Heilongjiang Feng Ao Agricultural and Animal Husbandry Group Co Pty Ltd v Vicstock Grain Pty Ltd (in Liq) - [2020] WASC 422

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   HEILONGJIANG FENG AO AGRICULTURAL & ANIMAL HUSBANDRY GROUP CO PTY LTD -v- VICSTOCK GRAIN PTY LTD (IN LIQ) [2020] WASC 422
CORAM:   KENNETH MARTIN J
HEARD:   22 OCTOBER 2020 & ON THE PAPERS
DELIVERED          :   23 NOVEMBER 2020
FILE NO/S:   CIV 3094 of 2019
BETWEEN:   HEILONGJIANG FENG AO AGRICULTURAL & ANIMAL HUSBANDRY GROUP CO PTY LTD
Plaintiff
AND
VICSTOCK GRAIN PTY LTD (IN LIQ)
First Defendant
VSG FARMING SERVICES PTY LTD (IN LIQ)
Second Defendant
V-ASSETS PTY LTD (IN LIQ)
Third Defendant

Catchwords:

Costs - Orders allowing for payment out of trust fund for legal fees - Application for release of trust funds for legal fees - Whether sufficient detail as to legal work performed - Summary determination

Legislation:

Nil

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiff	:	No appearance
First Defendant	:	No appearance
Second Defendant	:	No appearance
Third Defendant	:	No appearance

Solicitors:

Plaintiff	:	King & Wood Mallesons
First Defendant	:	Minter Ellison
Second Defendant	:	Minter Ellison
Third Defendant	:	Minter Ellison

Case(s) referred to in decision(s):

KENNETH MARTIN J:

The defendants are all corporations in liquidation. That occurred on 5 May 2020. They are also related corporations with a common director, Mr Sim. After 5 May 2020, they have had common liquidators (Messrs Albarran, Lawrence and Shaw of Hall Chadwick). The second and third defendants were added as defendants to the action by my orders of 24 March 2020.
Presently, I am dealing with an application made under the defendants' minute of proposed orders of 19 October 2020 (folio document 72), seeking that:
The sum of $169,628.14 be paid to MinterEllison out of the funds held on trust by Marsh & Maher Richmond Bennison (MMRB).
The application is supported by an affidavit of David Brian Suttner, a senior associate employed by MinterEllison, the lawyers for the defendants, sworn 21 October 2020. It is also supported by a further affidavit of Emily Jane Kathleen Chappelow, another senior associate of MinterEllison, sworn 21 October 2020.
The matter was initially made returnable before me in chambers on 22 October 2020, for directions. At that time I was advised by senior counsel for the plaintiff (HFA) that HFA could not consent to the proposed order seeking payment of MinterEllison's fees out of the funds held by MMRB.
In the end, I made further directions and orders that day, allowing for the parties to file further written materials and as well, for the defendants' application to be determined summarily on the papers.
Consequently, I later received further materials by way of the defendants' written submissions of 26 October 2020, the plaintiff's written submissions of 29 October 2020, the plaintiff's further submissions of 5 November 2020 and the defendants' responsive submissions filed 5 November 2020.

