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El-Hanania v Vella [2019] NSWCA 167 (10 July 2019)

Last Updated: 10 July 2019





Court of Appeal

Supreme Court New South Wales



[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

JUDGMENT

GLEESON JA: My reasons for joining in the orders made on 3 July 2019 accord with the reasons of McCallum JA. PAYNE JA: I have read the judgment of McCallum JA in draft. Her Honour’s reasons encapsulate my reasons for joining in the orders of the Court made on 3 July 2019. McCALLUM JA: These are proceedings for judicial review of two decisions concerning the costs charged by a solicitor, Mr Saba El-Hanania. The proceedings required an extension of time and also faced an application by Mr El-Hanania’s former client, Mr Alon Vella, for security for costs. This judgment addresses those two applications. Mr El-Hanania acted as Mr Vella’s solicitor in a claim for damages for personal injury arising out of an accident that both involved a motor vehicle and occurred at work. After those proceedings had been resolved favourably to Mr Vella, a dispute arose between Mr El-Hanania and Mr Vella as to legal costs. The dispute has a complex procedural history which is addressed in detail below. In short, after receiving an itemised bill which claimed costs payable to Mr El-Hanania in the sum of $294,671.85 plus disbursements (of which, after deducting a small amount attributable to a paralegal, $42,026.85 was alleged to remain outstanding), Mr Vella obtained an assessment of Mr El-Hanania’s costs in the sum of $44,452.61, meaning that he was entitled to a substantial reimbursement from Mr El-Hanania. The certificate of determination issued by the costs assessor recorded that Mr Vella had previously paid Mr El-Hanania the sum of $294,671.85 on account of costs. The certificate purportedly required Mr El-Hanania to pay Mr Vella the balance of $250,219.24. The amount recorded as having been paid by Mr Vella was incorrect. However, there is no dispute that Mr El-Hanania had retained an amount from the settlement funds that substantially exceeded the amount of costs assessed by the costs assessor. The difference between the amount retained by Mr El-Hanania and the amount of costs assessed as being reasonable is agreed to be in the order of $212,765.37. An application by Mr El-Hanania for review of the costs assessor’s determination was unsuccessful. The determinations were affirmed by the costs review panel on 6 December 2017. In the meantime, Mr Vella had filed the costs assessor’s certificate of determination with the District Court at Orange. The Court issued a registration certificate, which is taken to be a judgment, in the amount of the balance recorded as being owed to Mr Vella. I will refer to that judgment as the certificate judgment. It is common ground that the course of filing the certificate in the form in which it was issued (so as to be taken to be a judgment against Mr El-Hanania) was not available in the circumstances. The dispute was governed by the Legal Profession Act 2004 (NSW) (now repealed). Registration of a certificate of determination of a costs assessor under that Act was the mechanism available to recover costs that had not been paid: s 368(5) of the Act. Where costs had been paid in an amount that exceeded the amount assessed, the overpayment could be recovered as a debt: s 368(4) of the Act. There was no statutory authority for the Court to accept a certificate for registration in that circumstance. The appropriate course to recover the overpayment would have been for Mr Vella to file a statement of claim. Against a history of further procedural complexities explained below, Mr ElHanania now seeks judicial review in this Court of both the decision of the costs review panel (affirming the determinations of the costs assessor) and a later decision of the District Court which, by consent, corrected the amount in which the certificate judgment was obtained to the agreed figure of $212,765.37. The application for an extension of time and the application for security for costs were listed for preliminary determination on 3 July 2019. At the conclusion of argument, the Court made the following orders:

1. Subject to the conditions in paragraph 2 below, extend the time for filing of the Summons to 1 April 2019.

2. Within 28 days of today the applicant is to:

(a) pay into the Court the sum of $212,765.37 to abide the further order of the Court;

(b) provide security for costs in a form satisfactory to the Registrar of the Court in the amount of $35,000;

3. Otherwise dismiss the respondent’s amended notice of motion filed 15 April 2019.

4. Reasons are reserved.

5. Proceedings are stood over to Monday, 5 August 2019 for directions before the Registrar.

These are my reasons for joining in those orders.

