Calvo v Ellimark Pty Ltd

The decision of the primary judge and the notice of appeal

1. The trial was heard over four days and involved many more issues than have been summarised above. Her Honour rejected a suite of challenges to Ellimark's 2009 Deed, and required the 12.5% parcel of shares to be transferred to it upon payment of $417,000. Her Honour declared the 2007 Deed void, as well as a mortgage and a share transfer obtained by Ms Johnson, but concluded that the 2007 costs agreements remained in force. Her Honour also found that Ms Johnson was not estopped from recovering fees for the services she had provided. The most convenient course will be to summarise her Honour's reasoning, in respect of each of those aspects mentioned above, when dealing with the relevant grounds of the appeal.
2. Reasons for judgment were delivered on 31 August 2015. Declarations and orders in the nature of specific performance were made on 22 October 2015. Mrs Calvo was ordered to pay Ellimark's costs, and most of Ms Johnson's costs. A stay pending appeal was refused, upon Ellimark undertaking not to sell or encumber the 1,250 shares.
3. Mrs Calvo's notice of appeal contains 29 grounds, but helpfully identified the four parts of the judgment challenged as follows: "a. Whether on the proper construction of the [2009 Deed] and the events which happened, the first respondent's rights under the [2009 Deed] lapsed [paragraphs 153 to 167 Judgment]; b. Whether the [2009 Deed] ought to be set aside under the Contracts Review Act 1980 [paragraphs 80 to 152 Judgment]; c. Whether the Costs Agreement between the second respondent (Ms Johnson) and Dr Calvo dated 14 May 2007 and the Costs Agreement between Ms Johnson and Mrs Calvo dated 14 May 2007 together with the [2007 Deed] constituted a contingency agreement within section 325 of the Legal Profession Act 2004 (NSW) which was prohibited by section 327(4) of the Legal Profession Act 2004 (NSW) [paragraphs 240 to 251 Judgment]; d. Whether Ms Johnson is estopped from claiming legal fees for work done in the [Sweeney proceedings] [paragraphs 252 to 264 Judgment]."
4. These reasons follow the approach indicated in that summary and adopted in oral submissions in addressing the four broad issues identified above, rather than the individual grounds of appeal.

Did Ellimark's rights under the 2009 Deed lapse (Grounds 1-7)?

1. The 2009 Deed is a short document between Dr Calvo and Ellimark which recited the shareholding of AIM, the fact that Dr Cavlo had commenced proceedings seeking the recovery of Mr Sweeney's shares and the intentions of Dr Calvo and Ellimark in relation to the ownership of AIM if Dr Calvo were successful. Its substantive terms were as follows: "The parties agree as follows: 1 Affirmation of Shareholders Agreement Dr Calvo affirms the Shareholders' Agreement as between himself and Ellimark and agrees that he will not challenge it or allow or assist anyone else to do. 2 Ownership of AIM (a) If Dr Calvo is successful in obtaining the return of Bill's shares to him or a court order for Bill to return those shares to him, he agrees to sell 12.5% of the total shares in AIM to Ellimark, with the intention that Dr Calvo and Ellimark will each hold 50% of the shares in AIM for a price calculated in accordance with clause 2(c). (b) Ellimark may, but is not obliged to, purchase those shares in AIM. If, after the price is determined, it does not want to purchase the shares, it must give written notice to Dr Calvo. (c) The price will be 12.5% of the valuation of AIM in accordance with the following conditions: (i) the valuation will be carried out by a valuer who has been a member of the appropriate professional organisation for at least 7 years and has at least 7 years' experience in valuing businesses similar to this business; (ii) the valuation will be based on the 2008 accounts for AIM; and (iii) both parties must agree on the valuer and if they cannot agree, then they must make a joint request to the President of the Australian Property Institute (or his nominee) to appoint a valuer with the qualifications in this clause. (d) The parties must act in good faith and do everything reasonably necessary to give effect to this deed. (e) The appointment of the valuer must take place promptly after the earlier of Dr Calvo obtaining the return of Bill's shares to him or a court order requiring Bill to return those shares."
2. The Calvos submitted that correspondence from the solicitors acting for Ellimark in 2011, in particular, correspondence dated 16 May and 21 September 2011, disentitled Ellimark from exercising any right it had to require the transfer to it of 12.5% of the shares for a price of $417,000. In order to assess the legal effect of the correspondence on which the Calvos relied, it is first necessary to construe the 2009 Deed.
3. The Calvos characterised the Deed as being in the nature of an option, entitling but not obliging Ellimark to acquire 12.5% of the shares in AIM at a price determined by a valuation. The Calvos accepted that it was open to Ellimark to seek to negotiate the acquisition of those shares at a different price, dehors the Deed, but submitted that doing so amounted to a communication that Ellimark did not "want" to purchase the shares. The Calvos submitted that the state of mind envisaged by cl 2(b) was not a state of mind of wanting to purchase the shares in AIM at any price, but to purchase the shares in AIM at the price determined by the valuation.
4. The essence of Ellimark's submission was that there was an obligation on it, upon receipt of a valuation in accordance with cl 2(c), to give a written notice to Dr Calvo, within a reasonable time, in the event that it did not want to purchase the shares, in the absence of which its rights to purchase the shares remained available. Indeed, Ellimark submitted that if it had not provided written notice that it did not want to purchase the shares, then it became under an obligation to purchase them.

Construction of the 2009 Deed

1. The following uncontroversial matters may be noted concerning the 2009 Deed. First, the Deed is conditional on Dr Calvo obtaining either the 37.5% shares owned by Mr Sweeney, or a court order to that effect. Its premise is thus that Dr Calvo is or is entitled to become the legal owner of 62.5% of the shares in AIM. Secondly, the right given to Ellimark is one which, if exercised, would yield two equal shareholders of AIM. Thirdly, Ellimark's right is contingent upon there being a valuation of AIM, carried out in accordance with cl 2(c). Fourthly, Ellimark also is subject to an obligation, namely, that it must give written notice to Dr Calvo if it does not want to purchase the shares after the price is determined.
2. I turn now to two matters of construction which were more controversial, and more important to the resolution of this aspect of the appeal.
3. First, as noted above, at the forefront of the Calvos' submissions on appeal was the proposition that it was meaningless to speak merely of Ellimark wanting to purchase the shares at any price, or at an unspecified price, and that cl 2(b) was to be read as if it provided: "Ellimark may, but is not obliged to, purchase those shares in AIM. If, after the price is determined, it does not want to purchase the shares at that price, it must give written notice to Dr Calvo."
4. I agree. I do not regard this as amounting to the implication of a term, but rather the natural meaning of cl 2(b) read in its context. In State of Victoria v Tatts Group Ltd [2016] HCA 5; 90 ALJR 392 at [51]-[76], the High Court construed a contract by having regard to the text, context and purpose (doing so without requiring any ambiguity to be present before turning to context and purpose). I follow the same approach.
5. As a matter of ordinary English, as well as ordinary commerce, Ellimark's mental state of not wanting to purchase the shares is to be read as not wanting to purchase the shares at a particular price, namely, the price which has been determined, reference to which is made immediately before the words "it does not want to purchase the shares".
6. The word "purchase" occurs twice in the clause, both before and after the words "after the price is determined". Ellimark's entitlement to purchase, and the absence of any obligation to purchase, only makes sense if the purchase is at the price determined by the valuation. Likewise, Ellimark's obligation to give written notice only makes sense if it is by reference to the price determined by the valuation.
7. The context supports that conclusion. The context is that Dr Calvo is (or is entitled to become) one of precisely two members of a company who are precluded from transferring shares without first offering them to existing members. The written notice from the only other member of AIM would release Dr Calvo from his obligation to sell that parcel of shares to Ellimark at the price determined by the valuation, and would entitle him to transfer the parcel of shares at that price to a third party investor.
8. The second matter of construction is that although it is plain that the obligation upon Ellimark to provide written notice cannot arise until the price is determined, the Deed does not specify any time period for Ellimark to make up its mind. Nor does it specify any time period within which, having made up its mind, Ellimark must provide written notice to Dr Calvo. However, I did not understand it to be controversial that obligations to do so within a reasonable time would be implied. Dixon J said in Reid v Moreland Timber Co Pty Ltd (1946) 73 CLR 1 at 13 that "[a]n implication of a reasonable time when none is expressly limited is, in general, to be made unless there are indications to the contrary"; see also the decisions mentioned by Ward JA in Gray t/as Clarence Valley Plumbing Services v Ware Building Pty Ltd [2013] NSWCA 271 at [47]. There are no indications to the contrary in the 2009 Deed.
9. In light of the way the appeal was argued, two potentially complex aspects relating to this aspect of the dispute may be put to one side. 1. The first is how long, in the circumstances obtaining after April 2011, was a reasonable time before Ellimark became obliged to give notice that it did not want to acquire the shares? There are suggestions in the Deed that the parties regarded the position as involving a degree of urgency. The valuer was required to be appointed "promptly", and the trigger for doing so was not merely Dr Calvo obtaining the return of the shares, but also obtaining a court order requiring Mr Sweeney to do so. Further, Ellimark had been a shareholder of AIM for many years, and it had had the draft BDO report for many months before it was finalised. Against that, it is relevant by April 2011 to observe that almost two years had passed since White J's order. Moreover, the uncertainty regarding the not for profit status of AIM was a matter which informed whether a reasonable time had elapsed. A further factor was the death of Dr Calvo on 17 June 2011. 2. The second is whether a time might come whereupon the Calvos were no longer bound to sell the 12.5% parcel of shares to Ellimark by reason of the mere effluxion of time (that is to say, in circumstances where Ellimark had neither indicated a wish to purchase the shares in AIM at the price so determined, nor given written notice that it did not want to do so). On this latter question, the parties advanced competing submissions: the Calvos said that the right to purchase would lapse, while Ellimark said that a failure to "opt out" would mean that Ellimark was bound to proceed to acquire the shares.
10. The reason it is unnecessary to analyse those matters is that this issue in the appeal turned upon the legal consequences of Ellimark's solicitors' correspondence dated 16 May and 21 September 2011, and it was not put by Ellimark that, by those times (around 5 weeks and 5 months respectively) a reasonable time had not elapsed since the valuation had been finalised.

