Federal Court of Australia

Bingham v Boensch [2023] FCA 117

ORDERS

THE COURT ORDERS THAT:

1.    The appeal is dismissed.

2.    The appellant is to pay the costs of the respondent to be agreed or assessed.

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

REASONS FOR JUDGMENT

ABRAHAM J:

1    The appellant, Mr Bingham, appeals an order setting aside a bankruptcy notice which was issued on 23 June 2021, on his application. The bankruptcy notice demanded that the respondent, Mr Boensch, pay $372,674.84 to him. That is the amount of a judgment entered in the District Court of New South Wales, which is the sum of three amounts recorded in a Certificate of Determination of Costs (Costs Certificate) issued pursuant to s 70 of the Legal Profession Uniform Law Application Act 2014 (NSW) (LPUL Application Act), and filed with the District Court pursuant to s 71(3) of that Act. The largest of the three amounts, $358,234.71, represents the amount for which the costs assessor who issued the Costs Certificate (Costs Assessor) determined are the costs of legal services Mr Bingham and instructed counsel, Mr Bevan, provided to Mr Boensch in connection with an appeal to the High Court of Australia (Costs Determination). The other two amounts represent interest on the amount of the Costs Determination, and the filing fee Mr Bingham paid when he lodged his application for the assessment of costs.

2    On 4 February 2022, the primary judge ordered that the bankruptcy notice be set aside: Boensch v Bingham (No 2) [2022] FedCFamC2G 47 (PJ). It is not challenged that it was open to the primary judge to set aside a bankruptcy notice on the basis that it does not represent a true debt. Rather, the appellant’s challenge focusses on the findings of the primary judge which underpinned the conclusion that the notice, in this case, did not represent a true debt.

3    The appellant alleges five grounds of appeal:

1. The primary Judge erred in finding that Mr Bingham and Mr Boensch did not enter into costs agreements on the terms contained in Mr Bingham's February or October costs disclosures.

2. The primary Judge erred in finding that the only costs agreement entered into between the [sic] Mr Bingham and Mr Boensch was an agreement constituted by the Mortgage.

3. The primary Judge erred in finding that Mr Boensch's liability to pay the legal costs the subject of the certificate of determination of costs was to be determined solely by reference to the terms of the Mortgage.

4. The primary Judge erred in finding that the Mortgage, by reason of clause 6, limited the extent of the debt or liability "to the sum of one hundred thousand dollars ($100,000)".

5. The primary Judge should have found that Mr Boensch by his conduct signified an unqualified acceptance by him of the terms contained in Mr Bingham's February and October costs disclosures.

4    The respondent is not legally represented in these proceedings, and was not represented before the primary judge. He made written and oral submissions on his own behalf, and opposed the appeal.

5    For the reasons below, the appeal is dismissed.

Primary judgment

6    Given the submissions on the appeal, it is appropriate to set out, in some detail, the reasons of the primary judge.

Submissions

7    Mr Boensch claimed that his liability, if any, to pay Mr Bingham’s costs of the appeal to the High Court were entirely regulated by the terms of a mortgage he and Mr Bingham executed in March 2019. Mr Boensch submitted that, under the terms of that mortgage: any liability to pay the costs would be limited to $100,000; Mr Bingham could enforce such liability only to the extent it could be satisfied out of a property in Rydalmere in which Mr Boensch was the trustee (the Property); and Mr Bingham could not enforce the liability until 1 March 2024. Accordingly, Mr Boensch submitted that he was not indebted to Mr Bingham for the costs, meaning it had not been open to Mr Bingham to apply to have them assessed and to register the Costs Certificate as a judgment of the District Court: see PJ [3].

Factual background

8    The primary judge set out the background as follows.

9    Around January 2019, Mr Boensch and Mr Bingham discussed Mr Bingham and Mr Bevan acting for Mr Boensch in an application for special leave to the High Court: see PJ [5].

10    On 31 January 2019, by email to Mr Bingham, Mr Bevan confirmed the terms of a retainer previously provided to him subject to, inter alia, both of their fees being secured by a second mortgage to be granted over the Property: see PJ [6].

11    On 5 February 2019, Mr Bevan and Mr Bingham met with Mr Boensch to finalise fee arrangements. They discussed a proposed mortgage over the Property: see PJ [8]-[9].

12    On or shortly after 7 February 2019, Mr Bingham provided Mr Boensch a document titled “Costs Disclosure & Costs Agreement” (Solicitor’s February costs disclosure). The primary judge observed that this document was provided in fulfilment of the obligations imposed by s 174(1) of the Legal Profession Uniform Law (NSW) (LPUL) (see below at [46]).

13    The Solicitor’s February costs disclosure set out “General Terms of Business”, including “your right to . . . negotiate a costs agreement with us”. It provided that Mr Bingham would charge at the hourly rate of $360 plus GST. The estimate of the fees was $32,500, which was to cover three anticipated activities: an application for special leave ($7000); resisting a potential application for security for costs ($5,500); and the appeal ($20,000). The estimate of legal fees referred to above did not include counsel’s fees, but under the heading “Disbursements” the disclosure stated: “[w]e may incur disbursements (being money which we pay or are liable to pay to others on your behalf, that is, third party expenses). Disbursements may include … barrister’s fees. Where you instruct us to brief a barrister or other expert and they provide a disclosure and costs agreement we will provide this to you”: see PJ [10] and [15]-[17].

14    The billing arrangement set out in the “General Terms of Business” of the Solicitor’s February costs disclosure also provided: “[o]ur usual policy is to issue a tax invoice on a monthly basis but we may issue tax invoices on a more frequent basis depending on the nature of the work. All tax invoices are due and payable 30 days from the date of the tax invoice”: see PJ at [16].

15    The primary judge found that Mr Bingham also appeared to have provided Mr Boensch with a document titled “Costs Agreement between a Barrister and Solicitor pursuant to section 180(1)(c) of the Legal Profession Uniform Law (NSW) (‘UL’)”, dated 2 February 2019 and signed by Mr Bevan (Barrister’s February costs disclosure). That document provided an estimate of $63,000 to $75,000 for the three anticipated activities: an application for special leave ($24,000-$27,000 plus GST); resisting an anticipated application for security for costs ($9,999-$12,000 plus GST); and preparing for and conducting the appeal ($30,000-$36,000 plus GST): see PJ [18].

16    On 6 and 7 March 2019, Mr Boensch, Mr Bingham and Mr Bevan discussed amendments to and the execution of the mortgage via email and telephone. Those emails included, on 6 March 2019: Mr Bingham commenting that he “agreed to limit the amount to the principal sum of $100,000” in response to Mr Boensch’s statement “[a]n amount with min[imum] and [m]ax[imum] expected to be nominated – not an open-ended arrangement”; and Mr Boensch stating “[t]hat the moneys for [Mr Bingham] and [Mr Bevan’s] work is to be paid when I have it available”: see PJ [19]-[22].

17    On 8 March 2019, Mr Boensch executed the mortgage over the Property. Mr Bingham did so on 12 March 2019: see PJ [23].

18    I note that Annexure A to the mortgage as executed is as follows:

ANNEXURE 'A'

This is the Annexure 'A' to the Mortgage between FRANZ BOENSCH (hereinafter referred to as the Mortgagor) and JOHN DAVID BINGHAM (hereinafter referred to as the Mortgagee).

In consideration of the Mortgagee agreeing to provide or continuing to provide legal services to the Mortgagor or to forbear from obtaining payment of money owing by the Mortgagor, the Mortgagor hereby covenants with the Mortgagee as follows:

l. The Mortgagor will observe the provisions set forth in the memorandum filed with the Registrar-General as dealing number Q860000 ("the Memorandum") which provisions are deemed to be incorporated herein.