Circumstances in which the dispute arose

Mr Vella initially retained a different solicitor to act in his personal injury claim. Mr El-Hanania commenced acting for Mr Vella in January 2014. However, it was not until 22 October 2014 that he sent Mr Vella a costs agreement and costs disclosure. The estimate of costs stated in the costs disclosure was $165,000. The proceedings were resolved on 31 August 2015 when Mr Vella accepted an offer for $900,000 inclusive of costs. According to Mr Vella, he was told before he accepted that offer that, after payment of costs (including those of the former solicitor) and the Medicare reimbursement, he would receive no less than $600,000 and more likely $625,000. Mr El-Hanania’s trust account ledger shows that, by 23 October 2015, the amount of $810,000 in settlement funds had been received. The balance of $90,000 appears to have been held against the liability to Medicare. According to Mr Vella, he attended Mr El-Hanania’s home in late November 2015 and was given a cheque for only $400,000 (the trust account ledger records that the cheque was drawn on 6 November 2015). Mr El-Hanania told him he would receive the balance after Mr El-Hanania had received information he was waiting on from Medicare. Mr El-Hanania’s trust account ledger shows that, at the time that payment was made to Mr Vella, the trust account had been debited in amounts totalling $192,400 on account of Mr El-Hanania’s costs since the deposit of the settlement payments and that a further $217,600 remained in the trust account. On 9 November, after the payment of $400,000 to Mr Vella, the remaining funds of $80,240.75 from Medicare were deposited into the trust account. Mr Vella learned this from Medicare and contacted Mr El-Hanania again. A draft bill of costs dated 8 December 2015 itemises the solicitor’s costs as totalling the amount of $234,793.35 plus disbursements of over $180,000. The bill records amounts already paid by the client of $161,700 leaving an alleged balance outstanding of $254,072.25. On 12 December 2015, according to Mr Vella, Mr El-Hanania told him that his costs exceeded $250,000 but that he would accept that amount. The trust account ledger shows that, after the payment of disbursements and three separate further invoices to Mr El-Hanania “as per itemised invoice dated 8/12/15” totalling $44,241.10, there was exactly $100,000 left in the trust account. Mr Vella says Mr El-Hanania required him to sign a document, following which he was given a cheque for $100,000. Accordingly, from the settlement of $900,000, he received exactly $500,000. Mr Vella subsequently sought an itemised bill which was provided on 20 September 2016. The bill itemised solicitors’ fees in the sum of $294,671.85 plus disbursements to the previous solicitor, counsel, doctors and Medicare totalling $182,252,50, giving a total of $476,924,35. After deducting amounts already paid by Mr Vella in the sum of $255,341.10 (and, it appears, waiving fees of $577.50 for a paralegal), it was claimed that the total professional costs outstanding were $42,026.85. The itemised bill included over 500 hours of Mr El-Hanania’s time (the equivalent of over 62 days of 8 hours) charged at $450 an hour (a total of $250,286.85). By far the majority of that time was recorded as having been spent by Mr El-Hanania perusing documents. On 3 May 2017, Mr Vella applied for an assessment of the costs. On 22 June 2017, the costs assessor sought Mr El-Hanania’s response. Mr El-Hanania sought an extension to 28 July 2017 and that was granted. On 31 July 2017, an employee of Mr El-Hanania again wrote to the assessor seeking “one final extension” until 16 August 2017. The letter included a medical certificate dated 5 July 2017 from a general practitioner which stated:

“This is to certify that I examined [Mr El-Hanania] on the 5th July 2017 and he is unable to work from 05/07/2017 to 05/08/2017 inclusive.”

