impermissible way of seeking to coerce a party to pay a disputed debt;
(2) there was a failure on the part of Doyles to provide Rusca with an estimate of total legal costs as required by s 174 of the LPUL such that, pursuant to s 178, Doyles is not permitted to commence or maintain proceedings for recovery of any or all of its legal costs until those costs have been assessed;
(3) given the Assessment Application, which has not been finally determined, irrespective of the operation of ss 174 or 194 of the LPUL, there is a genuine dispute about the existence or the amount of the debt the subject of the Demand;
(4) even if Rusca is a commercial client and thus not entitled to an assessment of its costs, which is denied, Rusca has a right to challenge Doyles’ costs given the overriding legal obligation on legal practitioners to only charge their clients costs that are fair and reasonable, a client could not be expected to pay costs that are not fair and reasonable, charging more than an amount that is fair and reasonable in connection with the practice of law is conduct capable of constituting unsatisfactory professional conduct or professional misconduct and such unreasonable or unfair costs could never be due and payable;
(5) there is an off-setting claim arising from Doyles’ failure to lodge an adjudication application on time which caused Rusca to suffer loss and damage comprising at least the amount of fees charged by Doyles for the preparation and lodgement of the adjudication application and the costs incurred by Rusca in retaining new lawyers in relation to that issue; and
(6) there is some other reason to set aside the demand within the meaning of s 459J of the Act including that the Demand appears to have been issued for an improper purpose, including to coerce Rusca to pay a disputed debt.
statutory framework and legal principles
25 A company may apply for an order setting aside a statutory demand within 21 days after the demand has been served on it: s 459G of the Act.
26 Section 459H of the Act applies where, on an application under s 459G, the court is satisfied that there is a genuine dispute between the company and the person serving the demand about the existence or amount of the debt to which the demand relates or that the company has an off-setting claim, and prescribes a formula to be applied to calculate the “substantiated amount” of the demand. If the substantiated amount is equal to or more than the statutory minimum the court can vary the demand to reflect that amount. Section 459H has effect subject to s 459J of the Act.
27 Section 459J(1) provides that on an application under s 459G the court may set aside the demand if it is satisfied that, because of a defect in the demand, substantial injustice will be caused unless the demand is set aside or there is some other reason why the demand should be set aside.
28 In Ligon 158 Pty Ltd v Huber (2016) 117 ACSR 495;  NSWCA 330 at  Barrett AJA (with whom McColl and Meagher JJA agreed) referred to the decision of Black J in Re Wollongong Coal Ltd (2015) 110 ACSR 134;  NSWSC 1680 in which a summary of the principles relating to the task of the court in determining whether there is a genuine dispute for the purposes of s 459H of the Act was set out as follows:
(1) A dispute is “genuine” if it is not “plainly vexatious or frivolous” or “may have some substance” or “involves a plausible contention requiring investigation”. A genuine dispute requires that it be bona fide and, to that effect, be premised on sufficiently particularised grounds that are “real and not spurious, hypothetical, illusory or misconceived” and which demonstrate the dispute’s “objective existence” and “prima facie plausibility”.
(2) The test is governed by principles analogous to those which underpin an application for an interlocutory injunction or summary judgment. The court must, however, guard against setting the threshold too low for that is liable to defeat the legislative purpose of the section.
(3) The task faced by a company challenging a statutory demand on the genuine dispute ground is by no means at all a difficult or demanding one. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow and the demand will be set aside. A finding to the contrary could only be arrived at if the contentions advanced are so devoid of substance that no further investigation is warranted.
(4) The function of the court is merely to determine the existence of a genuine dispute. While this neither requires nor invites it to weigh or assess the merits of the dispute, the court will not exceed its legitimate function by having regard to evidence which bears upon whether the asserted dispute is genuine.
29 In relation to the existence of an off-setting claim for the purposes of s 459H of the Act, in Macleay Nominees v Belle Property East  NSWSC 743 at  Palmer J said:
In my opinion, a genuine offsetting claim for the purposes of CA s.459H(1) and (2) means a claim on a cause of action advanced in good faith, for an amount claimed in good faith. “Good faith” means arguable on the basis of facts asserted with sufficient particularity to enable the Court to determine that the claim is not fanciful. In a claim for unliquidated damages for economic loss, the Court will not be able to determine whether the amount claimed is claimed in good faith unless the plaintiff adduces some evidence to show the basis upon which the loss is said to arise and how that loss is calculated. If such evidence is entirely lacking, the Court cannot find that there is a genuine offsetting claim for the purposes of s.459H(1) and (2).
30 As to quantification of an alleged off-setting claim, there must be some monetary value ascribed to the claim that has at least some basis in logic or some reasonably cogent basis of quantification, even if in part theoretical: see Asia Pacific Glass v Sindea Trading Co  NSWSC 334 at ; Yoogalu Pty Ltd v Intentia Australia Pty Ltd  NSWSC 278 at .
31 In Meehan v Glazier Holdings Pty Ltd (2005) 53 ACSR 229;  NSWCA 24 at  Santow JA (with whom Tobias JA and Young CJ in Eq agreed) said the following about s 459J(1)(b) of the Act:
There being no defect in the demand, reliance was placed upon whether there be “some other reason” as would satisfy s459J(1)(b). The claimants contend that such reason cannot be based simply on some need to bring to the relationship between the parties some broad form of perceived fairness or reasonableness. Rather there must be “sound or positive ground or good reason” to set aside the statutory demand for “some other reason”, which was consistent with the legislative intent of Pt 5.4 of the Act: Portrait Express (Sales) Pty Ltd v Kodak (A’asia) Pty Ltd, above, at 757 per Bryson J; Kezarne Pty Ltd v Sydney Asbestos Removal Services Pty Ltd (1998) 29 ACSR 11 at 18 per Austin J. It is the claimants’ contention that the reasons given by the trial judge do not satisfy the latter requirements but are indeed based upon some broad form of perceived fairness or reasonableness.
32 In Grocon Constructors (Qld) Pty Ltd v Dexus Funds Management Ltd as Trustee for the Dexus 480Q Trust (No 2)  FCA 1117 at - Moshinsky J said in relation to the circumstances in which a statutory demand may be set aside pursuant to s 459J(1)(b) of the Act:
14 A statutory demand will be set aside for “some other reason” under s 459J(1)(b) of the Corporations Act where the conduct of the creditor in issuing the statutory demand is unconscionable, an abuse of process, or gives rise to substantial injustice. Conduct falling within this category includes using the statutory demand process by a creditor as a debt collection device. The reasons for this were explained by Martin CJ (with whom Owen and Miller JJA agreed) in Createc Pty Ltd v Design Signs Pty Ltd (2009) 71 ACSR 602 at  as follows:
The issue of the statutory demand, and the appeal from the decision of the master setting it aside, reflect a fundamental misconception as to the purpose of the statutory demand process created by Pt 5.4 of the Corporations Act. That purpose is to provide a means whereby the insolvency of a company may be established for the purposes of an application to wind up that company. Its purpose is not to provide a means whereby those claiming a genuinely disputed debt can avoid the obligation of establishing their entitlement to that debt in a court of appropriate jurisdiction by placing commercial pressure on the party resisting payment. There is a clear inference from the evidence that Createc’s purpose in issuing the statutory demand was the improper purpose of using the statutory demand process to enforce payment of a debt which it knew to be genuinely disputed. That is an abuse of process.
