Z Firm and C Pty Ltd

[2010] FamCA 1011

FAMILY COURT OF AUSTRALIA

Z FIRM & C PTY LTD [2010] FamCA 1011

FAMILY LAW – COSTS – SOLICITORS – Validity of engagement and instructions

APPLICANT: Z Firm

RESPONDENT: C Pty Limited

FILE NUMBER: SYF 2153 of 2001

DATE DELIVERED: 29 October 2010

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: The Hon. Justice Cohen

HEARING DATE: 18 October 2010

REPRESENTATION

SOLICITOR FOR THE APPLICANT:

Mr Z,

Z Lawyers

COUNSEL FOR THE RESPONDENT: Mr Milanovic

SOLICITOR FOR THE RESPONDENT: Cadmus Lawyers

Orders

1. That the time limited for compliance with Order 3 made on 29 March 2010 herein is extended to 21 days from today.

2. That the said points of claim referred to in the said Order 3 shall be limited to the issues over whether or not Z Firm, Solicitors, was validly engaged to act for S Pty Limited (in liquidation) alone or with another or others and whether or not S Pty Limited (in liquidation) is liable alone, with others or at all for the costs it has paid the said solicitors or which have been the subject of the solicitors’ proof of debt to the Liquidators of S Pty Limited (in liquidation).

3. That in the event that C Pty Limited fails to file and serve its points of claim in compliance with Order 3 of 29 March 2010 as amended by Orders 1 and 2 above its Application in a Case filed 17 June 2009 opposing the admission by the Liquidator of S Pty Limited (in liquidation) of the proof of debt of Z Firm, Solicitors, shall on that failure hereby be dismissed forthwith.

4. Costs are reserved.

IT IS NOTED that publication of this judgment under the pseudonym Z Firm & C Pty Ltd is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF2153 of 2001

Z FIRM

Applicant

And

C PTY LIMITED

Respondent

REASONS FOR JUDGMENT

1. On 10 January 2006 Rowlands J made orders by which, among others and pursuant to s 33 of the Corporations Act 2001, he wound up S Pty Limited (S Pty Ltd) and restrained its directors, specifically including Mr WJ and Mr G Rand, from taking certain steps. G Rand (Mr Rand) is the husband’s father and is the 3^rd respondent in the overall proceedings.

2. Z Firm, Solicitors, (Z Firm) claims to have acted as solicitors for S Pty Ltd and filed a proof of debt with S Pty Ltd’s Liquidators. The Liquidators admitted this proof of debt in full. It is for $22, 533.35, the claimed unpaid balance of legal fees and expenses which Z Firm charged S Pty Ltd.

3. C Pty Limited (C Pty Ltd), the 11^th Respondent, is a company in which Mr Rand and his wife, N Rand (the 4^th Respondent), have an interest. It appears to be controlled by him. It claims S Pty Ltd owes it $289,000.00 and is seeking to be admitted as a debtor in the winding up. The Liquidator of S Pty Ltd is claiming about $693,000.00 from Mr Rand and his wife under a guarantee.

4. On 11 June 2009 the solicitor acting for C Pty Ltd faxed a letter to Z Firm, referring to its intention to challenge the Liquidator’s acceptance of Z Firm’s proof of debt and asking for copies of the documents Z Firm relied on for it. Z Firm responded on the same day with a faxed request that C Pty Ltd indicate the basis for questioning the claim and informing C Pty Ltd that the Liquidator had already provided C Pty Ltd with the documentation on which the solicitors rely.

5. On17 June 2009, C Pty Ltd filed an Application in a Case. By that application it sought, pursuant to s 1321 of the Corporations Act, that the decision of the Liquidator to admit the proof of debt lodged by Z Firm “in the sum of $22,533.25 be revised, modified or admitted in such lower amount as the Court shall think fit”, meaning the Family Court of Australia. On 12 August 2010 Z Firm filed an Application in a Case seeking the dismissal of C Pty Ltd’s Application in a Case filed on 17 June 2009. It is the dismissal application that I am now determining. The ground relied on is C Pty Ltd’s failure to file points of claim as ordered. No points of claim have yet been filed or served.

