Supreme Court New South Wales Medium Neutral Citation: Ellimark Pty Ltd v Calvo [2015] NSWSC 1240 Hearing dates: 18, 19, 25 and 26 May 2015 Written submissions 12 June 2015 Date of orders: 31 August 2015 Decision date: 31 August 2015 Jurisdiction: Equity Before: Bergin CJ in Eq Decision: Plaintiff entitled to specific performance of Deed. Defendants' claims dismissed as against plaintiff. Defendants' claims against former solicitor to set aside various contracts upheld. Former solicitor's claim for specific performance dismissed. Catchwords: DEEDS – construction – whether unfair in all the circumstances – where former solicitor claims entitlement to transfer of shares the subject of litigation in which solicitor retained – whether various agreements between solicitor and former client unfair in all the circumstances – whether solicitor's conduct unconscionable. LEGAL PROFESSION – whether certain documents are conditional costs agreement for the purposes of the Legal Profession Act 2004 – whether void for non-compliance with the Act – whether contingency fee – whether void. ESTOPPEL – whether former solicitor is estopped from claiming fees or costs by reason of conduct in failing to produce tax invoice until 6 years after the litigation. Legislation Cited: Contracts Review Act 1980 Legal Profession Act 2004 Legal Profession Uniform Law (NSW) 2014 Trade Practices Act 1974 (Cth) Cases Cited: Bolitho v Banksia Securities Limited (No 4) [2014] VSC 582 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 Calvo v Sweeney [2009] NSWSC 719 Clyne v New South Wales Bar Association (1960) 104 CLR 186 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Hart v MacDonald (1910) 10 CLR 417 Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392 Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41 Rudi's Enterprises Pty Ltd v Jay (1987) 10 NSWLR 568 Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 Category: Principal judgment Parties: Ellimark Pty Limited (Plaintiff; 1st Cross-Defendant to First Cross-Claim) Athalie Calvo as Executrix of the Estate of the late Peter Calvo (1st Defendant) Athalie Calvo (2nd Defendant; Cross-Claimant to the First and Third Cross-Claims) Leigh Johnson (2nd Cross-Defendant to First Cross-Claim; Cross-Claimant to the Second Cross-Claim; Cross-Defendant to the Third Cross-Claim) Representation: Counsel: GKJ Rich SC/SA Lawrance (Plaintiff; 1st Cross-Defendant to First Cross-Claim) CRC Newlinds SC/P Newton (1st and 2nd Defendant; Cross-Claimant to the First and Third Cross-Claims) TS Hale SC/PR Nagle (2nd Cross-Defendant to First Cross-Claim; Cross-Claimant to the Second Cross-Claim; Cross-Defendant to the Third Cross-Claim) Solicitors: Arnold Bloch Leibler (Plaintiff; 1st Cross-Defendant to First Cross-Claim) Stephen Wawn & Associates (1st and 2nd Defendant; Cross-Claimant to the First and Third Cross-Claims) Norbert Kelvin (2nd Cross-Defendant to First Cross-Claim; Cross-Claimant to the Second Cross-Claim; Cross-Defendant to the Third Cross-Claim) File Number(s): 2013/353242 Publication restriction: Nil Judgment 1. The plaintiff, Ellimark Pty Ltd, seeks specific performance of a Deed dated 11 February 2009 between it and the late Dr Peter Calvo (the Ellimark Deed). The Ellimark Deed confers on the plaintiff an option to purchase 12.5% of the shares in a company known as the Australian Institute of Music Limited (AIM). AIM was founded by Dr Calvo and his wife, Mrs Athalie Calvo, in 1968 (originally under the name the Sydney Spanish Guitar Centre). Mrs Calvo is the executrix of Dr Calvo's estate and in that capacity she is the first defendant in the proceedings. Mrs Calvo is also named in her personal capacity as the second defendant. 2. AIM offers a range of music diplomas, degrees and graduate music studies. This involves music theatre, audio technology, entertainment management, composition, music production, acting and theatre studies. AIM conducts its business in a building in Surry Hills owned by the plaintiff. Mr Nitzan Ronen is the sole director and sole shareholder of the plaintiff. 3. By 2004 AIM was suffering financial difficulties and was in arrears of rent of approximately $1.6 million. In September 2004 Dr Calvo introduced Mr Ronen to Mr Bill Sweeney who had been providing accounting services to Dr and Mrs Calvo prior to this time. Dr Calvo advised Mr Ronen that Mr Sweeney would be taking over the management of AIM and was to become a shareholder in AIM. 4. The discussions between Mr Ronen, Dr Calvo and Mr Sweeney culminated in an agreement pursuant to which the plaintiff would forgive the arrears of rent owed by AIM in return for the issue of shares in AIM. This agreement was formalised in a Shareholders Agreement dated 27 September 2004. The Shareholders Agreement recorded that the plaintiff held 37.5% of the shares; Mr Sweeney held 37.5% of the shares; and Dr Calvo held 25% of the shares in AIM. 5. In January 2005 Mr Ronen was convicted of tax fraud charges and was sentenced to a period of imprisonment. He was incarcerated until July 2010. At the time that Mr Ronen was convicted, his father-in-law, Henry Edward Moore, became a director of the plaintiff in his place. 6. A dispute arose between Dr and Mrs Calvo and Mr Sweeney in relation to Mr Sweeney's failure to pay for the shares in AIM that had been issued to him. Dr and Mrs Calvo's son, Daniel Calvo, introduced them to a lawyer, Ms Leigh Johnson (the cross claimant to the second cross-claim and a cross defendant to the first and third cross-claims) with whom they met at their apartment in Zetland on 10 May 2007. Mrs Calvo claimed that at this meeting Ms Johnson did not have any documentation with her and was accompanied by Ms Kala Subramanian. Mrs Calvo claimed that Ms Johnson suggested that once Mr Sweeney was served with a Statement of Claim he would probably capitulate. Mrs Calvo also claimed that Ms Johnson said that she would "get 32½% of the shares in AIM" for acting for Dr and Mrs Calvo and that they would not have to pay anything except disbursements such as photocopying. Mrs Calvo also claimed that Ms Johnson said that they should not mention the agreement about the shares to anyone. Ms Johnson denied that the conversation took place in these terms. She claimed that she informed Dr and Mrs Calvo that she very much doubted that they would get the shares back and that she could try to negotiate a settlement and get some money for both of them to retire. Ms Johnson said that she informed Dr and Mrs Calvo that she would look at the documents but that she would not act for them and would need to refer their case to a commercial lawyer. Costs Agreements 1. Both Dr and Mrs Calvo signed identical documents entitled "Costs Agreement Between Solicitor and Client" with Ms Johnson, as the principal of Leigh Johnson Lawyers, on 14 May 2007. Those Agreements included the following: Thank you for your instructions to act for you in your matter. You have read and understood the attached Costs Disclosure. We are required by the Legal Profession Act to set out the terms of our engagement which are as follows: THE WORK 1. The work you require us to do includes but is not limited to: a. To appear in court on your behalf and file documents as necessary. b. To do all such work as may be reasonably necessary to represent you and advise you in relation to the above matter including drafting letters, communicating with other parties or solicitors during the course of acting on your behalf, responding to and forwarding correspondence as necessary. c. To carry out any necessary searches, instruct process servers, engage other specialists such as another lawyer or accountants to provide specialist advice or service if necessary. We will consult you as to the terms of their engagement. d. Preparation in relation to your matter including statements, notes, Counsel's brief, documents to be filed in Court including applications, affidavits, subpoenas etc. e. Instruct Counsel on your behalf if necessary. CHARGES AND EXPENSES 2. We will charge you: a. at the rate of $500.00 per hour for each hour engaged on your matter plus b. at the rate of $300.00 per hour for each hour engaged on your work by others. c. A Lump sum of d. ………………….% of all monies recovered. We will ask you to pay us upfront, an amount to cover payment of expenses or to provide security for them and our charges. We will assume, upon receipt of your payment, your authority to draw on the money paid for our charges and expenses immediately. 2007 Deed 1. Dr and Mrs Calvo also executed a Deed of Agreement with Ms Johnson on 29 May 2007 (the 2007 Deed). The 2007 Deed named Ms Johnson as "A", Dr Calvo as "B" and Mrs Calvo as "C". The Deed included the following: RECITALS: THE PARTIES AGREE AS FOLLOWS: B, C HAVE ENGAGED A TO ASSIST THEM IN VARIOUS MATTERS RELATING TO THE AUSTRALIAN INSTITUTE OF MUSIC LTD ACN: 003 261 112. IN CONSIDERATION FOR THIS WORK, A WILL BE GIVEN 32½% (THIRTY-TWO AND ONE HALF PERCENT) OF THE TOTAL SHARES IN THIS COMPANY – TO BE TRANSFERRED IMMEDIATELY UPON THE REMOVAL OF WILLIAM SWEENEY AS DIRECTOR AND SHAREHOLDER OF THE COMPANY. Exclusivity: B, C and any of their agents and/or assigns agree to exclusively deal with A for the purposes defined in this Deed. Confidentiality: A, B and C shall keep all discussions between themselves and the terms of this Deed confidential, without limit on time, and shall not disclose same to any other person, entity, organisation or company. Dispute Resolution: In the event of any dispute, A, B and C will engage in open and honest discussion about the issues and explore mutually acceptable avenues of action. Severability: Any provision of this Deed which is prohibited or unenforceable in any relevant jurisdiction shall not invalidate the remaining provisions of this Deed or affect the validity and enforceability of that provision in any other jurisdiction. This 2 page Deed is binding on all the heirs, executors and assigns of both A, B, C and is to be legally binding under the state laws of New South Wales Australia. 1. The circumstances in which the 2007 Deed was executed and the conversations that took place at that time are in issue and will be dealt with later in these reasons. 2. On 26 June 2007 Dr Calvo underwent heart surgery. On 30 June 2007 Mr Sweeney terminated Dr and Mrs Calvo's employment at AIM leaving them without any income. 3. On 19 July 2007 Dr and Mrs Calvo commenced proceedings in this Court against Mr Sweeney seeking a declaration that Mr Sweeney held his AIM shares on trust for them and an order that he transfer the shares to them (the Sweeney proceedings). Stanford Lawyers were retained as city agents to act for Dr and Mrs Calvo in the Sweeney proceedings. Mr Charles Stanford of that firm instructed counsel to appear at the trial and attended the trial. The proceedings were listed for hearing on 9 February 2009. By November 2008 Dr and Mrs Calvo could no longer afford to pay Ms Johnson, Mr Stanford nor counsel briefed in the matter, Mr David Conti SC and Mr D Mitchell. Funding arrangements 1. In November 2008 Ms Johnson and Dr and Mrs Calvo's son, Daniel Calvo, visited Mr Ronen in Oberon Correctional Facility. They asked Mr Ronen if he would be willing and able to assist Dr and Mrs Calvo in funding the Sweeney proceedings. Mr Ronen said he was prepared to lend up to $500,000 to support the case but on the condition that if Dr Calvo regained the shares from Mr Sweeney, then Mr Ronen would be entitled to become an equal shareholder in AIM by purchasing 12.5% of the shares. 2. Mr Ronen's solicitor, Ms Catherine Hallgath, then a partner at Swaab Attorneys, spoke with Ms Johnson who advised her that she could deal directly with Mr Conti. Ms Hallgath spoke with Mr Conti and on 2 December 2008, wrote to him directly by email enclosing a letter on Swaab letterhead that included the following: Ronen loan to Calvo I refer to our discussions over the past week and confirm that I act for Nitzan Ronen. Nitzan Ronen would like to ensure that if he lends money to Mr and Mrs Calvo to allow them to run the litigation, that they have a team who is experienced in commercial litigation so as to give them the best possible chance of success. We understand that the estimated costs of the litigation, with this requirement, are estimated to be $285,000-$300,000 based on the following: (a) your unpaid fees of $100,000 including GST; (b) a contribution of $50,000 including GST towards the town agent's unpaid fees so to enable the town agent to continue to act; (c) your fees of approximately $100,000 including GST to take the matter to trial and run it; and (d) junior counsel for approximately 10 days with some preparation time of approximately $15,000. I understand that this amount could be raised by an increase on an existing mortgage of a property owned by Mr and Mrs Calvo and a loan from Nitzan. I am instructed that Nitzan would be happy to lend funds to Peter and Athalie Calvo on the conditions below. The entity that will make the loan has yet to be finalised. I anticipate that Nitzan Ronen will make the loan in his personal capacity and so have referred to the lending identity in this letter as 'Nitzan'. I set out the conditions on which the loan will be made below. 1. Existing mortgage over the farm to be increased by Mr and Mrs Calvo Mr and Mrs Calvo own a property in the country. … mortgaged to the Commonwealth Bank. $600,000 is owed to the bank and the property is worth approximately $980,000. I understand that the Commonwealth Bank would agree to increase the existing loan to Mr and Mrs Calvo by a further $185,000, subject to Mr and Mrs Calvo providing proof that they are able to repay the loan. I note that if Daniel Calvo is employed, one option the bank would accept is for Daniel to guarantee the loan. … 2. Amount of loan to be made by Nitzan $100,000 Nitzan may agree to lend a small additional amount at a later date, if necessary, but only for use for the items below. 3. Security Second mortgage over certificate of title [of the property]. Charge over shares of the proceeds of their sale (subject to whether Mr Sweeney has agreed not to comply with the earlier deed between Mr Calvo and Mr Sweeney). 4. Repayment We understand that the trial will be completed by March 2009. Accordingly we propose that the loan be repaid in March 2009. … 7. Conduct of the litigation It is important to my client that Mr and Mrs Calvo are represented by a team with the appropriate experience. Accordingly, my client makes it a condition of the loan that Mr and Mrs Calvo have a team who is experienced in commercial litigation, being you, a junior selected by you and the current town agent. It is also important at this stage that I no longer liaise with Daniel Calvo directly. I understand that he has been assisting with the litigation, however, it has now reached a stage given the negotiations that will need to take place with the bank, that it is inappropriate for me to liaise directly with him. If this proposal is acceptable, please let me know and arrange for Daniel to contact the bank to increase the loan amount. I will then prepare a second mortgage. 1. On 9 December 2008 the Commonwealth Bank advised Ms Hallgath that the loan had been formally approved and that loan documents were to be prepared. Ms Hallgath advised Mr Conti that the funds would be available the following week. 2. On 16 December 2008, after a conversation with Mr Conti in which he advised that the delay in the provision of the funds was holding up "needed preparation", Ms Hallgath wrote to Mr Conti by email advising that she understood that the loan documents had been signed by Dr and Mrs Calvo and that the funds would be available the following day. Ms Hallgath also advised Mr Conti that she would "need to bow out" as she could not arrange the first mortgage. She asked if Mr Conti could arrange for a cheque direction from Mrs Calvo to the Bank and then request the Bank to provide bank cheques available for Mr Conti to collect directly. 3. On 29 January 2009 Ms Hallgath had a conversation with Mr Conti, during which she made a file note the relevant portions of which are as follows: David Conti - met with the Calvo's (1) affirm compliance to s'holders' agt (2) future ongoing relationship join forces to make AIM a profit org'n t'fer 12.5% shares to Ellimark so 50/50 shareholder price = to be agreed @ approp time method = on basis that AIM = a profit org'n (w'n the immed future), o'wise referred to a valuer to be agreed by the p's. agree to consult in relation to litig'n but not to be bound by the partic direction figures for AIM value of $8 - $10 mill bandied about 1. Ms Hallgath's affidavit evidence was that at the beginning of this conversation Mr Conti said that he had "met with the Calvos" and that they "have agreed to the following". The file note reflects Mr Conti's instructions as communicated that Dr and Mrs Calvo would agree to the transfer of 12.5% of the shares in AIM to Ellimark and that they would work together to convert AIM from a not-for-profit organisation to a for-profit organisation. 2. Ms Hallgath's affidavit evidence was that during the conversation Mr Conti said that in order to determine the price to be paid by Ellimark for 12.5% of the shares in AIM, Dr and Mrs Calvo proposed that AIM be valued on the basis that it would become a for-profit organisation within the immediate future. She claimed that it was Mr Conti, rather than herself, who proposed this mechanism and the use of a valuer to be agreed by the parties. The documents 1. Ms Hallgath prepared a suite of documents which she emailed to Mr Conti on 6 February 2009. That email was in the following terms: I refer to our discussions and now attach: 1. Mortgage frontsheet; 2. Memorandum of mortgage; 3. Letter setting out the terms, affirmation of shareholders agreement, deed of intention re sale of shares if Dr Calvo is successful and the annexure to the mortgage. I would appreciate it if you were able to give these to Dr and Mrs Calvo. The documents have not yet been finally approved by Nitzan Ronen. I look forward to receiving: (a) the signed documents; (b) certificate of currency of insurance of the property; and (c) written confirmation from the Commonwealth Bank that they consent to the second mortgage and will not advance any further money without Nitzan's consent. These are not unusual conditions and should not cause any difficulty. I would appreciate it if they saw a lawyer in relation to these documents and returned them with a letter saying that they had obtained legal advice. In relation to the timing of payment and obtaining consent from the bank, Nitzan will start making payments when we receive written consent from the Commonwealth Bank to the second mortgage. We will then lodge a caveat and make the payments while the Commonwealth Bank is producing the title. I recommend that the Calvo's obtain at least a verbal consent from the Commonwealth Bank before they sign the documents. Please let me know if you have any concerns. Mortgage 1. The first two documents referred to in the email were the Mortgage front sheet and Memorandum of Mortgage. The Mortgage was between Dr and Mrs Calvo as mortgagors and Mr Ronen as mortgagee. Annexure "A" to the Mortgage was in the following terms: This mortgage contains the provisions below in addition to those contained in registered memorandum V849099 and amends the provisions of registered memorandum V849099 as set out below. 1. Definitions In this mortgage the following terms have the meanings given below, except where the contrary is implied: Terms Sheet means the letter from Swaab Attorneys to the mortgagors dated 6 February 2009. 2. Acknowledgements (a) The Mortgagee acknowledges that this mortgage is a second mortgage. (b) The provisions of the Terms Sheet form part of this mortgage. 3. Repayment The moneys hereby secured must be repaid by the Mortgagor to the Mortgagee or as the Mortgagee directs on or before 30 June 2009. Terms Sheet 1. The letter referred to in the Annexure to the Mortgage as the "Terms Sheet" was in similar terms to the letter from Swaab Attorneys to Mr Conti on 2 December 2008, extracted earlier. It was addressed to Dr and Mrs Calvo and was dated 6 February 2009. It was headed "Nitzan Ronen loan to Peter and Athalie Calvo". It referred to the discussions with Mr Conti and Ms Johnson and confirmed that Ms Hallgath acted for Mr Ronen. It then replicated what appeared in the letter to Mr Conti of 2 December 2008 in respect of the estimated costs and ensuring that there was a team experienced in commercial litigation. It repeated that Mr Ronen would be happy to lend funds to Dr and Mrs Calvo and then set out the following: 1. Existing mortgage over the farm to be increased by Mr and Mrs Calvo Mr and Mrs Calvo own a property in the country. … This property is mortgaged to the Commonwealth Bank. The Commonwealth Bank must consent to the second mortgage and produce the title to allow it to be registered and must provide its updated valuation of the property to us. 2. Amount of loan to be made by Nitzan $125,000 3. Security Registered second mortgage over certificate of title folio identifier XXX. Charge over shares or the proceeds of their sale (subject to whether Mr Sweeney has agreed not to comply with the earlier deed between Dr Calvo and Mr Sweeney). 4. Repayment We understand that the trial will be completed by March 2009. The loan must be repaid on or before 30 June 2009. 5. Interest Interest will be payable at Nitzan's principal bank's interest rate for loans of this amount. 6. Purpose of loan The loan may only be used to pay the fees for David Conti, Donald Mitchell and Catherine Hallgath. Nitzan will arrange for the funds to be paid to those people directly. 7. Drawdown of loan Nitzan will pay the loan in instalments, within 21 days after the receipt of invoices from David Conti and Donald Mitchell and on the basis that they will issue invoices on or after the following dates and for the amounts below: (a) 6 February 2009 $58,595.75 (b) 13 February 2009 $39,490 (c) 18 February 2009 $22,770 All amounts in this letter include GST. Payment under this clause is dependent on the receipt of written consent from Commonwealth Bank to the grant of the registered second mortgage. 8. Stamp duty & Legal Costs Stamp duty and Nitzan's legal costs are payable by Dr and Mrs Calvo. If Dr and Mrs Calvo wish to accept the loan, we request that they sign below. 