Burrell Solicitors Pty Ltd v Reavill Farm Pty Ltd & Ors [2011] NSWSC 1602

Supreme Court New South Wales

Medium Neutral Citation: Burrell Solicitors Pty Ltd v Reavill Farm Pty Ltd & Ors [2011] NSWSC 1602 Hearing dates: Friday, 25 November 2011 Decision date: 25 November 2011 Jurisdiction: Equity Division - Duty List Before: White J Decision: Refer to para [24] of judgment. Catchwords: EQUITY - equitable remedies - injunction - application for injunction to restrain defendants from dealing with or disbursing proceeds of sale of property - where defendants agreed to apply whole of net proceeds of sale in reduction of unpaid legal fees claimed by plaintiff - where defendants allege that third parties have prior entitlement to security over property or proceeds of sale - where it appears security given to third parties in breach of agreement with plaintiff - plaintiff entitled to protect rights under agreement - proceeds of sale ordered to be paid into court to allow competing claims to be determined Category: Interlocutory applications Parties: Burrell Solicitors Pty Ltd (Plaintiff) Reavill Farm Pty Ltd (1st Defendant) Champions Quarry Pty Ltd (2nd Defendant) Macabil Pty Ltd (3rd Defendant) Jeff Francis Champion (4th Defendant) Diana Christine Champion (5th Defendant) Representation: J T Johnson (Plaintiff) 4th Defendant in person via telelink (Defendants) Burrell Solicitors (Plaintiff) N/a (Defendants) File Number(s): 2011/365912

Judgment 1HIS HONOUR : This is an application by the plaintiff that the third, fourth and fifth defendants, being Mr and Mrs Champion and Macabil Pty Limited ("Macabil"), be restrained from dealing with or disbursing the proceeds of sale of Lot 2 SP 41603, known as Unit 7, 4 Dixon Place, Lismore Heights, or causing or allowing disbursal of such funds until further order of the Court. 2The plaintiff seeks an order that the amount of the sale consideration, after authorised deductions, be paid into court, to be held pending further order. The plaintiff also seeks orders that those defendants provide an affidavit containing, or setting out, a complete copy of a contract for sale of land dated 6 September 2011 between Macabil and the purchaser, Mr Tobias Hillbom, and a copy of any settlement statement and details of the manner in which the proceeds of sale have been calculated. 3The plaintiff conducts the practice of a solicitor. The principal and director solicitor of the plaintiff is Mr John Burrell. The plaintiff acted as solicitor for the defendants in proceedings in the Land and Environment Court of New South Wales in 2010 and 2011. The plaintiff says that the defendants owe substantial amounts for unpaid legal fees and disbursements. The statement of account dated 14 November 2011 asserts that there are total outstanding legal fees of $620,357.12, plus interest. 4I understand from the submissions made by Mr Champion for the defendants, that the defendants dispute that they have the liability asserted. Mr Champion says that Mr Burrell failed to render monthly accounts, as he was bound to do; failed to provide proper estimates of the costs of the litigation; and failed to comply with instructions in relation to the conduct of the litigation. As yet, the defendants have filed no evidence in relation to these contentions. I am told that no application has been made for the costs to be assessed. 5The present application is based upon an agreement dated 26 March 2011 between the first defendant, Reavill Farm Pty Limited ("Reavill Farm"), the second defendant, Champions Quarry Pty Ltd ("Champions Quarry"), Mr and Mrs Champion, and the plaintiff. 6There are three agreements, each dated 26 March 2011, described as interrelated agreements. The first such agreement was between the parties I have mentioned. It recited that Reavill Farm had engaged the legal services of Burrell Solicitors on its own account, and for and on behalf of Champion Quarry Pty Limited in respect of Land and Environment Court proceedings. It stated that Burrell Solicitors had engaged the services of Mr Timothy Robertson of senior counsel. It recited that invoices had been rendered for work done until 11 February 2011 for matters in hand. The agreement provided that Burrell Solicitors would continue to provide legal services for Reavill Farm and Champion Quarry, and would continue to engage Mr Robertson for that purpose, notwithstanding some invoices were outstanding and unpaid. There was an agreement by Reavill Farm to pay $10,000 a month, at least, in reduction of its debt, and to provide a second mortgage to secure amounts outstanding. 