Abbott Stillman and Wilson v Smith - [2006] FMCA 1519

FEDERAL MAGISTRATES COURT OF AUSTRALIA

ABBOTT STILLMAN & WILSON v SMITH

[2006] FMCA 1519

BANKRUPTCY – Creditor disputed bankruptcy – sequestration order made.

Applicant:

ABBOTT STILLMAN AND WILSON

Respondent:

TREVOR SMITH

File Number:

MLG 898 of 2006

Judgment of:

Burchardt FM

Hearing date:

25 September 2006

Date of Last Submission:

25 September 2006

Delivered at:

Melbourne

Delivered on:

25 September 2006

REPRESENTATION

Counsel for the Applicant:

Mr J. Dunne

Solicitors for the Applicant:

Dibbs Abbott Stillman

The Respondent:

In person

ORDERS

Leave be granted to amend the date of commission of the act of bankruptcy in paragraph 1 of the petition so that the date reads 26 June 2006.
Reverification and reservice be dispensed with.
A Sequestration Order be made against the estate of Mr Trevor Smith.
The Applicant Creditor’s costs, including any reserved costs, be taxed in accordance with the Federal Court Rules and paid from the estate of the Respondent Debtor in accordance with the Bankruptcy Act 1966.

The Court notes that the date of the act of bankruptcy is 26 June 2006.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLG 898 of 2006

ABBOTT STILLMAN AND WILSON

Applicant

And

TREVOR SMITH

Respondent

REASONS FOR JUDGMENT

I have before me an application for a sequestration order made by Abbott Stillman and Wilson, a firm of solicitors in Melbourne. It is not necessary to refer to the various procedural issues that have brought the matter before the Court because there is in substance no challenge to the validity of the petition, service and the like, although I have granted leave for a minor error as to the date of the commission of the act of bankruptcy to be amended.
The history by way of background that has brought this matter here is not a satisfactory one in many ways. Mr Smith at my request has told me in full detail the history from his perspective. He used to have a successful business which had two arms, one of which was a business involving 45 school canteens around Australia and the other of which he described as the commercial arm. The commercial arm lost its contracts and so he looked for a buyer for the canteen business.
At that stage he received two offers, but had unfortunately in the interim sold his assets, realised his superannuation and generally dispossessed himself of all his realisable assets to put funds into the business. He has told me that he met two of the directors of Abbott Stillman and Wilson to whom he made it clear he had no money and that he would therefore not sign a fees or costs agreement or retainer in respect of the matter that Abbott Stillman were apparently initially engaged to undertake, namely to sell the canteen business.
At that time it would appear Mr Smith had a buyer of considerable financial means who seemed ready, willing and able to purchase the business, or at the very least it seemed like a fair prospect to enter into a contract to buy it. Ultimately that did not happen and Court proceedings were issued against Logan Corp, an entity associated with a venture capitalist who had been engaged in relation, as I understand it, to the proposed sale of the business. Everything had not worked out.
It would appear that separate instructions were given to Abbott Stillman and Wilson to prosecute Logan Corp in a proceeding in the Supreme Court of Victoria and that led to a decision successful not to Mr Wilson but his company on 10 December 2003. It would appear that the usual order for costs was made in the successful plaintiff's favour. It seems clear - and this is not in any way a criticism - that Mr Smith through a lack of familiarity with the way in which the law works was not aware until today when I told him that even had that successful cost order been enforced as against Logan Corp, there would still have been a solicitor-client component that he would have had to pay himself.
The march of events proceeded and Abbott Stillman and Wilson issued proceedings in the Magistrates Court of Victoria (“the Magistrates Court”) for unpaid fees, which I believe were of the order of $21,000.00. Mr Wilson engaged a solicitor to act for him in that matter. His defence would have been essentially that there was no costs agreement for “the main game” (as Mr Wilson described it), in other words, the endeavour to try and sell the business, and the retainer on the side matter, as he described it, namely Logan Corp, was not with him but with his company.
He said that letters which showed that Abbott Stillman and Wilson were acting for the company were known to him in the sense that he had received them and/or seen copies of them. He said that a fair amount of material, indeed quite a substantial amount of material, deposed to in the relevant affidavit of discovery by Abbott Stillman and Wilson showed that everything related to that firm acting only on behalf of the company and not Mr Smith personally.
Unfortunately for him, however, Mr Smith agreed to terms of settlement offered by Abbott Stillman and Wilson in the Magistrates Court proceeding.
Relevantly, this required Mr Smith to pay the sum of $12,000.00 over time of which he actually paid $3,000.00 to $4,000.00. He was then unable to continue payments because his finances did not enable him to do so. Mr Smith told me that this was done on the basis of legal advice and also because what he described as on his part a fear of going to court or the court process. From the discussion I had with Mr Smith today it seems quite clear that he made the decision to enter into the terms of settlement voluntarily in the sense that it was not coerced, as coercion is known to the law, nor was he otherwise overborne as to his will at the time.
Accordingly and noting in fact that the retainer which the Logan proceeding involved has Mr Smith's name under the heading for "Client" as well as the company, there would have been a very significant forensic difficulty to be overcome. Furthermore, although Mr Smith complained vigorously about the failure of Abbott Stillman & Wilson to provide him with the documentation on their letterhead to which I have earlier referred, such documentation might well not have been thought to have been inconsistent with the terms of the retainer. Most unfortunately the history of the proceeding before the Magistrates Court is attended by what would seem to be a very unsatisfactory procedural sequence.
Mr Smith gave his new address to the Court which it failed to notice, it would appear, on at least two occasions. All in all, he was never really given, on his version of events, any fair opportunity to articulate the matters of which he wished to make complaint. In essence, those were the fact that he asserts the retainer to Abbott Stillman and Wilson was with the company and not with him personally, and secondly, the fact that documentation was improperly suppressed.
As things presently stand, Mr Smith has last Friday or late last week initiated a process of seeking leave to appeal to the Supreme Court of Victoria out of time. I would wish to emphasise that anybody who has the misfortune to find judgments entered into in circumstances where they have not attended because of what would appear to be at first blush error by the court itself is going to have a justifiable feeling of concern and anger. But the difficulty that, in my view, cannot be overborne is that Mr Smith did enter into the terms of settlement. He did so wittingly and on legal advice. Although he did not have then in his possession the letters which subsequently it appears became available, he was in a position to - and one might infer did - seek advice as to where he stood with such matters, bearing in mind that he knew the letters existed.
There is nothing in the materials that suggest that the settlement was not bona fide and the judgments that sprang from it, albeit that they arrived in a procedurally most unfortunate way, cannot really be impugned, in my opinion. However inappropriate the procedure, the basis for judgment in the Magistrates Court, namely the failure to pay the terms agreed to be paid in the terms of settlement, is sound even on Mr Smith's own account. So it is for that reason that I make the order that I have made.

I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of Burchardt FM

Associate: Brooke Evans

Date: 25 September 2006