In the matter of Horizons (Asia) Pty Ltd

[2021] NSWSC 1690

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Horizons (Asia) Pty Ltd [2021] NSWSC 1690

Hearing dates:

9 December 2021

Decision date:

22 December 2021

Jurisdiction:

Equity - Corporations List

Before:

Rees J

Decision:

Dismiss application to set aside statutory demand.

Catchwords:

CORPORATIONS – application to set aside statutory demand – cross-examination – Graywinter principle – whether costs assessment application made out of time renders bills not due and payable.

WORDS AND PHRASES – “in accordance with”.

Legislation Cited:

Corporations Act 2001 (Cth), ss 459G, 459H, 459J

Legal Profession Act 2004 (NSW)

Legal Profession Uniform General Rules 2015 (NSW), r 5

Legal Profession Uniform Law (NSW), ss 186, 187, 194, 198, 269

Legal Profession Uniform Law Application Act 2014 (NSW), ss 11, 68

Supreme Court (Corporations) Rules 1999 (NSW), r 2.4A

Cases Cited:

Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344

Conder v Silkbard [1999] NSWCA 459

David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265; [1995] HCA 43

Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560

Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785

Friends of Leadbeaters Possum Inc v VicForests (2018) 260 FCR 1; [2018] FCA 178

Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452

Hopetoun Kembla Investments Pty Ltd v JPR Legal Pty Ltd [2011] NSWSC 1343; (2011) 87 ACSR 1

In the matter of Australia Zhongfu Oil Gas Resources Pty Ltd [2012] NSWSC 1208

In the matter of Bitar Pty Ltd [2015] NSWSC 2158

In the matter of Chameleon Mining NL [2009] NSWSC 602

In the matter of Elgar Heights Pty Ltd [1985] VR 657 at 669

In the matter of Gorji Property Investment Pty Ltd [2018] NSWSC 1671

In the matter of Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601

In the matter of Tetbury Pty Ltd [2017] NSWSC 37

In the matter of UGL Process Solutions Pty Ltd [2012] NSWSC 1256

Ligon 158 Pty Ltd v Huber [2016] NSWCA 330; (2016) 117 ASCR 495

Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) [2015] VSCA 330

Pinn v Barroleg Pty Ltd (1997) 23 ACSR 541

Process Machinery Australia Pty Ltd v ACN 057 260 590 [2002] NSWSC 45

Ramsay v Sunbuild Pty Ltd (2014) 221 FCR 315; [2014] FCA 54

Re Attard [2013] NSWSC 1579; (2013) 96 ACSR 581

Re LA (1993) 41 FCR 151

Remuneration Data Base Pty Ltd v Pauline Goodyer Real Estate Pty Ltd [2007] NSWSC 59

Rusca Bros Services Pty Ltd v Dlaw Pty Ltd (No 2) [2019] FCA 1865; (2019) 140 ACSR 533

Saferack Pty Ltd v Marketing Heads Australia Pty Ltd [2007] NSWSC 1143; (2007) 214 FLR 393

Telecasters North Queensland Ltd v Australian Broadcasting Tribunal (1983) 50 ALR 281

Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd (in liq) [2004] NSWSC 527; (2004) 185 FLR 130

TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70; (2008) 66 ACSR 67

Tuta Healthcare Pty Ltd v Nipro Asia Pty Ltd [2005] NSWSC 664

Zizza v Seymour [1976] 2 NSWLR 135

Texts Cited:

A Black and R Austin, Australian Corporations Legislation (2021, LexisNexis)

Category:

Principal judgment

Parties:

Horizons (Asia) Pty Ltd (Plaintiff)
NA Ackroyd & Others t/as Holding Redlich Lawyers Defendant)

Representation:

Counsel:
Mr K Dandachli, Solicitor (Plaintiff)
Mr C McMeniman (Defendant)

Solicitors:
KDA Legal (Plaintiff)
Holding Redlich Lawyers (Defendant)

File Number(s):

2021/277754

Judgment

1. HER HONOUR: This is an application under section 459G of the Corporations Act 2001 (Cth) to set aside a statutory demand served by Holding Redlich Lawyers. The statutory demand sought payment of $38,912.50, being unpaid fees owed by former client, Horizons (Asia) Pty Ltd (the company). Three issues arise:

1. Is there a genuine dispute where a client requests itemised invoices, said not to have been provided? Or, as Holding Redlich contends, were itemised bills provided – without a shadow of doubt – long ago in answer to the company’s request, attached to an email from Holding Redlich on 11 March 2020 (the Email) and the company’s Senior Administrator has repeatedly perjured herself by suggesting otherwise.

2. Whether, by seeking a costs assessment after service of a statutory demand and “out of time” (being the 12 months prescribed by the Legal Profession Uniform Law (NSW)), a debt ceases to be due and payable.

3. Whether the Graywinter principle precludes the company from also now raising an issue with the firm’s costs disclosure and costs estimate and, in the alternative to its primary contention, with the adequacy of the itemised invoices.

2. The company relied on the evidence of its accountant, Charles Abraham, and Senior Administrator, Lee Ng. Holding Redlich relied on evidence of partners Blair Beven and Gregory Wrobel.

Cross-examination and credit on application to set aside demand

3. The circumstances in which cross-examination may be undertaken on an application to set aside a statutory demand were explained by the Court of Appeal in Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344 at [67] per the Court:

… One object of cross-examination is to undermine the evidence given in chief or establish that it is false, incorrect, unreliable or implausible. Whilst cross-examination is not (and ought not be) the norm in an application brought under s 459G, there are occasions where cross-examination may be permitted, if directed to whether there is a genuine dispute as to the existence of a debt or whether there is a plausible basis for an off-setting claim, as distinct from the merits of any such dispute or claim: Re Mibor Investments Pty Ltd v Commonwealth Bank of Australia at 294.

