Ausurv Operations Pty Ltd v Swanston Joe Pty Ltd (Costs)
[2017] VSC 389
•30 June 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2017 00800
IN THE MATTER of AUSURV OPERATIONS PTY LTD (ACN 600 403 012)
| AUSURV OPERATIONS PTY LTD (ACN 600 403 012) | Plaintiff |
| v | |
| SWANSTON JOE PTY LTD (ACN 159 576 468) | Defendant |
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JUDGE: | GARDINER AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 31 May 2017 |
DATE OF JUDGMENT: | 30 June 2017 |
CASE MAY BE CITED AS: | Ausurv Operations Pty Ltd v Swanston Joe Pty Ltd (Costs) |
MEDIUM NEUTRAL CITATION: | [2017] VSC 389 |
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CORPORATIONS – Application to set aside statutory demand served by solicitor on former client who had requested bill in itemised form under s 187 of the Legal Profession Uniform Law – Demand set aside pursuant to s 459 of Corporations Act (2001) (Cth) – Jarena v Sholl Nicholson (1996) 136 ALR 427, Callite v Adams [2001] NSWSC 52 applied– Order for costs sought by plaintiff on a special basis – Circumstances warranted order being made that defendant pay costs on an indemnity basis.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr H R Hassan | McKean Park |
| For the Defendant | Mr R M Watson-Jones (Solicitor) | Snowton Saje |
HIS HONOUR:
By an originating process filed 7 March 2017, the plaintiff Ausurv Operations Pty Ltd (‘Ausurv’), made application to set aside a statutory demand dated 14 February 2017 served on it by the defendant, Swanston Joe Pty Ltd (‘Swanston Joe’).
At the hearing of the proceeding on 31 May 2017 I delivered ex tempore reasons and made orders that the statutory demand dated 14 February 2017 be set aside under s 459J of the Corporations Act 2001 (Cth) (‘the Act’).
At the conclusion of the delivery of my reasons, counsel for Ausurv, Mr Hassan, sought an order that Swanston Joe pay its costs of the proceeding on an indemnity basis and made short oral submissions in support of that application. The solicitor appearing on behalf of Swanston Joe, Mr Watson-Jones, indicated that he wanted to take the opportunity to file short written submission on the question of why costs should not be awarded on a special basis. He did so on 8 June 2017. He also filed an affidavit sworn by him on 8 June 2017.
Swanston Joe are Ausurv’s former solicitors and performed legal services for Ausurv and related entities in 2015-2016. Mr Watson-Jones was the solicitor who performed the legal work and in that regard he dealt with the former financial controller of the Ausurv Group, Mr Peter Giljohann.
In early February 2017, Ausurv terminated the services of Mr Giljohann. On 3 February 2017, Mr Watson-Jones emailed the director of Ausurv, Michael Milford, stating that he would be immediately ceasing to act for Ausurv because of a conflict of interest which he contended arose because he also acted for Mr Giljohann. Shortly afterwards, on 6 February 2017, Ausurv received a tax invoice for $8,520.40 from Swanston Joe.
There ensued email correspondence between the parties between 6 February 2017 and 13 February 2017 involving several people including Mr Watson-Jones, Mr Milford, representatives of Ausurv (including an external financial consultant engaged by Ausurv, Mr Andrew Darbyshire) and Mr Burt who is Ausurv’s solicitor.
In the period 6 February 2017 to 13 February 2017, the following email exchange took place between Mr Darbyshire and Mr Watson-Jones:
(a)At 9.39pm on 6 February 2017, Mr Darbyshire requested a “proper itemised bill in taxable form”
(b)At 11.16pm on 6 February 2017, Mr Watson-Jones responded:
“My invoice is not what would be characterised as a lump sum bill. It satisfies the definition of “itemised.” In the current form of invoice you have what you need/what I am statutorily required to give.”
(c)At 3.33pm on 13 February 2017, Mr Darbyshire requested Mr Watson-Jones to “re-submit the bill rendered for the further review and assessment if deemed appropriate by the company”
(d)At 4.39pm on 13 February 2017, Mr Darbyshire emailed Mr Watson-Jones saying:
“Based on further advice, in case my meaning was not plain or in any way ambiguous, and for the avoidance of doubt, the Company (Ausurv Surveyors Pty Ltd) requests an itemised account pursuant to s.187 of the Legal Profession Uniform Law”
(e)Mr Watson-Jones immediately responded (also at 4.39pm) on 13 February 2017:
“The Company is entitled to request itemisation but the request in my view is disingenuous. The bill will be assessed at much more than what it is charged, the company will spend more time and money and it is therefore obvious that there is no desire to pay. That you sought advice on this issue is indicative of the lengths and costs you will go to Andrew.”[1]
[1]Affidavit of Michael John Milford sworn 7 March 2017, 9
The following day, on 14 February 2017, Ausurv was served with the statutory demand and affidavit in support. The schedule to the demand described the debt as “ Unpaid tax invoice no. 785 dated 6 February 2017 issued by the creditor to the company for services rendered.” In the affidavit accompanying the demand, Mr Watson–Jones swore as to his belief that there was no genuine dispute about the existence or the amount of the debt.
