68 Bathurst Street Pty Ltd v NV Legal Pty Ltd

[2010] NSWSC 292

CITATION:	68 Bathurst Street Pty Ltd & Ors v NV Legal Pty Ltd & Ors [2010] NSWSC 292
HEARING DATE(S):	25 March 2010
JUDGMENT DATE :	25 March 2010
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Palmer J
EX TEMPORE JUDGMENT DATE:	25 March 2010
DECISION:	Declaration that Plaintiffs not liable to pay solicitors’ costs.
CATCHWORDS:	CORPORATIONS – PROVISIONAL LIQUIDATION – COSTS – whether costs agreement between provisional liquidator and solicitors subject to oral conditions – whether conditions unfulfilled – whether solicitors’ costs payable by anyone.
CATEGORY:	Principal judgment
PARTIES:	68 Bathurst Street Pty Ltd (First Plaintiff) 70 Bathurst Street Pty Ltd (Second Plaintiff) 72-74 Bathurst Pty Ltd (Third Plaintiff) Blue Mountains Helicopters Pty Ltd (Fourth Plaintiff) Chobe Pty Ltd (Fifth Plaintiff) McInnes Perpetual Pty Ltd (Sixth Plaintiff) Volwave Pty Ltd (Seventh Plaintiff) Australian Barter Currency Exchange Pty Ltd (Eighth Plaintiff) NV Legal Pty Ltd (First Defendant) Robert Boyce Moodie (Second Defendant) Rodgers Reidy (NSW) Pty Ltd (Third Defendant) Gino Robert Cassaniti (Fourth Defendant)
FILE NUMBER(S):	SC 2009/290976
COUNSEL:	D.A. Allen (Plaintiffs) J.T. Johnson (First Defendant) F.G. Lever SC (Second and Third Defendants)
SOLICITORS:	Proctor & Associates (Plaintiff) NV Lawyers (First Defendant) Wyndham Prem Commercial Lawyers (Second and Third Defendants)

2009/290976 68 Bathurst Street Pty Ltd & Ors V NV Legal Pty Ltd & Ors

JUDGMENT - Ex tempore

25 March , 2010

Introduction

1 This a dispute as to who, if anyone, is liable for legal fees incurred by a provisional liquidator in the course of his administration.

2 The Second Defendant, Mr Moodie, was appointed provisional liquidator of the First to Seventh Plaintiffs. He retained the services of the First Defendant, NV Legal Pty Ltd an incorporated legal practice (“NV”), to act for him in the provisional liquidations.

3 The provisional liquidations of the First to Seventh Plaintiffs were subsequently terminated. NV's costs have not been paid. NV says that the First to Seventh Plaintiffs are liable to pay these costs because Mr Moodie, while provisional liquidator, was acting as their agent in entering into a costs agreement. The Plaintiffs have commenced these proceedings seeking a declaration that they are not liable. Alternatively, they say that if anyone is liable, it is Mr Moodie himself, as principal.

4 Mr Moodie says that the costs agreement he made with NV was subject to two conditions: first, that no costs would be payable unless and until he was appointed liquidator of the First to Seventh Plaintiffs and, second, that he subsequently recovered sufficient assets in the liquidations to pay NV's costs. Mr Moodie says that neither condition has been fulfilled so that NV is not entitled to costs from anyone.

5 NV denies that the costs agreement was subject to the alleged conditions. Alternatively, it says that if there was any condition at all to the costs agreement, it was to the effect that the costs would be payable if Mr Moodie, as provisional liquidator, received funds in the provisional liquidations. NV says that that condition has been fulfilled, so that it is entitled to payment by the Plaintiffs in accordance with the costs agreement.

6 There are only three factual issues for determination:

– was the costs agreement subject to conditions orally agreed between Mr Moodie and Mr Streeter on behalf of NV to the effect that payment of NV's costs would be conditional upon Mr Moodie being appointed official liquidator of the First to Seventh Plaintiffs and recovering assets in those liquidations sufficient to pay NV's costs?

