Amil Dlakic by his tutor Liliane Dlakic v Michael John Vaughan [2019] NSWSC 509 | Case summary

Amil Dlakic by his tutor Liliane Dlakic v Michael John Vaughan [2019] NSWSC 509 | Case summary | Zoe

[4]

Setting aside of the buyback agreement

As to the setting aside of the buyback agreement, as recorded in the principal judgment, shortly before the buyback agreement was made, the Law Society of New South Wales (Law Society) appointed a receiver for the law firm, Johnston Vaughan, which was then solely owned, or so it seemed, by Mr Dlakic. That step was taken by the Law Society in conjunction with other steps that led to the suspension of Mr Dlakic's practising certificate. As I understand it, Mr Dlakic remains unable to practice as a solicitor in this State. It is unlikely that Mr Dlakic will ever again become entitled to practice, and, as I understand it, Mr Dlakic is in the course of legal proceedings against an insurer that are based upon a claim by him that he is totally and permanently incapacitated from his former employment as a solicitor.
Consequently, if the buyback agreement is to be set aside, the Court will need to consider the possibility that the reinstatement of Johnston Vaughan to Mr Dlakic will be futile, and whatever value remains in the firm will be lost, by reason of the fact that Mr Dlakic is legally prohibited from carrying on the firm's business.
If the buyback agreement is set aside, then Mr Dlakic will become entitled to the net profit from the operation of the firm during the period after the date of the buyback agreement, during which it has been managed by Mr Vaughan. Mr Vaughan will be entitled to receive an appropriate amount of remuneration for his efforts. As recorded in the principal judgment, the financial records of Johnston Vaughan leave much to be desired, and provide an unsatisfactory foundation for the determination of the net profit for the relevant period.
At the hearing, Mr Dlakic complained, with considerable justification, that the consequence of his unsuccessful efforts to obtain full and accurate financial records for the operation of the firm for the relevant period from Mr Vaughan had the result that Mr Dlakic was unable to prove at the hearing the amount to which he would become entitled if the buyback agreement was set aside. As a result, it was not feasible for the Court to determine that issue on the basis of the evidence led at the hearing. The consequence is that the Court will now have to make appropriate orders for the conduct of an account to determine what, if any, net profit must be paid by Mr Vaughan to Mr Dlakic. That is one of the difficult issues that the Court must now determine.

[7]

Can the surrender of lease be set aside?