The correspondence of 16 May 2011 and 21 September 2011

1. In order to consider the legal effect of the letter dated 16 May 2011, it is sufficient to summarise the preceding correspondence starting from 7 April 2011. Following the finalisation of BDO's valuation, the Calvos' solicitors sent two letters dated 7 April 2011 to Ellimark's accountants. The first advised that the Calvos were "prepared to accept the mid range valuation as the value of 12.5% of the shares in AIM namely the sum of $417,000.00", and proposed a regime for payment in two tranches, from the first of which would be off-set the Calvos' outstanding indebtedness. The letter asked for a response as soon as possible.
2. However, later on the same day, the Calvos' solicitors were instructed to withdraw the offer contained in the letter sent earlier that day, on the basis that because AIM had in fact been a "for-profit" organisation since about October 2007, the valuation was inaccurate. Three weeks later, by letter dated 28 April 2011, Ellimark's solicitors responded to earlier correspondence from March 2011, referring to an agreement between Mrs Calvo and Mr Ronen as to the sale of the shares, and insisted that the outstanding indebtedness (then slightly more than $160,000) be repaid within 14 days. The letter stated that Mr Ronen withdrew his suggestion that the amount be off-set against the amount payable by Ellimark to acquire the parcel of shares.
3. By letter dated 2 May 2011, the Calvos' solicitors enclosed copies of the more recent correspondence, reiterated their reliance upon a suggestion that the repayment of the loan be set off against the amount to be paid for the shares, stated that the valuation "values the shares to be purchased at $417,000" and concluded: "Our clients continue to offer to resolve the settlement of the discharge of mortgage and purchase of shares on the basis set out in our letter to [Ellimark's accountants] dated 7 April 2011. Our clients require settlement to occur on or before 12 May 2011."
4. Ellimark's solicitors' letter dated 16 May 2011 responded to the Calvos' renewed offer to sell the shares at $417,000. The response was relevantly in the following terms: "Mr Ronen cannot continue to be a 'bank' for Dr and Mrs Calvo. Circumstances in relation to the Institute have changed significantly over the past few years. The valuation of the Institute was made on the basis of an assumption that has proved to be incorrect. This was the assumption that the Institute would become a profit making entity in the year 2012. The Board of the Institute has discovered that the Institute is in fact currently a profit making entity and has resolved to apply to the Tax Office for the reinstatement of its not for profit status on an urgent basis. It is necessary to do this to ensure that tax and grants it has received as a result of its supposed not for profit status [do] not need to be paid/repaid. We understand that the amount that would need to be repaid if the not for profit status is not reinstated is in the millions of dollars. The Institute has received advice that it will need to maintain its not for profit status for a further 5 years from the date the conversion back to the not for profit status is advised to them. Accordingly, it is unlikely that the Institute will become a profit making entity before 2016 or 2017. The valuation provides for a significant discount - 11% per annum to the valuation of the Institute for each year it remains a non profit organisation. Accordingly, the current valuation is inaccurate. If the discount were applied, the value of the shares is reduced to the amount that Mr Ronen and Mrs Calvo had agreed he would pay, being $350,000. The value of the shares may even be less than that amount. Mr Ronen had agreed with Mrs Calvo to pay $350,000 for the shares as set out in our earlier letter to you. Mrs Calvo then retracted that agreement by way of your letter to Hurwitz Geller. It is difficult to negotiate with people when agreements are reached and then retracted. We note there is also a risk that the not for profit status of the Institute will not be reinstated in which case significant debts would need to be repaid. This also impacts on the value of the Institute. The tax status of the Institute remains uncertain and will do so for some time to come. Mr Ronen remains happy to purchase the shares, but will to [sic] discuss it at a future time. Currently Mr Ronen requires the loan to be repaid and for full interest to be paid. If the loan is not repaid, as requested, Mr Ronen will take legal steps to obtain the repayment of the loan."
5. As is obvious from its terms, part of the context in which that letter was sent was Mr Ronen's demand for immediate repayment of the amount lent to fund the Sweeney proceedings. Although that letter refers to a number of issues, the matters of present relevance are (a) the reference to an earlier informal agreement between Mr Ronen and Mrs Calvo to sell the shares for $350,000 from which Mrs Calvo had walked away, (b) the difficulties in relation to what had recently emerged as to the change of not for profit status of AIM, (c) the statement that the valuation was inaccurate because it was based on an incorrect assumption (as to AIM's not for profit status) and (d) the statement that "Mr Ronen remains happy to purchase the shares, but will to discuss it at a future time".
6. It may be seen that on the one hand, the letter communicates a willingness to buy the parcel of shares ("Mr Ronen remains happy to purchase the shares"). On the other hand, that willingness is doubly qualified. Read in its context, Ellimark was not willing to buy the shares at $417,000, for it amounted to a rejection of the Calvos' offer initially made on 7 April, withdrawn later that day, but then renewed on 2 May 2011, to sell at the determined price of $417,000. Ellimark was also not presently willing to buy the shares; rather, Mr Ronen would "discuss it at a future time".
7. The email of 21 September 2011 is clearer. In its entirety, the email (from Ellimark's solicitor to the solicitor acting for the Calvos) was as follows: "Dear Stephen, I refer to Mrs Calvo and Ellimark's continuing negotiations in relation to the purchase of additional shares in AIM by Ellimark. Ellimark has previously offered $350,000 for the additional shareholding. The matter has continued unresolved for some time. Ellimark would like to resolve the matter and so offers to pay $400,000 for a shareholding of an additional 12.5% in AIM. We look forward to the receipt of your response."

The reasons of the primary judge

1. The primary judge characterised the correspondence of 16 May and 21 September in substantially the same terms. In each case, her Honour was not satisfied that the correspondence constituted notice that Ellimark did not want to purchase the shares: see at [159] and [162].
2. I respectfully disagree that is sufficient to answer the questions posed by the Deed. The question fell to be determined against the admitted fact in the litigation that "[o]n or around 7 April 2011, the price for the shares agreed to be sold by Dr Calvo pursuant to the Deed was determined to be $417,000" (paragraph 11 of the amended statement of claim, which was admitted in the defence). The question posed by cl 2(b) was whether Ellimark did not want to purchase the shares at a price of $417,000.
3. True it is that, at the time, and especially in May 2011, there was considerable uncertainty between the parties as to whether the valuation prepared by BDO determined the value of AIM for the purposes of cl 2(c). However, by the time Ellimark commenced proceedings, it accepted that the BDO valuation had produced a valuation which triggered its entitlement to purchase shares in AIM. The same was true of the Calvos. This had occurred in a formal way in the pleadings in the proceedings. Nor was this merely a "pleading point". To the contrary, an essential premise of Ellimark's claim to be entitled to an order for specific performance was that the 7 April 2011 valuation was a valuation in accordance with cl 2(c) which was sufficient to trigger an entitlement to acquire the shares for $417,000.

