Supreme Court New South Wales Medium Neutral Citation: Stojcevski v Kogan [2018] NSWSC 127 Hearing dates: 24 and 30 January 2018 Date of orders: 16 February 2018 Decision date: 16 February 2018 Jurisdiction: Equity Before: Robb J Decision: (1) The plaintiff's summons is dismissed. (2) The plaintiff is to pay the defendants' costs of the proceedings. Catchwords: APPEAL – Control of proceedings – whether plaintiff entitled to cause company to appeal CONTRACT – Deed of company arrangement – Construction of contract – meaning of reasonable prospects of appeal succeeding – whether Senior Counsel's written advice expressed reasonable prospects of appeal succeeding – whether administrators given required access to Senior Counsel Cases Cited: Abourjaily v Parkview Estate Pty Ltd [2017] NSWSC 1256 Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 Samuels v Western Australia (2005) 30 WAR 473; [2005] WASCA 193 Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300; [2005] NSWCA 153 Degiorgio v Dunn (No 2) (2005) 62 NSWLR 284 Spencer v the Commonwealth of Australia (2010) 241 CLR 118; [2010] HCA 28 Cranney Farm Pty Ltd v Corowa Fertilizers Pty Ltd [2011] NSWSC 9 Category: Principal judgment Parties: Lilly Stojcevski (plaintiff) Barry Frederic Kogan (first defendant) Joseph Hayes (second defendant) Representation: Counsel: P Bates (plaintiff) I Pike SC (defendants) Solicitors: Margiotta Solicitors & Attorneys (plaintiff) KL Gates (defendants) File Number(s): 2018/22906 Judgment 1. The plaintiff is Ms Lily Stojcevski. Ms Stojcevski is the sole director and the holder of 51% of the shares in Parkview Estate Pty Ltd (Subject to Deed of Company Arrangement) (the company). The defendants, Mr Barry Frederic Kogan and Mr Joseph Hayes, are the deed administrators of the relevant deed of company arrangement (the administrators). 2. The plaintiff commenced these proceedings by summons filed in Court on 22 January 2018. By the cooperation and with the agreement of the parties, the final hearing of the proceedings took place on 30 January 2018. 3. The need for an urgent final hearing arose because the issue at the heart of the dispute is whether Ms Stojcevski is entitled to cause the company to appeal from a judgment given by Darke J on 19 September 2017 in Abourjaily v Parkview Estate Pty Ltd [2017] NSWSC 1256. That case concerned whether a number of plaintiffs were entitled to orders for the specific performance by the company of contracts for the sale of certain properties that were lots in a proposed but unregistered subdivision at the time the various contracts were entered into. Each of the contracts of sale contained a term that entitled either party to rescind the contract if the plan of subdivision had not been registered by a stipulated date. The contracts imposed upon the company an obligation to use its reasonable endeavours, or its best endeavours, to achieve registration by the relevant date. In outline, the issue was whether the company had lost the right to rescind the contracts because it had failed to use its reasonable (or best) endeavours to achieve timely registration. In essence, Darke J found that the company had breached its obligations in a way that precluded it from rescinding the contracts. As the plan of subdivision has subsequently been registered, the plaintiffs have become entitled to specific performance of their contracts. 4. Ms Stojcevski caused the company to file a notice of intention to appeal, and the Court was told that the time for the company to file a notice of appeal expired on 17 January 2018. Accordingly, the company will not now be entitled to prosecute an appeal unless it is given leave to appeal by the Court of Appeal. An application for that leave should be made as soon as possible, if it is to be made, in order to avoid prejudice to the application by reason of delay. 5. Although Ms Stojcevski wants to cause the company to apply for leave to appeal, that course is opposed by the administrators, who take the view that it would be in the interests of the company and its creditors for the company to complete all of the contracts of sale, and not pursue an appeal from the judgment of Darke J. 6. The resolution of the dispute depends upon the application of a single term of the deed of company arrangement which governs Ms Stojcevski 's right to control the company's conduct of the proceedings. I will set out that term below. 7. By her summons, Ms Stojcevski seeks the following substantive relief: 1 A Declaration that the plaintiff has complied with sub-clause 6.1(b) of the Deed of Company Arrangement dated 2 June 2017 for Parkview Estate Pty Ltd made between the defendants and the plaintiff. 2 An Order that the primary carriage and control of the proceedings involving the Supreme Court matter of Abourjaily & ors v Parkview Estate Pty Ltd (Subject to a Deed of Company Arrangement) Case No. 2015/00174134, and an application for leave for additional time to appeal and an appeal therefrom (if leave be granted), be restored by the defendants to the plaintiff and her appointed solicitor Mr Anthony Steven Margiotta of Messes Margiotta Solicitors and Attorneys, pursuant to sub-clause 6.1(a) of the aforesaid Deed of Company Arrangement. 3 An order restraining the defendants, until related proceedings 2015 /174434 are relisted before Darke J for further orders pursuant to liberty to apply to Darke J granted by order 8 made on 17 October 2017, from taking any steps to specifically perform nor to settle nor to complete nor to notify registration of any of the contracts identified in orders 3, 4 and 5 made by Darke J in the said related proceedings on 17 October 2017. 1. The deed of company arrangement was made on 2 June 2017 between the defendants, the company and Ms Stojcevski. The only relevant term is clause 6, the material parts of which are as follows: 6. Non-DOCA Assets 6.1 Proceedings (a) Ms Stojcevski will: (i) have primary carriage and conduct of the Proceedings, including, but not limited to the power to: (A) appoint and instruct solicitors to act on behalf of the Company in the Proceedings; (B) determine litigation strategy; (C) file any or further evidence; and (ii) be solely responsible for, without set-off, counterclaim or demand, all fees and costs incurred by the Company directly, in connection with or associated to the Proceedings for the period beginning on and from the Commencement Date through to the termination of this Deed under clause 13. In the event that this Deed terminates under clause 13, Ms Stojcevski will be responsible for all fees and costs that arise from events, transactions, actions and actions that occurred during the Deed Period in respect of the Proceedings, notwithstanding that the relevant liability may not be payable until after the Deed Period. (b) if a judgment is given in the Proceedings which is adverse to the Company, Ms Stojcevski must not appeal or seek leave to appeal such judgment unless Ms Stojcevski: (i) has obtained written advice from Senior Counsel that the Company has reasonable prospects of success of appealing a judgment given in the Proceedings against the Company (Written Opinion), subject to the Deed Administrators approving the suitability of Senior Counsel; (ii) has provided the Deed Administrators with a copy of the Written Opinion; (iii) allows the Deed Administrators to have access to the Senior Counsel who provided the Written Opinion to clarify or seek explanation of any aspect of the Written Opinion and that the Deed Administrators considers appropriate; (iv) has given the Deed Administrators reasonable opportunity to object to any appeal or application for leave to appeal; and (v) is solely responsible for, without set-off, counterclaim or demand, all fees and costs in obtaining the Written