BETWEEN : LEGAL PROFESSION COMPLAINTS COMMITTEE

Legal practitioners - Disciplinary action - Unsatisfactory professional conduct - Whether practitioner accepted instructions in matter for which she lacked competence - Acting incompetently - Allegations of impropriety against opposing solicitor - Whether made without reasonable grounds

Acts Interpretation Act 1901 (Cth), s 36(1)

Bankruptcy Act 1966 (Cth)

Civil Judgments Enforcement Act 2004 (WA)

Corporations Act 2001 (Cth), s 458E(2), s 459C(2), s 459G(2), s 459J(1)(b), s 459Q, s 601CX(1)(a), s 601CX(3), Pt 5.4

Legal Practice Act 2003 (WA)

Ayrton Investments Pty Ltd v Andrlik [2000] ACTSC 55; (2000) 34 ACSR 643

Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336

Commonwealth Bank of Australia v Parform Pty Ltd [1995] FCA 1445; (1995) 13 ACLC 1309

David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43; [1995] 184 CLR 265

Deputy Commissioner of Taxation v Guy Holdings Pty Ltd [1994] TASSC 126; (1994) 12 ACLC 966

Hoare Bros Pty Ltd v Commissioner of Taxation (1996) 62 FCR 302

Re Bond Corporations Holdings Ltd (1990) 1 WAR 465

Re Lympne Investments Ltd [1972] 2 All ER 385

Re Sarina; ex parte Wollondilly Shire Council [1980] FCA 66; (1980) 30 ALR 266

1 The Legal Profession Complaints Committee alleged that a legal practitioner, Megan Maree in de Braekt, was guilty of unsatisfactory professional conduct by accepting instructions in a matter for which she lacked competence, acted incompetently in relation to that matter, and that she made allegations of unsatisfactory professional conduct against another practitioner without foundation.

2 The Tribunal examined the history of the practitioner's involvement in the matter in question. It concluded that it was not unsatisfactory professional conduct for the practitioner to have accepted instructions in relation to the matter, which concerned proceedings in the Supreme Court for winding up of Ms in de Braekt's client company and reliance on a statutory demand based upon a judgment debt in the Magistrates Court. It concluded, however, that Ms in de Braekt had acted incompetently in relation to that matter in a number of respects.

3 The Tribunal also concluded that Ms in de Braekt had made a number of allegations of impropriety and unsatisfactory professional conduct, including allegations of misleading the Court, against the practitioner on the other side of the matter, and that she lacked any reasonable foundation for those allegations. It concluded therefore that Ms in de Braekt was guilty of unsatisfactory professional conduct in respect of two of the three matters of complaint. The Tribunal determined that it would hear submissions on penalty.

4 The Legal Profession Complaints Committee (Committee) made three allegations of unsatisfactory professional conduct against a legal practitioner, Megan Maree in de Braekt. The Committee alleges that Ms in de Braekt was guilty of unsatisfactory professional conduct by:

(a) accepting instructions to act in a matter or matters for which she lacked the standard of competence that a member of the public is entitled to expect of a reasonably competent legal practitioner;

(b) acting incompetently in the course of legal practice;

(c) in the course of legal practice, making allegations of impropriety, unsatisfactory professional conduct or professional misconduct about another legal practitioner in circumstances where Ms in de Braekt had no, alternatively no reasonable, grounds for making such allegations.

5 The particulars of the allegation set out in para (a) above are found in para 10 and para 14 of the application. Those paragraphs read as follows:

1. On about 10 July 2007 the practitioner applied to the Supreme Court on behalf of Pro Used to set aside the statutory demand, notwithstanding that to the practitioner's knowledge:

(a) more than 21 days had elapsed since the date of service of the statutory demand;

(b) the winding up petition had been filed and served.

1. Up to and including 8 August 2007, the practitioner on behalf of Pro Used prosecuted the application to set aside the statutory demand and defended the winding up petition on the grounds, amongst others, but relevantly that:

(a) there were options available to Smart Transit to recover the debt, other than seeking to wind up Pro Used;

(b) Smart Transit had not sought to enforce the default judgment in the Magistrates Court;

(c) there was no evidence before the Court that Pro Used was insolvent;

(d) in effect, Smart Transit had allegedly unreasonably refused in April 2007 to compromise the debt;

(e) Smart Transit had refused to discontinue the winding up proceedings unless Pro Used agreed to pay Smart Transit's costs of those proceedings and the application to set aside the statutory demand;

(d) the directors of Pro Used had not actually received the statutory demand prior to the service of the winding up petition.

6 The Committee contends that by applying to set aside the statutory demand in the circumstances set out in para 10, and prosecuting the application to set aside the statutory demand and defending the winding up petition on the grounds referred to in para 14, it can be inferred that the practitioner exhibited a lack of knowledge of and competency in the law of corporate insolvency to such an extent that an inference can be drawn that she lacked the standard of competence that a member of the public is entitled to expect of a reasonably competent legal practitioner.

7 Paragraph (b) set out above also relies on para 10 and para 14 of the application.

8 In relation to allegation (c) above, the Committee particularised its allegations in para 16 to 19 of the application in the following terms:

(a) an affidavit prepared by the practitioner on behalf of Mr Grant Shaw sworn by him on 19 July 2007 and filed in Supreme Court COR 88 of 2007, in particular, at paragraphs 34-38, 42 and 49 of that affidavit;

(b) the last paragraph of an e-mail from the practitioner to Mr Gough dated 11 July 2007;

(c) an affidavit of the practitioner sworn on 23 July 2007 in Supreme Court COR 88 of 2007, in particular, at paragraphs 24, 26, 41 and 45 of that affidavit; and

(d) a letter from the practitioner to Mr Gough dated 20 July 2007, in particular, at pages 2 and 3 of that letter,

the practitioner alleged that Mr Gough or Smart Transit or both had acted improperly in causing the statutory demand and the winding up petition to be issued on behalf of Smart Transit, in circumstances where the practitioner had no, alternatively no reasonable, grounds for making that allegation.

1. In the last paragraph of an e-mail from the practitioner to Mr Gough dated 13 July 2007 (sent at 2.48pm) the practitioner alleged or alternatively, that Mr Gough had not acted honestly or bona fide in requesting the practitioner to make available a document for his inspection, in circumstances where the practitioner had no, alternatively no reasonable, grounds for making that allegation;
2. In:

(a) the first to fifth and seventh paragraphs of an e-mail from the practitioner to Mr Gough dated 11 July 2007;

(b) the third to ninth paragraphs of an e-mail from the practitioner to Mr Gough dated 12 July 2007 (sent 6.40pm);

(c) an affidavit of the practitioner sworn on 23 July 2007 in Supreme Court COR 88 of 2007, in particular, at paragraph 33 of that affidavit; and

(d) the last paragraph of a letter from the practitioner to Mr Gough dated 20 July 2007;

(e) the ninth to eleventh paragraphs of an e-mail from the practitioner to Mr Gough dated 20 July 2007;

(f) the second last and third last paragraphs of an e-mail from the practitioner to Mr Gough dated 22 July 2007;

the practitioner alleged that Mr Gough had intentionally misled the Supreme Court or the Magistrates Court or both, in circumstances where the practitioner had no, alternatively no reasonable, grounds for making that allegation.

(a) the second last and third last paragraphs of an e-mail from the practitioner to Mr Gough dated 11 July 2007;

(b) an e-mail from the practitioner to Mr Gough dated 12 July 2007 (sent 7.21pm);

(c) the second last paragraph of an e-mail from the practitioner to Mr Gough dated 13 July 2007 (sent 2.48pm);

(d) an affidavit of the practitioner sworn on 23 July 2007 in Supreme Court COR 88 of 2007, in particular, at paragraphs 43, 44, 47, 48, 50 and 51 of that affidavit,

the practitioner raised or implied the possibility that Mr Gough and Minter Ellison had sent documents to the directors of Pro Used in a manner intended to mislead Pro Used and the Supreme Court as to who sent the documents and when, in circumstances where the practitioner had no, alternatively no reasonable, grounds for raising or implying such a possibility.

10 The allegations arise in relation to work done by the practitioner on behalf of a company known as Pro Used Pty Ltd (Pro Used) in relation to proceedings in the Magistrates Court and the Supreme Court between Pro Used and a company known as Smart Transit Ltd (Smart Transit). To understand the allegations made against the practitioner, it is necessary to recount the relevant events.

11 On 14 March 2007, Smart Transit obtained a judgment by default against Pro Used in the Magistrates Court civil jurisdiction in the amount of $10,425.75 plus $750.85 costs, totalling $11,176.60.

12 On or about 14 or 17 April 2007, Pro Used sent a cheque in the sum of $11,275.60 to Smart Transit in full and final settlement of all matters between Pro Used and Smart Transit. The cheque was not accepted by Smart Transit. Pro Used subsequently engaged Ms in de Braekt. On 16 May 2007, the practitioner filed a notice of change of address for Pro Used and became the solicitor on the record in relation to the Magistrates Court proceedings.

13 On 23 May 2007, Ms in de Braekt filed an application on behalf of Pro Used in the Magistrates Court seeking an extension of the time to apply to set aside the default judgment, and applying to set that judgment aside. That application was served on Smart Transit's solicitors, Minter Ellison, on 24 May 2007.

14 On 13 June 2007, Minter Ellison, on behalf of Smart Transit, lodged an application pursuant to s 459Q of the Corporations Act 2001 (Cth) (Corporations Act) to wind up Pro Used on the ground that Pro Used had failed to comply with a creditors statutory demand for payment of debt. That application relied upon an alleged failure by Pro Used to comply with a statutory demand which was said to have been served by Richard Michael Johnson 'who caused it to be:

1. sent by prepaid post to the registered office of the defendant at c/- Kennerlys of Ground Floor, 24 Outram Street, West Perth on 9 May 2007; and
2. couriered to the registered office of the defendant at c/- Kennerlys of Gound Floor, 24 Outram Street, West Perth on 9 May 2007'.

15 The application averred that Pro Used had failed to pay the amount of the debt to the plaintiff's reasonable satisfaction within 21 days after the demand was served.