15 Martin CJ also stated, at -:
48 Following the introduction of Pt 5.4, doubts were expressed as to whether the statutory procedures provided an exclusive code for the resolution of proceedings brought as a result of the issue of a statutory demand. However, in David Grant & Co Pty Ltd v Westpac Banking Corp (1995) 184 CLR 265; 131 ALR 353; 18 ACSR 225;  HCA 43 (David Grant), Gummow J, with whom the other members of the High Court agreed, expressed the following view (at CLR 279; ALR 362; ACSR 234):
It also may transpire that a winding-up application in respect of a solvent company is threatened or made for an improper purpose which amounts to an abuse of process in the technical sense of that term, as explained in Williams v Spautz. However, in an appropriate case, injunctive relief may then be available to the company in a court of general equity jurisdiction.
49 Since that decision, it has generally been accepted that the court retains a residual jurisdiction to restrain reliance on the statutory demand procedure on the ground of an abuse of process: see House of Tan Pty Ltd v Beachiris Pty Ltd (1996) 21 ACSR 527 at 528: SMEC at ; Roberts at -; and State Bank of New South Wales v Tela Pty Ltd (No 2) (2002) 188 ALR 702;  NSWSC 20 at . In Roberts, the jurisdiction was exercised on the grounds of impropriety of purpose, and a winding-up application was dismissed with costs. Similarly, in Old Kiama Wharf Co Pty Ltd v DCT (2005) 55 ACSR 223;  NSWSC 929, an application to set aside a statutory demand was upheld because the court concluded that the process was being used to “attempt to apply pressure to a taxpayer to force payment of a debt”: at .
50 Adopting the criterion from Williams v Spautz (1992) 174 CLR 509; 107 ALR 635;  HCA 34 (Williams), suggested by Gummow J in David Grant, there will be an abuse of process if the purpose of the party issuing the statutory demand is not the purpose of pursuing the statutory demand to wind up the company on the ground of insolvency, but rather to use the process as a means of obtaining an advantage for which the process is not designed or to obtain some collateral advantage beyond what the law offers – such as the application of pressure to compel payment of the disputed debt.
a preliminary issue
33 At the hearing I refused Doyles’ application for leave to cross-examine Mr Rusca. I provided brief reasons for doing so at the time, but indicated that I would also provide written reasons.
34 Doyles submitted that it should be permitted to cross-examine Mr Rusca because it was entitled to:
(1) test his evidence that Rusca did not receive any costs estimates from Doyles;
(2) cross-examine on the issue of whether Rusca is a commercial client for the purposes of s 170 of the LPUL. Doyles contended that the evidence before the Court established that Rusca was a commercial client but that they were entitled to elicit a concession from Mr Rusca as to that matter and to put beyond doubt the question of whether there is a genuine dispute about that issue;
(3) cross-examine on the issue of who made the decision not to proceed with the adjudication application which is now said to give rise to an off-setting claim and why that decision was made;
(4) cross-examine on the question of whether Rusca is solvent, which they contended was an issue which is material to whether the Court would grant the application to aside the Demand; and
(5) cross-examine Mr Rusca on the character and conduct of those controlling Rusca and whether Mr Rusca still has control of the company. Doyles said that the evidence that has been filed raises a concern about those matters and that limited cross-examination should be permitted.
35 In Mandarin International Developments Pty Ltd v Growthcorp (Australia) Pty Ltd (1998) 143 FLR 408 (Mandarin International) Santow J considered the scope of cross-examination on an application to set aside a statutory demand sought by the defendant in that case. In doing so at 422-423 his Honour said:
… It is always difficult to determine whether cross-examination should be permitted in such a case. As Hayne J in Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1993) 11 ACSR 362 at 364 observed:
“Counsel for the bank sought leave to cross-examine the deponents. It was said that the cross-examination would deal with two subject matters: first that the defences filed on behalf of the companies were a recent invention in that on the day that the statutory demands were made there was no suggestion that liability to repay the facility provided by the bank to Redlock and Lamina was in issue or that the guarantees of that facility were not then on foot, and second that there was material which would demonstrate that the allegation that the dispute between the bank, its customers and guarantors had been compromised was untenable. I refused the bank leave to cross-examine the deponents. In my view neither of the matters which it was sought to explore by cross-examination goes to any issue arising on the companies’ applications to set aside the statutory demands. Whether the defences can be described in the sense used in the bank’s submissions as ‘recent inventions’ does not in my view bear upon the existence in this matter of a genuine dispute. That is to be judged according to whether there is now a genuine dispute about the alleged debt — not according to how recently that dispute may have arisen. Furthermore, cross-examination on this issue of so-called ‘recent invention’ or on the validity of the companies’ contention that the dispute was compromised in June 1993 in the end would be no more than cross-examination about the merits of the dispute not about its existence or whether it is genuine. I do not say that in no case can cross-examination be permitted of a deponent of an affidavit filed in support of an application under s459G. It may very well be that such cases are rare — perhaps very rare indeed. However it is enough for me to say that the cross-examination which was proposed in this matter did not in my judgment go to any issue falling for decision in the present matters.”
The present case posed the difficulty of whether, under the guise of cross-examination going to whether there was a genuine dispute, the defendant was in truth seeking to cross-examine about the merits of the dispute or on credit - the latter being rarely if ever permitted: see McLelland CJ in Equity in Eyota Pty Ltd v Hanave (at 787).
36 Ultimately Santow J resolved the issue of cross-examination in the case before him by permitting the defendant to embark on what his Honour described as a limited period of cross-examination “in order to appraise whether that cross-examination could be said to go to the genuineness of the dispute, even if unavoidably overlapping matters of merit”.
37 In MNWA Pty Ltd v Deputy Commissioner of Taxation (No 2) (2015) 109 ACSR 265;  FCA 1128 Griffiths J granted leave to cross-examine various witnesses on an application to set aside a demand. In explaining why that leave was granted, at - his Honour set out the applicable principles as follows:
79 It is well established that leave to cross-examine witnesses will generally not be granted in a proceeding in which it is sought to have a statutory demand set aside on the basis of a claim that there exists a “genuine dispute” concerning the subject debt (see, for example, Mibor Investments Pty Ltd v Commonwealth Bank of Australia  2 VR 290 at 292; (1993) 11 ACSR 362 at 364 per Hayne J; Trecomax Pty Ltd v Prentice (2004) 50 ACSR 314;  FCA 1057 at - and - per Sackville J; United Capital Properties Pty Ltd v Handbury Asset Management Pty Ltd (2011) 86 ACSR 161;  FCA 1075 at - per Stone J; Pharmanet Group Limited v Primelane Pty Ltd  FCA 208 at - per McKerracher J and PrimeSpace Pty Investment Ltd v Vienne Pty Ltd  FCA 326 at  per Griffiths J).
80 The general principle recognises that there may be exceptional or rare cases where it is appropriate that leave be granted to cross-examine in such a case. A recent example of leave being granted in a case involving inter alia a genuine dispute claim is Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (2015) 230 FCR 28; 104 ACSR 425;  FCA 221 at - per Wigney J.