2. The power of sale over the secured property of the Mortgagee which shall arise in the event of a default of any of the terms of this Mortgage by the Mortgagor shall be deferred until 1 March 2024 provided that such deferral shall not operate as a waiver of any of the rights of the Mortgagee under this Mortgage other than the Mortgagee's right to exercise his power of sale.

3. The Reference Schedule set out below sets out the applicable rate of interest accruing on the principal sum and related security relevant to this Mortgage.

4. The Mortgagor enters this Mortgage in his capacity as trustee of the Boensch Trust and holds the legal estate of the property hereby mortgaged (“secured property”) as trustee. The parties hereby agree that any liability arising under this Mortgage may be enforced against the Mortgagor only to the extent to which it can be satisfied out of the secured property.

5. The Mortgagor will pay interest on the principal sum or on so much of it as remains unpaid or on any judgment or order in which this or the preceding covenant become merged at the rate set out in the Reference Schedule.

6. The principal sum for legal costs incurred by the Mortgagor as the client of the Mortgagee and as trustee of the Boensch Trust secured under this Mortgage shall be limited to the sum of one hundred thousand dollars ($100,000).

7. The Mortgagee agrees that no interest under this Mortgage on the principal sum shall become payable until the time of repayment of the principal sum occurs, (whether such repayment be from the proceeds of sale of the secured property by the Mortgagor, the Mortgagee or any other security holder having security over the secured property) or until the last instalment of the principal sum is otherwise repaid. ·

8. The Mortgagee agrees not to secure its interest under this Mortgage by registering a caveat or other notation against the title to the mortgaged property before 30 March 2019.

19    On 21 June 2019, the High Court granted Mr Boensch special leave to appeal: see PJ [25].

20    On 3 October 2019, Mr Bevan issued Mr Bingham an invoice for work performed from January 2019 to September 2019 in the amount of “$261,750.00 plus GST plus $2,856.00 plus GST for photocopying 35,700 pages @ 8 cents per page”: see PJ [26].

21    On 4 October 2019, Mr Bingham sent an email to Mr Boensch attaching the following: see PJ [27]-[28]:

(a)    a document titled “John D. Bingham, Solicitor Costs Disclosure & Costs Agreement” (Solicitor’s October costs disclosure) which, under the heading “Estimate of Professional Fees, Disbursements and Internal Expenses”, estimated the costs of the work to be $358,700 (excluding GST), including: $35,000 for solicitor’s fees; $295,000 for Mr Bevan’s fees; and $20,000 for Mr Wells’ fees;

(b)    a document titled “Costs Agreement between a Barrister and Solicitor pursuant to section 180(1)(c) of the Legal Profession Uniform Law (NSW) (‘UL’)” (Barrister’s October costs disclosure), which estimated the costs of total fees and out-of-pockets incurred from 4 October 2019 to 12 October 2019 to be $31,000 plus GST; and

(c)    a letter dated 26 September 2019 from Mr Wells which set out the basis on which he would charge his fees as junior counsel to Mr Bevan.

22    The primary judge noted that there was no evidence that Mr Bingham had notified Mr Boensch before 4 October 2019 that the fees would be greater than those estimated in the Solicitor’s February costs disclosure or the Barrister’s February costs disclosure, or the $100,000 provided for in the mortgage: see PJ [29].

23    On 4 October 2019, Mr Boensch sent an email to Mr Bingham, copying Mr Bevan, in which he rejected the Solicitor’s and Barrister’s October costs disclosures. That email is set out at [87] below. The primary judge noted it would be reasonable to assume that Mr Bingham, and perhaps Mr Bevan, responded to Mr Boensch’s email but that no such response was the subject of any evidence. His Honour concluded that there was no basis for finding they did respond to Mr Boensch’s email: see PJ [30]-[31].

24    On 11 October 2019, the High Court heard Mr Boensch’s appeal: see PJ [31].

25    On 6 December 2019, Mr Bingham issued an invoice to Mr Boensch claiming $391,555.44, which included as disbursements $301,636.72 for Mr Bevan’s fees and $15,452.52 for Mr Wells’ fees: see PJ [32].

26    On 13 December 2019, the High Court dismissed Mr Boensch’s appeal: see PJ [31].

27    On 15 October 2020, Mr Bingham lodged an application for assessment of costs pursuant to s 198(1)(c) of the LPUL. He applied for assessment of the costs he had claimed in his invoice dated 6 December 2019, submitting that he and Mr Boensch had entered into a costs agreement constituted by the Solicitor’s February costs disclosure. The primary judge noted that Mr Boensch had not signed that document, yet Mr Bingham did not identify in his application the grounds on which he claimed that it recorded the terms of a costs agreement. Nor did Mr Bingham disclose the mortgage or communications leading up to it: see PJ [33]-[35].

28    Around the same time, Mr Bevan applied for an assessment of his costs under s 198(1)(d) of the LPUL, naming Mr Bingham as the costs respondent. In that application, Mr Bevan included a “Narrative of the Brief”, aspects of which the primary judge observed to be inaccurate and/or incomplete. Mr Bevan stated, inter alia: that the terms of the retainer were set out in the Barrister’s February costs disclosure (which he said related to the application for special leave), as updated by the Barrister’s October costs disclosure (which he said related to the completion of the matter including the conduct of the hearing); and that his fees were “payable by the instructing solicitor from the proceeds of sale” of the Property. Mr Bevan did not: identify the grounds on which he claimed the Barrister’s February and October costs disclosures recorded the terms of a costs agreement; disclose the email Mr Boensch sent on 4 October 2019 in which he stated that he did “not agree to the proposed updated costs agreements” (see [87] below); or disclose cll 2, 4 or 6 of Annexure A to the mortgage (see [18] above): see PJ [36]-[39].

29    On 26 November 2020, Mr Boensch submitted a letter to the Costs Assessor setting out his objections to Mr Bingham’s application. Mr Boensch referred to statements made by Mr Bingham as “at best misleading” and at worst “false and a fraud”, stating that there was “no contract” between them over the “falsely claimed amount”: see PJ [40].

30    On 4 December 2020, it appears (from the statement of reasons ultimately given by the Costs Assessor) that Mr Bingham lodged a response to Mr Boensch’s objections and referred to the mortgage as “merely a security for the Solicitor’s costs” and “not a costs agreement in itself”: see PJ [41].

31    The primary judge noted that once Mr Bingham’s and Mr Bevan’s applications for the assessment of costs had been allocated to the Costs Assessor, s 199(2) of the LPUL required the Costs Assessor to: first, determine whether or not a valid costs agreement existed; and second, determine whether Mr Bingham and Mr Bevan’s legal costs were “fair and reasonable”, and to the extent they were not, to “determine the amount of legal costs (if any) that are to be payable”. The primary judge determined that whether there was a valid costs agreement is a jurisdictional fact, giving reasons for doing so at [44]. Further, his Honour noted that s 198(1) of the LPUL provided that an application for the assessment of legal costs may be made where the whole or any part of the legal costs are “payable” to a law practice: see PJ [42]-[47].

32    The Costs Assessor found there was a valid costs agreement between Mr Boensch and Mr Bingham, and between Mr Bingham and Mr Bevan (the terms of which were recorded in the Solicitor’s and Barrister’s February and October costs disclosures respectively and Mr Wells’ costs disclosure). The primary judge summarised the reasons of the Costs Assessor, reciting aspects of the decision: see PJ [49]-[54].

33    On 12 May 2021, the Costs Assessor issued the Costs Certificate setting out his determination of the amount of legal costs ($358,234.71), interest on that amount ($10,524.58) and the application fee ($3,915.55): see PJ [55].