4. Likewise, Barrett AJA (McColl and Meagher JJA agreeing) observed in Ligon 158 Pty Ltd v Huber [2016] NSWCA 330; (2016) 117 ASCR 495, the Court must decide whether the grounds on which the company disputes the alleged debt “are grounds which, when viewed in the whole of the circumstances emerging from the evidence, indicate a plausible defence propounded in good faith and not one merely constructed in response to the pressure represented by the statutory demand. Issues of credibility will generally be confined to the question whether the asserted grounds are of that quality, as distinct from questions going to the ultimate merits of the postulated defence itself. It is for this reason that cross-examination of deponents is rare in such proceedings”: at [10].

5. Here, the company’s suggested genuine dispute largely turned on whether the Email contained the attachments as exhibited by Holding Redlich’s partners, or a different attachment containing less detail as exhibited by Ms Ng. Cross examination was allowed, it being directed to whether there is a genuine dispute as to the existence of a debt. It proved fruitful.

6. Except in “extreme cases”, the court is not concerned to engage in an inquiry as to the credit of the deponent of the affidavit filed in support of the application: Britten-Norman at [46]. What is called for is an assessment of the kind described by McLelland CJ in Eq in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 (approved in Britten-Norman at [46]) (citations omitted):

This does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit “however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be” not having “sufficient prima facie plausibility to merit further investigation as to [its] truth”, or “a patently feeble legal argument or an assertion of facts unsupported by evidence”.

It will be seen from what follows that Ms Ng’s affidavit and oral evidence that the company did not receive itemised invoices was wholly implausible.

Graywinter

7. It is convenient to deal with the Graywinter issue first. Section 459G(2) of the Corporations Act provides that an application to set aside a statutory demand may only be made within 21 days after the demand is served, and section 459G(3)(a) provides:

An application is made in accordance with this section only if, within that period … an affidavit supporting the application is filed with the Court …

8. An applicant may supplement an initial affidavit in support of an application to set aside a statutory demand by leading further evidence relevant to matters raised by the initial affidavit, but cannot rely on any ground for setting aside that demand which was not raised in the affidavit filed within that 21 day limit: A Black and R Austin, Australian Corporations Legislation (2021, LexisNexis) at 654 citing Process Machinery Australia Pty Ltd v ACN 057 260 590 [2002] NSWSC 45 at [21]-[22]; Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd (in liq) [2004] NSWSC 527; (2004) 185 FLR 130; Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560 at [7]; Re Attard [2013] NSWSC 1579; (2013) 96 ACSR 581. This is referred to as the “Graywinter principle”, from Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452. As Ward J explained in Hopetoun Kembla Investments Pty Ltd v JPR Legal Pty Ltd [2011] NSWSC 1343; (2011) 87 ACSR 1 at [36] (citations omitted):

There need not be an explicit articulation in the supporting affidavit of the ground(s) on which the application to set aside is to be raised, provided the ground is raised expressly or by necessary or a reasonably available inference.

9. In Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) [2015] VSCA 330, the authorities in respect of the extent to which an applicant can rely upon supplementary affidavits filed after 21 day period are perhaps best collated at [52]-[65]. The Court noted the following learned observations:

1. In Tuta Healthcare Pty Ltd v Nipro Asia Pty Ltd [2005] NSWSC 664 Campbell J rejected an affidavit filed after the 21 day period which founded a submission “which could never have been gleaned from the [supporting] affidavit” (at [10]) and noted that the supporting affidavit must fairly notify the respondent of the evidentiary basis for a submission that the statutory demand should be set aside on the particular ground on which the applicant seeks to rely: at [13].

2. In Saferack Pty Ltd v Marketing Heads Australia Pty Ltd [2007] NSWSC 1143; (2007) 214 FLR 393, Barrett J said that the correct approach was to treat a ground as having been raised within the 21 day period “if the ground is evident from the supporting affidavit, even if only because it can be discerned from some annexed document the content of which ‘reveals’ it”: at [25].

3. In In the matter of UGL Process Solutions Pty Ltd [2012] NSWSC 1256, Black J concluded that the Graywinter principle has been qualified to the extent that the initial affidavit will sufficiently raise a dispute if that ground is raised by a necessary or reasonable inference, including from documents exhibited to the initial affidavit: at [30].

4. Finally, in In the matter of Australia Zhongfu Oil Gas Resources Pty Ltd [2012] NSWSC 1208, Brereton J concluded that it was sufficient if the material facts on which the applicant intended to rely were discernible from the supporting affidavit and / or annexures and exhibits to it. It was important that the affidavit convey some fair notice to the respondent of the case: at [31].

10. In this case, the 21-day affidavit was sworn by the company’s accountant, Mr Abraham, who said the company retained Holding Redlich to represent it in Federal Court proceedings. The company received invoices “which were not itemised showing the time utilised for each entry to enable the plaintiff to consider whether the charges were fair and reasonable.” Mr Abraham said that he called the accounts department of Holding Redlich and requested itemised invoices suitable for assessment to determine whether the charges were fair and reasonable. Further details provided by the firm on 11 March 2020 were simply “not what I asked them to supply”. Whilst the company had not refused to pay the reasonable costs of work undertaken, “At no time has the defendant supplied invoices sufficiently itemised to allow the plaintiff to properly assess the invoices with respect to fairness and reasonableness.” Annexed to Mr Abraham’s affidavit was the Email, without attachments.