81 Significantly, however, in the present proceedings the plaintiffs’ applications to set aside the statutory demands are not based on a genuine dispute claim but, rather, as previously stated, are solely focused on a claim that there is “some other reason” under s 459J(1)(b) of the Corporations Act to set aside the statutory demands.
82 The plaintiffs carry the onus of establishing on the balance of probabilities that there is “some other reason” why the demands should be set aside. The Court must be satisfied that the “other reason” exists at the time the s 459J application is heard and determined (see Tatlers.com.au Pty Ltd v Davis (2006) 203 FLR 473;  NSWSC 1055 at - per Barrett J).
38 In this case the matters on which Doyles sought to cross-examine Mr Rusca were all matters which either went to the merits of any alleged dispute and not to whether it was a genuine dispute, were matters which were not relevant to the grounds on which Rusca relied to set aside the Demand or were an attempt to attack Mr Rusca’s credit. None of the issues on which Doyles sought to cross-examine Mr Rusca went to an issue relevant to whether there was some other reason to set aside the Demand.
39 The proposed cross-examination about whether Rusca received any estimates from Doyles for its costs and the indicia of whether Rusca was a commercial client for the purposes of the LPUL did not go to the issue of whether the dispute about Doyles’ costs was genuine but to its merits. Similarly the proposed cross-examination about who made the decision not to proceed with the adjudication application and why it was made could not go to the existence of that off-setting claim or its genuineness but could only go to its merits. The proposed cross-examination about Rusca’s solvency, whether Mr Rusca breached his duty as a director owed to Rusca, the character of those controlling Rusca and who controls it are not matters which are relevant to the present application. Finally, none of the areas of proposed cross-examination identified by Doyles were matters that went to or would assist the determination of the principle issues which underpin Rusca’s reliance on s 459J of the Act, in particular whether the costs charged by Doyles constitute a debt that is due and payable.
40 For those reasons I refused Doyles’ application to cross-examine Mr Rusca.
The effect of the Costs Assessment – is the debt due and payable?
41 It is convenient to start with Rusca’s contention that there is no debt due and payable to Doyles until such time as the Assessment Application is complete such that the Demand should be set aside for “some other reason” pursuant to s 459J(1)(b) of the Act.
42 Rusca submitted that as the Assessment Application has not been determined, s 194 of the LPUL precludes Doyles from taking any steps to recover its costs. In response Doyles submitted that as Rusca is a commercial client within the meaning of s 170 of the LPUL, s 194 does not apply to Rusca and it is able to take steps to recover its unpaid costs. It also submitted that at the time of service of the Demand the Assessment Application was not on foot so that s 194 did not apply but accepted that the position had changed by that time and that the Court needed to consider the application on the basis of the facts, which included that the Assessment Application had been concluded.
43 Section 170(1) of the LPUL provides that, save for some limited exceptions which are not presently relevant, Pt 4.3 titled “Legal costs” does not apply to a commercial or government client. The term “commercial or government client” is relevantly defined in s 170(2) as follows:
(2) For the purposes of this Law, a commercial or government client is a client of a law practice where the client is--
(b) one of the following entities defined or referred to in the Corporations Act--
(i) a public company, a subsidiary of a public company, a large proprietary company, a foreign company, a subsidiary of a foreign company or a registered Australian body;
(ii) a liquidator, administrator or receiver;
(iii) a financial services licensee;
(iv) a proprietary company, if formed for the purpose of carrying out a joint venture and if any shareholder of the company is a person to whom disclosure of costs is not required;
(v) a subsidiary of a large proprietary company, but only if the composition of the subsidiary’s board is taken to be controlled by the large proprietary company as provided by subsection (3); or
(f) a person who has agreed to the payment of costs on a basis that is the result of a tender process; or
44 Rusca is a proprietary company. A large proprietary company is defined in s 45A(3) of the Act as:
(3) A proprietary company is a large proprietary company for a financial year if it satisfies at least 2 of the following paragraphs:
(a) the consolidated revenue for the financial year of the company and the entities it controls (if any) is $25 million, or any other amount prescribed by the regulations for the purposes of paragraph (2)(a), or more;
(b) the value of the consolidated gross assets at the end of the financial year of the company and the entities it controls (if any) is $12.5 million, or any other amount prescribed by the regulations for the purposes of paragraph (2)(b), or more;
(c) the company and the entities it controls (if any) have 50, or any other number prescribed by the regulations for the purposes of paragraph (2)(c), or more employees at the end of the financial year.
45 Section 194 of the LPUL, titled “Restriction on commencing proceedings to recover legal costs”, provides:
(1) A law practice must not commence legal proceedings to recover legal costs from a person unless a bill has been given for the legal costs and the bill complies with the requirements of this Law and the Uniform Rules.
(2) A law practice must not commence legal proceedings to recover legal costs from a person who has been given a bill until:
(a) where the legal costs are the subject of a costs dispute before the designated local regulatory authority—the authority has closed or resolved the dispute; and
(b) at least 30 days after the later of:
(i) the date on which the person is given the bill; or
(ii) the date on which the person receives an itemised bill following a request made in accordance with section 187.
46 Although not expressly raised by Rusca it is also convenient to set out s 198 of the LPUL, found in Div 7 of Pt 4.3 of the LPUL which applies to legal costs payable on a solicitor-client basis: see s 196 LPUL. Section 198 relevantly provides:
(1) Applications for an assessment of the whole or any part of legal costs payable to a law practice may be made by any of the following:
(a) a client who has paid or is liable to pay them to the law practice;
(b) a third party payer who has paid or is liable to pay them to the law practice or the client;
(c) the law practice;
(d) another law practice, where the other law practice retained the law practice to act on behalf of a client and the law practice has given the other law practice a bill for doing so.
(2) An application under this section is to be made in accordance with applicable jurisdictional legislation.
(3) An application under this section must be made within 12 months after:
(a) the bill was given to, or the request for payment was made to, the client, third party payer or other law practice; or
(b) the legal costs were paid if neither a bill nor a request was made.
(7) If an application for a costs assessment is made in accordance with this Division:
(a) the costs assessment must take place without any money being paid into court on account of the legal costs the subject of the application; and
(b) the law practice must not commence any proceedings to recover the legal costs until the costs assessment has been completed.
Is Rusca a commercial client?
47 The first issue that arises is whether Rusca is a “commercial or government client” for the purposes of Pt 4.3 of the LPUL. If that is so then much of Pt 4.3 of the LPUL, including relevantly ss 194 and 198, will not apply to it. There is a dispute about that issue. But that is a dispute which in my opinion has been resolved for the purposes of the Assessment Application by Mr Castagnet as is evident from his determination set out at  above.
48 Doyles submitted that Mr Castagnet’s ruling was preliminary and thus would not apply to the present dispute. I disagree. Mr Castagnet’s ruling was preliminary only in the sense that, having been raised by Doyles, it needed to be determined as a threshold issue as it went to Mr Catagnet’s jurisdiction to continue with and determine the Assessment Application. To that end, in their letter dated 28 June 2018 to Mr Castagnet, Doyles said:
We refer to Paragraph 11 of our Objection to Cost Assessment Application that cost assessment is not available in this case because the Cost Applicant is a commercial client.
