New South Wales Supreme Court CITATION : Knox Street Apartments v Roger Percival Flexman & ANOTHER [2002] NSWSC 102 FILE NUMBER(S) : SC 1212/02 HEARING DATE(S) : 22 February 2002 JUDGMENT DATE : 28 February 2002 Knox Street Apartments PARTIES : Roger Percival Flexman Phillipa Margaret Flexman JUDGMENT OF : Gzell J at 1 COUNSEL : Mr B Coles QC and Mr G A Sirtes for the Plaintiff Mr D A Smallbone for the Defendant SOLICITORS : Mr LM S Pozniak for the Plaintiff Mr K A Bagley for the Defendant CATCHWORDS : Challenge to retainer of plaintiff's solicitor's - onus of proof - action instituted by solicitor on instructions by donees under power of attorney - no resolution of Board of Directors - power of attorney given under joint venture agreement - construction of power of attorney - refusal of leave to solicitor retained by directors to enter an appearance - rival claim to retainer noted. LEGISLATION CITED : Real Property Act 1900 Morgans Hill Gold Mining Co v Briscoe (1887) 8 NSWR 123 Harry s Bagg's Liquidation Warehouse Pty Ltd v Whittaker (1998) 44 NSWLR 421 A W & L M Forrest v BEamish (1998) 146 FLR 450 CASES CITED : Adams v London Motor Builders [1921] 1 KB 495 Halliday v Sacs Group Pty Ltd (23 December 1992, unreported) Halliday v High Performance Personnel Pty Ltd (1993) 113 ALR 637 Imray v Griffin (1889) 10 NSWR 114 Atkinson v Abbott (1855) 3 DREW 251 (61 ER 899) DECISION : Motion dismissed; See para 26 - 10 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION Gzell J 28 February 2002 1212/02 Knox Street Apartments Pty Ltd v Roger Percival Flexman & Anor JUDGMENT 1 GZELL J: Before the court is a summons in the name of Knox Street Apartments Pty Ltd seeking declaratory relief, specific performance, injunctive relief for the removal of caveats and damages under section 74P of the Real Property Act 1900 against Roger Percival Flexman and Phillipa Margaret Flexman. The summons was signed by Leslie Michael Steven Pozniak as the plaintiff's solicitor. 2 The defendants filed a notice of motion against Mr Pozniak and the plaintiff seeking an order that the proceedings be dismissed with costs against Mr Pozniak. In correspondence between Mr Pozniak and the solicitors for the defendants, Mr Pozniak stated that he held a retainer to act for the plaintiff pursuant to a joint venture agreement of 7 December 2000 and a power of attorney executed pursuant thereto of 8 December 2000. The solicitors for the defendants challenged Mr Pozniak's retainer to institute the proceedings before the court. 3 Joseph Esber swore an affidavit in support of the motion. He is a director and 50% shareholder in the plaintiff. The other director and shareholder is his brother Marcel Esber. Mr Joseph Esber stated that he swore the affidavit with the approval and knowledge of his brother. The plaintiff, he said, had at no time issued instructions to or engaged on retainer Landra and Co. Solicitors by which firm Mr Pozniak is employed. 4 Prior to the completion of the sale of lots in a strata plan for a development at Knox Street, Chippendale ('Development'), the plaintiff was the registered proprietor of all the Development land. It was subject to a registered first mortgage in favour of Mortgages Queensland Pty Ltd and to a second registered mortgage in favour of Residential Housing Corporation Ltd. 5 On 22 January 1999 the plaintiff entered into an agreement with the defendants agreeing to sell 6 specified lots in the Development to the defendants for $774,000.00 satisfied by the extinguishment of a prior debt and the set-off of agreed compensation for loss of a deposit. 6 The plaintiff defaulted under the first and second mortgages and in October 2000 entered into a joint venture with B J Metro Pty Ltd ('Metro') which was to make good the plaintiff's default and have the finance facilities restored. After discharge of the two mortgages and repayment of any moneys lent by Metro, it was to receive $2 million, the balance passing to the plaintiff. 7 In November 2000 the plaintiff, the defendants and the brothers Esber executed a deed whereunder the contracts with respect to 3 of the specified lots in the Development were rescinded and it was agreed as follows: 'Knox agrees to do all things necessary and execute all instruments to effect the transfer of the unencumbered title of units in the Remaining Contracts to Flexman on registration of the strata plan for which transfer the aforesaid sum of $774,00.00 shall be the total consideration. Such transfer will only be effected after the Mortgages registered upon the property as set out in Schedule C hereto being paid out in full; B J Metro Pty Limited being paid in full for all money advanced by that company in respect of the Joint Venture together with the contract price payable to that company for the building work done under the Joint Venture, and upon B J Metro Pty Limited receiving in full the profit share of $2,000,000.00 under paragraph 12 of the annexed Joint Venture Agreement. Flexman acknowledges and agrees that in order to pay sums owing to the mortgagees, and sums owing to B J Metro Pty Limited and the profit share