Opinion. … 6.4 Court timetable (a) The Company, under the direction of Ms Stojcevski pursuant to clause 6.1(a)(i) of this Deed, must adhere to and comply with in full and on time, all timetables, orders and directions set by the court in the Proceedings. (b) Any failure by the Company to comply with clause 6.4(a) and which is not rectified within 3 Business Days (whether by compliance or extension for time for compliance by the court), is a failure to comply with a fundamental provision of this Deed. … 1. It may be noted that clause 6.1(a)(i) refers to Ms Stojcevski having "primary carriage and control of the Proceedings". "Proceedings" is defined in clause 1.1 as meaning "Supreme Court of New South Wales Proceedings 2015/147134". Strictly, that is a reference to the first instance proceedings that were decided by Darke J, and not to any appeal from the judgment in those proceedings. However, the administrators agreed, in my view correctly, that on the proper construction of clause 6 of the deed of company arrangement "Proceedings" was intended to encompass any appeal from the judgment at first instance (because otherwise the terms of clause 6 that govern Ms Stojcevski's entitlement to control any appeal by the company would be meaningless). 2. Ms Stojcevski relied upon a Joint Memorandum provided by Mr Franco Corsaro SC and Ms Jane Merkel of counsel dated 17 January 2018, as being the advice from Senior Counsel required by clause 6.1(b)(i) of the deed of company arrangement. It may be noted that the advice is dated the same day as the time for filing a notice of appeal expired. 3. The parties agree, and the hearing was conducted on the basis that the Court's determination of two issues would be sufficient to determine the proceedings. The effect of those issues, as I understand them, is whether Stojcevski is not authorised by the deed of company arrangement to cause the company to initiate and prosecute an appeal from the judgment of Darke J because of either or both of the following matters: first, the written advice given by Mr Corsaro was not "written advice from Senior Counsel that the Company has reasonable prospects of success of appealing" from Darke J's judgment; and secondly, that Ms Stojcevski had not allowed the administrators to have access to Mr Corsaro "to clarify or seek explanation of any aspect of the Written Opinion" that the administrators considered appropriate, as required by clause 6.1(b)(iii). 4. It was accepted by the administrators that Mr Corsaro had been approved by them as suitable senior counsel. 5. The effect of the agreement between the parties is that by these proceedings the Court will decide once and for all whether Ms Stojcevski satisfied the requirements of clause 6.1(b) in a manner that gives her a right to cause the company to appeal from Darke J's judgment. In other circumstances, an issue may have arisen as to whether, in a case where Ms Stojcevski tried on one occasion to satisfy clause 6.1(b) in a manner that failed for some technical reason, she might be entitled to renew her attempt to satisfy the term by obtaining a second written opinion from senior counsel that conformed with its requirements. That is, in theory a question would arise concerning time limitations on Ms Stojcevski satisfying clause 6.1, and whether time was of the essence in relation to the steps that Ms Stojcevski was required to take. In this regard a question would arise concerning the possible application of clause 6.4 in the context of an appeal commenced by the company. The effect of the agreement of the parties is that this question does not arise, as Ms Stojcevski does not contend that if the court finds that she has not already satisfied the requirements of clause 6.1, she will still be entitled to attempt to do so by a renewed implementation of clause 6.1(b). Consequently, if in these proceedings Ms Stojcevski fails in relation to the determination of the two issues set out above, it will be established that she is not entitled to cause the company to pursue an appeal. 6. It will be necessary to construe the relevant aspects of clause 6.1 of the deed of company arrangement. 7. The parties' submissions did not address in any detail the principles of construction that are appropriate to be applied in the construction of deeds of company arrangement. 8. I will proceed on the basis that as the deed of company arrangement is a deed between the parties, it should be subject as a general matter to the same principles of construction that are applied to all written agreements: see for example Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]; and Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [52], [109]. 9. However, in my view it will be appropriate to construe the deed giving due allowance to its nature and the context in which it was entered into, as a deed of company arrangement. The deed not only binds the company and its principal shareholder and director, but it also binds creditors by reason of terms that it has not been necessary to set out in these reasons. In a sense, a deed of company arrangement is a quasi-constitutional document that governs the rights not only of the parties to the deed, but also of third parties such as creditors who had no involvement in the negotiation of its terms, and may not have voted in favour of any resolution to approve the making of the deed. Persons other than parties to the deed may for all manner of reasons act upon their interpretation of the effect of the terms of the deed. 10. Furthermore, the administrators under the deed of company arrangement owe significant duties to various parties, and one of the very objects of the deed of company arrangement is to state explicitly and unambiguously how the deed is to operate in a manner that is sufficiently clear so that, at least as an objective, resort to the courts is not required to implement its terms. 11. In my view, both of these considerations, while not usurping the requirement that ordinary principles of construction will be applied in determining the effect of the terms of the deed, have the effect that the Court should lean where the wording of the deed permits towards giving the words of the deed their natural and ordinary meaning wherever that is possible. A construction of the deed that makes its meaning clear on its face to ordinary commercial people in the shoes of the administrators, the directors and members of the company, and creditors should ordinarily be preferred. 12. I start by noting that clause 6.1(a) of the deed of company arrangement gives Ms Stojcevski primary carriage and control of the proceedings in an extensive manner. That is of significance because it means that there was an agreement, for the consideration provided generally by the deed, that Ms Stojcevski would have carriage of the case on behalf of the company at her expense. That consideration would justify a leaning towards construing the deed in a way that would give Ms Stojcevski the right to cause the company to institute and prosecute an appeal, because otherwise Ms Stojcevski might lose the fruits of clause 6.1(a) by reason of some appealable error made by the trial judge. 13. However, even if it be thought that as a matter of commercial common sense the right to have carriage of proceedings at first instance would carry with it the right of appeal, the plain purpose of clause 6.1(b) is to control the circumstances in which Ms Stojcevski could exercise that right. 14. Importantly, the chapeau to clause 6.1(b) expressly states that "Ms Stojcevski must not appeal or seek leave to appeal such judgment unless" the requirements set out in the following sub-paragraphs have been satisfied. 