11. No suggestion was made in the 21-day affidavit that there was a problem with the costs agreement or any costs estimate. Nor was the costs agreement annexed, from which it was discernible that such a dispute was in issue. The only issue was whether the firm had provided itemised bills sufficient to enable the client to ascertain whether the firm’s charges were fair and reasonable and, by inference, that the charges were not fair and reasonable. The affidavit did not, however, identify inadequate costs disclosure as a ground for setting aside the demand. Holding Redlich’s objection to that ground being raised in further affidavits by Ms Ng filed outside the 21-day period was well taken. Those grounds need not be considered further.

12. In closing oral submissions, the company submitted that, even if the Email did in fact attach itemised invoices as suggested by Holding Redlich, the itemised invoices did not satisfy the requirements of the Legal Profession Uniform Law. The description did not include the subject matter of emails, the documents reviewed, why a fee earner needed to liaise internally and with whom they liaised. This submission also suffers from a Graywinter problem. I would only turn to consider this submission if I found that the grounds articulated in the 21-day affidavit are not made out, that is, Holding Redlich did in fact provide the company with itemised invoices as requested. Such a ground is not referred to in, nor may be inferred from the annexures to, the 21-day affidavit which simply contended that no itemised accounts were ever provided. Thus, it is also not necessary to consider this ground further.

FACTS

13. Little is known of the company as no company search is annexed to the affidavit in support of the originating process, nor tendered at the hearing, contrary to rule 2.4A(3) of the Supreme Court (Corporations) Rules 1999 (NSW).

14. The company was being sued in the Federal Court of Australia in trademark proceedings. In February 2019, Ms Ng met with Mr Beven, then of Mills Oakley, with a view to retaining that firm but proceeded with another firm instead. In February and March 2019, emails to and from Ms Ng utilised two email addresses: [email protected] and [email protected].

15. Mr Beven moved from Mills Oakley to Holding Redlich. In October 2019, Ms Ng asked Mr Beven if Holding Redlich would take over the conduct of the Federal Court proceedings. Mr Beven agreed. A costs agreement was provided on 4 November 2019, together with a first invoice, which was paid. Further emails passing between Holding Redlich and Ms Ng in October and November 2019 continued to use the “service” and “ip” email addresses.

16. On 29 November 2019, Holding Redlich issued a second invoice, which was unpaid and forms part of the statutory demand. On 19 December 2019, a third invoice was rendered, which was partly paid; the unpaid portion forms part of the statutory demand. Emails concerning the invoices were dealt with by Mandy Fong, “Accounts Admin”, who used an email address [email protected]. Emails to and from Ms Fong were copied to the “service” and “ip” email addresses.

17. On 31 January 2020, Holding Redlich rendered its fourth invoice, which was unpaid. On 3 February 2020, Holding Redlich filed a Notice of Ceasing to Act in the Federal Court proceedings, as Mr Beven was concerned that the firm’s invoices were not being paid. On 5 February 2020, the company made a partial payment of the third invoice.

Requests for itemised invoices

18. On 6 February 2020, Holding Redlich sent reminders to pay the outstanding accounts. Ms Fong advised, “we must have itemized invoices for ALL of your billing … We otherwise cannot check or process your billed amounts for payment approval”. Ms Fong sent a further email, copied to the “service” and “ip” email addresses, stating:

… these accounts have been placed “ON HOLD” pending supply of itemised invoices by your firm for our checking and approval. No such itemised invoices have been received by our company, to date.

We would advise again that we must have itemized invoices for ALL of your billing, which includes the abovementioned. We otherwise cannot check or process your billed amounts for payment approval. …

19. Holding Redlich promptly replied, copied to the “service” and “ip” email addresses:

Please find attached further copies of the outstanding invoices. You will see that the invoices include each individual entry of work completed, and the amounts charged for each piece of work.

There is also a summary of the total fees allocated to each team member.

Please refer to page 2 of the invoices for the details mentioned above.

20. Ms Fong was not satisfied and, on 7 February 2020, again requested itemised invoices. On 10 February 2020, Holding Redlich ceased to act for the company in the Federal Court proceedings and, on 29 February 2020, rendered a final invoice which has not been paid.

21. On 5 March 2020, Ms Fong sent an email to Holding Redlich, copied to the “service” email address, advising that itemised accounts had not been received and the firm’s accounts remained in dispute. Holding Redlich’s national credit manager, Nathan Boschma replied, asking Ms Fong to give him a call to discuss her requirements so that he could try and resolve the issue. Ms Fong replied, copied to the “service” email address, “All that the company has requested is itemized accounts in order that such accounts may be checked and as you know, the company has requested this for a number of months. As advised, until the accounts are sorted, they remain in dispute.” On 6 March 2020, Holding Redlich responded to Ms Fong, copied to the “service” and “ip” email addresses:

I appreciate you would like our bills itemised, however, you have given no indication how you would like this set out.

Per my below email, can you please call me to discuss. If you cannot discuss, please provide me with the details of who I need to speak with at Horizon Asia to ascertain same, as your emails like the below are not assisting to resolve this matter.

I am happy to help you but cannot do so until I fully understand what detail you want to be further itemised.

I am available now to speak if that suits.

22. On 9 March 2020, Ms Fong replied, advising that the company’s external accountant, Mr Abraham would contact Holding Redlich to discuss. As earlier mentioned, Mr Abraham said that he called the accounts department of Holding Redlich and requested itemised invoices suitable for assessment to determine whether the charges were fair and reasonable. Ms Ng said the company needed, at a minimum: a date for each entry in the tax invoice; who undertook the work for each entry in the tax invoice; the amount of units for each entry in the invoice; and the costs for each entry in the invoice.