6. Early in the numerous occasions this matter had come before me, I was informed that there were at least two bases for this claim. One was that C Pty Ltd sought to tax the solicitor’s costs. The other, I was told, was that Z Firm never acted for C Pty Ltd but was only acting for Mr WJ and/or his company, H Pty Ltd. Each was said by C Pty Ltd to have an interest in work done by Z Firm which was charged to S Pty Ltd. H Pty Ltd has an interest in S Pty Ltd and Mr WJ’s interest in S Pty Ltd is through H Pty Ltd.

7. On 19 June 2009 I referred the taxation of Z Firm’s costs to a deputy registrar and gave leave to C Pty Ltd to stand in the place of the Liquidator for that purpose. I also made orders solely relating to the taxation to ensure it would progress without undue delay. Importantly, I made a specific order, order 9, which is not limited to the taxing, about the overall dispute over costs raised by C Pty Ltd’s objection to Z Firm’s claim. I also adjourned the matter to a date to be fixed subsequent to the outcome of the taxation.

8. The proceedings next came before me on 29 March 2010. On that day there was discussion about the failure of a deputy registrar to tax Z Firm’s bill of costs to S Pty Ltd. I referred the bill back to the Deputy Registrar for taxation. It had been listed on 31 March 2010 for a defended hearing of C Pty Ltd’s application of 17 June 2009 in relation to Z Firm’s proof of debt. The defended hearing was not ready to proceed on that day. I granted leave to C Pty Ltd to subpoena a bank to produce all evidence it held of payments of S Pty Ltd to Z Firm. I also ordered Mr Z, Solicitor, of that firm to provide C Pty Ltd with a copy of its retainer from S Pty Ltd, and any copies of the solicitors’ accounts for their services and incidental expenses to S Pty Ltd and copies of receipts issued to S Pty Ltd for payments of those accounts. Most significantly, I ordered C Pty Ltd to file points of claim in relation to its claim that the Court should disallow Z Firm’s proof of debt and all affidavits in support within 28 days, that is, by late April 2010. There was no objection to this time limit by those acting for C Pty Ltd.

9. I did this in response to Mr Z’s request which was made in circumstances where it was clearly known that the taxation had not been done and would not be completed for an indeterminate time. Mr Z had made it clear that he wished to know C Pty Ltd’s allegations about who it is that had instructed him and why it is said that S Pty Ltd was not liable for the fees (see transcript page 13.15-.35 for 29 March 2010). The matter was adjourned for mention only to 24 May 2010.

10. A directions agreement had been made between the Liquidator of the one part and Mr and Mrs Rand and C Pty Ltd of the other over the conduct of their disputes in the Family Court. The agreement is in evidence as Exhibit “XY”. The agreement mainly contains directions for the management of the proceedings over the claim of the Liquidator against the 3^rd and 4^th Respondents and the claim by C Pty Ltd against the Liquidator.

11. According to what I have been told at all hearings involving S Pty Ltd, C Pty Ltd and Mr Rand and his wife, Mr Rand has had the conduct of the litigation on behalf of C Pty Ltd and himself and his wife. The inference is that he also had control of the dispute between C Pty Ltd and Z Firm. Under Exhibit “XY” and the orders I made by consent as a result of the agreement, C Pty Ltd was to file its points of claim and evidence against the Liquidator and serve all parties who might be affected by the orders it sought by 12 April 2010. The Liquidator was to file and serve his points of defence and evidence in support within fourteen days of receipt of C Pty Ltd’s points of claim. The Liquidator was to file his points of claim against the 3^rd and 4^th Respondents by 6 April 2010 and the 3^rd and 4^th Respondents were to file their defence by 20 April 2010 whereupon the Liquidator was to file his affidavit evidence by 27 April 2010 and the 3^rd and 4^th Respondents were to file their evidence by 4 May 2010. 5 July 2010 was fixed for the hearing of the Liquidator’s claim against Mr & Mrs Rand as well as C Pty Ltd’s claim against the Liquidator. Both matters were adjourned to 24 May 2010 for mention for a compliance and readiness check.

