In the recent decision of Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29, the High Court ruled the Chorley exception, which allows self-represented litigants who are solicitors to recover costs incurred for their professional services in acting for themselves in any litigation, does not extend to barristers and, more broadly, is not part of the common law of Australia.
 
Background
The respondent, a barrister, was retained by the appellant, an incorporated legal practice, to appear in a family provision matter in the Supreme Court of New South Wales. At the conclusion of the proceedings, a dispute arose between the parties about professional fees, as the appellant paid the respondent only part of her fees.
In the first instance, the respondent sued the appellant for the balance of her fees in the Local Court of New South Wales but was unsuccessful. She then appealed to the Supreme Court of New South Wales where the appellant was ordered to pay the respondent the balance of the respondent’s fees, as well as her costs for both the Local Court and Supreme Court proceedings.
Pursuant to the costs orders, the responded forwarded a memorandum of costs to the appellant, which included costs incurred on her own behalf. The appellant refused to pay the costs claimed for work undertaken by the respondent herself and made an application for assessment of costs. The costs assessor decided in favour of the appellant and rejected the respondent’s claim for the costs of work she had performed herself on the ground that in New South Wales the Chorley exception does not apply to barristers. The respondent was unsuccessful in both her appeal to the Review Panel, and then to the District Court of New South Wales.
The respondent sought judicial review of the District Court decision in the Court of Appeal. The Court of Appeal held that the respondent, as a barrister, was entitled to rely on the Chorley exception as her costs were quantifiable by the same processes as solicitors.
The appellant appealed the decision of the Court of Appeal to the High Court of Australia.
The Chorley exception
The general rule is that self-represented litigants are not able to recover costs for any time or work performed in the course of the litigation. However, an exception to this rule, commonly referred to as “the Chorley exception,” is that self-represented litigants who are solicitors may be able to recover their professional costs of acting in the litigation.
The two principal issues determined by the Court was whether the Chorley exception applies to barristers who represent themselves in legal proceedings and, more broadly, whether it should be recognised as part of the common law of Australia.
The Chorley exception is not part of the common law in Australia
In the lead judgment of Kiefel CJ, Bell J, Keane J and Gordon J, their Honours determined the Chorley exception should not be recognised as part of the common law of Australia for reasons including the following:

As recognised by the majority in Cachia v Hanes (1994) 179 CLR 403, the Chorley exception is “anomalous” as it does not treat all litigants in the same manner. The exception affords a privilege to solicitors only, which is inconsistent with the principle that all persons are equal before the law. Further, because the exception is “anomalous”, the Court held that it should not be extended, by judicial decision, to apply to barristers.
If self-represented solicitors are permitted to recover costs for work undertaken themselves, there is the possibility a solicitor may profit for his or her participation in the litigation. This is contrary to the principle of costs orders, which are awarded by way of indemnity and not to compensate for lost earnings or reward a litigant’s success.
The Chorley exception is also inconsistent with the statutory definition of “costs” under s 3(1) of the Civil Procedure Act, which is a “means and includes” definition. The “means” part of the definition purports that costs are awarded for professional services actually incurred, and the “includes” part of the definition, which refers to “remuneration”, encompasses remuneration for professional services rendered under a contract for services. “Remuneration” does not cover the concept of payment to a person by himself or herself for services performed by himself or herself. Accordingly, as the definition of “costs” is otherwise exhaustive, it does not allow for self-represented solicitors to recover costs incurred on their own behalf.

What about a solicitor employed by an incorporated legal practice of which they are its sole director and shareholder?
It is well established that where in-house lawyers employed by governments and other agencies represent their employers in legal proceedings, the employer is entitled to recover costs in circumstances where an ordinary party would be so entitled by way of indemnity.
However, as the Court in these proceedings highlighted, there is still a question whether this view would also apply to solicitors employed by an incorporated legal practice of which he or she is its sole director and shareholder. As the Court noted, the resolution of this question may require close consideration of the legislation which provides for incorporation of solicitors’ practices and the intersection of that legislation with the provisions of the Civil Procedure Act in light of the general rule. Ultimately, the Court held that this is a matter for the legislature.
Implications
As the Chorley exception is not recognised as part of the common law of Australia, a self-represented litigant who happens to be either a barrister or solicitor will not be able to recover his or her professional costs for acting for himself or herself in any litigation.
Solicitors and barristers should now think twice about representing themselves in litigation. While solicitors may have in the past chosen to self-represent to save costs, this will not necessarily be the cost-effective option as they will no longer be recompensed for their time and effort by way of costs orders. Besides, as the Court highlighted, it is often undesirable of legal practitioners acting for themselves in legal proceedings. This is because a self-representing solicitor, lacking impartial and independent advice, may also lack objectivity due to self-interest.
It will be interesting to see if the legislature would follow the course which has been taken in England and abolish the general rule to allow self-represented litigants, whether legal practitioners or not, to recover costs for their time and effort in litigation. Any such change, in my view, is unlikely.
McCabe Curwood’s litigation and dispute resolution team is experienced in advising on and acting in all aspects of litigation, and regularly represents members of legal and other profession in disputes in different Courts. Do not hesitate to contact us if you require any assistance.
This article is not legal advice. It is intended to provide commentary and general information only. Access to this article does not entitle you to rely on it as legal advice. You should obtain formal legal advice that is specific to your particular circumstances.
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Like many areas of insolvency law, statutory demands have strict procedural requirements as to the timing by which documents must be served. But how is the passage of time calculated? If something is required to be done “21 days after” a document is served, is this intended to be inclusive or exclusive of the day the document was served? The Supreme Court of NSW recently grappled with this issue in Verimark Pty Ltd v Passiontree Velvet Pty Ltd [2019] NSWSC 455 and has provided clarity for lawyers and insolvency practitioners alike.
 
