Issue 1 - The Retainer Issue
28 Group argued that there was a genuine dispute within the meaning of s 459H(1)(a) of the Act as to whether or not Group was ever the client of the solicitors in relation to the proposed purchase of the development and that there was a genuine dispute as to whether Group was ever liable to pay the solicitors' fees and disbursements.
29 The solicitors certainly took the view that they had been initially retained by Group alone and that, for that reason, irrespective of whether or not ALF 1 also subsequently became a client and thereby became jointly and severally liable in respect of the solicitors' fees and disbursements, Group remained liable to pay those fees and disbursements. Group did not contact the solicitors at any time between February 2010 and September 2010 and draw their attention to the fact that they had rendered their Tax Invoices to the wrong corporation.
30 It was common ground between the parties at the hearing before me that it was Mr Byrnes who had initially engaged the solicitors in respect of the proposed purchase of the development.
31 Soon after being initially instructed, by letter dated 2 February 2010, the solicitors wrote to the vendor's solicitors. The purpose of the letter was for the solicitors to convey to the vendor's solicitors an offer to purchase the development on behalf of Group. The purchaser was described in that letter as "Group and/or its nominee". That letter was sent one day after the author of the letter, Belinda Adams, had had a telephone conversation with Mr Byrnes in which some of the critical aspects of the proposed transaction had been discussed. The note of that conversation between Ms Adams and Mr Byrnes prepared by Ms Adams contains no record of any discussion as to the identity of the proposed purchaser. However, Ms Adams obviously knew by the time she sent her letter to the vendor's solicitors that, as at 2 February 2010, the proposed purchaser was to be Group and/or its nominee. I infer from these circumstances that Ms Adams had ascertained from her reading of the draft contract which had been forwarded to her at the end of January 2010 that Group and/or its nominee was to be the purchaser of the development. The fact that Group and/or its nominee was to be the purchaser was most likely communicated to the vendor by Mr Byrnes. It certainly must have been conveyed by someone on behalf of Group.
32 The solicitors' letter dated 2 February 2010 sent to the vendor's solicitors was emailed to Mr Byrnes. Mr Byrnes did not suggest in his evidence that he did not receive that email. I find that he did receive that email. Mr Byrnes knew that both the solicitors and the vendor's solicitors were working upon the basis that the purchaser was to be Group and/or its nominee. Mr Byrnes did not instruct the solicitors that this was incorrect.
33 The first mention in the evidence of ALF 1 is in an email from Mr Byrnes to the selling agent (copied to Ms Adams) sent at 9.33 pm on 18 February 2010. In that email, amongst other things, Mr Byrnes requested that the purchaser be ALF 1 instead of Group. Thereafter, ALF 1 was the entity which the group of companies represented by Mr Byrnes intended would be the purchaser of the development.
34 On 19 July 2010, the solicitors forwarded to Mrs Byrnes correspondence concerning the proposed purchase of the development. Under cover of that correspondence, they furnished to Mrs Byrnes a raft of documents, including the signed Contract for Sale in respect of the purchase of the development by ALF 1. Included with the material sent under cover of that letter was a further costs disclosure and proposed costs agreement. Those documents showed ALF 1 as the client for the purposes of the disclosure being made in those documents. Mr Byrnes asserted that Group did not receive this correspondence.
35 The Contract for Sale was exchanged on 8 June 2010.
36 I do not think that there is any genuine dispute about the identity of the corporation which retained the solicitors at the end of January 2010. From that time until 18 February 2010, all of the communications which Mr Byrnes had undertaken with the solicitors had been undertaken on behalf of Group. The draft Contract forwarded to him and then passed on by him to the solicitors showed Group and/or its nominee as the purchaser. The solicitors believed Group and/or its nominee would be the purchaser until instructed otherwise. The letter from the solicitors to the vendor's solicitors dated 2 February 2010 recorded the fact that Group and/or its nominee was to be the purchaser. Mr Byrnes was aware of the terms of the draft Contract which he provided to the solicitors in late January 2010 and was also provided with a copy of the letter which they wrote to the vendor's solicitors dated 2 February 2010. At no time before December 2010 did Mr Byrnes or any other person on behalf of Group suggest to the solicitors that Group was not one of the clients which the solicitors were representing in relation to the proposed purchase of the development. Nor did he ever suggest to the solicitors that Group would not accept the ordinary obligation of a solicitor's client, namely, to pay the solicitor's reasonable fees and disbursements. ALF 1 is a subsidiary of Group. It ultimately became Group's nominee for the purposes of the proposed purchase, but Group remained as the main client.
37 It was submitted on behalf of Group that the fact that the solicitors forwarded a second Costs Disclosure to Mrs Byrnes on 19 July 2010 was a strong indication that the only client for whom the solicitors were acting in relation to the proposed purchase of the development was ALF 1 and that it was, therefore, ALF 1 who was responsible to pay their fees and disbursements.