1. Provision was then made for Dr and Mrs Calvo to sign the letter in the presence of a witness. Ellimark Deed 1. The Deed referred to in the email (the Ellimark Deed) is between Dr Calvo and the plaintiff, referred to in the Deed as "Ellimark". Ms Hallgath received the executed documents on 11 February 2009 and wrote that date on the Deed. It is in the following terms: RECITALS A. Dr Calvo, Ellimark and William Paul Sweeney (Bill) are shareholders in The Australian Institute of Music Ltd ACN 003 261 112 (AIM). B. Dr Calvo, Ellimark, Bill and AIM entered into a shareholders agreement on 27 September 2009 (sic) (Shareholders Agreement). C. Dr Calvo is seeking the return of the shares in AIM currently held by Bill to him. He has commenced court action. D. This deed affirms the AIM shareholders' agreement dated 27 September 2004 and sets out the intentions of Dr Calvo and Ellimark in relation to the ownership of AIM if Dr Calvo is successful in obtaining the return of Bill's shares to him. AGREEMENT The parties agree as follows: 1. Affirmation of Shareholders Agreement Dr Calvo affirms the Shareholders' Agreement as between himself and Ellimark and agrees that he will not challenge it or allow or assist anyone else to do. 2. Ownership of AIM (a) If Dr Calvo is successful in obtaining the return of Bill's shares to him or a court order for Bill to return those shares to him, he agrees to sell 12.5% of the total shares in AIM to Ellimark, with the intention that Dr Calvo and Ellimark will each hold 50% of the shares in AIM for a price calculated in accordance with clause 2(c). (b) Ellimark may, but is not obliged to, purchase those shares in AIM. If, after the price is determined, it does not want to purchase the shares, it must give written notice to Dr Calvo. (c) The price will be 12.5% of the valuation of AIM in accordance with the following conditions: (i) the valuation will be carried out by a valuer who has been a member of the appropriate professional organisation for at least 7 years and has at least 7 years' experience in valuing businesses similar to this business; (ii) the valuation will be based on the 2008 accounts for AIM; and (iii) both parties must agree on the valuer and if they cannot agree, then they must make a joint request to the President of the Australian Property Institute (or his nominee) to appoint a valuer with the qualifications in this clause. (d) The parties must act in good faith and do everything reasonably necessary to give effect to this deed. (e) The appointment of the valuer must take place promptly after the earlier of Dr Calvo obtaining the return of Bill's shares to him or a court order requiring Bill to return those shares. Execution of documents 1. Mrs Calvo claimed that on the evening of 10 February 2009, the second day of the hearing of the Sweeney proceedings during the morning of which Dr Calvo had been cross-examined, Ms Johnson arrived at their apartment and handed to them the Loan Agreement, the Mortgage, the Ellimark Deed and the Affirmation. Mrs Calvo claimed that Ms Johnson said that she needed Dr and Mrs Calvo to sign the documents. Mrs Calvo also claimed that Ms Johnson said that they had to sign the documents in order to get the loan from Mr Ronen and that he wanted 12.5% of their shares in AIM. Mrs Calvo claimed that Ms Johnson said that they had "no choice but to sign otherwise the hearing can't continue because the barristers require more money". Mrs Calvo claimed that she said to Ms Johnson that this was "extortion" with which Ms Johnson then agreed. According to Mrs Calvo, Ms Johnson said "It's extortion but you must sign". She also said that she could not witness the documents and that Dr and Mrs Calvo would have to get someone else to witness their signatures. 2. Ms Johnson agreed that she delivered the documents to Dr and Mrs Calvo but denied that the conversation Mrs Calvo claimed occurred took place. Ms Johnson claimed that Mrs Calvo said it was "outrageous" and asked what choice they had. She claimed that she informed Dr and Mrs Calvo that she could not advise them and that they should get independent legal advice in relation to the documents. 3. On 10 February 2009 Ms Hallgath wrote to Ms Johnson in terms that included the following: The repayment for the loan is to be secured by a registered second mortgage over a property owned by Dr and Mrs Calvo, among other things. At the same time as finalising the loan Ellimark Pty Ltd (Ellimark), one of the other shareholders in the Institute has requested clarification as to how the Institute will operate if Dr Calvo is successful in his claim. The need for this clarification arose after a meeting between Danny Calvo and Scott Moore in late January 2009 in which comments were made by Danny which lead Ellimark to be concerned about the future management of the Institute and how Ellimark would be treated as a shareholder. The request for clarification was also made in an environment where Ellimark believed that the intention of Dr Calvo was that if Dr Calvo's claim was successful, Dr Calvo and Ellimark would become equal shareholders. You will be aware that Ellimark has made substantial contributions to the Institute by way of loans and the forgiving of those loans in exchange for its shares in the Institute. Ellimark regrets that the need for clarification arose so close to the start of Dr Calvo's court case. However, it was unavoidable given the timing of the meeting at which Ellimark's concerns about its future with the Institute arose. You have sent text messages to me today indicating that you are concerned about the provisions of the deed which records the intention of the parties in relation to the sale of the shares. You have indicated that you consider the document is extortionate and that Dr Calvo is being forced to sign it in order to pay Counsel's fees. It is the case that the funds are to be advanced to pay Counsel's fees. It is not the case that the document is extortionate. We note that Ellimark, if it purchases the shares, has agreed to pay a price based on the valuation of the Institute (using the 2008 accounts). This is intended to be a commercial arrangement between the parties. I have spoken with Nitzan Ronen on 10 February 2009 and obtained instructions directly from him in relation to these matters. We look forward to receiving the executed documents so that we can commence to process the payments to be made under them. 1. On 11 February 2009 Dr and Mrs Calvo signed the documents before a witness who was not a lawyer. They did not take independent legal or other expert advice in respect of the documents. Shares Mortgage – Dr Calvo to Ms Johnson 1. On 10 February 2009 Dr and Mrs Calvo signed a Mortgage of Shares in AIM (the Shares Mortgage) between Dr Calvo as mortgagor and Ms Johnson as mortgagee. It was in the following terms: RECITALS 1. Leigh is a legal practitioner. 2. Peter and Athalie Calvo ("Athalie") have retained Leigh to provide them with legal and consulting services in respect of their claim against William Sweeney and The Australian Institute of Music Limited ("AIM"). 3. Peter and Athalie acknowledge that Leigh has provided services at their request, to, for and on behalf in relation to this matter and further acknowledge their indebtedness to Leigh both for her fees and the costs she has incurred on their behalf. 4. Peter and Athalie are not in a position to pay Leigh. In consideration for Leigh's provision of services, incurring costs on their behalf as well as for her continuing to provide services until the conclusion of this matter, Peter enters into this deed and mortgages all his shares. 5. Peter owns 2255 ordinary fully paid shares in AIM representing 25% of the shareholding in AIM. 6. In addition, Peter agrees that upon the successful conclusion of this matter, which commenced on 9 February 2009 before His Honour Mr Justice White in the Supreme Court of New South Wales ("the matter"), the 37.5% of the shareholding currently held by William Sweeney, which would then be owned by Peter, is also mortgaged to Leigh, in addition to the 25% currently owned by Peter ("Shares"). Peter acknowledges that Leigh is entitled to all of these Shares notwithstanding the quantum of her costs and fees. OPERATIVE PART 7. Peter hereby provides security to Leigh for costs incurred by her as well as for her fees to date and continuing to the conclusion of this matter, by entering into this Deed and mortgaging his Shares in AIM to Leigh. 8. Peter acknowledges that at the successful conclusion of the Hearing, which commenced on 9 February 2009 before His Honour Mr Justice White in the Supreme Court of New South Wales, Leigh may at any time thereafter, deal with her shares by any means necessary, including the sale of the totality of the Shares, being 62.5% of the shareholding in AIM (or 25% of the shareholding in AIM if the matter is unsuccessful). Peter acknowledges that Leigh is entitled to all of these Shares notwithstanding the quantum of her costs and fees. 9. Leigh will remain entitled to any dividends due from the shareholding and has the right to direct Peter in respect of the exercise of any rights attaching to the Shares. 10. All stamp duty and other costs of and incidental to the preparation and enforcement of this Deed and the mortgage created pursuant to it, shall be the responsibility of Peter. 1. The three provisions for signature were for Dr Calvo to sign personally as the mortgagor, for Mrs Calvo to sign for Dr Calvo under a Power of Attorney dated 14 November 2007, and for Ms Johnson to sign as the mortgagee. The witness to the signatures of Dr Calvo and Mrs Calvo was Daniel Calvo. 2. Mrs Calvo claimed that Ms Johnson advised that she had prepared the Shares Mortgage and that it was to stop Ellimark taking all of their shares in AIM. Mrs Calvo also claimed that Ms Johnson said "I will only use it if and when Ellimark tries to take your shares" and that it was "insurance so Nitzan and the Moores can't rip your shares off you". Ms Johnson denied that this conversation occurred and claimed that what she said to Mrs Calvo was that as neither she nor Mr Stanford had been paid, they wanted the Shares Mortgage "to guarantee our fees". Additional Terms Sheet 1. On 7 April 2009 Ms Hallgath wrote to Dr and Mrs Calvo referring to discussions with Mr Conti in which Mr Conti requested that Mr Ronen increase the funds loaned to Dr and Mrs Calvo from $125,000 to $140,636. The letter recorded the following: Nitzan Ronen will agree to loan the additional amount of $15,636 to you to pay the following fees: David Conti: $10,000 Donald Mitchell: $5,000 Swaab Attorneys: $636 (comprised of $60 additional stamp duty, $92 registration fees and $44 stamping and registration charges and $400 costs of seeking instructions in relation to the increase in the loan and arranging for the amendment of the mortgage and the upstamping of the documents). The mortgage will need to be amended in the definition of 'Terms Sheet' by inserting the words 'and the letter from Swaab Attorneys to the mortgagors dated 6 April 2009'. Nitzan Ronen will not agree to advance any further funds to Mr and Mrs Calvo. If Dr and Mrs Calvo wish to accept this increase in the loan amount and authorise Swaab Attorneys to amend the mortgage as set out above, we request that they sign below. 1. The letter was signed by Dr and Mrs Calvo under the words "We accept the increase of the loan and authorise Swaab Attorneys to amend the mortgage on the conditions contained in this letter". Ms Johnson witnessed Dr Calvo's signature without comment. However in respect of the witnessing of Mrs Calvo's signature the words "witness to signature only" were written. 2. The Annexure to the Mortgage was amended to include the letter of 6 April 2009 as part of the definition of "Terms Sheet". The Sweeney proceedings 1. The Sweeney proceedings commenced on 9 February 2009 and concluded on 18 February 2009. Judgment was delivered on 29 July 2009. A declaration was made that Mr Sweeney held his shares in AIM on trust for Dr and Mrs Calvo and an order was made for Mr Sweeney to execute a transfer of the shares to Dr and Mrs Calvo: Calvo v Sweeney [2009] NSWSC 719. Transfer of Shares 1. On 18 August 2009 Ms Johnson sent an email to Mrs Calvo in the following terms: I thought you were sending me an email confirming the 32 and half percent of shares. 1. On 18 August 2009 Mrs Calvo wrote by email to Ms Johnson in the following terms: This is to confirm the 32.5% of shares which will be handed over to you approximately 12 months from this date, as discussed. BS should be doing the right thing this afternoon! Very exciting. See you soon, Athalie and Peter Calvo 1. Dr Calvo had been suffering ill health for some years. In late 2009 he suffered a serious stroke and was admitted to Queanbeyan Hospital and then driven by Mrs Calvo to St Vincent's Hospital on 27 December 2009. 2. On 30 December 2009 Ms Johnson arrived at St Vincent's Hospital with Daniel Calvo. She had with her a Transfer of Shares in the following terms: Transfer of Shares I Athalie Calvo as Power of Attorney for Dr Peter Calvo and Athalie Calvo (the Transferor) in consideration of the sum of n/a paid to me by Leigh Johnson (hereinafter called the said Transferee) do hereby transfer to the said Transferee 32,500 Shares numbered … inclusive in the undertaking called the Australian Institute of Music Limited. To hold unto the said Transferee, subject to the several conditions on which I hold the same. And I the said Transferee do hereby agree to take the said Shares subject to the conditions aforesaid. AS WITNESS our hands this (signed by Daniel Calvo) day of 30/12/09 SIGNED by the transferor (Signed by Mrs Calvo "(P.O.A)") in the presence of (Signed again by Mrs Calvo) SIGNED by the transferee (Signed by Ms Johnson) in the presence of AIM Minutes – 5 January 2010 1. Minutes of a meeting of members of AIM on 5 January 2010 record that present at the meeting were Dr and Mrs Calvo and Daniel Calvo. The Minutes also record the following: Motion put by Athalie Calvo that Leigh Diane Johnson be appointed as a Director to the Board of the Australia Institute of Music Ltd. Motion seconded by Peter Calvo. Voted in favour of the motion by Daniel Paul Calvo. Resolved by unanimous resolution that Leigh Diane Johnson be appointed as Director of the Company. 1. On 30 March 2010 Dr Calvo executed a will in the presence of his solicitor, Stephen James Wawn, leaving the whole of his estate to Mrs Calvo or in the event of her death within 30 days of his death (or if she predeceased him) equally to their three sons. 2. Dr Calvo died on 17 June 2011. Mrs Calvo was granted Probate on 26 October 2011. Mrs Calvo swore an affidavit in support of the application for the grant of Probate of Dr Calvo's will. She gave evidence in these proceedings that in October 2011 she believed Dr Calvo was capable of understanding, and did understand his will (tr 95). Costs Assessment 1. In March 2010 Dr and Mrs Calvo's solicitors Stephen Wawn & Associates, in respect of the costs assessment of the Sweeney proceedings, communicated with the solicitors retained by Ms Johnson, Whitehead Cooper Williams. On 14 April 2010 Stephen Wawn & Associates wrote to those solicitors again in terms that included the following: We have advised our clients that your client cannot have both her legal costs and the shares in The Australian Institute of Music Ltd. It would appear clear that she has elected during the course of the proceedings to vary the terms of her original retainer and require payment to her of her professional fees and all the various disbursements to barristers and other lawyers rather than to have the shares in the company. Our clients have been forced to accept this variation. We are instructed that your client has also recently made demand for additional legal costs from our clients. Our clients are, as previously advised to your client, more than happy to pay your client a reasonable sum for her professional services on receipt of an itemised bill of costs. We are instructed to again reiterate that request. Please have your client prepare a bill of costs in a form suitable for assessment so that our clients can recover these costs from Mr Sweeney. 1. On 21 April 2010 Stephen Wawn & Associates wrote again to Whitehead Cooper Williams requesting copies of tax invoices relating to payments made to Ms Johnson totalling $55,000. The following request was also made: Provide any further tax invoices which remain unpaid or confirm that your client has been paid in full by our clients for work undertaken with respect to the Supreme Court proceedings. 1. On 22 April 2010 Whitehead Cooper Williams advised Stephen Wawn & Associates that they saw the issue of legal costs and the issue of Ms Johnson's entitlement to the shares in AIM as "separate matters". That letter included the following: The agreement between Ms Johnson and your clients is in writing and provides the payment of both the fees that she has received to this point and the shares. She is now pressing for the shares to be registered on the company register in accordance with the share transfer which your client has signed. In this respect we note that your clients are attempting to deal with their shares to the detriment of Ms Johnson's interests. Your clients, having already executed a share transfer and executed two agreements agreeing to transfer Ms Johnson those shares, would be behaving quite improperly in attempting to deal in those shares in the detriment of Ms Johnson's interest. 1. That letter also included reference to "Fee Agreements" dated 14 May 2007 and the 2007 Deed. The solicitors noted that the latter agreement was "separate to the Fees Agreement". 2. On 28 April 2010 Stephen Wawn & Associates wrote to Whitehead Cooper Williams in terms that included the following: We maintain our clients' position that the Deed of Agreement dated 29 May 2007 and the mortgage granted to your client of Dr Calvo's shares in AIM and those held by Sweeney are open to challenge under the Contracts Review Act and are in breach of the Legal Profession Act 2004. … Your client seeks to rely on both the Deed of Agreement and the Costs Agreement in breach of the agreement entered into by our respective clients. In light of sections 325 and 327(4) of the Legal Profession Act, we cannot see how your client would be successful in any proceedings to enforce a transfer of shares pursuant to the Deed of Agreement. … Again we are instructed that our clients are willing to pay your client's reasonable professional costs upon receipt of an itemised bill. We also again request itemised tax invoices for those payments already made to your client so that our client can proceed to an assessment of costs to recover these costs from Sweeney. 1. On 21 July 2010 Stephen Wawn & Associates wrote again to Whitehead Cooper Williams requesting an itemised tax invoice. 2. On 23 August 2010 Stephen Wawn & Associates advised Whitehead Cooper Williams that they had been instructed to make a complaint to the Legal Services Commissioner due to Ms Johnson's failure to issue an itemised tax invoice and to provide certain files. 3. On 17 March 2011, Ms KM Dulhunty wrote to Ms Johnson advising that the costs assessment in respect of the Sweeney proceedings had been assigned to her and directing Ms Johnson to produce by 1 April 2011 copies of the tax invoices in respect of the fees paid to her by Dr and Mrs Calvo. 4. It is apparent that Ms Johnson ignored Ms Dulhunty's direction to produce documents by 1 April 2011. On 18 May 2011 Stephen Wawn & Associates wrote to Ms Dulhunty requesting an assessment of costs excluding Ms Johnson's fees until the tax invoices were provided and requesting that "an interim certificate of determination be issued until Ms Johnson provides her tax invoices". 5. On 20 June 2011 Ms Dulhunty wrote to the Legal Services Commissioner in terms that included the following: Without Ms Johnson's invoices I am unable to assess the part of the bill that relates to work that she has done for the Costs Applicants. This is preventing the assessment from proceeding. Mr Stephen Wawn for the Costs Applicants has submitted that all attempts to contact Ms Leigh Johnson to get the invoices or to get any response at all have failed. This has been my experience also. I enclose for your assistance my notice, issued under Section 358 of the Legal Profession Act 2004 (LPA), to Ms Leigh Johnson dated 17 March 2011 requiring her to produce invoices for the work done for the Costs Applicants. I have not had any response whatsoever from Ms Johnson. I have also tried to contact her by telephone and left a message on her voicemail but again I have not received any response. … I now refer Ms Johnson to your office for disciplinary action to be taken against her and I also request that you require her to produce the invoices so that the assessment can proceed or obtain a refund of the monies paid by the Calvos so that the scope of the assessment is clarified and can proceed. 1. On 5 July 2011 Ms Johnson wrote to the Legal Services Commissioner in the following terms: I refer to your letter dated 30 June 2011 and advise that I spoke to Ms Dulhunty last week when she left a message on my voicemail. I rang her back the same day and she advised me she had sent me a letter. I advised her that I had received no letter from her and requested she re-send it either in hard copy or via email. Ms Dulhunty seemed vague and pre-occupied with other things and told me she wanted me to furnish her with my account re Calvo. I told her I would prepare it for her. In reference to Ms Dulhunty's allegations, I advise that I acted for the Calvo's from beginning to end of Supreme Court Proceedings which were ultimately successful. They had been to several lawyers before me who advised that they had NO prospects of success but that if they deposited $400,000 into their trust they would "kick it around" for them. They came to me and Mrs Calvo cried and begged me to act for them for NO money up front because she said they had none. (This I came to realise was a lie as was most of what Mrs Calvo said, including her evidence). At all times prior to being paid a very modest sum of money so that I could continue to a) eat, b) put petrol in my car to drive to attend to their litigation and c) pay my phone bills so that I could attend to their litigation I provided an invoice prior to payment. I was paid the extremely modest sum of $50,000 plus $5,000 GST for approximately three years of solidly working on their 'unwinnable' case, and dealing with their constant lies to myself and to counsel, which caused us all extreme concern to say the least. My files which included all invoices were provided and inspected by the Law Society at the time. I moved offices several times since then and at present am unable to locate them. I trust this answers your concerns. 