Background
Verimark commenced proceedings against Passiontree in the local court at Burwood for breach of contract, claiming approximately $40,000 in damages. During the proceedings, Passiontree was successful on two interlocutory applications and Verimark was ordered to pay Passiontree’s costs on these motions.
Passiontree had their costs assessed, and obtained certificates of determination in the sum of approximately $25,000. These certificates were lodged with the Local Court, and judgment was entered for that sum. Passiontree then served a statutory demand on Verimark for the judgment debt.
The statutory demand was served on Verimark on 1:30pm on 21 February 2019. At 4:00pm on 14 March 2019, Verimark filed an application with the Supreme Court of NSW to set the statutory demand aside.
Passiontree argued that the Court did not have jurisdiction to hear the application, as it was not served in time.
The issue in dispute
Pursuant to section 459G of the Corporations Act 2001 (Cth), an application to set aside a statutory demand “may only be made within 21 days after the demand is so served”. Section 105 of the Act also reads:
Without limiting subsection 36(1) of the Acts Interpretation Act 1901, in calculating how many days a particular day, act or event is before or after another day, act or event, the first-mentioned day, or the day of the first-mentioned act or event, is to be counted but not the other day, or the day of the other act or event.
Passiontree submitted that the reference to the first-mentioned day in section 105 is a reference to the date of service of the statutory demand (being 21 February 2019) and accordingly it is to be counted in the 21 day period set out in section 459G.
If Passiontree was right about this construction, the deadline to file an application to set aside the statutory demand expired on 13 March 2019 and accordingly the Court did not have jurisdiction to hear Verimark’s application to set aside the statutory demand.
Verimark submitted that the correct interpretation of section 459G is that the 21 days started counting from the first day after service, being 22 February 2019. On this construction, their time to file the application expired on 14 March 2019 and accordingly they filed within time.
The Court’s lap around the Interpretation Acts
The matter was heard by Ward CJ in Equity. Her Honour considered section 36 of the Acts Interpretation Act 1901 (Cth), which provides that if a period of time is expressed to begin after a specified day, then the period of time does not include that day. Her Honour also noted section 36(1) of the Interpretation Act 1987 (NSW), which states that “if in any Act or instrument a period of time, dating from a given day, act or event is prescribed for any purpose, the time shall be reckoned exclusive of that day or of the day of that act or event”.
This supports Verimark’s construction of section 459G. Her Honour also applied the case of Autumn Solar Installations Pty Ltd v Solar Magic Australia Pty Ltd [2010] NSWSC 463. In that case, Barrett J similarly found that where a section is phrased in terms of 21 days “after” a specific day, then one is to leave out of account the specified day itself.
Accordingly, her Honour held that Verimark’s submission that the days were to be calculated from the day after the service of the statutory demand was correct.
But what of section 105? Her Honour found that the Commonwealth and NSW Interpretation Acts can be read consistently with section 105 of the Corporations Act. This is because the particular event referred to in section 105 is the making of the application to set aside the statutory demand. Therefore, the “first mentioned event” (being the service of the application) is to be counted, but not the other event (being the service of the statutory demand).
In finding that the Court had jurisdiction to hear the application, her Honour went on to find that the statutory demand ought to be set aside as there was a genuine dispute as to whether it is payable, and that there is a genuine off-setting claim based on the damages claimed in the Burwood Local Court Proceedings.
Take home lessons
Statutory demands are an area of law where the courts take a strict approach with respect to procedural requirements, such as the deadlines for filing applications to set them aside. Procedural defects can lead to the parties incurring significant costs in trying to rectify the error, or may simply lead to their rights being prejudiced. Therefore, it is essential that the statutory time periods are followed strictly.
In this case, the passage of a single day was all that was required to trigger a dispute to the Supreme Court of New South Wales as to the jurisdiction for the application to set aside the statutory demand. The law is now absolutely clear that, in calculating the passage of time, it is the day after service of the statutory demand from which the 21 days are to be calculated.
Lawyers and insolvency practitioners alike should commit this rule to the forefront of their minds when they are diarising dates after the service of a statutory demand. These strict rules also emphasise the importance of ensuring that a statutory demand (and an application to set it aside) are served on the other party in such a manner that the exact time of service are precisely ascertainable so that there can be no dispute as to when the documents are served.
McCabe Curwood has experience in acting for insolvency practitioners and creditors in insolvency disputes, including prosecuting and defending applications to have them set aside.
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It is well known that a company served with a statutory demand has 21 days to comply. If the recipient fails to pay the amount of the demand (or obtain a court order extending the period for compliance) within the period of 21 days after the demand is served, the creditor may rely on the failure as a basis to apply for the company to be wound up in insolvency. But what if the company pays, or seeks to pay, the amount of the statutory demand after the 21 day period has expired? Can the creditor still apply to have the company wound up in insolvency, and if so, what are the prospects of the Court making such an order?
 
