Supreme Court New South Wales Medium Neutral Citation: Bechara v Bates (No 2) [2015] NSWSC 576 Hearing dates: 23 April 2015 Date of orders: 23 April 2015 Decision date: 23 April 2015 Before: McCallum J Decision: Stay is continued pending determination of the appeal on condition that plaintiff prosecutes the appeal with due expedition; costs of the application determined are costs in the cause. Catchwords: PROCEDURE – civil – summary disposal – default judgment – stay of default judgment – self-executing order resulting in default judgment – where judgment entered in factual circumstances where plaintiff misinformed as to date for compliance – where plaintiffs contentions have not been tested on the merits Legislation Cited: Legal Profession Act 2004 (NSW) Uniform Civil and Procedure Rules 2005 (NSW), r 36.16 Cases Cited: Bechara v Bates [2014] NSWSC 1935 Gnych v Polish Club Limited (No 2) [2013] NSWSC 1452 In the matter of Nexus Energy (subject to deed of company arrangement) [2014] NSWSC 1914 Category: Procedural and other rulings Parties: Maria Bechara t/as Bechara & Company (Plaintiff) Phillip Bates (Defendant) Representation: Counsel: D Allen (Plaintiff) P Bates (Self represented) Solicitors: Bechara & Company Lawyers (Plaintiff) Bannister Law (Defendant) File Number(s): 2015/115002 Publication restriction: None Judgment 1. HER HONOUR: Ms Maria Bechara is a solicitor trading under the name Bechara and Company. Mr Phillip Bates is a barrister. Ms Bechara retained Mr Bates as counsel in a number of legal proceedings. There has arisen between the two professionals what has become a bitter and hotly contested dispute as to Ms Bechara's alleged failure to pay Mr Bates' fees for his services provided in those proceedings. Without seeking to attribute blame to either party, it may be observed that their relationship no longer enjoys the degree of civility and mutual respect that might be hoped for in such a relationship in this jurisdiction. 2. The proceeding before the Court is Ms Bechara's appeal from a decision of a Magistrate dismissing a notice of motion, filed by Ms Bechara on 23 March 2015, to set aside default judgment entered against her on 20 March 2015. The present application is for a stay of the default judgment pending determination of the appeal. In order to explain the decision under appeal, it is necessary to record something of the history of the proceedings. 3. Part of the history of the proceedings is recorded in an earlier judgment of mine in Bechara v Bates [2014] NSWSC 1935. That was an application for leave to appeal against the decision of a Magistrate refusing an application for a review of the order of a Registrar of the Court requiring Ms Bechara to comply with a notice to produce. 4. To explain the issue of the notice to produce, in the proceedings in the Local Court, Mr Bates claims payment of his fees. Ms Bechara defends the claim on two grounds. First, Ms Bechara contends that there was an agreement between her and Mr Bates to the effect that any moneys claimed by him for work carried out by him at her request was payable contingently upon the recovery of moneys by her in two legal proceedings (those of Cross and Haratsaris) and that moneys claimed by Mr Bates for a third matter (that of Cameel Bechara) would be payable upon receipt of moneys by Ms Bechara in those first two matters. A further aspect of the alleged agreement was that moneys claimed by Mr Bates in all matters would be reduced in proportion to the quantum of moneys recovered by Ms Bechara in those two matters. It is convenient to refer to that aspect of the defence as the "contingency agreement". 5. Separately, Ms Bechara pleaded that Mr Bates failed to comply with the requirements of the Legal Profession Act 2004 (NSW) and that the effect of his alleged failure is that he is barred from recovering any costs until making an application to this Court for assessment of the costs in accordance with that Act. 6. In the circumstances I am about to explain, neither of those contentions has ever been heard or determined on the merits. 7. At an early point in the proceedings, Mr Bates alleged that Ms Bechara had in effect admitted the debts denied in the defence in certain documents lodged by her in bankruptcy proceedings relating, as I understand it, to the two former clients. In short, it was contended by Mr Bates that, if Ms Bechara had lodged proofs of debt claiming the amounts claimed against her by Mr Bates as debts owed to her by those clients, that would amount to an admission inconsistent with matters challenged by way of defence. That was enough to sustain the notice to produce. Ms Bechara's attempts to resist production of the documents sought failed, for the reasons recorded in my earlier judgment. 8. As recorded in the judgment at [3], at that time a self-executing order had been made in the Local Court that, if Ms Bechara failed to comply with the notice to produce, the defence was struck out and Mr Bates was able to apply for default judgment. 9. The circumstances giving rise to the present appeal illustrate the potential complications of self-executing orders in such circumstances. In particular, it may be noted that the event that would trigger the application of the self-executing order was an event as to which there was potential for a factual dispute. In fact, perhaps predictably, a factual dispute has transpired. 10. Two complications arose in respect of Ms Bechara's compliance or alleged non-compliance with the terms of the self-executing order: first, as a result of my judgment dismissing her earlier appeal, the time for compliance with the notice was extended until 15 December 2014. Unfortunately, the barrister who appeared for Ms Bechara on that occasion incorrectly reported to her that she had until 17 December 2014 to comply with the orders of the Magistrate. Acting, as she was entitled to do, on the advice of the barrister, Ms Bechara was accordingly already in default of the self-executing orders as at 17 December 2014. 