These proceedings concern a claim by the plaintiff, A1 Catering Services Pty Ltd (A1 Catering) against its former mortgagee, the second defendant, Manassen Holdings Pty Ltd (Manassen). The plaintiff seeks the return of $300,000.00 (the Security) held by Manassen, plus interest. The Security is the amount of surplus funds retained by Manassen following the sale of certain mortgaged properties and discharge of various mortgages securing a loan agreement entered into between Manassen as lender and the plaintiff and an associated company, RMW Services Pty Ltd (RMW), as borrowers. Manassen says that it was and continues to be entitled to retain that amount as security for costs in relation to reasonably anticipated litigation threatened by A1 Catering and RMW.
[2]
Background
On 6 November 2007, A1 Catering and RMW entered into a loan agreement with National Australia Bank (NAB) for a loan of $600,000.00 and provided a mortgage as security. The loan balance gradually increased over time, and further security was provided to NAB on 13 September 2009, when RMW granted NAB a mortgage over Lot 9 in Deposited Plan 250857.
On 14 December 2011, A1 Catering granted mortgages in favour of NAB over various properties, being Lot 2 of Strata Plan 5325, Lot 42 of Part 7 of Deposited Plan 773, Lot 5 of Strata Plan 3517, and Lot 3 of Strata Plan 4371. On the same date, Mr Roger Whalebone (Mr Whalebone), a director of A1 Catering and RMW, granted a mortgage in favour of NAB over Lot 416 of Deposited Plan 12567.
On 19 February 2013, a sequestration order was made in relation to Mr Whalebone by the Federal Magistrates Court of Australia, and he ceased to be a director of RMW.
By 19 November 2013, the amount owing to NAB under all the loans secured by the mortgages granted by Mr Whalebone, A1 Catering and RMW was $3,383.477.43. On 20 November 2013, NAB issued a default notice to A1 Catering and demanded payment of $35,544.41.
On 19 December 2013, Mr Whalebone ceased to be a director of A1 Catering.
On 13 February 2014, NAB demanded payment of $3,381,233.51, being the amounts owing under all the loans secured by the various mortgages. On 10 April 2014, following continued non-payment, NAB commenced possession proceedings against Mr Whalebone, A1 Catering and RMW in respect of various properties under the mortgages. On 30 June 2014, NAB obtained default judgment in those proceedings and on 10 July 2014 writs of possession were issued in relation to two properties.
On 30 July 2014, Mr Whalebone's bankruptcy was annulled and subsequently he was reappointed as a director of A1 Catering and RMW. However, enforcement action by NAB continued with notices to vacate issued by the NSW Sheriff for various properties in September 2014.
In October 2014 Mr Whalebone engaged a mortgage broker to assist him in obtaining refinance to repay the loans owing to NAB. Between January and March 2015, Mr Whalebone received a number of offers for finance from various lenders including Chifley Securities Pty Ltd (Chifley) which was formerly the first defendant in these proceedings. Mr Whalebone signed a letter of offer issued by Chifley on 24 February 2015. On 26 February 2015, Chifley approached Manassen to provide the funds for the loan. Ultimately, Manassen became the entity that would lend the money to A1 Catering and RMW.
On 13 March 2015, the loan agreement, mortgages, deeds of guarantee and other documents were executed by Manassen and Mr Whalebone and his wife (Ms Whalebone) on behalf of A1 Catering and RMW. The total amount advanced by Manassen was $3,925,000 of which approximately $3,466,639.01 was paid by direction of the borrower to discharge the NAB facility. The effect of the transaction was that the NAB facility was discharged and Manassen became the mortgagee of the various properties. Ultimately, it emerged that these documents were not properly executed by Mr and Ms Whalebone.
On 16 September 2015, Manassen issued default notices under the loan documents seeking repayment of the amount advanced. On 20 October 2015 Summer Lawyers, the solicitors engaged by Manassen, noted in an email that Mr Whalebone contended that the loan amount claimed by Manassen was wrong.
