Quaresmini v Crouch and Lyndon (A Firm) - [2010] FMCA 750

FEDERAL MAGISTRATES COURT OF AUSTRALIA

QUARESMINI v CROUCH & LYNDON (A FIRM)

[2010] FMCA 750

BANKRUPTCY – Application to Review sequestration order made by Registrar.

Bankruptcy Act 1966, s.52(1)
Queensland Law Society Act 1952, s.48J
Legal Profession Act 2007, ss.329(1), 330, 331

Aitkin Transport Pty Ltd v Voysey [1990] 1 Qd R 510
Chadwick Lawyers v McMullan (2009) FMCA 992

Applicant:

LAURENCE JOHN QUARESMINI

Respondent:

CROUCH & LYNDON (A FIRM)

File Number:

BRG 186 of 2010

Judgment of:

Jarrett FM

Hearing date:

3 June 2010

Date of Last Submission:

3 June 2010

Delivered at:

Brisbane

Delivered on:

16 August 2010

REPRESENTATION

Counsel for the Applicant:

Mr Black

Solicitors for the Applicant:

P M Lee & Co

Counsel for the Respondent:

Mr Meredith

Solicitors for the Respondent:

Crouch & Lyndon Lawyers

ORDERS

UPON THE UNDERTAKING OF THE APPLICANT to meet the trustee’s reasonable costs and expenses of the administration of his estate up to and including the date of hearing of the application to review and upon his application to forthwith commence proceedings and prosecute diligently proceedings to have the judgement by default in the Queensland Magistrates Court set aside .

THE COURT ORDERS THAT:

The application to extend time with in which to bring an order for review be granted.
The sequestration order made on 25 March 2010 by Registrar Belcher be set aside
The hearing of the creditor’s petition be adjourned to a date after the determination of the applicant’s application in the Queensland Magistrates Court to have the judgment by default set aside.
The parties’ costs of the creditors’ petition, the application to review and the application to extend time be reserved until the hearing of the creditors petition.
The parties be at liberty to apply in relation to costs upon the giving of three (3) days notice.
The creditors’ petition be adjourned for hearing to 9.30 am on 4 October 2010 in the Federal Magistrates Court of Australia at Brisbane.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT BRISBANE

BRG 186 of 2010

LAURENCE JOHN QUARESMINI

Applicant

And

CROUCH & LYNDON (A FIRM)

Respondent

REASONS FOR JUDGMENT

(revised from the transcript)