On 16 February 2017, the solicitors for Ausurv wrote to Mr Watson-Jones stating:
We are instructed that on 13 February 2017, AOPL requested you provide an itemised account pursuant to s187 of the Legal Profession Uniform Law (LPUL). By issuing the statutory demand, you appear to have ignored or rejected that request.
Section 194(2) of LPUL provides that a law practice must not commence legal proceedings to recover legal costs until at least 30 days after the client receives an itemised bill following a request made in accordance with s187.
While a statutory demand may or may not constitute legal proceedings for the purposes of s194, courts have consistently held that as a matter of public policy, statutory demands should not be used by legal practitioners as a method to recover costs: see for example Callite Pty Ltd v Adams [2001] NSWSC 52 and Jarena Pty Ltd v Sholl Nicholson Pty (1996) 136 ALR 427. Such demands will be set aside under s459J(1)(b) Corporations Act as against public policy.
We are concerned that you are apparently unaware of this.
AOPL now requests the following:
1.that you provide evidence of your entitlement to be paid by AOPL for legal services, including:
(a)any written costs agreement;
(b)any disclosure statement under LPUL s174 (or predecessor legislation);
2.that you provide an itemised account (for the avoidance of doubt, this request is made pursuant to LPUL s187); and
3.that you withdraw your statutory demand dated 14 February 2017.
If the statutory demand is not withdrawn by 4pm on Tuesday 21 February 2017, AOPL will apply to the Supreme Court of Victoria for orders setting aside the statutory demand without further notice. If the application is successful, AOPL will seek costs against you on an indemnity basis, in view of the above matters.
On 24 February 2017, Mr Watson-Jones responded to Mr Burt stating, amongst other things that:
(a) the plaintiff did not request an itemised account on 13 February 2017;
(b)the requested documents are in possession of Ausurv and will not be provided; and
(c) the request for an itemised account has been satisfied.
Mr Watson –Jones requested Mr Burt to “articulate the basis (if any) upon which the demand should be withdrawn”. He concluded “ I feel duty bound to alert your client to the risk to its ability to assert [legal professional privilege] over confidential communications if proceedings are commenced against the creditor”.
Ausurv submits that on and from 22 February 2017, when Ausurv lodged a complaint with the Legal Services Commissioner, Swanston Joe was aware of the mechanism available to the parties to resolve any dispute in respect of the costs they claimed. Instead its response was to dispute the jurisdiction of the Legal Services Commissioner to determine the matter.
I regard the conduct of Mr Watson-Jones and Swanston Joe in these circumstances as quite highhanded and that it was completely inappropriate for Mr Watson-Jones, the former solicitor for Ausurv, to have served and maintained the statutory demand. The proper course would have been to provide a bill in itemised form and the other documentation sought by Ausurv. Ausurv was entitled under the Legal Profession Uniform Law to request a bill in itemised form as it did on 13 February 2017. Swanston Joe responded by serving the statutory demand the very next day. Ausurv was then required to make application to set aside the demand to protect its position, with all the attendant legal costs.
The statutory demand could not be ignored by Ausurv and required it to expend considerable financial resources in legal costs to make application to set the demand aside, probably of an order of twice the debt claimed in the statutory demand. Those costs were necessary to be incurred to prevent a presumption of insolvency coming into existence by operation of s 459C of the Act.
In my view, the demand, which was for only $8,520.40, should never have been served by Swanston Joe and an order for indemnity costs in favour of Ausurv is warranted in this instance. The letter from Ausurv’s solicitors of 16 February 2017 informed Swanston Joe in clear terms of the relevant case law relating to service of statutory demands in this context and the provisions of the Legal Profession Uniform Law as to the right to be provided with a bill in itemised form. Ausurv’s solicitors invited Swanston Joe to withdraw the demand and indicated that indemnity costs would be sought in the event that an application to set aside the demand was successful.
I will order that Swanston Joe pay Ausurv’s costs of the proceeding including reserved costs on an indemnity basis.
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