On 4 November 2015, Manassen commenced proceedings in this Court against Mr and Mrs Whalebone, A1 Catering and RMW seeking orders for specific performance for the proper execution of the loan documents. On 13 May 2016, orders were made requiring the execution of the loan documents and on 18 May 2016, those documents were properly executed.
In those proceedings, Mr Whalebone filed an affidavit dated 22 January 2016 in which he stated that he disputed that the debt was due and payable, that Manassen's conduct was misleading and deceptive, and he called the loan a 'scam'. At the hearing of the proceedings before White J on 13 May 2016, Mr Ardino, the solicitor representing the defendants (including A1 Catering and Mr Whalebone) said:
Your Honour, my client is concerned that many - the final arrangements to put in place the loan came right at the very end. There were variations right at the very end. My client says he didn't understand them. Signed whatever he signed under some kind of pressure or coercion they felt at the time. Didn't understand the documents.
…
[Mr Whalebone has told me that he] is concerned that having signed the documents at that time and not completely signed every single page that was required, he subsequently made inquiries and it appears that the calculation of the amounts that he was required to pay, didn't fit in with what he believed he was signing.
So the situation at the moment is that he made (sic) be willing to sign whatever is required at the moment subject to a notation that he give such signatures without admission and reserving his rights, and that may or may not eventuate with any other claim that he might have against the plaintiff.
Later, after a short adjournment, Mr Ardino said to White J:
I have got instructions. My client says he will sign pursuant to the undertakings and then other issues that might arise further down the track, he will take whatever proceedings he is advised to.
On 25 May 2016, Manassen appointed Mr Bradd Morelli of Jirsch Sutherland as receiver and manager of RMW and A1 Catering. Mr Hayden Asper, an employee of the receiver, had day-to-day carriage of the matter.
On 6 June 2016, the mortgages in favour of Manassen were registered. On 10 June 2016, Manassen's solicitors stated that the 'payout figure' for the loans was $4,538,498.18. This included legal and receivership fees.
On 28 June 2016, Manassen issued fresh default notices requiring payment of $4,423,498.18 owing as at 30 June 2016, an amount which excluded legal fees.
On 30 June 2016 the receiver appointed a real estate agent to sell properties subject to mortgages in favour of Manassen.
On 13 August 2016, solicitors engaged on behalf of A1 Catering and RMW proposed a partial discharge of the loan, along with a proposal for a deed of release to be provided to A1 Catering's new lender.
On 18 August 2016, solicitors on behalf of A1 Catering sent a letter to Manassen's solicitors with the following statement:
We are instructed that our client is not prepared to execute the Deed of Release, as it is not necessary to payout in full the liability owed to your client. Our client will merely seek a final payout figure upon obtaining an unconditional loan approval from their new lender.
A1 Catering also proposed in that letter that Manassen and the receiver provide an assurance that payment of the 'final payout figure' would discharge the liabilities of A1 Catering and RMW to Manassen and the receiver.
In response, on 19 August 2016, Summer Lawyers, the solicitors for Manassen (who also acted for the receiver) sent a letter that contained the following:
…
1. We understand your clients will not agree to execute the Deed of Release as your clients wish to reserve their rights to commence proceedings against Manassen Holdings Pty Ltd and/or Jirsch Sutherland as receiver and manager.
2. You will be well aware that where a dispute has arisen or is reasonably anticipated to arise in relation to a mortgage, the mortgagee is entitled not only to payment of the amount secured by the mortgage but also payment or security for the probable costs of any contest.
