Pritchard Associates v Stevenson & Anor [2002] NSWSC 333

New South Wales Supreme Court

CITATION : Pritchard Associates v Stevenson & Anor [2002] NSWSC 333 CURRENT JURISDICTION: Common Law Division FILE NUMBER(S) : SC 11597 of 1997 HEARING DATE(S) : 4 - 8, 11 - 15 March 2002 JUDGMENT DATE : 23 April 2002

Pritchard Associates Pty Limited (Plaintiff) PARTIES : v David Stevenson (First Defendant) Harvey Wong (Second Defendant) JUDGMENT OF : Master Malpass

Mr I Wales SC (Plaintiff) COUNSEL : Mr R S Angyal (First Defendant) N/A (Second Defendant) Truman Hoyle (Plaintiff) SOLICITORS : Holman Webb (First Defendant) N/A (Second Defendant) CATCHWORDS : Claim for consulting services against partners - identity of parties to retainer - general legal services proper law of retainer - quantum of claim. LEGISLATION CITED : Legal Profession Act 1987, s 48E. CASES CITED : N/A DECISION : See Paragraphs 85 - 112.

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

Master Malpass

TUESDAY 23 APRIL 2002

11597 of 1997 Pritchard Associates Pty Limited v David Stevenson & Anor

JUDGMENT 1 Master Malpass: These proceedings have had a long and troubled history. Some years ago, the plaintiff obtained default judgment against both defendants. The first defendant successfully applied to have the judgment entered against him set aside on terms. The dispute between the plaintiff and the first defendant came on for hearing on 4 March 2002. The trial occupied 10 days. 2 The plaintiff's claim is as pleaded in the Amended Statement of Claim. The Defence is as pleaded in the Defence to Amended Statement of Claim. 3 The structure of the Amended Statement of Claim involves allegations of inter alia an offer to provide services, a conditional acceptance of that offer by the first defendant (upon the approval of Mr Michael Warren QC), the approval and an unconditional acceptance by both defendants. 4 Broadly speaking, the plaintiff's case is that it was retained by both defendants in about May 1996 to provide consultancy services in relation to the promotion of a forestry resource development project (the project) in the East and West Sepik Provinces of Papua New Guinea (PNG). It is alleged that the defendants were partners in relation to the promotion of the project. Curiously, there was no claim in the alternative for breach of warranty of authority. 5 The retainer has been described as involving an extremely complicated task. The project was regarded as being a huge one. 6 The terms of the retainer are pleaded in paragraph 5 of the Amended Statement of Claim and include terms as to hourly rates, the nature of the services to be performed, the payment of out-of-pocket expenses and the plaintiff entering into a confidentiality agreement. 7 It is alleged that pursuant to the retainer, services were provided and out-of-pocket expenses were incurred. A considerable part of the work was done whilst Mr Pritchard (the managing director of the plaintiff) was on leave (during the period 10 May to 22 July 1996) from Phillips Fox (a firm of solicitors). The services involved inter alia drafting a letter (re tax exemptions which were crucial to the project), drafting legislation and an agreement with the government of PNG and certain trust deeds. They also involved the employment of sub-consultants and travel to PNG. 8 It is common ground that a luncheon was had on 18 May 1996 during which discussion took place concerning inter alia the project and the retainer. In the version offered by Mr Pritchard inter alia representations were made by the first defendant as to the business activities of his family (including a representation in the terms "We are now working on a huge logging project in Papua New Guinea"). 9 By at least 20 May 1996, Mr Pritchard had become aware of an entity associated with the first defendant known as Tri-Pacific Trading Ltd (Tri-Pacific). It had an office in Vancouver. It was involved in the project in PNG. On 3 June 1996, Mr Pritchard says that he became aware of the entity San Kung Trading Limited (San Kung) which was said to be a company that the defendants were setting up in Guernsey. This he says took place during a telephone conversation with the first defendant, following the receipt of a facsimile from the first defendant on 2 June 1996. This facsimile sought the drafting of a "Tax letter to be provided by you to us for Ministry of Finance". The facsimile did not refer to San Kung. 10 Mr Pritchard also says that there was a telephone conversation had on 21 May 1996. He further says that during this conversation he was told that he would have to make an initial visit to Port Moresby to meet Harvey Wong and that the latter was represented to be "my partner" and "in charge of our office there" and that they were the only two partners (although they might bring in others later). 11 A facsimile from Pritchard Associates was transmitted to Tri-Pacific on 19 June 1996. It contained a retainer proposal. Mr Pritchard says that this was accepted during a telephone conversation had with the first defendant on 20 June 1996. He also says that he then became aware that payments would be coming from Guernsey. 12 On 20 June 1996, he says that he was told that there were funds in PNG and that an initial advance of $100,000 in kina could be paid. On 27 June 1996, an invoice for retainer fees for the Australian dollar equivalent of $100,000 kina was forwarded to San Kung. Such a payment was not made. 13 In July 1996, payments were made in the total sum of A$59,500 (a sum of $40,000 was paid by Christopher Wong (the son of the second defendant) and a sum of A$19,500 was paid by Seabed Marine Pty Limited). 14 The plaintiff rendered invoices (SK2, SK3, SK4 and SK6). The first was for fees and rendered on 7 August 1996 for a balance of US$219,227.50 (it gave credit for the earlier payments). This was for the period ended 31 July 1996. It is contended that what has been treated as the first agreement was varied on or about 10 August 1996 (what has been referred to as the second agreement) and that the plaintiff had agreed to accept a total sum of US$250,000 for all work carried out until 24 September 1996. The balance outstanding was to be paid as to a sum of US$154,185 forthwith and as to a further sum of US$50,000 on 1 September 1996. In addition, there was an offer to pay a success fee of US$200,000. The variation was reflected in SK3 (which replaced SK2). It was a Memorandum of Proposed Fees dated 13 August 1996. SK4 was a Memorandum of Proposed Fees dated 11 September 1996 for the balance of US$50,000 payable on 1 September 1996. It was expressed to be for the period ending 24 September 1996. On 12 September 1996, payment was also sought in respect of an amount of A$24,476.57 being out-of-pocket expenses (SK5). 