There is, however, a preliminary issue which must be resolved, before that primary issue can be determined. It is whether the Court should also make an order setting aside the surrender of lease that is referred to at [145] of the principal judgment.
This issue is significant for the following reasons. The practice, Johnson Vaughan, at all material times operated from premises in Kogarah which are owned by Davlite. Relevantly, on 8 December 2014, Mr Dlakic, as lessee, entered into a lease of the premises from Davlite, which commenced on 8 December 2014 and terminated on 7 December 2019, with an option to renew for five years (up to 2024).
The evidence given by Mr Dlakic in his 28 July 2017 affidavit in reply, at par 13, was that, on about 1 July 2015, at Mr Vaughan's request, Mr Dlakic signed a surrender of lease in respect of the lease of the premises. The surrender of lease was dated 30 October 2014, which coincided with the date on which Mr Dlakic was suspended by the Law Society. Absurdly, the surrender of lease was dated some 40 days before the date of the lease that was surrendered. The surrender of lease was not registered until 8 July 2015.
As matters stand, if the buyback agreement is set aside by the Court, and management of Johnston Vaughan is returned to Mr Dlakic, or some nominee of his, without the effect of the surrender of lease being reversed, then there will be no legal basis upon which Mr Dlakic can force Davlite to allow him or his nominee to conduct the practice from its existing premises.
That fact is the principal reason why I formed the view, when considering the findings that should be made in the principal judgment, that the Court should only state that in principle Mr Dlakic was entitled to an order setting aside the buyback agreement. It appeared to me that the making of that order, in circumstances where neither Mr Dlakic nor any nominee of his could operate the practice from its existing premises, might be calamitous, and might immediately destroy any value in the firm.
This situation has arisen because Mr Dlakic did not claim any relief in his amended statement of claim concerning the setting aside of the surrender of lease, or any consequential order that may be necessary to reinstate the lease, given that the surrender of lease has apparently been registered.
Consequently, I did not deal with this issue in the principal judgment, save to make an observation, at [145], to the effect that the surrender of lease was backdated to just before the buyback agreement was made, being when Mr Dlakic's practising certificate was suspended, to avoid the possible discomfort to Davlite of the company called Johnston Vaughan Solicitors Pty Ltd being ordered to be wound up. I did not consider or make any findings in respect of the issue of whether the surrender of lease should be set aside.
Not only was the issue not raised on the pleadings or contested at the hearing, but Davlite, as the lessor, would also have been a necessary party. Davlite has not been joined as a defendant, and the issue of whether the Court could proceed in the absence of Davlite was not considered.
If the Court makes an order setting aside the surrender of lease, and requires Davlite to do anything that may be necessary to reinstate the lease, then the making of an order setting aside the buyback agreement may make some commercial sense. Absent the making of those orders, setting aside the buyback agreement will make no commercial sense at all, and would almost certainly involve the Court being a party to destroying the value of the practice, to the pointless injury of its employees and clients, and one or both of the parties. There is no reason, on the evidence before the Court, to think that the goodwill of the firm is readily transferable to some other location, especially given that Mr Dlakic has had no contact with the clients for many years, and any nominee of Mr Dlakic will have no client connection at all.
It is in these circumstances that, after the principal judgment was handed down, Mr Dlakic sought an order setting aside the surrender of lease.
That claim is now made on the basis of prayer 8 in the amended statement of claim, which in the conventional way seeks such further or other order as the Court thinks fit. Mr Dlakic submits that the Court is entitled to, and should, make this additional order on the basis that it is consequential upon the Court's determination that, in principle, the buyback agreement should be set aside.
The question therefore is whether the Court can, and should, make an order setting aside the surrender of lease, and any necessary consequential orders for the reinstatement of the lease, taking into account the circumstances in which the hearing was conducted, and the fact that Davlite was not, and is not, a party to the proceedings.
In sum, the issues that require further consideration in relation to Mr Dlakic's application for an order setting aside the surrender of lease are: (a) whether Mr Dlakic should be required to further amend his amended statement of claim in order to claim that relief specifically; (b) whether Davlite must be joined as a party; (c) whether an order should be made setting aside the surrender of lease; and (d) whether any consequential orders should be made.

[8]

Significance of setting aside the surrender of lease

Unfortunately, these issues must be resolved before it will be appropriate for the Court to make any order setting aside the buyback agreement, and any necessary consequential order that Mr Vaughan effectively return the practice of Johnston Vaughan to Mr Dlakic.
This is so because I have decided that the Court should not make orders that have the effect of returning Johnston Vaughan to Mr Dlakic if the practice cannot be operated from the premises owned by Davlite, from where it has operated for a substantial number of years. Instead, in that case, in the exercise of the Court's discretion, it should award Mr Dlakic equitable compensation calculated on some, yet to be determined, appropriate basis.
On the other hand, if orders are made that reinstate Mr Dlakic's tenure of the premises, I have decided, though with considerable misgivings, that the Court should make the order setting aside the buyback agreement that the Court has already found that Mr Dlakic is entitled to in principle.
While Mr Dlakic will not presently be able to operate the practice of Johnston Vaughan personally, if it is returned to him, I have decided that it is Mr Dlakic, rather than the Court, who should be allowed to decide whether or not to take the risks that may flow from the setting aside of the buyback agreement.
In part, my decision to act upon Mr Dlakic's choice to have Johnston Vaughan returned to him is based upon the stance taken by Mr Vaughan, which may well be correct, that the goodwill of a solicitor's practice, with one principal solicitor, may not be substantial. If that is so, the preferable course is to give Mr Dlakic the opportunity to obtain whatever value he can out of the practice.
On 19 July 2010, Mr Dlakic purchased the practice of Johnston Vaughan from Mr Vaughan for $550,000. If there are no impediments to Mr Dlakic being given the opportunity to do so, he should now be given the opportunity to do what he can to recover as much as possible of the price that he paid for the practice.