11. Separately, a dispute arose as to whether there had been proper compliance with the notice to produce. Mr Bates inspected the documents produced early in January. He has stated on oath that he formed the view that compliance was deficient in two respects: first, he asserts that Ms Bechara failed to produce a complete copy of the report of "the referee". I use the word "complete" advisedly. Paragraph 13 of Mr Bates' affidavit, affirmed on 21 April 2015, states: "Although I and Ms Dufour had carefully inspected the document at the Registry on 6 January 2015, we did not see a complete copy of the referee's report." 1. Mr Bates does not accept that the complete report was produced by Ms Bechara on 17 December 2014. However, Ms Bechara says on oath that she did produce a complete copy of the report and that she has since sent to Mr Bates what she says is a copy of the report in fact produced. 2. The second dispute as to production refers to documents said to have been required by para 4 and 5 of the notice to produce (set out at pages 131 and 132 of the exhibit to Ms Bechara's affidavit in these proceedings) seeking proofs of debt lodged with named trustees. Those paragraphs do not, in terms, seek any document lodged with a trustee of the correct name. As far as I am able to discern from the material before me, it appears the notice to produce incorrectly named the trustee of the relevant estate as Antony De Vries. Mr Bates alleged that, in breach of her obligation in respect of the notice to produce, Ms Bechara failed to produce letters she had sent to a person of a different name (the correct trustee of that estate). 3. I have recited those events in some detail in order to illustrate what I have referred to as the potential complications of the self-executing order. What has followed from those events is that, in the face of Mr Bates' objection that Ms Bechara has failed to comply with the notice to produce, default judgment has now been entered against her on the strength of the self-executing order, if not by operation of that order. 4. Mr Bates also noted that he commenced his inspection of the produced documents in early January 2015. He sent four letters to Ms Bechara, all on different dates, complaining of her allegedly incomplete production. According to her evidence in these proceedings, she was away for the whole of that period (as is commonly the case for the legal profession in the month of January). An application for default judgment was, in due course, filed by Mr Bates by notice of motion dated 4 February 2015. 5. The proceedings then came before the Local Court for directions, or what I think that Court refers to as a review, on 17 February 2015. On 27 February 2015, Ms Bechara filed a notice of motion by which she sought to restrain Mr Bates from filing any application for default judgment. As already noted, that application had in fact already been filed but the import of the relief sought at that point was to restrain the process set in train by the self-executing orders. 6. Ms Bechara's notice of motion was heard and determined on the merits. The motion was dismissed. The Magistrate subsequently observed at [29] of the judgment: "The plaintiff may apply for default judgment." 1. In due course, default judgment was entered in the Registry in accordance with Mr Bates' notice of motion filed on 4 February 2015. That occurred on 20 March 2015. 2. On 23 March 2015, Ms Bechara filed a notice of motion to set aside the default judgment. Evidence relied upon in support of that application included confirmation from the barrister who had appeared for Ms Bechara at the hearing before me that he had indeed informed Ms Bechara of the wrong date for compliance with the original orders. It also included Ms Bechara's evidence, in a further affidavit sworn by her, that whatever be the proper construction of the notice to produce, she had now complied with it. 3. The transcript of the return of the notice of motion of 2 April 2015 is not yet available. The hearing before me proceeded on the basis of Ms Bechara's recollection of what occurred on that date, set out in a further affidavit sworn by her in which she said: "When the hearing began I said words to the effect 'I move on my notice of motion filed 23 March 2015 and read the affidavits in support as set out in the notice of motion'. Her Honour Keogh LCM refused to hear my motion and said words to the effect 'But it's on a question of law and fact and you should appeal to the Supreme Court. In reality, your motion was an attempt to bring an appeal against her Honour's final decision. The Local Court does not have the capacity to appeal final judgment.'" 1. Mr Allen, who appears for Ms Bechara in the proceedings in this Court, submitted in response to a question from me that the reference to "her Honour's final decision" must be understood to be a reference to the decision of the same magistrate given on 18 March 2015. That appears to be correct. The oddity of a Magistrate referring to herself as "her Honour" is probably explained by the fact that the words are recorded by a solicitor in an affidavit. I would understand Ms Bechara to be referring to Magistrate Keogh as "her Honour" and would think the words in quotation marks ought to be understood with that qualification. 2. The present proceedings seek to challenge that decision on the simple ground that her Honour erred in refusing to exercise jurisdiction in that she refused to hear a notice of motion on the premise that she did not have jurisdiction to hear it when in fact she did (that is my paraphrase of an argument better articulated in the grounds of appeal drafted by Mr Allen). 