We ask that this be determined as a preliminary point in order that there is an enforceable determination, whether by cost assessment or by independent expert determination as set out under the cost agreement.
We request a decision as to whether the Cost Applicant is a commercial client under Section 170 of the Legal Profession Uniform Law either as a large proprietary company under Section 170(2)(b)(i) or as having agreed to the payment of costs on a basis that is the result of a tender process under Section 170(2)(f).
Section 170(2)(f) of the Legal Profession Uniform Law is consistent with the warranty that Rusca Bros. gave to that effect in paragraph 1(e) of the Acknowledgement on page 8 of the Standard Retainer Agreement, that was issued to Rusca Bros. on 13 September 2017 and accepted by their continuing instructions.
49 In order to resolve the issue Mr Castagnet received submissions from the parties and, having considered those submissions, provided short reasons as to why in his opinion Rusca was not a commercial client, noting that more detailed reasons would be provided as part of the determination of the Assessment Application. Mr Castagnet did not express his findings in a tentative way or indicate that he would revisit the issue when determining the balance of the Assessment Application. Doyles in fact sought an “enforceable determination” from Mr Castagnet and has not challenged Mr Catagnet’s finding on this issue.
50 In light of that, the question of whether Rusca is a commercial client does not fall to be determined again in the context of this application. It thus follows that Pt 4.3 of the LPUL applies to Rusca insofar as it was a client of Doyles. I turn then to consider whether, as Rusca contends, there is presently no debt due and payable as a result of the Assessment Application.
Is the debt the subject of the Demand due and payable?
51 In In the matter of Tetbury Pty Ltd  NSWSC 37 (Tetbury) Black J considered an argument that a statutory demand issued by a firm of solicitors should be set aside under s 459J(1)(b) of the Act because the debt the subject of the demand was not due and payable. That was said to be so because of the operation of the Legal Profession Act 2004 (NSW) (LPA) which applied at the time of the solicitor-client relationship between the parties in that case. Relevantly subss 317(1) and (2) of the LPA Act provided that if a legal practice did “not disclose to a client or to an associated third party payer anything required by this Division to be disclosed, the client or associated third party payer … need not pay the legal costs until they have been assessed” and a legal practice that did “not disclose to a client … anything required by this Division to be disclosed may not maintain proceedings against the client … for the recovery of legal costs unless the costs have been assessed”. There the plaintiff, Tetbury, alleged that there had a been a failure by the legal practice to comply with its disclosure obligations such that it did not need to pay the legal costs until such time as they had been assessed and any debt that may have arisen was not due and payable. In addressing that argument at  Black J said:
I recognise that, if the statutory prohibition under the Legal Profession Act on the commencement of proceedings to recover a debt by a law practice remains in place, then a debt is not “due and payable” and a demand for a debt that is not due and payable may be liable to be set aside for some other reason under s 459J of the Corporations Act: Re Elgar Heights Pty Ltd above at 669, 671; Re Chameleon Mining NL; Chameleon Mining NL v Atanaskovic Hartnell  NSWSC 602 at : Re Tuffrock Pty Ltd  NSWSC 738. However, it does not seem to me that the premise of Tetbury’s submission in this respect is genuinely arguable. The engagement letter is in terms directed to four parties, including Tetbury, and its execution page provided for execution by those four parties, consistent with Mr Mahony’s advice to Mr Evanian in his email dated 23 April 2013 as to how it should be executed. It seems to me that no genuine case is raised that the engagement letter made disclosure to, or created rights against, only one of those four parties, although that engagement primarily related to proceedings involving Tresedar as well as extending to advice involving Tetbury.
52 Remuneration Data Base Pty Ltd v Pauline Goodyer Real Estate Pty Ltd  NSWSC 59 concerned the application of s 36 of the Property, Stock and Business Agents Act 2002 (NSW) to a statutory demand which had been served on the plaintiff for “selling fees”. Section 36 provided among other things that “an action or other proceedings cannot be commenced by a licensee for the recovery of remuneration or any sum as reimbursement for expenses until the expiration of 28 days after a statement of claim has been served personally or by post on the person to be charged with the remuneration or expenses”. The issues for determination by the court included whether s 36 applied to the debt the subject of the statutory demand and, if so, whether a statement of claim complying with that section was given more than 28 days before the statutory demand was served. Justice White found that s 36 did apply and that the defendants had failed to serve a statement of claim as required by that section prior to service of the statutory demand. His Honour then turned to consider whether, in the absence of a s 36 statement of claim, the debt the subject of the statutory demand was due and payable. At - his Honour said:
38 I think there is much to be said for the defendants’ submissions. However, it is not necessary to decide that point. On any view, s 36(1) of the Property, Stock and Business Agents Act precludes action being brought for the recovery of a debt until a statement of claim has been served. It was decided in Re Elgar Heights Pty Ltd (No. 1)  VR 657 that a statutory demand could only be validly served in respect of a debt which was not only immediately payable, but also presently recoverable by action. This conclusion was reached in the context of s 364(2)(a) of the Companies (Victoria) Code. That section applied where “a creditor ... to whom the company is indebted in a sum exceeding $1,000 then due has served on the company a demand ...”.
39 In Re Elgar Heights Pty Ltd, solicitors served a statutory demand on their client in respect of unpaid legal costs. Section 81 of the Supreme Court Act 1958 (Vic) precluded solicitors from commencing or maintaining any action for the recovery of such costs until one month after delivery of a bill of costs. The account rendered was not a bill of costs. Therefore, the claimed debt could not be recovered by action. The question of whether a debt which was not immediately enforceable by action could be the subject of a statutory demand had not formerly been decided. Ormiston J reviewed the cases exhaustively and concluded that such a debt could not validly be the subject of a statutory demand. His Honour concluded that the words “then due” in s 364(1)(a) required that the debt should not only be immediately payable, but should be presently recoverable by action (at 669, 671).
40 Section 459E of the Corporations Act requires not only that a debt be due, but also that it be payable. Given that, under the former legislation, in order for the debt to be “due” it had to be enforceable by action, the same must be true under s 459E. Whilst the statutory regime dealing with statutory demands has changed significantly, the underlying reasoning for Ormiston J’s conclusion is still applicable. One strand of his Honour’s reasoning was that winding-up proceedings at the instance of an unpaid creditor can be regarded as an indirect means of recovering a debt (IOC Pty Ltd v Mobil Oil Australia Ltd (1975) 49 ALJR 176 at 182;  HCA 28; 11 ALR 417 at 427; Re Elgar Heights Pty Ltd at 667). Such a procedure should only be available in respect of debts which can be enforced by action. This is also consistent with Jarena Pty Ltd v Sholl Nicholson Pty Ltd (1996) 19 ACSR 425 and Callite Pty Ltd v Peter John Adams  NSWSC 52, where it was concluded that statutory demands should be set aside pursuant to s 459J(1)(b) of the Corporations Law for “some other reason” where they were sought to be used to bypass statutory restrictions on a solicitor’s right to recover costs.