[9]

Evidence of potential sale of Johnston Vaughan

Mr Dlakic has provided evidence of an arrangement that he has made with a practising solicitor, Mr Anthony Liberiou, for the possible sale of the practice of Johnston Vaughan. Mr Liberiou has a solicitor's practice, which carries on business under the name Benchmark Lawyers from premises at Anzac Parade, Maroubra. Mr Liberiou's evidence is that he has agreed in principle with Mr Dlakic's wife and tutor to purchase the practice. Mr Dlakic tendered a pro forma Uniform Contract for Sale of Business that would form the basis of a contract for sale between Mr Dlakic and Mr Liberiou, if the buyback agreement was set aside.
The special conditions in the pro forma contract are on the following terms: 1. PURSCHASE [sic] PRICE is to be no greater than either: a. $250,000; or b. 12 months net profit after all operating expenses, (e.g. wages, rent, insurances, payroll) etc, as determined by audited accounts. 2. LEASE: The parties acknowledge that the lease is in dispute. Therefore, the parties agree that the contract is not binding until the purchaser agrees to the conditions of the lease. 3. DEPOSIT of $12,500 is non-refundable and only payable after the terms of the lease have been agreed to by the purchaser and vendor.
Mr Liberiou's evidence is that he is capable of undertaking the day-to-day operations of Johnston Vaughan and satisfactorily managing the ongoing matter files. He said that his current practice is a similar suburban practice and involves matter files in a variety of areas of law. He also said that the actual terms of the acquisition are yet to be determined, and will not be determined unless and until he has assumed conduct of the practice and has access to all relevant books and records.
If the buyback agreement is set aside, and the operation of the practice is effectively given to Mr Liberiou as Mr Dlakic's nominee, he will assume immediate conduct of the practice, for a remuneration of $1,800 per week payable monthly in arrears. He will have unfettered access to the books and records of the practice. He will make a formal offer to acquire Mr Dlakic's interest in the practice within three months of commencing the conduct of the practice, generally on the terms of the pro forma contract, and will continue to provide his services to the practice for one month after giving notice to Mr Dlakic of his intention not to offer to complete the purchase, if that is what occurs.
The effect of this evidence is that, if the buyback agreement is set aside, Mr Dlakic has prospects of selling the practice to Mr Liberiou for $250,000, or possibly more if the net profit over 12 months is a greater sum. The opportunity is, however, plainly contingent. If experience causes Mr Liberiou to form the view that the practice of Johnston Vaughan is not worth buying, then Mr Dlakic will only have Mr Liberiou's continuing services for one month, and that may not be sufficient for him to be able to find another purchaser. It is a real possibility that the practice of Johnston Vaughan may cease to operate, without Mr Dlakic receiving any real value as a result of the setting aside of the buyback agreement.
For the reasons I have given, however, as Mr Dlakic has succeeded on this aspect of his claim in principle, he should be given the opportunity to gain what he can from his proposal to sell the practice to Mr Liberiou.
As I have noted above, the effect of special condition 2 of the pro forma contract is that the proposed sale of Johnston Vaughan to Mr Liberiou will not become unconditional until Mr Liberiou is satisfied with the terms of the lease that will permit the practice to be conducted from the premises that it now leases from Davlite. This circumstance has fortified me in my finding that the buyback agreement should not be set aside unless the surrender of lease is also set aside.
I must assume that Mr Dlakic has made a prudent judgment about the consequences of the surrender of lease being set aside, if the buyback agreement is also set aside, but it turns out that Mr Dlakic is not able to sell the practice of Johnston Vaughan. In that event, Mr Dlakic will remain liable under the lease until 7 December 2019, but will be prevented by cl 6.1 from using the premises for any other purpose than conducting a law practice. Further, cl 9 will prevent Mr Dlakic assigning the lease to Mr Liberiou without the consent of Davlite. That consent may not be unreasonably withheld if the matters listed in cl 9.2 are satisfied. It would ordinarily be expected that Mr Liberiou would be able to satisfy those matters. However, there may be scope for disputation, especially if Mr Vaughan remains the sole director of Davlite.