15. The use of the expression "must not" is in my view plainly imperative, and the use of the expression makes compliance with the requirements essential. If that is so, it supports an approach to the construction of the sub-paragraphs in a manner that makes their meaning as clear as possible, as in principle it will be counter-productive for a deed to be interpreted in a manner whereby imperative requirements have indistinct meanings. 16. Clause 6.1(b)(i) requires that Ms Stojcevski "has obtained written advice from Senior Counsel that the Company has reasonable prospects of success of appealing a judgment given in the Proceedings against the Company". This requirement raises the meaning of the term "reasonable prospects of success", and what is required of the written advice as to the form or terms of the expression of senior counsel's advice. The significance of this issue in the present case is that the Joint Memorandum does not contain any opinion of Mr Corsaro expressed in terms that the company has reasonable prospects of success of appealing Darke J's judgment. There is an issue as to whether that fact is fatal to Ms Stojcevski's claim, and if it is not, whether the Joint Memorandum is equivalent to the expression of advice from Mr Corsaro that the company does have the required reasonable prospects of success of an appeal. I will return to these issues below. 17. There is no issue about Ms Stojcevski having provided the administrators with a copy of the written opinion, as required by clause 6.1(b)(ii). 18. There is an issue about whether Ms Stojcevski breached the requirement in clause 6.1(b)(iii), in that she did not allow the administrators to have access to Mr Corsaro "to clarify or seek explanation of any aspect of the Written Opinion that the Deed Administrators consider appropriate". 19. The administrators were given the opportunity of having a conference with Mr Corsaro on the evening before he and Ms Merkel delivered the Joint Memorandum. Mr Corsaro is reported as saying that the material that was available to him was insufficient to express a view as to whether or not the company had reasonable prospects of success in the appeal. Mr Corsaro and Ms Merkel then delivered the Joint Memorandum. In providing that document to the administrators, Ms Stojcevski told them that Mr Corsaro was on an aeroplane. It is at least clear that Ms Stojcevski did not in any positive way allow the administrators to have access to Mr Corsaro. I was told by counsel for the administrators that no such access had occurred up to the date of the hearing. 20. Ms Stojcevski appeared to rely upon the prior access that the administrators had to Mr Corsaro as being sufficient in all the circumstances to satisfy her obligation to give the administrators access to senior counsel in accordance with clause 6.1(b)(iii). In my view, it is self-evident that the access must be after the time when the administrators have been given a copy of the Written Opinion, and possibly also after they have had at least adequate time to digest it. If it were otherwise the entitlement of the administrators to seek information from senior counsel to clarify or explain any aspect of the written opinion would be ineffective. 21. Before I return to the issue of the proper construction of the most significant terms of the deed of company arrangement, I should mention the effect of clause 6.1(b)(iv), in so far as it requires Ms Stojcevski to give the administrators "a reasonable opportunity to object to any appeal or application for leave to appeal". The provision does not in any clear or express way set out the basis upon which the administrators may make an objection, or as to the consequences of any objection. That is not a matter of consequence to these reasons, as neither party sought to make anything out of the possibly defective drafting of clause 6.1(b)(iv). That issue does not matter, because in my view the access required to be given by clause 6.1(b)(iii) will not only be for the purpose of enabling the administrators to decide whether they should object to any appeal or application for leave to appeal. The administrators will also be entitled to the access on the simple basis that that will assist them to understand the written opinion and satisfy themselves that it does contain the opinion that the company has reasonable prospects of success of appealing the judgment, as is required by clause 6.1(b)(i). 22. What is the meaning of the term "has reasonable prospects of success of appealing a judgment" for the purposes of clause 6.1(b)(i)? 23. The parties have not referred the Court to any authorities that deal with the meaning of this term precisely in context. Nor have my researches identified any such authorities. That may be strange, as the practice of counsel giving opinions as to whether particular proposed proceedings have reasonable prospects of success has been ubiquitous over a long time. I speculate, but it may be that historical notions of advocate's immunity may explain the dearth of authority. 24. There are authorities that deal with the concept of "reasonable prospects" in other contexts. In Samuels v Western Australia (2005) 30 WAR 473; [2005] WASCA 193, the Court of Appeal of the Supreme Court of Western Australia considered the meaning of "a reasonable prospect of succeeding" in s 27(2) of the Criminal Appeals Act 2004 (WA) before leave to appeal can be granted in a criminal matter. The Court of Appeal of this State in Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300; [2005] NSWCA 153 considered the meaning of "reasonable prospects of success" in sections 198J, 198M and 198N of the Legal Profession Act 1987 (NSW) in the restriction on lawyers providing legal services on a claim or defence of a claim unless, on a certain basis, the lawyer believes that the claim or defence has reasonable prospects of success. In that case, McColl JA referred in particular at [131] to the judgment of Barrett J (as his Honour then was) in Degiorgio v Dunn (No 2) (2005) 62 NSWLR 284. The High Court of Australia in Spencer v the Commonwealth of Australia (2010) 241 CLR 118; [2010] HCA 28 considered the meaning of the term "no reasonable prospect of successfully prosecuting the proceeding" in s 31A(2)(b) of the Federal Court of Australia Act 1976 (Cth). Finally, in Cranney Farm Pty Ltd v Corowa Fertilizers Pty Ltd [2011] NSWSC 9, Ward J (as her Honour then was), in deciding whether a statutory demand should be set aside under s 459G of the Corporations Act 2001 (Cth), considered the issue of whether the applicant had reasonable prospects of succeeding on an appeal from a judgment at first instance that had established the debt the subject of the statutory demand. 25. All of these decisions, in their various contexts, establish that "reasonable prospects of success" may exist in cases where the claim cannot be said to be hopeless, but it is not required that success is more probable than not. It may be dangerous to engraft the observations made by the courts in these different statutory contexts onto the situation where senior counsel is required to give a professional opinion as to whether there are reasonable prospects of an appeal succeeding from a judgment at first instance. Nonetheless, in my view a proper flavour, so to speak, of what is required can be drawn from the following observations made by McColl JA in Lemoto v Able Technical Pty Ltd, with whom Hodgson and Ipp JA agreed. I have limited myself to this extract, because I regard the observations as indicative only as all of the authorities deal with the issue in a different statutory context. Her Honour said: [131] The question of what constitutes the provision of legal services "without reasonable prospects of success" for the purposes of Div 5C was considered by Barrett J in Degiorgio v Dunn (No 2) [2005] NSWSC 3. His Honour accepted (at 292 [26]) that Div 5C imposed upon legal practitioners "a standard that is more demanding than that applicable in cases where, by reference to general law principles, a costs order is sought against a party's lawyer". He said (at 291 [20]-[28]): "20 When that statutory language is examined, it is seen that, while s 198J(4) goes some way towards explaining 'reasonable prospects of success', it does so in a way that does not attempt to explain or define 'reasonable prospects'. The meaning of that expression must be gathered by analogy, with such attention as is permissible paid to Parliamentary materials. 