Progressive Projects Pty Ltd v McCullough Robertson Lawyers

Case •

[2024] QSC 39

•

18 March 2024

SUPREME COURT OF QUEENSLAND

CITATION: Progressive Projects Pty Ltd v McCullough Robertson Lawyers [2024] QSC 39
PARTIES:

PROGRESSIVE PROJECTS PTY LTD ACN 010 636 316

AS TRUSTEE FOR THE JOHN FACER SUPERANNUATION FUND

(Applicant)
v

MCCULLOUGH ROBERTSON LAWYERS ABN 42 721 345 951

(Respondent)
FILENO/S: BS 16265 of 2023
DIVISION: Trial Division
PROCEEDING: Application
ORIGINATINGCOURT: Supreme Court at Brisbane
DELIVEREDON: 18 March 2024
DELIVEREDAT: Brisbane
HEARINGDATE: 5 February 2024
JUDGE: Martin SJA
ORDER: The respondent pay the applicant’s costs on the standard basis.
CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – GENERAL RULE: COSTS FOLLOW EVENT – WHERE ACTION SETTLED OR OTHERWISE DETERMINED WITHOUT HEARING –

where the applicant engaged the respondent to act on its behalf in a proceeding – where the respondent sent invoices to the applicant for work performed – where the applicant expressed concern as to the level of fees – where the respondent issued a statutory demand – where the applicant filed applications seeking an assessment of costs and that the statutory demand be set aside – where the respondent withdrew the statutory demand – whether order should be made as to costs

Corporations Act 2001 (Cth), s 459E, s 459H, s 459J

Legal Profession Act 2007 (Qld) s 335, s 338

Ayrtown Investments Pty Ltd v Andrlik (2000) 34 ACSR 643; [2000] ACTSC 55, considered

Rusca Bros Services Pty Ltd v Dlaw Pty Ltd (No 2) (2019)

140 ACSR 533; [2019] FCA 1865, applied

Chameleon Mining NL v Atanaskovic Hartnell [2009] NSWSC 602, considered

Re Southern Cross Exploration NL [2016] NSWSC 1003, considered
COUNSEL: A Corbutt (Solicitor) for the applicant S-J Tan for the respondent
SOLICITORS:

K2 Law for the applicant

McCullough Robertson Lawyers for the respondent

  1. In November 2019 and, again, in September 2021, the applicant engaged the respondent (MRL) to act on its behalf in matters concerning the Australian Taxation Office and an appeal to the Administrative Appeals Tribunal. MRL sent invoices to the applicant for the work performed in the sum of $237,010.61. That sum was not paid and MRL issued a statutory demand (the Demand) under s 459E of the Corporations Act 2001 (Cth).

  1. After the applicant became aware of the Demand, it sought itemised invoices and filed:

    (a)an application under s 335 of the Legal Profession Act 2007 seeking an assessment of the costs charged; and

    (b)an application under s459H or s 459J of the Corporations Act 2001 seeking an order setting the Demand aside.

  1. On 1 February 2024 MRL withdrew the Demand. The parties have agreed to the appointment of a costs assessor.

  1. The applicant now pursues an order that MRL pay its costs on the indemnity basis.

The events which led to the withdrawal of the Demand

  1. In order to understand the arguments advanced by the parties it is necessary that the history of the matter be set out.

  1. From July 2022 the applicant, among other things, expressed its concern at the level of fees being charged in emails sent to MRL and in meetings held between John Facer (a director of the applicant) and David Hughes (a partner at MRL) as follows:

    (a)12 July 2022 – the applicant sent an email noting what it said was a “huge/massive difference” between the first quoted fee and a later estimate;

    (b)2 September 2022 – there was a meeting at which the applicant expressed its concerns about the level of fees and changes were made to the scope of work;

    (c)5 September 2022 – the applicant sought confirmation about the fees for certain work;

    (d)10 October 2022 – the applicant expressed its concern about changes in the fees estimated for further work;

    (e)20 October 2022 – the applicant sent an email listing concerns about fees and the progress of the matter;

(f)24 October 2022 – MRL responded to the concerns set out in the 10 October email;

(g)26 October 2022 – the applicant again sought clarification about particular fees;

(h)14 March 2023 – MRL sent an email about the matter and noted that fees had not been paid;

(i)14 March 2023 – the applicant replied contesting the amount owing; and

(j)31 March – 11 April 2023 – the applicant sent emails which included queries about fees and MRL responded to them.

  1. The applicant says that it asked MRL to go through the invoices and “to understand the revised scope of works” and that MRL has not done that. There is no evidence of any other communications after April 2023. It cannot have escaped MRL that the applicant disputed the level of fees being charged.

  1. On 12 December 2023 MRL sent the Demand and supporting affidavit to the applicant’s registered office.

  1. Mr Facer says that the applicant did not become aware of the Demand until 18 December 2023.

  1. On 20 December 2023 the applicant’s current solicitors wrote to MRL requesting:

    (a)itemised invoices for the services rendered by MRLS; and

    (b)that MRL withdraw the Demand.

  1. There was then correspondence about those requests and, on 22 December 2023, the applicant filed:

    (a)this application to set aside the Demand; and

    (b)the application for a costs assessment.

  1. Further correspondence ensued between the parties and, on 1 February 2024, MRL withdrew the Demand.

The effect of the application for a costs assessment

  1. Section 338 of the Legal Profession Act provides: “If a costs application is made—

    (a)     a person liable for the legal costs concerned can not be required to pay money into court on account of the legal costs; and

    (b)     subject to the leave of the court, the law practice must not start any proceedings to recover the legal costs until the costs assessment has been completed.”