[10]

Relevance of Johnston Vaughan Solicitors Pty Ltd

One further issue that must be considered concerns the possibility that, although Mr Dlakic purchased Johnston Vaughan from Mr Vaughan on 19 July 2010, and Mr Dlakic and Mr Vaughan were the only parties to the 25 November 2014 buyback agreement, the real owner of the practice, as at 25 November 2014, was a company owned by Mr Dlakic called Johnston Vaughan Solicitors Pty Ltd, that has since been deregistered. Evidence in the proceedings provided some support for a conclusion, based upon that company's financial accounts, that by some unidentified means Mr Dlakic had transferred the practice to the company.
I am satisfied that, notwithstanding the existence of that evidence, the possibility should be ignored for the purpose of the consideration of whether the buyback agreement should be set aside.
Mr Vaughan did not make anything of this issue during the hearing, notwithstanding that the existence of the evidence was obvious. Although obvious, the evidence was by no means conclusive. Mr Dlakic could have caused the company to operate the business of the practice as his agent, or it could have been used for some other purpose connected to the conduct of the practice. Notwithstanding the evidence that positively suggested that the practice was treated as an asset of the company in its financial accounts, this was an issue that was not explored at the hearing.
Consequently, as Mr Vaughan purported to buy back the practice of Johnston Vaughan from Mr Dlakic, by means of the buyback agreement, and as he has continued to conduct the practice since the date of that agreement, Mr Vaughan should not now be heard to say that the practice was not Mr Dlakic's to sell.
For these reasons, if the surrender of lease were effectively set aside, I would make a formal order setting aside the buyback agreement, together with any necessary consequential orders to give effect to that order.
This means that the question of setting aside the surrender of lease and the joining of Davlite must be addressed.

[12]

Joinder of Davlite as a defendant

It will now be appropriate to consider the issue of the joinder of Davlite. I take the effect of the decision of the High Court in John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19 to include that, as a lessor clearly has an interest in the setting aside of a surrender of lease granted by that lessor, any order made by this Court setting aside the surrender of lease will not be effective against Davlite, unless it is first joined as a party to these proceedings before the order is made, or, if available, some other order is made by the Court that permits it to proceed without Davlite being represented.
In his further written submissions, counsel for Mr Vaughan informed the Court that Davlite did not consent to being joined as a party to these proceedings.
Counsel was able to adopt this position because, as explained above, Mr Vaughan at present is the sole director of Davlite.
In these circumstances, it will unfortunately be necessary for Mr Dlakic to file a notice of motion seeking an order joining Davlite as second defendant in the proceedings, or any other order that may be available that would permit the Court to proceed in the absence of Davlite. That notice of motion may be given a return date by arrangement with my Associate. Because of pressure of business in the Court's diary, it will be necessary for the notice of motion to be made returnable for directions in the first instance. It would be advisable for Mr Dlakic, at least, to provide written submissions on the issues relevant to the making of the order before the return date. The Court will need to consider any submission relevant to the question of whether the issue of the setting aside of the surrender of lease was properly contested between the parties.
I do not know whether this issue of the need to join Davlite will be the source of any stalemate between Mr Dlakic and Mr Vaughan. As per the Court of Appeal's decision in Treadtel International Pty Ltd v Cocco [2016] NSWCA 360; (2016) 316 FLR 318, until Mr Dlakic has actually been entered into Davlite's register of members as a shareholder, he cannot be treated in equity as if he was already one.
It is concerning that any delay in the Court being able to deal with the issues of the joinder of Davlite, the setting aside of the surrender of lease, and the setting aside of the buyback agreement, may jeopardise the chance of a satisfactory commercial outcome to this aspect of the proceedings. That is an unfortunate consequence of the application for an order setting aside the surrender of lease only specifically being made after the publication of the principal judgment.

