Federal Court of Australia

Rahman v Kent [2022] FCA 485

ORDERS

THE COURT ORDERS THAT:

1.    The appellant be granted an extension of time to 12 August 2019 to file a notice of appeal against the judgment of the Federal Circuit Court given on 24 May 2019.

2.    The appellant have leave nunc pro tunc to file an amended notice of appeal in the form filed on 19 December 2019.

3.    The appeals be allowed.

4.    The orders of the Federal Circuit Court made on 24 May 2019 be set aside and in lieu thereof it be ordered that:

(a)    the application for review filed on 5 March 2019 be allowed;

(b)    order 2 of the orders made by the Registrar on 12 February 2019 be set aside and in lieu thereof it be ordered that “the respondent pay the applicant creditor’s costs (including reserved costs) of the petition”; and

(c)    the parties bear their own costs of the review.

5.    Order 2 of the orders of the Federal Circuit Court made on 16 July 2019 be set aside and in lieu thereof it be ordered that “the parties bear their own costs on the application in a case filed by the respondent on 12 June 2019”.

6.    Within 14 days of these orders, the parties provide to my Associate an agreed quantification of the respondent’s costs of the creditor’s petition and failing agreement the evidentiary material for the assessment of those costs that was before the Federal Circuit Court on 24 May 2019.

7.    The respondent pay the appellant’s costs of the appeal as agreed or taxed.

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

REASONS FOR JUDGMENT

STEWART J:

Introduction

1    This is an application for an extension of time to appeal, and the appeal if necessary, from the judgment of the Federal Circuit Court of Australia published as Kent and Orlizki v Rahman (No 2) [2019] FCCA 1357. It is also an appeal, without the need for an extension of time, from the judgment of the Circuit Court published as Kent and Orlizki v Rahman (No 3) [2019] FCCA 1999.

2    The respondent is a solicitors’ partnership of Rodney Kent and Tim Orlizki who practiced at the relevant time under the name “Kent Attorneys”. The appellant was at one time their client. Although the respondent is in substance Messrs Kent and Orlizki, since they are cited together as one respondent I shall refer to the respondent by the singular neuter pronoun “it”.

3    The central issue raised by the appeals is whether the appellant should be held liable for costs ordered and assessed in the respondent’s favour which include the respondent’s own professional costs of acting in the litigation. The costs orders in question were made shortly before the delivery of the judgment of the High Court of Australia in Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29; 269 CLR 333 which held that the “Chorley exception” is not part of the common law of Australia, i.e., that solicitors who act on their own behalf are not permitted to recover costs in respect of the value of their own time spent in the litigation, calculated as though they had retained an independent solicitor: at [3], [39], [57] per Kiefel CJ, Bell, Keane and Gordon JJ, [63] per Gageler J, and [93] per Edelman J, with reference to London Scottish Benefit Society v Chorley (1884) 13 QBD 872.

4    Until 4 September 2019 when Bell Lawyers was published, it was thought that the Chorley exception was part of the common law of Australia such that statutory provisions for “costs” to be awarded meant that other than solicitors in respect of their own professional fees, self-represented litigants could not recover the costs of representing themselves in the litigation: Bell Lawyers at [63] per Gageler J. That understanding was reflected at the level of the High Court as exemplified by Guss v Veenhuizen [No 2] [1976] HCA 57; 136 CLR 47 in which it was accepted that the Chorley exception formed part of the common law of Australia. Nevertheless, the Chorley exception was recognised as “somewhat anomalous” in Cachia v Hanes [1994] HCA 14; 179 CLR 403 at 411.

Background

5    The appellant, as client, retained the respondent, as solicitor, in respect of certain legal services. The respondent raised a number of invoices for the services performed by it. A dispute arose about the appellant’s liability for the fees reflected in the invoices. The respondent ultimately prevailed in the Local Court of New South Wales and obtained judgments against the appellant.

6    In November 2018, the respondent issued a bankruptcy notice against the appellant for the sum of $15,251.14 based on the judgments. In December 2018, the respondent filed a creditor’s petition against the appellant in the Circuit Court. The appellant eventually paid the respondent the sum claimed on 5 February 2019.