– if there was some other condition agreed, what was its terms?

– if the costs agreement is subject to any condition, has that condition now been fulfilled?

Mr Moodie’s evidence

7 Mr Streeter, a solicitor, was a director of NV. Mr Moodie has given evidence that, in the course of his practice as a liquidator, he frequently retained Mr Streeter as his solicitor on the basis that, if there were no assets in the particular liquidation on Mr Moodie's appointment, but there was some prospect of realising assets by legal proceedings, Mr Streeter would act as his solicitor ‘on spec – that is, on terms that his costs would be payable only if Mr Moodie were able to recover sufficient assets in the liquidation. The practice was, according to Mr Moodie, that if Mr Streeter accepted the retainer ‘on spec’, he would charge at a rate higher than for an unconditional retainer.

8 Mr Moodie was appointed provisional liquidator of the First to Seventh Plaintiffs on 7 July 2008. He says that on 8 July 2008 he had a telephone conversation with Mr Streeter in which he explained that there were presently no assets in the companies from which fees could be paid, but assets might be realised if he were appointed official liquidator and were able to take recovery proceedings. He says that he asked if Mr Streeter would act for him 'on spec' so that NV's fees would be conditional upon his appointment as official liquidator of the companies and upon the recovery of the assets thereafter sufficient to pay NV's fees. He says that Mr Streeter agreed as to NV's own costs being conditional, provided that Mr Moodie would have to be directly responsible for the payment of counsel's fees. Mr Moodie says that he agreed to that stipulation.

9 Mr Streeter sent to Mr Moodie a costs disclosure agreement on 8 July 2008. It contained no reference at all to the conditions said to have been agreed orally. However, the rate of charges set out was, according to Mr Moodie, the higher ‘speculative’ rate. Mr Moodie says that when he received the costs agreement he immediately rang Mr Streeter to confirm that the agreement was, in fact, subject to the oral conditions which they had discussed only a short time earlier. He says that Mr Streeter gave that confirmation. Mr Moodie then gave instructions to Mr Streeter to act in the provisional liquidations of the First to Seventh Plaintiffs.

10 In August 2008 Mr Streeter sent to Mr Moodie an updated costs estimate. It contained no reference to the costs agreement being subject to any conditions. Nevertheless, Mr Moodie says that he assumed that that updated costs agreement was subject to the same conditions as he had agreed orally with Mr Streeter.

11 Mr Streeter left NV at the end of September 2008. The departure was not harmonious. There is no dispute that the provisional liquidations of the First to Seventh Plaintiffs were terminated in early 2009, so that Mr Moodie was never appointed as their official liquidator and never received proceeds of realisation of any of their assets in the course of an official liquidation.

Mr Streeter’s evidence

12 The evidence of Mr Moodie as to his discussions with Mr Streeter has been confirmed in every particular by Mr Streeter himself. Mr Streeter says that his failure to refer expressly in the 8 July 2008 costs agreement to the conditions which he had agreed orally with Mr Moodie was due to inadvertence. He gave the same explanation for his failure for refer to the oral conditions in the updated costs estimate which he sent in August 2008.

Findings

13 Mr J Johnson of Counsel, who appears for NV, submits that I should not accept the evidence of Mr Moodie and Mr Streeter. He relies upon the plain and unequivocal terms of the original costs agreement and of the updated costs estimate. He relies upon the fact that there is no written record in Mr Streeter's files referring to, or corroborating, any of the oral discussions with Mr Moodie that the costs agreement would be conditional. He relies also on the absence of any detailed document in Mr Moodie's files recording the oral conditions for which Mr Moodie contends.

14 Notwithstanding the vigorous cross examination by Mr Johnson of Mr Streeter, I accept Mr Streeter's evidence. It follows that I also accept Mr Moodie’s evidence. Although it is a little hard to accept Mr Streeter's explanation that his failure to record, in the written costs agreement, the conditions orally agreed with Mr Moodie due to inadvertence, the explanation is not entirely improbable and it is supported by a number of contemporaneous documents.