Holding Redlich provides itemised accounts: the Email

23. On 11 March 2020 at 1.24 pm, Holding Redlich sent the Email to Ms Fong, copied to the “service” email address, stating:

I have today spoken with Charles and discussed the breakdown requirements in respect of our time entries.

Please find attached a time summary in the requested format for each of our below listed unpaid tax invoices.

24. The Email with attachments is annexed to Mr Beven’s affidavit. For each outstanding invoice, Holding Redlich provided a “Detailed schedule of professional fees”, comprising a five-column schedule itemising, for each charge: the date on which the work was done, the fee earner who did it, a description of the work done, the units of time charged and the amount of the charge. A fee earner summary was also provided, totalling the hours worked and amount charged by each of the solicitors on the matter. This would appear to satisfy the company’s requirements as described by Ms Ng at [22].

24. Two issues arise in respect of the Email and, more particularly, its attachments. First, did Ms Ng receive it? The Email was copied to the “service” email address which, historically, had been an email address used by Ms Ng to send emails and to which Holding Redlich sent her emails. Ms Ng said she did not use the “service” email address, but an address [email protected]. The contemporaneous documents point clearly the other way.

25. Second, were the detailed schedules in fact attached to the Email as received by the company. This issue arises because, after Mr Beven’s affidavit was served, Ms Ng swore two affidavits insisting that the attachments to the Email received by the company were different. I will return to these affidavits at [31].

26. On 13 March 2020 and 17 March 2020, Ms Fong advised Holding Redlich that she was endeavouring to discuss the matter with the company’s accountant but he was unavailable. As now seems customary, Ms Ng blamed the company’s inaction following the receipt of the Email on COVID-19, “everything was chaotic and I believe Mandy was holding the fort doing the best that she could.”

27. On 25 March 2020, Holding Redlich sent a follow-up email, to which there was no reply, nor was there any further correspondence with the company before issue of the statutory demand. It now appears that the company had, in fact, blocked emails from Holding Redlich: a recent email from Ms Fong to the company’s internet provider noted that sender “holdingredlich.com” was “‘blacklisted’ i.e. blocked (via email filter in cpanel) by the addressee email accounts”.

28. On 12 March 2021, the statutory demand was issued in the sum of $38,912.50. Holding Redlich was unable to serve the statutory demand despite effort. Ultimately the demand was served on 8 September 2021. On 22 September 2021, the company’s solicitor wrote to Holding Redlich contending that there was a genuine dispute inter alia because of the firm’s failure to provide itemised bills as requested. The same day, Holding Redlich provided the company’s solicitors with the Email again. These proceedings were commenced on 29 September 2021. On 1 October 2021, Holding Redlich provided the company’s solicitor with the Email yet again.

29. On 22 November 2021, Ms Ng signed a costs assessment application on behalf of the company. A draft affidavit by Ms Ng was served, asserting that the Email did not attach itemised invoices as exhibited to Mr Beven’ affidavit. On 23 November 2021, Holding Redlich wrote to the company’s solicitor suggesting that Ms Ng’s unsworn affidavit contained false statements. The company’s solicitor replied that the client was adamant that the itemised invoices had not been provided and was obtaining further evidence from the third party – which proved to be the company’s internet supplier – which may need to be the subject of a further affidavit.

Ms Ng’s first affidavit

31. On 24 November 2021, Ms Ng affirmed an affidavit. Ms Ng said that the company “only received itemised invoices for the first time on 1 November 2021, after receipt of Mr Beven’s Affidavit in these proceedings”. Ms Ng denied that Holding Redlich had provided itemised invoices on 11 March 2020 or that the attachments to the Email exhibited to Mr Beven’s affidavit were received by the company, “I deny the plaintiff received those documents.” Ms Ng annexed a copy of the Email received, including the attachments “which I have sighted and printed.” Ms Ng also identified various charges in the invoices said to be unreasonable or excessive.

32. One might infer that, when Ms Ng “sighted and printed” the Email, she saw the electronic version of the Email and printed it off. Certainly, that is what the words suggest. But Ms Ng insisted that she had sighted “the paper ones … In printed form … I sighted the company file records and we always keep file records in paper form and in sighting it I also took copy of it.” Ms Ng denied printing off a copy of the Email when preparing her affidavit, saying she printed “from the file record. … I told you, I printed from file records kept by our accounting department”. As to who prepared the “paper record”, Ms Ng said, “I don’t do accounting job” and presumed that someone else prepared it. It was suggested to Ms Ng in cross-examination that she thereby sought to distance herself from the falsity of her first affidavit as, had she seen the electronic version of the Email, it would have been plain that its attachments were not the same as those exhibited to that affidavit.

33. On 25 November 2020, Mr Wrobel swore an affidavit, deposing that he had inspected the original electronic version of the Email and had satisfied himself that the Email exhibited to Mr Beven’s affidavit were correct. Mr Wrobel exhibited a USB stick containing the electronic version of the Email.

Ms Ng’s second affidavit

34. The company was given leave to file further evidence to address Holding Redlich’s assertion that Ms Ng’s evidence was false. On 8 December 2021, Ms Ng affirmed a second affidavit, stating that the Email annexed to her first affidavit “was obtained by me from the plaintiff’s paper records and not printed from an electronic source.” Ms Ng said she had asked the company’s account manager for an electronic copy, but was informed that they could not do so “because the plaintiff’s servers were hacked in about late 2020”.