12. I specifically informed Mr Milanovic of Counsel who appeared for C Pty Ltd on 29 March that the mention of the Z Firm dispute on 24 May 2010 was for the purpose of fixing a date for the hearing (see TS p18.45 and 20.15 of 29 March 2010) and at TS p19.30-45 specifically canvassed consequences of any deliberate attempt at delay.

13. On 24 May 2010 Mr Grieve QC appeared with Mr Milanovic for C Pty Ltd and the 3^rd and 4^th Respondents among others. He informed me that Z Firm’s costs were still in the process of being taxed by a Deputy Registrar. I asked C Pty Ltd’s legal representatives in that matter to inform me when the taxation was likely to be completed so the matter could be fixed for hearing and stood the matter over to a date to be fixed. Mr Z did not appear. Mr Grieve also informed me that Mr Rand had left Australia for Lebanon on 18 May 2010. He admitted he did so despite knowing the situation relating to the mention (TS p4.20). In relation to the disputes involving the Liquidator, the Rands and C Pty Ltd, he said he had prepared a draft of the Rands’ points of defence but that to get instructions from Mr Rand to enable the draft to be settled and the points of defence to be filed and served would take 14 days. Some of the delay in filing the points of defence was because the Liquidator’s points of claim had been served late. He said the situation was the same with the claim by C Pty Ltd against the Liquidator (see T p5.5-.10). Of course, it could not have been. C Pty Ltd could not have been delayed in knowing what to plead against the Liquidator in the claim it had initiated by any delay by the Liquidator in serving his claim against Mr & Mrs Rand.

14. It was clear that delay would result because Mr Rand was in Lebanon. It was equally clear that he must have left Australia in the full knowledge that the matter would be back in Court on 24 May to fix a date to hear the authority issue between Z Firm and C Pty Ltd and that the claim that C Pty Ltd was making needed to be pleaded as did his and his wife’s defence to the Liquidator’s claim and C Pty Ltd’s claim against the Liquidator.

15. Subject to compliance with 2 conditions, I extended the time for filing points of defence on behalf of the Rands to 7 June 2010 in accordance with Mr Grieve’s request. Mr Grieve made the same request about C Pty Ltd’s points of claim against the Liquidator. I extended the time for the points of claim because it would serve no purpose not to do so even though there was no valid excuse for the delay with the points of claim. Mr Grieve already had drafts of both the points of defence and points of claim. I ordered that the drafts be served within seven days and that, on there being any apparent need to make changes to these in the filed pleadings, Mr Grieve was to notify Mr Cotman, Senior Counsel for the Liquidator, forthwith of those changes. The hearing date was confirmed for one week commencing 5 July 2010. I made provisions to permit the legal representatives of either the Liquidator, the Rands or C Pty Ltd to have the matter relisted at short notice.

16. On 24 June 2010 Mr Feller SC appeared in place of Mr Grieve QC for the Rands and C Pty Ltd in the matters against the Liquidator. He applied for me to disqualify myself on the ground of apprehended bias. The claim was based on what was claimed to be an imposition on his client of shorter time limits than I had placed on the Liquidator. In a very short judgment, very short because of the baselessness of the objective claim, I dismissed the application. There was no appeal from this dismissal.

17. By 5 July, Mr Grieve had not provided Mr Cotman SC with his drafts of the points of claim and points of defence in the matters against the Liquidator, nor had C Pty Ltd and Mr and Mrs Rand filed and served points of claim or points of defence in that matter. However, C Pty Ltd and the Rands had filed, on 21 June 2010, applications to transfer the proceedings against the Liquidator to the Supreme Court of New South Wales on the ground that the Family Court of Australia lacks jurisdiction to hear the claims by the Liquidator against the Rands and that this claim should properly be heard by the Supreme Court. It is also said to be more appropriate that the claim by C Pty Ltd against the Liquidator be heard in that Court. The Rands sought security for costs against S Pty Ltd in the sum of $400,000.00 by an application filed on 5 July. The Liquidator then sought judgment against the Rands and C Pty Ltd for failure of the Rands to file their defence and for want of prosecution by C Pty Ltd. I heard these matters on 5 July.

18. On 28 July, I dismissed the application by the Rands and C Pty Ltd and gave them 21 days to file their points of defence and points of claim respectively. These have not been filed, but the Rands and C Pty Ltd have appealed against my decision and have sought a stay of my orders.