21 In some contexts, 'reasonable prospects of success' signifies no more than 'arguable'. I quote the following passage from the decision of the Australian Industrial Relations Commission in Westend Pallets Pty Ltd v Lally (1996) 69 IR 1 at p 12: The requirement for an arguable case of either legal error or that the discretion has been miscarried will mean that applicants must demonstrate that their case has a reasonable prospect of success. 22 It may also be said that 'reasonable prospects of success' connotes something less than likelihood of success — hence the formulation of Sheppard J, in Ahern v Deputy Commissioner of Taxation (1983) 78 FLR 202, ' … will be likely to succeed or at least have reasonable prospects of success' [emphasis added]. That the test is not a particularly stringent one is suggested by an observation of Gleeson CJ, McHugh and Gummow JJ in United Mexican States v Cabal (2001) 209 CLR 165 at p 174: A constitutional challenge to legislation is always a matter of public importance. If it has even reasonable prospects of success, special leave to appeal will be granted — almost as a matter of course [emphasis added] 23 I was referred by counsel to an article by Nicholas Beaumont, 'What are reasonable prospects of success?' (2004) 78 ALJR 812 in which it is suggested that a claim satisfies the statutory requirement 'if it is not hopeless or entirely without merit'. The 'not hopeless' construction is put forward by reference to Cadogan v McCarthy & Stone (Developments) Ltd [2002] L&TR 249, an English decision about the phrase 'reasonable prospect of being able to bring about this occupation'. Saville LJ there said (at pp 253–4): 'The reason why it must be established that there is a reasonable prospect of obtaining permission is that otherwise the landlords could only be said to be contemplating, rather than genuinely intending, the desired course of action. A reasonable prospect in this context accordingly means a real chance, a prospect that is strong enough to be acted on by a reasonable landlord minded to go ahead with plans which require permission, as opposed to a prospect that should be treated as merely fanciful or as one that should sensibly be ignored by a reasonable landlord. A reasonable prospect does not entail that it is more likely than not that permission will be obtained.' 24 The learned author sees the 'not fanciful' formulation of Saville LJ as supported by the decision of the High Court in Bushell v Repatriation Commission (1992) 175 CLR 408 which concerned the expression 'reasonable hypothesis'. Brennan J (at p 428) approved the distinction drawn in Repatriation Commission v Webb (1987) 76 ALR 131 at p 135 between 'a theory that is rationally based' and one that is 'irrational, absurd or ridiculous'. 25 The explanatory note accompanying the Civil Liability Bill 2002 provides no guidance on the meaning of 'reasonable prospects of success'. The Premier's Second Reading Speech (Hansard, Legislative Assembly, 28 May 2002, p 2085) is of some assistance in that it refers to 'unmeritorious claims' and 'spurious defences'. The adjective 'unmeritorious' refers to something that is devoid of merit. Something is 'spurious' if it is false or not genuine. 26 I accept that this legislation imposes upon lawyers a standard that is more demanding than that applicable in cases where, by reference to general law principles, a costs order is sought against a party's lawyer. Cases of that kind turn upon the lawyer's duty to the court. Here, by contrast, the lawyer is subject to a statutory duty reflective of the interests of the community. A recent statement of the relevant general law approach may be found in the decision of the Queensland Court of Appeal in Steindl Nominees Pty Ltd v Laghaifar [2003] 2 Qd R 683. Davies JA there said (at p 689 [24]), with the concurrence of the other members of the court and after reviewing earlier authorities: 'To the extent that those statements state or imply that it is not improper for a legal representative to present a case which he or she knows to be bound to fail, I would reject them. I would prefer to say that it is one thing to present a case which is barely arguable (but arguable nevertheless) but most likely to fail; it is quite another to present a case which is plainly unarguable and ought to be so to the lawyer who presents it. In my opinion, with respect, it is improper for counsel to present, even on instructions, a case which he or she regards as bound to fail because, if he or she so regards it, he or she must also regard it as unarguable.' 27 In drawing a line at a somewhat higher point on the relevant scale of conduct, the Legal Profession Act should not, in my opinion, be presumed to intend that lawyers practising in New South Wales courts must boycott every claimant with a weak case. A statutory provision denying to the community legal services in a particular class of litigation cannot be intended to stifle genuine but problematic cases. Nor do I see the statutory provisions as intended to expose a lawyer to the prospect of personal liability for costs in every case in which a court, having heard all the evidence and argument, comes to a conclusion showing that his or her client's case was not as strong as may have appeared at the outset to be. The legislation is not meant to be an instrument of intimidation, so far as lawyers are concerned. 28 The several factors to which I have referred, including the references in the Premier's Second Reading Speech and the apparent legislative purpose, cause me to adopt the construction of 'without reasonable prospects of success' that equates its meaning with 'so lacking in merit or substance as to be not fairly arguable'. The concept is one that falls appreciably short of 'likely to succeed'." (Emphasis added) [132] Barrett J's construction of the expression "without reasonable prospects of success" appears to me to accommodate both the purpose of Div 5C and to reflect the language of s 198J. The test, whether a claim or a defence was "so lacking in merit or substance as to be not fairly arguable", must be applied, however, in the context of the constituent components of s 198J. In that context the question becomes whether the solicitor or barrister held a reasonable belief that the provable facts and a reasonably arguable view of the law meant that the prospects of recovering damages or defeating a claim or obtaining a reduction in the damages claimed were "fairly arguable". These are matters about which reasonable minds might differ. The question will be whether the solicitor or barrister's belief that they had material which objectively justified proceeding with the claim or the defence "unquestionably fell outside the range of views which could reasonably be entertained": Medcalf at (at 139 [40]) per Lord Steyn. 