7    On 12 February 2019, the creditor’s petition came before District Registrar Wall in the Circuit Court. As the debt had by then been paid, the respondent sought that the creditor’s petition be dismissed and that the appellant pay its costs. The Registrar so ordered and fixed the respondent’s costs in the sum of $10,630.11. The relevant order of the Registrar was as follows:

2.    The Respondent pay the Applicant Creditor’s costs (including reserved costs) of the Petition fixed in the amount of $10,630.11.

8    It is to be observed that that order has in effect two components: one is to hold the appellant liable for the respondent’s costs and the other is to quantify those costs in a fixed amount. Section 32 of the Bankruptcy Act 1966 (Cth) gave the Registrar the power to make a costs order on the creditor’s petition. That section provides for the making of such orders as to “costs” in such a proceeding as the court thinks fit. Although Bell Lawyers was decided with reference to a different statutory provision for the ordering of “costs”, namely s 98(1) of the Civil Procedure Act 2005 (NSW), the reasoning of the High Court applies equally to other statutory costs provisions including the provision applicable in this case. No suggestion was made to the contrary.

9    The appellant sought review of the costs order made by the Registrar pursuant to s 104(2) of the Federal Circuit Court of Australia Act 1999 (Cth). Specifically, he sought that order 2 made by the Registrar be set aside and that the costs of the petition be reserved pending determination of other proceedings in the District Court of New South Wales. It is to be noted that the gravamen of the appellant’s case on review was that costs should not have been ordered against him in circumstances where he had paid the debt underlying the creditor’s petition; it was not his case that the costs had been wrongly assessed to include the respondent’s own professional charges. Nevertheless, the primary judge necessarily considered the Registrar’s assessment of the costs and confirmed their assessment at the sum of $10,630.11. It is common ground that that sum substantially includes allowance for the respondent’s own professional charges.

10    On 24 May 2019, the primary judge dismissed the review application in Rahman No 2. The following orders were made:

1.     The application for review filed on 8 March 2019 by the respondent, Mr Fahmid Rahman, is dismissed.

2.     Subject to order 3, the respondent, Mr Fahid Rahman, pay the costs of the application of review of the applicants, Mr Rodney Kent and Mr Tim Orlizki.

3.     Should any party wish to apply to discharge or vary order 2, he or they must do so by filing by no later than 7 June 2019 an application in a case supported by an affidavit.

11    Exercising the liberty granted by order 3, the appellant sought that order 2 be discharged. That application was determined in Rahman No 3. On 16 July 2019, the primary judge dismissed the application and ordered the appellant to pay the respondent's costs as assessed or as taxed.

12    The respondent was self-represented at each stage in the Circuit Court – Mr Kent appeared before the Registrar, and Mr Orlizki appeared before the primary judge in the hearings that culminated in Rahman No 2 and Rahman No 3. This appeal concerns the respondent’s claim for the fees raised by it from Messrs Kent and Orlizki representing it (i.e., it being self-represented) in each of the creditor’s petition before the Registrar, the review in Rahman No 2 and the application in a case in Rahman No 3.

Notice of appeal

13    On 12 August 2019, the appellant filed a notice of appeal, expressly said to be from the following orders:

(1)    Order 2 on 12 February 2019 by the Registrar, i.e., the order that the appellant pay the costs of the creditor’s petition in the fixed sum of $10,630.11;

(2)    Order 2 on the 24 May 2019 in Rahman No 2, i.e., the order that the appellant pay the costs of the application for review of the Registrar’s orders; and

(3)    Order 2 made on 16 July 2019 in Rahman No 3, i.e., the order that the appellant pay the costs of the application to reconsider the costs order made in Rahman No 2.

14    The grounds of appeal, which were apparently drafted by the appellant himself, may fairly be described as incomprehensible. They cannot be said to identify in any intelligible way the challenge which is now made, i.e., that the appellant cannot be held liable to pay the respondent’s charges for professional services rendered to itself.

15    It is to be observed that no appeal lay against the order of the Registrar because that had been subsumed by the review of that order in Rahman No 2. In truth, the appellant took issue with order 1 in Rahman No 2 inasmuch as it confirmed the Registrar’s costs order. An appeal against that order should have been filed within 28 days, i.e., by 24 June 2019: r 36.03 of the Federal Court Rules 2011 (Cth). The notice of appeal was accordingly seven weeks late in respect of the challenge to Rahman No 2.