53 In In the matter of Chameleon Mining NL; Chameleon Mining NL v Atanaskovic Hartnell  NSWSC 602 at , in the context of considering whether a statutory demand could be maintained in light of s 332A(5) of the LPA which precluded the commencement of legal proceedings to recover legal costs until at least 30 days after complying with a request for an itemised bill of costs, Austin J said:
For present purposes the importance of the request for itemised bills arises under s 332A(5). According to that provision, as from 12 November 2008, the date when the request for itemised bills was made in respect of the three invoices that were the subject of the statutory demand, AH was precluded from commencing legal proceedings to recover the costs that were the subject of the statutory demand until at least 30 days after complying with the request. Consequently after the first 6 days of its currency, the statutory demand related to debts claimed by AH which they could not seek to recover by legal proceedings. There is authority to the effect that if a statute prohibits commencement of proceedings to recover a debt, then so long as the statutory prohibition remains in place the debt is not “due and payable” and consequently cannot found a statutory demand: Remuneration Data Base Pty Ltd v Pauline Goodyer Real Estate Pty Ltd  NSWSC 59 at -, applying Re Elgar Heights Pty Ltd  VR 657 at 669 and 671.
54 The circumstances here are analogous to those before the court in Tetbury in that Rusca contends that the debt the subject of the Demand is not due and payable for so long as the Assessment Application has not been determined and therefore that the Demand ought to be set aside. More precisely, Rusca contends that the prohibition in s 194 LPUL means that Doyles is precluded from commencing proceedings to recover costs from Rusca until, where the costs are the subject of a costs dispute before “the designated local regulatory authority”, that authority has closed or resolved the dispute.
55 That raises the question of whether, as Rusca contends, the debt the subject of the Demand is not due and payable because of the operation of s 194 of the LPUL. Insofar as s 194 (set out at  above) is concerned:
(1) the term “designated local regulatory authority” is defined in s 6 of the LPUL to mean “a person or body specified or described in a law of this jurisdiction for the purposes of a provision, or part of a provision, of this Law in which the term is used”;
(2) in turn, s 11 of the LPUL Application Act sets out the relevant “designated local regulatory authority” for the purposes of various provisions of the LPUL and provides that for the purposes of ss 174, 178, 194, 197, 202 and 205 of the LPUL, the “designated regulatory authority” is the New South Wales Legal Services Commissioner (NSW Commissioner);
(3) the term “costs dispute” is defined in s 269 of the LPUL to mean a “consumer matter” involving a dispute about legal costs payable on a solicitor-client basis between a law practice and a person charged with or liable to pay those costs; and
(4) pursuant to s 291(1) of the LPUL the designated local regulatory authority, i.e. the NSW Commissioner, is to deal with a costs dispute in the same manner as other consumer matters if the total bill for legal costs is less than $100,000 for any one matter or it is more than $100,000 for one matter but the total amount in dispute is less than $10,000 (all amounts indexed). However, if a complaint contains a costs dispute that falls outside those parameters the NSW Commissioner cannot deal with the dispute and must inform the parties of the right to apply for a costs assessment or to make an application under jurisdictional legislation for the matter to be determined.
56 There is no extant costs dispute about the legal costs the subject of the Demand before the NSW Commissioner. There could not be given that the costs claimed by Doyles exceed the limit with which the NSW Commissioner is permitted to deal. Rather the costs the subject of the Demand are, together with other legal costs claimed by Doyles, the subject of the Assessment Application. Thus, to the extent Rusca relies on s 194 of the LPUL as a basis to contend that the debt the subject of the Demand is not due and payable it cannot succeed. That is, s 194 cannot apply to the facts of this case.
57 On the other hand s 198 of the LPUL, which is to similar effect to s 194 but concerns costs assessments, may be relevant to a resolution of the issue. As set out above, s 198(7) precludes the relevant law practice from commencing any proceedings to recover the legal costs the subject of an assessment until the costs assessment is complete. Rusca did not refer to or rely on s 198 of the LPUL in its submissions. However, after the conclusion of the hearing, I granted leave to the parties to provide further written submissions on the applicability of s 198 of the LPUL.
58 Rusca submitted that s 198 of the LPUL applied to the present dispute and the Assessment Application because it concerns legal costs payable on a solicitor-client basis. It noted that, as was the case at time of the hearing, the Assessment Application was ongoing and had not concluded. Rusca further submitted that the prohibition in s 198(7)(b) should be read and interpreted consistently with similar prohibitions contained in ss 174 and/or 194 of the LPUL as concerns the effect on the ability to issue a statutory demand for allegedly outstanding legal costs, namely that:
(1) any debt said to be based upon legal costs that are subject to a legislative prohibition on recovery is not relevantly due and payable and, where that is so, there can be no basis to issue a statutory demand in respect of the alleged debt; and
(2) further or alternatively where such a prohibition on recovery of legal costs exists there is “some other reason” to set aside the statutory demand within the meaning of s 459J of the Act including because the statutory demand appears to have been issued for an improper purpose including to coerce payment of a disputed debt.
59 Rusca submitted that this approach is consistent with s 198(7)(a) of the Act which provides that an application for costs assessment under Div 7 of Pt 4.3A of the Act “must take place without any money being paid into court on account of the legal costs the subject of the application”. Rusca contended that this statutory prohibition on the payment of money into court is consistent with the principle that no debt is due and payable until the costs assessment has been completed. It submitted that on any view there is no debt due and payable and thus no ability to issue a valid demand and/or there is a genuine dispute as to the debt and the Demand should be set aside.
60 Doyles submitted that s 198(7) of the LPUL appeared to be relevant. However, it also submitted that as the Demand was received by Rusca on 8 May 2018 and the Assessment Application filed on 22 May 2018, no application for costs assessment had been made at the time that the Demand was served. Doyles referred to s 355 of the LPA which relevantly provided that if an application for a costs assessment was made the law practice “must not commence or maintain any proceedings to recover the legal costs until” that assessment had been completed. It submitted that s 198(7) of the LPUL precludes a law firm from commencing proceedings for recovery of its costs that are subject to a costs assessment but does not preclude the law firm from maintaining proceedings.
61 Doyles contended that other cases have suggested that a statutory demand should be withdrawn after an application for a costs assessment has been filed but they are to be distinguished where, as here, Doyles contends that the LPUL does not apply and thus the continuation was appropriate. Doyles also submitted that there was no genuine dispute if Rusca has not produced a copy of the completed costs assessment which was available to it at the time of the hearing based only on the lack of costs estimates.
62 Two issues arise. The first is whether, in circumstances where the Demand was served prior to the commencement of the Assessment Application, the statutory prohibition in s 198(7) applies. As noted at  above, Doyles submitted that it does not. As Doyles points out, the prohibition under s 198(7) is on commencement of proceedings. It is clear that once a costs assessment is on foot the legal practice cannot commence any proceedings for the recovery of the costs the subject of the assessment until its completion. Doyles argues that it had served the Demand prior to the commencement of the Assessment Application and that there is no prohibition on the maintenance of proceedings for recovery. However, Doyles’ argument misconceives the distinction between a statutory demand and a proceeding to recover. That is, Doyles’ argument is premised on the assumption that the issue of the Demand constitutes the commencement of a proceeding to recover. That is not so. The authorities referred to at - distinguish between a demand for payment of a debt and a proceeding to recover the amount the subject of a demand.