35. Ms Ng said she had arranged for the company’s external IT hosting company to re-download the Email and annexed a letter from “Only Domains” confirming that it had retrieved the email “in entirety”. The retrieved email and attachments were annexed to Ms Ng’s second affidavit, where the attachments were the same as those annexed to Ms Ng’s first affidavit. Ms Ng said, “I do not know, and cannot provide any explanation, why the invoices attached to the emails retrieved by ‘Only Domains’, are different”.

36. In cross-examination, Ms Ng said she was not personally involved in downloading and printing the emails referred to in the letter from ‘Only Domains’.

Q.    No. So you have no idea as to whether what has been printed off from those links is accurate or not?

A.   Well, I have sighted the record.

Q.   You have relied entirely on other people to do that; that's correct, isn't it?

A.   Not entirely. Depending on what we are talking about, maybe at some point, at some stages, I was physically there, but I think this affidavit says I engaged the plaintiff's external IT company, I understood to be engaged, not physically but that was the task that I engaged to do.

Q.   Ms Ng, I am asking you a very straightforward question which is you did not click on the link to the 11 March 2020 email and print it and its attachments out for this exhibit?

A.    Maybe not at the time of printing it out, maybe I wasn't present, but I would have been shown what came back and it was demonstrated to me and I said, "Well fine, then give me the printout".

…

Q.    You are not the person who printed this off for the purposes of preparing this exhibit, are you?

A.    I cannot remember. You are testing my memory because many things happened and many steps happened. I cannot remember whether I printed out or somebody else printed out and I pulled it out or...(inaudible)...

Q.    Ms Ng, this was prepared yesterday, this exhibit, wasn't it?

A.    Sorry?

Q.    This exhibit was prepared yesterday, wasn't it?

A.    Yes, everything was done in a hurry but I don't think this record was printed out yesterday only. We had prepared this beforehand.

Q.    And when you say "we", someone else prepared this for you, didn't they?

A.    I had other people helping me, yes, in the office.

Q.    So the answer to that question is yes?

A.    Yes.

Q.    So you are not the one who printed off this email at page 34, are you?

A.    I can't say for certainty which part I printed out, which part I didn't, but I know I was involved.

Answer to notice to produce

37. Holding Redlich issued a Notice to Produce to the company, seeking an electronic copy of the Email annexed to Ms Ng’s first affidavit. In addition, communications between the company and “Only Domains” were sought.

38. In answer to the Notice to Produce, the company did not produce an electronic version of the Email. The fact that the company did not produce the electronic version of the Email, notwithstanding Ms Ng’s evidence in her second affidavit that the company had gone to some effort to obtain precisely that from “Only Domains” on 24 November 2021, is most telling.

39. Further, the communications between the company and “Only Domains” which were produced reveal that the company asked “Only Domains” to provide a letter confirming whether an email from Holding Redlich on 25 October 2021 (serving Mr Beven’s affidavit) had been received given that emails from Holding Redlich had been blocked. In particular, Ms Fong wished to know whether Holding Redlich would have received a ‘bounce back’ email, putting the firm on notice that the email had not been received by the company. The company did not ask “Only Domains” for a letter in the form annexed to Ms Ng’s second affidavit. Indeed, Ms Fong specifically limited the company’s enquiry to the email sent by Holding Redlich on 25 October 2021 “ONLY … no need to complicate our inquiry with any other dates …” The emails between the company and “Only Domains”, being some 15 emails, contain no request for “Only Domains” to retrieve earlier emails or to provide a letter confirming that it had done so.

40. It is most mysterious. One possibility is that the company’s request was not made by email. The other possibility is that the letter from ‘Only Domains’ annexed to Ms Ng’s second affidavit is itself a fabrication, as is the annexed Email said to have been “re-downloaded” by ‘Only Domains’ “in entirety”. It is not necessary for me to decide whether the letter is a fabrication. It is necessary for me to decide whether there is a genuine dispute in respect of the receipt of itemised invoices as requested, such that the company cannot ascertain whether Holding Redlich’s fees are fair and reasonable.

GENUINE DISPUTE

41. There is no dispute as to the principles. The threshold to establish a genuine dispute about the existence of a debt is a relatively low one. Black J conveyed the principles in In the matter of Gorji Property Investment PtyLtd [2018] NSWSC 1671 at [14]:

…  In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681; (1997) 76 FCR 452 at 464, the Full Court of the Federal Court held that a “genuine dispute" must be bona fide and truly exist in fact, and the ground for that dispute must be real and not spurious, hypothetical, illusory or misconceived. In Panel Tech Industries (Aust) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 at [18], Barrett J (as his Honour then was) formulated that proposition as follows, in a proposition applied in subsequent cases:

“Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger.”

42. In Britten-Norman, the Court of Appeal (Beazley P, Meagher and Gleeson JJA) said in the context of an offsetting claim, at [30]:

It is settled law that s 459H requires the Court to be satisfied that there is a “serious question to be tried”: see Scanhill v Century 21 Australasia [Pty Ltd (1993) 47 FCR 451] at 467, or “an issue deserving of a hearing” as to whether the company has such a claim against the creditor: see Chase Manhattan Bank Australia Limited v Oscty Pty Limited [1995] FCA 1208; 17 ACSR 128 at [42] per Lindgren J; Eumina Investments Pty Ltd v Westpac Banking Corp [1998] FCA 824; 84 FCR 454 per Emmett J (as his Honour then was). The claim must be made in good faith: Macleay Nominees v Belle Property East Pty Ltd [[2001] NSWSC 743]. In that case, Palmer J observed, at [18], that good faith, in this context, meant that the offsetting claim was arguable on the basis of facts that were asserted “with sufficient particularity to enable the Court to determine that the claim is not fanciful”.