1. On 29 September 2011 Ms Dulhunty issued her Certificates as to Determination of Costs and her Statement of Reasons. The costs the respondent, William Sweeney, was to pay were determined at $454,544.46. The costs of the costs assessment were determined at $19,106.73. A certificate of Judgment was filed on 26 October 2011 in the amount of $471,740.52. On 25 November 2011 Mr Sweeney paid the judgment amount to Mrs Calvo. 2. On 26 September 2011 the sum of $100,000 was paid to Mr Ronen in part payment of the monies then due under the loan agreement. On 10 May 2012 the sum of $67,172.54 was paid to Mr Ronen as the balance of the amounts owing under the loan agreement. 3. On 24 March 2015 Mrs Calvo received a tax invoice from Ms Johnson in the amount of $2,289,248.54 (Ex 1). Valuation of AIM shares 1. In January 2010 Mr Moore spoke to Mrs Calvo about engaging a firm of accountants to carry out the valuation of the shares the subject of the Ellimark Deed. Mr Moore and Mrs Calvo agreed that BDO should prepare the valuation. 2. In June 2010 BDO produced a Draft Limited Scope Valuation of AIM as at June 2010. That valuation noted that AIM was a not-for-profit company and recorded that if it were to continue as such forever the value of its shares would be nil. However for the purposes of the valuation BDO made the assumption "as agreed by the shareholders" that AIM would become "a commercial entity (i.e lose the not for profit status)" at the end of 2012. On that and other assumptions, BDO valued the 12.5% shareholding to be acquired by Ellimark under the Ellimark Deed at between $394,000 and $440,000, with a mid-point of $417,000. 3. It is apparent that after the production of the Draft BDO valuation discussions took place between Mrs Calvo and Mr Ronen's accountant, Graham Hurwitz, of Hurwitz Geller Pty Ltd, and also between Mrs Calvo and Mr Ronen in respect of the sale of the 12.5% of the shares in AIM. 4. On 14 March 2011 Mr Hurwitz wrote to Dr and Mrs Calvo referring to those prior discussions and in terms that included the following: We understand that the principles in terms of which Peter and Athalie will sell to Ellimark are as follows: 1. The consideration for the sale of 12.5% of the issued shares in AIM is $350,000. 2. An amount of $160,719.81 (see attached Schedule A) remains payable by you to Nitzan Ronen. This amount is calculated as at 18 March 2011 and interest accrues at $28.05 per day after that date and is the total of the advances made by Nitzan to assist you with regard to meeting your legal costs in connection with litigation with Mr Sweeney, plus interest. The amount due is to be offset against the amount payable by Ellimark in respect of the shares. 3. You will transfer the shares to Ellimark and Ellimark will pay as follows: (a) on the receipt of signed share transfer forms in registrable form, Nitzan Ronen will forgive the debt for the amount in paragraph 2 and provide you with a discharge of mortgage in relation to the mortgage registered over the farm; (b) $94,640.09 – 6 months after the date Ellimark receives the signed share transfer forms; and (c) $94,640.09 – 12 months after the date Ellimark receives the signed share transfer forms. 4. Ellimark is of the view that the "not for profit" status of AIM should cease as soon as appropriate arrangements can be made. You agree with this proposal and will work with Ellimark to achieve this objective. 5. You and Ellimark will enter into arrangements [regarding] a dividend policy for AIM after the cessation of its "not for profit" status. We suggest that you and Ellimark enter into a comprehensive Shareholders' Agreement which would take account of the usual matters included in such agreement, eg appointment of directors, funding, dividend policy, sale of shares, issue of additional shares, etc and also update the Constitution to reflect the profit making status of AIM and the creation of another director position. 1. On 22 March 2011 Stephen Wawn & Associates wrote to Hurwitz Geller Pty Ltd advising that they acted for Dr and Mrs Calvo and had been provided with Mr Hurwitz's letter of 14 March 2011. They advised as follows: We are instructed that our clients do not agree to the terms set out in your letter regarding the sale price of the shares or the times for payment. We are also instructed that the other matters listed in your letter have not been agreed to by our clients although the matters raised in points 4 & 5 of your letter were discussed. Without prejudice to our clients' rights, we are instructed to request that BDO finalises its valuation of AIM. Once finalised our clients will consider the valuation and consider further negotiations. 1. It is apparent that BDO finalised its valuation sometime prior to 7 April 2011 in which the same valuation of between $394,000 and $440,000 with a mid-point of $417,000 was maintained. 2. On 7 April 2011 Stephen Wawn & Associates wrote to Hurwitz Geller Pty Ltd in the following terms: Our clients instruct us that they are prepared to accept the mid range valuation as the value of 12.5% of the shares in AIM namely the sum of $417,000.00. Would you kindly confirm that your client accepts this figure as a basis for finalising this transaction, and if so our client is prepared to offer the following terms of payment: 1. That your client pays half the consideration for the purchase of the shares to our client within 14 days of the date your client advises us in writing of its acceptance of the valuation of $417,000; 2. The debt owing on the Mortgage granted to your client be paid from the proceeds of the first half of the payment, the balance payable to our client. In this regard we note the agreement between our respective clients, and confirmed in writing on 23 February 2010 by Mr Moore during your client's incarceration, that "interest will not accrue for the period during which we are both undertaking steps required by the terms of the Deed. The payout figure will remain for this period as stated at 22 February 2010" (a copy of the email is attached). The payout figure will therefore be $149,858.17. 3. That the remaining half of the consideration namely $208,500.00 be paid at the expiration of six months thereafter secured by a first registered Mortgage over residential property at the rate currently charged by National Australia Bank for business loans secured over residential property to a maximum gearing of 70% of the sworn current market value; 4. Signed Share Transfer forms shall be handed to Ellimark Pty Limited upon payment of first half of the consideration and completion of registration of the Mortgage to our client to secure the remaining half of the consideration. 1. It is apparent that there was a board meeting of AIM on 7 April 2011 at which representatives from William Buck, a firm of chartered accountants, advised the board regarding the "not for profit" status. The board was advised that since 18 October 2007 the "not for profit" status of AIM had been cancelled apparently as a result of an application made by Mr Sweeney. It is apparent also that AIM was unaware of this and had continued since that time as though it had been a "not for profit" organisation. Options were apparently discussed which included advising the ATO that AIM was unaware that Mr Sweeney had made the application for the cancellation of the not for profit status and seeking to have it restored retrospectively to October 2007. In those circumstances advice was received that such status should not change within the next five years. 2. Later on the same day Stephen Wawn & Associates wrote again to Mr Hurwitz in the following terms: We refer to our letter of even date. It has just come to our clients' attention that the Australian Institute of Music Limited (AIM) has in fact been a 'for-profit' organisation since about October 2007. We enclose herewith a search of AIM extracted from "business.gov.au" which shows that the company is not (sic) longer a 'not-for-profit' entity. As a result, the valuation prepared by Mr David McCourt of BDO valuing the shares your client seeks to purchase pursuant to the Deed dated 7 February 2009 is inaccurate. We are therefore instructed to withdraw our clients' offer contained in our letter sent to you earlier today. We are writing to McCourt today advising him of the true status of AIM and requesting that his valuation be adjusted accordingly. We will contact you after receipt of an amended valuation based on this information. 1. On 28 April 2011 Swaab Attorneys wrote to Stephen Wawn & Associates in response to the letter of 14 March 2011 in terms that included the following: [Purchase] of the shares referred to in Hurtwitz Geller's letter dated 14 March 2011 was agreed to by Mrs Athalie Calvo in a conversation with Mr Nitzan Ronen shortly before the letter dated 14 March 2011 was sent to you. The letter reflected conversations that Mrs Calvo has had with Mr Ronen, apart from the timing for payment of the shares. The continued existence of the Australian Institute of Music and the extent of Dr and Mrs Calvo's ownership of the Institute is due to Ellimark Pty Ltd and Mr Ronen. Dr and Mrs Calvo owe $160,719.81 as at 18 March 2011 to Mr Ronen. Interest is accruing at $28.05 per day. This amount is the total of advances made by Mr Ronen to assist Dr and Mrs Calvo in relation to meeting their legal costs in connection with the litigation with Mr Sweeney, plus interest. The amount is secured against Dr and Mrs Calvo's farm. This amount is well overdue for payment and the necessary notices have been served. Mr Ronen withdraws his suggestion that the amount payable to him be offset against the amount payable by Ellimark in respect of the acquisition of further shares in the Australian Institute of Music. Mr Ronen requires the loan to be repaid within 14 days. We note that Dr and Mrs Calvo have made a written agreement to sell to Ellimark Pty Ltd so that Ellimark will own 50% of shares in the Institute. We look forward to receiving a bank cheque in favour of Mr Nitzan Ronen in payment of the loan. On receipt of those funds, we will provide the necessary discharges of the security. 1. On 2 May 2011 Stephen Wawn & Associates wrote to Swaab Attorneys referring to Mr Moore's advice of 22 February 2010 (referred to in paragraph 2 of their letter of 7 April 2011) that interest would not accrue on the loan during the period when steps were being undertaken under the Ellimark Deed. That letter included the following: Our clients have proceeded on this agreed basis since 22 February 2010. Our clients deny that the agreement is a 'suggestion' that can be withdrawn by Mr Ronen. The amount owing as at 22 February 2010 is $149,886.22 … and our clients require that this amount be set-off against the price to be paid by Ellimark Pty Ltd to purchase shares in the Australian Institute of Music pursuant to the deed dated 7 February 2009. Pursuant to the Deed, the parties obtained a valuation of the shares to be purchased. The valuation prepared by David McCourt values the shares to be purchased at $417,000. Our clients continue to offer to resolve the settlement of the discharge of mortgage and purchase of shares on the basis set out in our letter to Hurwitz Geller dated 7 April 2011. Our clients require settlement to occur on or before 12 May 2011. 1. On 16 May 2011 Swaab Attorneys responded to Stephen Wawn & Associates' letter of 2 May 2011 disputing the claim that interest was not to accrue in respect of the loan. That letter included the following: Mr Ronen cannot continue to be a "bank" for Dr and Mrs Calvo. Circumstances in relation to the Institute have changed significantly over the past few years. The valuation of the Institute was made on the basis of an assumption that has proved to be incorrect. This was the assumption that the Institute would become a profit making entity in the year 2012. The Board of the Institute has discovered that the Institute is in fact currently a profit making entity and has resolved to apply to the Tax Office for the reinstatement of its not for profit status on an urgent basis. It is necessary to do this to ensure that tax and grants it has received as a result of its supposed not for profit status quo not need to be paid/repaid. We understand that the amount that would need to be repaid if the not for profit status is not reinstated is in the millions of dollars. The Institute has received advice that it will need to maintain its not for profit status for a further 5 years from the date the conversion back to the not for profit status is advised to them. Accordingly, it is unlikely that the Institute will become a profit making entity before 2016 or 2017. The valuation provides for a significant discount – 11% per annum to the valuation of the Institute for each year it remains a non profit organisation. Accordingly, the current valuation is inaccurate. If the discount were applied, the value of the shares is reduced to the amount that Mr Ronen and Mrs Calvo had agreed he would pay, being $350,000. The value of the shares may even be less than that amount. Mr Ronen had agreed with Mrs Calvo to pay $350,000 for the shares as set out in our earlier letter to you. Mrs Calvo then retracted that agreement by way of your letter to Hurwitz Geller. It is difficult to negotiate with people when agreements are reached and then retracted. We note there is also a risk that the not for profit status of the Institute will not be reinstated in which case significant debts would need to be repaid. This also impacts on the value of the Institute. The tax status of the Institute remains uncertain and will do so for some time to come. Mr Ronen remains happy to purchase the shares, but will to (sic) discuss it at a future time. Currently Mr Ronen requires the loan to be repaid and for full interest to be paid. If the loan is not repaid, as requested, Mr Ronen will take legal steps to obtain the repayment of the loan. 1. On 11 August 2011 Mr Hurwitz had a conversation with Mrs Calvo. He asked whether she and Mr Ronen should meet to resolve the matter rather than spending time on "legal letters". Mrs Calvo suggested to Mr Hurwitz that she would pay $100,000 within the next four weeks in respect of the repayment of the loan with the balance in "a few months". Mrs Calvo also said that she wanted $500,000 for the shares and that she would speak with Stephen Wawn and get back to him. Mr Hurwitz followed Mrs Calvo up with a further telephone conversation on 17 August 2011 during which she advised that she had not done anything but would get back to him by the end of the week. 2. On 9 September 2011 Mrs Calvo and Mr Ronen met in a café in Sydney. During that meeting Mrs Calvo informed Mr Ronen that she would be able to pay him $100,000 within three weeks and the balance from the costs assessment of the Sweeney proceedings that was "nearing conclusion". Although Mr Ronen indicated to Mrs Calvo that he wanted some commitment in writing in respect of the shares, Mrs Calvo said she would not talk about that without her lawyer present. Mrs Calvo's note of the meeting included the following: He reiterated the terms of the Deed including the 2008 prices with emphasis on the 'between the highest and the lowest' but I think he's still thinking of mid, if anything. 1. On 21 September 2011 Ms Hallgath wrote by email to Stephen Wawn & Associates in the following terms: I refer to Mrs Calvo and Ellimark's continuing negotiations in relation to the purchase of additional shares in AIM by Ellimark. Ellimark has previously offered $350,000 for the additional shareholding. The matter has continued unresolved for some time. Ellimark would like to resolve the matter and so offers to pay $400,000 for a shareholding of an additional 12.5% in AIM. We look forward to the receipt of your response. 1. On 23 September 2011 Stephen Wawn & Associates responded to Ms Hallgath's email of 21 September 2011 in terms that included the following: An offer for the purchase of the shares was first made by way of a letter from your client's accountants, Hurwitz Geller, to this firm dated 14 March 2011 offering $350,000. That offer was not a conforming offer as the valuation of shares had not been finalised. Upon receipt of a final valuation by BDO, our clients advise your client that in conformity with the terms of the Deed, the shares were available for purchase at the mid-point valuation of $417,000 in accordance with your client's option in the Deed. This offer was withdrawn on the same day, namely 7 April 2011, as it came to our clients' attention that AIM had been "for profit" since about October 2007 and thus the valuation appeared to be based on incorrect information. On 2 May 2011 our clients reiterated their offer to your client as contained in our letter to Hurwitz Geller dated 7 April 2011. In your reply dated 16 May 2011, your client declined to accept the valuation obtained pursuant to the Deed. The Deed provides that: "if, after the price is determined, it (Ellimark Pty Ltd) does not want to purchase the shares, it must give written notice to Dr Calvo." At this time, the price of the shares had been determined in accordance with the terms of the Deed and your client declined to exercise its option to purchase the shares. In your letter dated 16 May 2011 you wrote: "Mr Ronen remains happy to purchase the shares, but will to (sic) discuss it at a future time". On what terms your client was proposing to purchase the shares and when was not known as your client did not accept the valuation provided by BDO pursuant to the Deed. The latest offer of $400,000 for the shares in your email of 21 September 2011 again is not in conformity with the terms of the Deed as the mid-point valuation for the shares is $417,000. In the circumstances, we have advised our client that your client's option to purchase the shares has now lapsed. 1. On 6 December 2011 Swaab Attorneys wrote to Stephen Wawn & Associates. Swaab Attorneys then referred to the previous communications between the parties and to the Ellimark Deed. That letter included the following: Accordingly, our client insists that it be a 50% shareholder in the AIM and that Mrs Calvo, as a result of her husband's death, be the other 50% shareholder. This requires Mrs Calvo to transfer to our client 12.5% of the issued capital in AIM. The valuation by David McCourt previously valued the shares at $417,000. We are instructed that our client: (a.) requires the transfer of 12.5% of the issued capital in AIM to it; (b.) will pay the amount of $417,000 for the shares by the end of January 2012. Mr Ronen agrees to offset the balance of the money owed to him by Dr and Mrs Calvo against the monies payable for the shares; and (c.) does not consent to the transfer of shares by Mrs Calvo as executor of her late husband's estate to herself. 1. On 16 December 2011 Stephen Wawn & Associates referred to the previous correspondence between the parties, in particular to their letter of 23 September 2011 in which they advised that Ellimark's option to purchase the shares had lapsed. The letter also advised that Mrs Calvo would not agree to transfer 12.5% of the issued capital in AIM to Ellimark "as these shares are not for sale". The letter also reiterated Mrs Calvo's position that Ellimark's option to purchase the shares had lapsed. Proceedings 1. These proceedings were commenced in November 2013. They were heard on 18, 19, 25 and 26 May 2015. On 26 May 2015 the parties were granted leave to file additional written submissions in respect of the claims under the Legal Profession Act 2004 (LPA). The filing of written submissions concluded on 12 June 2015. 2. Mr GKJ Rich SC leading Mr SA Lawrance, of counsel, appeared for the plaintiff. Mr CRC Newlinds SC, leading Mr P Newton, of counsel, appeared for Mrs Calvo. Mr TS Hale SC, leading Mr PR Nagle, of counsel, appeared for Ms Johnson. The issues between the plaintiff and Mrs Calvo 1. The plaintiff seeks specific performance of the Ellimark Deed with an order for the transfer of 12.5% of the shares in AIM to it. In her Amended Defence to the plaintiff's Amended Statement of Claim and in the Amended First Cross-Claim, Mrs Calvo seeks a declaration that the Ellimark Deed is unenforceable and an order that it be set aside. The first basis for these claims was non est factum. However that was abandoned on the third day of the trial (tr 201, 204-205). The other basis is conduct by the plaintiff alleged to be unjust and unconscionable. 2. There was also a claim by Mrs Calvo for rectification of the Deed to give effect to a claimed understanding that the option to purchase the AIM shares was part of the security for the monies owing under the loan and as there are now no monies owing in respect of which the Deed was security, Ellimark is not entitled to exercise the option to purchase 12.5% of the shares in AIM. On this basis and those referred to above Mrs Calvo seeks a declaration that she is the owner of 62.5% of the shares and Ellimark is the owner of 37.5% of the shares in AIM. 3. Mrs Calvo also claims that the Deed is unjust in the circumstances. It is alleged that Dr Calvo's will was overborne and his consent and signature on the Ellimark Deed was not independent or voluntary and that he was unable to make a judgment as to what was in his best interests. There were also claims under s 7 of the Contracts Review Act 1980 (CRA) and ss 51AA, 51AB and 51AC of the Trade Practices Act 1974 (Cth) (TPA). Although claims were made under ss 20, 21 and 22 of the Australian Consumer Law (ACL) it was accepted at trial that the relevant conduct is alleged to have occurred prior to 1 January 2011 and that the ACL is not applicable. 