The application

From the defendants' point of view, the application seeking the order for the payment of MinterEllison's accounts for legal fees is a simple one. It is said to follow as a matter of course from out of orders I issued, essentially by consent, back on 7 May 2020 (7 May 2020 Orders) (see folio document 46). That day, at another directions hearing in chambers, there was no controversy over my making of order 2(a)(i)(C) and 2(b) in the following terms:
On and from the date of this order until the day after the determination of which party is entitled to the funds held on trust by MMRB, the second and third defendants (whether by themselves, their officers, servants, agents or others):
(a)will cause all amounts held on trust by MMRB to be preserved and not paid out to any party other than for the purposes of:
(i) any payments which shall fall due and payable to:
...
(C)MinterEllison (insofar as those payments are for work done in relation to these proceedings or Vicstock's negotiations with the Southern Ports Authority ABN 30 044 341 250 (Southern Ports));
...
(b)will give to the plaintiff full particulars of any payments made under paragraph (a) above at the time or as soon as possible after the payments have been made.
Relevantly then, as is apparent from Mr Suttner's affidavit of 21 October 2020, I am dealing with seven invoices as have subsequently been issued by MinterEllison lawyers, explained under attachment DS1. That attachment is MinterEllison's letter to Mr Wang of King & Wood Mallesons of 16 September 2020.
Seven invoices for legal fees are found there identified at par 4 of that letter from MinterEllison under pars 4(a) through 4(g).
The invoices of MinterEllison range across a period from 22 May 2020 for invoice 10663165 for $80,058 through to a seventh invoice, number 10707944, dated 31 August 2020, for $2,227.50.
Amounts the subject of the MinterEllison invoices at pars 4(a) through 4(g) in aggregate total $189,574.95. However, as seen, the present claim after the defendants' proposed credit is only for $169,624.14 inclusive of GST. Consequently, there has been a reduction to the total of those invoices in the amount of $19,950.81. There would appear to have been an adjustment made to the invoice at par 4(b), invoice 10671266, in the amount of $29,372.75. That invoice can be found in Mr Suttner's affidavit, at attachment DS3 page 14.
The circumstances under which I came to issue, essentially by consent, the 7 May 2020 Orders are explained in HFA's written submissions of 29 October 2020. But, in very brief terms, an undertaking in almost identical terms to the 7 May 2020 Orders had earlier been voluntarily given by the parties who were later to become the second and third defendants (respectively, VFS and V-Assets) on 20 January 2020 - in the face then of a threatened interlocutory injunction application against those corporations by HFA.
However, the 20 January 2020 undertakings were only interim undertakings by those two corporations and were expressed to be given until their discontinuance (see the preface to the undertakings - folio documents 25 and 26).
Prior to 20 January 2020 there had been an even earlier interim undertaking from those two corporations of 23 December 2019 - again to circumvent a threatened injunction by HFA's lawyers. The earliest interim undertakings expired on 15 January 2020 (see folio documents 22 and 23).
But following a descent into liquidation by all three defendants as at 5 May 2020, a communication was then received by the court, copied to HFA, given on behalf of the defendants' mutual liquidators. This was to the effect that the defendants then had proposed to unilaterally discontinue their 20 January 2020 undertakings as from 8 May 2020 (see folio document 41). Consequently, the timing of the 7 May 2020 directions hearing was significant - given then a looming withdrawal and expiry on the very next day of the 20 January 2020 undertakings by the second and third defendants.
The 7 May 2020 Orders, as is confirmed by the transcript, were effectively issued then to maintain the former protected status quo over the funds from the second and third defendant corporations as then held by MMRB.
There had, in fact, been three undertakings given on 20 January 2020 (one from each defendant). But it had only been the undertakings of the two corporate entities (who were to become later the second and third defendants) which had dealt with that MMRB fund. The undertaking position for the first defendant, as the original defendant, was somewhat different for historic reasons that are presently unnecessary to develop.
On 7 May 2020, I had this exchange with counsel for the defendants (ts 6):
KENNETH MARTIN J: ... And so largely the format of order 2, not identically but substantively, seeks to replicate that position continuing as regards the receipts of those funds by the second and third defendant, albeit they are now in liquidation. Is that right?
MR SCOVELL: Yes, your Honour, and I think that the intention is just to now maintain status quo from those - two of those undertakings.
The plaintiff was also content with that position.
Consequently, the 7 May 2020 Order 2(a)(i)(C) remains in place. It has not been altered or set aside.
Although HFA's submissions seek to raise a number of matters concerning the funds as held by MMRB, the fact is order 2(a)(i)(C) of the 7 May 2020 Orders relating to work done in these proceedings (ie, in CIV 3094 of 2019), or by MinterEllison concerning 'Vicstock's negotiations with the Southern Ports Authority', remain of full force and effect. They have not been varied, altered or set aside, to date. The only real question is whether they are sufficiently engaged under present circumstances.
I note that by further orders made on 28 May 2020, I allowed the defendants (but not HFA) until 5 June 2020 to bring an application to vary order 2 of the 7 May 2020 Orders. However, no such application was ever made, as far as I can ascertain.
On 19 June 2020, I gave leave, again uncontroversially, pursuant to s 500(2) of the Corporations Act 2001 (Cth), for these proceedings to proceed against the three defendants who were by then in liquidation. By order 1, I ordered:
The plaintiff has leave pursuant to section 500(2) of the Corporations Act 2001 (Cth) for these proceedings to proceed for the determination of the plaintiff's entitlement to the fund held on trust by [MMRB].