38 In BMG Poseidon Corp Pty Ltd v Adelaide Bank Ltd (No 2) [2009] FCA 404 at [63]-[66], I endeavoured to summarise the relevant authorities as to the meaning of "genuine dispute" for the purposes of s 459H(1)(a) of the Act. I said:
63 For s 459H(1)(a) to be engaged, the Court must be satisfied that there is a genuine dispute about the existence or about the amount of the debt. In order for a dispute of that kind to be raised, there must be more than the mere assertion of a dispute or the mere making of a claim (per Lindgren J in Rohalo Pharmaceutical Pty Ltd v RP Scherer SpA & Pharmagel SpA (1994) 15 ACSR 347, (1994) 13 ACLC 94 at 352/30-354/15, esp at 353/20-25).
64 The dispute must have an objective existence the genuineness of which is capable of being assessed (Rohalo 15 ACSR 347, 13 ACLC 94 at 353/17-25). The test has been equated with the test as to whether the creditor would be entitled to summary judgment on the claim (Rohalo 15 ACSR 347, 13 ACLC 94 at 353/42-354/8).
65 In Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787-788, (1994) 12 ACLC 669, McLelland CJ in Eq said:
It is, however, necessary to consider the meaning of the expression "genuine dispute" where it occurs in s 450H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the "serious question to be tried" criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit "however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be" not having "sufficient prima facie plausibility to merit further investigation as to [its] truth" (cf Eng Mee Yong v Letchumanan [1980] AC 331 at 341), or "a patently feeble legal argument or an assertion of facts unsupported by evidence": cf South Australia v Wall (1980) 24 SASR 189 at 194.
But it does mean that, except in such an extreme case, a court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute. In Mibor Investments (at 366-7) Hayne J said, after referring to the state of the law prior to the enactment of Div 3 of Pt 5.4 of the Corporations Law, and to the terms of Div 3:
These matters, taken in combination, suggest that at least in most cases, it is not expected that the court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the court conclude that there is a dispute and that it is a genuine dispute.
In Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601 at 605 Thomas J said:
There is little doubt that Div 3 … prescribes a formula that requires the court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the court will examine the merits or settle the dispute. The specified limits of the court's examination are the ascertainment of whether there is a "genuine dispute" and whether there is a "genuine claim".
It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it), the court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another.
The essential task is relatively simple - to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).
I respectfully agree with those statements.
66 In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 at 461-464 a Full Court of this Court discussed the relevant principles by reference to a number of the relevant authorities. At 464F-G the Court said:
In our view a "genuine" dispute requires that:
• the dispute be bona fide and truly exist in fact;
• the grounds for alleging the existence of a dispute are real and not spurious, hypothetical, illusory or misconceived.
(See also Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach (No 2) [2003] NSWSC 896 (per Barrett J); and King Furniture Australia Pty Ltd v Higgs [2011] NSWSC 234 (per Ward J)).
39 In the present case, I do not think that there is any genuine dispute as to whether Group was a client of the solicitors in relation to the proposed purchase of the development. Nor is there any genuine dispute about its liability to pay the solicitors' fees and disbursements. Group was clearly the solicitors' client until 18 February 2010. In my view, it plainly remained their client thereafter. ALF 1 is a wholly owned subsidiary of Group and was inserted into the transaction at the behest of Group for its own purposes. It was incorporated especially for that purpose. I find that, on or about 18 February 2010, ALF 1 also became a client of the solicitors. From about that time, it was the legal entity which was to undertake the obligations as purchaser of the development. The correct complexion to place upon the undisputed relevant facts concerning the retainer is that, on and after 18 February 2010, both Group and ALF 1 were clients in respect of the proposed transaction and that both of them became jointly and severally liable to pay the solicitors' fees and disbursements. I do not need to decide, however, whether ALF 1 ever became liable to pay those fees and disbursements. The important question for present purposes is whether Group was liable to pay those fees and disbursements. In my view, it clearly was and there is no genuine dispute about that liability.
40 I am fortified in that conclusion by the fact that no-one on behalf of Group or on behalf of ALF 1 complained about the fees and disbursements rendered by the solicitors until much later and also by the fact that, until the Statutory Demand was served, no-one had ever suggested that Group was not a client of the solicitors or that Group was not liable to pay the solicitors' fees and disbursements. The notion that the tax invoices from the solicitors had been sent to the wrong corporation is very much a recent thought on the part of Mr Pakula and Mr Byrnes.
41 For these reasons, I find that Group was relevantly a client of the solicitors and was and is liable to pay their reasonable fees and disbursements.
42 No issue as to the reasonableness of the charges made or the basis upon which those charges were made was raised in the hearing before me.
43 Accordingly, Group fails on Issue 1. Subject to Issue 2, it has failed to persuade me that there is a genuine dispute as to its liability to pay the sum of $12,228.45, being the outstanding fees and disbursements rendered to it by the solicitors.