19. It was not in contention that Mr Rand was giving instructions in the matters against the Liquidator or that he absented himself without warning the Liquidator that he proposed to do so in circumstances where to do so would cause delay. In the decision I made on 28 July I rejected excuses for his actions and for the failure of the solicitor for the 3^rd and 4^th Respondents and C Pty Ltd to take appropriate steps to avoid further undue delay and loss to the Liquidator and inconvenience to the Court and held that Mr Rand’s actions were the result of his choice “to benefit tactically” from his “unreasonable and improper behaviour by making the adjournment of the hearing a fait accompli, then using the opportunity provided by the adjournment to make what he no doubt must regard as tactically beneficial applications.” In effect, I found that the solicitor instructed by him failed in his duty to the Court and in doing so assisted this situation to arise.

20. On 6 August 2010 my Associate received a copy email from C Pty Ltd’s solicitor to the effect that he had not been able to establish the likely completion date of the taxation of Z Firm’s costs. This seems to confirm the misunderstanding Mr Elias had about the proceedings which I shall canvas in due course.

21. It is in this context that the Court should examine any failure, if there has been a failure, to comply with the orders of the Court, which require C Pty Ltd to file its points of claim against Z Firm. The application of 12 August 2010 filed by Z Firm is expressed to be filed on behalf of Mr WJ. Mr Z, solicitor at Z Firm, had received his instructions from Mr WJ when he purported to act for S Pty Ltd in the proceedings which have given rise to the dispute over its proof of debt. He informed me he had inadvertently drafted the application as though the applicant was Mr WJ when his firm was the true applicant. I granted leave to amended the application by substituting Z Firm, solicitors, for Mr WJ in the application. Mr Z actually signed the Application in a Case which is relied on. No injustice could be imposed on C Pty Ltd by permitting this slip to be corrected. Although C Pty Ltd, through its counsel Mr Milanovic, objected to the amendment, he did not advance any reasons why I should not permit it.

22. So far as I could understand it, C Pty Ltd’s claim to resist the solicitors’ application has 4 bases: Firstly, it is said that it has filed the points of claim ordered. Secondly, it said that it is not in a position to do so because the bill of costs has not been taxed so it does not know to what extent it can challenge the Liquidator’s acceptance of the solicitor’s claim to fees and outgoings. Thirdly, it said that when the matter was dealt with on 24 May, because of what was said in the dialogue between Mr Grieve and myself and because of the fact that the matter was stood over to a date to be fixed, ie in effect generally, I had either postponed the requirement that points of claim be filed or led those advising C Pty Ltd to the erroneous but understandable belief that I had postponed any requirement that points of claim be filed. In such circumstances, it is submitted, I should not dismiss C Pty Ltd’s application for failure to file them. Finally, it is said that C Pty Ltd should be entitled to rely on a allegedly serious aspect of the dispute over the solicitor’s claim for costs. C Pty Ltd alleges that Mr WJ acted without authority in engaging Z Firm to act for S Pty Ltd and should be regarded as personally liable for the costs of the work done and expenses incurred by Z Firm rather than S Pty Ltd. Alternatively, it is said that Mr WJ acted for himself and/or his company, H Pty Ltd rather than S Pty Ltd. Originally Mr Milanovic informed me that an email from the 3^rd Respondent to Mr WJ which on its face appears to give Mr WJ clear authority to engage Z Firm on behalf of S Pty Ltd was in the relevant part a forgery. I observed that I was told this immediately after Mr M Rand (the husband, who was present in Court) appeared to give Mr Milanovic instructions in response to Mr Z’s tender of the supposed email. The allegation of forgery was then somewhat reservedly withdrawn and Mr Milanovic told me that C Pty Ltd could not say whether or not the document is a forgery until Mr Rand could give instructions and that the claim of forgery had been made with undue haste because the email had taken those acting for C Pty Ltd by surprise. Mr Z then tendered Exhibit “B” which on its face indicates that the email had been sent to the solicitors then acting for C Pty Ltd and the Rands on 3^rd June 2009 by the solicitors acting for the Liquidator.