of $2,000,000.00 it may become necessary for all or any of units 27, 56 and 58 to be sold prior to the transfer of those units to Flexman. However, the Esbers covenant and undertake to make every endeavour to procure the unencumbered transfer of the properties subject of the Remaining Contracts even to the extent of including but not limited to purchasing the properties, the subject of the Remaining Contracts at any auction or auctions as foreshadowed by clause 16 of annexure "B" contributing funds from their own monies to enable discharge of the aforementioned obligations to Metro. Furthermore, Knox and the Esbers covenant with Flexman to use their best endeavours to procure the consent of Metro to refrain from a sale of any and all of the properties the subject of the Remaining Contracts by private treaty as aforesaid in clause 16 of annexure "B". Flexman acknowledges and agrees to withdraw his Caveat in the event of an inevitable sale of any or all of properties in the Remaining Contracts and will not do anything or commence any claim or action which might impede any such sales proceeding.' 8 In December 2000 a joint venture agreement was entered into between Kimberley Securities Limited ('Kimberley'), the plaintiff and the brothers Esber. Kimberley was appointed development manager and agreed to co-ordinate the overall Development. In particular, it agreed to supervise and co-ordinate marketing arrangements and exchange and completion of contracts for sale of strata title lots forming part of the Development and to co-ordinate discharges of mortgage in respect of the Development with the project and construction financier. The joint venture agreement acknowledged the arrangements between the defendants, the plaintiff and the brothers Esber with respect to 3 specified lots in the Development. The plaintiff and Kimberley agreed that these lots would not be marketed or sold unless and until in their reasonable opinion there would not be enough proceeds from the sale of lots to pay out all the mortgages unless those lots were sold. The agreement provided that after payment out of the first mortgage, the second mortgage, any sums advanced by Kimberley including $2 million being the fee due and payable to Kimberley for its participation in the joint venture and the payment of all unsecured creditors, the plaintiff would be entitled to the next $3 million and the balance, if any, would be divided equally between the plaintiff and Kimberley. The agreement provided that simultaneously with its execution the plaintiff would execute a power of attorney. 9 On the same day the plaintiff, Kimberley and the brothers Esber executed a deed of loan and guarantee whereunder Kimberley agreed to advance funds to the plaintiff. The deed provided that the plaintiff should pay to Kimberley a fee of $2 million. On the same day the plaintiff executed a mortgage over the Development land to secure repayment of moneys due and owing under the deed of loan and guarantee. 10 The power of attorney was executed by the plaintiff the next day. It was granted in favour of two individuals jointly and severally. By its terms the plaintiff irrevocably appointed the attorneys as its attorney to sell and transfer the lots in the proposed strata plan for the Development: 'and otherwise attend to all such matters and things as are to be carried out or are envisaged as being attended to by the Attorney pursuant to the Joint Venture Deed…..and matters ancillary thereto including but not limited to the power to: 1.1 make application to the local council for any necessary building and/or development approvals or variations thereto; 1.2 execute any contract, transfer, notice of sale or other document associated with the sales of any or all of the lots to be comprised in the Property ("the lots") such powers to extend (without limitation) to the matters referred to in the Fourth Schedule.' 11 The Fourth Schedule provided that the contract terms must be in accordance with the requirements of the joint venture agreement. 12 Two days before the joint venture agreement was executed, the solicitors for the defendants wrote to the solicitors for the plaintiff and Metro advising that their clients agreed to substitute the joint venture agreement in place of the one with Metro. In the period between this letter and the execution of the joint venture agreement, the solicitors for the defendants consented to the registration of a third mortgage by Kimberley. 13 Kimberley asserted that the expenses of the Development could not be met without third party sales of the 3 specified lots within the Development and called on the defendants to remove their caveats. The defendants refused alleging that the $2 million fee was not payable until after settlement of the contracts for sale of the 3 lots to them. Contracts of sale of the 3 lots to third parties having been executed in the name of the plaintiff by the attorneys with dates of completion which have already expired, the attorneys retained Mr Pozniak to initiate these proceedings in the name of the plaintiff. There was no resolution by the brothers Esber as directors of the plaintiff approving this course. 