7That is part of the background to the second agreement, which is the agreement the plaintiff seeks to enforce on today's application. It recites that Reavill Farm had had to rationalise its assets and borrow money to service the accounts of Burrell Solicitors, including Mr Robertson. It described four properties owned by Reavill Farm and a fifth property, being the property in question on today's application, at 4 Dixon Place, Lismore Heights. It was described as a single residential unit owned by Macabil Pty Limited as trustee for the J & D Champion Super Fund. It was said to be unencumbered. 8Clause 2 of this agreement provided: " Mr & Mrs CHAMPION will cause lot 2 SP 41603 at 4 Dixon Place, Lismore Heights to be sold and the whole of the net proceeds (estimated at $175,000) to be invested in loans to entities (as permitted under the terms of the superannuation trust) and from these to be paid to [Burrell Solicitors] in reduction of the debts of REAVILL FARM to [Burrell Solicitors]." 9Clause 6 provided that the moneys received by Burrell Solicitors would be paid to it in reduction of any amount owed to Mr Robertson. The same agreement included a promise by the plaintiff to accept 80 per cent of the total amount in full and final payment of its bills in lieu of 100 per cent if those moneys were paid within three months of the approval of the Part 3A or approval by the Land and Environment Court, and there being no significant breach by the other parties of the agreement. 10Clause 9 stated that in any event, Reavill Farm and/or Mr and Mrs Champion must pay all amounts owed to Burrell Solicitors, including any interest thereon, within six months of the date of the agreement. 11On 6 September 2011 Macabil Pty Limited contracted to sell lot 2 of SP 41603 to a Mr Hillbom for $200,000. Only the front page of the contract has been produced. Mr Champion deposes that the deposit of $20,000 plus an additional $5,000 was released by the purchaser in two parts. He says the deposit was released on 1 September 2011, which is before the date of the agreement. 12Mr Champion also deposes that Macabil has agreed to provide vendor finance of $40,000. He produces a document dated 29 August 2011 called " Vendor Finance Agreement " which appears to be duly signed. It provides that Mr Hillbom was proposing to purchase the property and that Macabil was prepared to carry $40,000 interest-free for five years. In consideration of that, Mr Hillbom agreed to release $25,000 to the vendor. 13Notwithstanding the terms of clause 2 of the agreement of 26 March 2011, the $25,000, being part of the net proceeds for the sale of the property, has not been paid to the plaintiff in reduction of debts owed by Reavill Farm to the plaintiff. 14A title search of the property disclosed no registered mortgages. Mr Champion deposed that there are two prior ranking security holders, namely Pitman Constructions Pty Ltd and J S & P A Bridge, who are entitled to receive $30,825 and $35,182, respectively, from the proceeds of sale. In support of that, he produces two documents executed by him and Mrs Champion for Macabil Pty Limited directed to Simpson Partners Business Lawyers Pty Ltd. It is named as the purchaser's solicitor on the contract. The direction dated 16 September 2011 stated that Macabil " ... do hereby direct Simpson Partners Business Lawyers Pty Limited to make an irrevocable priority payment to Pitman Constructions Pty Ltd ... in the sum of Thirty Thousand Eight Hundred and Twenty Five Dollars exactly ($30,825) as part of the settlement in respect to the sale of Unit 7/4 Dixon Place, Lismore Heights ... to [Mr Hillbom]." 15The second direction dated 31 October 2011 is in the same terms save that it purports to be an irrevocable direction that $35,182 be paid to J S & P A Bridge. No evidence has been adduced as to how Pitman Constructions Pty Ltd or J S & P A Bridge may have had security over the property which entitles them to such payment. 16The directions seem to be in breach of the promise in clause 2 of the agreement that Mr and Mrs Champion would cause the whole of the net proceeds of sale to be applied in a way to permit them being paid to the plaintiff. It is because of the potential for Pitman Constructions Pty Ltd and J S & P A Bridge to assert priority over that part of the net proceeds of sale that the plaintiff seeks an order for the payment of proceeds of sale into court, rather than directly to the plaintiff. 