Michales v CharterLaw Legal Pty Limited [2026] FCA 209

This case started as a dispute about unpaid legal fees and ended as a challenge to a bankruptcy notice. CharterLaw Legal Pty Ltd, called CLL in the judgment, had acted for Paul Michales in legal proceedings connected with a tax agency business. CLL worked for him from February 2020 to April 2023. During that period, Mr Michales paid more than $262,000 in fees, but an unpaid balance remained when CLL stopped acting.

That unpaid balance did not stay as a simple invoice dispute. It went through the New South Wales costs assessment and review process between April 2024 and June 2025. Mr Michales took part in that process. The review panel affirmed the costs assessor's determination on 3 June 2025 and certified the review costs on the same day. Those certificates were then turned into two Local Court judgments, one for $99,449.58 and another for $8,204.95.

The timeline matters because CLL had ceased engaging in legal practice on 30 June 2024, before the costs review process finished and before the bankruptcy notice was issued. A different company, CharterLaw Pty Ltd, commenced legal practice in New South Wales on 1 July 2024 and later acted as solicitor for CLL in the Federal Court. Mr Michales argued that this change meant CLL could no longer recover the fees, enforce the judgments or even properly instruct lawyers.

The judgment makes a clear distinction between the two companies. CLL was the company that had originally provided the legal services to Mr Michales. It later ceased engaging in legal practice on 30 June 2024. CharterLaw Pty Ltd was a separate company that commenced legal practice on 1 July 2024 and acted as solicitor for CLL in the Federal Court proceeding.

The Court did not treat those companies as the same legal entity. In fact, one part of the reasoning expressly states that CLL and its solicitors are distinct and separate legal entities. That mattered because Mr Michales alleged that CharterLaw Pty Ltd was a "phoenix" company and could not act for CLL. The Court rejected that allegation, saying there was not a skerrick of evidence to support any illicit purpose and describing the allegation as founded on scandalous and unfounded assertions.

The Court also accepted evidence from Jarryd James Willson, a solicitor employed by CharterLaw Pty Ltd, that he was acting on instructions from the directors of CharterLaw's client, CLL. The Court accepted that CLL remained a registered company with directors who were its controlling mind. On that basis, CLL could engage solicitors, instruct them through its officers, and have them prepare the court book and brief counsel.

The central legal issue was whether the bankruptcy notice should be set aside. The proceeding before the Registrar had been conducted on the basis that Mr Michales was really relying on a claimed counterclaim, set-off or cross-demand under the Bankruptcy Act, even though his application was not neatly expressed in those terms. When the matter came before Perry J for review, the Court had to decide whether any of his arguments gave a proper basis to set the notice aside.

The key argument was built around the Legal Profession Uniform Law (NSW). Mr Michales contended that because CLL had ceased legal practice, it was no longer a qualified entity and therefore could not claim, recover or retain legal costs. He also argued that CLL had lost the capacity to instruct solicitors and participate in the proceeding, and that CharterLaw Pty Ltd could not properly act for it.

The Court also had to deal with several procedural applications. Mr Michales sought to join numerous additional parties, including public bodies and officials. He sought leave to amend his originating application to add declarations, injunctions, restitution, document production orders and damages under the Australian Consumer Law. He also sought review of a Registrar's decision setting aside a notice to produce and refusing subpoena-related relief for insurance documents, practising certificates and employee records.

So the Court was not only deciding the debt enforcement issue. It also had to decide how far this kind of proceeding could be expanded, and whether the documents sought had any real bearing on the narrow bankruptcy question.

The most important reasoning in the case is the distinction between carrying on legal practice and recovering historical debts for legal work already done. The catchwords state the point directly: recovery of unpaid legal fees by a previously qualified entity does not constitute unqualified legal practice. Perry J repeated the same idea in the reasons, saying that CLL did not in any sense engage in legal practice contrary to the Uniform Law by seeking to enforce, after it ceased practising law, debts owing to the company for services provided while it was in legal practice.