This is an application for an extension of time within which to pursue an application to review the order of a registrar who made a sequestration order against the respondent’s estate. The application for the extension of time is necessary because the application for review was filed some three weeks late.
The respondent says that if he is granted the extension of time, the sequestration order made by Registrar Belcher against him should be set aside and the creditor’s petition dismissed. Alternatively, he says that if the sequestration order is set aside, the creditor’s petition should be adjourned pending resolution of certain proceedings which he intends to commence in the Queensland Magistrates Court.
The facts of the matter leading to the making of the sequestration order seem to be these. In June and July 2007, the petitioning creditor did some legal work for the respondent. There were two invoices rendered for the work, each one in respect of a discrete and unrelated task. One tax invoice was rendered on 15 June 2007 for the sum of $6237.65 and the second was rendered on 18 July 2007 for $1436.60.
Now, there seems to be no dispute on the material that in respect of the work done in June 2007 and which forms the subject matter of the first costs invoice issued on 15 June 2007, the respondent engaged the petitioning creditor for the purposes of performing legal services on his behalf. The second tax invoice levied on 18 July 2007 is in a different position because there is an assertion by the respondent that he did not instruct the petitioning creditor on his own behalf but rather instructed the petitioning creditor on behalf of his brother or perhaps his brother’s company.
The material relied upon by the respondent falls far short of establishing the proposition that he was not personally responsible for that debt. It falls short of establishing that proposition because his own evidence was that he was the person who gave the instructions to the petitioning creditor to perform the work the subject of the second tax invoice: see paragraph 4 of his affidavit filed by leave at the hearing before me. He was the person who communicated with the solicitor at Crouch & Lyndon in relation to the matter. He asserts, although there is no evidence to prove it, that he did so as a disclosed agent for his brother’s company. That he asserts such in an affidavit, however, does not prove the fact.
In Aitkin Transport Pty Ltd v Voysey [1990] 1 Qd R 510, the Full Court of the Supreme Court of Queensland applied the principle that, generally speaking, a creditor is entitled to assume that he or she is dealing with the person with whom she or she is face to face with at the time of receiving instructions. If a person is acting as an agent for a principal, it is incumbent on them to say so. There is no evidence before me that that was done in this case. So that does not seem to me to be a serious issue. It is not something upon which I would rely on in determining that there ought not be a sequestration order.
Proceedings were issued from the Magistrates Court of Queensland in respect of the two invoices. The proceedings led to a judgment by default on 7 October 2009. The respondent says that he never received the initiating documents and did not know about the proceedings.
There is evidence from the petitioning creditor that personal service of the documents was not carried out - it was problematical. There was an order for substituted service and the documents were served in accordance with the order for substituted service. The order for substituted service provided for the delivery of the relevant documents by pre-paid post to a post office box, PO Box 804 Archerfield, which, on all of the evidence before me, was the postal address for the respondent. Notwithstanding that, he says he did not receive the documents.
On 14 January 2010, there was a bankruptcy notice served on the respondent based on the judgment. It is not suggested, in this application, that the bankruptcy notice is defective in any material way. The bankruptcy noticed needed to be complied with and it was not. There is, accordingly, an act of bankruptcy that has been committed by the respondent.
Consequently, a petition was presented and served on the applicant on 11 March 2010 and, as I have already remarked, an order for the sequestration of the estate of the applicant was made by Registrar Belcher on 25 March 2010.
The formal matters that are required to be proved for the purposes of making a sequestration order under s.52(1) of the Bankruptcy Act were made out before the Registrar. Those formal matters continue to be proved in way necessary. There can be no doubt that making a sequestration order is open.
Is there an arguable case to show that the sequestration order ought not be made, either because the applicant is solvent or because there is some other reason not to make a sequestration order?
I will go to the second ground first, that is whether there is a reason not to make the sequestration order. In that regard, the respondent’s case is that I ought to go behind the judgment debt and determine that there is a real or genuine dispute about the existence of the debt. One ground upon which he relies to justify the Court so doing is the ground to which I have already referred, namely that he was not the contracting party. But I am not satisfied that the evidence reveals a genuine dispute about that matter.
The other basis upon which he says there is a real genuine dispute, is the entitlement or more to the point, lack of entitlement, of the petitioning creditor to sue on the invoices for legal costs as they did.
The matter is not straightforward because when the first tax invoice was rendered, the Queensland Law Society Act 1952 was in place and it regulated the solicitor’s rights to charge clients for legal work and services. When the second tax invoice was rendered the Legal Profession Act 2007 had commenced operation and it regulated the solicitor’s rights to charge clients for legal work and services. The legal proceedings to enforce payment of the solicitors’ costs and outlays were commenced well after the commencement of the Legal Profession Act and so it is to that Act that one must go to determine the solicitors’ entitlement to sue for their costs.
Subsection 329(1) of the Legal Profession Act provides:
A law practice must not start legal proceedings to recover legal costs from a person until at least 30 days after the law practice has given a bill to the person under sections 330 and 331 or under provisions of a corresponding law that corresponds to section 330 and 331.
I will deal with the second tax invoice first. Section 330 of the LPA provides that a bill may be in the form of a lump sum bill or an itemised bill. The bill in this case, the second tax invoice rendered in July 2007, was a lump sum bill but as s.330 provides, a bill can be delivered in that form. There is nothing wrong with that. Section 331 of the Act provides that a bill must include or be accompanied by a written statement that sets out certain matters. There is no evidence before me that the bill in this case was accompanied by a statement under s.331.