[14]

Order for accounting between Mr Vaughan and Mr Dlakic

The next unfinished aspect of this matter is to deal with the orders necessary to implement the accounting that must be undertaken to determine the amount, if any, to which Mr Dlakic is entitled, as a result of the setting aside of the buyback agreement, in the context of the unusual agreement that the Court found in the principal judgment to have been made between Mr Dlakic and Mr Vaughan, to the effect that Mr Dlakic would continue to enjoy the profits of the practice, and be responsible for its debts, notwithstanding the buyback agreement.
Orders should be made now to enable the accounting to take place, notwithstanding that I have continued to reserve my decision as to whether an order setting aside the buyback agreement should be made by the Court until after the issue of whether the surrender of lease should also be set aside has been determined. The reason is that the Court did not have before it the evidence necessary for it to decide what amount Mr Dlakic is entitled to from the conduct of the practice of Johnston Vaughan after the date of the buyback agreement, and that amount will have to be determined anyway, even if the buyback agreement is not set aside, as that amount would form part of any equitable compensation to which Mr Dlakic would be entitled.
The parties are agreed that the accounting should be undertaken by way of a reference under Division 3 of Part 20 of the Uniform Civil Procedure Rules 2005 (NSW).
It will be appropriate for the Court to adapt the draft orders for reference submitted by Mr Dlakic.
The following brief reasons concern particular submissions made by the parties concerning the basis upon which the reference should be conducted.
Mr Dlakic submitted that Mr Vaughan should be ordered to account to him for the period after 24 November 2014, as Mr Vaughan took over the conduct of Johnston Vaughan from the 25 November 2014 date of the buyback agreement. Mr Vaughan submitted that the referee should be ordered to determine the net profit of Johnston Vaughan for two periods; being (a) 19 July 2010 to 25 November 2014; and (b) 25 November 2014 and two years after that date. The draft order submitted by Mr Vaughan seems to provide that Mr Vaughan is to account to Mr Dlakic for the net profit of the practice for both periods.
I reject the submission that the first of these periods is properly the subject of an accounting. That was the period when Mr Dlakic conducted the practice of Johnston Vaughan as its principal, having purchased the practice from Mr Vaughan on 19 July 2010. Any net profit that Mr Dlakic made was his own. It may be that, in ways that I do not yet understand, the financial performance of the practice in the first period may have an evidentiary relevance to the matters that the referee will be required to determine for the period after the date of the buyback agreement. That will be a matter for the parties to raise with the referee.
I also reject the submission that the later period should be limited to a term of two years. I consider the original proposal that, if Mr Dlakic regained his practising certificate within two years, Mr Vaughan would re-transfer the practice to him, to be irrelevant for the present purpose. Mr Vaughan must account to Mr Dlakic for the net profit earned by the practice from the date of the buyback agreement to the present.
On the other hand, Mr Vaughan is entitled to the net profit being assessed on the basis that he was entitled to receive proper and reasonable remuneration, given that he was notionally an employee of the practice who performed all of the duties of its sole principal.
Apart from the allowance for Mr Vaughan referred to in the preceding paragraph, I am not willing to stipulate the matters that the referee should be required to take into account in determining the net profits of the practice. It is already apparent that the referee's task will be impeded by the lack of comprehensive and reliable financial records for the practice. The parties will have to make submissions to the referee as to the most cost efficient manner for the reference to be conducted in the first instance. Both the parties and the referee will be given liberty to apply to the Court for directions to resolve any difficulties.

[16]