16    In respect of the challenge to Rahman No 3, i.e., the orders that the challenge to the costs order in Rahman No 2 be dismissed and that the appellant pay the costs of that challenge, the notice of appeal was within time (by three days).

The appellant becomes represented

17    Although the appellant had been represented in the dispute about the invoices and, as I understand it, at least initially in his opposition to the creditor’s petition, there was no appearance by or on behalf of the appellant before the Registrar on 12 February 2019. This is explained in Rahman No 2 at [37]. The appellant has deposed an affidavit in the present proceeding in which he says that he was “legally unrepresented in these proceedings from early March 2019”.

18    The appellant remained unrepresented when the appeal first came on before me for case management on 7 November 2019. On that occasion, it was identified in the discussion that the appeal raised the question whether the appellant should have the benefit of the then very recent decision in Bell Lawyers notwithstanding that no point had been taken below that the respondent was not entitled to the benefit of the Chorley exception. Substantially because of the nature of that point, which raises amongst other issues whether Bell Lawyers has the effect of abolishing the Chorley exception retrospectively or only prospectively, I issued a referral certificate under r 4.12 of the Rules for the Registrar to attempt to arrange for the provision of legal assistance to the appellant by a pro bono lawyer.

19    Mr N G Olson of counsel generously accepted the referral. I acknowledges his able assistance.

20    Thereafter, on 19 December 2019, there was filed on behalf of the appellant an application for an extension of time, a supporting affidavit and an amended notice of appeal.

Amended Notice of Appeal

21    The amended notice of appeal raises only one point, although it is expressed in two paragraphs. The point is that following Bell Lawyers, the respondent’s entitlement to the costs of the creditor’s petition and any subsequent costs orders does not include its own charges for professional services. Substantively, there is no answer to the point. In Bell Lawyers itself it was made clear that the abrogation of the Chorley exception operates retrospectively: at [55]. That is to say, even though it was not known to be so at that time, when the Registrar assessed the respondent’s costs of the creditor’s petition to include the respondent’s own charges for professional services, that was contrary to the common law of Australia and therefore unjustified and wrong. The primary judge’s confirmation of the Registrar’s assessment suffers from the same defect.

22    The appellant’s case is that because the Registrar was wrong, he should have succeeded in Rahman No 2 with the result that there was no basis for the costs order against him in Rahman No 2. If there had been no costs order against him in Rahman No 2, then there would have been no Rahman No 3 which means that there should be no adverse costs order in Rahman No 3. The appellant submits that if there is such an order, then the existing order should be replaced with an order that he pay the respondent’s costs but that those costs exclude the respondent’s own professional fees, as was done in Ratkovic v Hadzic [2019] NSWSC 1627 by Ward CJ in Eq. That would be in order to make it clear that the assessment should not be done on the basis that the Chorley exception is part of Australian law.

23    The respondent raises two obstacles to the appellant’s substantive contentions on the appeal being adjudicated, namely that the appellant requires an extension of time with respect to the challenge to the confirmation of the order of the Registrar in Rahman No 2 and that he requires leave to argue in the appeal the Bell Lawyers point which was not raised below.

24    I will consider each of those obstacles in turn.

Extension of time

25    Rule 36.05 of the Rules makes provision for an application for an extension of time within which to file a notice of appeal, and in particular provides that the application may be made during or after the expiry of the period for filing a notice of appeal.

26    An application for an extension of time to appeal challenges a respondent’s vested right to obtain the benefit of the judgment that is the subject of the appeal: Jackamarra v Krakouer [1998] HCA 27; 195 CLR 516 at [3]-[4] per Brennan CJ and McHugh J, and [66] per Kirby J. It is in effect to grant an exception to the important value of finality in litigation.

27    It is well-settled that the factors to be taken into account when considering whether an extension of time should be granted include the extent of the delay, the explanation for the delay, any prejudice a respondent might suffer because of the delay, and the merits of the proposed appeal: Hunter Valley Developments Pty Ltd v Cohen [1984] FCA 186; 3 FCR 344 at 348-9, adopted by the Full Court in Parker v R [2002] FCAFC 133 at [6]-[7].