63 In this case it is because of the Assessment Application that Doyles cannot commence a proceeding for recovery of its costs. That is, the statutory prohibition in s 198(7) means that the debt the subject of the Demand can no longer be said to be immediately “due and payable” as required by s 459E of the Act. This is because the debt the subject of the Demand cannot presently be enforced by action by the commencement of any proceeding for recovery. That is so even if the Demand was served prior to the commencement of the Assessment Application. While the debt might have been due and payable at the time of service of the Demand because there was no prohibition on the commencement of a proceeding for recovery at that time, that status changed as soon as the Assessment Application was filed.
64 The second issue is whether the Assessment Application is complete. Doyles submitted that it is such that any statutory prohibition no longer operates. In support of that submission it relied on the 21 June Letter in which Mr Castagnet informed the parties that he had forwarded the Costs Determination to the Manager and that it would be available on payment of the applicable fees and that his “task has now been completed”. Rusca submitted that the Assessment Application was not complete until such time as the certificates issued by Mr Castagnet pursuant to ss 70 and 71 of the LPUL Application Act are in fact issued to the parties after which they could be registered as judgments and enforced. At the time of the hearing before me regrettably, and for reasons not disclosed, neither party had paid the applicable fees to have those certificates issued.
65 I was not taken to any authorities on the question of when a costs assessment is complete for the purposes of s 198 or any other section of the LPUL. Nor could I locate any such authorities. Contrary to Doyles’ submission, that issue is not resolved by a statement from the costs assessor that his task is complete. Rather the question of when a costs assessment is complete must be considered having regard to the meaning of the phrase in the context of the statute. Starting with the text, the word “complete” is defined in the Macquarie Dictionary (7th ed 2017) as follows:
/kəmˈplit/ (say kuhm'pleet)
adjective 1. having all its parts or elements; whole; entire; full.
2. finished; ended; concluded.
3. Also, Archaic, compleat.
a. perfect in kind or quality: a complete life.
b. (of persons) accomplished; skilled; expert: the complete businessman; the complete hostess.
–verb (t) (completed, completing)
4. to make complete; make whole or entire.
5. to make perfect.
6. to bring to an end; finish; fulfil.
and in the Concise Oxford English Dictionary (Oxford University Press, 12th ed, 2011) as:
adj. 1. having all the necessary or appropriate parts; entire. (complete with) having as an additional feature.
2. having run its full course; finished.
3. to the greatest extent or degree; total: a complete surprise
4. (also compleat) chiefly humorous fully competent in an activity; consummate.
v. 1. finish making or doing. Brit. conclude the sale of a property.
2. provide with the items necessary to make (something) complete. write the required information on (a form).
Applying those definitions, a law practice is prohibited from commencing proceedings to recover the legal costs until the costs assessment has run its full course, been made whole or perfect or brought to an end.
66 In order to ascertain when that is so it is necessary to have regard to the context in which the section operates. Section 70(1) of the LPUL Application Act requires a costs assessor to issue a certificate on making a determination of costs that sets out the amount of the costs determined (including any GST that is payable), any costs of the costs assessment determined under s 78 of the LPUL Application Act or s 204 of the LPUL and any interest on those amounts determined under s 81 of the LPUL Application Act or s 101 of the Civil Procedure Act 2005 (NSW). Upon filing of the certificate in the office or registry of a court having jurisdiction to order the payment of the unpaid amount of money specified in the certificate, and with no further action, the certificate is taken to be a judgment of that court for the amount of unpaid money: see s 70(5). Section 70(5A) of the LPUL Application Act provides that:
The regulations may make provision for or with respect to the forwarding of a certificate issued under this section (or a copy of the certificate):
(a) by the costs assessor to the parties to the costs assessment or the Manager, Costs Assessment or both, and
(b) by the Manager, Costs Assessment to the parties to the costs assessment.
67 Section 70 of the LPUL Application Act does not apply to the costs referred to in subs 71(1)(a) and (b) of that act, which concern the costs incurred by the costs assessor and the Manager and the costs related to the remuneration of the costs assessor: see s 70(6) and s 71(1) LPUL Application Act. That is, it is concerned only with the costs payable to a party to the assessment as determined by the costs assessor.
68 Regulation 42 of the LPUL Regulation relevantly provides that:
(1) The costs assessor must forward a certificate issued under section 70 of the application Act or a copy of the certificate to:
(a) the Manager, Costs Assessment, and
(b) each party to the assessment, unless subclause (2) applies.
(2) If the costs of the costs assessor are payable by a party to the assessment as referred to in section 71 of the application Act, 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.
69 Finally a party to a costs assessment may apply for a review of a determination of costs within 30 days after the costs assessor’s certificate of determination has been forwarded to the parties: see s 83(1) of the LPUL Application Act.
70 In my opinion, having regard to the context in which s 198(7) operates, the costs assessment is not complete, in the sense of being made whole, until the certificate of determination issued under s 70 of the LPUL Application Act has been provided to the parties. The parties’ rights consequent upon the assessment do not take effect until such time as the certificate has issued to them: the time in which they may lodge a review runs from the date on which the certificate is provided and the party entitled to payment cannot, as a step in its enforcement, file the certificate with a court so as to take effect as a judgment until it has possession of the certificate. In other words, until such time as the certificate is provided to the parties there is no relevant outcome of the assessment and the parties cannot take any steps consequent on it.
71 Accordingly, as the certificate issued by Mr Castagnet pursuant to s 70 of the LPUL Application Act has not been provided to the parties, the Assessment Application is not complete. As that is the case, it follows that Doyles is precluded by s 198 of the LPUL from taking steps to recover its costs and, in those circumstances, the debt the subject of the Demand is not due and payable and the Demand should be set aside pursuant to s 459J(1)(b) of the Act.
72 As set out at  above, Rusca raises alternate bases upon which it says the Demand should be set aside because there is no debt due and payable or because there is a genuine dispute about the amount the subject of the Demand. While it is not strictly necessary for me to determine those alternate grounds, I will do so briefly.
73 First, Rusca contends that there is no debt due and payable and therefore the Demand should be set aside for some other reason pursuant to s 459J(1)(b) of the Act because Doyles has not complied with the disclosure requirements in s 174 of the LPUL, which requires that:
(1) Main disclosure requirement
A law practice—
(a) must, when or as soon as practicable after instructions are initially given in a matter, provide the client with information disclosing the basis on which legal costs will be calculated in the matter and an estimate of the total legal costs; and
(b) must, when or as soon as practicable after there is any significant change to anything previously disclosed under this subsection, provide the client with information disclosing the change, including information about any significant change to the legal costs that will be payable by the client—
together with the information referred to in subsection (2).
74 Section 178 of the LPUL sets out the consequences of a failure by a law practice to comply with its disclosure obligations and relevantly provides:
(1) If a law practice contravenes the disclosure obligations of this Part—
(a) the costs agreement concerned (if any) is void; and
(b) the client or an associated third party payer is not required to pay the legal costs until they have been assessed or any costs dispute has been determined by the designated local regulatory authority; and
(c) the law practice must not commence or maintain proceedings for the recovery of any or all of the legal costs until they have been assessed or any costs dispute has been determined by the designated local regulatory authority or under jurisdictional legislation; and
(d) the contravention is capable of constituting unsatisfactory professional conduct or professional misconduct on the part of any principal of the law practice or any legal practitioner associate or foreign lawyer associate involved in the contravention.