15 On 17 September 1996, the sum of US$100,000 was paid on account of consultancy fees by Abacus Nominees. On 22 October 1996, the out-of-pocket expenses were paid. 16 On 14 November 1996, payment of further out-of-pocket expenses in the sum of A$12,117.72 was sought. This was forwarded together with a facsimile of the same date which referred to the outstanding moneys and provided an estimate of fees from that date to 24 December 1996. 17 On 12 February 1997, a request for payment of consultancy fees payable in respect of the period 25 September 1996 to 31 December 1996 in the sum of US$160,000 was made. 18 No further moneys have been paid. For completeness, I should mention certain other matters which occurred in respect of the payment of outstanding fees. There was a proposed retainer agreement with Tri-Pacific. It was not executed. There was also mention of involvement of Jardine Fleming in the project. This proved to be abortive. There was also mention of funds being generated from other PNG projects. This did not take place. 19 The plaintiff now seeks the recovery of two sums. The first is in the amount of US$264,185 and the second is in the amount of A$12,117.72. 20 It appears that the project needed to overcome a number of hurdles. It was vital to the project that tax and customs exemptions be obtained. It was sought to obtain them by changes to the law (rather than deal with the bureaucrats). The project received a blow when the Deputy Prime Minister (DPM), who had been a supporter, changed his mind and declined to introduce the proposed legislation into parliament. There was a difficult political climate. There were many political factions and changes of allegiance were rife. In 1997, there was a change of attitude and certain tax exemptions were almost obtained, but this further attempt to obtain tax exemptions was ultimately unsuccessful. They fell at the last hurdle (they were not gazetted). Finally, the creditworthiness of the developer came under attack and attempts to finance the project failed. The project collapsed in or about 1997. 21 The failure of the project seems to have generated disputes amongst involved parties. Apart from these proceedings, the defendants have been said to be in dispute with each other. Also, there was evidence of dispute between San Kung and Abacus (over unpaid fees). As could be expected in these circumstances, relevant entities have been dissolved and participants in the project left unpaid. 22 I now turn to the issues raised by the first defendant. There are a number of principal issues. It is said that Mr Pritchard of Phillips Fox was retained to provide legal services for San Kung. During submissions, the first defendant moved to the position of contending merely that the plaintiff had failed to prove any contract with him. It is said that the services provided constituted general legal work within the meaning of s 48E of the Legal Profession Act 1987 (the Act) and that the carrying out of such work by the plaintiff was prohibited. It is further said that there was breach of implied terms to that effect, the services were not carried out promptly and efficiently and that not all the time for which claims had been made was reasonably required for the purposes of the project. 23 A formidable body of material has been put before the court. Apart from the evidence of witnesses, there has been tender of a prolific volume of documentation (including the many project files and other written communications concerning the project). Largely, the documentation tendered on behalf of the first defendant was not material to questions concerning the relationships involving the defendants, San Kung and Tri-Pacific. 24 Mr Pritchard has been the only witness for the plaintiff. He has relied on his written statements and affidavits (together with exhibited material). He has given supplementary oral evidence and has been the subject of an inordinately long cross-examination (it extended over a period of about 5 days). The apparent objective was to destroy his credibility. 25 The first defendant has sworn two affidavits. He has given supplementary oral evidence and has been cross-examined. In addition, he has relied on an affidavit and a statement from F. Michael Warren QC and an affidavit from Mr Applegate. Mr Warren was cross-examined by means of video link. Mr Applegate is a solicitor and his evidence has been put forward in the capacity of an expert. He was cross-examined. An affidavit from the defendant's estranged wife (admitted on the basis that she would also be cross-examined by means of video link) was subsequently rejected following her not being available for cross-examination. Circumstances relevant to her unavailability may be found in an affidavit sworn by Mr Allsop. 26 This is a case in which the reliability and credibility of witnesses is a matter of utmost importance. The court has been presented with conflicting versions of various conversations (inter alia in respect of conversations had between Mr Pritchard and the first defendant). I have closely observed the demeanour of the witnesses whilst evidence has been given. In assessing reliability and credibility, I have had regard both to demeanour and evidence. 27 The plaintiff says that Mr Pritchard's evidence should be accepted. Contrary to this view, there has been an extensive and sustained attack on the credibility of Mr Pritchard by the first defendant. Numerous references to the transcript were given in submissions. Very serious allegations were made. It is said inter alia that he is a liar and a fabricator of evidence. There were also other allegations. I shall deal with these matters later in the judgment. 28 The reliability and credibility of the first defendant has likewise been the subject of an extensive and sustained attack. It has been conceded that the first defendant has not been frank (or was at least coy) in his evidence on matters of tax. He has been presented as being not a lawyer but a businessman whose major interest was timber. It is said on his behalf that generally his evidence should be accepted. 29 Mr Pritchard is a very experienced solicitor (admitted in 1965 and has been a partner in Arthur Pritchard & Co, Clayton Utz and Phillips Fox). A Curriculum Vitae is in evidence. There is also an affidavit which provides detail as to his qualifications and experience (he had prior experience with work in the forestry industry and in PNG). 