34    On 4 June 2021, Mr Bingham lodged the Costs Certificate for registration with the District Court, and on the same day the judgment was entered. Mr Boensch unsuccessfully sought to have that judgment set aside and on 23 November 2021, applied for review of the Costs Assessor’s determination, but an extension of time was not granted: see PJ [57]-[58].

35    On 13 December 2021, Mr Boensch filed: a summons in the Supreme Court of New South Wales seeking various orders in relation to the Costs Assessor’s determination and the agreement he claimed he entered into with Mr Bingham in relation to the appeal to the High Court; and another notice of motion in the District Court seeking that the judgment referred to at [34] above be stayed or set aside: see PJ [58].

Consideration

36    The primary judge set out the parties’ submissions at PJ [59]-[68], determining at PJ [69] that three questions arose. Relevantly, the first question was:

(a)    Is it open to Mr Boensch to rely as a ground for setting aside the bankruptcy notice on the contention that the Judgment Amount does not reflect any debt that he in truth owes to Mr Bingham because, first, the Costs Assessor ignored the Mortgage and, second, the Costs Assessor did not in any event conduct a proper costs determination? If so, does Mr Boensch succeed in his contention?

37    Accordingly, the primary judge considered whether the judgment amount represented a true debt. His Honour noted that the court’s power to inquire into whether a judgment arising from the filing of a costs certificate (pursuant to s 71(3) of the LPUL Application Act) represents a true debt, is directed to the costs determination that is recorded in the costs certificate that is filed. The question therefore became “whether there are substantial reasons for questioning that the costs determination represents a lawful determination. More particularly … whether there are substantial reasons for questioning that the costs determination was made without any jurisdictional error”: see PJ [80].

38    It is appropriate, given the submissions on the appeal, that his Honour’s answer to that question be recited in full:

[83]    The Costs Determination on the basis of which the Costs Certificate was issued was premised on the Cost Assessor’s finding that Mr Boensch and Mr Bingham entered into costs agreements on the terms contained in the Solicitor’s February and October costs disclosures. The evidence before me, however, not only gives rise to a substantial reason for questioning that finding; it leads me to conclude that Mr Boensch and Mr Bingham did not enter into any such costs agreements, and that the only costs agreement they entered into in relation to the payment of the HC Costs is the agreement constituted by the Mortgage.

[84]    I rely on the following findings and conclusions:

(a)    In February 2019 Mr Bingham provided to Mr Boensch the Solicitor’s February and the Barrister’s February costs disclosures; and Mr Boensch and Mr Bevan informed Mr Boensch they would require a mortgage over the Property as security for the payment of their costs.

(b)    The Solicitor’s February costs disclosure cannot by itself evidence the terms of a costs agreement. At most it evidences an offer by Mr Bingham to provide legal services to Mr Boensch on the terms set out in the Solicitor’s February costs disclosure. Before such offer can be found to have been converted into a costs agreement, however, there must be evidence that Mr Boensch engaged in conduct that could be taken to constitute an unqualified acceptance by him of the terms contained in the Solicitor’s February costs disclosure.

(c)    There is no evidence Mr Boensch engaged in any conduct that could be characterised as the unqualified acceptance by him of the offer constituted by the Solicitor’s February costs disclosure. On the contrary, the evidence shows Mr Boensch, on the one hand, and Mr Bingham and Mr Bevan, on the other, held discussions and exchanged emails that led to Mr Boensch and Mr Bingham executing the Mortgage.

(d)    The effect of the Mortgage is as follows:

(i)    Mr Boensch granted a mortgage over the Property as security for the “debt or liability described in the terms and conditions set out or referred to in this mortgage”, the terms and conditions being those identified in Annexure ‘A’ to the Mortgage.

(ii)    The only clause in Annexure ‘A’ to the Mortgage that is capable of being construed as describing a debt or liability is cl 6, which refers to the “legal costs incurred by the Mortgagor (that is, Mr Boensch) as the client of the Mortgagee and as trustee of the Boensch Trust”. The Mortgage itself does not further identify the “legal costs incurred by the Mortgagor”. Given that this constitutes one of the subject matters of the Mortgage, extrinsic evidence is admissible to identify the incurring of legal costs to which cl 6 refers. That evidence would at the very least include the Solicitor’s February costs disclosure, and in particular that part which identifies the legal work Mr Bingham would perform, and the rates at which he would perform the work.

(iii)    In addition to describing the debt or liability, Annexure ‘A’ to the Mortgage identifies the capacity in which Mr Boensch is to assume the debt or liability, namely as “trustee of the Boensch Trust” (cl 4); it limits the extent of the debt or liability “to the sum of one hundred thousand dollars ($100,000)” (cl 6); it limits the means by which Mr Bingham can enforce such debt or liability, namely, “only to the extent which it [that is, Mr Boensch’s debt or liability under the Mortgage] can be satisfied out of the secured property” (cl 4); and it defers the time the liability or debt may be so enforced “until 1 March 2024” (cl 2).

(e)    Given the terms of Annexure ‘A’ to the Mortgage I identify in (d), the Mortgage constitutes “an agreement about the payment of legal costs”. It is therefore a “costs agreement” for the purposes of the LPU Law; and, being a “costs agreement”, s 184 of the LPU Law provides that, subject to “this Law,” the Mortgage “may be enforced in the same way as any other contract”. That includes the right Mr Boensch has to set up the terms of the Mortgage as a defence to a claim for the payment of the HC Costs that purports to be based on an asserted costs agreement other than the agreement that is constituted by the Mortgage.

(f)    The Solicitor’s October costs disclosure is incapable of constituting the terms of any costs agreement or updated costs agreement. Mr Boensch communicated his rejection of those terms as being contrary to what had been agreed in March 2019; and Mr Boensch did so on the same day he received the Solicitor’s October costs disclosure.

(g)    The Costs Assessor did not purport to set aside or vary the Mortgage, or otherwise find the Mortgage to be unfair or contrary to the LPU Law. That means that, on the evidence, the Mortgage is the only agreement between Mr Boensch and Mr Bingham about the payment of legal costs; and Mr Boensch’s liability to pay the HC Costs is to be determined by reference to the terms of the Mortgage.

(h)    The right the Mortgage gives to Mr Bingham to recover “out of the secured property” no more than $100,000 has not accrued, because 1 March 2024 has not arrived. For this reason alone, and assuming such right can properly be characterised as a liability by Mr Boensch to pay anything to Mr Bingham, Mr Boensch is not, and, when Mr Bingham issued his invoice dated 6 December 2019 Mr Boensch was not, liable to pay Mr Bingham any amount on account of the HC Costs. Thus, at the time Mr Bingham lodged his application for assessment of his costs, no legal costs were payable to him, and the Costs Assessor had no authority to undertake any costs assessment of Mr Bingham’s or Mr Bevan’s costs.

(i)    Given the terms I identify in (d), it cannot be said Mr Boensch assumed any personal liability to pay any amount to Mr Bingham in relation to the HC Costs. Mr Bingham’s rights are restricted to seeking satisfaction “out of the secured property”, not by a personal action for judgment against Mr Boensch.

[85]    The Judgment Amount, therefore, does not represent any debt that is payable by Mr Boensch to Mr Bingham. In truth Mr Boensch owes no debt to Mr Bingham in relation to the HC Costs; and no legal costs were payable to Mr Bingham at the time he applied for the assessment of his costs. The Costs Assessor, therefore, purported to embark on an assessment of legal costs he had no authority to undertake, and he therefore purported to make a costs determination in relation to the HC Costs he had no jurisdiction to make. The Costs Determination, therefore, is incapable of having any legal effect. Further, given the Mortgage is a “costs agreement” which Mr Boensch has the right to enforce, and Mr Boensch enforced his rights under the Mortgage by relying on its terms before the Costs Assessor as an answer to Mr Bingham’s application for the assessment of legal costs, it was not open to the Costs Assessor to ignore, as he did, the terms of the Mortgage; and his having ignored the terms of the Mortgage is incapable of altering the rights and obligations Mr Boensch and Mr Bingham have in relation to the HC Costs as provided for by the terms of the Mortgage.