14 Counsel for the plaintiff sought to read in opposition to the defendants' motion an affidavit sworn in other proceedings which, for convenience, were heard concurrently with the defendants' motion. Counsel for the defendants objected on the ground of relevance and I reserved my decision. The affidavit goes to the whereabouts of a solicitor's file with respect to the sale of a lot in the Development consequent upon the withdrawal of her instructions to act on behalf of the plaintiff by Mr Joseph Esber. I agree with Counsel for the defendants that that issue is irrelevant for present purposes and I do not grant leave to read it in these proceedings. 15 Counsel for the defendants submitted that the onus was on Mr Pozniak to prove his authority. In Morgans Hill Gold Mining Co v Briscoe (1887) 8 NSWR 123 a solicitor who had acted for the plaintiff company on previous occasions refused to accept service of a writ issued by the defendants but on the defendants taking further proceedings, he filed a claim in the name of the plaintiff company and obtained an ex parte injunction. On the motion to continue the injunction the defendant challenged the retainer of the solicitor. On appeal it was held that the defendants had a right to call on the solicitor to produce his authority and as he had failed to do so the injunction must be dissolved. In Harry S Bagg's Liquidation Warehouse Pty Ltd v Whittaker (1998) 44 NSWLR 421 at 430 Powell J said that the onus of establishing a retainer would seem to lie on the company or on the solicitor on the record for the company. Young J followed this authority in holding that the onus is on the solicitor in A W & L M Forrest Pty Ltd v Beamish (1998) 146 FLR 450. 16 On the other hand, in Adams v London Motor Builders [1921] 1 KB 495 Bankes LJ at 500 and Atkin LJ at 502 put the onus on the party asserting a lack of authority. Those decisions were followed by Dawson J in Halliday v Sacs Group Pty Ltd (23 December 1992, unreported) is authority for the proposition that the applicant bears the onus of establishing the absence of a contract of retainer, a view endorsed by Mason CJ in Halliday v High Performance Personnel Pty Ltd (1993) 113 ALR 637 at 639. Counsel for the plaintiff also announced their appearance for Mr Pozniak. Mr Coles QC, Senior Counsel for the plaintiff and the solicitor submitted that it was unnecessary for me to resolve this conflict because on any view Mr Pozniak had authority to institute the proceedings in the name of the plaintiff. In view of the conclusions I have reached in this matter, it is unnecessary for me to resolve this apparent conflict. 17 Counsel for the defendants submitted that by causing the attorneys to commence proceedings in the name of the plaintiff, Kimberley avoided all the problems it would have had had it commenced an action against the plaintiff and the defendants. That may be a consequence of the present proceedings but it does not, in my view, advance the case on the motion. 18 Counsel's central submission was based upon Bowstead on Agency, 16th ed at 110-111. A power of attorney is strictly construed and is interpreted as giving only such authority as it confers expressly or by necessary implication. Where authority is given to do particular acts followed by general words, the general words are restricted to what is necessary for the proper performance of the particular acts. 19 Mr Coles QC submitted that the authorities for the proposition deal with issues between principal and agent and a different approach to construction might emerge with respect to action between the donee of the power and a third party. In my view, however, a strict interpretation of the power of attorney in this case justifies the initiation of the proceedings which are directed to obtaining a clear title in order to complete a sale of the 3 specified lots in the Development to third parties which, on the plaintiff's case, arose by reason of the failure of other proceeds of sale to cover the costs of the Development including the $2 million fee or profit to Kimberley. 20 The fact that the defendants challenge the assertion that the costs of the Development include the $2 million is not to the point with respect to the motion. That is an issue for the substantive proceedings. 21 The attorneys were appointed to sell and transfer the lots under the strata plan of the Development and otherwise attended to all matters to be carried out under the joint venture deed. Counsel for the defendants submitted that this power was defective because it was limited by the following words "or are envisaged as being attended to by the Attorney" and there were few tasks which the joint venture agreement assigned to the attorneys. In my view, however, the power relates to matters and things to be carried out pursuant to the joint venture agreement and matters or things envisaged as being attended to by the attorneys pursuant to the joint venture agreement. The joint venture agreement provided that Kimberley should supervise and co-ordinate marketing arrangements