16 On 20 June 2007, the winding up petition was served on Pro Used.

17 On 10 July 2007, Ms in de Braekt applied to the Supreme Court on behalf of Pro Used to set aside the statutory demand. That application was accompanied by an affidavit of a director of Pro Used, Mr Grant Shaw. That affidavit deposed to the fact that on the evening of 18 June 2007, Mr Shaw returned to his home to discover an 'OHMS' envelope in his letterbox which was postmarked 17 June 2007. The envelope was addressed to Mr Shaw in handwriting. It contained a letter from Minter Ellison dated 9 May 2007, enclosing by way of service a statutory demand and a copy of the judgment relied upon in the statutory demand. Both of those documents were also enclosed in the OHMS envelope. Mr Shaw's affidavit confirmed that the registered office of Pro Used is c/- of Kennerlys, Ground Floor, 24 Outram Street, West Perth. The affidavit continued 'Kennerlys forwards mail to myself whenever they receive any mail for Pro Used Pty Ltd. No statutory demand from Smart Transit Ltd has ever been forwarded to me from Kennerlys. Kennerlys always forward Pro Used Pty Ltd's mail to me in Kennerlys envelopes'. Mr Shaw then deposes that no statutory demand from Smart Transit was ever received by the other director of Pro Used. The affidavit then deals with the circumstances of the judgment having been obtained in the Magistrates Court, and the fact that an application to set aside the default judgment had been made and served on Minter Ellison. Mr Shaw deposed that the application to set aside the default judgment had been adjourned first on 18 June 2007, then on 9 July 2007, and was to be determined on 16 July 2007. The affidavit asserts that the default judgment obtained against Pro Used was 'irregular'.

18 On 11 July 2007, the solicitor at Minter Ellison who was handling the matter, Mr Gough, sent an email to Ms in de Braekt which contained the following:

I have received your client's application and supporting affidavit in respect to its application to set aside the 459 notice. Would you please address all correspondence to Minter Ellison in relation to this matter to me as I will be handling this issue as well.

I am sorry to write in these terms but with respect, the affidavit in support of your client's application is so inadmissible and/or deficient that it is embarrassing in an extreme way. As a matter of personal courtesy, for the purposes of O59R9 and in an endeavour to avoid the total waste of court resources I provide a number of comments below which I hope you will address prior to the hearing. If you proceed on the current material only it is likely that in the event your client fails (which for the reasons set out below I believe is inevitable) then I expect that I will be instructed to seek indemnity costs against your client and possibly against you on the basis the application is so fundamentally flawed (as a matter of law and civil procedure) that such an order is appropriate.

SERVICE

Service of the 459 notice is dealt with in the affidavit of Richard Johnson sworn in support of the winding up application. It deposes to sending the notice by courier and by express post to your client's registered office. Both forms of service can be traced and I am currently arranging for the details to be provided to me so that that Mr Shaw's hearsay allegations can be proved to be incorrect (if in fact the records are as I anticipate). I expect that the records will include the signature of a person at Kennerlys who accepted the delivery.

Mr Shaw's affidavit seeks to depose on hearsay to what Kennerlys have or have not done. Your client seeks to introduce no direct evidence from Kennerlys at all. For this reason alone your client's application will almost certainly fail.

With respect, the issue as to when Mr Shaw was provided with anything (whether from Kennerlys or otherwise) is not the most relevant issue. What is most relevant is whether your client was served at its registered office, and if so, when. Your client is clearly under a disability if it thinks that its application can be determined in its favour without addressing that issue by direct evidence when there is no impediment to it doing so.

In any event Mr Shaw deposes to receiving the 459 notice on 18 June 2007. Even if that were deemed to be the date of service, your client's application is still out of time, which for the reasons set out below is fatal.

OUT OF TIME APPLICATION FATAL

I refer to the High Court decision is [sic] David Grant & Co Pty Ltd -v- Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265. I believe most of the insolvency texts have commentary on this case. In short, the court found that failure to serve the application within time is fatal, and notwithstanding the fact that your client does not seek any extension of time, on any view it would appear the application is late. Further, even if service were to be found to have occurred on the date that Mr Shaw admits (18 June 2007) it is the case that Mr Shaw deposes to nothing that would assist him in explaining the delay in filing your client's application.

...

19 The email continued to identify a number of objections to Mr Shaw's affidavit and the basis for those objections.

20 Ms in de Braekt's response, apparently written at 10.28 pm on 11 July 2007, was as follows:

Mr Gough

The content of Affidavits drafted and filed by your firm on behalf of Smart Transit Ltd are not compliant with the Rules of Evidence. It is remarkable that you would attempt to raise such issues when the Affidavits drafted and filed on behalf of Smart Transit Ltd (in both jurisdictions) are such embarrassingly incompetent depositions.

You have on a number of occasions now, stated matters to myself, (of both fact & law) and to the Magistrates' [sic] Court which have been blatantly incorrect. Indeed, it would be open to the Magistrates' Court to find that

For example, by stating to the Court on 9/7/2007 that I had 'declined to provide an Affidavit of service'. What a disgrace that was. 'Declined' in the context used by you on 9/7/2007, means to expressly have declined, which I of course did not do, and it was most improper of you to have stated anything to the contrary.

A further example occurred on 18/6/2007 in the Magistrates' [sic] Court, when you incorrectly stated to the court that I had refused to consent to an adjournment, when I had not refused to do so, but rather had refused to make an application for an adjournment, but instead required that you appear and make such an application if that is what your client sought. Which was quite proper. Our matter had been called first on 18/6/2007 because I had confirmed with the Court Orderly prior to Court, that we would consent to the adjournment. As you are perhaps aware, consent matters are called first.

Further, much important and material information has been omitted from Affidavits drafted and filed by your firm, where such information does not favour your client. However the omission of such information presents an inaccurate, incomplete and unreliable alleged account of events and matters to the Court. Indeed it would be open to the courts to find at least some of these Affidavits to be misleading.

Of course you would be aware that it is possible to file and rely upon further Affidavits in support of an application to set aside a statutory demand, and to file and serve such further Affidavits after the 21 day period has expired, provided that the application and a supporting Affidavit was filed within the 21 day time limit, which ours was, and the further Affidavits relate to matters in the Affidavit filed with the application.

There are many material matters not covered by Affidavits prepared and filed by your firm on behalf of Smart Transit Ltd.

Conspicuously absent from your response is any explanation for the O.H.M.S. envelope matter, which arrived at Mr Shaw's home address very shortly after we had had a telephone conversation in which I had informed you that my client had not received a statutory demand.

Please answer the following questions by 13 July 2007:

1. Did anyone employed or engaged by your firm write on the OHMS envelope and/or post the respective documents (including the statutory demand) to Mr Shaw in this envelope?
2. Did Mr Male write on the OHMS envelope and/or post the respective documents (including the statutory demand) to Mr Shaw, in this envelope?
3. Do you or anyone else employed or engaged in, or by your firm have any knowledge of who did, or may have written on the OHMS envelope, inserted the respective documents, and/or mailed the OHMS envelope (together with its contents) to Mr Shaw?

The mailing and use of the OHMS envelope is a very serious matter.

Further, Smart Transit Ltd's winding up application is an abuse of the Court's processes, defective and has no reasonable prospects of success. My client will be seeking indemnity costs against Smart Transit Ltd, and against its lawyers personally. Smart Transit Ltd is improperly using the winding up application for simple debt collection, is improperly attempting to avoid a merit determination of the Magistrates' [sic] Court matter, is improperly attempting to prevent Proused [sic] Pty Ltd from defending the Magistrates' [sic] Court matter, is attempting to improperly pressure Proused [sic] Pty Ltd, and/or attempting to gain an improper strategic advantage for itself.

21 Various paragraphs of that email are relied upon by the Committee in support of allegation (c) - see para 16(b) of the application as to the last paragraph; para 18(a) as to paragraphs 1 to 5 and 7; para 19(a) as to the second and third last paragraphs.

22 The following morning, 12 July 2007, Mr Gough responded. In relation to the question of the OHMS envelope, Mr Gough said:

1. Nobody at Minter Ellison sent the OHMS envelope or arranged for it to be sent or has any knowledge of it;
2. The fact the enclosures in the envelope (if in fact the envelope is truly the envelope involved) are very clearly what was express posted to Kennerlys (see the covering letter from Minter Ellison and what is said in point 3 below) probably should give you a pretty good idea of where the documents came from;
3. Our client will prove service in the way I previously indicated to you. In this regard I note that I have now recovered the relevant records and confirm that the 459 notice was express posted (therefore in an express post envelope) to Kennerlys on 9 May 2007. If you need to check with Australia Post the tracking number is CW5342191. I have also recovered details of the courier to Kennerlys on 9 May 2007. It was signed for by Kiera at 4:19 pm. I have telephoned Kennerlys and spoken to the appropriate person. Kiera was an employee at Kennerlys at the relevant time and the 459 notice was received by them. Can you please make the appropriate enquiries so as to satisfy yourself that the affidavit of Mr Shaw is irrelevant and your absolute statement to the court that the 459 notice was never served is not correct.

23 In the balance of the email, Mr Gough sought further detail as to the criticisms which had been levied in Ms in de Braekt's email and, while expressing a view that there was no substance to the allegations, invited her to refer her allegations to 'those who can regulate and sanction my conduct'.

24 At 6.40 pm on 12 July 2007, Ms in de Braekt emailed Mr Gough as follows:

Your email incorrectly represents the content of my email, as my client believes you well know.

If my email is as clear as you claim, then point to specific parts which say exactly what you claim.

Is this the sort of response you give in Court, when Judges ask you to take them to the precise words? Courts won't accept you saying 'It's clear enough, I don't have to take Your Honour directly to it'.

You have made an allegation, so now you have to justify it Mr Gough.

Your failure to answer my question is proof of your claim having no substance - because you are again incorrectly representing information.

Do you do this in other matters?

If not, why are you doing it in this matter?

If you also incorrectly represent information in other matters, doesn't anyone point this out to you and the Court?

If you also incorrectly represent information in other matters, and other Lawyers point out your incorrect representations to the Courts and yourself, then why do you keep doing it?

25 The Committee relies on this portion of the email as supporting allegation (c) - see para 18(b) of the application.

26 Later at 7.21 pm on 12 July 2007 Ms in de Braekt sent a further email making the following rather extraordinary requests:

If you stand by your previous answers with respect to neither you, nor anyone in your firm nor your client having any involvement in sending the OHMS envelope to my client, then the following applies:

Quite appropriately, I have been instructed to arrange for the OHMS envelope to be examined and tested by forensic experts.