1. Having due regard to these propositions derived from other contexts, in my view the proper approach is to give the relevant wording of clause 6.1(b)(i) effect in accordance with the natural and ordinary meaning of its words, having regard to the ubiquity of the practice of lawyers being called upon to express an opinion of that nature. What is required is that the case be considerably better than not hopeless, but it is not necessary that the appeal is more likely to succeed than to fail. The expression of the opinion should not ordinarily be divorced from the reasoning that is provided to support it. It would not ordinarily be sufficient for the relevant senior counsel simply to state the opinion without reasons. It is implied in the term "written advice" that proper reasons will be given to support the opinion. What is required in a particular case will depend upon all of the circumstances. Ordinarily, it would be necessary for there to be some analysis of the judgment at first instance to set out its logical structure in a manner that would permit the reader of the written advice to understand the logic of the opinion to be given. Arguable errors of law or fact in the judgment would then be identified. An explanation would be given as to how, if the Court of Appeal could be persuaded that the errors had been made, the logical outcome would be that the result of the judgment would be overturned. The senior counsel expressing the opinion would then provide a written statement of his or her opinion as to the likelihood that the Court of Appeal would accept the process of reasoning of the appellant in a way that would lead to the appeal being successful. That particular opinion may be expressed in terms that there is "reasonable prospects of success", because the subject matter of the opinion will often be conceptually complex and depend upon an assessment of the likely reaction of possible appeal judges to the line of reasoning put by the appellant. There will be scope in the provision of such an opinion for the relevant senior counsel, based upon judgment and experience, to state a distilled view that the prospects are reasonable. Such an opinion may be adequate at times even where the opinion cannot be justified as a matter of strict logic. As I have said, however, senior counsel must commit him or herself to the opinion that the prospects are reasonable, which will be in all the circumstances, taking into account the nature of the issues, the cost of the appeal, and the amount or outcome that is in issue. 2. If those considerations are right, they deal only with what is required for there to be reasonable prospects of success of appealing from a judgment. They do not deal with the issue which is at the heart of this case, being whether the particular written advice must actually use those words, or what will be the consequence of some other form of words being used. 3. I have come to the view that it is not essential, on the proper construction of clause 6.1(b)(i), that the written advice actually be expressed in terms of there being reasonable prospects of appealing a judgment. As a matter of good practice, it obviously would be preferable for senior counsel to be given instructions, and for those instructions to be reflected in the written advice, that the advice sought was as to whether or not there were reasonable prospects of success of appealing a judgment, and at the end senior counsel, if appropriate, would express that opinion specifically. That approach would obviate the doubt that has led to the present proceedings. 4. The term requires that senior counsel provide a written advice that the company has the reasonable prospects of success required, and does not explicitly state that the advice must be given in those terms. Notwithstanding that view, in my opinion, however senior counsel formulates his or her advice, it must in substance be to the effect that there are reasonable prospects of success, and that conclusion must appear clearly from the manner in which the advice is formulated. 5. There can be no precise test of what is adequate, but as a working proposition, the written advice must be expressed in a way such that reasonably competent commercial people in the position of the administrators would understand from a reading of the written advice that there were indeed the reasonable prospects of success required. I rather think that what is required, if the actual use of the words is not essential, is the use of words relatively unambiguously to the same effect. 6. In any event, it should not be sufficient if the administrators are required, so to speak, to poke around in the interstices of a complex opinion to form their own view as to whether or not senior counsel has in fact expressed an opinion that in substance conforms to the requirements of clause 6.1(b)(i). 7. Were it otherwise, the whole purpose of clause 6.1(b)(i) would be liable to be defeated. That purpose is that the administrators will be given a written advice from an approved senior counsel that will provide the justification for the administrators allowing Ms Stojcevski to initiate and prosecute an appeal or application for leave to appeal. The existence of the written advice will provide a protection to the administrators from other interested parties, in particular the creditors, in the event that the appeal goes wrong and the overall consequence is to damage the interests of the company. Even if it is not strictly necessary for the written advice to be prepared in a formulaic way (though desirably it would be) the sufficiency of the written advice must clearly appear on its face. 8. In my view the requirements of clause 6.1(b)(i) and (iii) should be considered together and in a complementary way, rather than separately. There may be cases where, by reason of inadequate time, or the complexity of the judgment at trial, or the complexity of the issues on appeal, that the written advice that is able to be produced by senior counsel may not be quite sufficient to enable senior counsel to express the advice in terms of reasonable prospects of success. Ms Stojcevski will have no control over the way senior counsel expresses the written advice. In the ordinary course of events, there may be scope for doubt as to the meaning of aspects of the written advice. From the administrators' point of view, the content of the written advice should not entirely be divorced from their right to have access to senior counsel to clarify or seek explanation of any aspect of the written advice. 9. Because access was not granted to the administrators to Mr Corsaro in this case, the occasion does not arise to develop these considerations at length. It may well be that after the administrators in a particular case have sought clarification and explanation, some aspect of the written advice that did not strictly satisfy the requirements of clause 6.1(b)(i) may be resolved in a manner that requires the administrators to accept that in substance senior counsel did mean to provide an advice that reasonable prospects of success on appeal were present. That may entitle the administrators to require senior counsel to give them a supplementary advice that made the matter clear, and could be relied upon by the administrators to establish, if the matter were contested by third parties, that they had not allowed Ms Stojcevski to initiate and prosecute an appeal or application for leave to appeal without the necessary advice of senior counsel having first been provided. 