[86]    What I say in paragraphs 83, 84, and 85 of these reasons is premised on the view that whether there exists a costs agreement within the meaning of s 180 of the LPU Law is a jurisdictional fact. Even if, contrary to this premise, the question whether there is a costs agreement is not a jurisdictional fact, but is a question for a costs assessor to determine, there are substantial reasons for questioning that the Costs Determination was made free from jurisdictional error. Each of the following matters separately constitutes a reason to so question the Costs Determination:

(a)    For the reasons stated in paragraph 51(a) above, the Costs Assessor incorrectly understood, and therefore did not consider, the grounds on which Mr Boensch claimed that the Mortgage regulated the parties’ rights in relation to the payment of legal fees.

(b)    The Costs Assessor does not set out the terms of the Mortgage, or otherwise manifest any acquaintance with or understanding of those terms; he does not explain in what sense the Mortgage “was merely a security for the Solicitor’s cost” and, for that reason, was not a costs agreement; and he gives no reasons for that conclusion. These matters afford a rational basis for inferring either that the Costs Assessor did not consider the terms of the Mortgage (thus committing a jurisdictional error of the sort identified in Minister for Immigration and Citizenship v SZRKT), or, if he did, the Costs Assessor did not genuinely consider the Mortgage (thus making a jurisdictional error of the sort found in Gunatillake v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs), or, if the Costs Assessor did genuinely consider the Mortgage, the Costs Assessor’s conclusion that it did not constitute a costs agreement is a conclusion that no reasonable costs assessor in the position of the Costs Assessor could reasonably or rationally have arrived at.

(c)    The Costs Assessor does not refer to Mr Boensch’s email of 4 October 2019 to which I refer in paragraph 30 of these reasons. That affords a rational basis for inferring either that the Costs Assessor did not consider Mr Boensch’s email (thus committing a jurisdictional error of the sort identified in SZRKT), of, if he did, the Costs Assessor did not genuinely consider it (thus making a jurisdictional error of the sort found in Gunatillake), or, if the Costs Assessor did genuinely consider it, his finding that Mr Boensch had agreed to the terms contained in the Solicitor’s February and October costs disclosures is a finding that no person in the position of the Costs Assessor could reasonably have made.

(d)    The Costs Assessor does not identify any evidence on which he relied in finding that Mr Boensch became party to a costs agreement on the terms set out in the Solicitor’s February and October costs disclosures. The material that was before the Costs Assessor, including Annexure ‘A’ to the Mortgage and Mr Boensch’s email of 4 October 2019, affords a rational basis for inferring that the Costs Assessor’s finding Mr Boensch became so bound was made without evidence, or was otherwise a conclusion that no reasonable costs assessor could have arrived at.

[87]    Each of these matters, considered alone, raises a substantial reason for questioning that the Costs Determination was made free from jurisdictional error. The onus, therefore, rests on Mr Bingham to prove that the Costs Determination was made free from jurisdictional error, or is otherwise binding on Mr Boensch. Mr Bingham has not attempted to discharge any such burden. In those circumstances, I am not satisfied that the Costs Determination on the basis of which the Judgment was entered in truth represents a debt Mr Boensch owes to Mr Bingham. For those reasons, the bankruptcy notice is liable to be set aside.

(Citations omitted)

Costs Assessment

39    As apparent from the summary of the primary judgment above, the basis of the application for bankruptcy was the Costs Determination, which the primary judge concluded did not in truth represent a debt Mr Boensch owed Mr Bingham.

40    As referred to above at [34], on 23 November 2021 (before the hearing before the primary judge), Mr Boensch applied for an extension of time to challenge that decision of the Costs Assessor, but on 3 December 2021, the Manager, Costs Assessment, refused the extension. On 24 January 2022 (before the primary judge’s decision in this matter), Mr Boensch filed a summons in the Supreme Court of New South Wales, seeking a review of that decision. On 17 March 2022, Mr Boensch filed an amended summons. On 21 October 2022 (the Friday before the hearing of this matter the following Monday), Chen J: allowed the review; set aside the decision of the Manager; extended the time in which to seek a review; and referred the matter to be reviewed by a review panel: Boensch v Bingham [2022] NSWSC 1432.

41    In light of that decision, Mr Boensch raised whether this appeal was futile. The appellant submitted that the appeal had utility because of the effect of the decision to be made.

42    Chen J concluded at [68]-[69]:

[68]    There is a further matter that I consider to be significant. I was advised by the parties that an appeal had been filed by the defendant seeking to appeal the decision of the Federal Circuit and Family Court. Those circumstances, in my view, also favour granting an extension of time: the appeal will determine the question as to the proper characterisation of the arrangement between the plaintiff and defendant, and that is so whether the appeal is allowed or dismissed. Put another way, if my analysis about whether an issue estoppel arises is correct, then the determination by the appeal court will have preclusive effect: it will either confirm the decision of Judge Manousaridis (in which case the plaintiff would be entitled to rely upon that further determination in legal answer to the defendant’s claim for costs that exceeded the costs “cap”), or allow the appeal (in which case the defendant would be entitled to rely upon that further determination in claiming the costs that he has).

[69]    To sum up: in my view the finding of Judge Manousaridis has preclusive effect or, alternatively, is highly relevant to any costs determination. It follows that the plaintiff’s claim has, in my view, “substantial merit”. This finding is the most significant matter in my overall assessment, and supports the making of the order the plaintiff seeks. To the extent I am required to find the merits to be “strong” or “exceptional”, I consider that they are: Tu'uta Katoa v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2022] HCA 28; (2022) 96 ALJR 819 at [18].

43    As the appellant submitted, this decision will feed into the reassessment undertaken by the review panel.

44    In the circumstances, it cannot be said that this appeal lacks utility.

The legislative regime

45    I now turn to consider relevant provisions of the LPUL. This is also addressed by the primary judge at PJ [10]-[14].

46    Section 174(1) of the LPUL addresses disclosure obligations on the practitioner, being: first, they 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: s 174(1)(a); and second, they must, when or as soon as practicable after there is any significant change to anything previously disclosed under the 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: s 174(1)(b).

47    Section 174(2) is also significant, as it includes information “about the client’s rights . . . to negotiate a costs agreement with the law practice”. These rights are provided for in Division 4 of Part 4.3 of the LPUL. Subsection 179(1) of the LPUL provides that a “client of a law practice has the right to require and to have a negotiated costs agreement with the law practice”.

48    Section 180 of the LPUL deals with the making of costs agreements. It provides:

180 Making costs agreements

(1)    A costs agreement may be made—

(a)    between a client and a law practice retained by the client; or

(b)    between a client and a law practice retained on behalf of the client by another law practice; or

(c)    between a law practice and another law practice that retained that law practice on behalf of a client; or

(d)    between a law practice and an associated third party payer.

(2)    A costs agreement must be written or evidenced in writing.

(3)    A costs agreement may consist of a written offer that is accepted in writing or (except in the case of a conditional costs agreement) by other conduct.

(4)    A costs agreement cannot provide that the legal costs to which it relates are not subject to a costs assessment.

49    Section 184 of the LPUL provides that, subject to “this Law, a costs agreement may be enforced in the same way as any other contract”.

50    Neither the LPUL nor the LPUL Application Act defines the expression “costs agreement”. However, it has been defined as simply meaning “an agreement about the payment of legal costs”: Anderson v Hill [2017] NSWSC 1149 at [35] (Anderson); Bevan v Bingham [2022] NSWSC 863 at [94].