4. During the trial and final submissions the real issues for determination were settled leaving aside what Mr Newlinds described as the "smoking remnants of straw men that have been knocked down" (tr 224; 235). The issues for determination between the plaintiff and Mrs Calvo are: (1) whether the Ellimark Deed is liable to be set aside under the Contracts Review Act; (2) whether the Ellimark Deed is liable to be set aside on grounds of unconscionability; and (3) whether the plaintiff's rights under the Ellimark Deed lapsed. Is the Ellimark Deed liable to be set aside under the Contracts Review Act 1980 1. Mrs Calvo's opening submissions included the following: It will be appreciated that there are two types of unjustness. A contract may be unjust because its terms, consequences or effects are unjust (substantive injustice), as where it imposed on the claimant a burden that was not reasonably necessary to protect the legitimate interest of the party seeking to enforce the contract. That is not alleged in this case. The second type of unjustness is because of the unfair methods used to make it (procedural injustice), as where the claimant for relief did not have the capacity or opportunity to make an informed decision whether to enter into the contract. It is this type of unjustness that impugns the Ellimark deed. 1. The final submissions for Mrs Calvo reiterated that there was no substantive injustice in respect of entry into the Ellimark Deed (at [80]). Ultimately there is no issue that both Dr and Mrs Calvo understood the essence of the transaction embodied in the Ellimark Deed (tr 203, 215). 2. Section 7(1) of the CRA provides, relevantly: 7 Principal relief (1) Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following: (a) it may decide to refuse to enforce any or all of the provisions of the contract, (b) it may make an order declaring the contract void, in whole or in part, (c) it may make an order varying, in whole or in part, any provision of the contract, … (2) Where the Court makes an order under subsection (1)(b) or (c), the declaration or variation shall have effect as from the time when the contract was made or (as to the whole or any part or parts of the contract) from some other time or times as specified in the order. 1. In Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41 Spigelman CJ said at [76]: Plainly, the conduct, whether by act or omission, of the party resisting a finding of unjustness under the Act is highly relevant, and will often be determinative. However, the scope of relevant circumstances is not confined to what the person resisting an order under s 7(1) did or did not do and knew or ought to have known. The critical phrase in s 7(1) – "the circumstances relating to the contract at the time it was made" – cannot be so limited. Section 9(1) provides that when determining unjustness "the court shall have regard to the public interest and to all the circumstances of the case". Furthermore, s 9(2)(l) includes, as I have noted, amongst the relevant circumstances "the commercial or other setting, purpose and effect of the contract". 1. The question of whether a contract is "unjust" for the purpose of s 7(1) of the CRA requires a consideration of factors similar to those that are relevant to a claim of unconscionable conduct: Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 at [291]. 2. Mr Ronen's unchallenged evidence was that he was not prepared to lend money to Dr and Mrs Calvo without the Ellimark Deed. Mrs Calvo's evidence was that the loan and the Ellimark Deed were the best option available to herself and her late husband (tr 106). 3. However it was submitted that Dr and Mrs Calvo did not receive any legal or financial advice about the transactions within the Loan Agreement, the Mortgage, the Ellimark Deed and the Affirmation. Fundamentally, it was said, they needed advice as to whether they had a choice other than to drop the case, accept an offer that had been made by Mr Sweeney (the details of which are not in evidence) or borrow money from Mr Ronen and sell shares to the plaintiff. It was submitted that Dr and Mrs Calvo needed advice on the value of the shares in AIM and the value or likely value of their remaining shareholding if the Ellimark Deed were to be entered into and the plaintiff exercised its rights under the Ellimark Deed. 4. In determining whether a contract is unjust, s 9(1) of the CRA requires the Court to have regard to the public interest and to all the circumstances of the case. The matters relied upon in this regard by Mrs Calvo focused upon the declining health of Dr Calvo over the relevant years. There is no issue that prior to the entry into the Ellimark Deed Dr Calvo was in declining health as a consequence of a stroke he suffered in July 2004 and a major operation he underwent on 26 June 2007. The unchallenged evidence is that he became physically weaker and frail. It is also not in issue that there was a progressive decline in his memory and concentration from about June 2008. From about December 2008 Dr Calvo was unstable when walking and was assisted by Mrs Calvo. Mrs Calvo was by this time Dr Calvo's major carer and constantly took him to medical appointments with neurologists, cardiologists and general practitioners. 5. Mr Ronen noticed that after his stroke in 2004 Dr Calvo was not the same as he had been before and appeared to lose concentration easily. Mr Ronen said that Dr Calvo appeared to have difficulty comprehending issues and he sometimes forgot facts which he had recalled in earlier conversations. Mr Ronen also observed that Dr Calvo appeared frail and did not have the same stamina that he had before the stroke. 6. There is also no issue that Dr and Mrs Calvo were under severe financial pressure. Their employment by AIM had been terminated and they were without income. Dr Calvo's cross-examination at the trial took place only during the period prior to the luncheon adjournment as his condition had deteriorated to the point where he was exhausted by the afternoon. There is an issue about when it was that Dr and Mrs Calvo first became aware of the proposal for Ellimark to purchase 12.5% of the shares in AIM. The determination of this issue is important in fixing the time frame during which Dr and Mrs Calvo had to consider the proposal and/or take advice upon it. It is certainly no later than 29 January 2009. However the plaintiff submitted that Dr and Mrs Calvo were well aware of the proposal in December 2008. 7. The issue arises because Mrs Calvo focuses upon Ms Hallgath's affidavit in which she claimed that she met Ms Johnson and Daniel Calvo in her office "In or around January 2009" (affd. 10/07/14 [5]). Ms Johnson gave evidence that approximately two or three days after visiting Mr Ronen in the Correctional Facility with Daniel Calvo, she met with Ms Hallgath at her offices in Sydney. The meeting with Mr Ronen occurred in November 2008. 8. Mrs Calvo was cross-examined as follows (tr 98-99): Q. Shortly after your son Daniel and Ms Johnson had been to see Mr Ronen in November 2008, Ms Johnson told you and Dr Calvo that Mr Ronen will yet (sic) lend you the money but only if you agree to sell 12.5 of the shares in AIM to Ellimark if the litigation was successful didn't you (sic)? A. Not initially. The offer was that he could help. Q. When you say "not initially", at some stage Ms Johnson told you that Mr Ronen will lend you the money but only if you agree to sell 12.5 of the shares in AIM to Ellimark, correct? A. I repeat, not initially. Q. Yes but at some stage she did tell you that, correct? A. Yes. Q. And do you recall when it was she told you that? A. I can't recall the date. Q. Was it sometime in November or December 2008? A. Did you say December? Q. Yes, November or December? A. December. Q. December 2008? A. I think so. … Q. And you understood, in late 2008, that the terms of that arrangement were being negotiated, correct? A. Correct. Q. And you also understood, at some point in December 2008, that that arrangement would include terms on which 12.5 of the shares would be sold to Ellimark if you were successful in the proceedings, correct? A. Correct. 1. It was accepted that Mrs Calvo conceded that she became aware of the condition for the transfer of 12.5% of the shares to Ellimark in December 2008. However, it was submitted that this was a concession in error, having regard to Ms Hallgath's affidavit evidence that it was "in or around January 2009" that she met with Daniel Calvo and Ms Johnson. That contention fails to take into account the fact that Ms Hallgath was communicating with Ms Johnson prior to the beginning of December 2008. It is apparent that Ms Johnson and/or Daniel Calvo spoke with Ms Hallgath prior to her direct communications with Mr Conti in the first week of December and prior to the letter to Mr Conti on 2 December 2008. It is important, however, to note that the letter from Ms Hallgath to Mr Conti on that date does not make reference to the transfer of 12.5% of the shares to Ellimark. The first written record of that condition is the file note Ms Hallgath made of her conversation with Mr Conti on 29 January 2009. 2. Mr Ronen's evidence was that at the first meeting that he had with Ms Johnson and Daniel Calvo in November 2008 he informed them of the condition of the option to purchase 12.5% of the shares in AIM. That evidence was not challenged. Ms Johnson and Daniel Calvo knew in November 2008 of the condition for the option for Ellimark to purchase 12.5% of the shares in AIM. Having regard to that evidence and to Mrs Calvo's concession, notwithstanding Ms Hallgath's affidavit evidence, I am satisfied that Mrs Calvo knew of that condition in December 2008. There is no issue that Mrs Calvo and Dr Calvo met with Mr Conti and Ms Johnson on 29 January 2009. Ms Hallgath's file note makes it clear that on that day Mr Conti telephoned her and advised her that he had met with Dr and Mrs Calvo. He then transmitted to Ms Hallgath Dr and Mrs Calvo's response to the proposal for Ellimark to purchase 12.5% of the shares in AIM should Dr and Mrs Calvo be successful in obtaining back from Mr Sweeney the 37.5% of the shares in AIM held by him. If Ellimark were to purchase 12.5% of the shares then Dr and Mrs Calvo and Ellimark would each be 50% shareholders in AIM, a matter recorded in Ms Hallgath's file note. 3. There is no direct evidence that Mrs Calvo informed Dr Calvo of the proposal in December 2008. However, having regard to Dr Calvo's intense interest in AIM and its future and the obvious closeness between Dr and Mrs Calvo it is probable that she did tell him about it. In any event, by December 2008 Mrs Calvo, and by no later than 29 January 2009 both Mrs Calvo and Dr Calvo, were well aware that Mr Ronen would only lend funds to them if Ellimark was to have an option to purchase 12.5% of the shares in AIM if they were successful in recovering the shares from Mr Sweeney. It is also clear that they must have been asked about their attitude to it in the confines of their senior counsel's chambers to enable him to transmit their instructions to Ms Hallgath. 4. Ms Johnson's affidavit evidence about the meeting in Mr Conti's chambers with Dr and Mrs Calvo was that Mr Conti said: If you take the loan, you are bound to sell the 12.5% to Mr Ronen at market value if you get the shares back from Bill Sweeney. At your age, wouldn't you be better off with some money? You'll have no money at the end of the litigation. An independent assessor would set the price for the shares so it will be a fair price. Aren't you better off having someone like Mr Ronen as a 50% shareholder in AIM because he's a smart businessman? 1. Ms Johnson also claimed that Mr Conti said that he could not advise Dr and Mrs Calvo whether or not to agree to Mr Ronen's terms, but that he and junior counsel were not prepared to appear at the hearing without being paid. Ms Johnson claimed that after the meeting with Mr Conti she had a conversation with Dr and Mrs Calvo as they stood in the street outside chambers. Her affidavit evidence in this regard was as follows: I said words to the effect that they should get some independent legal advice. To the best of my recollection, I gave them the name of a solicitor to speak to, but I no longer recall who that was. 1. Ms Johnson was cross-examined about this claim as follows (tr 188-189): Q. So they needed someone to give them advice, it was obvious? A. I referred them to a solicitor. I gave them the name of a solicitor and I – and then they didn't go to that solicitor. And then I told them to go to Randwick because it was very close to them and there were solicitors there. And they said, what solicitor. I said, just go, there is solicitors everywhere, just go and see a solicitor. Q. What, just off the street? A. Well, they needed to see a solicitor. They seemed to be very loath to go and get independent legal advice. Q. But this is the night of the second day of the trial? A. Well, if you are saying that. But, you know, this had been going on for weeks. This had been going on for ages before that. Q. But they got the documents on the first or second day of the trial, didn't they? A. I think they had the documents before that. In fact, I am sorry, they did have the documents before that. Q. You gave them the documents on the evening of 10 February? A. No, that's not true. Q. In any event, why did you pick Randwick? A. Because it was near where they were. Q. But so was the city, presumably they come into the city a lot, and that's full of solicitors? A. Well, I don't – I don't think that, you know, they are smart people, and I don't think they are that stupid that if I say, "Go to Randwick," they know we must go to Randwick and see a solicitor. They could have gone anywhere to see a solicitor, and they were constantly advised to seek independent legal advice by both myself, by Mr Conti, and I believe also by Mr Stanford in that meeting of the Supreme Court. But I agree with you, that was at the beginning of the trial with Mr Stanford. Q. So you say they were constantly told to get independent legal advice? A. Yes, they were. Q. Did you write them any letter at the time confirming that that's what you had told them? A. No. Q. Did you make any note at the time confirming that that's what you told them? A. Probably not. Maybe I would have, yeah. Q. When you prepared the $2.4 million bill of costs, did you go through your file? A. No, I had someone do it. Q. So you haven't looked at your file? A. No, I had someone do it. Q. This was a very important matter, at the very least to protect your own position? A. Sorry. Q. To confirm that you had advised them to get independent legal advice, was it not? A. They were told that, they were told that in my presence by Mr Conti, and by me. 1. There is no issue that Ms Hallgath forwarded the relevant agreements and documents for execution to Mr Conti on 6 February 2009 under cover of an email. It is not clear how those documents came into Ms Johnson's possession. However the reasonable inference is that she obtained them from Mr Conti. 2. There is an issue about what was said at the time that Ms Johnson attended Dr and Mrs Calvo's apartment on 10 February 2009 and provided to them the relevant documents. Mrs Calvo claimed that Ms Johnson said "I need you and Peter to sign these". Mrs Calvo also claimed that she said that the arrangements were "extortion" and that Ms Johnson agreed but said that they "must sign". Mrs Calvo claimed that Ms Johnson said that she could not witness their signatures and they would need to get someone else to witness their signatures. Ms Johnson claimed that what she said to Dr and Mrs Calvo was that they needed to get "independent legal advice" in relation to the documents. 3. On 11 February 2009 Mrs Calvo drove Dr Calvo and Daniel Calvo to premises in Randwick where Daniel Calvo's car was being serviced by Mr Nick Bourdo. The documents were signed at those premises and witnessed by Mr Bourdo. 4. Section 9(2) of the CRA contains a list of the major matters to be considered when determining whether a contract was entered into in circumstances that were unjust. Inequality of bargaining power 1. Section 9(2)(a) requires the Court to have regard to whether or not there was any material inequality in bargaining power between the parties to the relevant contract. The parties to the Ellimark Deed are Dr Calvo and Ellimark. It is true that Dr Calvo's health was declining. Both Dr and Mrs Calvo were under severe financial pressure. 2. It was contended that Ellimark, on the other hand, was under no pressure or constraints. It had Swaab Attorneys representing it and protecting its interests. 3. The context of the provision of the documents to Dr and Mrs Calvo includes the history of the negotiations that led up to their provision in February 2009. Dr and Mrs Calvo's son, together with Ms Johnson, had suggested that funding of the litigation occur. It was not Ellimark or Mr Ronen who had pursued the transaction. When asked whether there was a willingness to fund the litigation, the condition that was suggested by Mr Ronen to Dr and Mrs Calvo's lawyer, Ms Johnson, in November 2008 was that it would be necessary to enter into an arrangement with Ellimark to bring it up to a 50% shareholding should Dr and Mrs Calvo be successful in the proceedings in obtaining Mr Sweeney's shareholding. 4. Inequality of bargaining power per se is not the relevant matter under s 9(2)(a) of the CRA. Such inequality must be "material" or significant in the circumstances. Obviously Ellimark was not in need, notwithstanding that its director was incarcerated. Whereas Dr and Mrs Calvo were in significant need of funding to continue their case. In that sense there was inequality in their position in the bargaining process. However they had the contingency of the returned shares from Mr Sweeney with which to bargain. In determining whether the inequality was "material" it is permissible to take into account what happened in the bargaining process. 5. Dr and Mrs Calvo were represented by solicitors and barristers who, it is clear, assisted them in negotiating with Ellimark's solicitor in respect of the terms of the Ellimark Deed. It was with the assistance of their senior counsel that they conveyed to Ellimark that they wanted a process for what they regarded as the fair valuation of 12.5% of the shares in AIM. 6. Dr and Mrs Calvo were in a weaker commercial position than Ellimark and in that sense there was an inequality between them and Ellimark. However, that did not mean that there was material inequality in their bargaining power. I am not satisfied that there was any "material inequality in bargaining power" between Ellimark and Dr and Mrs Calvo. Subject of negotiation 1. The next matter for consideration is whether or not at the time the Ellimark Deed was executed its provisions were the subject of negotiation: s 9(2)(b) of the CRA. There is no dispute that Dr and Mrs Calvo met with Mr Conti on 29 January 2009 for three hours. Mrs Calvo did not dispute, but could not recall, discussing the transfer of 12.5% of the shares to Ellimark with Mr Conti (tr 100). The file note made by Ms Hallgath of her conversation with Mr Conti clearly suggests that Mr Conti discussed the matter with Dr and Mrs Calvo. It is also quite clear that it was Mr Conti who suggested to Ms Hallgath that the provision to fix the valuation should be inserted into the Deed. I am satisfied that there was negotiation and that the terms that were suggested by Dr and Mrs Calvo through Mr Conti were taken up as a result of that negotiation. Practicality of alteration or rejection of any provisions 1. The next matter for consideration is whether or not it was reasonably practicable for Dr or Mrs Calvo to negotiate for the alteration of the Ellimark Deed or to reject any of the provisions within it: s 9(2)(c) of the CRA. I am satisfied that it was reasonably practicable and that Mr Conti, on behalf of Dr and Mrs Calvo, did negotiate terms of the Ellimark Deed with Ms Hallgath. As referred to above, Ellimark, through Ms Hallgath, accepted the proposal put by Dr and Mrs Calvo, through Mr Conti, for the introduction of the mechanism of valuation and the use of a valuer for the purposes of the sale of the shares to Ellimark. Not reasonably necessary for the protection of legitimate interests 1. The next matter for consideration is whether or not any of the provisions of the Ellimark Deed imposed conditions that were unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the Deed: s 9(2)(d) of the CRA. It was conceded that there are no such provisions in the Ellimark Deed. However it was contended that Ms Johnson's request of Mrs Calvo in the 2007 Deed not to disclose to anyone her purported right to acquire 32.5% of the shares in AIM meant that such disclosure was not made to Ellimark. Clause 2(a) of the Ellimark Deed provided that the sale of 12.5% of the total shares in AIM to Ellimark was "with the intention that Dr Calvo and Ellimark will each hold 50% of the shares in AIM". It was submitted that although this is an "intention" as opposed to a condition, such intention could not be achieved if Ms Johnson's 2007 Deed is valid and enforceable. 2. I am not satisfied that the Ellimark Deed imposed conditions that were either unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the Deed. Inability to protect interests 1. The next matter for consideration is whether or not any party to the Deed was not reasonably able to protect their interests because of their age or the state of their physical or mental capacity: s 9(2)(e) of the CRA. It was contended that by reason of Dr Calvo's declining health and the circumstances referred to above he was not reasonably able to protect his interests. 2. In Calvo v Sweeney White J referred to Dr Calvo's presentation in the witness box in the following terms (at [167]): It is very difficult to assess what was Dr Calvo's understanding of the transaction because he could not be usefully cross-examined on that matter. Dr Calvo underwent heart surgery on 30 June 2007. One of the effects of his medical condition from July 2007 was that he would lose his train of thought. Not infrequently in giving evidence, Dr Calvo was unable to complete an answer because he lost his train of thought. It would be wrong to draw conclusions from his present condition about his capacity to understand the agreements in September 2004. He is undoubtedly an intelligent man. Nonetheless, Mr Sweeney gave evidence that during executive meetings held during August 2004, Dr Calvo appeared not to be holding his concentration throughout the meetings and on occasions appeared to be confused. He said that Dr Calvo had exhibited those symptoms in the past. 1. Although White J did not consider that in 2004 Dr Calvo suffered from a special disability or was under a special disadvantage that would attract the principles against unconscionable dealing in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, his Honour concluded that Dr Calvo's stroke left him weaker and more susceptible to the exercise of influence by Mr Sweeney. His Honour also concluded that the stroke compromised Dr Calvo's ability to negotiate in his and his wife's interests (at [189]). 