10. It will be appropriate to assume that the reader of these reasons for judgment has a sufficient understanding of the reasons in Darke J's judgment in Abourjaily v Parkview Estate Pty Ltd. The reasoning in that decision is somewhat complex. In broad terms, his Honour was required to consider all of the steps taken by the company in relation to the satisfaction of the pre-conditions to the registration of the plan of subdivision propounded by the various plaintiffs. Darke J had to determine whether the delays propounded by the plaintiffs had occurred, and if so whether the delays were caused by a failure of the company to use reasonable (or best) efforts to achieve registration of the subdivision by the specified date. A finding that delays had occurred that involved breaches by the company would not end the matter. Some breaches might cause delays, but those delays may not have been on the critical path, and may not have been an objective cause of the ultimate failure by the company to achieve registration by the due date, because of the effect of other causes of delay that were not a result of relevant breaches by the company. For a trial judge to decide cases of the nature decided by Darke J, it is necessary for the judge to identify all of the factors that have effects on the ability of the company to comply with all conditions to allow registration of the plan of subdivision by the due date, and to understand how all of those causes interrelate in causing the ultimate result. The court will only find in favour of the plaintiffs if to the requisite degree of proof, the Court identifies individual or cumulative breaches by the company of its duty that are sufficient causes of the ultimate result, so that the conclusion should not be reached that registration would not have been achieved by the due date in any case where registration was not achieved by reason of other causes not the result of relevant breaches by the company. Plainly, in this case Darke J did find that there were a number of operative causes of delay that involved breaches of the relevant duty by the company. 11. Darke J found that the company had failed to discharge its obligations in two respects [147]. The first concerned the making of arrangements in relation to stormwater works. In brief, certain conditions of the development consent required the defendant to carry out stormwater engineering works on a neighbouring property to the property the subject of the proposed plan of subdivision. Darke J set out the history of the company's attempt to reach an appropriate agreement with the neighbouring land owner, and expressed the conclusion [156]: "The situation was allowed to drift". His Honour found that from about February 2014, Ms Stojcevski became aware that an application could be made under s 88K of the Conveyancing Act 1919 (NSW) for an order that the neighbouring owner grant to the company an easement sufficient to enable it to carry out the required works. Darke J concluded that the defendant, acting reasonably, ought to have considered and commenced such an application by no later than early 2014. It was not adequate for the company merely to continue with intermittent negotiations with the neighbour [161]. His Honour found that if the company had instituted proceedings at an appropriate time it is likely that either a satisfactory agreement would have been reached or easements would have been imposed in sufficient time to allow the civil works to be completed, and the subdivision to be registered by the due date [162]. 12. In respect of the plaintiffs' entitlement to rely upon this argument, Darke J said at [164]: I should add that I do not accept the defendant's submission that the particulars supplied by the plaintiff do not encompass a failure of the type found above. The first particular of breach identifies as a failure to resolve downstream drainage approval from [the neighbour] in a reasonable time. The particular is broadly drawn and, unlike particular (n), is not to be read as confined to a resolution by agreement (see also particular (j)). 1. The second respect in which his Honour found that the company failed to discharge its reasonable (or best) endeavours obligations concerned the company's dealings with some of its contractors, involving delays in making payments [165]. One form of delay in paying a contractor effectively precluded completion of the civil works by the end of 2014, which had the result that the sewer construction works took longer than was necessary [170]. If the remediation validation report had been released by about the end of August 2014, there would likely have been time for the company to engage a contractor to complete the civil works by the end of the year [170]. 2. Asbestos was unexpectedly discovered on the property, and his Honour found that delays in paying the remediation contractors held up the release of documents that were required in order for a subdivision certificate to be issued [171, 172]. 3. Finally, Darke J found that he was comfortably satisfied that the company's failures to discharge its obligations to use all reasonable (or best) endeavours materially contributed to the plan of subdivision not being registered by the due date [174]. Accordingly, the company was not entitled to rely upon the term that gave it a right to rescind the contracts. 4. I will now turn to consider the effect of the Joint Memorandum. 5. In par 7 of the Joint Memorandum, in the context of stating the matters at issue, counsel recorded that by memorandum dated 14 November 2007, Mr Corsaro "provided his opinion on Parkview's prospects of successfully overturning Darke J's decision on appeal". That opinion is not in evidence, but it may be inferred that it did not contain a positive statement of the opinion that the company did have reasonable prospects of success on the appeal. In fact, the evidence suggests that Ms Stojcevski obtained advice from Mr Corsaro on a number of occasions before she ultimately obtained the Joint Memorandum on 17 January 2018. Even if it may be inferred that those opinions did not contain the advice required by clause 6.1(b)(i) of the deed of company arrangement, the administrators in this case did not seek to make anything of that fact. In practical terms they accepted that Ms Stojcevski was entitled to seek the necessary written advice in a number of steps provided those steps culminated in the written advice required by the deed of company arrangement being given before the time for filing a notice of appeal. 6. In submissions, Ms Stojcevski relied upon the content of par 7 as establishing that Mr Corsaro was aware that the issue was whether the company had the necessary prospects of successfully overturning Darke J's decision, although that paragraph does not use the word "reasonable". In any event, the evidence as to what occurred at the conference with Mr Corsaro the day before the Joint Memorandum was issued shows that in fact Mr Corsaro was aware that what was sought was his advice as to whether there were reasonable prospects of succeeding on the appeal. 7. Next, in pars 10 and 11 of the Joint Memorandum, counsel summarised their opinion under the heading "Opinion in Brief". They said: 10 The additional documents relate to factual determinations made by his Honour, not the legal findings made. Accordingly, it is our opinion that the New South Wales Court of Appeal is unlikely to find any legal error in Darke J's reasoning. This is as Mr Corsaro advised in his 14 November 2017 memorandum. 11 It is our opinion that arguable grounds may exist to establish error in Darke J's judgment, and which may permit [the company] to successfully challenge his Honour's decision on appeal. 1. The primary, but not the only, question before the Court is whether the statement of opinion in par 11 is in substance and effect an advice that the company had reasonable prospects of successfully appealing from Darke J's judgment. 