Submissions

51    The appellant alleges that the primary judge “failed to draw the proper inferences from the established facts and misconstrued the contractual instruments”. That submission is directed to his Honour’s conclusion at PJ [83], and aspects of the reasoning in PJ [84]-[85], recited above at [38].

52    Although five grounds of appeal are alleged, the appellant did not address his submissions to those grounds. Rather, the appellant’s challenge to the primary judge’s reasoning is as follows.

53    In respect to PJ [84(b)], it was submitted: that a solicitor’s costs disclosure does not have to be, and is conceptually distinct from, the terms of a costs agreement; and that Mr Bingham combined his obligation of disclosure and incorporated it into a document titled “Costs Disclosure and Costs Agreement”.

54    The appellant accepted that there must be evidence of a client engaging in conduct that could be taken to constitute an unqualified acceptance of a costs agreement. However, he submitted that Mr Boensch did engage in such conduct by continuing to instruct Mr Bingham. It was submitted therefore that cl 2 of the General Terms of Business applied. That clause provided:

2 Acceptance of Offer

You may accept the Costs Disclosure and Costs Agreement by:

a)    signing and returning this document to us or:

b)    continuing to instruct us. Upon acceptance you agree to pay for our services on these terms.

Mr Bingham submitted that the instructions to prosecute the proceedings were given and the steps taken to do so were recorded in the itemised bills submitted to the Costs Assessor.

55    In respect to PJ [84(c)], the appellant added that the exchange of emails was wholly referable to the fact that he would not act without some security for his costs. Negotiations regarding this security continued into March 2019, at which time the mortgage was signed.

56    In respect to PJ [84(d)(ii)], the appellant submitted that the primary judge’s construction of the mortgage was incorrect, and his Honour’s reliance on extrinsic evidence was misplaced. He submitted that: the security was in respect of the legal services to the mortgagor or to forbear from obtaining payment of money owing by the mortgagor; and that cl 6 of the mortgage merely limits the scope of the security to $100,000.

57    In respect to PJ [84(d)(iii)], the appellant submitted that Annexure A to the mortgage contained limitations on the security and its enforcement by the power of sale, but did not limit the way Mr Bingham could enforce his costs agreement in the meantime.

58    In respect to PJ [84(e)], the appellant submitted that the mortgage was not a costs agreement, as it did not, and did not intend to, set out essential features of a costs agreement, in line with the LPUL.

59    In respect to PJ [84(f)], the appellant accepted that Mr Boensch did reject the Solicitor’s October costs disclosure. However, he submitted that Mr Boensch did not give notice under cl 11 of the General Terms of Business to terminate the services of Mr Bingham. That clause provided:

You may terminate our services by written notice at any time. However, if you do so you will be required to pay our costs incurred up to the date of termination (including if the matter is litigious, any cancellation fees or other fees such as hearing allocation fees for which we remain responsible)”.

The appellant submitted that the respondent continued instructing Mr Bingham, noting that his email of 4 October 2019 made reference to the hearing date of 11 October 2019 before the High Court. It was also submitted that an offeree who has omitted to accept an offer, but has nonetheless taken the benefit of that offer will be bound by the contract, citing Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 535 (Empirnall Holdings).

60    In respect to PJ [84(h)], the appellant accepted that the mortgage gives a right of recovery (via the power of sale) which has not yet been accrued, but submitted that does not mean Mr Bingham cannot sue Mr Boensch at common law without involving the mortgage.

61    In respect to PJ [84(i)], the appellant submitted that Mr Boensch did assume personal liability to pay Mr Bingham in relation to the legal services rendered to him for the reasons set out in the submissions above.

62    In respect to PJ [86], the appellant submitted that the primary judge’s finding that the existence of a costs agreement is a jurisdictional fact, is flawed. He submitted that a costs assessor is given express statutory power (pursuant to s 199(2)(a) LPUL) to determine whether a valid costs agreement exists. If no such agreement exists, the appellant submitted that s 172 of the LPUL directs the costs assessor to determine whether the costs are “fair and reasonable”, taking into account s 172(4) of the LPUL, which changes the mode of the assessment.

63    During oral submissions, the appellant referred to the documentary evidence before the primary judge. For example, he submitted that the emails of 6 March 2019 (see above at [16]), distinguished between the security for costs outstanding and the actual costs outstanding.

64    The appellant, in his written reply, submitted that Mr Boensch’s interpretation of the mortgage was influenced by his subjective intention, in circumstances where it is appropriate to determine the terms of the mortgage from the document itself. He submitted that Mr Boensch had the benefit of the work done by Mr Bingham (and Mr Bevan) which was the subject of the invoice dated 6 December 2019 (including work done by Mr Bingham and Mr Bevan between 7 February 2019 and 8 March 2019, prior to execution the mortgage). He also submitted that many of the matters raised in the respondent’s written submissions were not supported by the evidence before the primary judge.

65    The respondent submitted that the appellant’s submissions were flawed because, inter alia, he treated the Solicitor’s February costs disclosure and Annexure A to the mortgage separately, even though the two documents are inherently connected. He also submitted: that the Solicitor’s February costs disclosure was not accepted by the respondent in the form it was provided; and that negotiations provided for by s 179 of the LPUL began immediately, with no further instructions given until a maximum was agreed.

66    The respondent made submissions as to the meaning and significance of the documentary evidence, including emails, which was before the primary judge.

Material provided after the hearing

67    As noted above, the appellant took issue with some written submissions made by the respondent on the basis that there was no evidence of the matters relied on. It became apparent during the hearing that there was evidence before the primary judge, said to be relevant by the respondent, which did not form part of the appeal books in this matter. In that circumstance, leave was granted to provide the Court with that material (which related primarily to a conversation said to be had by Mr Boensch, with Mr Bingham and counsel, on or about 5 February 2020).

68    Mr Boensch later accepted that the affidavit referred to in his submissions, which detailed that particular conversation of 5 February 2020, was not before the primary judge. However, he submitted that the conversation appears or is otherwise reflected in the evidence before the primary judge, identifying where that occurred. Mr Boensch is correct that there was other material before the primary judge which could be said to be referencing the content of the conversation that he contends occurred. For example, the email of 4 October 2019, recited below at [87], refers to communications with Mr Bingham which occurred at about the time of the execution of the mortgage. I note also that this email was in evidence before the primary judge, and that there was no evidence before his Honour that Mr Bingham responded to that email or challenged Mr Boensch’s assertions as to communications contained therein.

69    However, I do not have regard to the evidence referred to in Mr Boensch’s submissions as to the conversation of 5 February 2020, which was not before the primary judge. Where there is no evidence of matters relied on, those matters have not been considered in this decision.

70    By email on 14 December 2022 and by interlocutory application dated 30 January 2023, the respondent sought leave to reopen the proceeding in order to have additional material received into evidence. That additional material is a letter from Mr Bingham to Mr Boensch dated 28 October 2019 (over two weeks after the hearing of the High Court appeal). The affidavit of Mr Boensch accompanying the application makes it clear that two sentences in the document are relied on, said to give rise to an inference consistent with his case. The appellant opposed leave being granted to reopen the proceeding and submitted that, regardless, the document did not give rise to the inference contended by the respondent. I note that the appellant’s opposition to leave being granted was in circumstances where he also submitted that these reasons will affect any decision by the review panel (see above at [43]). I note also that the appellant does not suggest that the letter should be admitted as it supports his case.

71    The ultimate question to determine this application would be whether it is in the interests of justice that the further evidence be admitted: see, for example, Colin R Price & Associates Pty Ltd v Four Oaks Pty Ltd [2017] FCAFC 75; (2017) 251 FCR 404 at [168]-[169]; Inspector-General in Bankruptcy v Bradshaw [2006] FCA 22 at [24]. In light of my conclusion below, it is not necessary to determine Mr Boensch’s application, as even if the evidence were to be admitted, it would not have altered the outcome of this proceeding. The letter the subject of the interlocutory application dated 30 January 2023 has not been taken into account in the resolution of this appeal.