Ellimark's submissions

1. Ellimark advanced a series of submissions against the conclusion that its correspondence triggered cl 2(b) of the 2009 Deed. The first was that the agreement of the parties for the purpose of the litigation commenced in 2013 could not alter the objective character of the correspondence at the time it was written in May and September 2011. The latter fell, so it was said, to be determined on its own terms, and in light of the fact that there was an obvious dispute in April 2011 as to whether the valuation had proceeded on an incorrect basis. As it was put orally: "The question is whether the letters were 2(b) notices, and that is a question, we submit, which has got to be answered by reference to the terms of the letters themselves and the context in 2011. We may have been wrong in May when we said that wasn't a valid valuation, but that doesn't change the proper construction of our letter."
2. Attractively as the submission was put, I cannot agree with it. The issue for determination was whether, in light of the correspondence of May and September 2011, Ellimark was disentitled from suing on the 2009 Deed for specific performance of the obligation to transfer the shares. In order to determine that issue, the threshold question is whether there had been a valuation in accordance with cl 2(c). It is quite plain that the making of offers prior to 7 April 2011, when there was merely a draft valuation in existence, could not jeopardise Ellimark's rights under the clause, for Ellimark had no right to purchase the shares until a valuation had been made. That suffices to demonstrate that the legal character of Ellimark's correspondence turns not merely upon the correspondence themselves, but also upon the context in which they were written, including in particular whether they were written at a time when a valuation in accordance with cl 2(c) had been performed.
3. The state of the pleadings means that the position must be assessed on the basis that after 7 April 2011, the 12.5% parcel of shares in AIM had been valued at $417,000 for the purposes of cl 2(c). To reiterate, this is not merely a consequence of an allegation in Ellimark's pleadings admitted by the Calvos. An essential element of Ellimark's case was that it had an entitlement to acquire the shares compulsorily at $417,000, and (so far as the evidence revealed) that entitlement could have arisen at no time later than the finalisation of the valuation (there was nothing to suggest that some later valuation had been prepared). Senior Counsel for Ellimark was right to accept that "it [was] an agreed fact that the valuation was valid, or the price was validly determined, in April".
4. Secondly, Ellimark submitted that the Calvos had themselves been making offers inconsistent with the 2009 Deed. The letter of 16 May 2011 referred to an earlier oral agreement to pay $350,000, from which Mrs Calvo had backed away. The Calvos' solicitor had sent two letters on 7 April 2011, one making an offer based on a sale price of $417,000, the latter withdrawing the offer. In September 2011, Mrs Calvo mentioned a figure of $500,000.
5. Ellimark submitted that, against that background, a reasonable bystander would conclude that (a) Ellimark wished to acquire the 12.5% shareholding, (b) there was a dispute concerning the validity of the valuation and (c) "without either party giving up its rights under the Deed, the parties were negotiating outside its four corners in an attempt to reach an agreement on price". It follows that, so it was put, the letter and email were not notices engaging cl 2(b).
6. I agree that the question is to be determined objectively, but that is the extent to which I can accept this submission. As for (a), what matters is not that Ellimark maintained that it wished to purchase the shares (albeit at a lower price than was on offer), but (as noted at [67] above) that Ellimark made it clear that it did not at that time want to purchase the shares for $417,000. To be sure, the context to which Ellimark pointed, reflecting a series of offers and counter-offers, was at no stage expressed in terms of a "final offer", and thus it might be thought that an offer by Ellimark to purchase at a lower price was not necessarily inconsistent with Ellimark wanting (or at least being prepared) to purchase at a higher price. However, I do not consider that such considerations are relevant. Ellimark had what amounted to an option to call for the parcel of shares for $417,000, and the Calvos were themselves prevented by AIM's Shareholders Agreement from dealing with the shares without first offering them to Ellimark. The question posed by cl 2(b) was whether the correspondence of 16 May and 21 September 2011 evinced an intention not to purchase the shares at the price determined by the valuation, rather than whether Ellimark had (notwithstanding the offers contained in that correspondence) an uncommunicated preparedness to purchase at that price in the event that the Calvos would not accept a lower offer.
7. In other words, the context (namely, that cl 2(b) of the 2009 Deed was enlivened following the valuation being finalised) meant that the correspondence could not be equated to regular commercial negotiations, in which making an offer does not necessarily convey a refusal to purchase at a different price.
8. As for (b), although plainly there was a dispute about the correctness of the valuation, the nature of Ellimark's correspondence falls to be determined on the agreed basis that Ellimark was wrong in April and September 2011 to believe that the valuation was invalid.
9. As for (c), it is of course ordinarily open to the parties to agree to such a course (by making offers without prejudice to their contractual rights, or, where time matters, by what is commonly known as a "standstill agreement"). It will usually be wise for such an agreement to be written, or at the least, express, in order to avoid later disputes. There was no suggestion in the evidence of any express agreement to that effect; as it was put in oral submissions, "nobody uttered the magic words without prejudice". I see no reason for an agreement to be implied. The evidence records the parties negotiating irrespective of, and inconsistently with, their rights as provided by the 2009 Deed. There is a vital distinction between the ordinary negotiations between vendor and purchaser as to the price of a consensual sale, and the situation when a person has a right to acquire by compulsion at a particular price.
10. On many occasions, it is not necessary for the parties wishing to negotiate to ensure that their communications are without prejudice to existing contractual rights. However, where as here the valuation had been finalised and, accordingly, Ellimark's rights were "delicate" (as it was put by the Calvos in oral submissions in reply) I consider that it was essential for it to be made clear that a written offer to buy the shares at a price less than $417,000 did not amount to written notice that Ellimark did not want to buy the shares at that price.
11. Thirdly, it was submitted that the offer of $400,000 made in the 21 September 2011 email was within the range of values contained in the BDO valuation, and could not for that reason be considered to be written notice of not wanting to purchase the shares within the meaning of cl 2(b). I cannot agree. In order for a promise to sell to be binding, let alone specifically enforceable, it is necessary for the price to be defined. The 2009 Deed required the valuation to determine the price. The parties have litigated on the basis that the BDO valuation did determine a price, of $417,000. As much was express on the face of Ellimark's originating process. What matters is not whether the correspondence evinced an intention not to purchase at a price within a range, but whether it evinced an intention not to purchase at the price determined by the valuation.
12. In summary, the position was as follows. By September 2011, five months had elapsed since a final valuation for the purposes of the 2009 Deed had been obtained. The analysis must proceed on the basis that that valuation was valid, notwithstanding doubts were held about this on both sides at the time. Although allowance is to be made for time to consider the valuation and its implications, for Dr Calvo's death, and for the relatively slow pace at which the parties had proceeded following the Calvos' success against Mr Sweeney, I would conclude that on any view of the matter, five months was a reasonable time for Ellimark to have formed a view whether it wanted to purchase the shares for $417,000 or not. But Ellimark unequivocally maintained, by its email of 21 September 2011, five and a half months after the valuation had been finalised, that it did not wish compulsorily to purchase the shares at $417,000. To the contrary, it was still seeking to bargain consensually for a lower price. I consider that the email engages cl 2(b).
13. The position would be more finely balanced if this issue turned on the letter of 16 May 2011, a little more than a month after the valuation. But even so, Ellimark did not submit that by 16 May 2011 it had not had sufficient to time to evaluate the position. Accordingly, I consider that that letter would, for the reasons outlined above, also engage cl 2(b). That letter also unequivocally rejected the Calvos' offer to sell at $417,000.
14. Once notice engaging cl 2(b) had been given, Ellimark was no longer able to compel the transfer of the Calvos' shares.
15. I would allow the appeal on this ground, set aside the orders made by the Court at first instance in the nature of specific performance, and order that Ellimark transfer the shares to the Calvos. Mrs Calvo will need to refund the $417,000 she has been paid.