75 Rusca asserted that no estimates were ever provided by Doyles to it. However in the 13 September Letter (see  above) Doyles provided what appears to be a preliminary estimate which was significantly less than the total fees ultimately rendered to Rusca. Doyles otherwise relies on the terms of the Costs Agreement and the invoices it rendered which it said not only served as an account for the work done in the period covered by the invoice but was an estimate for the following month and was sufficient to meet the disclosure requirements in the LPUL.
76 Rusca submitted that the Court would not infer that the 13 September Letter setting out the estimate was in fact sent because it was introduced for the first time prior to the hearing, despite the question of estimates being an issue between the parties for a long time. There is no proper basis on which I can infer that the 13 September Letter was not sent. The evidence given by Matthew Michael Beltran, a solicitor in the employ of Doyles, was that it was emailed to Rusca on 13 September 2017 and it appears as an attachment to an email of that date in Mr Beltran’s affidavit.
77 In any event there is an issue as to whether the estimate given in the 13 September Letter was sufficient for the purposes of s 174 of the LPUL. In my opinion it was not. It fell well short of the total legal costs rendered by Doyles for the Matter and was, at its outer limit, approximately 2% of the total amount billed, was expressed as “being subject to change as the matter proceeds” and was based on an assumption that the work would be concluded within three weeks. Further, there was no evidence of the provision of information to Rusca of “any significant change” to the legal costs that would be payable as required by s 174(1)(b) of the LPUL. If that was the only issue raised, then by reason of the operation of s 178 of the LPUL the costs the subject of the Demand would not be payable until they had been assessed and Doyles could not commence or maintain proceedings for their recovery until they had been assessed.
78 However, a further issue arises, namely whether the invoices issued by Doyles were in each case effective to operate as estimates for the following month’s work. That is a matter about which there is clearly a dispute. There is a plausible argument that no estimate beyond that contained in the 13 September Letter was given to Rusca and that the monthly invoices do not constitute estimates for the purposes of s 174 of the LPUL. There is clearly a dispute about the question of whether the invoices rendered by Doyles were estimates for the purpose of s 174 of the LPUL which goes to the issue of whether the debt is due and payable as discussed in the preceding paragraph. It is not a dispute about the existence or amount of the debt to which the Demand relates.
79 Secondly, Rusca contends that, irrespective of the operation of ss 174 or 194 of the LPUL, the fact of the ongoing Assessment Application is evidence of a genuine dispute about the level of costs claimed by Doyles. That is, Rusca challenges the reasonableness of the costs charged by Doyles and whether they are in fact all due and payable and has, by the Assessment Application, sought to have those charges reviewed.
80 The evidence relied on by Rusca clearly shows that there is a dispute about the reasonableness of Doyles’ fees. Mr Rusca gives evidence that he engaged Gillis Delaney because of growing concerns about Doyles’ costs; he wrote to Doyles on the same day expressing his surprise at the size of the bill rendered in April and noting that while “all reasonable costs will be paid”, they would have to go through each bill to ensure it was “reasonable as it is already well beyond what we thought”; on 4 May 2018 Mr Kerridge wrote to Doyles on behalf of Rusca noting among other things that, given their size, he believed the bills should be assessed quickly; on 8 May 2018 Mr Rusca sought itemised bills from Doyles; and on 25 May 2018 the Assessment Application was filed in the Supreme Court. The Assessment Application has been ongoing since that time and the parties have been engaged in the process. I am satisfied based on the evidence before me and the fact of the Assessment Application in which the parties have actively engaged that there is a genuine dispute about the debt the subject of the Demand for the purposes of s 459H(1)(a) of the Act.
81 Thirdly, Rusca contends that even if it is a commercial client, a matter about which there is clearly a dispute, and thus not entitled to an assessment of its costs, it has a right to challenge Doyles’ costs given the overriding legal obligation on legal practitioners to only charge their clients costs that are fair and reasonable.
82 Rusca submitted that the obligation on solicitors to only charge their clients costs that are fair and reasonable arises from the fiduciary relationship between a solicitor and its client and the duties imposed on solicitors in that capacity including that they not prefer their own interests over those of their clients. Rusca relied on the decision in Law Society of New South Wales v Foreman (1994) 34 NSWLR 408. In that case, at 435-436, Mahoney JA observed that a solicitor is in a fiduciary position vis-à-vis her client and/or in a position of influence and therefore has obligations to the client not only in the carrying out of an agreement made between a solicitor and client but also in respect of the making of it including in relation to the making of a special agreement in respect of costs. The court also held that the court retains its inherent jurisdiction in dealing with legal practitioners: at 419 per Kirby J, 446 per Mahoney JA.
83 Rusca also referred to s 298(d) of the LPUL which provides that charging more than a fair and reasonable amount for legal costs in connection with the practice of law is capable of constituting unsatisfactory professional conduct or professional misconduct. Rusca relies on the supervisory jurisdiction of the Supreme Court in respect of legal costs and costs agreements and notes that those clients who are unable to avail themselves of Pt 4.3 of the LPUL because they are relevantly “commercial clients” may have their costs agreements reviewed and their costs assessed by that court.
84 In its further submissions filed pursuant to the leave granted after the hearing, Rusca also referred the Court to the recent decision in Atanaskovic Hartnell v Birketu Pty Ltd  NSWSC 1006 at - where Hammerschlag J set out the following principles:
2 Costs agreements between solicitors and their clients are subject to control by the Court in the exercise of its inherent powers: McNamara Business and Property Law v Kasmeridis (2007) 97 SASR 129; Athanasiou v Ward Keller (6) Pty Ltd (1998) 8 NTLR 23 (Athanasiou); Law Society of New South Wales v Foreman (1994) 34 NSWLR 408 (Foreman).
3 The Court will not permit a solicitor to enforce an agreement with a client which requires the client to pay to the solicitor for services rendered an amount which represents an overcharge beyond the bounds of professional propriety: Foreman at 422. Such an amount would, of course, be excessive as being unfair and unreasonable.
4 A solicitor is in a fiduciary position vis-à-vis the client and has obligations to the client both in respect of the making of a costs agreement and in the carrying of it out: Foreman at 435; Moss v Moss (No 2) (1900) 21 LR (NSW) Eq 253 at 258; Chan v Zacharia (1984) 154 CLR 178 at 198; United Dominions Corporation Limited v Brian Pty Ltd (1985) 157 CLR 1 at 11-12.
5 The Court, as a superior court, has jurisdiction to ascertain by taxation, moderation or fixation, the costs, charges and disbursements of a solicitor from the client: Athanasiou at 28; Baalman (JS & JH) v Dare Reed (1984) 52 ACTR 3 at 17.
85 Accepting that is so, I do not think it takes the matter any further or would result in the Court setting aside the Demand. By this contention, Rusca simply says that if it could not participate in the costs assessment process then it could commence proceedings in the Supreme Court and seek relief about the Costs Agreement and the costs charged by Doyles. But that has not occurred and, presumably because of the Assessment Application, there is no evidence before the Court of any proceedings of that nature or of an intention to commence such proceedings.