and exchange and completion of contracts for sale of strata title lots forming part of the Development. The achievement of this object was within the authority of the attorneys either under their authority to sell the lots under the strata plan or to attend to all such matters and things that are to be carried out pursuant to the joint venture agreement. In order to be able to complete the sales of the 3 specified lots in the Development to third parties, Kimberley required the caveats to be lifted in accordance with the contractual right it had under the joint venture agreement with Metro, on its case. 22 Counsel for the defendants said he was not aware of any case in which a power of attorney was construed to extend to initiating suits and that one should be slow to so interpret the power of attorney in this case. Halliday, supra, is authority for the proposition that the authorisation of the insurer under an ordinary contract of insurance to take over the conduct of proceedings in the name of the insured is sufficient authority to enable the insurer to institute proceedings in the name of an insured company. Kimberley claims an analogous contractual right under the power of attorney and the provisions of the joint venture agreement. 23 Reference was made to Imray v Griffin (1889) 10 NSWR 114 in which the plaintiff, upon retiring from a partnership upon its dissolution, assigned the benefit of a contract with the defendant to his former partners. The plaintiff had given a power of attorney to his new partner authorising him to act in respect of any legal proceedings in which the plaintiff might be interested or concerned. When the plaintiff's former partners proposed to commence action against the defendant under the contract, the solicitors retained by the former partners to commence the action against the defendant had communications with the plaintiff's new partner consequent upon which they issued proceedings against the defendant in the name of the plaintiff as well as his former partners. My attention was drawn to a passage in the judgment of Windeyer J at 119 in which his Honour observed that the power of attorney did not authorise the taking of the proceedings in the name of the plaintiff because it was limited to proceedings in which the plaintiff was interested or concerned and the plaintiff was no longer interested or concerned in the action by his former partners against the defendant. That was a matter of construction of the limited terms in which the power was expressed. In any event it was held that the solicitors were entitled to use the name of the plaintiff in the proceedings because a partner can use his co-partner's name, the right being reserved to the latter to come in and ask for security for costs. 24 I was also referred to Atkinson v Abbott (1855) 3 Drew 251 (61 ER 899) in which the retainer of a solicitor to proceed against executors to compel probate of a will and to take such other proceedings for obtaining an accountant as might be necessary did not extend to the commencement of fresh proceedings for an account 3 years after the obtaining of probate and an account regarded by the solicitor as insufficient. I find little assistance in this case which turned upon quite different circumstances from those with which I am concerned. 25 Counsel for the defendants raised other issues with respect to the proper construction of the joint venture agreement such as the lack of evidence of agreement by the plaintiff with Kimberley that the proceeds were insufficient to pay out all the mortgages, that the reference to "mortgages" should be limited to the first and second mortgages as the only registered ones at the time of execution of the joint venture agreement. Like the argument as to when the $2 million becomes payable to Kimberley, these matters are germane to the substantive proceedings but do not, in my opinion, advance the defendants' cause under the motion. 26 At the time of hearing the motion, I entertained at the same time a summons by Kimberley and the attorneys against the brothers Esber which, as I have said, relates to the security of a solicitor's file with respect to the sale of a lot under the strata plan for the Development. I gave leave to Mr Lynch an employed solicitor with Beswick Solicitors to file in court a notice of appearance for Joseph Esber in those proceedings. Mr Lynch also sought leave to file in court a notice of appearance on behalf of the plaintiff in the proceedings in which the defendants brought their motion. I refused leave but noted that Beswick Solicitors asserted a retainer on behalf of the plaintiff. In view of the interpretation I place on the power of attorney, an asserted rival retainer by the plaintiff does not destroy the authority of the attorneys to institute and maintain the present proceedings. 27 I conclude that the attorneys had authority to institute the substantive proceedings in the name of the plaintiff. I dismiss the motion. I order the defendants to pay the plaintiff's costs. ooOoo Last Modified: 12/03/2002 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.