3. In circumstances where your client will not agree to enter into a Deed of Release and has previously foreshadowed potential dispute, our client will only agree to release the documents set out in your letter on the condition that a further amount of $300,000.00 is paid on settlement as security for our client's potential legal costs…
On 22 August 2016, A1 Catering's solicitor replied stating that there was no basis on which Manassen could assert that a dispute had arisen or was reasonably anticipated to arise in relation to the Manassen loans. The question was then directly put in an email from Manassen's solicitor on the same day in the following form:
[Manassen and the receiver] require your client to confirm whether:
1. A1 Catering Services Pty Ltd, RMW Services Pty Ltd, Roger Michael Whalebone and Han Ying Whalebone, jointly or severally reserve their rights against Manassen Holdings Pty Ltd; and/or
2. are contemplating any potential proceedings against any other party relating to this transaction
A1 Catering's solicitor responded by email on the following day which stated that:
… A party is entitled to reserve all rights they have without an inference that they are contemplating some sort of legal action.
I have not been instructed to advise upon or institute any legal action by my client against any party. My instructions are to obtain a payout figure to redeem the mortgage. This Is my client's entitlement. Kindly provide the payout amount.
By an email on the same day, Manassen's solicitor replied as follows:
Your client has previously threatened legal action to me directly. This is supported in the attached affidavit from your client dated 22 January 2016. In particular I refer you to paragraphs 19 - 23.
The mortgagee therefore repeat's its position that a dispute is reasonable (sic) anticipated and therefore is entitled to require not merely payment of the amount secured by the mortgage but also payment or security for the probable costs of any contest.
I will attempt to provide a payout figure tomorrow (for Friday) with an amount added for contingent liability.
Four properties subject to mortgages in favour of Manassen were sold by auction in August 2016 and settled in mid-October 2016. Following the sales there was a surplus of approximately $700,000. On 27 October 2016, Manassen's solicitor sent an email to A1 Catering's solicitor, which indicated that it intended to retain $300,000 of the surplus moneys as security for costs unless a deed of settlement and release was entered into.
In reply to this email, on 10 November 2016, A1 Catering's solicitors sent a letter stating:
1. Now that the debt owing to your client has been settled, please provide to us a statement of account including the following information:
a. The purchase price of each of the properties sold;
b. The total amount received by your client;
c. A statement as to how the moneys received were applied including to whom the moneys were paid and the amounts that were paid to each entity.
2. As previously advised, our client is not prepared to enter into a deed of release. Accordingly, we note your intention to withhold the sum of $300,000 on account of security for costs for any future claim, which we presume will be included in the statement of account.
On 15 November 2016, an itemised breakdown of the application of the sales proceeds was provided. On 1 December 2016, A1 Catering sent an email to Manassen's solicitors requesting 'fully itemized legal accounts' relating to money that was used from the sales proceeds to pay the fees of the receiver and Summer Lawyers, and referred to the loan transaction as a "loan scam".
On 31 January 2017, A1 Catering's solicitors sent a letter stating:
In the meantime, we note that your firm has retained the sum of $300,000 on account of security for costs for contingent costs in the event that further litigation in relation to this matter ensues.
We are instructed that our client is not pursuing any further litigation against your client and requires that the retained sum of $300,000 be released to our client forthwith, plus any interest accrued thereon.
We note in your correspondence dated 27 October 2016 that your client seeks our client to enter into a deed of settlement and release. We note our prior objections to entering into the deed of settlement and release and advise that our client is not prepared to enter into the deed as it is not a prerequisite for a proper discharge of mortgage and is not a prerequisite for the release of excess fund following the exercise of a power of sale.
For abundant clarity, our client consented to your withholding the sum of $300,000 in order to properly consider the material and seek the relevant advice in relation to any potential claim against your client. Having considered the material and sought such advice, we are instructed that our client does not seek to be involved in any further litigation with your client. This letter serves as notice to you that there is no longer a dispute as between our clients. Our client merely wishes to sever the relationship with your client completely and finally.
Throughout February 2017 correspondence between the solicitors continued. Manassen's position was that on the basis of Mr Whalebone's conduct (and therefore by extension A1 Catering and RMW) they would have a reasonable apprehension of litigation unless and until a deed of release was entered into. A1's position was that it had advised Manassen that it did not have an intention to pursue litigation, and Manassen could not hold the money as a bargaining chip to require the execution of a deed of release.