In this regard, please respond in writing to the following questions, by the close of business tomorrow (13 July 2007):

1. Are you agreeable to providing (within the next 2 weeks) a handwriting sample and your fingerprint impressions to forensic experts engaged by my client to analyse the OHMS envelope?
2. If the answer to (1) is NO, why not?
3. If the answer to (1) is YES, what are your available times and dates during the next 2 weeks?
4. Are all other staff members at Minter Ellison who have been involved in this matter, and any staff member who may or could have had any involvement in sending mail to my client, agreeable to providing (within the next 2 weeks) a handwriting sample and fingerprint impressions to forensic experts engaged by my client to analyse the OHMS envelope?
5. If the answer to (4) is NO, who are the staff members who are agreeable, and who are the staff members who are not agreeable?
6. If the answer to (4) is NO, what are the reasons for your firm's respective staff members who are not so agreeable, being not so agreeable?
7. If the answer to (4) is NO, please provide the available dates and times for the next 2 weeks, as well as their names and contact details, of staff members who are so agreeable?
8. If the answer to (4) is YES, please provide the available dates and times for the next 2 weeks, as well as the names and contract details, of all such staff members who are so agreeable?
9. Is your client's Director (Mr Male) agreeable to providing (within the next 2 weeks) a handwriting sample and fingerprint impressions to forensic experts engaged by my client to analyse the OHMS envelope?
10. If the answer to (9) is NO, why not?
11. If the answer to (9) is YES, then please supply Mr Male's available times and dates for the next 2 weeks so arrangements can be made to obtain these comparative samples.

These questions, and your response (if any is received) will be included in an Affidavit to be filed and relied upon in the Supreme Court, as well as perhaps also the Magistrates' [sic] Court.

If no response is received to any or all of these questions, by the close of business tomorrow, then we will presume your response to be in the negative.

Please note that all handwriting samples and fingerprint impressions will need to be provided (created) in the presence of the forensic experts we engage, and cannot be created elsewhere and then simply forwarded or handed over to the forensic experts we engage. Inked fingerprint impressions of all fingers and thumbs on both hands of each person will be required, and this also includes palm prints.

Several lines of handwriting in different forms, on material and with a pen or pens supplied by the forensic document examiner will be required by the forensic document examiner.

Each person will also need to be [sic] bring photographic identification with them to prove their identity to the forensic experts. In total this should all take less than 15 minutes for each person. The process is also likely to be video recorded, and we will be happy to provide (as soon as possible thereafter) each person with a copy of their respective part of the tape if they so require or request.

27 This email is also relied upon by the Committee - see para 19(b) of the application. On 13 July 2007, Mr Gough replied as follows:

This email is a direct response to your email below. I comment as follows:

1. Please note that in future this firm will not be responding to emails in the nature of that which is below.
2. Minter Ellison, our client and myself personally do not agree to the regime proposed below. We are not required to answer your various inappropriate questions and decline to do so.
3. Your entire request is inappropriate and unnecessary (for reasons including those set out in point 4 below). If your client considers it has legal grounds to make any such request please bring whatever application to the court you consider appropriate.
4. Your request indicates that perhaps your client is still acting under some considerable misunderstanding about the relevance of the OHMS envelope. It is irrelevant for the purposes of your client's application to set aside the 459 notice. It is irrelevant because, as I have very clearly pointed out to you previously, our client can prove service on your client's registered office on 9 May 2007. Further, as I have also told you, I have contacted Kennerlys who have confirmed service of the 459 notice. What may or may not have been sent to Mr Shaw on or about 18 June 2007, and how it was or was not sent, is totally irrelevant.
5. Our client will prove service in the way previously advised to you.

28 The email continued taking exception to the allegations being made as to the manner of service of the notice and advising that the correspondence had been referred by Mr Gough to various partners of the firm by reason of the allegations. It concluded with advice that a notice under O 26 r 8(2) of the Supreme Court Rules 1971 (WA) to produce the OHMS envelope was being served by a separate email.

29 A short time later, at 2.48 pm on 13 July 2007, Ms in de Braekt replied by email. She described Mr Gough's email as 'offensive, disrespectful and discourteous' and continued:

My client's request that you, other staff of your firm and your client participate in a forensic examination process of the OHMS envelope is entirely appropriate in the circumstances, and my client is well within its rights to submit to the Court that the Court can and should draw adverse inferences from the refusal to participate in the forensic process.

My client is of the view that if you do not believe that the OHMS envelope is in any way relevant to the proceedings, your request to inspect the envelope therefore cannot be genuine, or made for bona fide purposes.

30 On 16 July 2007, the application to set aside the default judgment was dismissed in the Magistrates Court.

31 The attempt to set aside the default judgment having failed, Ms in de Braekt advised her client that the judgment sum should be paid immediately. On Tuesday, 17 July 2007, Ms in de Braekt sent an email to Mr Gough. The email advised that Pro Used was willing immediately to pay the sums specified in the statutory demand free of any conditions. The email enquired whether, if the payment was made, Smart Transit would immediately discontinue the winding up application, and advised that, if so, Pro Used would immediately discontinue the application to set aside the statutory demand. The email proposed that each party bears its own costs in respect of the Supreme Court proceedings. In support of that proposition, Ms in de Braekt asserted that Minter Ellison was aware of the application to set aside the default judgment before it lodged the winding up application and therefore that application was 'precipitous', so that the costs of taking the winding up application should lie where they fall.

32 Mr Gough replied by email later that afternoon advising that he was unable to obtain instructions on the proposal before the hearing of the Supreme Court applications which were listed for 23 and 24 July 2007, respectively. The reason given for the inability to obtain instructions was that Mr Male, Smart Transit's director, had departed that day for Europe via the Middle East so that instructions could not be obtained 'until probably Friday of this week'. In relation to the assertion that the winding up proceedings should not have been commenced, Mr Gough said:

I note your comment concerning the filing of the winding up application, but I fail to see the relevance given your client's application to set aside the default judgment has been dismissed. In any event we do not agree that our client was not entitled to proceed with the winding up application even upon receipt of notice of your client's application to set aside the default judgment. Your client's application to set aside the default judgment (like the application to set aside the statutory demand) was without basis, which was reflected by the Court's dismissal of your client's application. The fact remains that your client failed to comply with the statutory demand, and our client was therefore entitled to file the winding up application. As I have previously pointed out to you, if (which appears inevitable) I can prove service on the registered office, your client's application to set aside the statutory demand is also fundamentally and fatally flawed. Therefore our client's application to wind up the company will almost certainly succeed. Accordingly, our client is entitled to recover all costs as a condition of the dismissal of the winding up application.

33 Ms in de Braekt responded later that evening saying that, if the hearings were to proceed, she would require Mr Male to attend for cross-examination.

34 At 6.53 pm on 17 July 2007, Ms in de Braekt sent a further email to Mr Gough. The email suggested that to continue with the winding up application after payment had been made would amount to an abuse of the Court's process. It concluded that if confirmation of Smart Transit's intention to discontinue the winding application prior to 23 July was not to be received prior to close of business on 19 July 2007, an application would be made to summarily dismiss the application for winding up 'and in the alternative an application will also be immediately made to strike out the incompetent depositions filed in the Supreme Court on behalf of Smart Transit Ltd', and that costs would be sought against Smart Transit with Pro Used reserving its right to seek costs against Mr Gough personally.

35 Shortly afterwards, Ms in de Braekt sent a further email at 7.55 pm on 17 July 2007. The email read as follows:

Regardless of what your client may decide a bank cheque for $11,176,60 made payable to Smart Transit Ltd will be delivered to the offices of Minter Ellison prior to 23 July 2007.

Traveling [sic] to Europe does not make a person uncontactable for 48 or 72 hours. Your response in this regard is entirely incredible.

Please provide precise justification as to why Mr Male would be uncontactable and unable to provide instructions for the next 48 - 72 hours due to him traveling [sic] to Europe?

Your delayed obtaining of instructions from Mr Male causes my client to incur further unnecessary costs as Affidavits etc to oppose the winding up application will now have to be finalized, filed & served etc.

Your client won't obtain any costs but instead will have to pay my client's costs if it persists with this pointless application. If your client persists with this pointless application then my client will have to continue its application to set aside the statutory demand, and incur costs as a direct result of your client's pursuit of the pointless winding up application.

In my view the Supreme Court is very likely to be less than impressed with such an approach by your client.

If common sense does not prevail, and your client continues with this application, and/or the decision to discontinue is unduly delayed (ie delayed beyond close of business tomorrow - 18 July 2007) then we will seek indemnity costs against your client and yourself.

Given your response, I am now (as of 7.20 pm on Tuesday 17 July 2007) commencing work which otherwise could have been avoided (had your client promptly adopted a common sense approach), with costs to be claimed on an indemnity basis accruing accordingly. Such work will include the following:

1. Notice of appearance in winding up application;
2. Affidavits in opposition to winding up application;
3. Further Affidavits in support of application to set aside statutory demand;
4. Affidavit of service for application to set aside statutory demand;
5. Application for security of costs for opposing winding up application in the minimum amount of $20,000.00;
6. Summarily [sic] dismissal application of winding up application;
7. Application to strike out incompetent dispositions filed on behalf of Smart Transit Ltd;
8. Drafting programming orders to be sought at first return dates of both applications

(We require the provision of outlines of submissions well prior to any hearing taking place. A hearing will not take place at the first return date in any event as any Lawyer with substantive advocacy experience in the Supreme Court well knows. Further, the hearing of the winding up application cannot precede the hearing of the application to set aside the statutory demand. Further one of the people from whom an Affidavit needs to be obtained in support of our application to set aside the statutory demand is intestate [sic] and won't be available to depose to such Affidavit until 27 July 2007);

1. Forensic analysis of OHMS envelope (which will not be able to be completed before 23 or 24 July 2007); and
2. Commence work on submissions for both applications.

In addition to legal fees, disbursements and filing fees will also be incurred.

It is totally irresponsible and unacceptable of your client to be unavailable/uncontactable for any extended period at this point in time, given the proximity to the various Court proceedings' dates.

36 On 19 July 2007, Ms in de Braekt sent by facsimile a copy of a bank cheque payable to Smart Transit for the amount of the judgment and costs in the Magistrates Court proceedings.

37 On the same day, Mr Gough wrote to the Civil Listings Coordinator at the Supreme Court, and apparently copied that letter to Ms in de Braekt by facsimile. Mr Gough's letter read as follows:

Dear Civil Listings Officer

Smart Transit Ltd v Pro Used Pty Ltd COR 88 of 2007 (Winding up proceedings) and Pro Used Ltd v Smart Transit Ltd COR 106 of 2007 (Application to set aside Statutory Demand)

The two matters referred to above involve the same parties.

COR 88 of 2007 is a winding up application that is based on the failure of the relevant company (Pro Used Pty Ltd) to comply with a statutory demand.

COR 106 of 2007 is an application seeking to set aside the statutory demand, which was filed after the winding up application. The affidavit is support of the application to set aside the statutory demand deposes to matters asserting that the service of the statutory demand was not effected in accordance with the process deposed to in the affidavits filed on behalf of our client.

The solicitor representing Pro Used Pty Ltd (Megan in de Braekt) has in correspondence suggested the application to set aside the statutory demand should not be heard after the hearing in which the winding up application may be determined.