Contracts Review Act (Grounds 8-26)

1. Although these 19 grounds of appeal were directed, in a variety of ways, to challenging the conclusion by the primary judge that the 2009 Deed was not liable to be set aside under the Contracts Review Act, the Calvos' written submissions in reply and oral submissions adopted a more refined approach. Ellimark's oral response was similarly confined. In light of the fact that these grounds fall away by reason of what has already been said, I propose to follow the approach taken in the appellant's submissions in reply and orally, as well as by Ellimark, and restrict my reasons to the matters which may be taken to reflect what the appellants perceived as their strongest basis for success in relation to the Contracts Review Act.
2. It suffices to give a simplified summary of the position at the end of 2008. First, there had been a mediation between the parties in mid-November 2008, during the course of which it was suggested that Mr Conti would not appear at the trial, which had been set down for hearing from 9 February 2009, unless funds were made available. A letter dated 2 December 2008 from Mr Ronen's solicitor to Mr Conti recorded her understanding that some $285,000-$300,000 was required, the major component of which was Mr Conti having some $100,000 of unpaid fees and estimating that his additional fees to complete the trial would be $100,000.
3. Secondly, it was at some stage proposed that Mr Ronen would lend an additional $100,000, secured by a second mortgage, on terms that the Calvos would grant him the right to acquire 12.5% of AIM in the event that they succeeded against Mr Sweeney.
4. Thirdly, although Ms Johnson advised that she was willing to run the trial, she advised against that course, and it seems to have been accepted on all sides that an experienced commercial litigator was appropriate. After all, a "town agent" had been retained because the litigation was different from that in which Ms Johnson was ordinarily involved. Her evidence was that "most of my work is done in the area of criminal law. I really don't do much commercial work".
5. Fourthly, it was not until the beginning of the trial that the 2009 Deed was executed. At that time, the Calvos had no alternative apart from accepting any offer available from Mr Sweeney, or else calling their barrister's bluff that he would cease to appear.
6. In those circumstances, the Calvos submitted that any competent solicitor acting for the Calvos would have made enquiries to see if a barrister would accept the brief to run the hearing either pro bono or on a speculative basis. There was, so it was said, a real chance that, had such enquiries been made in late November or December 2008, such a barrister would have been found. In those circumstances, the Calvos would have had an additional option which might well have been less unpalatable than acceding to Mr Sweeney or entering the 2009 Deed and thereby permitting Ellimark to become an equal shareholder of AIM (such an option might also have provided leverage to negotiate with Ellimark).
7. The Calvos were at pains to acknowledge that there was nothing substantively unfair or unjust in the 2009 Deed and the offer of finance made by Ellimark. They accepted the primary judge's finding that Dr Calvo understood the essence of the transaction in the 2009 Deed, and that neither Ellimark nor Mr Ronen had pursued the transaction, but rather that Mr Ronen was approached by the Calvos' solicitor, to assist in a predicament which arose through no fault of Mr Ronen. They accepted that the Deed was a legitimate arrangement, responding to Ellimark's concern that if the Calvos succeeded, they would have an absolute majority of the shares in an unlisted company, and it would be "trapped" as a minority shareholder. Notwithstanding the limited options faced by the Calvos, the finance given by Ellimark was at ordinary commercial rates, and the sale of 12.5% of the shares in AIM was at a value reflected in the 2008 accounts (although it did not include any premium for control).
8. The Calvos were right to accept that the 2009 Deed was not substantively unjust or unfair.
9. The Calvos' essential submission was that it was unfair for Dr Calvo to be placed in a position in February 2009 where he had no practicable alternative other than to execute the 2009 Deed when any competent solicitor would have made those inquiries, even though the 2009 Deed was substantively fair, and even though Ellimark was not the source of the unfairness under which the Calvos laboured in February 2009. The appellants acknowledged that those matters were relevant to the exercise of discretion under the Contracts Review Act, but, so it was said, they were not determinative either at the evaluative stage of determining whether a contract was unjust, or at the discretionary stage of making orders.
10. The submission summarised above had the advantage that it entitled the Calvos to submit that the unfairness brought about by Ms Johnson's failure in November and December 2008 was something which had not been considered by the primary judge, and did not involve overturning any findings of primary fact. The reason for this, it may be inferred, is that a quite different emphasis was given on appeal than at trial (where especial weight was given to Dr Calvo's declining health). However, no complaint was made that the different focus was outside the pleadings or unduly departed from the way the case had been run at first instance.
11. I do not consider that the 2009 Deed was unjust. In reaching that conclusion, it is necessary to have regard to the totality of relevant circumstances: Provident Capital Ltd v Papa [2013] NSWCA 36; 84 NSWLR 231 at [7]. It was common ground that the 2009 Deed was substantively fair. From the perspective of Dr Calvo, it enabled him to continue to deal with a lender with whom he had had considerable experience. Although the Deed produced a position whereby he might never obtain a majority shareholding in AIM, he was at the time he entered the Deed only a minority shareholder, and the valuation mechanism contained in the Deed was not one which was demonstrably unfair.
12. The point of the Calvos' submission based on procedural unfairness was that it denied them a real chance of a viable alternative. I do not agree. My disagreement is not based upon the absence of evidence of other counsel being available, or the absence of evidence that the Calvos would have chosen to retain fresh counsel and dispense with Mr Conti, but upon a closer analysis of the consequences of that alternative, in accordance with what was pointed out by Ellimark in submissions. For the reasons which follow, I do not accept that the Calvos were denied any real chance of an alternative which would have led to any better ultimate outcome.
13. Let it be assumed (despite the absence of any evidence) that some counsel other than Mr Conti were available to appear at trial, and that the Calvos were prepared to retain that counsel and release Mr Conti. Suppose further that the new counsel succeeded and obtained a favourable costs order. It is very much to be doubted that counsel would appear on a basis where their remuneration was confined to what might be obtained as a result of such a costs order. For one thing, the premise of the proceedings was that Mr Sweeney had failed to pay the Calvos for the shares; and any costs order against him might turn out to be valueless. For another, counsel accepting a conditional brief on the terms hypothesised by the Calvos in November or December 2008 would be entitled to charge an uplift on their ordinary fees. For a third, it would be difficult to conceal the fact that Mr Conti claimed to be owed $100,000.
14. But even if all of those matters were allowed, favourably to the scenario contemplated in this aspect of the Calvos' appeal, there would still have remained the outstanding question of Mr Conti's and the "town agent's" unpaid costs. How was that sum to be repaid? The only substantial asset the Calvos owned was the parcel of shares. It is far from clear to me that, even making all of those assumptions favourable to them, the Calvos would ever have been able to retain 62.5% of the shares in AIM. If it were necessary to sell some or all of those shares, then, of course, Ellimark (which enjoyed pre-emptive rights) would have to be offered shares first.
15. I am prepared to accept that there may be circumstances where significant procedural unfairness leads to the conclusion that a transaction which is substantively fair is nevertheless unjust in the circumstances so as to engage s 7 of the Contracts Review Act. McHugh JA recognised as much in West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 620, as did Gleeson JA in Canty v PaperlinX Australia Pty Ltd [2014] NSWCA 309 at [119]. But I do not accept that this appeal is an example of such a case. I am of that view because the 2009 Deed (coupled with the additional loan) was not on the borderline of what was substantively fair. It was indeed in many respects a generous transaction, from the point of view of the Calvos, so much so that I cannot readily contemplate realistic circumstances in which it would have been bettered. Thus even if Ms Johnson had taken the steps which it was submitted should have been taken, it has not been shown that the Calvos had any viable alternative which would produce any materially better result for them. In those circumstances, even if there were some measure of procedural injustice, the transaction which eventuated is not one which can be regarded as unjust.
16. I would dismiss these grounds of appeal.