On 22 February 2017, Summer Lawyers wrote a letter to A1 Catering's solicitor stating that it was possible that 'an appropriately drafted letter from your office (that our client will rely upon as an absolute bar)' would be sufficient to satisfy Manassen.
In June 2017, Mr Whalebone sent letters of demand to Summer Lawyers and the receiver relating to funds held by the former or inappropriately distributed by the latter.
By a letter dated 31 August 2017, Mr Whalebone instructed his solicitor to prepare a statement of claim 'for the recovery of lost monies, overcharging fee, rip off monies, also fire sale of our properties'.
In December 2017, Mr Whalebone sought an assessment of the fees paid to Summer Lawyers out of the proceeds of sale of the four mortgaged properties which had been sold.
On 16 March 2018, discharges of the registered mortgages were provided to Mr Whalebone for the mortgaged properties which had not been sold.
On 17 February 2021, A1 Catering commenced these proceedings.
On 29 August 2022, A1 Catering commenced proceedings against the receiver, Mr Asper and Jirsch Sutherland relating to the sale by the receiver of two of the mortgaged properties seeking equitable compensation. The claim is essentially that the plaintiff was denied the opportunity to purchase the properties at the auctions. It is not in dispute that if an amount is recoverable by way of equitable compensation, the receiver will have a claim against Manassen by way of indemnity.
Mr Reese, the solicitor at Summer Lawyers who acted for Manassen at all relevant times, gave evidence in his affidavit about the view he had formed at the time he sent his letter of 19 August 2016 referred to at [22] above regarding the prospect of litigation between the parties:
75. At the time that the 19 August 2016 SL Letter was issued, Roger, or his related entities, had not commenced proceedings against Manassen nor had they articulated in any meaningful fashion the nature of any relief or claim they might make against Manassen and/or Mr Morelli. Nevertheless, drawing on my experience in conducting mortgage enforcement litigation and taking into account my knowledge of the various complaints and issues raised in the 2015 Proceedings and correspondence from Roger and Han (and their legal representatives), it was my belief that A1, RMW, Roger, Han or any combination thereof, might commence proceedings against Manassen and/or Mr Morelli which raised some or all of the following:
a. alleged unconscionable conduct on the part of Manassen in respect of the entry into the Loan Agreement, mortgages and the ancillary security documents relying upon assertions that Roger and Han did not understand what they were signing, the circumstances of the entry into the documents in respect of the advance were unfair or unreasonable and/or the terms of the Loan Agreement, mortgages and the ancillary security documents were unconscionable;
b. allegations about the conduct of Mr Morelli in his capacity as receiver and manager including, but not exclusive to, the reasonableness of his conduct, and the remuneration of Mr Morelli acting as receiver and manager of A1 and RMW; and/or
c. allegations about the reasonableness of the legal fees charged by Summer Lawyers
76. The potential claims described at paragraphs [75(a)] and [75(b)] above would be brought in the NSW Supreme Court. In the context of the many allegations made by Roger against many persons, it seemed to me at that time that multi party litigation was a distinct possibility. In my experience, multi-party litigation is considerably more expensive than two (2) party litigation. Further, by reason of the wide-reaching allegations spanning across the period from prior to the execution of the Loan Agreement to the sale of Security Properties by Mr Morelli as the receiver and manager, it was my opinion, at the time, that any litigation would likely involve multiple witnesses providing affidavits and being subjected to cross-examination. Such an outcome would only further increase the amount of costs likely to be incurred in defending any proceeding brought by A1, RMW, Roger, Han or any combination thereof.
77. In the event that claims were made in respect of the reasonableness of the conduct of Mr Morelli as receiver and manager of A1 and RMW, based on my experience, it would be necessary to incur further costs obtaining expert evidence. The costs of expert witnesses for a case involving the sale of six (6) properties (which Mr Morelli had engaged NG Farrah to sell at public auction as referred to at paragraph [56] above) would likely be considerable and at least $50,000.00.