Their Honours make it clear that a similar standard of proof is required whether an offsetting claim or a genuine dispute is alleged.

43. In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70; (2008) 66 ACSR 67, Dodds-Streeton JA, with whom Neave and Kellam JJA agreed put the test in the following terms, at [71]:

As the terms of s 459H of the Corporations Act and the authorities make clear, the company is required, in this context, only to establish a genuine dispute or off-setting claim. It is required to evidence the assertions relevant to the alleged dispute or off-setting claim only to the extent necessary for that primary task. The dispute or off-setting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile. …

44. Often cited is the judgment of Thomas J in In the matter of Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601 at 605, which provides useful guidance:

It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it) the court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another.

The essential task is relatively simple — to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).

See also McLelland CJ in Eq in Eyota v Hanave, earlier reproduced at [6] of this judgment.

Submissions

45. The company submitted that, by the Email, Holding Redlich did not provide itemized invoices being “a bill that specifies in detail how the legal costs are made up in a way so as to allow costs to be assessed”: Rule 5, Legal Profession Uniform General Rules 2015 (NSW). While the invoices rendered by Holding Redlich contained lists of tasks, the invoices did not identify the time spent on each task or the personnel responsible for each task. The invoices did not enable the plaintiff to consider whether the charges were fair and reasonable and, thus, the fees were not fair and reasonable. The company has not refused to pay “reasonable costs of work undertaken” but seeks itemised invoices “to allow full consideration before payment”. There is a genuine dispute with respect to the invoices, and therefore as to the amount of the debt, and as a result the statutory demand should be set aside pursuant to section 459H(1)(a) of the Act.

46. The company submitted that it is entitled to apply (out of time) for costs assessment and has done so. An application for assessment of legal costs is evidence of a genuine dispute as to the debt: Rusca Bros Services Pty Ltd v Dlaw Pty Ltd (No 2) [2019] FCA 1865; (2019) 140 ACSR 533 at [80]. The debt was not due and payable so long as the assessment application has not been determined and accordingly the demand ought to be set aside: In the matter of Tetbury Pty Ltd [2017] NSWSC 37 at [30] per Black J. The dispute should be resolved by way of costs assessment under the Legal Profession Uniform Law or by proceedings in the Local Court. The statutory demand, if it is not set aside, was said to likely prevent, frustrate and delay the company’s ability to have its dispute with respect to the Invoices determined on its merits.

47. Holding Redlich submitted that requesting itemised invoices, without more, is insufficient to ground a genuine dispute about a debt. Requesting invoices was a preliminary step in a chain of inquiry which could lead to a genuine dispute about the debt. Equally, that chain of inquiry could lead to there being no dispute about the debt at all. The evidence of Mr Abraham does not suggest that Horizons disputes the debt; rather, the high-water mark of his evidence is that Horizons asked for further information about the invoices. That does not amount to any genuine dispute meeting the standard of requiring further investigation or there being a serious question to be tried. In any event, itemised invoices were in fact provided by the Email. There was no suggestion at the time that the itemised invoices were insufficient. Since the service of the statutory demand, the company has falsely asserted that it did not receive the attachments to the Email, which falsity has now been entrenched and amplified by Ms Ng’s first affidavit; Ms Ng has and ‘doubled down’ on the falsity in her second affidavit. Nor has Ms Fong been called by the company, where Ms Ng said that Ms Fong continued to be employed.

48. Holding Redlich submitted that as the company has sought a costs assessment well beyond the 12 month period from when the invoices were required to be paid, the company needs the costs assessor to determine, after having regard to the delay and the reasons for the delay, that it is just and fair for the application for assessment to be dealt with after the 12-month period: section 198(4) of the Legal Profession Uniform Law. The reasons provided to the Court in support of such an indulgence are based on the same falsity in Ms Ng’s evidence regarding the purported failure by Holding Redlich to provide itemised invoices and repeated within the costs assessment application itself. Rusca Bros Services was said not to assist the company where the costs assessment application in that case was filed in time and before the application was made to set aside the statutory demand.

49. Finally, Holding Redlich submitted that commencing a costs assessment does not prevent the Court deciding whether to set aside a statutory demand: In the matter of Bitar Pty Ltd [2015] NSWSC 2158 at [3]-[7]. (Re Bitar does not assist Holding Redlich, where Brereton J was concerned with an application to appoint a liquidator following non-compliance with a statutory demand rather than the effect of a costs assessment process on whether the amount sought in a statutory demand remains ‘due and payable’). Even if the Court accepted that the particular items about which the company now complained were excessive, the Court would reduce the amount of the demand by $7,557, leaving $33,917.18 about which no complaint was made.

No genuine dispute

50. It is clear beyond argument that the Email was in the form exhibited to Mr Beven’s affidavit. There can be no serious suggestion that the Email and its attachments were in the form exhibited to Ms Ng’s first or second affidavits. Ms Ng’s evidence to the contrary is unbelievable. The asserted ground of the genuine dispute – that the company cannot assess whether Holding Redlich’s fees are fair and reasonable in the absence of an itemised bill – lacks the necessary qualities of plausibility or good faith.

51. Having received itemised invoices on 11 March 2020, the company did nothing save for “blocking” further emails from Holding Redlich. Having eventually been served with the statutory demand 18 months later, the company contended that it had not been provided with itemised bills as requested and was immediately provided with a copy of the Email again, and provided with the Email yet again after these proceedings were commenced. A costs assessment application was only sent to the Court after Holding Redlich had filed its evidence in these proceedings and when the company’s evidence in reply was due. The suggested ground for setting aside the demand, being the failure to provide an itemised invoice, fails.