3. The proceedings came before the duty judge last week on an ex parte basis with an application to abridge time for service and an application for a stay of the default judgment. The stay was granted by Bellew J. His Honour made the proceedings returnable before me as duty judge yesterday. Although the stay was granted "until further order", Mr Allen accepted that the onus was on Ms Bechara to establish why the stay should be continued pending determination of the appeal, yesterday being the first occasion on which Mr Bates had an opportunity to respond to it. For the following reasons, I have concluded that the stay should be continued pending determination of the appeal. 4. The principles applicable to the grant of a stay pending appeal were not in dispute. The first consideration, to my mind, is that there is, on my consideration of the material, a point which could be characterised as fairly arguable that the Magistrate declined to exercise jurisdiction which she in fact had. It is clear enough that the Court has jurisdiction to set aside a default judgment other than one entered in open court: Uniform Civil and Procedure Rules 2005 (NSW) r 36.16. 5. Mr Bates argued before the Magistrate in written submissions handed up to her Honour and before me that, whilst technically the default judgment was entered in the Registry, it should be regarded as being one in effect entered after argument on the merits. There may be some force in that submission, but the plain words of the Rules state that, at least according to the terms of the Rules, Ms Bechara had an entitlement to make an application to set the default judgment aside. 6. Secondly, the application was based on further evidence which cannot be dismissed as being irrelevant. The first piece of further evidence was an affidavit from Ms Bechara's counsel confirming that he had in fact informed Ms Bechara of the wrong date following his appearance before me in the earlier appeal. That was plainly a matter of concern to the magistrate, who evidently entertained a degree of scepticism as to Ms Bechara's evidence on that issue, notwithstanding the fact that her earlier affidavit included a copy of a letter or email correspondence from the barrister stating the wrong time period. 7. At [18] of the judgment, the Magistrate referred to that correspondence as "a redacted copy of the letter she received from counsel". It appears that her Honour entertained some doubt as to the authenticity of that correspondence, as her Honour continued: "She did not have any affidavit from her counsel to confirm that she was given this information in error because apparently her counsel was unable to provide one." 1. I must acknowledge that, so far as I can recall, Ms Bechara has never appeared before me and I do not know how she presented in her submissions to the Magistrate, but there is nothing recorded in the judgment as to why her Honour should have entertained scepticism when a solicitor informed her that her barrister had reported to her the wrong date by which to comply with an order of the Court. In any event, that scepticism must now be put to rest by the fact that the barrister has sworn an affidavit confirming his mistake. 2. The second aspect of the further evidence is that Ms Bechara has put on an affidavit saying, whatever the proper construction of the notice to produce, she has now complied with it. The concern as to non-compliance also evidently moved the Magistrate in refusing the previous notice of motion. For reasons not expressly recorded in the judgment, her Honour was satisfied that the notice to produce had not been complied with as at the time she determined the application heard on 12 March 2015. My consideration of the material put forward by the parties on that issue causes me to have some concern that Ms Bechara may have been put on the back foot in relation to that issue and may well have had a respectable case for showing she had fully complied with the notice on 17 December 2014. 3. In the result, Ms Bechara now faces the prospect of committing an act of bankruptcy if she does not pay her former barrister an amount for $80,000 for fees where her defences to his claim have never been determined on the merits. It should be observed that the amount of time and the quantum of legal costs that must have been incurred in respect of these interlocutory disputes might equally, on a rough estimate, have seen a determination of those issues on the merits. 4. I accept that it is a relevant consideration in determining whether to grant a stay in such circumstances to know whether the judgment debtor has either offered security for the judgment debt or offered to pay an amount into Court. That has not occurred in this case and, as correctly observed by Mr Bates, there is no evidence to the effect that it would visit any hardship on Ms Bechara to do so. As frankly and properly acknowledged by Mr Allen, that is a relevant consideration militating against the grant of a stay. 5. I have considered the authorities provided by Mr Bates on that issue, particularly Gnych v Polish Club Limited (No 2) [2013] NSWSC 1452 and In the matter of Nexus Energy (subject to deed of company arrangement) [2014] NSWSC 1914. I do not understand those authorities to compel the degree of weight to that issue contended for by Mr Bates. This case is a bit different from the circumstances considered in either of those cases. 6. For the reasons I have already stated, namely, where Ms Bechara is faced with the prospect of having to front up with a large sum of money in circumstances where her apparently respectable defences to the barrister's claim have never been determined on the merits, I consider it appropriate to continue the stay pending the determination of the appeal on condition that Ms Bechara prosecutes the appeal with due expedition. The costs of the present application will be costs in the cause. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 May 2015