28    As mentioned, the notice of appeal was filed seven weeks late in respect of the challenge to Rahman No 2. That is not a particularly long period of time, although it is also not trivial. That period must also be understood in the context of what was happening in the litigation between the parties at that time. Relevantly, the litigation continued because the appellant exercised the liberty to have the primary judge revisit the costs order made in Rahman No 2. The appellant did that promptly. There is thus no sense in which the litigation was final even following the entering of orders in Rahman No 2. The period of seven weeks is therefore of relatively little significance.

29    The appellant’s explanation for the delay in challenging Rahman No 2 begins with reference to the final paragraph, [55], of that decision which is in the following terms:

I propose to order that the application for review be dismissed. There is no apparent reason why the usual order as to costs should not be made. I propose, therefore, to order that Mr Rahman pay the creditors’ costs of the application for review. I will, however, reserve to the parties liberty to apply within fourteen days should any one of them wish to apply to discharge or vary the order for costs I propose to make.

30    The appellant says that because of the primary judge’s use of the word “propose”, he did not understand that the application to review the Registrar’s orders was dismissed in Rahman No 2. He thought that that was something the judge said he would do in the future which only occurred in Rahman No 3 after he had exercised the liberty to have the “proposed” costs order in Rahman No 2 revisited. The appellant says that his understanding is reflected in the notice of appeal which he filed following Rahman No 3 which expressly challenges the Registrar’s determination.

31    In view of the fact that the published reasons in Rahman No 2 include on the second page the orders that were made and entered, the appellant’s understanding was obviously mistaken. It might even be said that it was obtuse. However, in view of the fact that the appellant was not challenged on his understanding, it cannot be said that that was not in truth his understanding.

32    It is also to be observed, as submitted on his behalf, that the appellant was nothing if not astute over the course of the litigation between the parties to promptly challenge every costs order that was made against him. Although that might be thought not to be particularly to his credit, it makes it clear that his failure to file a notice of appeal from Rahman No 2 within time cannot for a moment be thought to be because he either was accepting of that order or did not at that time intend to challenge it; he always intended to challenge it, but misunderstood when that was properly to be done.

33    The respondent identifies no particular relevant prejudice that it faces if an extension of time is granted, other than the prejudice inherent in the delay that has been occasioned. However, in view of the fact, as identified, that the litigation between the parties was in any event ongoing, and the fact that no extension of time is required in respect of the challenge to the orders in Rahman No 3 with the result that any extension of time does not delay the finalisation of the litigation, there is in truth no appreciable prejudice to the respondent if an extension is granted.

34    In considering the delay, it must be borne in mind that the considerable delay between the appointment of pro bono counsel and the appeal being heard is because the parties jointly sought the delay of the appeal hearing until such time as the circumstances of the COVID-19 pandemic allowed the appeal to be heard in person, rather than remotely. Thus, the delay of approximately two years thereby occasioned must be disregarded.

35    Insofar as the merit of the proposed appeal against Rahman No 2 is concerned, I have already explained that it is effectively unanswerable – Bell Lawyers forecloses on any doubt in that regard.

36    In those circumstances, I am persuaded that the appellant is deserving of an extension of time for the institution of the appeal against Rahman No 2. To refuse an extension would do him an injustice and it would reward the respondent with costs it is clearly not entitled to.

Raising a new point on appeal

37    An appellate court will not entertain a point not raised in the court below where evidence could have been given there which by any possibility could have prevented the point from succeeding: Suttor v Gundowda Pty Ltd [1950] HCA 35; 81 CLR 418 at 438. As it was explained in Coulton v Holcombe [1986] HCA 33; 162 CLR 1 at 7, it is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at first instance; the powers of an appellate court with respect to amendment (i.e., correction of the judgment appealed against) are ordinarily to be exercised within the general framework of the issues determined at first instance and not otherwise.

38    With reference to the present case, the substantial public interest in the finality of litigation obviously looms large in considering whether a point determined by the High Court in an unrelated proceeding after final orders in the present proceeding, and which was not raised in the present proceeding, should be allowed to be raised in an appeal against those final orders. However, as pertinently submitted on behalf of the appellant, had the Bell Lawyers point been formally raised in the primary proceeding nothing much would have changed because of the received understanding at that time as to the common law position.