15 The first document is a handwritten file note made by an employee of Mr Moodie at a meeting between Mr Moodie and Mr Streeter on 15 July 2008, very shortly after the costs agreement had been sent to Mr Moodie. A number of matters were discussed at the meeting but the file note relevantly records: “recovery fees - counsel fees – Streeter to specs [sic]”.

16 The authenticity of the file note has not been questioned. I interpret the item referring to Mr Streeter as confirming that he had agreed to act for Mr Moodie ‘on spec’ in the terms which Mr Moodie recounts, but that counsel's fees were to be treated separately.

17 The second document is an e-mail dated 22 September 2008 from Mr Streeter to one of his co-directors in NV, Mr David Fleming, in which Mr Streeter refers to a number of matters related to his imminent departure from NV, one of them being the state of the file in the provisional liquidations of the First to Seventh Plaintiffs being conducted by Mr Moodie.

18 Mr Streeter says, in reference to his bills for those matters: “I note that the payment for these bills is dependent on the liquidator selling property in order to be in funds to pay the account”. I take this to be a shorthand reference to the conditions which he says were orally agreed with Mr Moodie on 8 July 2008.

19 The evidence of Mr Moodie and Mr Streeter is supported by the commercial probabilities. A provisional liquidator is not usually given power to realise assets and to distribute proceeds. Further, the position of a provisional liquidator is interim only. The company may not ultimately be placed in liquidation. It is therefore inherently unlikely that Mr Moodie would be willing to expose himself or his firm to unconditional liability for NV's costs when he was not yet the official liquidator of the First to Seventh Plaintiffs and there were no assets in those companies then available for payment of NV's fees.

20 Further, I take into account that there is no evidence to refute the assertions of both Mr Streeter and Mr Moodie that the fees set out in the costs agreement sent on 8 July 2008 are in accordance with the higher speculative rate and not in accordance with the lower non-speculative rate.

21 I accept Mr Moodie's evidence that the absence in his files of any diary note or detailed record of the oral discussions which he had with Mr Streeter is due to his long-standing professional relationship with Mr Streeter and his belief that he could take Mr Streeter at his word.

22 For these reasons, I accept that the costs agreement between Mr Moodie and NV evidenced by the document dated 8 July 2008 was subject to two conditions orally agreed between Mr Moodie and Mr Streeter on behalf of NV prior to acceptance of the agreement by Mr Moodie. Those conditions were that the costs would not be payable unless Mr Moodie was appointed official liquidator of the First to Seventh Plaintiffs and, as such, was able to realise assets of the companies sufficient to pay NV's fees. As I have noted, there is no dispute that neither of those conditions has been fulfilled.

23 It follows that Mr Moodie is not liable to NV under the costs agreement and that the First to Seventh Plaintiffs could not be liable under the costs agreement as Mr Moodie's principals. The declaration sought by the First to Seventh Plaintiffs in paragraph 2 of the Summons should be made.

Orders
24 The orders of the Court are as follows:

i) Declaration in terms of paragraph 2 of the Summons.

ii) Order that the First Defendant pay the costs of the First to Seventh Plaintiffs in the proceedings.

iii) Order that the First Defendant pay the costs of the Second and Third Defendants on the party/party basis up to 12pm on 23 March 2010 and thereafter on the indemnity basis.

iv) The costs of the Fourth Defendant of the proceedings are reserved.

v) The balance of the Summons is dismissed.

vi) I direct solicitors for the Plaintiffs to provide a copy of this judgment to the Fourth Defendant within seven days. If the Fourth Defendant wishes to make any submissions as to costs he should notify the other parties within seven days after receipt. If no notification is received, then the order of the Court will be that there is no order as to the Fourth Defendant's costs. If he wishes to contest the matter, he should notify the parties that he intends to do so and it will be brought back for directions.

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