New South Wales Supreme Court CITATION : Callite Pty Ltd v Peter John Adams & 3 Ors [2001] NSWSC 52 revised - 16/02/2001 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 4619/00 HEARING DATE(S) : 12/02/01 JUDGMENT DATE : 12 February 2001 PARTIES : Callite Pty Ltd (ACN 067 596 909) (Plaintiff) Peter John Adams, Michael Wayne Tiyce, Jennifer Pamela Fraser and Joseph Mazurkiewicz carrying on in practice under the firm name of Adams & Partners Lawyers (Defendants) JUDGMENT OF : Santow J COUNSEL : P Walsh (Plaintiff) J K Chippindall (Defendants) SOLICITORS : M D Nikolaidis & Co (Plaintiff) Adams & Partners (Defendants) CATCHWORDS : CORPORATIONS — Application to set aside statutory demand — Mandatory requirements for supporting affidavit — Failure of affidavit to comply with Corporations Rules not fatal — Public policy as basis for setting aside statutory demand under s459J(1)(b). Corporations Law s459G s459J(1)(b) Corporations Law Rules cl 2.4(2) LEGISLATION CITED : Legal Profession Act 1987 (NSW) s175 s182 s192 Legal Profession Regulations 1994 Regulation 22A CASES CITED : Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452 Jarena Pty Ltd v Scholl Nicholson Pty Ltd (1996) 19 ACSR 425 DECISION : Plaintiff's application is granted pursuant to s459J(1)(b) of the Corporations Law. REVISED — 16 February, 2001 IN THE SUPREME COURT OF NEW SOUTH WALES IN EQUITY SANTOW J No. 4619/00 CALLITE PTY LTD (ACN 067 596 909) Plaintiff PETER JOHN ADAMS, MICHAEL WAYNE TIYCE, JENNIFER PAMELA FRASER and JOSEPH MAZURKIEWICZ carrying on in practice under the firm name of ADAMS & PARTNERS LAWYERS Defendants JUDGMENT — ex tempore 12 February 2001 INTRODUCTION 1 This is an application to set aside a Statutory Demand. The relevant facts are largely set out in a Statement of Agreed Facts appended below. Essentially the Defendants, a firm of solicitors have issued a Statutory Demand against the Plaintiff company. It is in respect of fees charged for legal work purportedly done by the Defendants in relation to the Plaintiff's development. 2 The Plaintiff applies to set aside that Statutory Demand, purportedly pursuant to s459G of the Corporations Law. In the end, the dispute in relation to that application is twofold: (a) is the application and in particular the essential affidavit said to support it, in compliance with s459G of the Corporations Law , and (b) if yes, should the Statutory Demand be set aside either on the basis either that there is a genuine dispute, or alternatively that the Court is satisfied that, in terms of s459J(1)(b) "there is some other reason why the demand should be set aside." STATEMENT OF AGREED FACTS "1. The plaintiff is a developer, having its registered office at 22 Hunter Street, Parramatta. 2. The defendants are a firm of solicitors practising at Penrith. 3. The plaintiff employed the solicitors for it on the sale of certain home units situated at Chapman Street, Werrington near Penrith. 4. The defendant acted on the sale of some seven of the units and were paid their fees on such sales and they had instructions from the plaintiff to act on the sale of the remaining seven units. 5. The defendants had incurred costs and expenses for acting in such transactions. 6. the defendants also acted for certain of the purchasers of the units. 7. Disputes arose between the plaintiff and the purchasers as to the completion of the sales and the defendants found themselves in a conflict of interest and declined to act further. 8. The plaintiff, through its agent Bruce Oakland uplifted the defendants' files and passed them to other solicitors on 29th September. 9. The said Bruce Oakland was handed memoranda of costs and disbursements which are annexure "A" to the affidavit of George Kekatos and tendered to the defendants a cheque for the total of such memoranda totalling $5,197.20. The cheque was not honoured on presentation. 9A. The Plaintiff engaged other solicitors to undertake and complete the conveyances. 10. On 23rd October 2000 the plaintiff caused to be served upon the defendant a notice being a notice pursuant to Section 459 of the Corporations Law which was verified by an affidavit of Joseph Mazurkiewicz. The notice and its affidavit were regular in form and complied with the Rules and such notice was served by registered post on 23rd October 2000 addressed to the plaintiff at his registered office. 11. On 15th November the plaintiff served upon the defendant an application under s459G of the Corporations Law and an affidavit in support which are filed in the proceedings served in time. 12. There was no cost agreement between the plaintiff and the defendants. 13. No fee disclosure was made from the defendants to the plaintiff, but previous conveyancing bills in relation to the relevant development have been paid. 14. Whether the legal costs were agreed to be paid is in dispute. 15. There has been no assessment of the legal costs." 3 For present purposes I need only deal with the sole affidavit relied upon as complying with s459G(3), namely the affidavit of Mr George Kekatos of 15 November 2000. 4 Various contentions were advanced as to the claimed deficiencies of that affidavit. This is in terms of whether it constituted sufficient disclosure of facts showing there is a genuine dispute between the parties for purposes of s459H(1)(a), or whether it otherwise could ground an application to set aside the demand, pursuant to s459J(1)(b). 