The further extension was granted. Mr El-Hanania was later to obtain a report from a psychiatrist, Professor Woods, which recorded that Mr El-Hanania was suffering from depression and was on a “pilgrimage” in Israel and Palestine in July 2017. Professor Woods expressed the opinion that Mr El-Hanania’s depression was acute by September and October 2017. On 3 September 2017, having received no further communication from Mr El-Hanania, the costs assessor completed his assessment. On 6 September 2017, prompted by a letter from Mr Vella’s solicitor, an employee of Mr El-Hanania wrote to Mr Vella’s solicitor stating that Mr El-Hanania was “currently unwell” and would provide his response within 14 days. The costs assessor responded to that letter on 7 September 2017 indicating that he had already completed the assessment and that he would not accept any further submissions from either party. He issued his certificates of determination on 11 September 2017. As already noted, s 368 of the Legal Profession Act 2004 contemplated a different procedure upon the issue of a certificate of determination depending on whether the amount of costs had been paid and there had been an overpayment or whether the costs were unpaid. The costs assessor’s certificate was issued in terms which conflated that distinction. The certificate said:

“1 The application is determined by assessing as a fair and reasonable amount of costs to be paid to the costs respondent the sum of $44,452.85.

Note 1: The amount assessed excludes the costs of the cost assessment for which a separate certificate has issued (s 368(3) of the Act).

Note 2: The costs applicant has previously paid the sum of $294, 671.85.