2. It is true that Dr Calvo had difficulty at times in understanding matters but it is not suggested that he was incapable of understanding the terms of the arrangements that were entered into in February 2009. Indeed it was conceded that Dr Calvo understood the transactions. However his declining health meant that he needed assistance to protect his interests. 3. Another matter of relevance is that, in March 2010, a year after entry into the Ellimark Deed, Dr Calvo executed a will. Mr Stephen Wawn met with Dr Calvo and took his instructions for the will. He drew the will and witnessed Dr Calvo's signature (tr 93-94). Mrs Calvo was present when Dr Calvo gave instructions to Mr Wawn in respect of the will and was also present when he signed the will (tr 94). Mrs Calvo gave evidence in these proceedings that she believed that Dr Calvo was capable of understanding the will and did understand it at the time that he signed it (tr 95). The plaintiff made the point that on 18 October 2011 when Mrs Calvo swore an affidavit in respect of the application for probate she claimed that she was not aware of any circumstances that raised any doubt as to her entitlement to a grant of probate (Ex C). Mrs Calvo agreed that she understood at the time that she swore that affidavit that she would not be entitled to a grant of probate if Dr Calvo had not understood the will when he signed it (tr 94). 4. Although I am satisfied there was no "inability" to protect his interests, Dr Calvo's ability had been diminished by his declining health. It is appropriate to take into account the difficulties under which Dr Calvo was labouring in respect of his mental and physical capacity in February 2009. Economic circumstances, educational background and literacy 1. The next matter for consideration is the relevant economic circumstances, educational background and literacy of the parties to the Deed: s 9(2)(f) of the CRA. Clearly Dr Calvo was a highly educated and literate man. The same can be said of Mrs Calvo. The economic circumstances have been described above and need to be taken into account. The language of the contract 1. The next matter for consideration is whether the contract is wholly or partly in writing, the physical form of the contract and the intelligibility of the language in which it is expressed: s 9(2)(g) of the CRA. There is no issue that the contract is wholly in writing and there is no criticism of the language used within it. Independent and other expert advice 1. The next matter for consideration is whether or not and when independent legal or other expert advice was obtained by Dr or Mrs Calvo: s 9(2)(h) of the CRA. Ms Johnson's evidence was that she advised Dr and Mrs Calvo that she thought they should get independent legal advice in relation to the documents including the Ellimark Deed. Although it is contended that Mr Conti did not advise Dr and Mrs Calvo on the Ellimark Deed, the communications with Ms Hallgath, the subject of the file note, suggest that there was communication between Mr Conti and Dr and Mrs Calvo that enabled Mr Conti to propose the mechanism of valuation and the independent valuation of the shares. 2. Mrs Calvo contended that Mr Conti could not have given any advice to herself and Dr Calvo because the proposed loan from Mr Ronen was for the purpose of paying Mr Conti's fees. It was submitted that Mr Conti was in a position of conflict if he gave advice to Dr Calvo in relation to the then proposed transactions and it should be presumed that he would not engage in conduct that would impair or conflict with his duties to Dr and Mrs Calvo. 3. It was submitted that Ms Hallgath correctly perceived that there was a need for Dr and Mrs Calvo to obtain independent legal advice by requesting a letter from Ms Johnson or Mr Conti from an independent lawyer who had provided advice to them. It was also submitted that Ms Hallgath inexplicably allowed the transaction to proceed without obtaining that letter and without knowing whether Dr or Mrs Calvo obtained independent legal advice. 4. In Calvo v Sweeney White J recorded that notwithstanding advice to Dr and Mrs Calvo to obtain independent legal advice in respect of the 2004 agreement under consideration, they did not do so. They spoke to a law student about it and when asked whether they had taken independent legal advice they, through Mrs Calvo, suggested that they had taken such advice. White J recorded that Mrs Calvo claimed that she said this because she did not wish to "appear to be an idiot". 5. In any event it is unlikely that any advice from an independent solicitor would have made any difference in this case. It was certainly not an improvident bargain. It included the mechanism for a proper valuation of the shares. It only gave Ellimark an equal shareholding with Dr and Mrs Calvo. It is appropriate also to reiterate that in her opening submissions Mrs Calvo accepted that the substantive terms of the transaction were not unjust. 6. The fact that Dr and Mrs Calvo did not obtain independent legal or other expert advice in respect of the Ellimark Deed is a matter to be taken into account. Explanation of the Deed 1. The next matter to be taken into account is the extent, if any, to which the provisions of the Ellimark Deed and their legal and practical effect were accurately explained by any person to Dr Calvo or Mrs Calvo and whether or not they understood the provisions and their effect: s 9(2)(i) of the CRA. There is no issue that Dr and Mrs Calvo understood the provisions of the Ellimark Deed. 2. Mrs Calvo claimed that she informed Ms Johnson on 10 February 2009 that it was an extortionate arrangement. This view was apparently not conveyed to Mr Conti who negotiated the Deed less than two weeks earlier with Ms Hallgath, clearly on instructions from Dr and Mrs Calvo. Certainly Ms Johnson sent a message to Ms Hallgath on 10 February 2009 suggesting that the documents that had been prepared by Ms Hallgath were "extortionate". However Ms Johnson had been aware of the proposed arrangement since December 2008 and had not made that suggestion until 10 February 2009. There was clearly tension between Ms Johnson and Ms Hallgath and I am satisfied that Ms Johnson's use of this colourful descriptor was a reaction to her dealings with Ms Hallgath. 3. I am satisfied that both Dr and Mrs Calvo understood that it would be a protection to have the shares that were to be sold to Ellimark independently valued at the relevant time of the transaction and instructed Mr Conti to negotiate that term on their behalf. I am satisfied that there was an explanation given to Dr and Mrs Calvo and that they understood that if they accepted the loan from Mr Ronen and they recovered the shares from Mr Sweeney they would be obliged to sell 12.5% of the shares in AIM to Ellimark if it wished to purchase the shares. Undue influence, unfair pressure or tactics 1. The next matter to be considered is whether any undue influence, unfair pressure or unfair tactics were exerted on or used against Dr or Mrs Calvo: s 9(2)(j) of the CRA. Although it was contended that unfair pressure or tactics were used against Dr Calvo, it is very difficult to accept that this occurred. Mr Ronen was in prison. He understood that Dr Calvo was represented not only by a solicitor but also by counsel. The fact that he had heard that the solicitor did not have such a good reputation does not mean that he and/or Ellimark were exerting unfair pressure or tactics. 2. I am not satisfied that there was any unfair pressure or unfair tactics exerted on Dr or Mrs Calvo. Similar contracts 1. The next matter for consideration is the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing: s 9(2)(k) of the CRA. 2. This matter is not relevant to these proceedings. Commercial or other setting, purpose and effect of the contract 1. The next matter for consideration is the commercial or other setting of the Ellimark Deed: s 9(2)(l) of the CRA. In this regard the timing of the execution of the Deed was highlighted. It was the second day of the trial that the documents including the Ellimark Deed were provided to Dr and Mrs Calvo and they executed them on the third morning of the trial. However Mrs Calvo had understood at some point in December 2008 that the terms of the arrangement that were being negotiated included the provision for the sale of the 12.5% of the shares in AIM to Ellimark (tr 99). It was submitted that Mrs Calvo thought that she did not have any option but to accept the proposal from Mr Ronen/Ellimark. 2. The purpose of the Ellimark Deed was to secure Mr Ronen's agreement to fund the litigation. The effect of the Ellimark Deed was that if Dr and Mrs Calvo were successful in obtaining Mr Sweeney's shares they were obliged to give Ellimark the option to purchase 12.5% of the shares in AIM. I have no doubt that Dr and Mrs Calvo well understood this condition, and the nature and effect of the Ellimark Deed, well before 10 February 2009 and no later than 29 January 2009. As I have said earlier Mrs Calvo was well aware of this condition in December 2008. Conclusion on Contracts Review Act 1. Dr Calvo and Mrs Calvo were in exquisitely uncomfortable circumstances as they considered their options to continue funding the litigation or to settle it. They certainly found themselves in a delicate situation because the barristers required payment for their fees or some security for their fees. This pressure was no doubt exacerbated by Dr Calvo's ill health and the requirements on Mrs Calvo to care for her husband and also to manage the litigation and the arrangements in respect of its funding. 2. It is conceded that Dr Calvo understood the commercial arrangements into which he was entering. It is also conceded that there is nothing substantially unjust within the content of the arrangement and Ellimark was entitled to protect itself and seek the terms that it did in the Ellimark Deed. 3. There are many aspects to the arrangements that were made in late 2008 and early 2009 that were highly unsatisfactory that relate mainly to the issues between Mrs Calvo and Ms Johnson that are dealt with later in these reasons. However that cannot be said in respect of the arrangements between Dr and Mrs Calvo and Ellimark. 4. The main purpose of Ellimark's involvement was so that Mr Conti's outstanding fees could be paid and he and his junior's continued appearance could be secured. The arrangement for Ellimark's solicitor, Ms Hallgath, to deal directly with Mr Conti was in the circumstances very unusual. However, having regard to my findings about Ms Johnson's conduct later in these reasons, it is probable that Mr Conti's involvement was thought to be necessary for Dr and Mrs Calvo to secure the required funding successfully. 5. Ellimark proposed a legitimate commercial arrangement in respect of a company, AIM, in which it had invested a great deal and sought equality of shareholding with a person (Dr Calvo) to whom it had provided and enjoyed a supportive commercial relationship over a number of years. It was a proposal that would only be triggered if the contingency (the return of Mr Sweeney's shares) came to fruition. 6. Ellimark's conduct was in my view professional and flexible to negotiation. It adopted the terms suggested on Dr Calvo's behalf. There were no inappropriate tactics or unfair pressures brought to bear on Dr or Mrs Calvo. I accept Ms Hallgath's evidence that she was being "hounded" by Daniel Calvo (who was well aware that Ellimark was to have the option to purchase 12.5% of the AIM shares) to conclude the arrangements (tr 81). 7. The fact that Dr and Mrs Calvo did not accept Mr Conti's advice and that of Ms Johnson to take independent legal advice was said to be known to Ellimark. That submission is based on Ms Hallgath's email to Mr Conti on 6 February 2009 in which she wrote: "I would appreciate it if they saw a lawyer in relation to these documents and returned them with a letter saying that they had obtained legal advice". Ms Hallgath described the peculiar circumstances of having to deal with a senior silk on the other side as "very much a bespoke transaction" (tr 73). 8. Ms Hallgath said that she made this request in the email because she was aware that Mr Conti was a barrister (although she also suggested that she regarded him as the "transactional solicitor" (tr 73)). She said that she thought Mr Conti would ask Ms Johnson to provide the letter (tr 78). She also said that she made the request because she was concerned that Ms Johnson may make a claim later on that "we" had acted in an unconscionable or extortionate way (tr 75). However Ms Hallgath did not receive the letter as requested. Rather she received a number of abusive text messages from Ms Johnson and adjusted to the circumstances by writing the letter of 10 February 2009, the terms of which are set out earlier in these reasons. It was clear from this process that Ms Johnson was purporting to express views on behalf of her clients and it was reasonable for Ms Hallgath and Ellimark to assume that they were obtaining legal advice (irrespective of whether it was independent) in respect of the documents. 9. I am satisfied that the Ellimark Deed is not liable to be set aside under the CRA. Is the Ellimark Deed liable to be set aside on the grounds of unconscionable conduct 1. In Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447 Mason J said at 461: But relief on the ground of "unconscionable conduct" is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage. … Although unconscionable conduct in this narrow sense bears some resemblance to the doctrine of undue influence, there is a difference between the two. In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position. 1. In Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392 the Court said at 439-440 [161]: Equitable intervention to deprive a party of the benefit of its bargain on the basis that it was procured by unfair exploitation of the weakness of the other party requires proof of a predatory state of mind. Heedlessness of, or indifference to, the best interests of the other party is not sufficient for this purpose. The principle is not engaged by mere inadvertence, or even indifference, to the circumstances of the other party to an arm's length commercial transaction. Inadvertence, or indifference, falls short of the victimisation or exploitation with which the principle is concerned. 1. It is necessary to show that the plaintiff knew, or ought to have known, of the existence of a disabling condition or circumstance and its effect on Dr Calvo and that it took unconscientious advantage of it: Amadio at 462; Kakavas at 398 [6]. 2. The claim under s 51AA of the TPA reflects the doctrines referred to above. The claim under s 51AC of the TPA is wider than the general law. A claim under that section is not constrained by cases at general law or in equity. The plaintiff's conduct must demonstrate "a high level of moral obloquy" and be "irreconcilable" with what is "right or reasonable": Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 at [291]. 3. It was submitted that Dr Calvo's physical and mental condition exacerbated by exhaustion from the trial was such that he was in a special position of disadvantage and that his disability was known to Ellimark. It was submitted by Mrs Calvo that Ms Johnson and Daniel Calvo were the agents of Ellimark for the purpose of execution of the Ellimark Deed. It was further submitted that Ms Johnson and Daniel Calvo were aware of Dr Calvo's disability and that their knowledge is imputed to Ellimark. 4. Agency is a consensual relationship the central characteristics of which reveal the closeness of identity that is required for the relationship to exist: Tonto Home Loans Australia Pty Ltd v Tavares at [171]-[179]. There was nothing in the evidence in this case that could suggest that Ms Johnson or Daniel Calvo was acting as the agent for Ellimark. There is no evidence of any consensual arrangement or indeed evidence of a relationship such that could amount to an agency relationship between Ellimark/Mr Ronen and Ms Johnson and Daniel Calvo. 5. It was submitted on Mrs Calvo's behalf that it was difficult to see that a reasonable person would not see a "red light" when considering the scenario in which the Ellimark Deed was executed. It was submitted that the circumstances were such that Dr and Mrs Calvo were in a situation of "special disadvantage" that was known to Ellimark. Further it was submitted that it was unconscientious for Ellimark to enter into the Ellimark Deed with Dr Calvo given the circumstances in which the execution was procured. Conclusion on unconscionable conduct 1. I disagree with the submissions made on behalf of Mrs Calvo. Ellimark had been open and candid with its requirements for the provision of funding for the litigation since first approached in November 2008. That indication was given in circumstances where Dr and Mrs Calvo were represented by not only a solicitor but by barristers. It was given in circumstances where Ellimark was represented by a solicitor who then negotiated with the lawyers representing Dr and Mrs Calvo. Even if it were to be accepted that there was a special disadvantage there was nothing unconscientious in Ellimark's conduct. It facilitated the successful outcome of the litigation by enabling Dr and Mrs Calvo to secure their legal representation. 2. The Ellimark Deed is not liable to be set aside on the ground of unconscionable conduct. Have the plaintiff's rights under the Deed lapsed? 1. Mrs Calvo's claim in this regard is based on the premise that it was necessary for the plaintiff to give notice in order to exercise the option under the Deed to purchase 12.5% of the shares in AIM. In this regard it is appropriate to extract again the provisions of clause 2(b) of the Deed which provides: Ellimark may, but is not obliged to, purchase those shares in AIM. If, after the price is determined, it does not want to purchase the shares, it must give written notice to Dr Calvo. 1. There is no express requirement for the plaintiff to give notice if it wishes to proceed with the purchase. The express requirement for notice is if it does not wish to purchase the shares. 2. Mrs Calvo submits that there should be implied into the Deed additional words in clause 2(b) and an additional clause 2(bb) as follows: (b) Ellimark may, but is not obliged to, purchase those shares in AIM. If, after the price is determined, it does not want to purchase the shares at that price, it must give written notice to Dr Calvo that it does not want to purchase the shares at the determined price, whereby its right to purchase the shares under this Deed lapses. (bb) If Ellimark does not exercise its right to purchase the shares in AIM within a reasonable time after the price is determined in accordance with clause 2(c), the right to purchase the shares under this Deed lapses. 1. The plaintiff submitted that the implied term in clause 2(b) is not necessary to give the Deed business efficacy; would be inconsistent with the existing notice requirement of having to give notice if it did not want to purchase the shares; and is not so obvious that it goes without saying: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347; BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 282-3. 2. There is no real issue that there should be implied into the Deed a requirement that the plaintiff exercise its rights under the Deed within a reasonable time after the determination of the valuation of the shares. It is also not in issue that reasonableness is assessed at the date of exercise of the right and not the date of contract and that the Court will have regard to subsequent events including the conduct of the parties: Hart v MacDonald (1910) 10 CLR 417; Rudi's Enterprises Pty Ltd v Jay (1987) 10 NSWLR 568 at 576. 3. Mrs Calvo claims that the correspondence between the parties and their solicitors supports the conclusion that the plaintiff's rights under the Deed have lapsed. The first letter relied upon is that of the plaintiff's solicitors dated 16 May 2011 (extracted earlier) in which they advised that Mr Ronen had agreed to pay $350,000 for the shares and that he remained happy to purchase them but would discuss it at a future time. Mrs Calvo submitted that in context this letter could only be seen as a statement that the plaintiff did not want to purchase the shares at the determined price and constituted notice under clause 2(b) of the Ellimark Deed whereby the plaintiff's rights lapsed. 4. The plaintiff submitted that the context of this letter includes reference to the risk that the not-for-profit status of AIM would not be reinstated and that there may be significant tax debts that would need to be paid. It was noted that the uncertainty would continue until the issue was settled. The plaintiff submitted that against that background and notwithstanding these issues it was indicated that Mr Ronen was still happy to purchase the shares and discuss it at a future time. It was submitted that when read in context the letter is not a notice that the plaintiff did not wish to purchase the shares under the Ellimark Deed. I agree. I am not satisfied that the letter of 16 May 2011 constituted notice that the plaintiff did not want to purchase the shares. 5. The next letter from the plaintiff's solicitors relied upon by Mrs Calvo is that of 21 September 2011 (extracted earlier) in which reference was made to a willingness to purchase the shares at $400,000. It was submitted that this constituted notice that the plaintiff did not want to purchase the shares at the determined value whereby its rights lapsed. 6. The plaintiff submitted that this letter makes it very clear that the plaintiff did wish to purchase the shares. The BDO valuation provided a range of between $394,000 and $440,000. It was submitted that the offer of $400,000 was well within the range. It was also submitted that this letter must be read in the context that on 11 August 2011 Mrs Calvo had offered to sell the shares outside the range at $500,000. 