23. Mr Milanovic’s submission on behalf of C Pty Ltd to the effect that C Pty Ltd has filed its points of claim to some degree follows paragraph 7 of his instructing solicitor’s affidavit of 20 August 2010 on which C Pty Ltd relies. On the face of paragraph 7, this submission can be seen for what it really is, a disingenuous confection which relies on semantics rather than facts which might be relevant.

24. What is submitted is that on 16 July 2009 a Notice Disputing Itemised Costs Account was filed in Court and that annexure “CA1” to it is the points of claim filed in response to my order. This is a ridiculous claim. It should not have been made by Mr Milanovic. My order was made on 29 March 2010 so the documents of 16 July 2009 could not be in compliance with it. Before the affidavit of 20 August 2010 was sworn, it had not been stated or suggested that “CA1” would be relied on as the points of claim. The order was made on 29 March 2010 after Mr Z addressed me about the reasons why the Deputy Registrar might have referred the taxation of the bill of costs back to me without taxing it. It was said by Mr Z that the Deputy Registrar may have decided he could not tax the bill before issues over liability and apportionment of the liability under the bill were decided by the Court and that I might need to make a determination on who instructed him and in what circumstances; meaning really, on behalf of whom was the firm of Z Firm instructed. He then clearly made the point that before the Court could decide this “they (meaning C Pty Ltd) should file and serve all the material they wish to rely upon, give me an opportunity to respond”. It is because of this submission that I made the orders for the filing by C Pty Ltd of its points of claim and affidavit evidence in support. Mr Milanovic was present at the time. He was Mr Grieve’s junior in the disputes the Rands and C Pty Ltd have with the Liquidator, but he was acting without a leader in the Z Firm dispute on this day.

25. Mr Milanovic addressed me after Mr Z sought to have C Pty Ltd file and serve the material in support of its claim against his firm but made no suggestion that points of claim had been filed or that they should not be filed and accompanied by the evidence relied on. Instead, he sought orders and the issue of subpoenas which would assist C Pty Ltd to file its points of claim and evidence in support of its case that the Liquidators should not have admitted Z Firm’s proof of debt. There is no doubt that Mr Milanovic agreed with the order that his client file its points of claim within 28 days, file any fresh affidavits to be relied on within that time and inform Mr Z of the affidavits which have already been filed on which C Pty Ltd will rely. The transcript pp 13 to 18 inclusive could not leave anybody in doubt about the situation or that, on 24 May, the matter was intended to be mentioned to obtain a date for hearing and determination before the taxation could be finalised. On p 19 of the transcript at point 30 Mr Milanovic said, in effect, that although he felt his client could comply within 28 days he was concerned that a bank might not answer a subpoena his client intended to serve on it in time, so that might cause delay in filing and serving the points of claim and affidavit evidence.

1. I reject the claim that Annexure “CA1” to the Notice Disputing Itemised Cost Account filed 14 September 2009 is in answer to Order 3. made on 29 March 2010. It is a claim which reflects badly on Mr Milanovic and his instructing solicitor, Mr Elias.

2. It follows from the above that it was also made clear on 29 March 2010 that there would be a hearing before taxation of the issues over the authority of Mr WJ to instruct Z Firm on behalf of S Pty Ltd and whether the solicitors were instructed by Mr WJ and/or H Firm rather than or as well as S Pty Ltd; issues which should be decided before taxation. Thus, the claim that the points of claim could not be filed until taxation is baseless.

3. On 24 May 2010 when Mr Grieve QC appeared with Mr Milanovic for C pty Ltd against Z Firm, Mr Z did not appear. Mr Grieve erroneously told me that because I had sent the matter back to the Deputy Registrar to be taxed and it had not been taxed the matter could not be set down for hearing. Mr Z was not present to correct him. Mr Milanovic was and should have done so. My response was ambiguous because I was interrupted before finishing it. Either I intended to say that the taxation should not be undertaken until the issue of authority and the identity of the client or clients were resolved by the Court or I intended to say that the hearing which was intended to be set that day should not be set until the taxation was complete. I was interrupted by Mr Cotman SC. He had no direct interest in the Z Firm proceedings but interrupted me in order to correct Mr Grieve’s erroneous understanding. I actually said (at p.7.20 of the transcript of 24 May 2010) “My understanding is that nothing can be done until” and did not complete what I wished to say. This could easily have been understood by Mr Grieve, Mr Milanovic and Mr Elias to indicate that I held the view that no hearing should take place before the taxation. Mr Grieve, if he had not read the transcript for 29 March, could not know whether I was intending to say nothing was to be done about filing the points of claim until the taxation was complete or nothing should be done about the taxation until the issues about liability for the solicitor’s costs had been decided. Mr Cotman’s interruption was intended to correct the misconception Mr Grieve had expressed. He did not correct Mr Grieve bluntly enough. I then must have erroneously assumed that what Mr Grieve had said was correct.