2. The costs respondent is to pay to the costs applicant the sum of $250,219.24.”

The costs assessor issued a separate certificate for the costs of the costs assessment. The certificates of determination were sent to the parties on 10 October 2017. On 25 October 2017, Mr Vella filed the certificate with the District Court at Orange. On 2 November 2017, Mr El-Hanania served on Mr Vella an application for review of the costs assessor’s determinations by the costs review panel. The application was filed on 9 November 2017. It did not seek to address the substance of the costs assessor’s decision. The grounds for review stated that Mr El-Hanania had suffered from ill-health with a chronic illness. A medical certificate was provided which went no further than to specify the dates on which he had consulted a particular surgeon and the procedures he had undergone. It did not specify the illness or the duration of any incapacity. Separately, the review application stated that the file was “extremely large”; that due to his ill health Mr El-Hanania had not been able to provide material to the costs assessor prior to the determination of costs and that, having “perused the relevant file” Mr El-Hanania now enclosed the material that had not already been provided to the assessor which was said to be “crucial to the determination”. The additional material forwarded to the costs review panel was included in annexure A to the affidavit of Benedict Cleary sworn 3 June 2019. It does not appear to contain evidence of any additional work not recorded in the itemised bill of costs. It does include a file note of an alleged conversation between Mr Mark Hanna, an employee of Mr El-Hanania, and Mr Vella at the time the personal injury proceedings were resolved in which Mr Vella was allegedly told that if he accepted the offer of $900,000 he would receive “something between $450,000 and $500,000”. As already noted, Mr Vella says he was told he would receive no less than $600,000 and probably $625,000. He has foreshadowed his intention to challenge the authenticity of the file note. On 10 November 2017, Mr El-Hanania’s application for review of the determinations of the costs assessor was assigned to a review panel. On 12 December 2017, Mr El-Hanania purported to withdraw that application. However, by that time the review panel had already made its determination to affirm the costs assessor’s determinations. The review panel’s determination was issued on 6 December 2017. On 27 December 2017, Mr Vella obtained a garnishee order against a bank account held by Mr El-Hanania. However, the account held only a small amount (just over $500). On 2 March 2018, Mr El-Hanania commenced a new proceeding by summons filed in the District Court seeking leave to appeal against the determinations of the costs assessor, the determinations of the costs review panel and the certificate judgment. The grounds of appeal were confined to alleged errors in the costs assessor’s determinations, evidently overlooking the fact that the operative determinations (leaving aside the excursion to Orange) were those of the costs review panel. I will refer to those proceedings as the District Court appeal proceedings. Mr Vella’s solicitor responded to the commencement of those proceedings by seeking payment into court of the amount of overpayment certified by the costs assessor, being $250,219.24. It appears that, following the commencement of the District Court appeal proceedings, Mr El-Hanania became aware of the irregularity in the entry of the certificate judgment. On 18 April 2018, a solicitor retained by Mr El-Hanania wrote to Mr Vella pointing out the irregularity and inviting Mr Vella’s consent to set aside that judgment. Mr Vella did not respond to that request. On 19 April 2018, Mr El-Hanania filed a notice of motion in the District Court at Orange to have the certificate judgment set aside, invoking r 36.15 of the Uniform Civil Procedure Rules 2005 (NSW) or the Court’s inherent jurisdiction. The filed motion does not record a return date for the motion. I will refer to that as the motion in the Orange proceedings. Two notices of motion were then filed in the District Court appeal proceedings. On 26 April 2018, Mr Vella filed a notice of motion to have the summons in those proceedings dismissed, evidently on the basis that the grounds of appeal did not seek to impugn the operative determination. On 27 April 2018, Mr El-Hanania responded by filing a notice of motion seeking leave to amend the summons to add grounds alleging error in the costs review panel’s determination. On 31 May 2018, the two notices of motion in the District Court appeal proceedings came before Neilson DCJ. The extant motion in the Orange proceedings was not before his Honour. However, in an understandable attempt to resolve the complexities before him in a simple and pragmatic way, after pressing the parties as to what was the real issue in dispute, the judge turned his attention to the issue raised by that motion. During the course of argument on those matters, a number of points emerged as common ground. The solicitor appearing for Mr El-Hanania appeared to accept that the original summons in the District Court appeal proceedings, and perhaps also the proposed amended summons, required revision. Separately, both parties accepted that, leaving aside the statutory irregularity of a costs assessment certificate that purported to certify an amount of overpayment, coupled with the further irregularity of the court accepting registration of such a certificate as a judgment against the overpaid solicitor, the certificate of the costs assessor involved an error. As already noted, the costs assessor had identified the amount previously paid by Mr Vella to Mr ElHanania as being the sum of $294,671.85. However, as confirmed in an affidavit sworn by Mr Vella in support of the dismissal application, it was only $255,341.10 (according to the itemised bill prepared by Mr El-Hanania). After being afforded an opportunity to obtain instructions, the legal representatives for both parties acceded to the judge’s suggestion that the error could be addressed by in effect calling up the Orange proceedings and making an order reducing the certificate judgment to $212,765.37. On the part of Mr El-Hanania, consent to that course was given without prejudice to any action Mr El-Hanania may take to obtain prerogative relief “in another place”. An order was made by consent in the Orange proceedings 2017/322206 as follows:

“By consent, I set aside judgment entered on 25/10/17 in the sum of $250,219.24. In lieu thereof, I enter judgment for the plaintiff against the defendant for $212,765.37. Such judgment to take effect from 25/10/17. Therefore, credit to the defendant/judgment debtor for monies recovered on the garnishee order issued on 27/12/17.”

The judge then disposed of the two motions in the appeal proceedings that had been listed before him 2018/68777 by making the following orders:

“Motion filed by the defendant in these proceedings on 26/4/18 is withdrawn and dismissed. Motion filed by the appellant in these proceedings on 27/4/18 is withdrawn and dismissed. I grant leave to the appellant to withdraw the summons which is accordingly dismissed.”

On 10 August 2018, Mr El-Hanania filed a summons in the Common Law Division seeking leave to appeal from the decision of the costs review panel. As has subsequently been acknowledged by him, that proceeding was misconceived. Neither party identified the difficulty. The matter went through the usual procedural steps and was listed for hearing before Rothman J on 20 February 2019. Upon his Honour raising the question of jurisdiction, the matter was adjourned for directions on 25 February 2019 before the Court of Appeal Registrar. On 1 April 2019, the present proceedings were commenced by summons filed in this Court seeking judicial review of the judgment of the District Court (the corrected judgment entered by consent by Neilson DCJ in the sum of $212,765.37) and the determination of the costs review panel.