Costs of the claims made by Mr Dlakic

The first question concerns the costs orders that should be made in the principal proceedings by Mr Dlakic.
The dispute only relates to Mr Dlakic's claim for damages in prayer 5 of his amended statement of claim.
At pars 34-45 of his amended statement of claim, Mr Dlakic pleaded a claim for damages of $290,314.88 that Mr Dlakic was obliged to pay to settle proceedings commenced by Mr Fetin for non-repayment by Mr Dlakic of a loan of $160,000 that Mr Dlakic borrowed from Mr Fetin on 29 April 2015. Mr Dlakic also claimed, as part of his damages, $13,376 as his legal costs of the Fetin proceedings. In short, Mr Dlakic alleged that Mr Vaughan had given him legal advice in relation to the loan, and that in various respects Mr Vaughan had acted negligently, in breach of his duty to Mr Dlakic, in relation to the advice given, and that it was that negligence which caused Mr Dlakic to enter into the Fetin loan, and so suffer the loss alleged.
Then, in pars 46-53 of his amended statement of claim, Mr Dlakic made a second professional negligence claim against Mr Vaughan in respect of a loan of $300,000 entered into by Mr Dlakic with Dr Peter Vince and his wife (the Vince loan). The amount of damages claimed was $714,000. Again, Mr Dlakic alleged that he entered into the loan, and arranged for securities to be given in respect of it, on the negligent advice of Mr Vaughan, who Mr Dlakic had retained to provide legal advice to him on the loan documentation.
In my view, it is entirely clear that the two professional negligence claims that Mr Dlakic made against Mr Vaughan were completely separate from all of the other claims that Mr Dlakic made. The two claims were very substantial, given that the total amount of damages claimed was $1,017,690.88. The evidence relevant to the professional negligence claims had very little bearing on the other claims for which Mr Dlakic succeeded, except perhaps to the extent that Mr Vaughan's conduct in relation to each of the claims had some significance to the findings concerning his credibility in relation to all of the claims.
The principal judgment deals with Mr Dlakic's negligence claim concerning the Vince loan at [178]-[240] of the principal judgment.
I concluded, at [204], that Mr Dlakic did not give any evidence that was capable of supporting a finding that he entered into a retainer agreement with Mr Vaughan in respect of this issue. I made observations, at [219], about the significance of the failure of Mr Dlakic to call his parents to give evidence. At [221], I stated my conclusion that I was unable to accept that Mr Dlakic simply received the bundle of documents, allowed Mr Vaughan to read them for 30 minutes and make the statements attributed to Mr Vaughan, and then took his parents to the office of Mr Tsolakis so that the documents could all be signed and witnessed, without either Mr Dlakic or his parents having any clue about the effect of the documents that they were signing. I found, at [233], that for a multitude of reasons stated in the judgment the evidence fell short of establishing either an implied retainer or a level of knowledge on Mr Vaughan's part that caused him to be subject to any duty of care towards Mr Dlakic.
Then, I found, particularly at [237], that Mr Dlakic had substantially overstated the damages that he claimed, because he would not be entitled to recover the $300,000 principal that he had borrowed. The reason was that Mr Dlakic had used the $300,000 to pay a debt that he already owed, so he was no worse off.
Consequently, the finding was that Mr Dlakic failed totally in his claim in relation to the Vince loan.
The Court dealt with Mr Dlakic's negligence claim concerning the Fetin loan at [298]-[325].
For comparable reasons to those relating to the claim based upon the Vince loan, I concluded at [321] that Mr Dlakic's negligence claim against Mr Vaughan concerning the Fetin loan should be dismissed.
For reasons set out at [322]-[325], I also concluded that Mr Dlakic had overstated his damages in respect of this claim.
While it would go too far to say that Mr Dlakic's professional negligence claims against Mr Vaughan were misconceived, he only had a very tenuous basis for the claims and that basis did not withstand any scrutiny upon the analysis of the evidence.
In these circumstances, I conclude that it would be unfair to Mr Vaughan to order him to pay Mr Dlakic's costs in respect of the two professional negligence claims. On the contrary, those claims were quite separate, and could have been run in separate proceedings. Mr Dlakic should pay Mr Vaughan's costs of the two claims on the ordinary basis.

[19]