2. This issue starkly raises the significance of the actual words used by senior counsel in the expression of his opinion. Paragraph 11 is expressed in two parts. First is a statement of opinion that "arguable grounds may exist to establish error" in the judgment. It cannot be escaped that literally the statement is not one that arguable grounds do exist. It is probably the case that the use of the expression "arguable grounds" implies that the grounds are reasonably arguable, which may go part way to satisfying the requirement that there be advice that there are reasonable prospects of success. However, the use of the word "may" is not the same as if the word "do" was used, or alternatively that "may" was simply omitted. It is hard to accept that the use of the word "may" in this precise context was not intended to have any significance. It would be a very loose performance of senior counsel's obligations if he included the word "may" as some accidental and immaterial inclusion in what was the ultimate statement of the effect of the Joint Memorandum. As I read this part of par 11, it is a pointed statement, taken in isolation, that arguable grounds may exist; not that they do exist. 3. The second part of par 11 is the statement of the conclusion that the arguable grounds that may exist "may permit Parkview to successfully challenge his Honour's decision on appeal". This second use of the word "may" is probably less problematic than the first. It may be that a statement that an arguable ground may permit an appellant to successfully appeal falls in substance within a statement that there are reasonable prospects of appealing successfully. Nonetheless, it is the case that the word "may" is used twice, and I find that taken in isolation par 11 does not adequately state an opinion of senior counsel that the company did have reasonable prospects of successfully appealing. 4. The next heading provided by counsel is "Our Opinion Explained", so it should be accepted that a careful reading of the explanation may qualify or add to the summary opinion in par 11, with the possibility that the Joint Memorandum taken as a whole is sufficient to satisfy clause 6.1(b)(i) of the deed of company arrangement. 5. In the paragraphs of the Joint Memorandum preceding par 43, counsel discussed the findings of Darke J relevant to the ground of his decision in which he held that the company's failure to take proceedings under section 88K was a breach of duty. At par 43, counsel expressed the view that by reason of the company's receipt of a letter dated 21 February 2004 that an "in principle agreement" had been reached with the neighbour (which was not in the event accepted by the company): "This may support an argument on appeal that no reasonable grounds then existed to warrant litigation, and that there was no evidence to establish that had [the company] commenced contested proceedings at that time, the available time frame permitted a hearing and the completion of the necessary works to enable the registration of the plan of subdivision by the agreed date". 6. This opinion is no more than that the existence of the letter may support the argument referred to. 7. At par 44, counsel expressed the view that "it is arguable" that the particulars did not encompass a case that the company did not use all reasonable (or best) endeavours by failing to commence proceedings for orders under s 88K. It is also stated in that paragraph: "It is arguable that [the company] was reasonably entitled to follow that advice". 8. I will come back to this matter, but it is to be noted that counsel merely stated that certain matters were arguable. They did not state that the argument had reasonable prospects of succeeding. 9. Counsel then turned to a possible different basis for challenging Darke J's reasoning. At par 47, they referred to a finding by his Honour that the sewer works were completed by about 14 November 2014, and stated that this finding disregarded the plaintiffs' expert's evidence that at least other sewer works for the issue of the compliance certificate by Sydney Water Corporation had not been completed until 8 October 2015. Counsel referred to evidence given by the expert that nonetheless the company could have secured the compliance certificate at an earlier time "by bonding the sewer works under the Sydney Water bonding policy" (par 48). They then stated at par 47 that Darke J made no finding on the allegation that the company should have bonded the works before their physical completion. The point being made by counsel appears to be that Darke J made an error of fact as to the time when he found the relevant compliance certificate would have been issued, because there were additional sewerage works that were not in fact completed until much later. There would have been a way for the company to get around that problem by resort to what was described as the bonding policy, but this did not cure the defect in his Honour's reasoning, because he did not advert to the bonding policy or make the necessary finding of fact. 10. At par 50, counsel observed that Darke J should not be criticised in not referring to the significance of this point, as the company's submissions did not refer to it. They concluded: "The Court of Appeal may, nonetheless permit [the company] to raise this issue on appeal". 11. This is a statement of possibility, in so far as the word "may" is used. Counsel did not express any opinion as to reasonable likelihood that the Court of Appeal would allow this argument, and further, they did not give an opinion as to the reasonable prospects of its success. 12. From par 51 of the Joint Memorandum onwards, counsel deal with Darke J's second basis of decision, being the consequences of the company's delays in paying various contractors. As I understand par 55, counsel addressed an argument that the consequences of late payment of contractors was not material, because other aspects of the subdivision works that were required to be completed before the subdivision certificate could be issued had not been completed. Counsel used the terms: "In our opinion, [the company] may argue on appeal that these certificates and approval letters may have been material if all other aspects of the subdivision works were completed…" 13. Again, this involves a statement that the company may make an argument on appeal, without expressing any conclusion on the prospects that the argument would succeed, and its consequences to the overall requirement that there be reasonable prospects of the appeal succeeding. 14. In my view, upon a careful analysis of the Joint Memorandum, it did not contain an advice by Mr Corsaro that he was of the opinion that the company had reasonable prospects of success appealing from the judgment of Darke J. 15. I have explained above why I do not accept that such an opinion was expressed in par 11. In analysing the explanation provided by counsel for that opinion, I have attempted to identify each occasion when counsel expressed opinions concerning the availability of arguments in the Court of Appeal. Uniformly, counsel expressed their opinion in terms of some proposition may support an argument, or some matter being arguable. Further, counsel observed that the Court of Appeal may allow the company to argue certain matters. 16. What is missing in all of these statements of opinion is a positive statement by senior counsel that in his opinion either individually or collectively, the various matters gave the company reasonable prospects of succeeding on the appeal. I do not see in the Joint Memorandum the use of any other expressions that could genuinely be treated as an equivalent to the statement of an opinion by Mr Corsaro that there were reasonable prospects of success. 17. The absence of a positive statement, by whatever particular words were used, of senior counsel's opinion that for certain reasons the appeal would have reasonable prospects of success is in my view fatal to Ms Stojcevski's position. The requirement for the expression of the opinion in terms of reasonable prospects of success was not an unnecessary requirement. 