Re Lawnic Pty Ltd

[1995] QSC 199

IN THE SUPREME COURT
OF QUEENSLAND

Brisbane  APN. No. 499 of 1995

Before the Hon. Justice Mackenzie

[Re Lawnic Pty Ltd]

BETWEEN:

IN THE MATTER OF THE CORPORATIONS LAW

AND:

IN THE MATTER OF LAWNIC PTY LTD

JUDGMENT - MACKENZIE J.

Judgment delivered  25/08/1995

CATCHWORDS: CORPORATIONS LAW - Statutory demand - application to set aside -monies owed to individual by service company of solicitors' firm as remuneration for secretarial work - legal work done for individual by principal of solicitors' firm - alleged set off agreement - whether on the evidence there was a genuine dispute or a genuine offsetting claim.

Counsel:G. O'Grady for applicant

P. McQuade for respondent

Solicitors:Goss Downey Carne as t/a for Broadbents for applicant

Lang Hemming & Hall as t/a for Brown Fowler for respondent

Hearing date:          8 August 1995

IN THE SUPREME COURT
OF QUEENSLAND

Brisbane  APN. No. 499 of 1995

Before the Hon. Justice Mackenzie

[Lawnic Pty Ltd]

BETWEEN:

IN THE MATTER OF THE CORPORATIONS LAW

AND:

IN THE MATTER OF LAWNIC PTY LTD

JUDGMENT - MACKENZIE J.