Proposed orders

I propose to make the following orders, but will not make those orders now. I will give the parties leave to comment on the proposed orders by communicating with my Associate within three days of these reasons for judgment being delivered. The subject matter of any comments should be limited to any omissions that may be perceived, having regard to the reasons, and any improvements to the wording that may be suggested.
The proposed orders are as follows: 1. Grant leave to the Plaintiff to file a further amended statement of claim seeking an order setting aside the surrender of lease executed by the Plaintiff in favour of Davlite Pty Ltd on or about 1 July 2015, and any consequential relief sought by the Plaintiff. 2. Direct the Plaintiff to serve on the Defendant his draft further amended statement of claim and to deliver that draft to the Associate to Robb J within 10 days of the publication of this judgment. 3. Direct the Defendant to inform the Plaintiff and the Associate to Robb J within 3 days of receipt of the draft further amended statement of claim as to whether the Defendant consents to the filing of that draft, and, if not, the reasons why the Defendant declines to consent. 4. Grant leave to the Plaintiff to file a notice of motion and any supporting affidavits seeking an order joining Davlite Pty Ltd as a defendant to the proceedings, and any alternative order that the Plaintiff may be advised to seek in order to permit these proceedings to continue in the absence of a representative of Davlite Pty Ltd. 5. Direct the Plaintiff to serve on the Defendant the notice of motion and any supporting affidavits and to deliver the notice of motion and affidavits to the Associate to Robb J within 10 days of the publication of this judgment. 6. Grant leave to the Plaintiff to make the notice of motion returnable before Robb J for directions at a time to be arranged with the Associate to Robb J, as may be convenient to the Court and the parties. 7. Order that the Defendant be restrained, until further order of the Court, from destroying or removing from the premises of Johnston Vaughan or elsewhere, by himself or others engaged by him, any documents (physical and/or electronic) and things of or relating to the legal practice Johnston Vaughan. 8. Reserve the issue of whether the Defendant should be ordered to account to the Plaintiff for the net income of Johnston Vaughan for the period from 24 November 2014, or whether, alternatively, the Defendant should be ordered to pay equitable compensation to the Plaintiff, until the Court has determined whether to make an order setting aside the buyback agreement. 9. Order that the proceedings be referred to a referee, who is to be a qualified forensic accountant, as agreed between the parties within 10 days of the publication of this judgment or, failing such agreement, to be appointed as soon as reasonably practicable by the president of the Institute of Chartered Accountants in Australia, for determination of the amount for which the Defendant will be liable to account to the Plaintiff for the net income of Johnston Vaughan for the period from 24 November 2014 to the date of the report, if the Court makes an order that the Defendant account to the Plaintiff in that manner. This amount is to be a sum which fairly and equitably in all the circumstances is the best estimate of the likely net profit of the business of Johnston Vaughan over the relevant period, taking into account the accounts rendered, income received, genuine expenses, including expenses which were paid by the Plaintiff, and making an allowance to the Defendant for his work in that business as is reasonably appropriate for a solicitor performing the function of the sole principal of the practice. 10. Order that the referee be provided by each party with one (1) accounting report relating to the sum that that party contends ought to be paid on account; and the underlying source material which the Defendant has made available to the Plaintiff in the course of these proceedings. 11. Grant liberty to the parties and the referee to apply to the Court for advice and directions in relation to the conduct of the reference. 12. Grant liberty to the parties to apply in relation to the adoption of the referee's report. 13. Order the Defendant to pay the reasonable costs of the reference in the first instance, without prejudice to the right of the Defendant to require the costs of the reference to be assessed. 14. Direct the Australian Securities and Investments Commission to correct the register of members of Davlite Pty Ltd to show the Plaintiff as the holder of one (1) of the two (2) issued shares in that company. 15. Order the Defendant to make all reasonable attempts to produce to the Court the register of members of Davlite Pty Ltd within 10 days of the publication of this judgment. 16. Grant liberty to the Plaintiff to apply to have his name recorded in the register of members of Davlite Pty Ltd if such register is produced by the Defendant. 17. Order the Defendant to pay the Plaintiff's costs of these proceedings, other than the claims made by the Plaintiff for damages for professional negligence in respect of the loans made by Mr Fetin and Dr Vince pleaded in pars 34-45 and 46-53 respectively of the amended statement of claim (the professional negligence claims). 18. Order the Plaintiff to pay the Defendant's costs of the professional negligence claims. 19. Grant leave to the parties to apply to the Court if they wish to seek an order by the Court as to the total proportion of the Plaintiff's costs that the Defendant should be ordered to pay to the Plaintiff in lieu of Orders 17 and 18. 20. Notes the abandonment by the Defendant of the cross claim in proceedings 2016/368205, dismiss that cross claim, and order that the Defendant pay the Plaintiff's costs of the cross claim on the indemnity basis. 21. Notes the abandonment by the Plaintiff of the claim in proceedings 2016/321090, dismiss the claim, and order that the Plaintiff in that claim pay the Defendant's costs of the claim on the indemnity basis. 22. Grants liberty to the parties to apply on 3 days' notice by arrangement with the Associate to Robb J.

Amil Dlakic by his tutor Liliane Dlakic v Michael John Vaughan

At a glance

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Judgment (20 paragraphs)

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Legislation Cited (1)

Cases Cited (5)

Cited By (2)