The claims against Ms Johnson (grounds 27, 28 and 29)

1. By the third cross-claim, which was only filed in the week prior to the final hearing, the Calvos advanced claims that the 2007 Deed was contrary to the Legal Profession Act and that Ms Johnson was estopped from recovering legal costs in respect of work performed in the proceedings.
2. Before addressing those claims, something should first be said about the way in which they arose so late in the day. The litigation had commenced in 2013 and Ms Johnson had been joined in 2014. Amongst other issues, the Calvos sought to set aside a transfer of shares in AIM in favour of Ms Johnson. The primary judge set aside that transfer and it is outside the scope of this appeal.
3. The issues at trial expanded because by letter dated 17 March 2015, which was received by the Calvos on 24 March 2015, a solicitor stated that he acted for Ms Johnson and provided a bill of costs and disbursements in the amount of $2,289,248.54.
4. There is much concerning that bill which is of concern. 1. The bill was said to relate to work done between 1 January 2007 and 17 May 2010, with the bulk of it having been performed more than six years prior to the service of the bill. (The trial before White J had concluded in February 2009, more than six years earlier.) 2. The bill was not accompanied by the notifications required by s 333(1) of the Legal Profession Act (including the right to assessment, the right to apply to set aside the costs agreement, and the right to apply for a mediation). 3. Although styled as a tax invoice, the bill appears to contain no amounts of GST at all. Since most of the calculations are based upon an hourly rate of $500 per hour, it would appear to be exclusive of GST, and so on one view the bill reflects charges of in excess of $2.5 million. 4. The spreadsheet listing the billed items includes a total of $2,442,969.54, some $175,000 more than the so called tax invoice or the covering letter. 5. There is no reference to the $55,000 already paid by the Calvos. 6. The bill includes numerous items, billed at Ms Johnson's agreed rate of $500 per hour, totalling over 24 hours on the same day. For example, on 9 February 2009, items billed at $500 per hour total 27.6 hours, on 10 February 2009, items billed at $500 per hour total 25.1 hours, and on 11 February 2009, items billed at $500 per hour total 24.3 hours. There is nothing to suggest that any lawyer other than Ms Johnson was charging $500 per hour on those days. 7. Individual items on the bill include entries such as "Searching LegalLink for confirmation of listing" for 90 minutes, totalling $750, and "Checking Supreme Court website for confirmation of listing" for 30 minutes, totalling $250. 8. As will be seen by reference to what the costs assessor determined to be fair and reasonable, the amounts appear to be out of all proportion with amounts that could properly be charged.
5. The service of that bill of costs some seven weeks prior to the proceedings going to trial led to the Calvos filing the third cross-claim. The claim was litigated without Ms Johnson being required to file a defence, on the basis that all allegations were in issue. The primary judge rejected an application made by senior counsel then appearing for Ms Johnson to sever the third cross-claim and the correctness of that decision was outside the scope of the appeal.
6. That may perhaps explain why there were some gaps in the evidence relating to the claim that Ms Johnson was estopped from recovering fees from the Calvos.
7. The issues arising on appeal are, once again, narrower than those debated at trial. Grounds 27 and 28 dealt with whether Ms Johnson's costs agreements and the 2007 Deed complied with the Legal Profession Act, and ground 29 dealt with the Calvos' claim that Ms Johnson was estopped from recovering fees from her former clients. It is convenient to deal first with estoppel.

Factual background relating to Ms Johnson's fees

1. Following obtaining a costs order in the Calvos' favour in the Sweeney proceedings and the abandonment of Mr Sweeney's appeal, the solicitors acting for the Calvos repeatedly wrote requesting tax invoices for amounts they claimed had been paid to Ms Johnson and for any additional fees that were owed. On 14 and 21 April 2010, they advised that they were instructed that Ms Johnson had been paid a total of $55,000 (in the latter letter, details of four payments were provided). In both letters, they advised that "our clients are more than happy to pay your client a reasonable sum for any further fees claimed on receipt of an itemised bill of costs", or words to that effect. They requested copies of tax invoices relating to the payments made, and the provision of any further tax invoices which remained unpaid or a confirmation that Ms Johnson had been paid in full.
2. There was a response from solicitors acting for Ms Johnson dated 22 April 2010, to which it will be necessary to return, which did not respond to the requests for an itemised bill of costs and copies of tax invoices.
3. By letter dated 28 April 2010, the solicitors reiterated that the Calvos were willing to pay Ms Johnson's reasonable professional costs upon receipt of an itemised bill. They "again request itemised tax invoices for those payments already made to your client so that our client can proceed to an assessment of costs to recover these amounts from Sweeney."
4. There was not in evidence any response to the further request by letter dated 28 April 2010.
5. The solicitors acting for the Calvos renewed their request by letter dated 21 July 2010. They stated that legal costers had been retained to prepare a bill of costs to apply for an assessment of party/party costs in the Sweeney proceedings. They asserted that the Calvos were entitled to receive an itemised bill, and required an itemised tax invoice and all files held by Ms Johnson relating to the Supreme Court proceedings. They threatened referring Ms Johnson to the Legal Services Commissioner for breaches of the Legal Profession Act.
6. By letter dated 23 August 2010, the Calvos' solicitors stated that they had received no reply to their letter dated 21 July 2010 and noted a telephone conversation when the solicitor acting for Ms Johnson stated that the letter had been forwarded to Ms Johnson but the solicitor had not heard from her. The letter advised that a complaint would be made to the Legal Services Commissioner.
7. At all relevant times, s 332A of the Legal Profession Act required Ms Johnson's law practice to provide an itemised bill within 21 days of being requested to do so.
8. What (if anything) happened in the balance of 2010 is not explained by the evidence. The reasons of the costs assessor disclose that an application for assessment was made on 1 February 2011, and referred to a costs assessor on 17 February 2011. Neither the application nor the itemised bill of costs which would have accompanied it was in evidence. It is plain from what was in evidence that Mr Sweeney's solicitors had served a notice of objection of 55 pages, to which the Calvos' solicitors supplied a response of 20 pages. Relevantly for present purposes, the costs assessor, Ms Dulhunty, issued a notice dated 17 March 2011 to Ms Johnson under s 358 of the Legal Profession Act, directing her to produce copies of the tax invoices in respect of the fees paid to her by the Calvos by 1 April 2011. Failure to comply with such a notice is an offence. Ms Dulhunty advised that if Ms Johnson failed to produce the tax invoices by 1 April 2011, she would refer her to the Office of the Legal Services Commissioner for consideration as to the disciplinary action to be taken against her for professional misconduct, and to take whatever steps were necessary to refund the fees paid to her by the Calvos.
9. On 5 May 2011, Ms Dulhunty wrote to the solicitors acting for the Calvos advising that "I have received no response whatsoever to my letter to [Ms Johnson] dated 17 March 2011." That produced a response, dated 10 May 2011, from the Calvos' solicitors requesting that further action be taken by Ms Dulhunty to obtain the tax invoices from Ms Johnson.
10. The lawyers acting for Mr Sweeney were copied into the correspondence. They wrote on 13 May 2011 that: "The Costs Respondent submits that it would be a clear breach of the indemnity principle for the Costs Applicants to be awarded any costs in relation to Ms Johnson's work in circumstances in which they have grounds to seek, and may ultimately obtain, a refund of some or all of the moneys paid to her. Therefore, it is submitted that no costs of Ms Johnson should be allowed by you."
11. By letter dated 18 May 2011 the Calvos' solicitors invited Ms Dulhunty to take steps to obtain tax invoices from Ms Johnson and to proceed with the costs assessment including Ms Johnson's fees, but added: "In the event that you do take steps to obtain Ms Johnson's tax invoices, we are instructed to request that the assessment proceed excluding Ms Johnson's fees until those tax invoices are to hand and that an interim certificate of determination be issued until Ms Johnson provides her tax invoices."
12. The reference to the Office of the Legal Services Commissioner which had been threatened by Ms Dulhunty occurred by letter dated 20 June 2011.
13. On 21 June 2011 the Calvos' solicitors wrote to Ms Dulhunty requesting that she: "proceed to assess costs on a final basis with Ms Johnson's costs to be withdrawn. Our client will file a new application in respect to her costs at a later time if those costs are not refunded to our client in the meantime".
14. By letter dated 5 July 2011, Ms Johnson responded to the Legal Services Commissioner (his letter was not in evidence). The terms of Ms Johnson's response are relevant to the question of estoppel. Ms Johnson said that she had spoken with Ms Dulhunty and confirmed that she would prepare an account. She advised that she had acted for the Calvos from beginning to end, after previous lawyers had advised them they had no prospects of success. She then said: "They came to me and Mrs Calvo cried and begged me to act for them for NO money up front because she said they had none (this I came to realise was a lie as was most of what Mrs Calvo said, including her evidence). At all times prior to being paid a very modest sum of money so that I could continue to a) eat, b) put petrol in my car to drive to attend to their litigation and c) pay my phone bills so that I could attend to their litigation I provided an invoice prior to payment. I was paid the extremely modest sum of $50,000 plus $5,000 GST for approximately three years of solidly working on their 'unwinnable' case, and dealing with their constant lies to myself and to counsel, which caused us all extreme concern to say the least. My files which included all invoices were provided and inspected by the Law Society at the time. I have moved offices several times since then and at present am unable to locate them."
15. It appears that Ms Johnson's letter was only received by the Office of the Legal Services Commissioner on 6 September 2011. The reason for that delay is unknown. When it was forwarded to Ms Dulhunty, she responded that she had "recently allowed the Applicants to withdraw the portion of the application that covers the costs charged by Ms Johnson. That can then be the subject of a separate party/party application at a later date." That reflected what Ms Dulhunty had indicated to the parties by letter dated 21 July 2011. She wrote: "As stated previously, if the costs relating to her part of the matter are not assessed because the invoices do not turn up [in] time then I will treat that part of the application as withdrawn and recommend a partial refund of the filing fee for that portion of the costs claimed."
16. The solicitors acting for Mr Sweeney rejected the proposal that there be two phases of the assessment of the costs order. By letter dated 21 July 2011, they submitted that the costs assessment regime: "requires the whole of the party/party costs the subject of the costs order made by the Court at the conclusion of the proceedings to be assessed once and for all. Under that regime, once a certificate of determination has been issued, the Applicants will have no residual right to make a further application for assessment of any costs the subject of that costs order".
17. They indicated that they would oppose any later attempt to file an application for a separate assessment of Ms Johnson's component of the costs.
18. On 26 July 2011, the Calvos' solicitors requested Ms Dulhunty to finalise the costs assessment without the tax invoices from Ms Johnson, unless they were delivered prior to finalising it. They reserved their clients' right to have Ms Johnson's tax invoices assessed at a later time should they arrive.
19. Ms Dulhunty was of the view that she was empowered to allow part of the costs to be withdrawn and assessed at a later time. That was recorded in her reasons (at para 5.23), which referred to correspondence to the parties to that effect which had not been tendered at the trial. It may be inferred that correspondence to that effect was sent.
20. The Calvos' solicitors took issue with the submission from Mr Sweeney that it was not possible to separate an aspect of the assessment and, by letter dated 28 July 2011, once again suggested that the assessment proceed without Ms Johnson's costs.
21. Ms Dulhunty advised by letter dated 29 September 2011 that her assessment was complete. She provided some 64 single-spaced pages of reasons for disallowing some of the claims. Although the application was not in evidence, it may be inferred from the fact that Ms Dulhunty determined that $367.40 of the filing fee was to be refunded to the applicants and that the balance of the filing fee was $6,401.73, that the total amount of costs originally claimed was in the order of $675,000. The total amount of costs determined to be fair and reasonable was $115,265.73, and disbursements of $339,278.73 (all inclusive of GST where applicable). The certificate was filed in the Supreme Court of New South Wales on 26 October 2011 in the amount of $471,820.52.
22. As noted at the outset of these reasons, following negotiations (not all of which were in evidence) concerning Mr Sweeney's ability to pay and the likelihood of an instalment agreement being ordered, the Calvos' solicitors accepted a cheque dated 25 November 2011 in the amount of $363,820.52 in full and final settlement of the costs claim.
23. Ms Johnson was cross-examined about her lack of response to Ms Dulhunty's requests. She said that she did not have time to prepare a bill of costs. She denied that the reason she failed to mention the 2007 Deed was because she appreciated it was illegal. She said, instead, that "I am slack in pursuing my own - my own entitlements".