30 He was a partner in the firm Phillips Fox from about 1991 until 1 October 1996. Thereafter, he continued his legal practice under the name of Pritchards International Legal Consultants. The plaintiff is a company which since 1988 has acted as a consultant on international investment. During the period that he was a partner with Phillips Fox, the business was conducted both from his office (at Phillips Fox), with the knowledge and consent of the firm, and at home. 31 The first defendant presents as a resident of Anguilla (a tax haven in British West Indies). In his passport his given permanent address is an office building in Vancouver. Mr Warren also gives his address as Anguilla. He was said by the first defendant to live "down at the end of the street". Both appear to have spent considerable time in Vancouver, Canada. Both have spent time in the United Kingdom. Both have given their occupation as "Businessman". 32 In his first affidavit, the first defendant merely gave "Anguila" as his address. In the second affidavit he gave the address "1 Landsome Road, Anguila" as his address. In oral evidence the address was given as "Seaview House, The Rocks, Anguilla". He said that he had leased this property for approximately five years. 33 He has not lived at 1 Landsome Road. It is said to be a mailing address. It appears to be an office building used by the Hansa Bank and Counsel Ltd. The latter has been the source for documents discovered by the first defendant. It is an entity of which the first defendant professes to have no knowledge. Mr Warren knew of it and believed that accounting records were sent to it by Tri-Pacific so that accounting functions could be performed. 34 The first defendant has said that the main attraction for him in Anguilla was that Mr Warren lived there and that they were working on a lot of different projects. 35 It appears that prior to the project, the first defendant had had an involvement in forestry development and management. His father had an involvement in a large construction company in Canada which had been responsible for substantial building work in Vancouver. At the time of the project, the first defendant had had considerable experience with various projects, corporate structures and tax havens. 36 There is a marked contrast between what appears in his affidavits and his presentation in the witness box. His affidavits present material which is expressed with the precision that could be expected from a lawyer (there are many examples including what is said in paragraph 3 of his second affidavit). This is sought to be explained away on the basis that it was drafted by lawyers and that what is presented is the effect of what was said. If that is the case, then it produces a most unsatisfactory state of affairs. The court is left to evaluate material which puts forward a lawyer's version and not a version containing words which were allegedly used by the first defendant. In any event, I do not regard such material as being reliable. 37 Neither Mr Pritchard nor the first defendant present themselves as note takers of conversations said to have taken place. Mr Pritchard has certain written records. Largely, they record topics rather than detail of conversations had and his material is in evidence. Whilst the first defendant may have made some notes (in a loose leaf diary), he has not discovered any of them and presumably has not used them in the preparation or presentation of his case. As opposed to Mr Warren (whom he described as "the legal note taker"), the first defendant said that it was not in his character to take notes. He said "I am just not a detailed guy". It may be added for completeness that there is no other evidence that Mr Warren either made notes or used them. His evidence is consistent with a lack of note taking concerning relevant conversations. 38 The defendants were the persons mainly in contact with Mr Pritchard concerning the project. There had been regular telephone communication with the first defendant in the May to August 1996 period (often there could have been numerous communications during the course of a day). Although he spent time in PNG, largely, during an earlier part of the retainer the first defendant was in Vancouver. He later moved to the United Kingdom. Largely, during the earlier period, he was the person mainly in contact with Mr Pritchard. The second defendant spent more time on the project. He was described as the man on the ground in PNG. He was the major contact during the later part of the retainer. Some contact was also had with others (including persons apparently involved in Tri-Pacific). 39 In his oral evidence, the first defendant said he was a small player in a big pond. He sought to present himself as a person without either the means or the intention to incur personal liability. Contrary to the presentation made in court, it is said that prior to the commencement of the proceedings the first defendant has presented himself as a member of a family in the venture capital business in Vancouver involved in developing and financing projects in Canada and elsewhere. Also, there has been a presentation that the family was a successful real estate development group in Vancouver and that they were in the logging business both in Canada and Belize. As previously mentioned, there was also the presentation as to the huge logging project in PNG. 40 At this stage, it is convenient to mention some other aspects of his conduct and evidence. 41 A memorandum of understanding was purportedly executed between San Kung and others (certain members of parliament who are described as elected leaders having the total support of owners whose land was to be developed by the project) on 9 May 1996 (a copy of it is RLP4). There was a ceremonial signing in the Sepik Province which had been organised for the local people. It was important and symbolic. The purported execution on the part of San Kung was effected by three persons (including the first and second defendants), none of whom had authority to do so. The first defendant signed as a director. The description he agreed was false. He did it, knowing that it was wrong. He expressed himself to be present as a representative of San Kung on the authority of the agreement had between San Kung and Tri-Pacific. 42 There was oral evidence from the first defendant which gave a version of what he says precipitated the retainer. The evidence was repetitive and seemed to be related to a matter that he was keen to have before the court. He said that primarily, he was very interested in getting top notch legal advice for the company and that "at the end of the day what we needed was blue chip legal firms to put, write that we had these tax" exemptions "because we're talking about a very, very valuable play". 43 He referred to "a whole mixture of opinions". It was said that the second defendant was working with the DPM and "they were telling us one thing" and that Gadens "was telling us another thing". He said that the politicians and the attorney were saying different things. In those circumstances, he contends that he said to Mr Warren inter alia "We need to get a great lawyer to sort this out" and "get an opinion of this whole project". In another version, he said "We need to get somebody to sort this out what this means and give us, San Kung Trading and Tri-Pacific, an answer". His evidence suggests that Mr Warren also thought that they should get it sorted out with a good corporate solicitor. 