Judgment Delivered 25 August 1995

This is an application to set aside a statutory demand delivered by Judith Merle Chambers upon the company.  The company is the service company of Broadbent's solicitors.
          Mrs Chambers was initially employed by Mr Broadbent in 1990.  When Lawnic was incorporated in 1993 it took over responsibility for paying the financial commitments of the firm including Mrs Chambers remuneration which by that time was at an hourly rate because she was employed part-time.  Mrs Chambers' husband ran a plumbing business which got into financial difficulties.  Mr Radich who was then conducting the firm, deposes that from May 1994 to September 1994 he gave informal advice to Mrs Chambers.  By 29 September 1994 the view was formed that Mr Chambers' company was insolvent.
          According to Mr Radich the legal aspects of the insolvency were such that he told Mrs Chambers that he could not continue to do it on a voluntary basis and that he and Mrs Chambers struck an agreement under which he would continue to do legal work for her and her husband and she would work for Lawnic, rendering accounts but not being paid in full until a final assessment of the value of the legal work had been made to him.  Since about 23 March 1995, Mr Radich's files (with one exception) have been in the custody of the Magistrates Court Southport for the purpose of conducting examinations of persons in connection with the affairs of the plumbing company and an associated company.  That process has now concluded and the files can be returned to Mr Radich.
          The evidence establishes that Mrs Chambers rendered accounts for services rendered and that some amounts less than the total account rendered were paid to her generally on a weekly basis.  Mr Radich claims that the first indication he had that Mrs Chambers was taking a view contrary to what he says was the agreement was a letter of 1 March 1995 received on 7 June 1995 in which she claimed $10,878.85.  Mr Radich replied saying amongst other things that he was waiting for the return of his files after which costing of the work would be done "for which, as we agreed, there will be a set off against monies owed by my service company to you.
          Mrs Chambers replied on 19 June 1995 that she was employed not by Lawnic but by Broadbents.  She claimed Lawnic was in financial difficulties.  She said that the suggestion that he was waiting for the files to enable the costing to be done was spurious and claimed that the value of any legal work done would amount to no more than $2,000.  She suggested that at least the balance over that sum be paid.  Further correspondence ensued in which the issues were debated without resolution and in which Mr Radich advised that he was having the one file in his possession costed.  On 6 July 1995, the statutory notice of demand was sent to sent to Lawnic.  It is inherent in the demand that Mrs Chambers was employed by Lawnic.  On 7 July 1995, Mr Radich replied saying that the debt was genuinely disputed and asked for the demand to be withdrawn.
          On 12 July 1995 an assessment of the costs of the file that had been in his possession was made at $11,665.10 subject to the qualification that it was based on the limited information available.  Objection was taken to the admissibility of the assessment on the basis that there was no evidence as to the information that had been acted upon by the assessor.  That is probably correct in the direct sense but there is a good deal of evidence about the nature of the work that was allegedly done and I am satisfied that the objection goes to weight rather than admissibility.  An affidavit was also read from Mr Downie, the insolvency practitioner who had conferred with Mr Radich and the Chambers, to the effect that when the question of how the legal costs of the considerable work that was anticipated to be required was to be met, Mr Radich said in the presence of the Chambers that he had an arrangement with Mrs Chambers in that regard. 
          Mrs Chambers says in her affidavit that a meeting was arranged with Mr Downie "as set out in" Mr Radich's affidavit "however, there was never at anytime a discussion with myself or my husband in relation to any arrangements for payment of costs associated with any legal work which may have to be carried out for the company".  It is not my function to resolve any disputes as to what happened in Mr Downie's office or elsewhere in these proceedings.  However it is apparent that if Mr Downie were to be accepted as a witness of truth there might be an inference open that there was no demur at the time to the proposition that there was an arrangement.
          Mrs Chambers has deposed that she did not have any conversation in which an agreement was struck to offset the cost of the legal work against the cost of the secretarial work.  In correspondence she denied that work done by Mr Radich could be offset against the debt for her secretarial work.  It was submitted that there was not a true offset situation because Mr Radich had done the legal work and Mrs Chambers had done the secretarial work for Lawnic.  That probably depends on what the agreement is found to be if an agreement is found to have existed.  There is, in my view, no conceptual difficulty with an agreement that, in consideration of a  person doing legal work for an individual the individual would provide services to an associated company and that if the value of one exceeded the other a cash adjustment would be made.
          It is conceded that the matter must be approached on the basis that there is a serious question to be tried as to whether there was an agreement and what it was.  The applicant submitted that there was a genuine dispute about the existence of a debt.  Alternatively there was an offsetting claim under s.459H(5).  It was further submitted that in any event the money was not due and owing because final costings had not been done because the files had been unavailable and there had been no undue delay.  It was submitted that the applicable principle was whether on the evidence there was a genuine dispute or genuine offsetting claim,  and that it is not part of this process to attempt to predict the result of the dispute or the claim (Re. Morris Catering (1993) 11 ACLC 919; Re. Copperart Pty Ltd (1995) 16 ACSR 351; Rohalo Pharmaceutical Pty Ltd v. R.P. Scherer SpA (1995) 13 ACLC 94).
          It was submitted on behalf of the respondent that there was no genuine offsetting claim and that in any event the quantum of it was not established.  I have already referred to the point taken that if there was an agreement there was no evidence that Lawnic was a party to the agreement.  It was further submitted that Lawnic could pay the accounts in an amount and at a time it considered appropriate and that the agreement was uncertain (Argyll Park Thoroughbreds Pty Ltd v. Glen Pacific Pty Ltd (1993) 11 ACSR 1). Whether the agreement is to be so construed is a question to be tried. The competing proposition put by the applicant was that if there was no time stipulated the law would imply that it must be done within a reasonable time.
          It was submitted that the commencement date of the arrangement was 29 September 1994 and that up to that time there was $5,265.40 owing by Lawnic to Mrs Chambers.  Two distinct propositions were put as to the effect of payments made from time to time after that date.  It was submitted that they should be regarded as reducing the preexisting debt, on the one hand, and as being attributable to an agreement to pay part of the accounts rendered pursuant to the agreement which commenced on 29 September 1994, on the other.  If the former is correct the preexisting debt would have been extinguished within a short period of time.   If the latter was correct it was submitted that the sum of $5,265.40 was owing irrespective of the agreement.  Finally, it was submitted that the bona fides of any alleged agreement must be suspected in the absence of any written record of it.  That is a matter which cannot be resolved in the present proceedings.   In relation to the offsetting claim, it was submitted that Lawnic had not quantified it. 
          The applicant submitted that the issues of uncertainty of the agreement and whether the time taken to crystallise the amount allegedly incurred in legal fees are matters for the tribunal which ultimately hears the matter.  There is in my view sufficient evidence to suppose that there is a basis for argument that the amount of legal work may equal or exceed the amount of the debt.  If the kind of agreement alleged by Mr Radich is found the tribunal of fact hearing the matter will have to determine any issues relating to quantum.
          In my view the facts raise a genuine dispute about the debt and about an offset.  The statutory notice of demand is set aside.  I order that the respondent pay the costs of and incidental to the application to be taxed.