The problem

The residual difficulty that I still encounter, as I indicated to counsel for the defendants at the directions hearing on 22 October 2020, is that the seven MinterEllison invoices, partly seen as appended to Mr Suttner's affidavit, are not specific enough as to the legal work said to have been performed by MinterEllison for me to sanction a deployment of funds held in the MMRB trust account to MinterEllison, under my 7 May 2020 Orders.
For example, invoice 10663165 of 22 May 2020 (attached at DS3, page 13) is only seen as addressed and directed to:
Attention: Richard Albarran, Richard Lawrence & Cameron Shaw

Vicstock Grain
(Presumably a reference to the first defendant.)
The same invoice then carries only the briefest description:
Description
Heilongjiang Feng AO Agricultural & Animal Husbandry      Group Co Pty Ltd and Vicstock Grain Pty Ltd -


Contract Dispute


Australian Dollars

Professional fees
-


Professional fees - taxable     72,780.00
Plus GST                   7,278.00
Total amount payable on receipt of invoice                  AUD 80,058.00
That unduly brief and bland description from the face of the invoice effectively conveys nothing sufficient to engage against the criteria of 'work done in relation to' this proceeding (CIV 3094 of 2019), or with the alternate allowed criteria of Vicstock's negotiation with the Southern Ports Authority.
It is only necessary to refer in illustration to one more of the remaining six invoices, since all subsequently issued six invoices commonly display the same vacuous descriptions towards work billed for by MinterEllison.
Invoice 10671266 of 29 May 2020 (attached at DS3, page 14) is again directed to the same persons as the 22 May 2020 invoice, save for being 'in their capacities as Liq'. This time the brief description given merely reads:
Liquidation assistance regarding VSG Farming Services Pty Ltd, Vicstock Grain Pty Ltd & V-Assets Pty Ltd.
That 'assistance' description again conveys nothing tangible to assist me about legal work performed. In short, that is, again, just too bland to support a proposed utilisation of trust money that is in dispute as to its ultimate beneficial ownership in this action.
There is, of course, to be seen in the 29 May 2020 invoice a below reference to professional fees taxable at $19,937.50. Further amounts are added to that amount. But again, there is no detail for any of this. Again, I regret it is impossible, looking at all this, for me to confirm for the purposes of an application of a dealing with trust funds that there is a proper and sufficient engagement with the criteria of order 2(a)(i)(C) of my 7 May 2020 Orders.
All seven MinterEllison invoices do, I would point out, carry a stamp at the foot of the invoice which says:
For details and breakdown please see attachment
But no such attachment information has been provided to me within Mr Suttner's affidavit, nor any other materials relied on by the defendant in this application. Within the substance of Mr Suttner's affidavit, what he says in terms of the MinterEllison fees is, again, inadequate detail towards work of MinterEllison. At par 9 he says, after referring to an 'overdue sum' which he says is unpaid:
This sum relates to fees invoiced by MinterEllison after the 7 May Orders.
That is simply inadequate detail.
Required detail in order to sanction a dealing with trust funds to meet the terms of the criteria, as identified under my 7 May 2020 Orders, is absent.
Consequently, there can be no orders made as are sought.

Orders and costs

Consequently, the defendants' application on 19 October 2020 must be dismissed. I reserve all questions as to costs of the application.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DW
Associate to the Honourable Justice Martin
23 NOVEMBER 2020