44 One of the sources of advice was Gadens (a legal firm then retained in relation to the project). Whilst the precise nature of the advice remains unclear, it seems that it was negative concerning the project. Another source of advice came from the DPM via the second defendant. This was apparently to the effect that if certain steps (inter alia the legislative changes) were taken, tax and customs concessions could be obtained. 45 Whilst the first defendant has given oral evidence to the effect that he wanted the lawyer to assess and advise as to the prospects of success of obtaining the exemptions, his affidavit material presents a different picture (see inter alia paragraph 3 of the second affidavit). This material contains inter alia a stipulation that legal counsel "will also be required to obtain tax exemptions". Similar material may be found in the affidavit sworn by Mr Warren. Other evidence (including the documentation) does not support the contention that such advice was sought from Mr Pritchard. In other oral evidence, the first defendant expressed the opinion that Mr Pritchard had failed "over time" because he had not informed him that the project had no chance of success. On this matter, Mr Pritchard has given conflicting evidence. 46 The first defendant gave evidence that there came a time when a firm decision had been made that no further payment would be made to Mr Pritchard in respect of his services. He identified this time as being when the payment of $100,000 was made. This took place about 17 September 1996. No one else has given evidence to support this material (including what was said by Mr Warren). This evidence seemed to be inconsistent with the communications that subsequently took place, the continuing performance of services thereafter by Mr Pritchard and the making of payment thereafter. Indeed, there is writing from the first defendant in October 1996 (RLP 18) which has him continuing to pursue with Abacus the payment of SK5. 47 Mr Warren had been a practising lawyer. For many years, he has not practised and has concentrated on his substantial business interests. He said that his particular expertise was that of financing. Mr Pritchard has given evidence of being told by the first defendant that Mr Warren was responsible for the financing and that his role was limited to financing. Further, he has given evidence of being told that Mr Warren might later be brought in as a partner. This was denied by the first defendant. The dispute as to Mr Warren's role was made an issue during the cross-examination of Mr Pritchard. 48 According to Mr Warren, it was contemplated that he would assume a role in San Kung at some future stage "on the consummation of the financing of the project". This never came to pass. He never became Chairman (contrary to what has been said by the first defendant). In an affidavit, the first defendant said that by 25 May 1996 Mr Warren had been appointed Chairman. In oral evidence, he oscillated between saying that he did not know whether or not he had been appointed Chairman ("I wasn't privy to a lot of things that took place in Guernsey") and adhering to what he had said in his affidavit. 49 Mr Warren said that he had no official position in San Kung. However, he described himself as "one of the principal active voices in the enterprise". During early stages he participated inter alia in the drafting of documentation. He said that his role started out as that of a friend of the Stevenson family. The defendants were also described by him as active voices. He said that they played a more active role, as he had a large company to run. 50 Contrary to what was said by the first defendant, Mr Warren did not see himself as being in the nature of the first defendant's boss ("he never was in a position of an employee"). The first defendant said Mr Warren was boss in May 1996 ("everybody was particularly answering to Mr Warren") and ceased to be boss more than 6 months thereafter (even though he said that he really didn't know the answer to such question). By way of contrast, Mr Warren regarded himself as an influence because of his age. It seems to be common ground that he played the role of an influential adviser. His stated awareness was that the first defendant's father had limited involvement in the project. 51 He assumed the role of recommending a lawyer for the project (he said that he had a "mandate"). He met with Mr Pritchard on a number of occasions. He seems to have regarded one meeting as an interview. He told the court that he recommended Mr Pritchard in his guise as partner in Phillips Fox as legal adviser to the project. 52 San Kung was incorporated on 23 February 1996 in Guernsey. It seems that its administration involved the Abacus Group of companies which were located in Guernsey. These companies had an association with Coopers & Lybrand. 53 San Kung is an entity shrouded in considerable mystery. Such evidence as there was concerning this entity was largely adduced through cross-examination and left a situation that was unclear. Different views have emerged concerning the identity of its directors and shareholders (inter alia by the first defendant and Mr Warren). The views did not accord with what was shown in a register of members and share ledger and what appears in a brochure concerning San Kung (it states that the Board of Directors presently consists of three experienced businessmen based in Guernsey and presents the defendants as senior members of the multidisciplinary project team). There remained mystery as to the identity of the beneficial shareholders. There was uncertainty as to the role played by Abacus and Coopers & Lybrand. 54 I shall refer to some of the evidence given by the first defendant concerning it. There is evidence from the first defendant that Blair Downes (who spent time in prison for telemarketing fraud) put up most of the money and controlled the company. He has said that the trustees of San Kung could authorise the payment of the invoices and that neither he nor Mr Wong was a trustee. He has said that he did not cause it to be formed, but that he was a party to the process which led to it being incorporated in Guernsey. He said that they were advised by Thorsteinssons. He said that he was involved in the affairs of San Kung but not "to a great deal". 