Reasons of the primary judge

1. The primary judge regarded Ms Johnson's evidence as unsatisfactory. However, her Honour concluded that it was probably open to a costs assessor to issue more than one determination in respect of a single order as to costs, so that it would be open for a further assessment to take place in respect of the latest bill of costs. Her Honour stated that there was some uncertainty about the matter.
2. The primary judge then concluded at [262]-[264]: "The detriment that will be suffered by Mrs Calvo is: (1) having to go through the costs assessment process again; (2) having to revisit the litigation and the steps taken within it, seven years after the event; (3) the prospect that Mr Sweeney may argue that Mrs Calvo is now not entitled to have these costs assessed having regard to the certificate of judgment that was enforced in respect of the costs assessment process that was originally completed; (4) the prospect that such argument may be successful. That detriment could be dealt with in part on the basis that Ms Johnson would have to pay any costs of the process. However it is the uncertainty of Mr Sweeney's position so long after the event in circumstances where he has paid the costs of the litigation the subject of the certificate of judgment consequent upon Ms Dulhunty's costs assessment that is of serious concern. However when the difficulties with obtaining Ms Johnson's tax invoices were encountered, there was no assumption that a costs assessment excluding those costs would prevent Ms Johnson making a claim for her costs in the future. On balance I am not satisfied that Ms Johnson is estopped from claiming that she is entitled to be paid her costs in the circumstances. Although this is not a matter that has been debated and is perhaps not a matter for this Court to determine, the circumstances of this case would in my view justify a condition being imposed upon Ms Johnson that she indemnifies Mrs Calvo for any costs that Mrs Calvo may incur in the costs assessment process and a further condition that Mrs Calvo should not be required to pay any costs to Ms Johnson that are not able to be recovered from Mr Sweeney."
3. It is plain from the foregoing that the primary judge envisaged, although perhaps only tentatively, that such entitlement as Ms Johnson might still have to recover costs should be at her own expense, and limited to amounts recoverable from Mr Sweeney. Ms Johnson made no submission against that approach on appeal.
4. However, no orders were made formalising the conditions (as to indemnity and limited recourse to what could be recovered from Mr Sweeney) to which the primary judge referred in the last paragraph reproduced above.