7. The plaintiff contended that this process was well within the rights of the parties. The Ellimark Deed did not preclude them from making offers on different bases. However it was submitted that having herself stepped outside the price range fixed by the valuer, Mrs Calvo should not be heard to say that any counter-offer which did not accord with the mid-point of the BDO valuation (but was well within the determined range) immediately caused the rights under the Ellimark Deed to lapse. I agree with these submissions. I am not satisfied that the letter of 21 September 2011 was a notice under clause 2(b) of the Ellimark Deed that the plaintiff did not want to purchase the shares. 8. The final document relied upon by Mrs Calvo in this regard is the plaintiff's solicitors' letter of 6 December 2011 (extracted earlier) requiring the transfer to the plaintiff of 12.5% of the issued capital in AIM for $350,000. As the correspondence extracted earlier establishes, Mrs Calvo was proposing that the amount outstanding under the loan be set-off against the purchase price of the AIM shares. At this time $350,000 represented the difference between the mid-point of $417,000 and the amount that was still outstanding under the loan agreement of approximately $67,000. 9. Mrs Calvo submitted that this letter constituted notice under clause 2(b) of the Deed that the plaintiff did not want to purchase the shares. It was submitted that it is no answer to say that the idea of a "set-off" was first raised by Mrs Calvo. 10. I do not agree with the characterisation of this letter as a notice that the plaintiff did not want to purchase the shares. In fact when one takes into account the amount owed under the loan agreement, the mid-point of the BDO valuation and the offered amount of $350,000, the plaintiff was willing to "pay" $417,000, the mid-point of BDO's valuation. 11. I am not satisfied that the letter of 6 December 2011 constituted notice under clause 2(b) of the Deed that the plaintiff did not wish to purchase the shares. 12. The conduct of the parties as outlined in the correspondence establishes that the plaintiff was seeking to purchase the shares within a reasonable time of the determination of the BDO valuation. It was only unable to do so by reason of the claim made that its rights had lapsed. Those claims were unjustified. The plaintiff's rights under the Deed to purchase the shares have not lapsed. Outcome as between the plaintiff and Mrs Calvo 1. The plaintiff is entitled to an order for specific performance of the Ellimark Deed. Mrs Calvo's claims will be dismissed. The issues between Mrs Calvo and Ms Johnson 1. In the Second Cross-Claim Ms Johnson seeks a declaration that Mrs Calvo holds the shares in AIM the subject of the Transfer of Shares dated 30 December 2009 on trust for her and an order that they be transferred to her. In the alternative Ms Johnson seeks damages for breach of the Shares Mortgage and/or the 2007 Deed. 2. In her Defence to Ms Johnson's Cross-Claim, Mrs Calvo claims that she has distributed the assets of the estate of her late husband. She claims that there was no consideration given for the promise contained in the 2007 Deed and that Ms Johnson was a volunteer and is not entitled to specific performance. Mrs Calvo also claims that any entitlement under the Shares Mortgage has not been triggered. There was also a claim that the Ellimark Deed, Shares Mortgage and the Transfer of Shares are not enforceable on the basis of non est factum. However this claim was abandoned at trial. 3. In the Third Cross-Claim Mrs Calvo seeks a declaration that the 2007 Deed, the Shares Mortgage and the Transfer of Shares are unenforceable and an order that they be set aside. Mrs Calvo also claims that the 2007 Deed, the Shares Mortgage and the Transfer of Shares should be set aside on the basis of unjust and unconscionable conduct. Mrs Calvo also seeks a declaration that Ms Johnson is estopped from claiming any costs under the Tax Invoice dated 28 January 2015 (Ex 1). 4. At the conclusion of the trial the issues for determination between Mrs Calvo and Ms Johnson were distilled into the following: (1) whether Ms Johnson is entitled to specific performance of the Transfer of Shares and the declaration and orders claimed in relation to the shares; (2) whether the 2007 Deed, the Shares Mortgage and the Transfer of Shares are liable to be set aside under the CRA and/or on the grounds of unconscionable conduct. (3) whether the 2007 Deed alone or together with the Costs Agreements made in May 2007 are void under s 327 of the LPA (now repealed and reflected in s 185 of the Legal Profession Uniform Law (NSW) 2014; and (4) whether Ms Johnson is estopped from claiming legal costs from Mrs Calvo for work done in the Sweeney proceedings; 5. Many of the matters for consideration in dealing with Ms Johnson's claim for an order that Mrs Calvo transfer 32.5% of the shares in AIM to her will also need to be considered in dealing with Mrs Calvo's claims that the 2007 Deed, the Shares Mortgage and the Transfer of Shares are unenforceable and should be set aside, particularly based on the CRA and Ms Johnson's alleged unconscionable conduct. The claims under the Contracts Review Act 1. The issue of whether the 2007 Deed is liable to be set aside under the CRA arises by reason of Ms Johnson's claim for specific performance. Although originally pleaded as a claim for specific performance of the 2007 Deed, such claim was eschewed in Ms Johnson's final submissions. It was submitted that the 2007 Deed is effectively spent by reason of the execution of the Transfer of Shares on 30 December 2009 at St Vincent's Hospital. It is that document that is now said to be an agreement separate from the 2007 Deed, albeit that the only basis upon which the Transfer of Shares document was executed was the obligation under the 2007 Deed. 2. The fact that the claim for specific performance of the 2007 Deed was abandoned does not obviate the need to consider the circumstances surrounding its execution. Although the Shares Mortgage and the Transfer of Shares were executed in 2009, it is necessary to consider each of those documents in the context of the existence of the 2007 Deed and Ms Johnson's knowledge of the terms of the Ellimark Deed and her involvement in securing the funding for the Sweeney proceedings from Mr Ronen. 3. The Recitals to the Shares Mortgage included the following: 6. In addition, Peter agrees that upon the successful conclusion of this matter, which commenced on 9 February 2009 before His Honour Mr Justice White in the Supreme Court of New South Wales ("the matter"), the 37.5% of the shareholding currently held by William Sweeney, which would then be owned by Peter, is also mortgaged to Leigh, in addition to the 25% currently owned by Peter ("Shares"). Peter acknowledges that Leigh is entitled to all of these Shares notwithstanding the quantum of her costs and fees. 1. Paragraph 8 of the "Operative Part" of the Shares Mortgage provided: 8. Peter acknowledges that at the successful conclusion of the Hearing, which commenced on 9 February 2009 before His Honour Mr Justice White in the Supreme Court of New South Wales, Leigh may at any time thereafter, deal with her shares by any means necessary, including the sale of the totality of the Shares, being 62.5% of the shareholding in AIM (or 25% of the shareholding in AIM if the matter is unsuccessful). Peter acknowledges that Leigh is entitled to all of these Shares notwithstanding the quantum of her costs and fees. 1. Ms Johnson swore three affidavits in these proceedings. The first two affidavits, sworn 3 July 2014 and 11 November 2014, were proposed to be read by the plaintiff in its proceedings against Mrs Calvo. This was prior to the filing of the Second and Third Cross-Claims. After Ms Johnson was joined as the second cross-defendant to Mrs Calvo's First Cross-Claim, she swore a further affidavit on 3 May 2015. 2. In her first affidavit, Ms Johnson outlined the circumstances in which she met Dr and Mrs Calvo. Daniel Calvo's wife was her hairdresser and over time Ms Johnson became socially acquainted with Daniel Calvo. It was at his behest that she met with Dr and Mrs Calvo in respect of their difficulties with Mr Sweeney. Ms Johnson said that she viewed a lot of documents together with Dr and Mrs Calvo over a period of about eight weeks. She claimed that she gave them her view on the prospects of their case against Mr Sweeney but said she was reluctant to take it on because she was a criminal lawyer and she thought that the work required to run the case was more than Dr and Mrs Calvo could afford. Ms Johnson's first affidavit referred to a conversation that she claimed occurred at this time in the following terms: Mrs Calvo: We'll give you 37½% of AIM once we win the case. Ms Johnson: That's ridiculous! It's a stupid offer because you'd be running the case and giving all the shares away if you win it. Mrs Calvo: We'll give you 32½% then, and we'll keep the other 5%. 1. Ms Johnson claimed that when Mrs Calvo made the offer of 32.5% of the shares she "agreed" and said "this is not in lieu of my fees". 2. In her second affidavit of 11 November 2014 Ms Johnson addressed her observations of Dr Calvo. That evidence included the following: Over time, I observed that his condition got progressively worse. But in the dealings I had with him, Dr Calvo appeared to understand what was going on at all times prior to the hearing, and during the hearing. When we spoke, he would ask questions or give responses that indicated he had understood what I had said. 1. In her first affidavit of 3 July 2014 Ms Johnson dealt with her observations of Dr Calvo during the three months preceding the hearing in February 2009 when she spoke with him and/or Mrs Calvo "on almost a daily basis". Her evidence included the following (par [17]): At no stage did Dr Calvo say that he did not understand what was proposed in relation to the loan and option. Had I at any point thought that Dr Calvo did not understand the option or loan, then I would have obtained medical advice as to the nature of his condition. But I never thought that he did not understand these documents. Also, every time that I saw Dr Calvo in relation to the option and the loan, Mrs Calvo was present. At no point did Mrs Calvo ever say to me words to the effect of 'Peter does not understand what he is doing.' Also, at the time, I was taking instructions from Dr Calvo in relation to the Sweeney litigation. If I had been at all unsure about Dr Calvo's mental capacity I would have sought medical advice as to whether Dr Calvo was fit to give instructions. 1. In her second affidavit Ms Johnson said that she remembered delivering the documents (the Terms Letter of 6 February 2009, the Ellimark Deed and the Mortgage) to Dr and Mrs Calvo and claimed that the following conversation took place: Mrs Calvo: This is outrageous! What choice do we have? Ms Johnson: I can't advise you. I think you should get independent legal advice in relation to these documents. Mrs Calvo: Why don't you just witness these documents. Ms Johnson: I can't witness them. You need to get independent legal advice. 1. Ms Johnson gave the following evidence in cross-examination in relation to the Ellimark Deed and the fact that she did not feel able to give Dr and Mrs Calvo any legal advice about it (tr 183): Q. Why was it that you didn't feel able to give the Calvos any legal advice about the agreement they were entering into with Mr Ronen and Ellimark? A. Because they really didn't like the agreement. Q. So why couldn't you give them legal advice about that? A. Because I didn't want to advise them to enter into an agreement that they really didn't want to enter into. … Q. What you wanted them to do, you say, was for them to get someone else to advise them? A. Yes. Q. But wouldn't that person have the same problem, they would be confronted with a client that didn't want to do something, and they are giving them advice? A. Yes. Q. And ultimately, if a lawyer is told by a client that they don't want to do something -- A. Yes. Q. -- unless compelled by law, the appropriate advice to give them is, well, don't do it, isn't it? A. Yes. Q. It is obvious? A. Yes. Q. So were you hoping that the Calvos wouldn't tell another lawyer that they didn't want to enter into the agreement? A. God no. They could tell the other lawyer whatever they wanted to. That's why I didn't want to be a part of it. 1. Ms Johnson agreed that it was inevitable that she would have read the Ellimark Deed before Dr and Mrs Calvo signed it (tr 184). She claimed that Daniel Calvo told Mr Ronen about the agreement for her to receive 32.5% of the shares when they first met him in prison (tr 185). She gave the following further evidence in cross-examination (tr 185): Q. And therefore, it must have been very strange to you that both Mr Ronen and the Calvos were signing up to an agreement that said in paragraph 2(a) something that wasn't right? A. That's why I guess I wanted them to have independent - I mean, not specifically for that, but I wanted them to have independent legal advice on this. Q. That is something you should have immediately stepped in and said, hey guys, everyone, you have forgotten about me? A. Well, I actually had a conversation with Mr and Mrs Calvo after the lengthy meeting with Mr Conti, where Catherine Hallgath got on the phone to Mrs Calvo, in the presence of Mrs Calvo. We were downstairs in Phillip Street, and I said to her, I knew she was concerned about that, and I said to her, "I'll sell him the 12 and a half per cent from my shareholding." Q. What does that mean? A. Well, it just means that they didn't have to sell the 12 and a half per cent from their shareholding. It was just an offer I made. Q. Well, yes, they did, because they were signing an agreement with him saying they had to? A. Well, they didn't have to sign that agreement. Q. I know that, but they thought they had no choice, correct? A. Well, the choice they had was that I could have run the trial. 1. Ms Johnson also claimed in her second affidavit that Mr Stanford prepared the Shares Mortgage and that he told her that the "document was intended to guarantee" their fees. Ms Johnson's affidavit evidence was that she gave the Shares Mortgage to Mrs Calvo and said "We have not been paid. We want a mortgage over the shares to guarantee our fees". 2. Mrs Calvo had given affidavit evidence that when she looked at the Shares Mortgage the following conversation took place: Mrs Calvo: It looks like you own all our shares. Ms Johnson: You will just have to trust me on this one. It's to counter the Catherine effect. It's insurance so Nitzan and the Moores can't rip your shares off you. 1. Mrs Calvo explained in her affidavit that she understood Ms Johnson's reference in this conversation to the "Catherine effect" to mean Ms Hallgath. Ms Johnson denied that this conversation took place. However at no stage in any of her affidavits did Ms Johnson suggest that she explained the Shares Mortgage in any detail to Dr or Mrs Calvo. Nor did Ms Johnson suggest that she advised Dr and Mrs Calvo to take independent legal advice in respect of the Shares Mortgage. 2. In her third affidavit (sworn as the second cross-defendant to Mrs Calvo's First Cross-Claim) Ms Johnson referred to a conversation with Mrs Calvo and Daniel Calvo after the Sweeney proceedings judgment was delivered on 29 July 2009. Ms Johnson claimed that she said to Mrs Calvo and Daniel Calvo, "We need to have my shares transferred" to which either Mrs Calvo or Daniel Calvo said, "Yes we are going to" or "Yes we will get round to that soon". It was in this affidavit that Ms Johnson annexed the emails of 18 August 2009 referred to earlier between herself and Mrs Calvo in respect of the 32.5% of the shares in AIM. 3. In her third affidavit Ms Johnson claimed that in late December 2009 she was telephoned by either Mrs Calvo or Daniel Calvo in which she was advised "Let's get your shares transferred". She claimed she was "told to come to the hospital on 30 December 2009". In her second affidavit when Ms Johnson was to be a witness for the plaintiff, she gave the following evidence: On the afternoon of 30 December 2009, I attended a hospital together with Danny Calvo. Dr Calvo was at the hospital and so was Mrs Calvo. I took with me an agreement. This agreement was different to the document that is exhibited at tab 11 to the Calvo affidavit. At the hospital, I explained to Dr and Mrs Calvo that I wanted them to sign the transfer agreement. I recall that Mrs Calvo said words to the effect that 'Peter can sign it.' I recall that Dr Calvo then said words to the effect that 'yes, I can sign it.' Dr Calvo then signed the transfer agreement. I also asked Mrs Calvo to sign on behalf of Dr Calvo under a power of attorney. Mrs Calvo then signed the transfer agreement and I signed the transfer agreement. After we had signed the transfer agreement, I sat in a waiting room up the hall with Danny Calvo for about 5 minutes. Mrs Calvo then came out, and we went to the hospital cafeteria for a cup of tea. At the cafeteria, Mrs Calvo said to me words to the effect of 'we're excited! Welcome to AIM!'. 1. Ms Johnson claimed that at the hospital there was a conversation between herself, Daniel Calvo, Mrs Calvo and Dr Calvo about the number of shares in AIM. The discussion revolved around whether there were 10,000 shares or 100,000 shares. Ms Johnson said that she thought that Mrs Calvo had said that there were 100,000 shares and that is why the Transfer of Shares contains the transfer of 32,500 shares which is 32.5% of 100,000 shares. In her first affidavit Ms Johnson had given the following evidence: 19. Sometime after judgment, I met with Dr and Mrs Calvo and there was discussion about their promise to give me 32½% of AIM. At the meeting, Mrs Calvo said words to the effect of: We've thought about the 32.5% that we were going to give you. We're going to sell 12.5% to Nitzan. If we give you 32.5%, that will leave us with too small a holding. We're not going to give you the 32.5%. 20. At that point, I protested. The Calvos had paid $55,000 on account of my fees during the course of the proceeding, but a considerable amount was still outstanding. I had worked on the Calvos' case full-time for a number of months during which I had not been able to earn other income. I said words to the effect that they had promised me the 32.5% and were obliged to transfer it to me. In response, Mrs Calvo leaned forward, sneered at me and said, "Sue me". 1. In her third affidavit Ms Johnson claimed that the conversations referred to in paragraph 19 of her first affidavit took place not long after 5 January 2010. 2. Ms Johnson's affidavit evidence was that Mrs Calvo and Daniel Calvo told her on various occasions that Ellimark opposed the registration of her shares. However she was subsequently provided with a letter dated 12 October 2012 from Ellimark to the directors of AIM consenting to the transfer to her of 3,250 shares in AIM. 3. It is now appropriate to consider the matters in s 9 of the CRA in determining whether any of the 2007 Deed, the Shares Mortgage and the Transfer of Shares was unjust under s 7 of the CRA and if so whether any of them should be set aside. Inequality of bargaining power: s 9(2)(a) CRA 1. At the time that Ms Johnson executed the 2007 Deed she knew that Dr and Mrs Calvo were in financial difficulty. She also knew that Dr and Mrs Calvo were unable to obtain legal representation without having to pay monies "up front". Their bargaining power in respect of the 2007 Deed was very much less than Ms Johnson's bargaining power. Ms Johnson had two Costs Agreements in which Dr and Mrs Calvo had each agreed to pay her costs at $500 per hour, such agreements having been signed two weeks prior to the 2007 Deed being executed. 2. In this instance there was a material inequality in bargaining power as between Dr and Mrs Calvo and Ms Johnson. 3. The position in relation to the Shares Mortgage was far worse. It was produced to Dr and Mrs Calvo on the second day of the trial in which Dr Calvo was being cross-examined. I accept Mrs Calvo's evidence that Ms Johnson informed her that this document was effectively for their protection in case Ellimark tried to rip all their shares off them. There was no capacity for Dr and Mrs Calvo to bargain with Ms Johnson at all. There was a material inequality in their bargaining power in respect of the Shares Mortgage. 4. The Transfer of Shares was executed in extraordinary circumstances where, I am satisfied, there was an inequality of bargaining power between Dr Calvo and Ms Johnson and Mrs Calvo and Ms Johnson. Although Ms Johnson stepped away from the 2007 Deed in her submissions, it is clear that the Transfer of Shares was executed as a result of the fact that Dr and Mrs Calvo had executed the 2007 Deed and were being pressed by their son and Ms Johnson to transfer the shares to Ms Johnson. 5. By the time the Transfer of Shares was signed Dr Calvo's health was in serious decline and he had just suffered another stroke. 6. The materiality of the inequality of bargaining power must have been obvious to Ms Johnson. Subject of negotiation: s 9(a)(b) CRA 1. The so-called negotiation in respect of the 2007 Deed was that Ms Johnson rejected the offer by Mrs Calvo and Dr Calvo to "give" her 37.5% of the shares in AIM. It was Ms Johnson who 'negotiated' that figure down to 32.5%. 