55 He also gave versions as to the beneficial owners of San Kung. Initially, it did not include himself as an investor or his family as being a beneficial owner. Later he said that his father was a beneficiary of the Charles F White Trust (said to be a minor shareholder in San Kung) and having a "very extensive involvement". However, he did seem to think that Mr Warren or his Trust was a shareholder. Mr Warren gave a contrary version which inter alia presented the Stevenson family as being a significant beneficial owner. 56 It seems to have been intended inter alia to play an investment role in the project. It has been represented as being in the business of providing venture management and funding for profitable, world-class resource development projects. It was one of a number of entities concerned with the project. There is documentation which refers to a group made up of powerful multinational consortiums owned by Canadians. In the brochure, Tri-Pacific is represented as an affiliated company. 57 Each defendant was said to have an interest in Tri-Pacific. Mr Warren described them as the principals of that company. At Transcript p. 336, in the context of the relationship with San Kung the first defendant used the expression "my partners of Tri-Pacific". The shareholding was held by other entities (in the case of the first defendant through K D Stevenson Enterprises Ltd). 58 The effect of what was said by the first defendant is that there was an agreement or agreements on foot between San Kung and Tri-Pacific and that services in relation to the project were provided by the latter for the former. The role was described as being basically the day-to-day administration of the project in PNG. Whatever the position may have been, no documentation was identified as that being in force at the relevant time. Under the terms of a document purporting to be an agreement dated 23 February 1996, Tri-Pacific was to render business services for reward (an annual fee and out-of-pocket expenses). This document was in evidence (and the only one such agreement discovered by the first defendant). 59 Despite the length of the hearing, at the end of the trial, the relationships involving the defendants and various entities remained far from clear. Also, it remained far from clear how the first defendant could present himself as representing San Kung in contractual negotiations and in engaging a party to perform services for it. Neither defendant appears to have had any authority to enter into an agreement on behalf of San Kung. 60 There is no documentation demonstrating authority. In affidavit evidence, the first defendant deposes to telling Mr Pritchard that "all agreements have to be referred to the directors of San Kung in Guernsey for their approval". This material is not consistent with other evidence and the court does not have evidence of the retainer being referred to them for approval. The oral material did not advance the position. In oral evidence, the first defendant initially said that the three trustees were directors and then later conceded that he wasn't actually certain. At one stage during cross-examination, he said to the effect that if Tri-Pacific wanted anything done, they had to go to San Kung which made the final decisions. Whatever his intention may have been, the evidence of the first defendant did little to enlighten the many mysteries. 61 In reaching the findings made on the crucial questions of reliability and credibility regard has been had to the extensive argument on them. These became principal issues in the case. Broadly speaking, the plaintiff looks to documentation and other matters that are mentioned in this judgment and the first defendant looks to the evidence of inter alia what has been said by Mr Warren as well as the content of documentation. 62 Because of the formidable body of material that has been placed before the court, it is not possible to expressly refer to all of that which is of relevance. Likewise, it is not possible to expressly refer to each and every submission made in respect of the material. The observations made in this judgment are not intended to be exhaustive. 63 The submissions of the parties have seen numerous references to documents relied on as giving support for their respective cases. In many instances, what may be drawn from documents is equivocal. By way of illustration, I mention that the first defendant has repeatedly placed weight inter alia upon a facsimile transmitted on 22 May 1996 (which contains the words "a wise solicitor"), the San Kung brochure and documentation signed by or drafted by Mr Pritchard. It may be observed that the facsimile (which is from Mr Warren) is directed to Mr Pritchard and Pritchard Associates and does not mention San Kung. 64 In the case of Mr Pritchard, largely, what has been said by him is consistent with documentation and other evidence. I am not satisfied that he gave false evidence. In the case of the first defendant, in certain respects, there is conflict between what has been said by him and Mr Warren. There is his unreliable affidavit material. There is conflict between the oral and written material (including the affidavit material) provided by the first defendant. There is conflict in his oral evidence. His version lacks credibility when regard is had to the volume and content of the material from the plaintiff and the failure to take issue with it until after the commencement of litigation. I have earlier mentioned other matters which throw doubt on his credibility and reliability. 65 After considering the material and the arguments advanced, I have come to the view that largely I prefer the evidence of Mr Pritchard to that given by the first defendant (inter alia I prefer his version of the contractual negotiations). 66 Largely, Mr Warren was not an unimpressive witness. However, there were areas in his evidence where he lacked recollection. Also, his recollection was faulty in certain respects. His initial evidence on a significant matter was that the retainer was made at a face-to-face meeting with Mr Pritchard and not during a telephone conversation had on 20 May 1996 (a phone call which he says could have taken place, but of which he has no present memory). Later, he expressed the beginning of doubt on the matter. He categorically denied that the meeting took place after Mr Pritchard had commenced work on the project. The first meeting was had on 28 May 1996 (it had been preceded by a facsimile transmitted on 20 May 1996 which is inconsistent with the initial evidence of Mr Warren). Another meeting took place on about 18 June 1996 (at a time after which Mr Pritchard had commenced performing services for the project). Where there is conflict, I prefer the evidence of Mr Pritchard. 67 These findings lead to the issues to be decided concerning the retainer itself. It is now convenient to look at events which led up to the making of contractual arrangements. 