That distinction answered much of Mr Michales' case. His argument assumed that once CLL stopped legal practice, it could no longer enforce the fees or participate in the costs process. The Court rejected that premise. It also said no authority had been identified for the proposition that CLL lacked jurisdictional capacity, with the assistance of solicitors, to engage in the costs assessment process or for the costs assessor and review panel to issue costs certificates. The Court referred to the statutory framework under the Legal Profession Uniform Law Application Act 2014 (NSW) and the relevant regulation as the source of that jurisdiction.

The Court's reasoning on the company side was equally practical. CLL remained a registered company. A company acts through its directors and officers. Because it still existed as a corporation, it could engage solicitors and instruct them. The fact that it no longer carried on legal practice did not mean it had ceased to exist or had lost ordinary corporate capacity.

For business readers, this is the key point. A company may stop carrying on the regulated activity that originally generated a debt, but still retain the legal capacity to collect that debt. The Court treated those as different questions.

The Court refused leave to amend the originating application. The proposed amendments went well beyond an application to set aside a bankruptcy notice. They sought to join additional parties who were not judgment creditors, asked the Court to determine matters outside the issues required for this kind of application, and sought relief such as damages and restitution that the Court said it had no power to grant in a proceeding of this kind. Perry J described significant parts of the proposed amended application as misconceived and liable to be struck out.

The Court also emphasised the overarching purpose in the Federal Court of Australia Act, namely the just, quick, inexpensive and efficient resolution of disputes. In bankruptcy notice matters, that concern is sharpened by the short statutory period for compliance. The judgment cites authority saying that attempts to enlarge the grounds of challenge after the statutory period should be closely scrutinised and not lightly countenanced. The Court said that provided a further reason to refuse the amendment application.

The notice to produce and subpoena requests failed because of relevance. Mr Michales wanted LawCover certificates of currency and invoices, practising certificates and invoices, and employment and payroll records. He said these documents would help establish whether CLL held insurance and whether its employees held practising certificates. The Court accepted that lack of apparent relevance is a ground for setting aside a notice to produce and held that the onus was on Mr Michales to show relevance.

Perry J concluded that the documents sought had no apparent relevance to the issues in the proceeding. Even if there were separate questions about insurance or practising certificates, those matters did not confer on Mr Michales any right to a counterclaim, set-off or cross-demand against CLL in this bankruptcy notice challenge. The Court also reasoned that CLL's insurance status and the practising certificate status of its employees could not affect whether CLL satisfied the definition of an incorporated legal practice at the relevant times. On the evidence before the Court, CLL was a registered corporation and had been registered as an incorporated legal practice for the period 1 September 2015 to 30 June 2024.

Perry J dismissed every substantive application brought by Mr Michales in the Federal Court proceeding. The Court dismissed the application to join additional parties, the application to amend the originating application, the application to review the Registrar's decision about the notice to produce and subpoenas, and the application to set aside the bankruptcy notice itself. The Court also left open the possibility of indemnity costs, setting a timetable for further submissions if the respondent wished to pursue that issue. If no such submissions were filed, the applicant was ordered to pay the respondent's costs of the applications on a party-party basis, including the costs of hearings before the registrars.

For businesses owed money, the case is useful because it confirms a practical point. If the creditor company still exists and the debt has already been established through the proper process, a later change in operations does not necessarily stop enforcement. The Court was prepared to separate the old receivable from the fact that the company had ceased legal practice.

For businesses or individuals on the receiving end of a bankruptcy notice, the case is a warning against diffuse litigation strategy. The Court looked for a real legal answer to the notice. It did not allow the proceeding to become a vehicle for every complaint about the creditor, its lawyers, regulators or unrelated third parties. If there is a genuine counterclaim, set-off or cross-demand, it needs to be identified clearly and supported with relevant evidence. If there is not, broad allegations and document fishing may simply increase cost exposure.

More generally, the case highlights the value of entity hygiene. If one company stops operating and another takes over active work, keep records showing which company owns the receivables, which company is instructing solicitors, and what judgments or certificates support the debt. Those basic corporate and evidentiary points can become central in enforcement litigation.