78. Having regard to the above, I formed the view that a final hearing of any claim commenced by A1, RMW, Roger, Han or any combination thereof would take at least seven (7) days to be heard and would require briefing junior and senior counsel to appear and advise in that proceeding, including settling pleadings, evidence and preparing for and attending at the final hearing. I formed the view that it would be necessary to engage both senior and junior counsel given the complexity of dealings involved with the advance and enforcement of Manassen's mortgages, including the appointment of Mr Morelli, and the resistance which Mummer Lawyers had received and were continuing to receive form Roger (and his legal representatives) to the enforcement steps taken (and proposed to be taken) by Manassen and Mr Morelli at the time.
It was not in dispute that [75]-[78] of Mr Reese's affidavit accurately summarise the types of allegations which were in dispute at the time the $300,000 was withheld as security for costs.
[3]
Relevant provisions of the loan documents
I will now set out the provisions of the transaction documents which are relevant to a claim for costs by Manassen against A1 Catering or the other mortgagors.
The loan agreement between Manassen as lender and RMW and A1 Catering as borrowers includes cl 13, which requires each borrower to pay to Manassen on demand all expenses (including legal costs and disbursements on a solicitor and client basis) incurred by Manassen in connection with (emphasis added):
(c) (Enforcement): the enforcement, attempted enforcement or preservation of any rights under any Transaction Document including, without limitation, any expenses incurred in the evaluation of matters of material concern to the Lender and the Lender's internal costs for the time being of its employees in relation to any enforcement, attempted enforcement, preservation or evaluation costed at the rate certificate by the Lender to be the rate then usually charged by it to the Lender's clients for the services of its employees.
The real property mortgages given by each of A1 Catering and RMW, as mortgagor, to Manassen, as mortgagee, impose an obligation on the mortgagor to pay the Secured Moneys to the mortgagee. The term "Secured Moneys" is defined in the mortgage as follows (emphasis added):
Secured Moneys means all moneys which the Mortgagee (alone or with another person) now or in the future owes or may contingently owe including:
(a) any money owing by the Mortgagor to the Mortgagee under any of the Transaction Documents or any judgment, order or other thing into which the obligations of the Mortgagor under the Transaction Documents are merged;
any liability of the Mortgagor assigned to the Mortgagee (with or without the consent of the Mortgagor);
liquidated or unliquidated damages awarded to the Mortgagee against the Mortgagor;
moneys which the Mortgagee may charge to an account (whether trading or otherwise) of the Mortgagor;
money which under another clause of this mortgage is part of the Secured Moneys;
costs, charges, fees, expenses, duties, imposts and taxes suffered or incurred by the Mortgagee in order to make effective the security contained in this mortgage or to give this mortgage its intended priority; and
costs, charges, fees and expenses suffered or incurred by the Mortgagee or a Receiver in enforcing the Transaction Documents or this mortgage.
I note that the reference to "Mortgagee" in the chapeau to this definition is an error of a typographical nature and should read as "Mortgagor". In my view, on the proper construction of the mortgage and this definition, that should be regarded as an obvious slip and it should be construed as "Mortgagor", not "Mortgagee". See P Herzfeld and T Prince, Interpretation (Thomson Reuters, 2nd Ed, 2020) at [22.140].
A separate provision of the mortgage headed "Indemnities" contains an indemnity which provides relevantly as follows (emphasis added):
The Mortgagor indemnifies the Mortgagee against all actions, claims, demands, losses, damages, liabilities, costs, charges, fees and expenses suffered or incurred by the Mortgagee as a result of or in connection with:
a failure by the Mortgagor to pay any Secured Moneys when due or payable or to comply with any other obligation owed to the Mortgagee;
the occurrence of an Event of Default;
the Mortgagee, a Receiver or an attorney appointed under this mortgage exercising or attempting to exercise any power or right under this mortgage, in any other agreement between the Mortgagor and the Mortgagee or at general law;
the Mortgagee seeking to recover any Secured Moneys from any other person liable to pay it;
…
a claim that a payment, obligation, settlement, transaction, conveyance or transfer in connection with Secured Moneys (or money which would be Secured Moneys if the claim was invalid) is void or voidable under any law relating to insolvency, bankruptcy, or the protection of creditors from debtors or for any other reason, being upheld conceded or compromised;
the appointment of or any indemnity given to a Receiver;
…
unless and to the extent arising as a direct result of the fraud, negligence or wilful default of the Mortgagee.