68 In about May 1996, discussions were had between the first defendant and Mr Warren. The advice of the latter was sought as to the retainer of an adviser. Mr Warren contacted Banki Polombi Haddock & Fiora (BPHF), a firm of solicitors that had acted for one of Mr Warren's companies (Murex). He sought advice from a member of that firm (Mr Polombi) who recommended Mr Pritchard. What the first defendant says was then had in mind may be found in inter alia Exhibits 12 and 13. The first defendant looks inter alia to this material for support in his contention that what was wanted was the retainer of the services of a solicitor (not a consultant). There is no reference to San Kung in this material. It speaks of what was wanted by the first defendant. 69 As the first defendant was visiting Sydney during the weekend commencing 18 May 1996, arrangements were made for a meeting between him and Mr Pritchard. A meeting took place on Saturday 18 May 1996. They met in the lobby of the Regent Hotel. After some discussion, they were joined by the wife of the first defendant. The three persons then had lunch at the Pier Restaurant. The luncheon proceeded over some hours. The material throws up conflicting versions as to what was said during that time. Mr Pritchard presents a version in support of the plaintiff being retained as a consultant. The first defendant presents a version in support of San Kung retaining Mr Pritchard of Phillips Fox. As to the conversations that took place, I prefer the version given by Mr Pritchard. The arrangement that was reached was to be subject to the approval of Mr Warren. One of the other matters that was in dispute in the conflicting versions was the role to be played by Mr Warren. Earlier reference has been made to this matter. Another matter concerns the evidence from Mr Pritchard as to a requirement from the first defendant that a confidentiality agreement be signed and of his agreement to writing one up and of faxing it to the first defendant in Vancouver. 70 During the luncheon, Mr Pritchard provided his Curriculum Vitae. He said that he was asked to send a copy of it to Mr Warren in London. A copy was later sent to Mr Warren. This was received by him in London on or about 19 May 1996 by facsimile. The facsimile contained the following:- "As discussed with David, I could use my consulting firm Pritchard Associates or operate as your general counsel on a part-time basis if that would assist in the negotiations." 71 Mr Pritchard says that he received a telephone call from Mr Warren on 20 May 1996. Mr Pritchard has deposed to a version of the conversation. It is said that during this conversation Mr Warren gave his approval to the retainer. I have earlier referred to what Mr Warren says concerning this conversation and the matter of the approval. Mr Pritchard's version refers to the earlier communication had with the first defendant. It conveys that he could only act as a consultant (through Pritchard Associates Limited) and that Pritchard Associates would use law firms as necessary. Mr Warren denies that anything like that was said. As to this conversation I prefer the version given by Mr Pritchard. 72 On 20 May 1996, a facsimile was transmitted to Tri-Pacific (it was directed to the attention of the first defendant). A copy was forwarded to Mr Warren. It contained inter alia an observation that Mr Warren "rang me to say that he was agreeable to my taking on the task of being his 'alter ego' down under". On the same day, Mr Pritchard transmitted to Tri-Pacific (Attention David Stevenson) by facsimile a confidentiality undertaking. It contains the words "for the purpose of representing your interests as a professional adviser". The name of San Kung does not appear in the document which is on the letterhead of the plaintiff. This is a document which would not have been necessary if Mr Pritchard had been engaged to perform legal services. 73 On or about 21 May 1996, the first defendant telephoned Mr Pritchard from Vancouver. Mr Pritchard says that the call was made to his home in Sydney. Mr Pritchard has provided a version of this conversation. It is in this conversation he says that he was told "Consider yourself hired". Also, it is in this version that the name of the second defendant first appears and mention is made by the first defendant of them being partners in the project. The first defendant denies certain aspects of this conversation. His version is that he said Mr Wong was his associate in Tri-Pacific and that he spent a lot of time at the office in PNG. He also says that he referred to a service agreement existing between Tri-Pacific and San Kung. As to this conversation, I accept the version given by Mr Pritchard. 74 In the Amended Statement of Claim, the plaintiff contends that the earlier offer to provide consultancy services was unconditionally accepted by the defendants on or about 21 May 1996. 75 Thereafter, work was commenced on the project. It seems that this was on about 3 June 1996 (see Exhibit 2). I find that it was on this day that Mr Pritchard became aware of San Kung (via a telephone conversation with the first defendant). During the period of the retainer Mr Pritchard made a number of visits to PNG (the first was on 10 June 1996) and performed work there. He used sub-contractors (including Miss Potts). He incurred out-of-pocket expenses. There are time sheets for the work done by Mr Pritchard up to 31 July 1996 and for work done by Miss Potts up to 2 August 1996. No work was done after 31 December 1996. 76 Largely, the material emanating from Mr Pritchard had the "Pritchard Associates" letterhead and was forwarded to Tri-Pacific (inter alia the invoices were addressed to San Kung and sent to Tri-Pacific). There is little documentation emanating from the first defendant. 77 Upon his return to work at Phillips Fox on 22 July 1996, Mr Pritchard opened a file in the name of San Kung. He prepared a retainer letter. The retainer was expressed in the following terms:- "The scope of work is to advise the company generally on its negotiations to establish a new forestry project in Papua New Guinea." 78 A file produced on subpoena by Phillips Fox evidenced the opening of a file by that firm in the name of San Kung (together with a letter of retention). It also revealed that Phillips Fox had rendered services. The file contained evidence of a bill dated 23 September 1996 for those services in the sum of $50,377. If that bill had been sent to the client it is probable that it was forwarded to BPHF. In evidence given on behalf of the plaintiff, it was said that this sum has been included in the claim made by the plaintiff. 