FEDERAL COURT OF AUSTRALIA

Laughton v Gye [2019] FCA 2165

ORDERS

THE COURT ORDERS THAT:

1.    That the respondent pay the applicant’s costs of the Creditor’s Petition prior to 12 July 2018 in the sum of $4,138.30.

2.    That the applicant pay the respondent’s costs of the Creditor’s Petition from 12 July 2018 (excluding the costs of the 18 July 2018 case management hearing) in a sum to be taxed if not agreed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BURLEY J:

1    This is the last remnant of protracted proceedings brought by the applicant Gregory Laughton SC in respect of fees charged for work done pursuant to a written retainer against a solicitor, Clement Gye. Mr Gye was also the controlling director of the corporate client who was the ultimate consumer of Mr Laughton’s legal services.

2    The issues between the parties concern the payment of costs as follows:

(1)    Whether Mr Laughton’s costs of his Creditor’s Petition prior to 12 July 2018, and any costs awarded for the period following 12 July 2018, should be assessed on a lump sum basis or as taxed;

(2)    Whether, following a payment into court of the money the subject of the Creditor’s Petition on 12 July 2018, Mr Laughton ceased to be an unsecured creditor within s 4 of the Bankruptcy Act 1966 (Cth), with the consequence that he is required to pay Mr Gye’s costs of the Creditor’s Petition after that date and if so, on what basis.

3    The more salient events going to the background to the dispute may be briefly summarised as follows:

(1)    On 17 May 2017 a costs assessor assessed the costs owed to Mr Laughton as $45,320.00. Mr Gye and Mr Laughton both applied for a review of the assessment by the Costs Assessment Review Panel in accordance with s 373 of the now repealed Legal Profession Act 2004 (NSW).

(2)    On 20 September 2017 the Panel made a decision about the costs owed to Mr Laughton, and on 29 January 2018 Mr Laughton registered a certificate of the Panel’s decision pursuant to s 368(5) of the Legal Profession Act. The registration of the certificate stands, under s 368(5), as if the amount set out in it has been awarded pursuant to a judgment, and it is referred to below as “the judgment”.

(3)    On 12 February 2018 Mr Laughton served a Bankruptcy Notice on Mr Gye, and then filed a Creditor’s Petition in this Court on 19 March 2018, contending that Mr Gye owed him the amount of $19,620.07 for unpaid legal fees.

(4)    On 29 March 2018 Mr Gye filed a summons in the Supreme Court of New South Wales seeking judicial review of the decision of the Panel and a stay of the judgment (Supreme Court proceedings). There were various procedural irregularities in that application which are not presently relevant, but which are addressed in the decision of Campbell J in Gye v Laughton [2018] NSWSC 1026.

(5)    On 2 July 2018 Campbell J ordered that the judgment be stayed pending disposition of the review, on condition, relevantly, that the amount of the judgment be paid into the Supreme Court on or before 13 July 2018.

(6)    The sum of $19,620.07 was duly paid into court by Mr Gye on 12 July 2018.

(7)    On 15 August 2018 Mr Gye filed a Notice stating grounds of Opposition to the Petition in this Court together with an accompanying affidavit, which stated that Mr Laughton was a “secured creditor with no debts owing” because of the money paid into the Supreme Court on 12 July 2018.

(8)    On 22 January 2019 Mr Laughton filed an application and accompanying affidavit in this Court to extend time for when the Creditor’s Petition would lapse.

(9)    On 22 February 2019 Harrison AsJ delivered reasons declining to set aside the judgment: Gye v Laughton [2019] NSWSC 121; and ordered that the sum paid into Court by Mr Gye be paid to Mr Laughton together with interest accrued.

(10)    On 4 March 2019 the money was paid to Mr Laughton.

(11)    On 20 May 2019 this Court ordered, by consent, that the Creditor’s Petition be dismissed.

4    During the pendency of the Supreme Court proceedings, the Creditor’s Petition was adjourned on 2 May 2018, 16 May 2018, 4 July 2018, 18 July 2018, 22 August 2018, 19 September 2018, and 6 February 2019.

5    There is no dispute that the dismissal of the Creditor’s Petition followed as a matter of course from the payment to Mr Laughton of the money held by the Supreme Court. Nor is there any dispute that Mr Laughton is entitled to his costs of the Petition up until and including 12 July 2018. However, there remains the questions of quantifying the costs, and whether Mr Laughton or Mr Gye should pay the costs incurred after 12 July 2018, when the money was paid into the Supreme Court.

6    Mr Laughton contends that he is entitled total costs in the amount of $11,468.80 including the costs of junior counsel who appeared on his behalf and his own costs as senior counsel. He relies on affidavits dated 27 March 2019 and 12 April 2019 in support, which include two Statements of Costs and Disbursements said to be in accordance with sch 3 of the Federal Court Rules 2011 (Cth) (FCR). Mr Laughton submits that the Court should make a lump sum costs order in this amount in his favour, as well as orders for the payment of the costs of hearings on 17 April 2019, 16 May 2019 and, one assumes, the costs of written submissions subsequently filed.

7    Mr Gye contends that Mr Laughton is not entitled to any costs after 12 July 2018 because from that date Mr Laughton became a secured creditor within s 4 of the Bankruptcy Act, in respect of the judgment debt upon which the Creditor’s Petition was based. He submits that Mr Laughton should pay his costs from that date on an indemnity basis, because the proceedings from that date should be characterised as an abuse of process as Mr Laughton insisted on pursuing the proceedings when, if properly advised, he must have known that the proceedings were doomed to fail. Mr Gye further contends that any award of costs should be taxed, rather than awarded as a lump sum.