A separate provision of the mortgage headed "Discharge", sets out the circumstances in which the mortgagor can require a discharge of the mortgage as follows:
Mortgagor's rights to a discharge
On payment of all Secured Moneys and at the request of the Mortgagor, the Mortgagee must execute a discharge of this mortgage unless the Mortgagee reasonably considers that the whole or part of the Secured Moneys will or may become actually, contingently or prospectively owing by the Mortgagor to the Mortgagee:
because a payment made to the Mortgagee could be voided under any law relating to insolvency, bankruptcy or the protection of creditors from debtors, or for any other reason; or
as a result of any claim or action the Mortgagee has against the Mortgagor or any other person.
These provisions refer to Transaction Documents, a term defined to include a collateral security and which encompasses the loan agreement and a document entitled "general security deed" which was entered into between Manassen (referred to as the Secured Party) and A1 Catering (referred to as the Grantor) at the same time as the other documents were executed and has not been discharged. Clause 17.1, 17.2 and 17.3 of the general security deed provide for a broad indemnity for costs, relevantly as follows:
17.1 The Grantor agrees to pay or reimburse the Secured Party on demand for:
…
(b) the Secured Party's and any Receiver's Costs in otherwise acting in connection with this Security Deed or any other Transaction Document, such as enforcing or preserving rights (or considering enforcing or preserving them) or doing anything in connection with any enquiry by an authority involving the Grantor or any of the Grantor's Related Entities; and
…
17.2 The Grantor indemnifies the Secured Party against any liability or loss arising from, and any Costs in connection with:
(a) an Event of Default;
(b) any person exercising or attempting to exercise rights in connection with this Security Deed or any other Transaction Document after an Event of Default; or
(c) the Collateral and this Security Deed; or
…
17.3 The Grantor agrees that:
(a) the Costs referred to in clause 17.1 and the liability, loss or Costs in clause 17.2 include legal Costs in accordance with any written agreement as to legal Costs or, if no agreement, on whichever is the higher of a full indemnity basis or solicitor and own client basis; and
(b) the Costs referred to in clauses 17.1(a) and 17.1(b) include those paid, or that the Secured Party reasonably believes are payable, to persons engaged by the Secured Party in connection with this Security Deed or any other Transaction Document (such as consultants).
[4]
Principles
Where a mortgagor seeks a discharge of a mortgage from the mortgagee at a time when a contingent liability is owing to the mortgagee which is secured by the mortgage, the mortgagee is entitled to require not merely payment of the amount presently secured by the mortgage but also payment of an amount which is a reasonable estimate of that contingent liability: see Liberty Funding Pty Ltd v Steele-Smith [2004] NSWSC 1100 at [24]-[29], Overton Investments Pty Ltd v Cuzeno RVM Pty Ltd [2003] NSWCA 27 at [63], and Australia and New Zealand Banking Group Ltd v Mishra [2012] NSWSC 1333 at [27]-[41]. This is because the mortgagor is not entitled to redeem the mortgage while such amounts are contingently owing: see also the decision of the English Court of Appeal in Re Rudd and Son Ltd (1986) 2 BCC 98,955. In the present case, this is confirmed by the discharge clause in the mortgage itself, set out above.
As illustrated by Mishra's case, the principle that a mortgagee can require the payment of a sum as security for a contingent liability which is secured by the mortgage extends to costs reasonably anticipated to be incurred by the lender in the event of an anticipated dispute with the borrower at the time the discharge is sought where the mortgage provides or secures an indemnity for such costs.