The above issues have been considered in two 2019 decisions of the Supreme Court of Victoria.
In the matter of HGC Properties Pty Ltd [2019] VSC 202 (25 March 2019)
An Owners Corporation obtained judgment against HGC Properties Pty Ltd (“the Company”) for a total $240,638.02 in respect of unpaid fees and levies. In the meantime another party had filed an application to wind up the Company in insolvency. At the first return of the matter, the plaintiff was given leave to withdraw from the proceeding on the basis it had been paid its underlying debt. The Owners Corporation then filed an interlocutory process to be substituted as applicant for the Company to be wound up.
At the next return of the matter, the Company’s counsel produced a bank cheque and sought to tender it as payment of the entire amount of the judgment debt. Payment was refused by the Owners Corporation. However, the Court ordered that the bank cheque be paid into Court pending the resolution of the proceeding. In addition, the defendant made payments to the Owners Corporation in respect of interest on the judgment debt.
One of the questions for the Court was whether in all the circumstances the Owners Corporation should be prevented from being substituted as plaintiff, in the exercise of the Court’s discretion.
The Court observed as follows at [24]: “The object of a tender is not to end all controversy between the parties but to “throw the risk of further controversy upon the other party”.  So long as a defendant is able to show that he or she was willing to unconditionally pay the entirety of an amount falling due, then tender will be effective”. Other relevant principles referred to by the Court included that:

a valid tender and payment into Court does not eliminate the debt itself, that is, the creditor’s status is preserved;
a tender may be valid even if proffered “without admissions” or “under protest”, provided only it is unconditional; and
the creditor’s reasons for refusal of payment, and specifically whether the creditor has acted unreasonably in refusing payment, is a matter relevant to the exercise of the court’s discretion.

Ultimately the Court concluded that even assuming the Owners Corporation had not acted unreasonably in refusing to accept the tender, as a matter of discretion and having regard to all of the surrounding circumstances, it should not be substituted as applicant for the Company to be wound up. In reaching this decision the Court accorded great weight to the Company’s actual payment into Court.
In the matter of Vitamin Co Pty Ltd [2019] VSC 540 (23 August 2019)
In this more recent case, the statutory demand issued by the plaintiff claimed the “relatively trivial” amount of $2,372.36 (being only slightly higher than the prescribed statutory minimum). The solicitors for the defendant wrote to the plaintiff’s solicitors confirming that they held an amount referable to the statutory demand in their trust account.  They also stated that they were instructed to pay that amount to the plaintiff in satisfaction of the debt on the basis that: (a) the debt remained disputed; and (b) “[t]he payment is made under protest and will be the subject of recovery proceedings for damages in due course”.
The plaintiff declined to accept payment because of a concern that the defendant was insolvent. The defendant sought and was given leave to pay the relevant funds into Court.  It then did so. The Company opposed the winding up application on various grounds including that it had sought to pay the debt.
In these circumstances the Court held that the tender was unconditional (whilst the solicitor’s reference to the payment being the subject of separate proceedings for damages was “inelegantly worded”, the Court accepted that it “simply evinced an attempt to reserve the defendant’s rights”). Further, the potential for the payment to constitute a voidable transaction was not a sufficient basis to refuse the tender. The Court held at [71]:
“I am satisfied that the defendant has demonstrated valid tender in respect of the amount of the statutory demand. That amount has been paid into Court and the defendant remains willing to discharge the debt. These are matters which strongly weigh in favour of the Court exercising its discretion to refuse to make a winding up order”.
The Court ultimately declined to make a winding up order against the defendant notwithstanding that it had tried, but failed to displace the statutory presumption of insolvency.
Points to take away
If a company fails to comply with a statutory demand within the 21 day period (thus giving rise to a presumption of insolvency) all is not lost, particularly if the company subsequently becomes able to pay the amount of the demand.
The company should attempt in the first instance to unconditionally tender the debt to the creditor which issued the demand.
If the creditor refuses to accept the tender, and subsequently applies to have the company wound up in insolvency, the company should seek leave to pay the relevant funds into Court then (assuming leave is granted) do so. It should also thereafter manifest a continued readiness and willingness to pay the same to the creditor, together with interest.
A valid tender and payment into Court will be a matter relevant to the exercise of the Court’s discretion to substitute the applicant for a company to be wound up, and to make a winding up order.
McCabe Curwood has extensive knowledge and experience when it comes to bankruptcy and insolvency matters. Do not hesitate to contact us if you require any assistance in these areas.
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