The winding up application is listed for hearing at 9.15am on Monday 23 July 2007. The application to set aside the statutory demand is listed for hearing at 9.15am on 24 July 2007. In the circumstances, given the request that we have received from Ms in de Braekt, we would be grateful if you could list the application to set aside the 459 notice at the same time as the winding up application is being heard, that is at 9.15am on 23 July 2007.

Alternatively, if this is not possible at this stage, we would be grateful if you could ensure that the judicial officer who is hearing the winding up application on 23 July 2007 also have access to the file in relation to the application to set aside the statutory demand (that is COR 106 of 2007).

38 On 20 July 2007, Ms in de Braekt wrote to Mr Gough, enclosing her client's bank cheque for $11,176.60. The letter also enclosed an affidavit of Mr Shaw sworn 19 July 2007. The letter continued:

Your client clearly did not have the required standing to validly commence the winding up application, as your client knew prior to commencing the proceedings, that my client genuinely disputed the debt, given my client's filing and pursuit of an application to set aside the default judgment in the Magistrates' Court, as per my facsimile to Mr Graham Anstee-Brooks on 24 May 2007, which included Mr Vlahov's Affidavit sworn on 23 May 2007. This is included in Mr Shaw's Affidavit sworn 19 July 2007 and is also included in an Affidavit sworn by myself to be filed later today.

It was imprudent and improper of your client to commence winding up proceedings when he well knew Proused [sic] Pty Ltd had no solvency difficulties, and also to commence such proceedings prior to determination of my client's application to set aside the default judgment. Your client has accordingly incurred otherwise avoidable costs due to its own poor and imprudent decision making. It will accordingly have to bear the burden of such costs itself, as well as it being very likely that it will have to also bear the burden of my client's costs, which are considerable, as I had warned you, but which you appeared to disregard.

Further, you and your client knew on 13 June 2007 that neither Director of Proused [sic] Pty Ltd had received the statutory demand dated 9 May 2007, however despite this you improperly filed the winding up application which was entirely reliant on the statutory demand. Your acknowledgement and acceptance of the Proused [sic] Directors not having received the statutory demand dated 9 May 2007, was confirmed by your service of the winding up application upon both Directors at their respective home addresses, rather than only relying on effecting service at the registered company address.

Additionally, your client unreasonably rejected the cheque payment forwarded on or about 14 April 2007, and most improperly retained the cheque, despite later requests it be returned after your client had rejected it. Your client and your firm well knew that non-payment of the alleged debt had nothing to do with its solvency and your client therefore improperly commenced and pursued the winding up application against my client, in clear abuse of the Court's processes.

Your client has improperly used the winding up application for the purpose of simple debt collection, without making any attempts to enforce the judgment in the jurisdiction in which it was obtained, which would have been far cheaper for your client, and the appropriate course of action to take (only until learning of my client's application to set aside the default judgment of course).

As my client does not intend to appeal the decision of the learned Magistrate not to set aside the default judgment, my client had no option but to pay Smart Transit the respective amount in the default judgment order, which it has now done, as per the undertaking in my email of 17 July 2007.

Significant costs have been incurred by my client due to the Plaintiff's improper use of winding up proceedings, and the plaintiff allegedly being uncontactable due to his departure overseas in the week before the first return dates of the Supreme court matters in which his company is a party. Indeed you informed me in your emails to continue with preparatory work as if the proceedings would continue. This is what we have done and substantial costs have resulted.

Your client's position in the Supreme Court proceedings is embarrassing and entirely unsustainable. It is my view your client's approach is likely to attract judicial criticism, and may also attract indemnity costs being awarded against your client.

Lastly, you and your client are put on notice that neither my client nor I will abide any submissions (oral or written) made on behalf of your client, in the Supreme Court, which do not accurately and properly represent the facts and truth of the matters in issue.

39 The contents of this letter are relied upon by the Committee as supporting allegation (c) - see para 16(d) of the application and para 18(d) (as to the last paragraph).

40 Mr Shaw's relatively lengthy affidavit of 19 July 2007 repeated in substance the circumstances of the receipt of the OHMS letter on 18 June 2007. It recited the fact that a cheque had been sent to Smart Transit on 17 April 2007 but had not been accepted by Smart Transit apparently because the cheque was expressed to be in full and final settlement of all matters between Pro Used and Smart Transit. Mr Shaw deposed that at no time had Pro Used been insolvent and that the debt to Smart Transit was 'genuinely in dispute between the parties'. References were made to the affidavit filed in the Magistrates Court in support of the application to set aside the default judgment, and to the fact that that affidavit had been provided to Minter Ellison on 23 May 2007. Mr Shaw then deposed to the circumstances surrounding the alleged agreement upon which Smart Transit had sued, and asserted that no agreement had ever been concluded.

41 Paragraphs 34 to 38 of Mr Shaw's affidavit read as follows:

1. I believe these winding up proceedings are unjustified and inappropriate because Proused [sic] did provide payment by cheque to Smart Transit on or about 14 April 2007, but Smart Transit unreasonably rejected it because of the attached reasonable conditions (ie full & final settlement), and thereafter Proused [sic] Pty Ltd sought to have the default judgment set aside due to a genuine dispute about the alleged debt. At no time was the solvency or insolvency of Proused [sic] Pty Ltd in issue, nor was it a factor in any way responsible for the payment / non-payment of the said alleged debt.
2. Further, despite their prior knowledge of Proused's [sic] application to set aside the default judgment in the Magistrates' Court (see Annexure 6), Smart Transit and Minter Ellison proceeded nonetheless to file a winding up application against Proused [sic] based entirely on the default judgment Smart Transit had obtained against Proused, [sic] and without making any other attempts to enforce the judgment in the jurisdiction in which it had been obtained.
3. The abovementioned 24 May 2007 facsimile sent to Minter Ellison (Annexure 5) clearly explained on the fax cover sheet, that Proused [sic] Pty Ltd had filed an application in the Magistrates' Court (on 23 May 2007) to set aside the default judgment obtained by Smart Transit Ltd in case number 18227/2006 on 14 March 2007. But despite this Smart Transit Ltd and its lawyers - Minter Ellison, commenced and pursued the winding up application against Proused, [sic] which relied entirely on the default judgment which we had applied to have set aside.
4. Further support for my belief that Smart Transit's pursuit of this winding up application has been and is for improper purposes in abuse of the Court's processes, is that despite Minter Ellison being informed by Proused's [sic] Lawyer on behalf of Proused, [sic] on 13 June 2007, that Proused's [sic] Directors had not received any statutory demand, Minter Ellison on behalf of Smart Transit proceeded to file the winding up application 13 June 2007, and thereafter continued to pursue it.
5. Further support for my belief that Smart Transit's pursuit of this winding up application has been and is for improper purposes in abuse of the Court's processes, is Smart Transit's rejection of our offer of payment on or about 14 April 2007, which included the very reasonable condition that the payment be in full and final settlement of all matters between Proused [sic] and Smart Transit.

42 Paragraphs 42 and 49 of the affidavit deposed that:

1. The submissions filed in the Magistrates' [sic] Court in case number 18227/06, on behalf of Smart Transit Ltd by Minter Ellison, in opposition to the setting aside of the default judgment, form Annexure 7 hereto. The content of those submissions (including but not limited to (& amongst other things dealt with in a separate Affidavit) Smart Transit's request to the Magistrates' [sic] Court that Proused's [sic] application to set aside the default judgment be adjourned sine die so as not to interfere with progression of this winding up application) supports my belief that this winding up application against Proused [sic] Pty Ltd was commenced and is being pursued without justification, and for improper purposes.
2. Based on my belief that Smart Transit's application to wind up Proused [sic] Pty Ltd has been commenced and is being pursued without justification (as explained elsewhere in this Affidavit), and for improper purposes, further supporting evidence of Proused's [sic]solvency is not provided in this Affidavit, due to our serious concerns about Smart Transit also 'fishing' for more detailed information about Proused's [sic] financial capacities, when Smart Transit is not properly entitled to such further information. However we will of course provide such further evidence of our solvency to the court should it hereafter be necessary to do so and the Court so requires.

43 These paragraphs are those referred to in paragraph 16(a) of the application set out above. The affidavit then recounted the history of the proceedings in the Magistrates Court.

44 In the course of opposition to the application to set aside the judgment in the Magistrates Court, Smart Transit's solicitors filed submissions in opposition to the application. Those submissions referred to the failure by Pro Used to comply with the statutory demand and the fact that winding up proceedings had been commenced on 13 June 2007, prior to anything being served in relation to the application to set aside the default judgment. The submissions continued:

... it is submitted that the matter ought be adjourned sine die pending determination of the Supreme Court proceedings. Of note is the fact that the defendant seeks to ventilate in this Court matters which by virtue of section 459S of the Corporations Act they now can not ventilate (or rely on) in the Supreme Court Proceedings. Policy considerations ought prevail in that it was clearly the intention of Parliament to deny parties the right to rely on the circumstances of an underlying debt when they fail to respond to a Statutory Notice of Demand.

45 Mr Shaw's affidavit of 19 July 2007 (at para 42) made reference to those submissions as follows:

The content of those submissions (including but not limited to (& amongst other things dealt with in a separate Affidavit) Smart Transit's request to the Magistrates' Court that Proused's [sic] application to set aside the default judgment be adjourned sine die so as not to interfere with progression of this winding up application) supports my belief that this winding up application against Proused [sic] Pty Ltd was commenced, as is being pursued without justification, and for improper purposes.

• No other debt recovery or judgement enforcement action had been taken pursuant to the Civil Judgments Enforcement Act 2004 (WA) in respect of the default judgment prior to the issuing of a statutory demand;
• Pro Used had never received any documents from Smart Transit or its lawyers which made any enquires about, or alleged, the insolvency of Pro Used;
• Pro Used has no unpaid debts;
• Smart Transit is a foreign registered company, its Director, Mr Male is not an Australian Citizen, Smart Transit does not own any real property in Western Australia, Pro Used has incurred substantial costs in relation to the statutory demand, and therefore Pro Used had instructed its lawyer to seek security for costs in an amount of $15,000 if the winding up application was not concluded before 23 July 2007.

47 It is noteworthy that in neither his affidavit of 19 July 2007 nor his earlier affidavit of 23 May 2007 in the Magistrates Court, did Mr Shaw depose to having made any enquires of Kennerlys to ascertain whether it had received the letter of 9 May 2007 enclosing the statutory demand, nor whether the OHMS letter had been sent from Kennerlys.

48 At 7.15 pm on 20 July 2007, Ms in de Braekt sent an email to Mr Gough in which she said:

It was entirely improper of you to forward a letter to listings at the Supreme Court without first obtaining my (including my client's) permission to do so. You did not even mention the possibility [o]f forwarding such a communication.