4. I should say I have no doubt that Mr Grieve’s error was inadvertent. I am not as sure about Mr Milanovic’s failure to correct Mr Grieve. He should have known that I listed the matter on that day because I intended to undertake the hearing of the authority issue first because taxation should not be completed without resolving who Z Firm was really acting for in relation for each item of work it had charged for. Mr Elias should also have known this. So should I. I either forgot what I intended or became confused. I did not have a transcript of 29 March. I should not impose a higher standard on Mr Milanovic or Mr Elias than I was able to meet. If I was misled, it was probably innocently. I erroneously stood the hearing of the liability issue over to a date to be fixed once enquiries as to the time frame for completing the taxation could be made. This was an error on my part, one which probably has been sufficiently misleading to those acting for C Pty Ltd to warrant the belief that they did not have to file and serve the points of claim and evidence in support which were ordered on 29 March 2010. In view of this, I should not dismiss the Application in a Case filed on 17 June 2009.

5. It is not necessary to canvas the final ground relied on by C Pty Ltd. I am in no position to know whether or not there is substance in the suggestion that evidence relied on by Mr Z to establish his instructor’s identity is a forgery, but if this allegation is persisted with it is a very strong reason why the points of claim and evidence in support of C Pty Ltd’s case is disclosed within a reasonable time.

6. No attempt has been made to file points of claim or to inform the Court and Mr Z of the ambit and nature of the claim that S Pty Ltd is not liable for Z Firm’s costs or of the evidence which is to be relied on by C Pty Ltd. Nor has any indication been given about when points of claim  could be filed and served or when Z Firm could be given notification of the affidavit evidence to be relied on. Because of the overall conduct of the litigation and my finding about the 3^rd Respondent in relation to his absence in the proceedings between C Pty Ltd and the Rands and the Liquidator, there is the possibility that delay is at the heart of the continuing failure to file and serve points of claim and evidence in support. As I am still of the view that the authority issue ought to be decided before taxation can be completed. I am also of the view that I should minimise further delay, whether it has been innocent or deliberate. I should extend the time for filing and serving the points of claim together with all affidavit evidence in support to 21 days from the date of this judgment.

7. In taking this course I am aware that Mr Rand may still not be in Australia and that will make it more difficult for C Pty Ltd to comply with my order. I have still not been told if he has returned to Australia or, if he has not, when he will return and why, if it is the case, that he cannot give instructions and send and receive documents by the modern means of communication that should be available. I have already found his attitude to litigation and the needs of the parties and the Court to be inappropriate. I have been told by Mr Milanovic that the husband, Mr Rand junior, is a director of C Pty Ltd. He has been present in Court on all occasions I have dealt with the Z Firm matter. On the hearing of this matter, he was active in giving instructions about facts to Mr Milanovic and his instructing solicitor. In any event, there has been no acceptable excuse put forward for Mr Rand’s continuing unavailability, if that is the case, or for the continuing failure to inform the Court and Z Firm of the case C Pty Ltd seeks to make against Z Firm. For added certainty, I shall specifically limit the points of claim to the dispute over whether or not Z Firm was validly engaged to act for S Pty Ltd, whether that firm was acting for another or others instead of or in addition to S Pty Ltd in relation to the costs that it has charged and has claimed from S Pty LTd and to any issue as to sharing of costs between S Pty Ltd and another or others.

8. I shall make orders which accord with the above.

I certify that the preceding thirty three (33) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cohen delivered on 29 October 2010.

Associate:     

Date:              29 October 2010