79 I have earlier referred to the bill that was rendered for services provided by Phillips Fox. In February 1997, discussions took place between Mr Pritchard and certain of his former partners. The discussions led to the bill being written off and the file being closed. This was said to have been done for taxation reasons. Mr Pritchard has said that if the moneys are recovered as part of his claim, Phillips Fox would be reimbursed in that sum. This was said to be part of the arrangement made with the partners. The arrangement is not evidenced in writing. Neither Mr Reid nor any other partner was called. Although the matter was not the subject of full argument, the first defendant says that this entitles him to have a Jones v Dunkel inference drawn. 80 There is challenge to the evidence given by Mr Pritchard on these matters. It is said that he should not be believed. It is said that the opening of the file was a sham. Further, it is said inter alia that he has both misled and defrauded his partners. 81 In my view, the first defendant has failed to make out these allegations. Further, I am not satisfied that the inference sought by the first defendant should be drawn. 82 As has been said, the defendants have been sued as partners in relation to the promotion of the project. This matter excited debate that was less than full. The pleading does not contain any alternative allegation. There was argument as to whether or not the plaintiff could succeed in the absence of proof of partnership. As could be expected, competing arguments were advanced on this matter. 83 The plaintiff has not sought to prove any written or other agreement made between the defendants. The first defendant denies the existence of any relationship of partnership and presents a case of no personal liability on his part. I do not accept the evidence given by the first defendant on this question. 84 There are other means of proof open to the plaintiff. Indeed, it may be further said that it by no means follows that persons who are liable as if they were partners are partners in reality. They may be held liable as if they were. 85 The plaintiff may prove its case by inter alia admissions. In this case, it has been found that representations were made by the first defendant holding out that he and the second defendant were partners in relation to the project. For completeness, it may be added that in his oral evidence the first defendant used the description of "partners" again. In my view these matters suffice to prove the allegation of partnership for the purposes of these proceedings. 86 If there be a need to look to other evidence it may be added that the admissions find further support from other circumstances. Without seeking to be exhaustive, mention can be made of the conduct of both defendants in relation to the project and other presentations made by the first defendant. 87 Whatever may have been had in mind prior to the meeting with Mr Pritchard, I am satisfied that there was a conditional acceptance by the first defendant of what was offered by Mr Pritchard on behalf of the plaintiff and that this acceptance later became unconditional following the approval by Mr Warren on 20 May 1996 and/or the telephone conversation had on or about 21 May 1996. 88 I find that the plaintiff was retained to provide consultancy services and that the first defendant was a party to that contract. He is in my view personally liable to the plaintiff. The personal liability of the second defendant has not been the subject of argument in this case. He has not sought to have the default judgment set aside. 89 Further, I should add that if a different view had been taken on the question of partnership, I consider that the plaintiff would still be entitled to succeed. This follows from the findings that have been made. If there be a need to do so, it remains open to the plaintiff to apply for leave to amend the pleading. 90 I now turn to the defence raised pursuant to s 48E of the Act. The first defendant bears the onus of making out this defence. 91 The relevant provisions of s 48E are as follows:- "(1) In this section: fee includes any form of, and any expectation of, a fee, gain or reward. general legal work means the work involved in drawing, filling up or preparing an instrument or other document that: (a) is a will or other testamentary instrument, or (b) creates, regulates or affects rights between parties (or purports to do so), or (c) affects real or personal property, or (d) relates to a legal proceeding. probate work means the work involved in: (a) taking instructions for a grant of probate or letters of administration, or (b) drawing or preparing papers on which to found or oppose a grant of probate or letters of administration. (2) A person must not directly or indirectly do any general legal work, or any probate work, for a fee unless the person is a barrister or solicitor or unless the person is an incorporated legal practice and the work is done on its behalf by a barrister or solicitor. Maximum penalty: 20 penalty units. ………" 92 The plaintiff advances a number of arguments which purport to demonstrate that s 48E has no application in the present case. For present purposes, it is only necessary to address one of those arguments. 93 It is not in dispute that the Act should be so construed as not to exceed the jurisdiction of New South Wales. There has been less than full argument as to whether the proper law is that of New South Wales or elsewhere. This is a case where there has not been any choice of law and it is necessary for the court to look for the system of law with which the transaction has its closest and most real connection. 94 The retainer relates to the performance of work in respect of a project in PNG. The contract required the plaintiff to provide consultancy services in respect of that project. The other parties resided outside New South Wales. The services were to be paid for in US currency. 95 The land on which the project was concentrated was situated in PNG. A significant part of the work involved the preparation of documentation which was intended to operate or be used in PNG in the context of the laws of PNG (inter alia the drafting of documentation to obtain tax exemptions, proposed legislation, trust documents and agreements) and other performance in PNG (inter alia negotiations, investigations and dealings with other advisers). 96 In support of his contentions, the first defendant points to other matters. I shall mention certain of them. The plaintiff is resident in New South Wales. The contract was made in New South Wales. Payment for the services was to be made into a New South Wales bank account. These factors tend to be regarded as being of little weight. He also says that a significant part of the work was also done in New South Wales. If this were a relevant factor, it could also be said that a significant part of it was also done in PNG. 97 However, the authorities indicate that the inquiry which is to be made is one in the light of the circumstances as they existed at the time of the formation of the contract (not what the parties do or say thereafter). 