Consideration

72    The appellant’s submissions cannot be accepted.

73    The issue identified by the primary judge, relevant to this appeal, is set out at [36] above.

74    It is not challenged that the questions posed by his Honour accurately summarised the issues for resolution. On each aspect, the primary judge ruled in the respondent’s favour. In addition, quite separately, his Honour described flaws in the costs assessment and inaccuracies and/or incompleteness in the material put by the appellant (and Mr Bevan) in support of their applications, which can be accepted. I also note that the primary judge accurately set out the chronology of events by reference to relevant documentation (to which no issue was taken by the appellant).

75    As apparent from the summary of the appellant’s submissions above at [51]-[64], they are not directed to the individual grounds of appeal but rather, to aspects of the primary judge’s conclusions in PJ [84]. In considering the submissions, it is important to recall that the reasons of the primary judge are to be read as a whole.

76    In large part, the basis on which it is alleged there are errors made by the primary judge, is that the appellant’s submissions as to the construction of the documents should have been accepted. At the heart of the grounds of appeal are two alleged errors: first, the primary judge erred in failing to find that Mr Boensch did not, by his conduct, accept the costs agreements in the terms outlined in the Solicitor’s February and October costs disclosures; and second, the primary judge misconstrued the mortgage, and the mortgage cannot be a costs agreement. Based on those two matters, the appellant asserted that the primary judge erred in finding that Mr Boensch did not enter into agreements in the terms of the Solicitor’s February and October costs disclosures, and that the agreement was the mortgage limiting Mr Boensch’s liability to $100,000. The appellant also challenged the primary judge’s conclusion that the existence of a costs agreement is a jurisdictional fact, although given the reasoning of the primary judge at PJ [86], it is difficult to identify what is said to be the consequence of this alleged error.

77    It should be observed at the outset that the appellant’s challenge to the primary judge’s conclusions fails to address or otherwise grapple with factual findings which do not align with his position. Rather, the appellant’s submission proceeds on the basis that the primary judge failed to draw the proper inferences from “the established facts”, in circumstances where what are asserted to be established facts were not accepted by the primary judge. The appellant’s submissions assert error on the basis that the correct position is as he contends.

78    In that context, before addressing the alleged errors identified above, it is appropriate to make some initial observations as to the events. It is accepted that the two primary documents in issue are what are referred to as the Solicitor’s February and October costs disclosures (the appellant contending they are agreements).

79    As noted above, the primary judge summarised the chronology of events, including the Solicitor’s and Barrister’s February and October costs disclosures.

80    A number of observations can be made.

81    First, the purpose of the costs disclosures is self-evident. However, they were provided in a context where it can readily be inferred that it was apparent to Mr Bingham that Mr Boensch had limited financial means. This is evident from the documents in evidence before the primary judge (for example, the email of 6 March 2019 referred to at [16] above and the email of 4 October 2019 extracted at [87] below). Further, Mr Bingham stated that he would not act for Mr Boensch without the mortgage being granted over the Property unless Mr Boensch could afford to pay him and Mr Bevan along the way. This was also in a context where there were issues with payment by Mr Boensch of his previous lawyers, who had a caveat over the same property. The documentation reflects that the previous lawyers for Mr Boensch had not been paid fees they were owed. For example, including Mr Boensch’s statement in the email of 6 March 2019, quoted at [16] above, “[t]hat is mainly to avoid bad experiences such as with Somerville”. As the primary judge noted at PJ [20], that is a reference to Mr Boensch’s previous lawyers, who had served him with a bankruptcy notice based on a costs judgment: Boensch v Somerville Legal Pty Ltd [2019] FCCA 868 (noting also that Mr Bingham appeared for Mr Boensch in that proceeding).

82    As the appellant submitted, “the objective theory of contract attributes to a reasonable person all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract”. The appellant relied on authorities including Maggbury Pty Limited v Hafele Australia Pty Limited [2001] HCA 70; (2001) 210 CLR 181 at [11] to submit that, in this case, that knowledge includes matters of law. That submission may be accepted, but the knowledge is not so confined. A contract may be construed by an examination of the text in the context of the surrounding circumstances known to the parties, including the purpose and object of the transaction.

83    Second, the Solicitor’s February costs disclosure was never signed by Mr Boensch. The documents in evidence before the primary judge reflect that there were discussions between the appellant and the respondent about the costs arrangement before and after the Solicitor’s February costs disclosure was sent to Mr Boensch, although the extent of those discussions is not apparent (see, for example, above at [9]-[17]). Nonetheless, the compelling inference is that, given Mr Boensch’s financial circumstances, he was negotiating the costs agreement, as he was entitled to. As referred to above, to act for Mr Boensch, the appellant required him to execute a mortgage over the Property to cover the costs (or on the appellant’s case, a portion thereof). To that end, the appellant sent to Mr Boensch a draft mortgage, the proposed terms of which were not accepted by him. As part of the negotiations, by the email of 6 March 2019, Mr Boensch informed Mr Bingham that did not want an “open-ended arrangement” and required a maximum to be fixed, which Mr Bingham agreed to, as $100,000.

84    I note that primary judge concluded at PJ [35]:

Mr Boensch did not sign the Solicitor’s February costs disclosure, and Mr Bingham did not, in his application for costs assessment, identify the basis on which that document constituted the costs agreement between him and Mr Boensch. It could not be inferred solely from the Solicitor’s February costs disclosure that it constituted any costs agreement, because, as I have already noted, cl 5 of the GTB provides, among other things, that it is “your right to … negotiate a costs agreement with us”. The evidence reveals Mr Boensch, on the one hand, and Mr Bingham and Mr Bevan, on the other, held discussions and exchanged emails in relation to arrangements for the payment of costs which resulted in Mr Boensch and Mr Bingham executing the Mortgage. Mr Bingham apparently did not disclose in his application for a costs assessment these email communications, or the Mortgage.

That is an accurate recitation of what is reflected in the documents.

85    Third, in that context, the terms of the mortgage, which are recited at [18] above, properly read, cap the costs at $100,000. The effect of the mortgage is accurately described by the primary judge at PJ [84(d)] recited above at [38]. There is nothing in that document (or elsewhere) which suggests that the respondent accepted that he would pay anything other than that amount, or that he would be personally responsible for any additional amount. To the contrary, the inference from the terms of the mortgage is that $100,000 is the maximum, noting also that it is approximately the figure that was estimated as the costs of the appeal process by Mr Bingham and Mr Bevan (including special leave and a full hearing) at the time the mortgage was executed.

86    Mr Bingham’s submission to the Costs Assessor, which appears to have been accepted, that the mortgage secured all legal costs claimed is, as the primary judge correctly observed at PJ [51], not supported by the terms of the mortgage. The mortgage only secured Mr Bingham’s costs in so far as those costs were capped at $100,000. As the primary judge concluded at PJ [51(c)]:

The only liability in Annexure ‘A’ to the Mortgage can reasonably be construed to describe is the liability described in cl 6, namely the “principle sum for legal costs incurred by” Mr Boensch as a client of Mr Bingham, and his capacity as trustee of the Property, which would have to be read with cl 6, which provides that the liability so incurred “shall be limited to” $100,000.

87    Fourth, the Solicitor’s October costs disclosure was dated and provided to Mr Bingham on 4 October 2019 (one week before the date of the hearing in the High Court). Mr Boensch immediately rejected that “updated agreement”, sending the following email to Mr Bingham on the same day (errors in original):

I do not agree to the proposed updated cost agreements, as I am not accepting for myself and on behalf of the trust any financial responsibility additional and over that what we agreed as a maximum and I signed back in Chris’s Office at the outset. That includes the matter with Somerville as it was discussed, included and agreed in the paperwork including the payment terms if I have to pay for that agreed max amount.