86 Fourthly, Rusca contends that it has an off-setting claim which arises from Doyles’ failure to lodge an adjudication application on time. Rusca says that the failure to do so has caused loss and damage comprising at least the fees charged by Doyles relating to the preparation and lodgement of the application and the costs incurred by Rusca in respect of the failure to lodge. The nature of the off-setting claim was articulated in a letter dated 17 May 2018 from Gillis Delaney to Doyles as follows:
Further, we are now in receipt of correspondence indicating that the adjudication application prepared by your firm was filed out of time. Accordingly, your client cannot maintain a claim for fees that in any way relate to the adjudication application. Moreover, our client has an off-setting claim against your firm in respect of the costs and loss suffered in respect of the failure to lodge the adjudication application on time.
87 The facts giving rise to the alleged off-setting claim are set out in Mr Rusca’s affidavit. He says that the adjudication application was filed on or about 30 April 2018; Lendlease disputed that it had been filed within time such that there was no jurisdiction to proceed with the adjudication; the adjudication application was subsequently withdrawn; Lendlease is now seeking its costs of that application which are in excess of $209,000; and Rusca continues to incur costs in dealing with the failure by Doyles to lodge the adjudication application in time and he understands that the costs claimed by Doyles relate to the initial steps in relation to the adjudication application.
88 In terms of the alleged loss:
(1) Mr Rusca annexed Doyles’ invoices to his affidavit although it is clear that Rusca does not seek the full amount of the costs claimed in those invoices;
(2) the adjudicator’s decision on costs of the adjudication application dated 31 May 2018 was in evidence before me. In that decision the adjudicator determined that Rusca was to pay the adjudicator’s costs of $9,817.50 (including GST) but declined to make an order that Rusca pay Lendlease’s costs of the adjudication. It follows that Lendlease’s costs do not form part of the amount claimed; and
(3) at the hearing counsel for Rusca provided the Court with what he described as an aide memoire which comprised copies of the Doyles invoices annexed to Mr Rusca’s affidavit marked-up to show those costs which Rusca contends relate to the adjudication application. However, given the form in which that material was provided, without any explanation as to who undertook the analysis and how, and its provision at the hearing, giving Doyles no opportunity to consider it, I would not place any weight on it.
89 Thus, the only evidence of Rusca’s alleged loss is the adjudicator’s costs of $9,817.50 and an assertion that some of Doyles’ costs related to the adjudication application with no quantification or even estimation of that amount provided. In those circumstances, while I accept that Rusca has an arguable claim against Doyles arising out of the late lodgement of the adjudication application, there is no evidence of the basis on which the alleged loss is said to arise and how the loss is calculated beyond the amount of the adjudicator’s fees which Rusca is liable to pay in the sum of approximately $10,000.
90 Fifthly, Rusca contends that there is “some other reason” to set aside the Demand within the meaning of s 459J(1)(b) of the Act because the Demand appears to be issued for an improper purpose including to coerce Rusca to pay a disputed debt. Rusca pointed to the following matters in support of that contention: there was clearly a dispute as to the quantum of costs being charged by Doyles; Rusca engaged in the costs assessment process and will be bound by the outcome of that process; and well before the issue of the Demand it informed Doyles that its fees were excessive but that it would pay reasonable fees. Rusca noted that these matters needed to be viewed in context, namely that Doyles’ fees were largely charged for an adjudication application that could only ever form an interim assessment of liability and was not lodged on time.
91 As I understand Rusca’s submission, it is that in circumstances where Doyles was on notice of the dispute as to the quantum of costs and where the Assessment Application was later filed, its service and maintenance of the Demand was used to coerce Rusca to pay the disputed amount which is contrary to the underlying policy of Pt 5.4 of the Act. The evidence shows that Rusca was concerned about the quantum of costs and raised its concerns prior to service of the Demand. Against the background of the exchange of correspondence which raised those concerns and suggested that the bills be assessed quickly, the irresistible inference is that Doyles used the Demand as a means of debt collection and to coerce payment of the amount the subject of the Demand. Doyles was on notice of the dispute and of Rusca’s suggestion that the bills be assessed. Even if Doyles was of the opinion that its Costs Agreement precluded Rusca from relying on Pt 4.3 of the LPUL and having its bills assessed, that agreement had a mechanism in it to resolve disputes by way of mediation or expert determination which Doyles could have, but did not, take up. I am satisfied that, in those circumstances, the Demand was issued for an improper purpose which provides an alternative basis on which it should be set aside pursuant to s 459J(1)(b) of the Act.
92 Finally I address a submission made by Doyles that an application to set aside a statutory demand should be made by a solvent company. Doyles further submitted that where there is a solvency issue it should be investigated and that the character and conduct of the company, which Doyles contended was in the control of its external financiers, was a relevant matter. In support of that submission Doyles sought to read and rely on an affidavit sworn by Russell John Munday, a chartered accountant, on 12 June 2019 which annexed a report prepared by Mr Munday in which he expressed views about Rusca’s solvency as at 30 June 2018. Rusca objected to Mr Munday’s affidavit on the grounds of relevance. I indicated that I would address the admissibility of Mr Munday’s affidavit on this application in my reasons. Having considered the parties’ submissions I would not admit Mr Munday’s affidavit. The question of whether Rusca was solvent as at 30 June 2018 is not relevant to the question of whether the Demand should be set aside.
93 In Mandarin International Santow J considered the admissibility of evidence of general insolvency in circumstances where the defendant was seeking to use it “as a sword in aid of the statutory demand by citing the consequences if it were set aside, namely that an insolvent company (if indeed it were) would remain out of liquidation”. His Honour noted that such attempts had failed in the past because the basis of setting aside a demand is the existence of a bona fide dispute and, where there is none, proof of solvency does not avail: at 420. Here Doyles also seeks to rely on evidence as to Rusca’s solvency as “a sword”. However, that issue does not arise on this application. Questions of solvency can arise as a ground of opposition to a winding up application and should not be determined at the antecedent stage of an application to set aside a statutory demand: see Liverpool Cement Renderers (Aust) Pty Ltd v Landmarks Constructions (NSW) Pty Ltd (1996) 19 ACSR 411 at 418.
94 Doyles sought to rely on Tetbury at . There the plaintiff seeking to set aside the statutory demand made a submission that it was inappropriate for the demand in that case to have been issued and that the company, Tetbury, was solvent in any event. In considering that submission, Black J accepted that it may be easier to conclude that a dispute about a debt is genuine when it is raised by a solvent company. His Honour considered the evidence that Tetbury relied on to establish its solvency and concluded that it did not have sufficient weight to support the setting aside of the demand in that case. The circumstances in Tetbury were quite different to this case. There it was the company seeking to set aside the demand that sought to establish its solvency in the context of asserting that there was a genuine dispute about the debt the subject of the demand. The issue of solvency was not raised, as it is here, by the defendant as a reason why the demand should not be set aside.
95 On the basis of the conclusions reached at  and  above, I am satisfied that the Demand could also be set aside under s 459H of the Act because there is a genuine dispute about the amount or existence of the debt the subject of the Demand or under s 459J(1)(b) because the Demand was issued for an improper purpose.
96 In light of the matters set out above, I am satisfied that the Demand should be set aside. Given that Rusca has been successful on its application to set aside the Demand it follows that it should have its costs. I will make orders accordingly.