2. There was no negotiation at all in respect of the Shares Mortgage. Nor was there any negotiation in respect of the Transfer of Shares, it having depended upon the 2007 Deed in respect of which the so-called "negotiation" is referred to above. Practicality of alteration or rejection of any provisions: s 9(2)(c) CRA 1. Dr and Mrs Calvo were not in a position either practically or otherwise to seek to have altered any provision of the 2007 Deed or to reject any of its provisions. The same position pertained in respect of the Shares Mortgage and the Transfer of Shares. Not reasonably necessary for the protection of legitimate interests: s 9(2)(d) CRA 1. Ms Johnson had two Costs Agreements executed on 14 May 2007. To then secure for herself a transfer of the majority of the property the subject of the litigation was not reasonably necessary for the protection of her legitimate interests. Then to place on top of the 2007 Deed the Shares Mortgage was far and beyond any reasonable approach between two parties to an agreement, let alone between a solicitor and her clients. The Transfer of Shares is a result of the 2007 Deed and the same can be said of it. Inability to protect interests: s 9(2)(e) CRA 1. Ms Johnson would have been well aware that Justice White had held that the 2004 stroke had compromised Dr Calvo's ability to negotiate in his and his wife's interests. As I have said above his health had declined further since then. 2. True it is that the 2007 Deed was executed prior to Justice White's findings. However the Shares Mortgage was produced at a time when Dr Calvo was under cross-examination and a case was being run on his behalf that he in fact was under a special disability or a special disadvantage. The position as between Dr and Mrs Calvo and Ellimark is different to the position as between Dr and Mrs Calvo and Ms Johnson. Ms Johnson was supposed to be protecting their interests in the litigation and making sure that their capacity to protect their own interests was not compromised. The fact that Ms Johnson proceeded without informing either Dr Calvo or Mrs Calvo to take independent advice or to explain the details of the Shares Mortgage to them adversely affected their ability to protect their own interests. The same can be said of the circumstances surrounding the Transfer of Shares. Economic circumstances, educational background and literacy: s 9(2)(f) CRA 1. This has been dealt with earlier at [118]. The language of the contracts: s 9(2)(g) CRA 1. Ms Johnson's evidence suggests that Mrs Calvo understood the terms of the 2007 Deed, the Shares Mortgage and the Transfer of Shares. 2. The language of the 2007 Deed, in particular the use of the expression "consideration for this work" in the context of Dr and Mrs Calvo having already signed Costs Agreements two weeks prior, created uncertainty. Even Ms Johnson appeared to be uncertain about it having regard to her evidence as to whether she informed Dr and Mrs Calvo that the 2007 Deed was or was not in lieu of her fees. 3. The language of the Shares Mortgage in the context of the existence of the 2007 Deed and the Ellimark Deed was also bound to create uncertainty. The language used in the Transfer of Shares is not in issue. Independent and other expert advice: s 9(2)(h) CRA 1. There was no independent or expert advice given to Dr and Mrs Calvo, or suggested by Ms Johnson, in respect of the 2007 Deed, the Shares Mortgage or the Transfer of Shares. Explanation of the documents: s 9(2)(i) CRA 1. There was no explanation given to Dr or Mrs Calvo in respect of the 2007 Deed, the Shares Mortgage or the Transfer of Shares. Undue influence, unfair pressure or tactics: s 9(2)(j) CRA 1. The tactics that were adopted by Ms Johnson in respect of the requirement for Mrs Calvo and Dr Calvo to enter into the 2007 Deed, the Shares Mortgage and the Transfer of Shares were in my view quite unfair. The absence of any suggestion that they take legal advice in respect of these documents independent of Ms Johnson or that they seek to have them explained by someone other than Ms Johnson is demonstrative of the inappropriate tactics that were adopted by Ms Johnson in respect of the AIM shares. Similar contracts: s 9(2)(k) CRA 1. The provisions of s 9(2)(k) are not relevant in this instance. Commercial or other setting, purpose and effect of the contracts: s 9(2)(l) CRA 1. The setting for the execution of the 2007 Deed was in the context of a solicitor giving advice to a client. This was also the setting in respect of the Shares Mortgage and the Transfer of Shares. 2. Although the Shares Mortgage made reference to the transaction occurring "notwithstanding the quantum" of Ms Johnson's "costs or fees", there was no express reference to Ms Johnson's costs or fees in either the 2007 Deed or the Transfer of Shares. However there was reference in the 2007 Deed to "consideration" for the "work" provided by Ms Johnson. Conclusion in respect of the Contracts Review Act 1. If Ms Johnson's evidence in relation to the circumstances surrounding the execution of the 2007 Deed were to be taken as an exemplar of how solicitors behave, it could justifiably cause a reasonably minded observer to lose confidence in the integrity of the legal profession. Even accepting Ms Johnson's version of a conversation that occurred with Mrs Calvo at the time the Deed was executed, when Ms Johnson says rather nobly that she refused to accept 37.5% of the shares and agreed to the lesser figure of 32.5% of the shares, the unfairness of the situation is of breathtaking proportion. If there ever were an exquisite example of an occasion on which independent advice should have been taken before the execution of a Deed, this is one of them. Ms Johnson's abject failure in her obligations to her clients at this stage was well understood by her senior counsel in final submissions when he eschewed any reliance upon the 2007 Deed. 2. It is understandable that solicitors are entitled to obtain security for their costs in certain circumstances. However the Shares Mortgage that was allegedly drafted by Mr Stanford gave to Ms Johnson the totality of Dr Calvo's shareholding and the totality of the shares recovered in the litigation, irrespective of whatever her costs or fees may have been for the provision of her legal services. The unfairness of this document is palpable. 3. The circumstances surrounding the execution of the Transfer of Shares at St Vincent's Hospital when Dr Calvo was so very ill, and when Mrs Calvo was extremely distressed, demonstrates the type of tactics to which Ms Johnson would stoop. I have no doubt that Ms Johnson understood the unfairness and inappropriateness of her conduct in securing signatures on this document at such a time. This conclusion is supported by her silence in respect of its existence, and that of the 2007 Deed, when she was dealing with Ms Dulhunty and the Legal Services Commissioner. 4. I am satisfied that the 2007 Deed, the Shares Mortgage and the Transfer of Shares were unjust in the circumstances. Each of those documents will be set aside. Unconscionable conduct 1. On the one hand the 2007 Deed was an arrangement pursuant to which Ms Johnson could require 32.5% of the 37.5% of the shares recovered from Mr Sweeney to be transferred to her. On the other, the Shares Mortgage entitled Ms Johnson to require a transfer of shares, at least to the amount of 25% then owned by Dr Calvo, to her "notwithstanding the quantum of her costs and fees". If the litigation was successful then Ms Johnson was entitled to deal with all the shares (62.5%, being Dr Calvo's 25% and the 37.5% from Mr Sweeney) irrespective of the "quantum of her costs and fees". 2. As I have said I accept Mrs Calvo's evidence that Ms Johnson said to her on 10 February 2009 that she would only use the Shares Mortgage if Ellimark tried to take Dr Calvo's shares. I do not accept Ms Johnson's evidence that she said to Mrs Calvo that the Shares Mortgage was "to guarantee" her fees and those of Mr Stanford. Ms Johnson was always conscious that she had secured an agreement from Dr and Mrs Calvo that she would have the 32.5% of the shares in AIM if the litigation was successful. That consciousness was exposed by her evidence that she suggested to Mrs Calvo at the time that the Ellimark Deed was negotiated that she, Ms Johnson, would sell 12.5% of the shares in AIM to Ellimark from her 32.5% shareholding, the subject of the 2007 Deed. 3. It was not suggested by Ms Johnson that she advised Dr or Mrs Calvo to take independent legal advice in respect of the 2007 Deed or the Shares Mortgage. Ms Johnson well knew that Dr Calvo and Mrs Calvo were wholly dependent upon her continuing in the case at a time when Dr Calvo was being cross-examined and they had mortgaged their home to fund the litigation and had borrowed from Mr Ronen. 4. However unsatisfactory the circumstances were, I am not satisfied that Dr Calvo or Mrs Calvo were suffering a special disability in July 2007 and/or February 2009. I have found that the 2007 Deed and Shares Mortgage are liable to be set aside under the CRA. However, I am not satisfied that they are liable to be set aside by reason of unconscionable conduct. 5. The execution of the Transfer of Shares at St Vincent's Hospital in circumstances where Ms Johnson had not given any indication of the quantum of her fees was quite disgraceful. Dr Calvo was clearly suffering from a special disability and Ms Johnson took unconscientious advantage of that situation. The inappropriate pressure of the circumstances surrounding the discussions and meetings at St Vincent's Private Hospital on 30 December 2009 demonstrate tactics that were quite disgraceful for any commercial person let alone an officer of this Court. 6. I am satisfied that the Transfer of Shares should be set aside both pursuant to the CRA and on the grounds of unconscionable conduct. The claim under the Legal Profession Act 2004 1. Mrs Calvo claims that the two Costs Agreements and the 2007 Deed amount to a conditional costs agreement under the LPA which does not comply with the mandatory requirements of the Act. It is also contended that the documents amount to a contingency fee arrangement and are therefore void for all purposes precluding any recovery of costs for the work done in the Sweeney proceedings. 2. The LPA includes the following definitions (ss 4, 302): conditional costs agreement means a costs agreement that provides that the payment of some or all of the legal costs is conditional on the successful outcome of the matter to which those costs relate, as referred to in section 323 (Conditional costs agreements), but does not include a costs agreement to the extent to which section 324 (Conditional costs agreement involving uplift fees) or section 325 (Contingency fees are prohibited) applies. costs includes fees, charges, disbursements, expenses and remuneration. costs agreement means an agreement about the payment of legal costs. itemised bill means a bill that specifies in detail how the legal costs are made up in a way that would allow them to be assessed under Division 11. legal costs means amounts that a person has been or may be charged by, or is or may become liable to pay to, a law practice for the provision of legal services including disbursements but not including interest. 1. Section 322 of the LPA provides that a costs agreement between a client and a law practice must be written or evidenced in writing and cannot provide that the legal costs to which it relates are not subject to a costs assessment under Division 11. The LPA also provides relevantly as follows: 323 Conditional costs agreements (1) A costs agreement may provide that the payment of some or all of the legal costs is conditional on the successful outcome of the matter to which those costs relate. … (3) A conditional costs agreement: (a) must set out the circumstances that constitute the successful outcome of the matter to which it relates, and (b) may provide for disbursements to be paid irrespective of the outcome of the matter, and (c) must be: (i) in writing, and (ii) in clear plain language, and (iii) signed by the client, and (d) must contain a statement that the client has been informed of the client's right to seek independent legal advice before entering into the agreement, and (e) must contain a cooling-off period of not less than 5 clear business days during which the client, by written notice, may terminate the agreement. … 325 Contingency fees are prohibited (1) A law practice must not enter into a costs agreement under which the amount payable to the law practice, or any part of that amount, is calculated by reference to: … (b) the amount of any award or settlement or the value of any property that may be recovered in any proceedings to which the agreement relates 327 Certain costs agreements are void (1) A costs agreement that contravenes, or is entered into in contravention of, any provision of this Division is void. … (4) A law practice that has entered into a costs agreement in contravention of section 324(1) (Conditional costs agreements involving uplift fees) or 325 (Contingency fees are prohibited) is not entitled to recover any amount in respect of the provision of legal services in the matter to which the costs agreement related and must repay any amount received in respect of those services to the person from whom it was received. 1. Although extracted earlier it is convenient to set out the relevant terms of the 2007 Deed again: RECITALS: THE PARTIES AGREE AS FOLLOWS: B, C HAVE ENGAGED A TO ASSIST THEM IN VARIOUS MATTERS RELATING TO THE AUSTRALIAN INSTITUTE OF MUSIC LTD ACN: 003 261 112. IN CONSIDERATION FOR THIS WORK, A WILL BE GIVEN 32½% (THIRTY-TWO AND ONE HALF PERCENT) OF THE TOTAL SHARES IN THIS COMPANY – TO BE TRANSFERRED IMMEDIATELY UPON THE REMOVAL OF WILLIAM SWEENEY AS DIRECTOR AND SHAREHOLDER OF THE COMPANY. Exclusivity: B, C and any of their agents and/or assigns agree to exclusively deal with A for the purposes defined in this Deed. Confidentiality: A, B and C shall keep all discussions between themselves and the terms of this Deed confidential, without limit on time, and shall not disclose same to any other person, entity, organisation or company. Dispute Resolution: In the event of any dispute, A, B and C will engage in open and honest discussion about the issues and explore mutually acceptable avenues of action. Severability: Any provision of this Deed which is prohibited or unenforceable in any relevant jurisdiction shall not invalidate the remaining provisions of this Deed or affect the validity and enforceability of that provision in any other jurisdiction. This 2 page Deed is binding on all the heirs, executors and assigns of both A, B, C and is to be legally binding under the state laws of New South Wales Australia. 1. The 2007 Deed refers to the "consideration for this work". The only work that was being undertaken by Ms Johnson was the provision of legal services to Dr and Mrs Calvo in respect of the "various matters" relating to AIM. That work was only in respect of the Sweeney proceedings. Ms Johnson was cross-examined about the two Costs Agreements and the 2007 Deed and gave the following evidence (tr 157-159): Q. What is your position, do you say that that agreement [Deed of 29 May 2007] was in lieu of any other legal fees that might have been payable to you or not? A. Yes. Q. You say that, do you? A. Yes. Q. On your oath? A. Yes. Q. Did you ever have a conversation with the Calvos to the effect that the Deed of Agreement at page 313 was in lieu of what would otherwise be your fees? A. That was the offer that was made to me from the very first. Q. Just explain to me what conversation did you have with the Calvos wherein it was stated that the Deed of Agreement at page 313 was in lieu of any other fees that you might be entitled to? A. There were many conversations. Q. Can you give me an example of one? A. Yes. Initially when I was contacted by Danny Calvo by telephone asking me if I would do this case, he was quite animated and was saying, "Well you can take these shares if you do this case and get these shares back. My parents have been swindled." He said, "You will get the 37 and a half per cent of shares." That was initially. By the way, I didn't want to do the case. Then when I met with Mr and Mrs Calvo, they reiterated the same offer. Q. Is this the conversation that you have set out in paragraph 6 of your affidavit of 3 July 2014? A. Yes. Q. Is it? A. It is one of them. Q. Just have a look at what you said in paragraph 6. In that conversation you say that you said words to the effect, "This is not in lieu of my fees"? A. Well, yes. I made it clear to Mrs Calvo, two things. One is initially I didn't think that we would ever get the shares back and I was trying to get them a payout, a settlement of money. They kept saying, "Take the shares, take the shares." I didn't think we would get them back. I never thought we would get the shares back so I said it is not – I didn't want to do the work, get them a payout and then them go, "Oh well, we don't have to give you the shares because we haven't got the shares." I wanted to, that's why I had a fee agreement with them. Q. I just want to try to understand what your evidence. Did you have a conversation with them where you said, "This is in lieu of my fees", or did you have a conversation with them where you said, "This is not in lieu of my fees"? A. Well, it was not in -- Q. Just answer that question, because this morning you have answered my questions and you have agreed that you had a conversation with the Calvos where you said, "This is in lieu of my fees", correct? That is what you have said this morning? A. Yes. … Q. Do you agree with me that this morning you have said that you did have a series of conversations with the Calvos where you told them that this – being the agreement at page 313 – was in lieu of your fees? A. If we got the shares back. Q. You haven't said that this morning? A. I have now. Q. Let me ask this question; what is your evidence? Did you say to them, "This is not in lieu of my fees", or did you say to them, "This is in lieu of my fees", or did you say something else? A. I said, "It is not in lieu of my fees" because I never believed we would get the shares back. Q. The evidence you have given this morning when you said on a number of occasions you said to them, "This is in lieu of my fees", what is her Honour to do with that? A. Can I explain? Q. Yes. Is it to be believed, is it to be rejected, was it a mistake, why did you say it? A. What I – I gave them a fee agreement because I never believed we would get the shares back. From the very beginning they were saying, "You are going to get 37 and a half per cent of the shares as soon as we get them back". I said, "I don't believe we will get the shares back." I did a lot of work prior to that May fee agreement being signed, just to get clear on what their story was. They weren't even clear on what had happened. When I finally got that right, I was saying to them, "Take this to another lawyer". They didn't want to take it to another lawyer, they kept saying, "You can have the shares". I kept saying, "I don't think we will get the shares back. I think the best we will do, I will try to get you a monetary settlement." So it was at their insistence that the agreement for the shares was signed. That was Mrs Calvo specifically, it was specifically at her insistence. Because I said, "I wouldn't believe that you would give them to me even if we got them back." She said, "No, we will put it in writing." So it was specifically at her insistence, but I said to her, "This is not in lieu of my fees." If we got a monetary settlement I didn't want them saying, "Oh well, we didn't get the shares back so we don't owe you anything". Q. So you did say -- A. I'm sorry, is that clear? I'm sorry. Q. You did say, "This is not in lieu of my fees", is that your position? A. Yes. 1. Ms Johnson gave the following evidence in cross-examination about the change in the Deed from 37.5% to 32.5% (tr 162): Q. Because you said that was ridiculous? A. I did. Q. May we take it the reason you thought that was ridiculous is that it would mean that the Calvos were running the entire case for no-ones benefit other than yours? A. That's what I said. Q. You didn't think 32 and a half per cent was ridiculous? A. That's what Dr Calvo said, "Well, make it 32 and a half per cent then". … Q. What I asked you was you thought that 32 and a half per cent was not ridiculous? A. I guess so, yes. 1. Ms Johnson claimed that she was not sure whether she drafted the 2007 Deed. That claim is understandable. The Deed as originally drafted referred to 37.5% of the shares. This would have been inconsistent with Ms Johnson's evidence that she advised Mrs Calvo that her suggestion that she take 37.5% of the shares in AIM was "ridiculous". Ms Johnson was not re-examined to explain why it was that she thought taking 32.5% (instead of 37.5%) was not ridiculous. 2. Ms Johnson said that at the time Dr and Mrs Calvo signed the three documents she did not turn her mind to the provisions of the LPA (tr 163). 3. The first issue for determination is whether the 2007 Deed either alone or in conjunction with the two Costs Agreements can be characterised as a conditional costs agreement under s 323 of the LPA. Notwithstanding Ms Johnson's rather extraordinary evidence, it is clear that the 2007 Deed related to her costs for the provision of her legal services. Although the expression "consideration" was used, I am satisfied that the parties intended that the provision of 32.5% of the shares in AIM was to satisfy Dr and Mrs Calvo's obligation to pay Ms Johnson for the legal services to be provided in respect of the Sweeney proceedings. It was only in circumstances where the shares were not recovered and the transfer did not occur that Dr and Mrs Calvo would be required to pay Ms Johnson any legal costs pursuant to the two Costs Agreements dated 14 May 2007. 4. The 2007 Deed was conditional upon the removal of Mr Sweeney as a shareholder. That was clearly the relief being pursued in the Sweeney proceedings. 5. The 2007 Deed is appropriately characterised either alone or read together with the two Costs Agreements as a conditional costs agreement pursuant to which the consideration for the provision of the legal services would be the transfer of 32.5% of the shares in AIM conditional upon the successful outcome of the Sweeney proceedings. 6. The 2007 Deed did not comply with the LPA. It made no mention of Dr and Mrs Calvo being informed that they had a right to seek independent legal advice before entering into it and it did not contain a cooling off period of not less than five clear business days. 7. Accordingly the 2007 Deed is void pursuant to s 327(1) of the LPA. The two Costs Agreements dated 14 May 2007 remain in force. 