Ms Johnson is estopped from recovering legal costs from the Calvos

1. The submissions concerning estoppel on appeal were more nuanced than those made to the primary judge. Her Honour dealt with estoppel in general terms. On appeal, the Calvos advanced a narrower estoppel - that Ms Johnson was estopped from seeking to recover any costs over and above the $55,000 already paid.
2. It may be accepted, consistently with the reasons of the primary judge, that the assessment excluded much of the fees which Ms Johnson had been paid. Although some items relating to costs involving Ms Johnson were disallowed, some $36,740 were excluded in the absence of any itemised bills from her. Both the Calvos (by the solicitor then acting for them) and the costs assessor herself proceeded on the basis that a further assessment of the $55,000 paid could take place in the future.
3. But the question whether Ms Johnson was estopped from recovering any additional amounts from the Calvos is different. The facts are extremely unusual, but I think that by what occurred throughout the assessment process, Ms Johnson must be taken to have represented that she would not seek to recover any additional legal costs. There were many reasons that is so. For one thing, there were in 2010 and 2011 a series of direct requests from solicitors acting for the Calvos for tax invoices, coupled with an offer to pay Ms Johnson's reasonable costs, so long as they received an itemised bill. For another, there were directions from a costs assessor, non-compliance with which was an offence. For a third, there was the risk that the Calvos would not be able to have those costs assessed and thereby contribute to an enforceable debt against Mr Sweeney.
4. But the main consideration is simply stated. The time to serve a bill of costs is when the client is seeking to enforce a favourable costs order against a solvent defendant. By failing to do so over a period in excess of a year, despite written requests on 14 April 2010, 21 April 2010, 28 April 2010, 21 July 2010 and 17 March 2011, and an oral request by Ms Dulhunty (confirmed in Ms Johnson's letter to the Legal Services Commissioner) which resulted in Ms Johnson stating that "she could have the invoices to [Ms Dulhunty] in a couple of weeks" which did not eventuate, Ms Johnson caused the Calvos to assume or expect that she would not seek to recover any additional costs from the Calvos.
5. I turn now to the two long letters on which Ms Johnson relied: that dated 22 April 2010 sent by the solicitors then acting for Ms Johnson to the Calvos' solicitors, and that dated 5 July 2011 from Ms Johnson to the Legal Services Commissioner.
6. The letter dated 22 April 2010 responded to a letter from the Calvos giving an account of the payment of costs in the litigation. It was said on behalf of the Calvos that the 2007 Deed was void, that despite Ms Johnson having advised that all fees other than minor disbursements would be paid by her, the Calvos were required to find $75,000 to pay Mr Conti, $55,000 to pay her, and later fees of $189,197 to pay the "town agent", expert witness fees in excess of $39,000, and Mr Conti's fees in the amount of $357,595. It was said that they had advised the Calvos that Ms Johnson "cannot have both her legal costs and the shares in The Australian Institute of Music Ltd" and that Ms Johnson "has elected during the course of the proceedings to vary the terms of her original retainer and require payment to her of her professional fees and all the various disbursements to barristers and other lawyers rather than to have the shares in the company". It concluded that the Calvos were "more than happy to pay [Ms Johnson] a reasonable sum for her professional services on receipt of an itemised bill of costs".
7. The response from Ms Johnson's lawyers is five single-spaced pages. It disputed much of the factual background. It acknowledged that Ms Johnson had been paid $55,000, but stated: "We see the issue of legal costs and the issue of Ms Johnson's entitlement to the shares as separate matters. We note your advice to you client but do not accept it. The agreement between Ms Johnson and your clients is in writing and provides [for] the payment of both the fees that she has received to this point and the shares."
8. The balance of the letter reiterated demands concerning the shares. At no stage was it suggested that Ms Johnson had an additional entitlement to fees. The letter thereby contributed to the assumption or expectation that no additional fees would be sought.
9. Turning to Ms Johnson's letter to the Legal Services Commissioner dated 5 July 2011 which was not received until 6 September 2011, Ms Johnson there claimed that she had spent "approximately three years of solidly working on their 'unwinnable' case" and had been paid "the extremely modest sum of $50,000 plus $5,000 GST". I accept Ms Johnson's submission that Ms Johnson was conveying that the legal services she had provided were worth more than she had been paid. However, this letter was dated shortly after she had indicated to Ms Dulhunty that she would provide the tax invoices for her fees, and itself confirmed as much. As noted above, the evidence does not explain why it was not received by the Legal Services Commissioner until two months later. By then, it was clear that Ms Johnson had not done what she said she would do. Once again, that contributed to the assumption or expectation that the Calvos would not be charged anything further by Ms Johnson.
10. Of course, Ms Johnson may have believed what was said in her solicitors' letter of 22 April 2010, that the 2007 Deed and the transfer she had obtained entitled her to 32.5% of the shares in AIM. Any such belief was ill-founded. The Calvos may also have assumed that Ms Johnson was relying on her rights in relation to those shares. That does not displace the basis for concluding that Ms Johnson represented that she would not seek to recover any additional legal costs from them. To the contrary, it confirms the reasonableness of the Calvos' reliance upon the representation.
11. I conclude that in the circumstances in 2010 and 2011, the Calvos were, by reason of the conduct of Ms Johnson, entitled to proceed on the assumption or expectation that they would not be pursued by her for any additional fees.
12. Plainly enough there was detrimental reliance by the Calvos on that assumption or expectation. They took steps to finalise the assessment of costs, filing the certificate in court, and compromising the deemed judgment debt with Mr Sweeney by accepting a cheque in full and final satisfaction of his obligations. Not only were the Calvos certainly denied the ability to incorporate some $36,740 in costs actually paid by them which were potentially recoverable against Mr Sweeney in 2011, there is also the risk that they will never be able to recover from him any additional amount of costs pursuant to that order. At the very least, there is a risk that Mr Sweeney will argue that he compromised the costs payable by him on the basis articulated by his lawyers at the time (that there would be no subsequent assessment of the same costs order) and that he has changed his position accordingly. As the Calvos submitted, that can in an appropriate case suffice for an estoppel to be made out: Delaforce v Simpson-Cook [2010] NSWCA 84; 78 NSWLR 483 at [5].
13. Ms Johnson submitted that there was no evidence directly from Mrs Calvo (or her solicitor) as to her assumption or belief, or reliance. But the absence of (self-serving) testimonial evidence is not fatal to the claim: Sangha v Baxter [2009] NSWCA 78 at [153].
14. I turn to the question of remedy. It is clear from the reasons of the primary judge reproduced above that even though her Honour rejected the claim in estoppel, she was of the view that the Calvos should not be themselves liable for any additional fees payable to Ms Johnson. I agree. However, no orders were made. That occurred, so far as appears from the transcript of 22 October 2015 when orders were made, because the primary judge accepted the submission of counsel then appearing for Ms Johnson that the point had not been argued and for that reason should not as a matter of fairness be made.
15. It is not necessary to consider Ms Johnson's submission that conditions of the nature indicated by the primary judge were outside the scope of the proceedings at first instance and the appeal. Having found an estoppel to have been made out, I would go further.
16. At least since the decision of the Privy Council in Plimmer v The Mayor, Councillors, and Citizens of the City of Wellington (1884) LR 9 App Cas 699 at 714, it has been clear that the appropriate relief turns very much on the facts: see the decisions collected by Handley AJA in Delaforce v Simpson-Cook at [58]-[59]. It is well established that the appropriate remedy may reflect the need for a "clean break": see Pascoe v Turner [1979] 1 WLR 431 at 438-9; Giumelli v Giumelli [1999] HCA 10; 196 CLR 101 at [50]; Gillett v Holt [2001] Ch 210 at 237. In the present case, the need for there to be a "clean break" between the Calvos and Ms Johnson is paramount.
17. If Ms Johnson is permitted now to depart from the assumption or expectation that she would not seek to recover any additional fees from the Calvos, even on the limited basis proposed by the primary judge, then the Calvos will inevitably be involved in further disputation with Mr Sweeney and Ms Johnson. Mr Sweeney's stance of opposing any additional attempt to reopen the assessment process has already been made clear. The nature of Ms Johnson's 2015 bill of costs is such that there will plainly be disputes between her and her former clients as to the need for and value of the services recorded in it, and whether those services were in fact sought or provided.
18. It was confirmed by Giumelli that there can be no prohibition against the appropriate relief being such as to make good the assumption or expectation. The present is a case where justice will not be done by a remedy which falls short of holding Ms Johnson to the assumed state of affairs her conduct engendered, something which accords with what was said in Sidhu v Van Dyke [2014] HCA 19; 251 CLR 505 at [85].
19. Accordingly, I would allow this ground of appeal, and propose that permanent injunctive relief issue against Ms Johnson taking any further steps to recover costs from the Calvos.
20. I note that an issue which was not fully debated on appeal was whether there is, now, a limitation defence available to the Calvos, given that the entirety of the legal services for which Ms Johnson now claims fees took place more than six years ago. On one view, such rights as a solicitor has are treated as contractual (see s 326) and the prohibition on suing before rendering a bill does not enable the six year limitation period imposed to be side-stepped by a lawyer who fails to render a bill years after performing the legal services. That would be consistent with Coburn v Colledge [1897] 1 QB 702 and (for example) Cockburn v Shehadie [2013] NSWSC 758. However, although this point was touched on during the hearing, it was not the subject of considered submissions, and I do not express a concluded view on it one way or the other.

Were the Costs Agreements and the 2007 Deed void under s 327 of the Legal Profession Act (grounds 27 and 28)?