39    It is worth exploring that scenario a little more fully. Had the Bell Lawyers point been raised before the Registrar at the time of the assessment of the respondent’s costs on the creditor’s petition, the Registrar would have been bound by the understanding of the common law at that time that the Chorley exception was available to the benefit of the respondent. Aside from any other binding precedent at that time, the Registrar would have been expected to follow the decision of the New South Wales Court of Appeal which was later overturned in Bell Lawyers, i.e., Pentelow v Bell Lawyers Pty Ltd [2018] NSWCA 150. The same is true if the point had been raised before the primary judge in the review of the Registrar’s assessment.

40    In those circumstances, there is no reason why the appellant should not be granted leave to raise the point for the first time in the appeal. Whilst it was formally available to him before the primary judge, it is not a point on which the primary judge could have found in the appellant’s favour. The point only became available to the appellant in any effective sense following the publication of the reasons in Bell Lawyers which, as mentioned, was more than three months after Rahman No 2 was heard and decided, and approximately seven weeks after Rahman No 3 was heard and decided.

41    The respondent seeks to make something of the fact that the appellant’s notice of appeal does not raise the point, and that the point was only raised in the amended notice of appeal some two and a half months after the decision in Bell Lawyers. I do not regard those considerations to be pertinent. First, the notice of appeal was filed, and necessarily so if it was to be done within time, before the decision in Bell Lawyers was published. The point was thus not in any effective sense available to the appellant at that time.

42    Secondly, the notice of appeal, albeit subject to the criticisms I have already identified, had the effect of putting the respondent on notice that it had no finality yet in the judgments appealed against. That is to say, the notice of appeal from both Rahman No 2 and Rahman No 3 had already been filed and served at the time Bell Lawyers was published and, obviously, at the time the point was later introduced by amended notice of appeal. Further, at least in respect of the appeal from Rahman No 3, there was an appeal properly constituted within time. This is therefore not a case where a properly finalised case is sought to be reopened on account of a new understanding of the common law being reached and declared by the High Court. In such a case, one would generally expect that the value in certainty and the finality of litigation would outweigh any argument in favour of the case being reopened, but this is not such a case.

43    Thirdly, it is not uncommon for a notice of appeal to be amended to introduce grounds not contained within the original notice of appeal. Indeed, r 36.10 gives an appellant the right to amend a notice of appeal during the period of 28 days after filing the notice of appeal by filing a supplementary notice of appeal. It is of course true that the amended notice of appeal in this case was filed well outside that period. The point, however, is that an appellant is not held forever to the points taken in its original notice of appeal. It is thus no determinative objection to the Bell Lawyers point being raised for the first time on appeal that it was not raised in the original notice of appeal.

Consideration

44    Given that it is common ground that a substantial part of the Registrar’s assessment of the respondent’s costs of the creditor’s petition in the sum of $10,630.11 constituted the respondent’s own charges for professional services representing itself, there is no doubt that that assessment is contrary to the respondent’s legal entitlement. It follows that the assessment is wrong, and the primary judge’s dismissal of the review of the assessment and his Honour’s effective confirmation of the assessment in Rahman No 2 must be set aside.

45    The line between what the respondent is entitled to and what it is not entitled to in the assessment of its costs is likely to be a relatively clear one. It submitted an itemised bill of costs confirmed by affidavit to the Registrar for assessment, which affidavit was before the primary judge. It is, therefore, technically before me on the appeal although neither side of the case has put it before me in any practical sense. Rather than remitting the assessment to the primary judge with the resultant delay and cost that that would occasion, the best course is for the parties to be given the opportunity to agree a fresh assessment in accordance with these reasons, i.e., on the basis that the Chorley exception is not available to the respondent. In seeking to reach agreement, the parties will no doubt bear in mind the relatively modest sum at stake and their obligations to conduct the proceeding, including negotiating any settlement, in a manner consistent with the overarching purpose of the civil practice and procedure provisions, i.e., to facilitate the just resolution of the dispute as quickly, inexpensively and efficiently as possible: ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth).

46    If the parties are unable to agree, they should put before me the relevant documents from the record of the case below so that I can consider whether it is practical for me to do the assessment on appeal. If it is not, then the matter will have to be remitted to the Circuit Court.