8. The next issue for determination is whether the 2007 Deed either alone or in conjunction with the two Costs Agreements of 14 May 2007 can be characterised as a contingency fee arrangement in contravention of s 325 of the LPA. The question is whether it is a "costs agreement under which the amount payable" to Ms Johnson "or any part of that amount, is calculated by reference to the amount of any award or settlement or the value of any property that may be recovered in any proceedings to which the agreement relates": s 325(1)(b) of the LPA. 9. It was submitted on Ms Johnson's behalf that the 2007 Deed is not an agreement under which there is "an amount payable" to her practice. It was also submitted that the 2007 Deed does not refer to the calculation of any "amount" by reference to the value of any property, the shares. In those circumstances it was submitted that this is not a contingency fee that is prohibited under s 325 of the LPA. 10. In Bolitho v Banksia Securities Limited (No 4) [2014] VSC 582 Ferguson JA observed that the equivalent provision to s 325 in that jurisdiction "banned contingency fees, such that a solicitor may not charge as a fee a percentage of the amount obtained by the client from the litigation" (at [50]). Her Honour also said (at [50]): The distinction between the approach to be adopted where lawyers have an interest in protecting their fees and an interest in the subject matter of the litigation was made clear in Clyne v The New South Wales Bar Association. The High Court, in very clear and direct terms, stated that the former is permissible; the latter is not. Although decided many years ago and in the context of a different style and type of litigation to modern commercial group proceeding litigation, the case is still good authority and is consistent with the continuing legislative prohibition on contingency fees. 1. In Clyne v New South Wales Bar Association (1960) 104 CLR 186 the High Court said at 203: And it seems to be established that a solicitor may with perfect propriety act for a client that has no means, and expend his own money in payment of counsel's fees and other outgoings, although he has no prospect of being paid either fees or outgoings except by virtue of a judgment or order against the other party to the proceedings. This, however, is subject to two conditions. One is that he has considered the case and believes that his client has a reasonable cause of action or defence as the case may be. And the other is that he must not in any case bargain with his client for an interest in the subject-matter of litigation, or (what is in substance the same thing) for remuneration proportionate to the amount which may be recovered by his client in a proceeding: see Fleming, The Law of Torts (1957) p.638, where it is pointed out that the position in the United States is different. 1. It was submitted on Ms Johnson's behalf that the whole structure of the Division of the LPA relating to Costs Agreement is focused on the "payment of legal costs". 2. It was submitted that the focus upon "payment" is supported by s 321 of the LPA which makes provision for the charging of interest on unpaid legal costs. Similarly ss 331 and 332 provide that legal costs must be capable of being the subject of a bill, either a lump sum bill or an itemised bill. Those bills specify the "amount" of the costs and how those costs are made up in a way that would allow them to be assessed: s 302(1) of the LPA. It was also submitted that the costs assessment process under Division 11 of the Act assumes that legal costs is a concept concerned with the "payment of money" the amount of which may be assessed. 3. Ms Johnson submits that the 2007 Deed is not a costs agreement under which an amount is payable and does not fall within the defined circumstances in s 325 of the LPA. In those circumstances it is submitted that there has been no contravention of s 325 of the LPA. 4. It was also submitted that Part 3.2 of the LPA does not prohibit a separate agreement between a solicitor and a client which provides for "payment in kind" of the client's obligation to pay legal costs under a costs agreement. 5. As discussed earlier Ms Johnson initially accepted that the 2007 Deed was an agreement in lieu of any other legal fees that might have been payable to her (tr 157). However Ms Johnson resiled from that position and claimed that the 2007 Deed was not in lieu of any other legal fees that might have been payable in respect of the legal services provided in the Sweeney proceedings. Ms Johnson claimed that if Dr and Mrs Calvo did not recover the shares in the litigation, she would be entitled to her legal costs under the two Costs Agreements signed on 14 May 2007. However if Dr and Mrs Calvo did recover the 37.5% of the shares in AIM from Mr Sweeney then she would be entitled to the shares in lieu of her legal costs (tr 158). 6. Although in Clyne v New South Wales Bar Association, the High Court equated a bargain for an interest in the subject matter of litigation with a bargain for remuneration proportionate to the amount recovered in the litigation, the LPA does not recognise that equation in the provisions relating to "contingency fees". The only reference to the term "contingency fees" is in the heading to s 325. It is not a prohibition on a contingency arrangement, as put by senior counsel for Ms Johnson, of payment "in kind" in discharge of the obligation to pay fees. 7. The LPA is specifically focused on payment of certain amounts for costs. For the purposes of identifying whether an agreement is a costs agreement as defined in s 325(1) of the LPA it must be an agreement in respect of an "amount payable" calculated by reference to the amount of any award or settlement or the value of any property that may be recovered in the proceedings to which the agreement relates. The section does not define the contingency by reference to any receipt of property that is equivalent in value to the amount of the fees to be charged. The same may be said of s 183 of the Legal Profession Uniform Law (NSW) 2014. 8. Although the 2007 Deed is void under s 327(1) of the LPA for the reasons stated above I am not satisfied that it falls within the defined circumstances in s 325(1)(b) of the LPA. Accordingly it is not affected by s 327(4) of the LPA. Estoppel 1. The next issue for determination is whether Ms Johnson represented not only to Dr and Mrs Calvo but also to the Legal Services Commissioner and the Costs Assessor, Ms Dulhunty, that she did not intend ever to submit any invoices for fees. 2. The correspondence in respect of the costs assessment process set out earlier in these reasons includes a claim by Mrs Calvo (via her solicitors Stephen Wawn & Associates) that Ms Johnson had some time before April 2010 "made demand for additional legal costs" from Dr and Mrs Calvo. Those solicitors later reiterated that Dr and Mrs Calvo were willing to pay Ms Johnson's reasonable professional costs upon receipt of an itemised bill. The issue between the solicitors was the demand by Ms Johnson for the registration of the shares pursuant to the 2007 Deed and/or the Transfer of Shares. When Ms Dulhunty referred the matter to the Legal Services Commissioner, Ms Johnson received a letter from the Commissioner dated 30 June 2011 (a copy of which is not in evidence). In Ms Johnson's response to the Legal Services Commissioner she advised that she had informed Ms Dulhunty that she would prepare an itemised bill "for her". Notwithstanding her statement that an itemised bill would be prepared, it was not forthcoming. Mrs Calvo's solicitors asked the costs assessor to issue an "interim certificate" until Ms Johnson provided her tax invoices. 3. Ms Johnson's evidence in respect of why she did not inform the costs assessor, Ms Dulhunty, or the Legal Services Commissioner, of the existence of the 2007 Deed was unsatisfactory. Although she conceded that "perhaps that would have been a good idea" she made the point, the relevance of which was not clear, that Mrs Calvo did not raise it with the costs assessor either (tr 165). She then made the point that she had assumed that Mrs Calvo would have raised it (tr 166). She was cross-examined as follows (tr 168-169): Q. In the clearest of terms what Mrs Calvo's solicitor was saying to you is, "You are kidding yourself if you think you can have the shares"? A. That's true. Q. "But we are happy to pay you your reasonable costs"? A. Yes. Q. "If you just tell us what they are"? A. Yes. Q. That's what you understood was the Calvos' position. A. Yes. Q. From 28 April 2010? A. Yes. 1. Ms Johnson also agreed that Dr and Mrs Calvo's lawyers for the costs assessment process were saying to her that they thought the agreement that she had with the Calvos was in breach of the LPA (tr 170). She gave the following further evidence in cross-examination (tr 170): Q. The question is why didn't you provide an itemised bill of costs in accordance with that request at the time? If you wanted to do so, do so under the cover of a letter which explained that your primary position was you were entitled to the shares, but if you weren't, as the Calvos asserted, here was your itemised bill of costs, why didn't you do that? A. I didn't. I was operating on the basis that I had the shares, but you are right, I should have. It would have been a good position, it would have been a good thing to do, you are right. 1. Ms Johnson said that she took seriously the direction under s 358 of the LPA from Ms Dulhunty but she did not have a bill prepared as she did not have the time to do it (tr 172). She was pressed further in cross-examination as to why she did not disclose to Ms Dulhunty the existence of the 2007 Deed and gave the following evidence (tr 173-174): Q. You didn't want to tell Ms Dulhunty that there was that arrangement in place, correct? A. I didn't see the point in doing a bill. Q. Just answer the question? A. I am sorry. Q. You didn't want to tell Ms Dulhunty that you had, as far as you were concerned, an arrangement in place with 32.5 per cent of the shares had already been transferred to you in payment of your fees, did you? A. I assumed that Mrs Calvo had, or her lawyers on her behalf, had told them that. Q. But it was pretty obvious when you read the correspondence that they hadn't, because Ms Dulhunty is not mentioning the shares, she is asking for tax invoices? A. Well, they would have been irrelevant if the shares were registered, wouldn't they. Q. Of course, that's my point. In your mind, the tax invoices were irrelevant, correct? A. Yes. Q. And all you needed to do was convey that position to Ms Dulhunty and she would be off your back, correct? A. I assume so. Q. So why didn't you do it? A. I don't know. Q. May I suggest this is a probable reason, you knew that that arrangement was illegal under the Legal Profession Act, and you deliberately kept it secret from Ms Dulhunty? A. No, sir, that is not true. Q. Can you offer any other explanation? A. I am slack, I am slack in pursuing my own – my own entitlements. Q. Even in the face of something couched as a direction under a statute? A. Well, yeah. It took -- Q. The very statute that governs your practice as a solicitor? A. Yes. It took me a couple of years before I even approached Ellimark and said, you know, would you – would you consent to the registration of the shares. Q. This is more than just money for you? A. Yes. Q. Correct? A. Yeah. Q. This was substantially to the benefit of the Calvos. If they could get hold of your invoices, then at least the process of them assessing how much Mr Sweeney had to pay them could get started, correct? A. Yes. Q. So it wasn't just a question of you not preferring your own commercial interests, you were falling flat on your face in relation to your obligations to your clients, correct? They needed your help? A. Well, they didn't ask for my help. Mrs Calvo had my telephone number. She could have picked up the phone, as she did for three years constantly, and said, look, Leigh, this is the situation. Let's not – let's not quibble. Give us a bill, we will get your money back, we don't want to give you the shares. Q. That was what Stephen Wawn was saying, in terms. He had said -- A. But she couldn't say that to me. Q. No doubt she could, but her lawyer had said to you, he had said, "Look Leigh, you are not getting the shares because it is an illegal costs agreement under the Legal Profession Act, and anyway, the company won't recognise the transfer, but we are happy to pay your reasonable costs"? A. Well, I think he had said the shareholders won't agree to it. Q. Fine, but the letter concludes with, "But the Calvos are happy to pay your reasonable costs, give us an invoice"? A. Well, I have given an invoice, and now they are not happy to pay me anything within the six year period, and now they don't want to give me anything. Two and a half years of work for nothing. 1. Ms Johnson said that she thought they "might have gotten somewhere had there been a direct approach instead of an aggressive approach from a lawyer" (tr 175). Ms Johnson also gave the following evidence (tr 176): Q. You just ignored it. Knowing that time was ticking on, and other people were organising their affairs upon the basis you weren't doing anything, correct? A. Yeah. 1. Ms Johnson's evidence in relation to her communications with the Legal Services Commissioner was equally unsatisfactory. She gave the following evidence (tr 179-181): Q. So why didn't you tell the legal services commissioner that that was the arrangement? A. I suppose I could have. I suppose the Calvos could have. I suppose Mr Wawn could have. Q. Yes, but my question was, why didn't you? We all know that you could have? A. Well, I don't know. Q. Well, can you do better than that, because you do understand that, either under the Act or just general ethical obligations, you had an obligation to be completely candid in your dealings with the legal services commissioner, didn't you? A. Well, I was, yes, sorry. Q. And you weren't, were you? A. No, I was, because at that point, that's all I had been paid. Q. You had the bit of paper with the title transfer of shares on it? A. That's right. Q. Which you had gone to a lot of trouble to get signed at St Vincent's Hospital the day after Dr Calvo had his stroke, yes? A. At the request of Mrs Calvo, yes. Q. Yes, you say that? A. It's true. Q. She wanted you to have that document signed at the hospital that day, did she? A. She did. Q. Why didn't you tell the legal services commissioner? If your answer is you just don't know, then I will move on? A. I just didn't consider it relevant, I suppose. Q. May I ask you to consider this? A. Yes. Q. You must have, if you are telling the truth now, considered the fact that you had an arrangement in place to receive the shares in lieu of fees, a relevant factor to explain to the legal services commissioner why it was that you weren't providing an itemised bill of costs? A. Sir, can I just say that I believed I had six years in which to provide an itemised bill of costs. I lived in hope that Ellimark would at one point agree to register my shares. I lived in hope that Mrs Calvo would honour the agreement that she had entered into with me. And I also thought that if that didn't happen, then I was within the six year period to provide the itemised bill. Q. Now, would you come to grips with the question I put to you, please? A. I am sorry if I didn't answer that. Q. If you are telling the truth today, you must have known it was a relevant matter to tell the legal services commissioner and Ms Dulhunty. You must have known that? A. If you say so. … Q. You must have known that it was relevant; that you had, as far as you are concerned, an arrangement in place that, instead of being paid money, you would receive the shares, and you already had a signed share transfer in your favour. The legal services commissioner needed to be told that to understand why it was that you were not providing tax invoices? A. Well, perhaps I should have said that. Q. Are you deliberately not answering the question? A. No, sir. I am really not. HER HONOUR Q. Look, you are just being asked that you must have known at the time that the deed of agreement and arrangement was relevant. Do you agree with that proposition or do you not? A. I agree that I should have known. Is that answer. Sorry, no. NEWLINDS Q. It's a matter for her Honour whether that answers the question, but I am prepared to put to you directly that you are deliberately not answering the question? A. No, I am not. I am really trying to answer your questions. Q. May I make the next point for you to consider, that the reason you didn't tell the legal services commissioner about the arrangement is that you full well knew that it was grossly in breach of the provisions of the Legal Profession Act? A. No, sir, that is not true. 1. The LPA provides relevantly: Determinations of costs assessments 367 (1) A costs assessor is to determine an application for a costs assessment relating to a bill by confirming the bill or, if the assessor is satisfied that the disputed costs are unfair or unreasonable, by substituting for the amount of the costs an amount that, in the assessor's opinion, is a fair and reasonable amount. (2) The costs assessor may include an allowance for any fee paid or payable for the application by the applicant. (3) A costs assessor may not determine that any part of a bill that is not the subject of an application is unfair or unreasonable. (4) A costs assessor may determine that the amount of fair and reasonable costs is the amount agreed to by the parties if during the course of the assessment the parties notify the costs assessor that they have agreed on the amount of those costs. Determinations of costs assessments for party/party costs 367A A costs assessor is to determine an application for an assessment of costs payable as a result of an order made by a court or tribunal by making a determination of the fair and reasonable amount of those costs. Certificate as to determination 368 (1) On making a determination of costs referred to in Subdivision 2 or 3 of this Division, a costs assessor is to issue a certificate that sets out the determination. (2) A costs assessor may issue more than one certificate in relation to an application for costs assessment. Such certificates may be issued at the same time or at different stages of the assessment process. … Reasons for determination 370 (1) A costs assessor must ensure that a certificate issued under section 368 (Certificate as to determination) … that sets out his or her determination is accompanied by: (a) a statement of the reasons for the costs assessor's determination, and (b) such supplementary information as may be required by the regulations. (2) The statement of reasons must be given in accordance with the regulations. … Determination to be final 372 A costs assessor's determination of an application is binding on all parties to the application and no appeal or other assessment lies in respect of the determination, except as provided by this Division. 1. The parties did not fully debate the issue of whether a costs assessor may issue more than one certificate in respect of an award of costs. However it was put on Mrs Calvo's behalf that there is at least some uncertainty around whether once the costs assessor issued a determination, no further determinations may be made. In this case the amount of $55,000, in respect of what they had paid Ms Johnson, that was claimed by Dr and Mrs Calvo was removed from the costs assessor's consideration. The solicitors for Dr and Mrs Calvo requested the costs assessor to issue an interim certificate indicating an anticipation of receipt of the tax invoice from Ms Johnson. 2. It is the particular bill in respect of which a costs assessor is to determine an application for a costs assessment: s 367(1) of the LPA. Notwithstanding that the LPA provides that the costs assessor's determination is "final", that does not mean that the costs assessor may only issue one determination. If a separate bill relating to the matter is filed for a costs assessment the costs assessor would probably be able to issue a separate determination. However as has been said, there is some uncertainty about this matter. 3. The detriment that will be suffered by Mrs Calvo is: (1) having to go through the costs assessment process again; (2) having to revisit the litigation and the steps taken within it, seven years after the event; (3) the prospect that Mr Sweeney may argue that Mrs Calvo is now not entitled to have these costs assessed having regard to the certificate of judgment that was enforced in respect of the costs assessment process that was originally completed; (4) the prospect that such argument may be successful. That detriment could be dealt with in part on the basis that Ms Johnson would have to pay any costs of the process. However it is the uncertainty of Mr Sweeney's position so long after the event in circumstances where he has paid the costs of the litigation the subject of the certificate of judgment consequent upon Ms Dulhunty's costs assessment that is of serious concern. 4. However when the difficulties with obtaining Ms Johnson's tax invoices were encountered, there was no assumption that a costs assessment excluding those costs would prevent Ms Johnson making a claim for her costs in the future. 5. On balance I am not satisfied that Ms Johnson is estopped from claiming that she is entitled to be paid her costs in the circumstances. Although this is not a matter that has been debated and is perhaps not a matter for this Court to determine, the circumstances of this case would in my view justify a condition being imposed upon Ms Johnson that she indemnifies Mrs Calvo for any costs that Mrs Calvo may incur in the costs assessment process and a further condition that Mrs Calvo should not be required to pay any costs to Ms Johnson that are not able to be recovered from Mr Sweeney. Conclusion 1. The plaintiff is entitled to an order for specific performance of the Ellimark Deed. Mrs Calvo's claims against the plaintiff will be dismissed. 2. Mrs Calvo is entitled to orders setting aside the 2007 Deed, the Shares Mortgage and the Transfer of Shares. Ms Johnson's claim for specific performance is to be dismissed. 3. The parties are to bring in Short Minutes of Order reflecting these outcomes together with an agreed order as to costs. If the parties are unable to agree on costs I will hear argument when the matter is listed for final orders. The parties should make contact with my Associate to relist the matter for the finalisation of the proceedings. ********** 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: 31 August 2015