It is my client's view that this was a deliberate approach.

Your letter to the Supreme Court was totally misleading, and likely to constitute contempt of Court.

If my client so instructs me, contempt of Court proceedings will be immediately commenced against you.

Do not ever purport to send any communication to any Court or tribunal on my, or my client's behalf ever again. The reference in your letter to 'Ms in de Braekt's request' gave the strong impression the letter had been sent with my prior consent, which was certainly not the case.

I did not even have any prior knowledge of any such letter being sent to the Court, let alone approve its content.

Do not ever forward communications to any entity relying upon or making reference to anything I may have said or done.

COR 106 of 2007 is my client's application, not yours. You have absolutely no right or ability to make any such attempt to change the first return date of our application.

What an absolute disgrace.

Your conduct is this regard is outrageous and most improper.

49 This communication is relied upon by the Committee in relation to allegation (c) - see para 18(e) of the application.

50 On 22 July 2007, a further email was sent to Mr Gough by Ms in de Braekt. In it she criticises Mr Gough over his attempt to send a long affidavit by facsimile rather than by process server, and continues:

The affidavit is an incompetent deposition anyway (based on what I received), and also fails to present the relevant information accurately and completely.

The production of such documents simply causes unnecessary costs to be incurred by both parties, and in the absence of a diligent opposing lawyer, would potentially mislead the Court.

51 Those paragraphs are relied upon by the Committee - see para 18(f) of the application.

52 On 23 July 2007, Ms in de Braekt swore and filed an affidavit 'in support of summary dismissal of winding up application and costs order against the plaintiff' in the winding up proceedings. The 27 annexures to the affidavit included most of the communications referred to above. It recounted the history of her involvement in the Magistrates Court proceedings and the communications in relation to her application to set aside the default judgment. In paragraphs 32 to 34 of the affidavit, Ms in de Braekt referred to the letter of 19 July 2007 from Mr Gough to the Civil Listings Coordinator and the reference to 'the request we have received from Ms in de Braekt'. She deposed to never having made any such request to Minter Ellison and to the fact that no attempts had been made to contact her prior to the letter being sent. She continued at para 33:

This letter sent to the Supreme Court is falsely based as it improperly relies on me having allegedly said something which I never said. I filed the application to set aside the statutory demand on behalf of my client - Proused [sic], and if it is in my client's best interests to request the first return date be brought forward, then only I make such requests, not the opposing party's lawyers.

53 In paragraph 19(d) of the application, the Committee relies upon paragraphs 43, 44, 47, 48, 50 and 51 of the affidavit. Those paragraphs read as follows:

1. On 19 June 2007 Mr SHAW delivered this 'OHMS' envelope to my office together with its contents, copies of, which all form Annexure 21 hereto. The OHMS envelope was postmarked '17 JUNE 07 PERTH', but was not franked. A return address in the front, top left-hand corner of the envelope had been whited out. The OHMS envelope was addressed to Mr Grant Shaw at his home address, and was handwritten. As is clearly evident, there is no mention of Proused [sic] Pty Ltd on the outside of the OHMS envelope.
2. On 11 July 2007 at 10.28pm I sent an Email to Minter Ellison (Annexure 22) asking whether they had any knowledge of the OHMS envelope and its contents received by my client.
3. On 12 July 2007 at 7.21pm I sent an email to Minter Ellison (Annexure 24) requesting relevant staff from their firm and the Director of their client company (Mr MALE) participate in a forensic examination of the OHMS envelope by providing their fingerprints and samples of their handwriting to forensic analysts engaged by my client.
4. On 13 July 2007 at 12.12pm , I received an email from Minter Ellison (Annexure 25) stating in very strong terms that the abovementioned OHMS envelope was entirely irrelevant to Proused's [sic] application to set aside the statutory demand which its Directors did not receive until after business hours on 18 June 2007. Indeed it was stated not less than 4 times in their email that the OHMS envelope was 'irrelevant' or 'totally irrelevant'. Further, Minter Ellison declined to participate in the forensic examination of the OHMS envelope as mentioned above.
5. After business hours on 12 July 2007 at 5.29pm, Mr Craig GOUGH of Minter Ellison sent me an email requesting to inspect the OHMS envelope at my office the following day. A copy of this OHMS envelope was annexed to an Affidavit sworn by Mr Grant Langley Hohepa SHAW, Director of Proused [sic] Pty Ltd, on 10 July 2007, and filed in the Supreme Court in COR 106 of 2007.
6. On Tuesday 17 July 2007, at 4.45pm I sent an email (Annexure 26) to Mr Craig GOUGH at Minter Ellison, in response to their request to inspect a document, a copy of which was annexed to an Affidavit sworn by Mr Grant Langley Hohepa SHAW, Director of Proused [sic] Pty Ltd, on 10 July 2007, and filed in the Supreme Court in COR 106 of 2007. I stated the respective document (an OHMS envelope) could be inspected at my office at 2.30pm on Wednesday 25 July 2007.

54 Ms in de Braekt deposed that on 13 July 2007 she contacted a person referred to as 'Lejo' at Kennerlys in regards to the question of receipt of the statutory demand. She deposed that Lejo advised her that a person named 'Keira' had not accepted delivery of, nor forwarded, any such item to Pro Used. She deposed that Lejo informed her that Kennerlys did have a record of receipt of something for Pro Used on or about 9 May 2007, but had no details of what the item was, and that the person who had taken receipt of the item and apparently forwarded it on to Pro Used no longer worked at Kennerlys as she was a temporary relief replacement and her current whereabouts were unknown. She deposed to being unable to arrange to take an affidavit from Lejo because of his unavailability.

55 The affidavit continued that neither Minter Ellison nor Smart Transit had ever provided Ms in de Braekt with any evidence of insolvency of Pro Used nor made any allegation of insolvency on the part of Pro Used.

56 The two applications were adjourned to be dealt with by the Master of the Supreme Court on 3 August 2007. On 2 August 2007, Ms in de Braekt filed an outline of submissions in opposition to the winding up application and in support of the application to set aside the statutory demand. Those submissions asserted that there had been a misuse of the statutory demand and winding up provisions of the Corporations Act. She contended that the proceedings were an abuse of process warranting an order for costs on an indemnity basis against Smart Transit.

57 Paragraphs 17 to 19 of the submissions summarised Ms in de Braekt's contentions in the following terms:

1. When considering whether there has been a misuse of such provisions, and therefore an abuse of process, regard is to be had to the overall context in which the proceedings were commenced and continued: Re Bond Corporation Holdings Ltd (1990) 8 ACLC 153, at 163, per Ipp J.
2. Whether proceedings have been commenced or continued in circumstances, where the applicant, properly advised, ought to have known they were inappropriate, without proper justification and/or unlikely to succeed, the surrounding context is a relevant consideration in determining whether proceedings [sic] an abuse of process has resulted, and also in determining issues of costs: Re Bond Corporation Holdings Ltd (1990) 8 ACLC 153, at 164, per Ipp J.
3. Smart Transit's use of the statutory demand, and its subsequent commencement and pursuit of winding up proceedings in this Court against Proused [sic], was from the outset, and remains a clear abuse of process, for the following reasons:
   1. no evidence of winding up proceedings being the only option;
   2. no attempt to utilise enforcement procedures in the jurisdiction in which the judgment was obtained;
   3. no evidence of insolvency;
   4. no evidence of asset dissipation;
   5. Smart Transit's knowledge of Proused's [sic] application to set aside the default judgment in the Magistrates' [sic] Court, prior to filing the winding up application;
   6. Smart Transit's prior knowledge that the debt was genuinely disputed;
   7. Smart Transit's prior knowledge that non-payment of the debt was in no way connected to Proused's [sic] solvency;
   8. Smart Transit's unreasonable refusal of Proused's [sic] payment offer (made on a commercial basis) on or about 18 April 2007;
   9. Smart Transit's refusal to discontinue the winding up application unless Proused [sic] agreed to pay all of Smart Transit's costs in COR 88 of 2007 and COR 106 of 2007, its instructions to Proused [sic] not to bother delivering the bank cheque payment and that the winding up proceedings would continue unless the aforementioned was agreed to;
   10. Smart Transit's knowledge (from 15 June 2007 onwards) that the Directors of Proused [sic] had not received the statutory demand (on which the winding up application relied) prior to winding up proceedings being commenced, but despite this, refusing to discontinue the winding up proceedings and also opposing Proused's [sic] application to set aside the statutory demand.

58 The written submissions then contained more detailed submissions, by reference of authority, to support each of the 10 reasons summarised in paragraph 19. In relation to reason number 10, the submissions read as follows:

1. Smart Transit's knowledge of Proused's [sic] Directors' non-receipt of statutory demand
2. It was improper of Smart Transit to have issued the statutory demand, but was unconscionable of it to rely on non-compliance with such statutory demand as a basis for the (improperly taken) winding up application, when Smart Transit well knew such non-compliance was in no way due to Proused's [sic] solvency or insolvency, but rather Smart Transit's rejection of payment offer on or about 18 April 2007, thereafter the existence of a genuinely disputed debt (until 16 July 2007), and Proused's [sic] Directors non-receipt of the statutory demand until after business hours on 18 June 2007.
3. Paragraph 12 (page 4) of Proused's [sic] solicitor's Affidavit (sworn & filed 23 July 2007) confirms she informed Mr Gough of Minter Ellison, on 15 June 2007 that the Directors of Proused [sic] had not received any statutory demand from Smart Transit.

59 In relation to the application to set aside the statutory demand, Ms in de Braekt said at paragraphs 65 and 66:

1. It was improper of Smart Transit to have issued the statutory demand, but was unconscionable of it to rely on non-compliance with such statutory demand as a basis for the improperly taken winding up application, when Smart Transit well knew such non-compliance was in no way due to Proused's [sic] solvency or insolvency.
2. Proused's [sic] application to set aside the statutory demand was certainly arguable and had good prospects of success. The fact is that a Director of Proused [sic] received (by mail) the statutory demand after business hours on 18 June 2007, which comprised Proused [sic] being served with the statutory demand. Whether Smart Transit's solicitors had caused another copy of the statutory demand to be served on Proused's [sic] office on another date is irrelevant. Proused [sic] had an entitlement to make an application to set aside the statutory demand it had received at one of its Director's home address on 18 June 2007 (after business hours), and it duly did so on 10 July 2007. Such statutory demands can be served on a company at the home address of a Director, which is what occurred after business hours on 18 June 2007, albeit in a [sic] 'OHMS' envelope, which raises other issues to be raised elsewhere.

60 The submissions concluded with references to authorities in relation to costs orders where proceedings are an abuse of process.