17After the moneys are paid into court the plaintiff proposes to give notice to Pitman Constructions Pty Ltd and J S & P A Bridge so they can be heard as to whether they have any claim and, if so, what claim, to those moneys. Unless those persons had a prior entitlement to security over the property or to the proceeds of sale that takes priority over the claims of the plaintiff to the proceeds of sale, it may be doubted whether the mere giving of what purported to be, irrevocable directions, in breach of contract, would confer such priority. 18However, that is not a question that has been argued by those persons and I express no concluded view on it. 19In my view, the plaintiff is entitled to orders to seek to protect its rights under clause 2 of the second agreement of 26 March 2011. I take account of the fact that the defendant says that those agreements are void or unenforceable. They say that the agreements were entered into under duress. As I have said there is, for the moment, no evidence from the defendants about that. No affidavit has yet been served dealing with such matters. 20Mr Burrell deposed that: " 7. There are three Deeds of Agreement dated 26 March 2011 ... and there is also a Mortgage also dated 26 March 2011. ... 8. The originals of these Deeds of Agreement and the Mortgage were held by Anthony Simpson solicitor as a term of the agreement ... 9. Accompanying the documents referred to in paragraph 7 above was a Certificate as to Legal Advice & Voluntary Treaty signed by the 3 rd and 4 th Defendants and Anthony C Simpson solicitor. " 21Mr Burrell produces a copy of such a certificate. It appears to be signed by Mr Simpson and by Mr and Mrs Champion. It is undated, but clause 1 of the certificate states it relates to three inter-related deeds of Agreement and a mortgage regarding payment of legal fees. Clause 2 states: " We obtained legal advice on the nature and effect of these Agreements and Mortgage (the 'Document') from the solicitor named below. " 22The words " before executing the document " have been deleted. However, the certificate goes on to say: " 4. We understand the obligations and risks involved in signing the Document. 5. We sign the Document freely, voluntarily and without pressure from any person. " 23Today is not the day to determine the validity of the Deed of Agreement the plaintiff seeks to enforce. There is at least a serious question to be tried that the agreement is effective and enforceable. The plaintiff is entitled to the substance of the relief sought on this application. 24I will make the following orders: 1. Upon the plaintiff by its counsel giving to the Court the usual undertaking as to damages, I order that: (a) each of the third, fourth and fifth defendants, by themselves, their respective employees and agents, be restrained from dealing with or disbursing the proceeds of sale of Lot 2 SP 41603 known as Unit 7, 4 Dixon Place, Lismore Heights, or causing or allowing the disbursement of such funds, until further of the Court, except in compliance with order 1(b) below. (b) the third, fourth and fifth defendants pay into court, to be held until further order, the amount of the sale consideration under the Contract for Sale of Land dated 6 September 2011 after adjustments in accordance with the terms of the contract, without deduction of any moneys the defendants may contend are payable to Pitman Constructions Pty Ltd or J S & P A Bridge, or any other prior security holder, and including such part of the proceeds of sale as have been released to the fifth defendant that have not been disbursed. 2. Direct that by 1 December 2011, the third, fourth and fifth defendants serve and send to my associate by facsimile or email an affidavit setting out: (a) a complete copy of the Contract for Sale of Land dated 6 September 2011 between the fifth defendant and Tobias Henry Hillbom; (b) a copy of any settlement statement issued for the purpose of any settlement of that contract; and (c) details of how Pitman Constructions Pty Ltd and J S & P A Bridge can be contacted. 3. I order that the plaintiff serve a copy of these orders on Mr Anthony Simpson of Simpson Partners Business Lawyers. 4. I order the costs of the application be the plaintiff's costs in the proceedings. 5. I direct that the amended summons, the notice of motion and affidavits I earlier ordered to be served, be served by Monday, 28 November 2011 by email. 6. I stand over the summons generally to 2 December. 7. These orders may be entered forthwith. 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. Decision last updated: 20 December 2011