8    In an initial exchange of submissions, Mr Laughton disputed the proposition that from 12 July 2019 Mr Gye became a secured creditor. However, the parties’ attention was subsequently drawn to the decision in Dura (Australia) Constructions Pty Ltd (in liq) (recs and mgrs. apptd) v Hue Boutique Living Pty Ltd (formerly SC Land Richmond Pty Ltd) [2014] VSCA 326; 49 VR 86 and further submissions were invited and received. In Dura, in order to secure a stay on the execution of a judgment debt pending the hearing and determination of an appeal, a judgment debtor paid $1,000,000 into an interest bearing account in the joint names of its solicitors and those of the judgment creditor, under an order of the court. The Court of Appeal (Santamaria JA, Maxwell P and Whelan JA agreeing) found that upon the payment into the joint account, the judgment creditor acquired a charge; see [3], [6], [40] – [60], [86]. In his subsequent submissions, Mr Laughton properly accepted on the basis of this authority that funds paid into court as a condition of a stay, may be charged in favour of the judgment creditor.

9    In my view Dura is relevantly indistinguishable from the facts of the present case. The consequence is that from the date of payment into court on 12 July 2018 Mr Laughton ceased to be an unsecured creditor. Section 44 of the Bankruptcy Act provides that only a creditor whose debt is unsecured may present a petition, unless a secured creditor includes particulars of the security within the petition and includes a statement that he or she is willing to surrender his or her security for the benefit of creditors generally in the event of a sequestration order being made against the debtor. Mr Laughton could not amend his Petition to include those requirements following the payment into court by Mr Gye because at that point the entirety of the debt owed to Mr Laughton was secured.

10    In these circumstances, Mr Laughton is not entitled to his costs following 12 July 2018.

11    The question then arises as to whether or not Mr Gye is entitled to have his costs following that date and if so, on what basis? Mr Laughton submits that it was open to Mr Gye to apply to have the Petition dismissed, but he did not. He also submits that it is relevant to the consideration of costs that Harrison AsJ observed, at [46] of her reasons, that the Supreme Court proceedings, which had been commenced well out of time, were commenced in order to stave off the bankruptcy proceedings. Mr Gye contends that once the funds were paid into court Mr Laughton, properly advised, should have realised that his application had no chance of success with the consequence that he should be ordered to pay Mr Gye’s costs on an indemnity basis.

12    It is tolerably clear that following the payment into court the eyes of the parties turned to the Supreme Court proceedings. The Creditor’s Petition was effectively dormant, with return dates being adjourned to see what happened in the Supreme Court proceedings. The circumstances are not such that I would conclude that the maintenance by Mr Laughton of the Creditor’s Petition was an abuse of process. However, it is appropriate that Mr Laughton pay Mr Gye’s costs, to be taxed if not agreed, from 12 July 2018.

13    The remaining issue between the parties is whether Mr Laughton should have his costs of the Creditor’s Petition prior to 12 July 2018 awarded on a lump sum basis pursuant to FCR 40.02(b). Mr Laughton relies on his affidavits to support the proposition that he has complied with FCR sch 3 and that he is entitled to claim:

(a)    $2,088.00 on the dismissal of the Creditor’s Petition;

(b)    $4,500.00 incurred by junior counsel for any adjournments for which costs have been reserved;

(c)    $2,630.80 for court fees and other fees; and

(d)    $2,250.00 as his own fees;

leaving a total of $11,468.70.80.

14    Leaving aside costs incurred after 12 July 2018, in my view it is appropriate for the Court to order that the fees be paid in a lump sum. In an annexure to his affidavit dated sworn 2 April 2019, Mr Gye objects to the quantum of some of the costs incurred by Mr Laughton prior to 12 July 2018, including submissions to the effect that some charges were duplications and others were unnecessary. In my view it is logical, fair and reasonable in the circumstances that in a simple case such as this that the parties not be put to the additional burden of taking the assessment of his costs to taxation. It will simply open another area of disputation and expense. On Mr Laughton’s evidence, the amounts incurred prior to 12 July 2018 were $1,812.50 in junior counsel fees, and $2,125.80 in court fees and other fees, totalling $3,938.30. To be added to this amount is $200.00 for junior counsel’s appearance for Mr Laughton on 18 July 2018, which Mr Gye concedes would have been necessary even if Mr Laughton had sought to discontinue the Petition. The amount of $2,088.00 claimed pursuant to item 14.2 of sch 3 concerns solicitors fees. Mr Laughton did not retain a solicitor and this amount is not allowable. This leave a total of $4,138.30. Despite My Gye’s objections, in my view Mr Laughton’s costs prior to 12 July 2018 assessed in this amount are fair and reasonable. Accordingly, I will order that Mr Gye pay those costs.

15    I note parenthetically that had Mr Laughton succeeded in obtaining an order for the payment of all of his costs of the Creditor’s Petition, he would nevertheless not have been entitled to the payment of his own costs (that he invoiced in the amount of $2,250.00). That is because recently, in Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29; 93 ALJR 1007, the High Court authoritatively ruled that the so called Chorley exception (arising from London Scottish Benefit Society v Chorley (1884) 13 QBD 872 at 877) does not apply in Australia, with the consequence that a barrister may not be recompensed for the value of his or her time spent in his or her own litigation (at [3], [57] – [58], [69], [99]).

16    I note that on 20 May 2019 Markovic J otherwise dismissed the Petition.

17    Accordingly, the orders that I now make are:

(1)    That the respondent pay the applicant’s costs of the Creditor’s Petition prior to 12 July 2018 in the sum of $4,138.30;

(2)    That the applicant pay the respondent’s costs of the Creditor’s Petition after 12 July 2018 (excluding the costs of the 18 July 2018 case management hearing) in a sum to be taxed if not agreed.

Associate:

Dated:    20 December 2019