61 The matter came before the Master of the Supreme Court on 3 August 2007. The hearing was relatively brief. The Master observed that there was no evidence led by Pro Used which went to establish that service as alleged by Smart Transit had not taken place. Ms in de Braekt responded that the evidence of service was hearsay and thus should not be relied upon. Rather, she suggested, there should be an affidavit from a process server rather than from Mr Johnson who deposed to 'causing' service to be effected by a pre-paid registered post and by courier. Having made that point, Ms in de Braekt continued:

... we would also say that's in part irrelevant because service obviously cannot only take place effectively at the office, the registered office of the company, but also, under the Corporations Act of course, at the homes of the respective Directors of the company. It is our respectful submission that that is what occurred after business hours on 18 June when Mr Shaw received the statutory demand, as he swore in his affidavit ...

62 The Master had raised the issue that the application to set aside the statutory demand appeared to have been made outside of the 21 day period permitted for such applications. Having made the submission set out above, Ms in de Braekt continued:

So with respect, it's my submission that it was open and indeed available to Pro Used to make an application to set aside the statutory demand after it had been served with that notice with the statutory demand at the director's home address after business hours on 18 June. Then if we also take into account the Acts Interpretation Act, s 36(1) which excludes from the computation of time days which include events having occurred on those days, then that takes us to the application to set aside a statutory demand having been filed and served within time ...

63 The Master was critical of Ms in de Braekt's allegations of impropriety against Minter Ellison, and expressed the view that it seemed to him that Ms in de Braekt had misunderstood completely the statutory demand process. He dismissed the application to set aside the statutory demand process and ordered that Pro Used pay Smart Transit's costs on a full indemnity basis save insofar as the costs had been unreasonably incurred. The winding up application was dismissed and Pro Used was ordered to pay Smart Transit's costs of that application.

64 The allegation by the Committee that Ms in de Braekt accepted instructions in a matter for which she lacked the required standard of competence, and the allegation that she acted incompetently in respect of that matter, are based upon the matters raised in para 10 and para 14 of the application, and it is necessary to consider each of those in turn.

Applying to set aside statutory demand more than 21 days after service and after winding up petition filed and served

65 Section 459G(2) of the Corporations Act provides that an application may only be made within 21 days after a statutory demand is served. It was not in dispute that the 21 day period within which an application to set aside a statutory demand must be made is not capable of extension - David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43; [1995] 184 CLR 265 (David Grant).

66 Ms in de Braekt was aware of the 21 day time limit, at least from 11 July 2007 when Mr Gough referred in his email to her to the time limit and to the decision in David Grant. At para 61 of her written submissions to the Master, express reference is made to the 21 day time limit. What is apparent from those submissions, is that Ms in de Braekt took the view that the application was within time because service had not been effected until 18 June 2007 when the OHMS envelope with its enclosures was received by Mr Shaw. That was of course some five days after the winding up application had been made by Smart Transit on 13 June 2007.

67 Ms in de Braekt explained her arguments in her written submissions filed after the hearing before the Tribunal. She points out that s 601CX(3) of the Corporations Act permits service of a document on directors of companies personally. On the basis that the OHMS document had been received by Mr Shaw on 18 June 2007, Ms in de Braekt explained (at [87] of the written submissions):

1. This raised the legal question about whether the 21 day period began to run from the 9 May 2007, when Smart Transit Pty Ltd claimed it first served a statutory demand on Proused [sic] Pty Ltd, or from 18 June 207 [sic], when Mr Shaw, (director of Proused [sic] Pty Ltd) received a statutory demand in the mail at his home address. Would the clock (ie 21 day clock) start to run at the first, or last service date (if indeed there was actually a 'first' service date on or about 9 May 2007)?
2. This situation also raised the legal question of whether the Court would consider these to be the same statutory demand, or different statutory demands? These legal questions were never heard or determined on their merits, nor were they determined at all.

68 A number of observations can be made about that argument.

69 The first is that it was no part of Smart Transit's application that the statutory demand had been served at any time other than on 9 May 2007. If service on 9 May 2007 were proved, the presumption of insolvency which arises pursuant to s 459C(2) of the Corporations Act arose on 31 May 2007. The application for winding up based upon that presumed insolvency was instituted on 13 June 2007. Ms in de Braekt's argument appears to be that if, as she contended, Smart Transit re-served Pro Used by delivery personally to a director, there would no longer be any presumed insolvency because the 21 day time for compliance commenced to run again. Ms in de Braekt describes that argument as 'perhaps novel or creative' but 'not ridiculous or hopeless'.

70 In our view, the proposition that effective service, as it occurred on 9 May 2007, would be rendered ineffective for the purposes of the operation of Pt 5.4 of the Corporations Act by the later provision of a copy of the relevant documents to a director is an argument that lacks any sensible basis.

71 The second observation which can be made is that delivery of the notice to a single director of a two director company, would not, in any event, satisfy s 601CX(3). That section provides that where two or more directors of a registered body reside in Australia, a document may be served on the body by delivering a copy of that document personally to each of two of those directors. In circumstances where Smart Transit's solicitors expressly denied sending the OHMS letter, no reliance was placed by Smart Transit on service having been effected on 18 June 2007, and service pursuant to s 601CX(3) could not be achieved by delivery to only one director, it is difficult to see any basis for a contention that there had been an effective fresh service, even if there were a basis for arguing that time recommenced running from a second service of a statutory demand.

72 The third observation is that, even if time began to run following service on 18 June 2007, the 21 day period, within which an application to set aside was required to be made, expired on 9 July 2007. The application by Pro Used was made on 10 July 2007 and was thus out of time in any event. Ms in de Braekt's submission to the Master sought to rely on s 36(1) of the Acts Interpretation Act 1901 (Cth) (AI Act) to support her submission that service occurred within time. That section excludes from the computation of time the day on which the occurrence, from which the time is calculated, occurred. She also refers to the fact that the alleged service occurred 'after business hours'. It is not clear whether Ms in de Braekt considered that after hours personal service on a director meant that service was then deemed to have occurred the following day, so that the following day would be excluded from the calculations. Otherwise s 36(1) of the AI Act is of no assistance. If that was her submission, it was, in our view, without merit, so that the application to set aside the demand on the basis that it was served on 18 June 2007 was fatally flawed even if time did begin to run again after that alleged service.

73 Ms in de Braekt sought to argue that Mr Johnson's affidavit did not prove service, because it contained hearsay evidence and was thus inadmissible. That was a contention with which the Master did not agree. Mr Johnson's affidavit deposes to him causing the statutory demand to be sent by pre-paid post to Pro Used's registered office, and to be couriered to the registered office. He attached to his affidavit the documentary records obtained by his firm as to both the postage by express post, and as to delivery confirmation by the courier service. As the Master observed, there was nothing in the lengthy affidavits filed on behalf of Pro Used which suggested that the documents had not been received at the registered office. In our view, the evidence contained in Mr Johnson's affidavit was sufficient to prove service in accordance with s 601CX(1)(a) of the Corporations Act. But even if Ms in de Braekt's submissions in relation to proof of service on 9 May 2007 were successful, there was no purpose to be served by arguing that the demands said to have been served on 18 June 2007 should be set aside. Smart Transit's case depended upon establishing service on 9 May 2007. If it did not establish that service, its application for a winding up order would necessarily have been dismissed. It would not have been open to Smart Transit to argue, if service on 9 May 2007 were not established, that it could rely on the notice because it was served five days after the application for winding up was commenced.

74 It follows that Ms in de Braekt's contention that her application was to set aside the demand served on 18 June 2007 was not capable of achieving any practically favourable outcome for her client.

75 Paragraph 14 of the application sets out a number of grounds which were relied upon by Ms in de Braekt in defending the winding up petition which the Committee says demonstrates a fundamental lack of understanding of the relevant law. Six different grounds were referred to. Ms in de Braekt submits that the grounds were not argued in isolation, but were rather each was put forward as one of many arguments as to the proceedings being an abuse of process.

Other options available to recover the debt other than winding up proceedings

76 The matters referred to in para 14(a) and para 14(b) of the application can be dealt with together. They concern the proposition that the winding up application should have been dismissed because there were other options available to Smart Transit to recover the debt other than seeking to wind up Pro Used, and that Smart Transit had not sought to enforce the default judgment in the Magistrates Court.

77 In her written submissions to the Master, under the heading 'No evidence of winding up proceedings being the only option' Ms in de Braekt submitted that Smart Transit had not provided any explanation or evidence as to why it did not use judgment enforcement provisions available in the jurisdiction in which it had obtained the default judgment. In para 25 of those submissions, she submitted that 'winding up proceedings should only be taken when they are the only available option: Ayrton Investments Pty Ltd v Andrlik 34 ACSR 64 (Ayrton Investments) at p 648 para 38'. The citation of Ayrton Investments was a typographical error, and should have been Ayrton Investments Pty Ltd v Andrlik [2000] ACTSC 55; (2000) 34 ACSR 643. Paragraph [38] of the decision of Higgins J in Ayrton Investments reads as follows:

There are two competing considerations. On the one hand, creditors should not issue demand notices as a more convenient alternative to suing for recovery of their debts in a court of competent jurisdiction. They should be positively satisfied that there is no genuine dispute concerning the debt and that the debtor was insolvent so that recovery of the debt otherwise than by winding up was unlikely. In the present case, I am satisfied that the respondent did not at any time believe the dispute was genuine. The appearance of a genuine dispute was a product of false testimony. The respondent also had reasonable grounds to conclude that the applicant was probably then at least, temporarily insolvent.

78 It can be seen that the passage relied upon is not authority for the proposition put forward in Ms in de Braekt's submission that winding up proceedings should only be taken when they are the 'only available option'.

79 Ms in de Braekt also submitted to the Master that 'it is an improper use of winding up proceedings to use them as an alternative to judgment enforcement procedures properly taken in the jurisdiction in which the judgment was obtained: Re Lympne Investments Ltd [1972] 2 All ER 385' (Re Lympne Investments Ltd). That submission was repeated in Ms in de Braekt's closing submissions to the Tribunal.

80 The relevant passage from Re Lympne Investments Ltd is found at pp 388 - 389 where Megarry J said:

A real dispute, turning to a substantial extent on disputed questions of fact which require viva voce evidence, and involving charges of fraud or near fraud, cannot properly be decided on petition. Nor is it right, or in accordance with the modern practice, to stand over the petition in order that the disputed issues may be resolved in other proceedings. That practice, I may say, seems to stem from Re London & Paris Banking Corpn. The Companies Court must not be used as a debt-collecting agency, nor as a means of bringing improper pressure to bear on a company. The effects on a company of the presentation of a winding-up petition against it are such that it would be wrong to allow the machinery designed for such petitions to be used as a means of resolving disputes which ought to be settled in ordinary litigation, or to be kept in suspense over the company's head while that litigation is fought out.