[5]
Consideration
It was not in dispute that the issues which arise in this case are two-fold: first, whether Manassen, a mortgagee, was entitled to retain the sum of $300,000 on the asserted basis that it was security for anticipated costs of litigation or other dispute with the borrowers; second, if the answer to that question is yes, whether the amount retained as security was reasonable.
As to the first issue, the primary basis on which Manassen sought to justify its retention of the amount of $300,000 is the principle which I have summarised at [47] above. I am satisfied that the clauses in the loan agreement, the mortgages and the general security deed will catch expenses incurred by Manassen in the event of a dispute between Manassen regarding the three matters set out in Mr Reese's affidavit. In particular, the costs of defending each of those claims described in Mr Reese's affidavit would give rise to legal costs and expenses for which Manassen could claim an indemnity under the clauses of the loan agreement and the mortgage set out at [41] and [44] above and were amounts contingently owing to the Mortgagee which fell within the definition of Secured Moneys in the mortgage. Ultimately, whether it is entitled to that indemnity will depend on the circumstances, eg in the case of the indemnity in the mortgage, it will depend on whether the carveout for fraud, negligence or wilful default in the relevant provision applies. However, that is not to deny that there was a contingent liability for such costs at the time A1 Catering and the other related parties sought the discharge of the mortgages. I reject the submission for A1 Catering that there was no such contingent liability.
My conclusion on this point makes it unnecessary to consider the scope of the mortgagee's right to retain a surplus for the purposes of so-called redemption proceedings dealt with in the decisions in Project Research Pty Ltd v Permanent Trustee of Australia Ltd (1990) 5 BPR 11,225 and Ginelle Pty Ltd v Singh [2010] NSWSC 116. Those cases did not concern the principle on which Mishra's case was decided and the line of authority relied upon by Davies J in that case.
I am also satisfied that, from 19 August 2016, it was reasonable for Manassen to anticipate that it was likely that there would be litigation with A1 Catering or one of its related entities regarding the matters set out in [75]-[78] of Mr Reese's affidavit, whose evidence I accept.
I turn now to the second issue which is whether the amount retained by Manassen was a reasonable estimate of the likely costs Manassen would incur in the event that any of the anticipated disputes arose. Mr Reese explains in his affidavit, in the passages I have set out above, why he formed the view in August 2016 that the amount of $300,000 was a reasonable estimate of the likely fees and expenses that would be incurred. In my view, that is a rational and coherent explanation of the basis of the calculation that he made. It is not, as submitted for A1 Catering, merely a sum which was left over after distribution of the balance of the proceeds of sale.
[6]
Conclusion
Accordingly, for all these reasons, I have concluded that prayers 3 and 4 of the amended statement of claim should be dismissed.
The parties have not made submissions on costs. My preliminary view is that costs should follow the event. However, as the parties wish to be heard on costs, I will make orders for submissions on costs.
Therefore, I will make the following orders:
1. Prayers 3 and 4 of the plaintiff's Amended Statement of Claim are dismissed.
2. The second defendant to file and serve submissions (of no more than five pages) and any affidavit evidence with a copy to be emailed to the Associate to Justice Richmond by Friday, 8 March 2024.
3. The plaintiff to file and serve submissions (of no more than five pages) and any affidavit evidence with a copy to be emailed to the Associate to Justice Richmond by Friday, 15 March 2024
4. The second defendant to file and serve any submissions in reply (of no more than two pages) with a copy to be emailed to the Associate to Justice Richmond by Wednesday, 20 March 2024.
[7]
Amendments
03 May 2024 - Correction to typographical errors:
[8]
[4] 'ceased' to 'he ceased'.
[10] 'facilities' to 'facility'.
[15] name of plaintiff corrected.
[17] insertion of 'as' before 'at 30 June 2016'.
[38] correction to quote.
[42] 'each of by' to 'by each of'.
[44] correction to quote.
[47] removal of 'I have'.
[51] 'rights' to 'right'.
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Decision last updated: 03 May 2024