You know the paperwork I am referring too as you have registered it.

I made clear at the time and now, that after some 15 plus years of litigation with pretty much is about the same thing, there are no financial means either by me or the trust to finance further appeal proceedings.

You both agreed with me and we signed the paperwork.

I asked at the outset what the proceedings will cost. 2 amounts were floated. When I insisted to deal only with the maximum amount, The average of both floated amounts was doubled and while it was a lot I agreed, since in my estimation enough time was allowed to take care of the payment.

…

Hopefully we don’t need to go through all these arguments after the 11th.

88    It is plain from that email that Mr Boensch understood that the costs agreement was capped at $100,000 (being the amount of the mortgage). There is no evidence that Mr Bingham responded to this email, or to the respondent’s rejection of the Solicitor’s October costs disclosure. However, he did continue to incur costs. That is, he did not dispute or otherwise take issue with Mr Boensch’s position.

89    Fifth, the total estimated costs (combined for solicitor’s and counsel’s fees) had increased from a maximum of slightly less than $110,000 in February 2019 to approximately $358,700 in October 2019. In the Barrister’s October costs disclosure (attached to the same email as the Solicitor’s October costs disclosure), Mr Bevan estimated that costs from 4 October 2019 to 12 October 2019 (by which time the appeal would have been completed) were $31,000. It follows, on the appellant’s case, if the costs were not capped at $100,000 as the respondent contends, that the appellant did not comply with s 174(1)(b). That is, far from Mr Bingham notifying Mr Boensch that there were increases in the estimated costs of the litigation, the legal costs more than tripled without any notification, while costs continued to be generated. The Solicitor’s October costs disclosure was not an updated disclosure for future costs likely to be incurred but, in large part, was a disclosure of costs already incurred. It encompassed over $200,000 of counsel’s fees above the original estimation, which had already been incurred without Mr Boensch having been informed and without his authorisation.

90    As the primary judge correctly observed at PJ [29]:

There is no evidence that before 4 October 2019 Mr Bingham had notified Mr Boensch that the fees would be greater than those estimated in the Solicitor’s February costs disclosure or the fees estimated in the Barrister’s February costs disclosure, or that the fees would be greater than the $100,000 provided for in the Mortgage; nor is there evidence that, before 4 October 2019, Mr Bevan notified Mr Bingham that there would be an increase in the estimate of $63,000 to $75,000 Mr Bevan disclosed in the Barrister’s February costs disclosure. According to his “Itemised bill of the fees invoiced”, Mr Bevan had performed at least $76,000 worth of work by 24 June 2019; and he had performed at least $100,000 worth of work by 11 July 2019, almost three months before Mr Bevan issued his invoice of 3 October 2019.

91    Against those observations, I turn to the alleged errors relied on by the appellant.

Acceptance by conduct

92    The appellant’s submission that both the Solicitor’s February and October costs disclosures were agreements is based on an assertion that in respect to each, Mr Boensch accepted the terms by his conduct in continuing to instruct Mr Bingham: see the appellant’s submissions in relation to PJ [84(b)], PJ [84(c)] and PJ [84(f)], set out above at [53]-[54], [55] and [59] respectively.

93    In respect to the Solicitor’s February costs disclosure, the appellant contended: that Mr Boensch continued to give instructions to prosecute the proceedings; and that the steps taken to do so were recorded in the itemised bill submitted to the Costs Assessor (dated 6 December 2019), which included items during the period between the Solicitor’s February costs disclosure and execution of the mortgage on 8 March 2019. This was said to activate cl 2 of the Solicitor’s February Costs Disclosure, being an acceptance of its conditions.

94    As the primary judge correctly observed, it was required that Mr Boensch had engaged in conduct which could be taken as representing unqualified acceptance. Indeed, it was also accepted by the appellant that for cl 2 to apply there must be evidence of conduct which could be said to constitute unqualified acceptance of the terms of the disclosure.

95    However, as explained above, it is plain from the documentation that there was correspondence between Mr Boensch and Mr Bingham about the issue of costs, and the terms on which the services would be provided, both before and after the Solicitor’s February costs disclosure was sent to Mr Boensch. The appellant’s submissions fail to address that aspect of the conduct. The conduct in continuing to negotiate the terms after receipt of the Solicitor’s February costs disclosure, which led to the execution of the mortgage, gives rise to the inference that the terms set out in the Solicitor’s February costs disclosure were not accepted. The terms were not finalised until the execution of the mortgage on 8 March 2019. The appellant’s submission, which is based on the proposition that the agreement had previously been reached and the subsequent emails only related to the fact that Mr Bingham would not act without security by a mortgage, cannot be accepted. The mortgage was, even on the appellant’s case, a condition of the agreement. Further, as explained above, the mortgage capped the legal costs at $100,000.

96    In oral submissions, the appellant contended that the primary judge did not refer to cl 2 in his reasons and therefore “he must have overlooked that [clause]”. There is no basis to suggest his Honour overlooked, or was not aware of, the condition. Rather, it is readily apparent that the primary judge’s conclusions in PJ [84(b)] and PJ [84(c)] were directed towards whether there had been acceptance of the terms in the Solicitor’s February costs disclosure, by Mr Boensch’s conduct.

97    In that context, the appellant’s submission that cl 2 was invoked because Mr Boensch continued to instruct Mr Bingham, cannot be accepted.

98    Given the evidence of the discussions between Mr Boensch and Mr Bingham (and also between Mr Bingham and Mr Bevan) regarding the terms of any agreement, it cannot be established there was any error in the primary judge’s conclusion at PJ [84(c)]. That is, no error has been established in the finding that there is no evidence that Mr Boensch engaged in any conduct that could be characterised as the unqualified acceptance by him of the offer constituted by the Solicitor’s February costs disclosure.

99    As referred to above at [59], the appellant accepted that Mr Boensch rejected the Solicitor’s October costs disclosure, but submitted that he entered into it regardless because he did not give notice under cl 11 to terminate Mr Bingham’s services (rather, he continued to instruct him).

100    In the context of the circumstances of the Solicitor’s October costs disclosure (which are described above), the submission that Mr Boensch did not terminate Mr Bingham’s services by cl 11 and therefore he is liable for the full amount of the costs, is rather disingenuous. It takes no account of Mr Boensch’s rejection of the agreement by email on 4 October 2019 and the context in which that email was sent. As noted above, there is no evidence that Mr Bingham responded to the email, and therefore there is no evidence that he took issue with Mr Boensch’s assertion contained therein that the agreement, which he signed at the outset, was as to maximum costs. The compelling inference is that Mr Boensch’s reference to maximum costs is a reference to the $100,000 referred to in Annexure A to the mortgage. The appellant did not suggest otherwise.

101    I make the following observations regarding that email of 4 October 2019. Contrary to Mr Bingham’s suggestion, the statement at the close of the email “[h]opefully we don’t need to go through all these arguments after the 11th”, cannot be interpreted, in context, as an agreement to the terms of the Solicitor’s October costs disclosure by agreement to continuation of the work until the hearing date for the appeal. This is at least by reason of the fact that, as apparent from the email in full, Mr Boensch considered he had an agreement for his legal fees to be capped at $100,000, which included the hearing of the appeal. Recalling also that the sentence referring to the date of the hearing does not refer to the amount. Further, Mr Boensch cavilled with other aspects of Mr Bingham’s conduct in the same email. In that context, a mere reference to the hearing cannot be interpreted as accepting the increased costs disclosure by conduct.