81 Neither that passage, nor anything else said in the decision, supports the proposition that where a creditor has obtained a judgment in a court of competent jurisdiction in relation to a debt, it is improper for the creditor to use winding up proceedings before exhausting possible enforcement procedures in the court in which the judgment was obtained. The comments in Re Lympne Investments Ltd were directed to the situation where there is unresolved litigation or dispute in relation to the debt. That is not the case where the debt exists by reason of a judgment.

82 In relation to the contention that enforcement procedures should first be exhausted, Ms in de Braekt also cited in her submissions to the Master the decision in Re Sarina; ex parte Wollondilly Shire Council [1980] FCA 66; (1980) 30 ALR 266 (Re Sarina) although cited in the submissions as (1980) 32 LR 596. In that decision, Deane J was called upon to determine whether the word 'able' in s 52(2)(a) of the Bankruptcy Act 1966 (Cth) should be read as 'willing and able'. The question arose because the debtor in that case had demonstrated his solvency. Notwithstanding that, it was argued that, because he had refused to pay the debt to the creditor, it should be found that he was not able to pay his debts in the sense relevant to the statutory provision. Deane J considered the arguments, but concluded that there was no policy underlying the provisions of the Bankruptcy Act to the effect that a creditor should be entitled to make a recalcitrant debtor bankrupt even though the debtor satisfies the court that he is plainly solvent and able to pay his debts. In those circumstances, His Honour said 'It seems to me that it may well be that the legislative intent was to leave a creditor, in those circumstances, to the ordinary remedies by way of execution and garnishee'.

83 The proposition for which Re Sarina was quoted in the submission before the Master was put by Ms in de Braekt as follows (at [27] of the submissions):

Smart Transit should have sought to enforce the default judgment order it had obtained in the Magistrates' [sic] Court, by using enforcement procedures in the Magistrates' [sic] Court, but it made no efforts to do so, and instead abused the Supreme Court's processes.

84 Re Sarina is not authority for that proposition.

85 In her submissions to the Tribunal, Ms in de Braekt made references to a number of other decisions of various courts to the effect that statutory demand and winding up petitions should not be used as a way of bringing pressure to bear on a creditor to pay a disputed debt, where it knows of the dispute. It is not necessary to deal with those cases in any detail, because all of them are to the effect of those already discussed. The important distinction in this case is the existence of the judgment debt obtained in the Magistrates Court, so that the basis of dispute of the debt, dealt with in some detail in Mr Shaw's affidavit of 19 July 2007, was no longer relevant to the obligation to pay.

86 Ms in de Braekt points out that, at the time the application for winding up was lodged, Smart Transit's representatives were aware of the application to extend time to apply and to set aside the judgment. Because that application had not, as at 13 June 2007, been resolved, she argues that it was clear that the debt was disputed, thus rendering the issue of a winding up application inappropriate. It is however clear from the correspondence that the advice to Smart Transit was that the application to set aside the default judgment was without merit and would not succeed. That view proved to be correct. Where, as here, a creditor holds a judgment for the amount of its claim and holds a view that the proposed attack on that judgment is without merit, we do not agree that it could be said that it is an abuse of process for the creditor to exercise its entitlement to issue a statutory demand, and commence proceedings consequent upon the failure of the debtor to meet that demand.

No evidence before the court that Pro Used was insolvent

87 In her submissions to the Tribunal in relation to this aspect of the matter, Ms in de Braekt said (at [153] of the submissions):

It is well established that Courts will not grant winding up applications based purely on a failure to meet a statutory demand, as there may be many reasons for a company not meeting a statutory demand other than insolvency: Deputy Commissioner of Taxation v Guy Holdings Pty Ltd (1994) 12 ACLC 996 ([sic] 966) (at 970), and as also referred to in Keay's Insolvency 2005.

88 The decision in Deputy Commissioner of Taxation v Guy Holdings Pty Ltd [1994] TASSC 126; (1994) 12 ACLC 966 concerned the question of whether an application for winding up should be permitted to continue notwithstanding that the debtor had paid the particular debt the subject of the statutory demand. The passage of the decision at p 970 of the report does not support the broad proposition put by Ms in de Braekt, although the decision would support an argument that, payment of Pro Used's debt having been made, and no other evidence of insolvency or debts being put before the court, the winding up application should be dismissed. The case says nothing about where the costs should lie, and it must be borne in mind that the substantial issue after payment of the judgment debt was merely the question of who should pay the costs of the Supreme Court proceedings.

89 More significantly, however, Ms in de Braekt's submissions appear to completely overlook the presumed insolvency which flows from a failure to pay the amount of a statutory demand within the required time. The statutory demand procedure is designed to avoid the necessity of creditors undertaking the difficult task of proving insolvency. Smart Transit was entitled to rely on the presumed insolvency in pursuing its action, and as a justification for the commencement for the proceedings and their entitlement to the costs of the proceedings. The fact that Smart Transit did not seek to adduce any additional evidence of insolvency is not unusual and certainly does not provide a basis to dismiss the application for winding up.

90 Ms in de Braekt submitted to the Master that the refusal by Smart Transit to accept the cheque tendered in full and final settlement of all matters between Pro Used and Smart Transit in April 2007 was a relevant consideration in the winding up application. She cited the decision in Commonwealth Bank of Australia v Parform Pty Ltd [1995] FCA 1445; (1995) 13 ACLC 1309. That decision concerned whether an offer made by the Company following the issue of a statutory demand amounted to compounding the debt in the sense referred to in s 458E(2) of the Corporations Act so that the notice had in fact been complied with. In this case, the original tender of a cheque occurred prior to the issue of the statutory demand, and thus considerations as to whether the demand had been complied with within 21 days of having been made did not arise.

91 Ms in de Braekt also submitted that the tender of the cheque demonstrated solvency. By itself, the capacity to meet a particular debt of a company does not establish solvency. The proffer of the cheque, which was never presented, in April 2007, is at best marginally relevant to the solvency of the company at the relevant time. In any event, the Committee's concern is as to the reliance on the proposition that unreasonable refusal of the proffered additional payment in April 2007 provides a basis to resist the winding up application. We agree that it does not.

Smart Transit's refusal to discontinue the winding up proceedings unless costs were paid

92 The payment of the judgment debt by Pro Used did not lead to the conclusion that the commencement of the winding up proceedings were unjustified. The question of the costs of the Supreme Court proceedings remained to be resolved. Smart Transit was entitled to maintain the proceedings for the purposes of obtaining an order for costs which it considered to be justified. We agree with the Committee that there was no basis for the allegation made by Ms in de Braekt that maintenance of the proceedings while the issue of costs remained unresolved, constituted an abuse of process so that the winding up application should be dismissed.

No actual receipt of the statutory demand by the directors prior to service of the winding up application

93 Ms in de Braekt submits that this issue is relevant to the exercise of a discretion under s 459J(1)(b) of the Corporations Act which permits a court to set aside a demand if satisfied that there is some other reason why the demand should be set aside. She cites Hoare Bros Pty Ltd v Commissioner of Taxation (1996) 62 FCR 302 as authority for the proposition that:

The unconscionable, unfair or unjust issuance of a statutory demand, or making of a winding up application, or where such processes are used in a manner which produces substantive injustice, or is an abuse of the court's processes, the statutory will be set aside under s 459J(1)(b) of the Corporations Act and a connected winding up application will fail.

94 In that case, in their joint reasons for decision, Black CJ, Einfeld and Sackville JJ, in considering the proper construction of s459J(1)(b), said at [691]:

It would be unwise to attempt to mark out the limits of the discretion conferred by s 459J(1)(b). Paragraph 687 of the Explanatory Memorandum provides illustrations of circumstances that might constitute appropriate reasons for setting aside the demand. Another illustration, which was given by the Australian Law Reform Commission in a discussion paper (General Insolvency Inquiry (DP 32, 1987), par 114), is the situation in which a creditor unreasonably refuses the Company's offer to meet the debt. The circumstances of Norper may well afford a further illustration. In the present case, Olney J implied that he would have been prepared to exercise the discretion in the Company's favour, had it been shown that the Commissioner's conduct was unconscionable, was an abuse of process, or had given rise to substantial injustice.

95 In her submissions to the Tribunal, Ms in de Braekt explained the point made before the Master as follows:

The respondent practitioner argued that it would be unfair or unconscionable not to set aside the statutory demand, or to grant the winding up application, when the reason for Proused [sic] Pty Ltd not meeting the statutory demand had nothing to do with its solvency/insolvency. The practitioner argued that it was unconscionable for the winding up application to be commenced when Smart Transit's Lawyers well knew 3 weeks before doing so, that Proused [sic] Pty Ltd had filed & served an application to set aside the default judgment, & it was also known that the statutory demand allegedly served on Proused [sic] Pty Ltd's office had never reached the Directors of Proused [sic] Pty Ltd. Annexure 6 of the respondent practitioner's Affidavit filed in the Supreme Court on 23 July 2007, refers [55 - 56].

96 That submission suffers from the difficulty that actual receipt of a copy of the statutory demand by the directors was not required in order for effective service to have occurred. To suggest that reliance on service on a registered office is unconscionable where, for some reason, the directors have not become aware of the service, ignores the effect of the statutory regime imposed by the Corporations Act in relation to service. The submission that that reliance constitutes an abuse of process or might give rise to substantial injustice suffers from the same difficulty.

Conclusion in relation to allegations of incompetence

97 Ms in de Braekt submits that this is not a case where she simply did not bother to research or consider the relevant law, but rather she did so diligently. That, she submits, is illustrated by the numerous case authorities contained in her written submissions, and to the references in those submissions to the Corporations Act and the Rules of the Supreme Court.

98 As is revealed by the above discussion of Ms in de Braekt's arguments, we are of the view that she misconstrued authority and put forward arguments which bore no chance either setting aside the statutory demand or of resisting the winding up application, or at least an order that her clients pay the cost of the winding up application. We accept that the submissions made to the Master demonstrate that she gave the matter considerable attention. It is quite apparent from her submissions to the Tribunal that she relied heavily on the text, Keay's Insolvency: Personal Choice and Corporate Law and Practice, (6th ed, 2008), from which she has extracted references to the various authorities upon which she relied. She has, however, then cited those authorities as support for propositions which they do not support, or at least for far broader propositions than can be justified.