  1. The effect of filing the costs application is to stultify the Demand because such an application is evidence of a genuine dispute as to the debt. In Rusca Bros Services Pty Ltd v Dlaw Pty Ltd (No 2)1 Markovic J dealt with a similar set of circumstances. In


  1. (2019) 140 ACSR 533; [2019] FCA 1865.

that case, 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:

“[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)2 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.”

  1. I respectfully agree with her Honour’s analysis.3 Upon the filing of the application for a costs assessment MRL could not proceed with the Demand. That circumstance should have been immediately obvious to MRL.

Costs when a statutory demand is withdrawn

  1. Section 459N of the Corporations Act provides that “[w]here, on an application under section 459G, the Court sets aside the demand, it may order the person who served the demand to pay the company’s costs in relation to the application.” That section does not apply because the Demand was withdrawn before the hearing, but the usual rule applies – the court has a discretion to order costs.

  1. The withdrawal took place on a Thursday. This hearing was listed for the following Monday. The applicant’s costs of the hearing had been incurred to a very large extent by then.

  1. This type of situation was considered by Higgins J in Ayrtown Investments Pty Ltd v Andrlik4 where, in a case where a demand was set aside, his Honour said:

    “[26] … the focus is on the reasonableness of the decision to issue it. Whether on the material known to the creditor before the notice issued, it should have been apparent that there was a dispute which, viewed objectively, was “genuine”, that is, warranting further inquiry. If so, the creditor must expect to pay costs in any event once the notice is set aside. If it was reasonable to issue the notice, but thereafter it


  1. Section 198(7) of the Legal Profession Uniform Law (NSW) is relevantly indistinguishable from s 338 of the Legal Profession Act 2007.

  2. As did Rees J in Re Horizons (Asia) Pty Ltd [2021] NSWSC 1690 at [63]: “…Rusca Bros Services is obviously correct”.

  3. (2000) 34 ACSR 643; [2000] ACTSC 55.

appears that there is a genuine dispute then, as soon as that appears, the creditor must withdraw or cease to oppose the setting aside of the notice. Otherwise, the creditor risks an adverse costs order.” (emphasis added)

  1. MRL argues that it was reasonable for it to issue the Demand given that the applicant had been indebted since February 2023 and that the request on 20 December 2023 for itemised invoices was “the first time that the Applicant had formally raised issues about the Respondent’s invoices”. The applicant had been indebted (for some amount) but it is not correct to say that the 20 December letter was the first time issues had been formally raised. The applicant had been complaining and seeking more details from July 2022 until April 2023.

  1. MRL relies upon the decision of Brereton J in Re Southern Cross Exploration NL5 where the parties had consented to an order setting the statutory demand aside. His Honour said that it was a case in which the parties compromised the case without resolving the question of costs, and in which there had been nothing unreasonable about the defendant’s conduct in the making of the demand and initial defence of the proceedings, and a reasonable and early abandonment of their defence after the off- setting claim was raised. His Honour made no order as to the costs of the proceeding. He did, though, make it clear that it was not the ordinary type of case. He said:

    “[6] As I said in In the matter of Gutsy Junior Pty Ltd [2015] NSWSC 2046, where a statutory demand is set aside, even by consent, it would ordinarily follow that a costs order should be made in favour of the successful plaintiff. That is because typically a case in which a statutory demand is set aside, even by consent, is not one in which there is an element of compromise in the outcome. However, this case is rather different.”

  1. In Chameleon Mining NL v Atanaskovic Hartnell6 where similar circumstances existed Austin J said:

    “[72] After the proceedings were commenced, it would have been reasonable for AH to consent to the setting aside of the statutory demand and to the payment of Chameleon’s costs up to the time of that consent. AH adopted the unreasonable position that it would consent to the setting aside of the statutory demand only if each party paid their own costs.

    [73] Counsel for AH submitted that the demand was issued in circumstances in which no dispute as to the amount in question had previously been expressed, and he said the existence of the dispute was not conveyed to the defendants until after the demand had been issued. But in the present circumstances the question is not whether AH was justified in issuing the statutory demand, but whether they ought to have withdrawn the statutory demand after they received PA’s letter of 12 November. Since, in my view, they should have withdrawn the demand, and they left Chameleon with no satisfactory option but to take proceedings to set the demand


  1. [2016] NSWSC 1003.

  2. [2009] NSWSC 602.

aside, they should be required to pay the costs of those proceedings.”

Conclusion

  1. I take into account the following:

    (a)MRL knew that the applicant disputed the level of the fees.

    (b)There had been detailed correspondence on that issue for about 10 months until April 2023.

    (c)Upon learning that an application for a costs assessment had been filed MRL should have realised that it could not proceed with the Demand.

    (d)MRL waited 39 days before withdrawing the Demand.

    (e)There was a very short time for MRL to respond to the notice of the assessment application before the application to set aside was filed.

    (f)The closure of the Supreme Court Registry for the Christmas-New Year period is irrelevant. The registry can be opened on payment of a fee.

  1. The time given by the applicant to MRL was very short but it should have realised that it had no choice but to withdraw. That consideration is particularly important given that MRL did not need, as a lay client would, time to seek advice. Further, the delay in withdrawing was inordinate. A timely withdrawal would have obviated the need to incur costs on the application. No reason was given for the delay.

  1. In some of the cases cited to me indemnity costs were ordered. That is not, on balance, the order that should be made in these circumstances.

  1. I order that the respondent pay the applicant’s costs on the standard basis.

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