18. In a great many commercial contexts, the expression of a particular opinion by an approved senior counsel is a precondition to the creation of agreed legal consequences. In the present case the precondition is a statement of opinion by a senior counsel chosen by Ms Stojcevski and approved of by the administrators, that the prospects of success of an appeal are reasonable. Both parties are relying on the experience and judgment of senior counsel, as while the grounds upon which the appeal may succeed may be articulated to some extent, it will almost inevitably be the case that it would be a matter of pure judgment as to whether, having regard to all relevant matters, the prospects of the grounds succeeding are reasonable. It is not sufficient that there is a statement that there are grounds that are arguable. It is probably also not sufficient that individual grounds are reasonably arguable. The issue is whether, having regard to all reasonably arguable grounds, in relation to the whole of the judgment at first instance, there are reasonable prospects of the appeal actually succeeding. 19. It would be idle for the court to try to explain verbally the difference between grounds that may be arguable, at one end of the spectrum and grounds that are more likely to succeed than to fail in the middle of the spectrum, with grounds that collectively give rise to reasonable prospects of the appeal succeeding somewhere between those extremes. Apart from the fact that words would fail in this exercise, and what are in fact reasonable prospects of success will be entirely sensitive to the circumstances, the real point is that the chosen senior counsel must exercise professional responsibility to make the judgment that it is proper to express the prospects of success in terms of reasonable prospects. The point is that the administrators were entitled to have the benefit of an unequivocal statement of opinion by senior counsel to that effect, even if perhaps not expressed specifically in terms of the formula in clause 6.1(b)(i). 20. Accordingly, in my view, Ms Stojcevski did not comply with clause 6.1(b)(i), and she is therefore prohibited from causing the company to seek leave to appeal, and if leave be given to prosecute the appeal. 21. I should refer to a number of other arguments put by Ms Stojcevski which I do not consider logically affect the conclusion I have just expressed. 22. Ms Stojcevski relied upon a draft notice of appeal prepared by Ms Merkel, apparently having regard to the terms of the Joint Memorandum. Some at least of the grounds of appeal were apparently drafted upon the basis of the suggestions made in the Joint Memorandum as to grounds which may lead to the appeal succeeding. There is no evidence that Mr Corsaro settled or adopted the terms of the draft notice of appeal. That draft was not provided to the administrators, and indeed only came to their attention when it was included in the exhibit to the affidavit in support of Ms Stojcevski's case. 23. In my view, no opinion expressed directly or indirectly by junior counsel could add to anything said in the Joint Memorandum that would stand as the advice of senior counsel for the purposes of clause 6.1(b)(i). 24. Ms Stojcevski also relied upon a letter written by Mr Corsaro to her solicitor on 24 January 2018 in response to an email from the solicitor dated 22 January 2018, which was not in evidence. Mr Corsaro's letter referred to the conference in his chambers on 16 January 2018. Mr Corsaro sought to explain his understanding of certain aspects of the conversation on that occasion. Mr Corsaro noted that he did not have any substantial disagreement with the substance and effect of what Mr Kogan's affidavit records relating to what he and Ms Merkel said during the discussion. In the final paragraph Mr Corsaro said: I also need to state that my reference to my being unable to provide an opinion as to whether there were reasonable prospects for an appeal was based on the understanding of the matter at the time of the discussion. Further additional and substantial work and effort followed the discussions, to arrive at the opinions set out in the joint memorandum, including further consideration of the evidence before Mr Justice Darke at the hearing. I confirm that the opinions in the joint memorandum, are the opinions I genuinely have, based on my consideration and view of the matter at the time I signed the memorandum, rather than at the time of the discussions referred to in Mr Kogan's affidavit. 1. For what it may be worth, this paragraph establishes that Mr Corsaro was aware that the issue was "whether there were reasonable prospects for an appeal". Mr Corsaro did not make any observation relevant to the fact that he did not actually express an opinion to that effect in the Joint Memorandum. While he confirmed that he held the opinions, he still did not state that the effect of the expression of those opinions was that it was his view that the appeal had reasonable prospects of success. 2. I therefore do not regard this letter as having any effect on the conclusion that I have expressed above. 3. On the issue of whether Ms Stojcevski complied with clause 6.1(b)(iii) by allowing the administrators to have access to Mr Corsaro "to clarify or seek explanation of any aspect of the written opinion", it is my opinion that she clearly did not. 4. It is self-evident that the access given to Mr Corsaro the evening before the Joint Memorandum was delivered could not be regarded as access for the purpose of seeking clarification or explanation for the Joint Memorandum. 5. As it happens, as the Joint Memorandum did not contain a clear expression of Mr Corsaro's opinion that the company did have reasonable prospects of success of appealing Darke J's judgment, this is an occasion where the administrators had a real need to have the benefit of the access to Mr Corsaro after they had an opportunity to review the Joint Memorandum. It is truly a matter of speculation as to what would have happened if that access had been granted. It cannot be known on the evidence whether events would have taken a course such that the requirements of clause 6.1(b)(i) would in substance have been satisfied. 6. I should record that, at about the time that Ms Stojcevski sent the Joint Memorandum to the administrators, she sent an email to one of their associates which said: Franco Corsaro is on a plane. He provided the advice as you requested. He could not speak to us about your concerns because he is on a plane. The advice was in the form of your request and you must accept the opinion as it is written. There is no other way to see it as he did as you asked. I would have had him review it if he was reachable. 1. Certain statements were made to the Court as to where Mr Corsaro had travelled, but there was no evidence on that subject, and I do not think it is proper to record what was said. The essential point is that clause 6.1(b) prohibited Ms Stojcevski from appealing or seeking leave to appeal unless, pursuant to sub-par (iii), she allowed the administrators to have access to Mr Corsaro for the stated purpose. It was her obligation to do that, possibly by any means of communication that was appropriate in the circumstances. She did not do so. That was a breach of clause 6.1(b). 2. The consequences are that I must dismiss Ms Stojcevski's summons. I order Ms Stojcevski to pay the administrator's cost of the proceedings. I note there is no disagreement between the parties about the fact that, to the extent that the administrators incur costs that are not recoverable from Ms Stojcevski, they will be costs of the administration under the deed of company arrangement. ********** Amendments 22 October 2020 - Publication restriction removed – judgment republished 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: 22 October 2020