98 The nature and subject matter of the contract is a very relevant matter (as opposed to what is said and done thereafter). Another factor of great importance is the principle of validation. Parties entering into a contract are taken to want their agreement to be binding. 99 In my view, the first defendant has failed to discharge the onus of making out this defence. Not only am I not satisfied that New South Wales was the proper law, it is my view that the proper law was that of PNG. I am able to reach this view without taking the principle of validation into account. If it is taken into account, it reinforces the view that I have reached. 100 For completeness, I should mention a further matter. Section 48E imposes a prohibition on the doing of certain work. For present purposes, that work is "any general legal work". Such work is defined in the section. The section imposes a maximum penalty of 20 penalty units for the doing of such work. 101 For the purposes of the first defendant's contention, the section needs to be construed as invalidating any contract which provides for the doing of such work. This was not a question that was fully argued. Indeed, no case was referred to which supports the first defendant's contention. 102 Finally, I turn to the question of quantum. Firstly, I should deal with a component of the claim which concerns the fees of Phillips Fox. This part of the claim relates to fees rendered for services provided by Phillips Fox to its client. In my view, these moneys cannot be recovered by the plaintiff on the basis that Phillips Fox was a sub-contractor. I consider that Phillips Fox is the proper plaintiff for the recovery of these moneys. Accordingly, that part of the plaintiff's claim fails. 103 I now proceed to the other matters. The first defendant relies on the report and oral evidence of Mr Applegate. I consider that his views are not of assistance in this case. I am not satisfied that these defences are made out. 104 Mr Applegate is a solicitor, who is currently a partner at Gadens (which has an office in PNG and had earlier acted in respect of the project). He is also a solicitor of the National Court of Justice in PNG. He practised there between 1979 and 1990 and during 1998. Annexure A to his affidavit is what may be described as a Curriculum Vitae. It seems Annexure B thereto is his expert report. 105 His views were formed after an examination of the project files only. For present purposes, the relevant opinions may be found in (c) to (e) of paragraph 3 of the report. He expressed the view that Miss Potts spent a considerable amount of time waiting for or attending meetings that were ineffectual in achieving her client's objectives or never happened and drafting documents that were never used. He did not regard her contribution as being particularly useful to the client and was of the opinion that her fees in the sum of US $119,437.50 should be largely discounted. 106 Sub-paragraph (e) contained the following:- "Having regard to all of the above factors, but particularly being of the view that much of the work undertaken was unnecessary or unproductive, in that it did not contribute in any meaningful way to the achievement of the client's objectives, and that an experienced advisor in the field would have been aware of that, I am of the opinion that the fees charged were in the circumstances excessive. While there is always a significantly subjective element in such an assessment, in my opinion a fair fee for what was done, having regard to what was achieved, would be in the range of $US125 000 (sic) to $US150,000." 107 In cross-examination, he was left to abandon views expressed as to the work performed by Miss Potts. He conceded error. Although he said that he "disallowed substantially all of her fees", ultimately, he was unable to say with precision what allowance he had made for her work. His opinion seemed to be conditioned by the view that it was a waste of time to speak to politicians. His view as to the fair fee turned out to be no more than an in globo personal judgment (as to what he "thought was a fair fee"). He accepted that it was "a kind of overall non-scientific assessment". He had in mind similar matters in his experience (such as when he as a lawyer was advising an investor). He was not familiar with the process whereby a lawyer's bill was taxed or assessed. Later he said that he was generally familiar with a process involving the preparation of an itemised bill. He said that assessment of costs was not in his area of experience. He seemed to be of the view that Mr Pritchard should have advised that the task of obtaining the tax exemptions was hopeless. Despite what was said in oral evidence, the documentation does not suggest that this was a matter upon which Mr Pritchard had been asked to advise. Indeed, advice had already been received from Gadens on the matter. In addition, Mr Pritchard has said that he repeatedly expressed his doubts that they would get the legislation through and I accept his evidence on this matter. I consider that the documentation and other evidence leads to the view that one of his tasks was to proceed and obtain the exemptions. 108 I am satisfied that the evidence supports a finding that the work has been carried out by the plaintiff. I am satisfied that the terms of the retainer were as pleaded in paragraph 5 of the Amended Statement of Claim. 109 Save for one of the bills, the bills were prepared in accordance with time sheets and the agreed hourly rates. There does not seem to be any complaint concerning the out-of-pocket expenses. Some of the bills have been paid. 110 The first defendant has made special submissions in relation to specific aspects of the claim (including the final account rendered in US$100,000). I do not accept any of the submissions. 111 The principal submission relates to the final account. I am satisfied that the evidence supports a finding that the work was performed. Whilst there are no time sheets to support this part of the claim, Mr Pritchard has given evidence that it was calculated on the basis of an estimate made by him. There has been no challenge to that estimate. It was in line with earlier budget predictions provided by him. In the circumstances, I am satisfied that the plaintiff is entitled to recover this part of the claim. Another aspect was in the sum of $16,250 and related to fees charged for work done by Miss Potts. In my view, this submission was lacking in merit. I am also satisfied that the plaintiff is entitled to recover this part of the claim. 112 It has been agreed between the parties that the quantification of the sum payable to the plaintiff should be deferred pending the delivery of these reasons. Accordingly, I leave that question for future agitation. **********