50. In Ms Ng’s first affidavit, complaint was also made about four charges in Holding Redlich’s invoices. Whilst Mr Abraham did not make any specific complaint in respect of any charge in his 21-day affidavit, I consider that it may be inferred from the request for itemised invoices that the company considered that the fees may not be fair and reasonable. Ms Ng’s complaint in her first affidavit, thus, is not excluded by the Graywinter principle. However, the company has had considerable detail about these charges for 18 months and made no further complaint nor, until recently, sought to have the costs assessed. When viewed in the whole of the circumstances emerging from the evidence, such a ground does not appear to be propounded in good faith but “merely constructed in response to the pressure represented by the statutory demand”: Ligon 158 at [10]. This ground also fails.

Effect of “out of time” application for costs assessment

53. The question remains whether, by seeking to file a costs assessment outside the 12-month timeframe prescribed by the Legal Profession Uniform Law, the unpaid costs cease to be ‘due and payable’ such that the statutory demand must be set aside.

54. As White J explained in Remuneration Data Base Pty Ltd v Pauline Goodyer Real Estate Pty Ltd [2007] NSWSC 59, statutory demands can only be validly served in respect of a debt which is not only immediately payable but also presently recoverable by action; statutory demands should be set aside under section 459J(1)(b) for “some other reason” where demands are sought to be used to bypass statutory restrictions on a solicitor’s right to recover costs; where Parliament has provided a mechanism for review of a debt before the debt can be sued for, then no inference of insolvency should arise from the non-payment of the debt: at [38]-[41]. More recently in Tetbury, Black J recognised that, if a statutory prohibition under the Legal Profession Act 2004 (NSW) on the commencement of proceedings to recover a debt by a law practice remained in place, then the debt is not “due and payable” and a demand for a debt that is not due and payable may be liable to be set aside for some other reason under section 459J of the Corporations Act: at [30]. Here, the Originating Process did not seek an order under section 459J(1)(b), albeit such an order was sought in the company’s supplementary submissions.

55. Section 186 of the Legal Profession Uniform Law provides that a bill may be in the form of a lump sum bill or an itemised bill. If the bill is given in the form of a lump sum bill, the client may request an itemised bill; such request “must be made within 30 days after the date on which the legal costs become payable”: section 187(2). The law firm must comply with this request within 21 days: section 187(3). Holding Redlich complied with the company’s request by the Email on 11 March 2020.

56. A law firm “must not commence legal proceedings” to recover unpaid costs from a client in the absence of rendering a bill (section 194(1)) and, if the costs are the subject of a costs dispute before the designated local regulatory authority, the dispute has been resolved and at least 30 days has passed since the client was given a bill or, if requested, an itemised bill: section 194(2). The “designated local regulatory authority” referred to there is the NSW Legal Services Commissioner: section 11(1), Legal Profession Uniform Law Application Act 2014 (NSW).

57. Thus, Holding Redlich was entitled to commence legal proceedings against the company 30 days’ after the Email, at least before the costs became the subject of a “costs dispute”, being a dispute about legal costs payable on a solicitor/client basis between a lawyer and client: section 269(2). Although Holding Redlich did not commence legal proceedings to recover its unpaid fees, but issued a statutory demand, the effect of any failure to provide an itemised bill would have equally prevented the law firm from maintaining such a demand. As Austin J observed in In the matter of Chameleon Mining NL [2009] NSWSC 602, where a request for itemised bills was made after a statutory demand had been issued in respect of unpaid fees, the law firm was precluded from commencing legal proceedings to recover the costs that were the subject of the statutory demand until at least 30 days after complying with the request. Until then, the statutory demand related to debts which the law firm could not seek to recover by legal proceedings. His Honour observed, “There is authority to the effect that if a statute prohibits commencement of proceedings to recover a debt, then so long as the statutory prohibition remains in place the debt is not ‘due and payable’ and consequently cannot found a statutory demand”: at [35], citing Remuneration Data Base at [39]-[40] and In the matter of Elgar Heights Pty Ltd [1985] VR 657 at 669 and 671. See likewise Conder v Silkbard [1999] NSWCA 459 at [29]-[31] per Beazley JA, with whom Meagher JA agreed; Zizza v Seymour [1976] 2 NSWLR 135 at 139 per Moffitt P (Hutley JA agreeing).

58. A client may apply for an assessment of the whole or any part of legal costs payable to the law firm: section 198(1)(a). Section 198(3)(a) provides: (emphasis added)

An application under this section must be made within 12 months after –

(a)   the bill was given to … the client …

This 12-month period expired on various dates from November 2020 to February 2021.

59. Section 198(4) provides:

However, an application that is made out of time may be dealt with by the costs assessor if the designated tribunal, on application by the costs assessor or the client or third party payer who made the application for assessment, determines, after having regard to the delay and the reasons for the delay, that it is just and fair for the application for assessment to be dealt with after the 12-month period.

The relevant “designated tribunal” is the Manager, Costs Assessment: section 11(3), Legal Profession Uniform Law Application Act.

60. Further, section 198(7) of the Legal Profession Uniform Law (NSW) provides:

If an application for a costs assessment is made in accordance with this Division —

…

(b)   the law practice must not commence any proceedings to recover the legal costs until the costs assessment has been completed.