5 The first of these grounds of attack can be quickly dismissed. It is that the affidavit failed, as indeed it did, to contain the annexed company search as now required by the Corporations Law Rules cl 2.4(2). It is clear that while non-compliance with the Corporations Law Rules is a matter for the Court to consider in determining whether or not to grant any dispensation, that question is quite distinct from whether the affidavit meets the description in s459G(3); that is to say, is it "an affidavit supporting the application" in the sense usefully explained in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452 per Sundberg J at 459. That exposition described the degree of particularity required in terms that it might read like a pleading, in which only the ultimate facts are required, not the evidentiary facts to establish those ultimate facts. That pleading need not itself be a model of precision so long as those ultimate facts sufficiently appear expressly or, it may be by necessary implication. Nor, I would add, are propositions of law required to be pleaded. 6 To omit such a company search is in that sense hardly to fail to provide, in a form that might read like a pleading, the basis for there being a genuine dispute. 7 On the other hand, I agree with the Defendants that this affidavit fails to provide those ultimate facts as would substantiate a claim based upon s182 of the Legal Profession Act 1987 (NSW) ("the Act"). It provides as follows: "(1) If a barrister or solicitor fails to make a disclosure to a client in accordance with this Division of the matters required to be disclosed by section 175 in relation to costs, the client need not pay the costs of the legal services unless the costs have been assessed under Division 6. (2) A barrister or solicitor who fails to make a disclosure in accordance with this Division of the matters required to be disclosed by section 175 or 176 in relation to costs may not maintain proceedings for the recovery of the costs unless the costs have been assessed under Division 6." 8 In particular, nowhere in the relevant affidavit are to be found the ultimate facts that would allow the legal conclusion to be drawn that there was no fee disclosure for the purposes of s175 of that Act. Nor, even inferentially, can one safely derive from the affidavit the conclusion by way of ultimate fact that there was no costs agreement. That Mr Kekatos' subsequent affidavit of 13 December 2000 purported to fill the latter gap in para 12 is nothing to the point. For that was not the affidavit relied on to conform to s459G. Later affidavits cannot fill such a gap in ultimate fact. 9 The remaining basis sought to be relied upon in the affidavit of 15 November 2000 is paragraph 9 below: "9. I have not received any accounting for the work the Solicitors had undertaken on behalf of the Plaintiff until requests were made of me following which I received accounts, copies of which are annexed hereto and marked collectively with the letter 'A'." 10 While hardly a statement of pellucid clarity, it does state what accounts were received. Moreover, they are themselves attached to the affidavit. They can be taken to be all the relevant accounts from the wording of para 9. A perusal of those accounts shows their lack of prescribed statutory content. That in turn provides sufficient basis of ultimate fact to enable consequential legal conclusions to be drawn. These consequential conclusions are as follows: (i) as required by s192 of the Act, bills of cost must comply with the Act and proceedings for recovery may not be commenced or maintained unless 30 days have passed in which the bills for those costs have been given in accordance with its direction; (ii) regulations may make provision for the form of and particulars to be included in bills of cost; (iii) mandatory requirements of Regulation 22A made under the Legal Profession Regulations 1994 require a description of work done, the period over which the work was done, the identity of the persons who did the work and their positions, the basis on which calculated or charged such as hourly rate, and the facts relied on by way of skill, labour and complexity to justify the charges; see paras (d) to (h) of Regulation 22A. Para 9 coupled with the annexed legal accounts establishes as an ultimate fact that the actual content of those accounts failed to include the mandatory information in (iii) above. 11 True it is the affidavit does not explicitly point out that those omissions occurred. But it does not need to do so since, self-evidently from a perusal of the annexed accounts, they lack those mandatory inclusions. 12 The legal consequences which follow are not required to be pleaded in such an affidavit. But they lead inexorably to the point where s459J(1)(b) of the Corporations Law is invoked as it was in Jarena Pty Ltd v Scholl Nicholson Pty Ltd (1996) 19 ACSR 425. There, Heerey J concluded that, though a statutory demand is not of itself "a proceeding to recover the costs", nonetheless as a matter of public policy the corresponding provision of the Victorian legislation should not be capable of being "effectively bypassed by utilising winding-up proceedings" (at 427). Therefore the demands were set aside on the basis that this public policy concern constituted "some other reason" for purposes of s459J(1)(b) of the Corporations Law. 13 In the present case, essentially the same legislative provision in the Act gives rise to the same consequence in terms of public policy. Accordingly, I would conclude that the statutory demand should be set aside under s459J(1)(b) of the Corporations law. I am satisfied that the relevant application with its accompanying affidavit was one which could properly be described as being "under s459G", despite the affidavit's deficiencies in other respects earlier identified. ORDERS AND COSTS 1. The Plaintiff's application of 15 November 2000 is granted pursuant to s459J(1)(b) of the Corporations Law . 2. The Defendants to pay the Plaintiff's costs. ******* Last Modified: 01/03/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.