1. The primary judge said at [235]: "Notwithstanding Ms Johnson's rather extraordinary evidence, it is clear that the 2007 Deed related to her costs for the provision of her legal services. Although the expression 'consideration' was used, I am satisfied that the parties intended that the provision of 32.5% of the shares in AIM was to satisfy Dr and Mrs Calvo's obligation to pay Ms Johnson for the legal services to be provided in respect of the Sweeney proceedings. It was only in circumstances where the shares were not recovered and the transfer did not occur that Dr and Mrs Calvo would be required to pay Ms Johnson any legal costs pursuant to the two Costs Agreements dated 14 May 2007."
2. Her Honour then reasoned that irrespective of whether or not the 2007 Deed was to be considered alone, or together with the costs agreements, it was appropriately characterised as a conditional costs agreement: the obligation to transfer the shares was conditional upon the successful outcome of the Sweeney proceedings: at [237]. Because the 2007 Deed did not comply with the obligations in s 323 to give a cooling off period and to inform the client of a right to seek independent legal advice, her Honour concluded that it was void by reason of s 327(1): at [236]-[239]. No challenge was made to that conclusion.
3. Grounds 27 and 28 of the appeal maintain that the primary judge ought to have found that the 2007 Deed altered the nature of the costs agreements such that they were, inter alia, contingency costs agreements under which the amount payable to Ms Johnson was calculated by reference to the value of property that may be (and was) recovered in the Sweeney proceedings, contrary to s 325 of the Legal Profession Act. If so, then s 327(4) would prevent Ms Johnson from recovering any amount in respect of the Sweeney proceedings.
4. Sections 325 and 327 of the Legal Profession Act at all relevant times provided as follows: "325 Contingency fees are prohibited (1) A law practice must not enter into a costs agreement under which the amount payable to the law practice, or any part of that amount, is calculated by reference to: … (b) the amount of any award or settlement or the value of any property that may be recovered in any proceedings to which the agreement relates. … 327 Certain costs agreements are void (1) A costs agreement that contravenes, or is entered into in contravention of, any provision of this Division is void. … (4) A law practice that has entered into a costs agreement in contravention of section 324(1) (Conditional costs agreements involving uplift fees) or 325 (Contingency fees are prohibited) is not entitled to recover any amount in respect of the provision of legal services in the matter to which the costs agreement related and must repay any amount received in respect of those services to the person from whom it was received."
5. Quite different submissions were advanced on appeal than at trial in relation to the operation of these provisions.
6. The Calvos submitted that a costs agreement which relieved a client of the obligation to pay costs in the event of success was one which contravened s 325, because in such circumstances, there must be a quid pro quo elsewhere and that was precisely the evil to which s 325 was directed. They said that there were two reasons why s 325 was contravened. The first was that the promise to transfer 32.5% of the shares in AIM contravened s 325 insofar as it was "the amount of any award or settlement" in s 325(1)(b). Alternatively, the Calvos submitted that the obligation to pay nil fees was calculated by reference to an order that Mr Sweeney transfer the shares to Dr Calvo, and this contravened s 325.
7. Ms Johnson submitted that there could be no difficulty in an agreement where the amount owing for legal services was calculated in a conventional way based on time costing, and the client and lawyer also agreed that the debt would be satisfied by the transfer of a fixed piece of property in the event of success. Although not in Ms Johnson's written submissions, considerable reliance was placed in oral address upon the unanimous decision of the Victorian Court of Appeal in Equuscorp Pty Ltd v Wilmoth Field Warne [2007] VSCA 280; 18 VR 250, dealing with substantially identical provisions in the Legal Practice Act 1996 (Vic). Ms Johnson distinguished the calculation of the amount owing for legal fees from the satisfaction of the liability to pay that amount by the transfer of shares in accordance with the 2007 Deed, in accordance with what was said at [132]-[133] of Equuscorp.
8. In light of the conclusions I have reached in relation to estoppel, nothing turns on these grounds. I am also conscious that there are many thousands of costs agreements throughout Australia, some of which will include elements which are conditional, as a result of which it is desirable that these reasons decide only what is necessary. The submissions advanced by the Calvos are different from those addressed by the primary judge. Equuscorp was not raised before the primary judge, was not mentioned in Ms Johnson's written submissions on appeal, and was supplied to the Court and the other parties at the end of the first day of the appeal. The Calvos in oral submissions in reply addressed Equuscorp briefly. I do not consider that this Court had the benefit of full argument on that decision. (To be clear, in making the previous statements, I should not be regarded as expressing any criticisms of any of the counsel appearing on the appeal.)
9. In those circumstances, I think it is better to refrain from determining these two grounds of appeal, an approach which does not affect the outcome as between the parties, and prevents the risk that some of the reasoning may give rise to difficulties between other parties not presently before the Court. The obligation to consider dealing with all grounds of appeal, even if it is unnecessary to the resolution of the appeal, was stated in Kuru v State of New South Wales [2008] HCA 26; 236 CLR 1 at [12]. Examples of when it is preferable not to do so are collected in Katter v Melhem [2015] NSWCA 213; 90 NSWLR 164 at [120].

Orders

1. For those reasons, I have concluded that the Calvos' appeal should be allowed against each of Ellimark and Ms Johnson.
2. The primary judge ordered that an executed transfer of the 1,250 shares in AIM be provided to Ellimark within 21 days of its paying $417,000. My understanding is that that has occurred, not least because Ellimark has given an undertaking not to sell or encumber those shares pending the determination of this appeal.
3. The notice of appeal seeks orders that declaring that Mrs Calvo is the sole beneficial owner of 62.5% of the shares in AIM. Those orders ignore the obligation upon Mrs Calvo to repay the consideration provided by Ellimark for the shares.
4. The appropriate orders will require Ellimark to transfer the parcel of 1,250 shares to Mrs Calvo upon her repaying $417,000 to it. It is unclear to me whether consequential orders could or should be made (for example, it is not clear whether AIM declared a dividend in the period during which Ellimark has owned the 12.5% parcel of shares, and, if it did, whether Ellimark could or should account for that). I propose that the parties be heard as to the precise form of the orders relating to the transfer of shares, and whether any consequential orders could or should be made.
5. In relation to Ms Johnson, the notice of appeal seeks an injunction restraining Ms Johnson from taking any step to recover any amount in respect of the provision of legal services in the Sweeney proceedings. Such an order may be made, although again I would be willing to hear from the parties as to its form.
6. Costs are a little complex. I start with costs of the appeal. This is an appeal where the Calvos succeeded in two non-overlapping cases against two separate respondents. It would not be appropriate for both respondents to be liable to pay the whole of the Calvos' costs of the appeal, especially since at least as a matter of impression, the Calvos' costs in respect of grounds 1-26 are likely to exceed the Calvos' costs in respect of grounds 27-29 (by way of example, the considerable majority of the Calvos' written submissions were directed to the grounds against Ellimark). That leads to the conclusion that the respondents should not be ordered to pay more than the costs of those aspects of the appeal that were directed to them.
7. Moreover, in relation to Ellimark, the Calvos have succeeded on a pure question of construction of the 2009 Deed and the legal effect of the subsequent correspondence, and failed in relation to the grounds based on the Contracts Review Act. I think it is necessary to hear from the parties further as to whether it is appropriate to depart from the ordinary rule that costs follow the event.
8. Ms Johnson should also be given the opportunity to supply written submissions as to the orders as to the costs of the appeal.
9. I am conscious that this appeal has arisen out of (a) the 2009 Deed which was entered into in order to pay for litigation and (b) the assessment of costs ordered against Mr Sweeney some seven years ago and Ms Johnson's belated rendering of a disproportionately large bill of costs. In the unfortunate circumstances of this litigation, I think it is appropriate to indicate that as presently informed, I would be disposed to making orders permitting one Judge of Appeal to determine any application for a lump sum costs order, should the Calvos seek such an order. It may well be that the result of such an application is a smaller amount of costs than would be obtained on assessment, but undoubtedly it would lead to a certain result faster and more cheaply.
10. I turn to the costs of the trial. Speaking generally, the primary judge ordered the Calvos to pay Ellimark's costs on an ordinary basis until 14 July 2014 and on an indemnity basis thereafter, and for them to pay 85% of Ms Johnson's costs of the second and third cross-claims. Those orders must be set aside, and the discretion re-exercised in light of the outcome of this appeal, but it is far from clear what orders should be made in their place. Again, it will be necessary to hear further from the parties as to those orders, and indeed whether they are of the view that this Court should deal with the question of the costs at first instance. Of course, it is desirable that this Court do so, if that is possible, rather than there be a remitter.
11. There is a final point. The nature and amount of costs allowed and disallowed by the assessor in the contested assessment in 2011 enables one quite comfortably to conclude something of the scale of the litigation in 2009. The trial of the Sweeney proceedings ultimately took eight days, and had elements which were complex. Nevertheless, I regard the $679,000 costs claimed as being, to say the least, on the high side. That view is consistent with the relatively high proportion of senior counsel's fees which have been disallowed.
12. All of that said, it is difficult to conceive how Ms Johnson could ever have properly charged either $2.289 million (the amount on her tax invoice), or $2.476 million (the total of her itemised bill) or either of those amounts plus GST (assuming her bills which did not include GST are to be read as exclusive of GST) for her work on the Sweeney proceedings. It is difficult to conceive how Ms Johnson could ever have properly charged anything close to those amounts. Save for the fact that the primary judge referred Ms Johnson to the Legal Services Commissioner, I would have done the same, based on the billing alone.
13. In the circumstances, I propose the following formal orders: 1. Appeal allowed. 2. Set aside orders 1D, 2, 8, 9, 10, 11 and 12 made on 22 October 2015. 3. Direct Mrs Calvo to file and serve, within 14 days of today, a copy of such further orders as are sought by her, and brief written submissions in support of such orders, including whether those orders should be determined on the papers. 4. Direct Ellimark and Ms Johnson to file and serve, within 28 days of today, a copy of such further orders as are sought by it and her, and brief written submissions in support of such orders, including whether those orders should be determined on the papers. 5. Direct Mrs Calvo to file and serve, within 35 days of today, a note of any additional matters which, in light of the respondents' submissions, are agreed, and any submissions in reply on matters which are not agreed.

Amendments 17 June 2016 - [105] - "2014" replaced with "2015" [152] - "fact" replaced with "facts" [163] - "were" replaced with "where" 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: 17 June 2016