It is clear from s.329(1) that a law practice’s entitlement to sue is dependent upon the law practice giving to the person said to be liable on the bill, a bill “under sections 330 and 331.” There is reason then to suspect, although I make no finding about it, that the solicitor’s right to sue in respect of the second tax invoice, may not have been made out because the relevant tax invoice could not be said to be “a bill… under sections 330 and 331.”
There is another issue that arises in respect of the second tax invoice. Section 319 of the LPA provides that, subject to Division 2, legal costs are recoverable on one of three bases. The first is under a costs agreement between the law practice and the client and made under Division 5 of the Act. The second, if there is no costs agreement between the law practice and the client, is according to an applicable scale of costs. An third, if there is neither a client agreement nor an applicable scale of costs, then the recoverable costs are calculated according to the fair and reasonable value of the legal services provided.
The second tax invoice in this case does not disclose the basis upon which it has been calculated. The statement of claim that was issued in the Queensland Magistrates Court to sue on the bill, does not disclose the basis upon which the costs have been calculated. In fact, not only does the statement of claim not set out the basis upon which the costs have been calculated, it does not plead, as a fact, the necessary elements entitling the solicitors to sue under s.329(1). That such a pleading point is significant is demonstrated by the judgment of Wilson FM in Chadwick Lawyers v McMullan (2009) FMCA 992, particularly at paragraphs [25] – [27].
The first tax invoice that issued in June 2007 is subject to a different regime in the sense that it is not a bill that was rendered when ss.330 and 331 of the LPA were in force. Subsection 329(1), however, directs the court’s attention to a “corresponding law that corresponds to sections 330 and 331”.
In his written submissions, counsel for the respondent suggests that s.48J of the Queensland Law Society Act is a “corresponding law that corresponds to sections 330 and 331”, but I disagree. Section 48J(1) of the QLSA is the mirror provision of s.329 of the LPA rather than ss.330 and 331. There are, however, sections in the QLSA which mirror s.330 and 331.
Again however, there is no evidence, no pleading and no other evidence that suggests that the statement required by the QLSA has been provided by the petitioning creditor the respondent when the first tax invoice was served.
In those circumstances it seems to me arguable that there is reason to be concerned that there is in truth, a debt due and owing to the petitioning creditor. The solicitors’ entitlement to sue for the value of each of the tax invoices is, on the material before me, indeed on their own material, in doubt.
The first step in this process, however, is to determine whether there ought to be an extension of time. I have gone to the trouble of considering the merits of the application for review because one of the more significant factors in determining whether they ought to be an extension of time, are the merits of the application which is sought to be commenced should the extension of time be granted.
There is no adequate explanation in this case for the respondent’s delay in bringing the application for review. He deposes that he was instructing solicitors and trying to get material together from the moment he found out about the bankruptcy notice. But that does not add to the propositions that:
a)he did nothing to resist the judgment by default;
b)he did nothing to resist the creditor’s petition, when it was served on him; and
c)he did nothing in a timely way when he became aware of the sequestration order having been made.
But the absence of an explanation for delay is but one factor. It is not determinative. The real issue is to ensure that a time limit is not used as an instrument of injustice.
In this case, where there may be some merit to the application to have the sequestration order set aside or to have the registrar’s decision reviewed, the fact that there is no acceptable explanation for the applicant’s delay in commencing these proceedings is not fatal.
There are questions of prejudice involved. There is prejudice, of course, to the petitioning creditor who has incurred costs in pursuing the petition; incurred costs in meeting the application for the extension of time and costs in meeting the application for the review.
And there are the trustee’s costs to consider. Insofar as the trustee’s costs are concerned, the applicant has offered an undertaking to the court to meet the trustee’s reasonable costs and expenses of the administration up to today.
In hindsight, it seems to me more appropriate that the applicant, if there is to be the relief that he seeks, should be required to pay the trustee’s costs up to and including the date of hearing of his application before this court. This judgment has been reserved for some time and it is through no fault of the respondent that there may have been some increased cost to the trustees.
There are issues of fact that arise concerning the solicitor’s bills that should probably and more properly be dealt with elsewhere. There was initially an application to the Queensland Magistrates Court to have the judgment by default set aside but that was withdrawn. There is the suggestion, I think, that the application will be refreshed. In the circumstances it seems to me that the appropriate course in this case is to do the following.
Firstly, on the respondent’s undertaking to meet the trustee’s reasonable costs and expenses of the administration of his estate up to and including the date of hearing of the application to review and upon his application, to forthwith commence and prosecute diligently proceedings to have the judgment by default in the Queensland Magistrates Court set aside, grant the application to extend time within which to bring an order for review.
The sequestration order made by Registrar Belcher on 25 March 2010 be set aside. Adjourn the hearing of the petition to a date after the determination of the applicant’s application in the Queensland Magistrates Court to have the judgment by default set aside. I will reserve the costs to the hearing of the creditor’s petition.
I will make it clear that both parties are at liberty to approach my associate to re-list the matter earlier than that in respect of the question of costs if it becomes apparent that the creditor’s petition is not going to be litigated. I do not want it to be the position that the parties’ entitlement to argue for their costs is lost. I appreciate that the representatives today are without instructions as to costs and so I am not going to force that issue to be dealt with today.

I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of Jarrett FM

Date: 30 September 2010