61. In Rusca Bros Services, a client became concerned about the costs being rendered by its solicitors. The client informed the solicitor that all reasonable costs would be paid, but the client would have to go through the bills to make sure it was reasonable as it was already well beyond what was expected. The client retained new lawyers, suggested to the former lawyers that the invoices should be “assessed quickly” and requested an itemised bill. The law firm served a statutory demand. The client filed a costs assessment application and lodged an application to set aside the demand. Markovic J concluded at [63]:

In this case it is because of the Assessment Application that Doyles cannot commence a proceeding for recovery of its costs. That is, the statutory prohibition in s 198(7) means that the debt the subject of the Demand can no longer be said to be immediately “due and payable” as required by s 459E of the Act. This is because the debt the subject of the Demand cannot presently be enforced by action by the commencement of any proceeding for recovery. That is so even if the Demand was served prior to the commencement of the Assessment Application. While the debt might have been due and payable at the time of service of the Demand because there was no prohibition on the commencement of a proceeding for recovery at that time, that status changed as soon as the Assessment Application was filed.

62. The law firm was thus prohibited from commencing proceedings to recover the legal costs until the costs assessment had run its full course: at [65]. As the certificate issued by the costs assessor had not been provided to the parties, the assessment application was not complete; the law firm was precluded by section 198 from taking steps to recover its costs, the debt the subject of the demand was not due and payable and the demand was set aside under section 459J(1)(b) of the Act: at [71].

63. While Rusca Bros Services is obviously correct, the position here is different as the application made by the company is an application “made out of time”. It is not an application “under this section”, as such an application “must be made within 12 months …”. Is it an application “made in accordance with this Division”, being Division 7 of Part 4.3? The meaning of the phrase “in accordance with” may depend upon the context: Friends of Leadbeaters Possum Inc v VicForests (2018) 260 FCR 1; [2018] FCA 178 at [201] per Mortimer J. Nevertheless, in various contexts, the expression has been held to mean “in conformity with” or “consistently with” (Ramsay v Sunbuild Pty Ltd (2014) 221 FCR 315; [2014] FCA 54 at [95] per Reeves J), “in complete agreement with” (Re LA (1993) 41 FCR 151 at 158 per Gray J), or “to require compliance in every respect … including its requirements with respect to time” (Telecasters North Queensland Ltd v Australian Broadcasting Tribunal (1983) 50 ALR 281 at 289 per Fitzgerald J). In Pinn v Barroleg Pty Ltd (1997) 23 ACSR 541, Santow J held that an application to set aside a statutory demand which was filed but not served within the 21-day time period was not made “in accordance with” section 459G of the Corporations Act, noting the mandatory wording of section 459G in conformity with David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265; [1995] HCA 43: at 547.

64. An essential requirement of an application under section 198 of the Legal Profession Uniform Law is mandated by sub-section (3), which requires that an application “must be made within 12 months” after the bill has been given. Failure to comply with this requirement renders the application as being one “made out of time,” which a costs assessor may nonetheless deal with following a determination by the Manager, Costs Assessment, having regard to various criteria, that it is just and fair for the application for assessment to be dealt with after the 12-month period.

65. Another essential requirement is provided by section 198(2) which provides, “An application under this section is to be made in accordance with applicable jurisdictional legislation.” This incorporates the requirements provided by section 68 of the Legal Profession Uniform Law Application Act:

(1)    Subject to this section, applications for an assessment of the whole or any part of legal costs are to be made in accordance with the costs assessment rules.

(2)    An application for costs assessment must—

(a)    be filed with the Manager, Costs Assessment, and

(b)    be accompanied by the fee prescribed by the local regulations, and

(c)    be served on the other parties to the costs assessment in accordance with the costs assessment rules.

…

66. There is no apparent warrant for distinguishing between the requirements in section 198(2) and section 198(3). Textually, compliance with both sections would be necessary for an application to be “in accordance with” the section (and therefore the Division). The text of sub-section (7) does not appear to pose a different question where the focus is on whether an application for a costs assessment has been duly made.

67. I conclude that, for the purposes of section 198(7), an application for a costs assessment is made in accordance with Division 7 of Part 4.3 if the application is made within 12 months of the bill being given. In this way, the legislature has struck what it has considered to be an appropriate balance between consumers and legal practitioners: cf Zizza at 139. Where an application for a costs assessment has been made “out of time”, at least where the Manager, Costs Assessment is yet to reach a determination that it is just and fair to deal with the application after the 12-month period, then the application for a costs assessment has not been made in accordance with the Division. It may be that once such a determination is made the application will then become an application made in accordance with the Division. It is not necessary to reach a concluded view about this as there is no such determination in this case.

68. The company has not made an “application for a costs assessment … in accordance with this Division” within section 198(7). Rather, it has made an application other than in accordance with the Division, being “an application … made out of time” that awaits the determination of the Manager, Costs Assessment as to whether the application will be entertained. As such, the prohibition on the law firm commencing proceedings to recover the costs does not apply and the amount claimed in the statutory demand remains due and payable. There is no reason to set aside the demand under section 459J(1)(b) of the Corporations Act.

ORDERS

69. For these reasons, I make the following orders:

1. Dismiss the Originating Process filed on 29 September 2021.

2. Order the plaintiff to pay the defendants’ costs of the proceedings.

3. If either party seeks a variation of Order 2:

1. Direct the party seeking the variation to serve any submissions (limited to three pages) and affidavits by 15 January 2022.

2. Direct the other party to serve any submissions (limited to three pages) and affidavits by 31 January 2022.

3. Any such application to be determined on the papers.

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Decision last updated: 22 December 2021