Applications before the Court

As already noted, the proceedings were listed before us for hearing of Mr ElHanania’s application for an extension of time and Mr Vella’s application for security for costs.

Extension of time

Proceedings for judicial review must be commenced within three months of the date of the relevant decision: r 59.10(1) of the UCPR. Mr El-Hanania’s summons filed 1 April 2019 was well out of time for both decisions of which review is sought. The determination of the costs review panel was given on 6 December 2017. The decision of Neilson DCJ was given on 31 May 2018. Rule 59.10(2) confers power to extend time. Rule 59.10(3) of the UCPR provides guidance as to the exercise of that power, as follows:

(3) In considering whether to extend time under subrule (2), the court should take account of such factors as are relevant in the circumstances of the particular case, including the following:

(a) any particular interest of the plaintiff in challenging the decision,

(b) possible prejudice to other persons caused by the passage of time, if the relief were to be granted, including but not limited to prejudice to parties to the proceedings,

(c) the time at which the plaintiff became or, by exercising reasonable diligence, should have become aware of the decision,

(d) any relevant public interest.

In addition to the factors to be considered pursuant to that rule, it is also relevant to have regard to the length of the delay, the reason for the delay and whether the applicant has a fairly arguable case: Dyason v Butterworth [2015] NSWCA 52 at [65] (McColl JA, Barrett and Gleeson JJA agreeing at [83] and [84]) citing Tomko v Palasty (No 2) (2007) 71 NSWLR 61; [2007] NSWCA 369 at [55]. The position concerning the corrected certificate judgment entered by Neilson DCJ is relatively straightforward. It is clear enough that the original certificate judgment entered at Orange was entered irregularly, for the reasons already explained. Mr Vella accepts, in that circumstance, that it is at least fairly arguable that the correction of that judgment was also irregular, notwithstanding the fact that the parties consented to that course. The different mechanisms of ss 368(4) and (5) were not drawn to the attention of the primary judge who, in fairness, was attempting to achieve a pragmatic result in what was already an unfortunate and presumably expensive saga. The delay in commencing proceedings for judicial review of that decision is adequately explained by a combination of the delay in obtaining the transcript of the hearing and the judgments and the misconceived proceeding commenced in the Common Law Division. As has previously been noted by this Court, delay while transcript is obtained will not always be viewed as an acceptable explanation: Dillon v Boland; Dillon v Cush [2012] NSWCA 364 at [5]. However, having regard to the unorthodox way in which the argument before Neilson DCJ unfolded, it was prudent in this case for counsel to consider it before giving advice as to what should happen next. The position concerning the decision of the costs review panel is more complex. The summons identifies six grounds for review of that decision. One relates to the curious formulation of the certificate of determination of the costs assessor (affirmed by the review panel) in specifying not only the sum assessed as a fair and reasonable amount of costs to be paid to Mr El-Hanania but also the amount to be repaid by Mr El-Hanania to Mr Vella. It must be accepted that it is fairly arguable that neither the costs assessor nor the costs review panel had authority to make a determination in those terms. That is a sufficient basis for concluding that the application for judicial review of that decision is fairly arguable. However, it was submitted on behalf of Mr Vella that, even if the certificates of determination issued by the costs review panel were set aside, there is no utility in allowing the present application to proceed because there is no basis on which it could be concluded that Mr El-Hanania has any prospect of obtaining a better outcome in the event that the matter is remitted to the review panel for redetermination. The only material on the strength of which that contention can be assessed is the additional material provided by Mr El-Hanania to the costs review panel in support of his review application. As already noted, nothing in that material took the question of assessment or responses to Mr Vella’s objections any further than the matters itemised in the bill of costs. However, before concluding that there was no utility in granting an extension of time, it would be necessary to conclude that the review of the determinations of the costs assessor, upon remittal, could not possibly produce a different result: Stead v State Government Insurance Commission [1986] HCA 54; (1986) 161 CLR 141 at 147; [1986] HCA 54; Nobarani v Mariconte [2018] HCA 36 at [38]; [2018] HCA 36; 92 ALJR 806. For the reasons explained in Nobarani at [48], this Court should not attempt to speculate on that issue at this stage of the proceedings.