102    The appellant’s reliance on Empirnall Holdings at 535 does not assist his case. It is appropriate to recite the passage relied on in its context. At 534-535 McHugh JA said:

Nevertheless, the silence of an offeree in conjunction with the other circumstances of the case may indicate that he has accepted the offer: Rust v Abbey Life Assurance Co Ltd [1979] 2 Lloyd's Rep 334 at 340. The offeree may be under a duty to communicate his rejection of an offer. If he fails to do so, his silence will generally be regarded as an acceptance of the offer sufficient to form a contract. Many cases decided in United States jurisdictions have held that the custom of the trade, the course of dealing, or the previous relationship between the parties imposed a duty on the offeree to reject the offer or be bound: CMI Clothesmakers Inc v ASK Knits Inc 380 NYS 2d 447 (1975); Brooks Towers Corporation v Hunkin-Conkey Construction Co 454 F 2d 1203 (1972); Alliance Manufacturing Co Inc v Foti 146 So 2d 464 (1962). But more often than not the offeree will be bound because, knowing of the terms of the offer and the offeror's intention to enter into a contract, he has exercised a choice and taken the benefit of the offer. In Laurel Race Course Inc v Regal Construction Co Inc 333 A 2d 319 (1975) a contractor proposed that it would do additional work upon the basis that, if the work was the result of its defective workmanship under the original contract, there would be no charge. Otherwise the work would be charged on a “cost-plus” basis. The building owner made no reply to this offer. The contractor commenced work on the job to the knowledge of the building owner who was held bound by the terms of the offer. Speaking for the Court of Appeals for Maryland, Judge Levine said (at 329):

“… Where the offeree with reasonable opportunity to reject offered services takes the benefit of them under circumstances which would indicate to a reasonable person that they were offered with the expectation of compensation, he assents to the terms proposed and thus accepts the offer.”

This formulation states acceptance in terms of a rule of law. However, the question is one of fact. A more accurate statement is that where an offeree with a reasonable opportunity to reject the offer of goods or services takes the benefit of them under circumstances which indicate that they were to be paid for in accordance with the offer, it is open to the tribunal of fact to hold that the offer was accepted according to its terms. A useful analogy is to be found in the “ticket cases” where an offeree, who has or ought to have knowledge of the terms of a contract of carriage or bailment, is generally bound unless he raises objection: cf Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 at 169 and MacRobertson Miller Airline Services v Commissioner of State Taxation (Western Australia) (1975) 133 CLR 125 at 136-140.

The ultimate issue is whether a reasonable bystander would regard the conduct of the offeree, including his silence, as signalling to the offeror that his offer has been accepted.

103    As is evident from that passage, every case is fact specific. The circumstances of this case are different. Mr Boensch explicitly rejected the increased costs reflected in the Solicitor’s October costs disclosure (and, as noted above at [89], the vast majority of those costs having already been incurred without Mr Boensch’s authorisation). The costs agreement in place capped the costs at $100,000, as understood by Mr Boensch, and covered the remaining conduct of the proceeding. It was Mr Bingham who remained silent in the face of Mr Boensch’s rejection and assertion that there was an agreement in place with costs capped to a maximum of $100,000, the inference being he chose to ignore it but proceed nonetheless. It would have been expected, if Mr Boensch’s assertions were challenged, that there would have been a response to that effect.

104    The appellant’s submission that the objective bystander would say “the services were to be paid for and the services were on those terms” (based on the “combined effect” of cl 2 of the Solicitor’s February costs disclosure and cl 11 of the Solicitor’s October costs disclosure, and on the work being done for Mr Boensch and its benefit accepted by him), cannot be accepted. That submission fails to grapple with the circumstances of this case.

105    A reasonable bystander would not regard the conduct of Mr Boensch as signalling to Mr Bingham that the increased costs in the terms of the Solicitor’s October costs disclosure had been accepted.

106    I note also that Mr Bingham chose not to call any evidence before the primary judge which disputed: Mr Boensch’s claim that the costs were agreed to be limited to $100,000, as reflected by the mortgage; or that Mr Boensch told he and Mr Bevan (as referred to in the email of 4 October 2019) that he had no financial means to fund further litigation, which resulted in the costs being capped to that maximum of $100,000. Such evidence would have been expected. The failure gives rise to the inference it would not have assisted the appellant.

107    The appellant has not established any error by the primary judge in concluding that Mr Boensch did not accept the terms of the Solicitor’s February and October costs disclosures by his conduct.

The mortgage

108    The appellant submitted that the primary judge misconstrued the mortgage (including by referring to extrinsic material), and that the mortgage cannot be a costs agreement.

109    As explained above at [85], the primary judge accurately described the terms and effect of the mortgage.

110    As noted above, “costs agreement” is not defined in the LPUL. The primary judge concluded that the mortgage was an “agreement as to the payment of costs”, citing Anderson at [35]: see PJ [14]. The appellant did not address this conclusion or authority, but rather contended that the mortgage is not a costs agreement, as it does not and does not intend to set out essential features of a costs agreement in line with the LPUL. In his submissions, the appellant referred to the first essential feature as “a costs agreement must be written or evidence[d] in writing” per s 180(2) of the LPUL, which is plainly complied with by the mortgage. The “next feature” was said to be that “a costs agreement may consist of a written offer that is accepted in writing or, except in the case of conditional costs agreement, by other conduct”, per s 180(3) of the LPUL. The appellant also referred to the obligations of disclosure in s 174 of the LPUL, submitting that the primary judge’s finding “would seem to be wrong…because there is no disclosure in the mortgage as to the basis of the costs and no estimate of the costs”. This submission conflates the obligation as to disclosure imposed on a lawyer, with an agreement. There is no basis in the legislation to require the agreement document to include those features. Indeed, an agreement could be for a fixed amount. There is no basis in the LPUL to exclude the mortgage, given its terms, as a costs agreement.

111    The appellant also criticised the primary judge for referring to extrinsic material to interpret the mortgage, on the basis that the mortgage was only a security for costs. That submission proceeds on the basis of an acceptance of it correctness.

112    As explained by the primary judge at PJ [84(d)(ii)], extrinsic evidence of the circumstances in which the mortgage was executed, to give meaning to the language therein, is permissible: Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337 at 349. The appellant does not challenge the correctness of the underlying principle, but its application in this case. Extrinsic evidence was referred to by the primary judge to identify the legal costs to which cl 6 of Annexure A to the mortgage referred. In any event, in the circumstances, it can hardly be controversial that the extrinsic evidence would at the very least include the Solicitor’s February costs disclosure, which contained the legal work Mr Bingham would perform and the rates at which he would perform that work: see PJ at [84(d)(ii)].

113    The appellant has not established error in the primary judge’s conclusions that the terms of the mortgage are the costs agreement or that the extent of the liability for legal costs is $100,000.

Jurisdictional fact

114    As explained above, the appellant’s submission that the primary judge erred because he proceeded on the assumption that the existence of a costs agreement is a jurisdictional fact, fails to address the consequence of the submission.

115    At PJ [86], the primary judge considered the alternative basis, that it was not a jurisdictional fact. His Honour identified four bases of error by the Costs Assessor, concluding as at PJ [87]: see [38] above.

116    That conclusion was preceded by a detailed explanation of the errors in the costs assessment, the reasoning of which is not challenged in this appeal.

117    Later, at PJ [95], the primary judge concluded:

In the light of my alternative conclusions in paragraphs 85 and 87 of these reasons, I propose to order that the bankruptcy notice be set aside.

118    The appellant has not challenged any aspect of the primary judge’s conclusions as to the alternative basis for his decision.

Conclusion

119    For the reasons above, the appellant has not established any of the grounds of appeal and accordingly the appeal is dismissed, with costs.

Associate:

Dated:    22 February 2023