47    In Rahman No 2, the primary judge ordered that the appellant pay the costs of the unsuccessful the review application. However, since the appellant is in the appeal now achieving success in Rahman No 2, on one view he should not have to pay the costs of Rahman No 2; that is to say, there is no event in the respondent’s favour on which a costs order in its favour should or can turn. Against that is the submission that since the appellant is succeeding on a point in the appeal that was not raised by him below, nor could he have succeeded on it below even if he had raised it, there is no occasion to disturb the costs order below.

48    In my view, the proper approach is to recognise that the point upon which costs were ordered below has been overturned by subsequent events such that there is no proper basis for that costs order to stand. The question of the costs of Rahman No 2 must therefore be considered afresh. The respondent was not to know at the time of Rahman No 2 that its defence of the Registrar’s costs assessment was wrong and that the assessment was liable to be overturned. In view of the High Court’s prior characterisation of the Chorley exception as anomalous, as well as the criticisms made by other courts (as to which see the authorities cited in Bell Lawyers at [86] per Edelman J), it may not have come as a particular surprise to the costs cognoscenti when Bell Lawyers declared that it was not part of the common law of Australia. However, since the NSW Court of Appeal had only a short time before Rahman No 2 found the Chorley exception to apply, there can be no criticism of the respondent for claiming its own charges in the assessment and defending the assessment in Rahman No 2.

49    In those circumstances, justice in the case is best served by each party paying its own costs in Rahman No 2.

50    The respondent submits that since the basis on which the appellant challenged the costs in Rahman No 2 in Rahman No 3 was wrong, and remains wrong and unaffected by Bell Lawyers, the appeal against the costs order in Rahman No 3 should fail. That is, the respondent says that there is no error in the form of order made by the primary judge; the only issue is the amount of costs allowed on taxation in respect of which there is no pending review or appeal. Against that, however, is the consideration that if Rahman No 2 had been correctly decided, i.e., in accordance with the law as we now know it to be, there would have been no occasion for Rahman No 3 so it would be unjust and not in accordance with the law for the appellant to have to pay the costs of Rahman No 3. That is a powerful consideration. The result is that once again the justice of the case is best served by the parties paying their own costs in Rahman No 3.

Costs of the appeal

51    As the appellant has been substantially successful on the appeal, in the ordinary course he should have the costs of the appeal. Against that is the consideration that the point taken by him on appeal was not taken below, in the circumstances discussed above. That consideration may have carried some weight, except that since at least December 2019 the respondent has been well aware that in accordance with the decision in Bell Lawyers it has no justification for a major part of the costs assessment which it has sought to defend. Its defences, which have essentially been procedural obstacles to the appellant’s success, have failed. In those circumstances, it should pay the appellant’s costs of the appeal.

Disposition

52    In the result there should be orders to the following effect.

53    The appellant should have an extension of time to 12 August 2019 to file a notice of appeal against the judgment of the Circuit Court on 24 May 2019 (i.e., Rahman No 2), and he should have leave nunc pro tunc to file an amended notice of appeal in the form filed on 19 December 2019.

54    The appeal against the orders of the Circuit Court on 24 May 2019 should be allowed, and orders 1 to 3 should be set aside and replaced with orders:

(1)    Allowing the review of the Registrar’s orders of 12 February 2019;

(2)    Setting aside order 2 of 12 February 2019 and replacing it with an order that “the respondent pay the applicant creditor’s costs (including reserved costs) of the petition”; and

(3)    The parties bear their own costs of the review by the Circuit Court on 24 May 2019.

55    There should be orders directing that within 14 days of these orders the parties provide to my Associate an agreed quantification of the respondent’s costs of the creditor’s petition and failing agreement that they provide to my Associate the evidentiary material for the assessment of those costs that were served before the Circuit Court on 24 May 2019. That is so that I can consider whether to conduct the assessment myself or to remit the matter to the Circuit Court as indicated.

56    The appeal against order 2 of the Circuit Court on 16 July 2019 be allowed, and that order be set aside and replaced with an order that the parties bear their own costs of the application in a case filed by the appellant on 12 June 2019.

57    The respondent should pay the appellant’s costs of the appeal as agreed or taxed.

Associate:

Dated:    3 May 2022