Other relevant factors

Against those considerations, a strong discretionary consideration pointing against granting the extension of time sought is the period of time for which Mr Vella has been kept out of pocket according to the original assessment. The settlement funds (including the settlement payment from Medicare) had all been deposited into Mr El-Hanania’s trust account by the end of November 2015. On the strength of the costs assessment as corrected by Neilson DCJ, Mr Vella has been out of pocket for some $212,000 for a very considerable period. There is evidence to establish that he is a man of little means with substantial family commitments. In those circumstances, and having regard to his allegation that Mr El-Hanania’s retention of those funds involves a breach of trust, Mr Vella proposed that, if the Court were minded to grant the extension of time sought, the order should be conditional upon payment into court of the whole amount of $212,755.37. The payment into court of that amount would provide substantial protection to Mr Vella against the prejudice of granting the extension of time. In all the circumstances, I was of the view that the extension of time should be granted for the reasons indicated but that the condition proposed was appropriate. Mr Vella also sought, as a condition of the extension of time, payment into court of the sum of $5,000 on account of the costs order made by Neilson DCJ. As the correctness of his Honour’s judgment is impugned and the point is conceded to be fairly arguable, I was not satisfied that it would be appropriate to include that further condition in the requirement to pay funds into court.

Security for costs

The amount of security sought by Mr Vella was $35,000. In the experience of the Court, having regard to the nature and complexity of the issues raised, that was a modest request. Mr El-Hanania offered to provide security in the amount of $20,000. Rule 59.11 of the UCPR provides that a plaintiff is not to be required to provide security for costs in respect of judicial review proceedings except in exceptional circumstances. Whether or not, in offering to provide part of the amount sought, Mr El-Hanania intended implicitly to concede the existence of exceptional circumstances, I was satisfied of that requirement. In particular, I had regard to the absence of any evidence that would support the conclusion that, even if Mr El-Hanania is successful in having the two impugned decisions set aside, he would obtain an order to have the matter remitted for further assessment (in accordance with the principles stated in Nobarani) or that, upon remittal, he would obtain a better result. In that context I note the apparent force in the findings of the costs assessor that the claims included in the bill of costs appear to be grossly excessive and include, in the earlier items, very substantial claims for perusal of existing documents including some instances of absurdly large amounts of time for that activity. Secondly, whilst both parties have contributed to the procedural complexity of the matter, Mr El-Hanania’s conduct has played a part in that. In that context, I note that there is evidence to suggest that, at a time when the costs assessor had been informed Mr El-Hanania required an extension of time to respond to Mr Vella’s objections to the itemised bill of costs because he was unfit for work for health reasons, he was about to travel to Israel and Palestine on a “pilgrimage” and then to go skiing at Perisher before returning to work in early August. Mr Vella’s evidence on that issue included photographs downloaded from Facebook showing Mr El-Hanania in ski gear on top of a snowy mountain. Finally, Mr Vella holds views, which it appears may have some foundation, that Mr El-Hanania will be unable to meet any costs order. That concern arises from the fact that Mr Vella has commenced bankruptcy proceedings against Mr El-Hanania based on his failure to pay the amount determined in the judgment entered by consent by Neilson DCJ and the fact that Mr El-Hanania has declined to make any payment whatsoever into court. For those reasons, I considered it appropriate to order Mr El-Hanania to provide security for the full amount of security for costs sought by Mr Vella.

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