99 In our view, the Committee has made out its complaint that Ms in de Braekt acted incompetently in the course of legal practice in the manner identified in para 10 and para 14 of the application. She attempted to overcome the 21 day limitation by her 'novel and creative' argument based on service on 18 June 2007. That argument created a false issue that resulted in considerable extra work for herself, Smart Transit's lawyers and the Court. She relied upon matters said to support a conclusion as to an abuse of process where those matters, whether seen together or in isolation, did not support that conclusion. She appears to have overlooked the fundamental presumption of insolvency that follows from non compliance with a statutory demand based upon a judgment debt.

100 Allegation (a) is that Ms in de Braekt accepted instructions in a matter in which she lacked the standard of competence that a member of the public is entitled to expect of a reasonably competent legal practitioner. Ms in de Braekt did not give evidence, and thus provided no information to the Tribunal as to her mode of practice, and in particular her level of experience in commercial litigation. The Committee's case appears to be put on the basis that the fact that she acted in a manner which demonstrates incompetence, suggests that it was unsatisfactory professional conduct to accept instructions in relation to that matter. That contention requires an inference to be drawn from her conduct that she was generally incapable of acting competently in relation to winding up proceedings. We do not consider that that general inference can fairly be drawn. All that the evidence establishes is that, in relation to this particular matter, she did not act competently. We do not think that we can go so far as to say that she should not have accepted instructions in the field at all. In our view, allegation (a) is not made out.

Allegation (c) - making allegations of impropriety etc without reasonable grounds

101 Allegation (c) made by the Committee is that in the course of legal practice, Ms in de Braekt made allegations, or alternatively conveyed allegations, of impropriety, unsatisfactory professional conduct or professional misconduct about another legal practitioner in circumstances where she had no, or alternatively no reasonable, grounds for making or conveying such allegations.

Allegations that Mr Gough or Smart Transit had acted improperly

102 The various passages in which Ms in de Braekt accused Mr Gough and Smart Transit of acting improperly are indentified and set out above. In summary, his affidavit of 19 July 2007, Mr Shaw described pursuit of the winding up application as being for 'improper purposes in abuse of the Court's processes'.

103 In her email to Mr Gough of 11 July 2007, Ms in de Braekt accused Smart Transit of 'improperly using the winding up application for simple debt collection, ... improperly attempting to avoid a merit determination of the Magistrates' [sic] Court matter, ... improperly attempting to prevent Proused [sic] from defending the Magistrates' [sic] Court matter, ... attempting to improperly pressure Proused [sic] Pty Ltd and/or attempting to gain an improper strategic advantage for itself'.

104 In her affidavit of 23 July 2007, Ms in de Braekt described continuation of the winding up application as 'pointless and perhaps also an abuse of process', 'most inappropriate', 'an abuse of the Court's processes' and 'improperly using the process for simple debt collection'.

105 In her letter to Mr Gough dated 20 July 2007 Ms in de Braekt described the commencement of the winding up proceedings as 'imprudent and improper', and made several other references to improper use of winding up proceedings.

106 In her closing submissions to the Tribunal, Ms in de Braket firmly maintained that the allegations of impropriety were appropriately made. She did so essentially on the basis of the arguments which she had made in her submissions to the Master and repeated to the Tribunal, which we have dealt with in relation to the allegation of acting incompetently. For the reasons explained above, the argument that the commencement and continuation of the winding up proceedings was improper is without merit.

107 Legal practitioners should be slow to make allegations of impropriety against other legal practitioners or their client. Such allegations should not be made unless there is a reasonable basis upon which to make them. The same can be said of allegations of abuse of process. It is apparent that the impropriety asserted by Ms in de Braekt was based upon her view that, having regard to the various matters upon which she relied, the winding up proceedings amounted to an abuse of process.

108 Some care must be taken in construing the expression 'abuse of process' in the context of winding up applications following issue of a statutory demand. The question of whether an abuse of process had occurred in circumstances where a winding up petition had been issued in relation to a disputed debt was discussed by Ipp J in Re Bond Corporations Holdings Ltd (1990) 1 WAR 465 at pp 467 ­ 471. Ipp J considered a number of authorities concerning disputed debts, and whether a Court's refusal to deal with a winding up petition in those circumstances is based upon abuse of process or a want of standing, and whether the expression, 'abuse of process' was used in its ordinary sense or in some extended way which encompassed a lack of standing. He concluded that there was distinction between a want of standing and abuse of process, although it appears he accepted that either might arise in the context of winding up proceedings in relation to disputed debts, depending on the circumstances of the particular case.

109 Ms in de Braekt did not, however, confine herself merely to allegations that the proceedings constituted an abuse of process. Rather, she accused Smart Transit and their legal advisors, of impropriety. She continues to make that allegation in these proceedings. The allegation was without foundation. It is clear that Ms in de Braekt believed, and indeed still believes, there was a basis for that serious allegation. The question is whether erroneous belief amounts to a reasonable ground for making the allegation.

110 In our view it does not. The arguments that the winding up petition should be dismissed could all have been put without any allegation of impropriety being made. The constant references to acting improperly were unnecessary, and viewed objectively, were likely to inflame the dispute rather than achieve its resolution. Had Ms in de Braekt taken more care to investigate the basis of her allegations, she might have realised that her arguments lacked merit, and that the allegation was unfounded.

Allegation that Mr Gough intentionally misled the Supreme Court or the Magistrates Court

111 Again, the particular passages relied upon by the Committee to establish that the practitioner alleged that Mr Gough had intentionally misled the Supreme Court or the Magistrates Court or both are set out and identified above. In summary, they are as follows.

112 In her email to Mr Gough dated 11 July 2007 Ms in de Braekt alleged that important information had been omitted from affidavits drafted by Minter Ellison 'where such information does not favour your client' and that it would 'be open to the courts to find at least some of these affidavits to be misleading'. One matter said to have been omitted from the affidavit was 'any explanation for the OMHS envelope matter'.

113 Ms in de Braekt contends that she did have grounds to say that much important information had been omitted from the affidavits filed on behalf of Smart Transit, and that it would be open to the Court to find that at least some of the affidavits were misleading. At para 270 of her written submissions to the Tribunal she says that that allegation was justified because:

- nothing is said in the Affidavits filed in the Supreme Court, about Smart Transit having been served with an application to set aside the default judgment obtained by Smart Transit in the Magistrates' [sic] Court;

- nothing is said in the Affidavits filed in the Supreme Court, of Smart Transit's &/or Mr Gough's knowledge of information which was inconsistent with Proused [sic] being insolvent;

- nothing is said in the Affidavits filed in the Supreme Court, of Smart Transit's &/or Mr Gough's knowledge of the reasons for Proused [sic] not having paid the debt amount contained in the statutory demand allegedly served on Proused's [sic] office on or about 9 May 2007, which had nothing to do with Proused's [sic] solvency or insolvency;

- nothing is said in the Affidavits filed in the Supreme Court, of Smart Transit's &/or Mr Gough's knowledge of the Directors of Proused [sic] not having received the statutory demand allegedly served on Proused's [sic] registered office on or about 9 May 2007;

- there being no Affidavits before the Supreme Court sworn by the persons who actually (allegedly) posted or delivered documents to Proused [sic];

- there having been nothing contained in the Affidavits filed in the Supreme Court, explaining why Smart Transit could not recover the debt through judgment debt enforcement processes, in the jurisdiction in which the default judgment was obtained (ie the Magistrates' [sic] Court Civil Jurisdiction).

114 Other than the affidavit of Richard Michael Johnson which was sworn on 17 July 2007 in relation to the application to set aside the statutory demand, none of the affidavits relied upon by the plaintiff in the Supreme Court proceedings were produced at the hearing before the Tribunal. We assume, therefore, that Ms in de Braekt's submission as to the matters not addressed in the relevant affidavits is correct. The substance of Ms in de Braekt's justification for her allegation is that misleading a court or tribunal may occur as a result of failing to provide all relevant information, or being deliberately selective about the information provided.

115 The email of 11 July 2007 did not identify the 'many material matters' said to be omitted, other than information in relation to the OHMS envelope. There was nothing in the email which would have enabled Mr Gough to know what other information was said to be omitted thus rendering the affidavits misleading. But even if Ms in de Braekt had set out in the email the matters set out in her submissions to the Tribunal, we do not consider that those matters constitute a reasonable basis for the serious allegation that another practitioner has misled a court. The matters mentioned by Ms in de Braekt were matters which she considered, we think wrongly, were relevant to her client's defence to the winding up petition. It was apparent from the correspondence between Ms in de Braekt and Mr Gough that Mr Gough did not share that view. The proposition that Mr Gough, or that his client, misled the court by failing to include in affidavits materials which were not necessary for it to prove as part of its case, and which were considered to be irrelevant, is simply not justified.

116 The effect of the email sent at 6.40 pm on 12 July 2007, which is set out at [24] above, is also relied upon as constituting an allegation that Mr Gough misled the courts. It is by no means clear what emails are being referred to by Ms in de Braekt in that email, nor what 'allegation' by Mr Gough is being addressed. Whilst Ms in de Braekt's email of 12 July 2007 is expressed in terms which we consider quite inappropriate in communications between lawyers, it is not open on the information before us to conclude that the email amounts to an allegation of misleading the court.

117 The third communication relied upon by the Committee is para 33 of Ms in de Braekt's affidavit of 23 July 2007 which is set out at [52] above.

118 Ms in de Braekt submitted to the Tribunal that what is contained in para 33 is 'precisely the truth'. She asserts that she made no 'request' to have the application to set aside the 459 notice at the same time as the winding up application, and thus what she said in her affidavit was true.

119 It is quite apparent that the reference to 'the request' in the fifth paragraph of Mr Gough's letter to the Court is a reference back to the previous paragraph. In the previous paragraph, Mr Gough advises that 'in correspondence' the solicitor representing Pro Used has suggested that the application to set aside the statutory demand should not be heard after the hearing in which the winding up application may be determined. That suggestion is contained in the paragraph numbered 8 in Ms in de Braekt's email at 7.55 pm on 17 July 2007 (see [35] above).

120 Ms in de Braekt's submission on this point reads as follows:

1. It is unheard of to have a practitioner for an opposing party, write to the Supreme Court behind the back of the other practitioner (who acts for the party who commenced the proceedings, ie to set aside a statutory demand) to change an appearance date of such application. It is entirely unheard of for such a thing to happen. It is only for the practitioner who acts for the party who commenced the proceedings, to write to the Supreme Court to ask for such a date to be changed, or at very least, the opposing party should first write to the other party's lawyer (in this case the respondent practitioner) & request whether such practitioner & his/her client are agreeable to such a course occurring, before writing to the Supreme Court and effecting such a change.

121 It would have been preferable had Mr Gough conferred with Ms in de Braekt about rearranging the hearing times prior to writing to the Court. It was apparent, however, that by 19 July 2007, the relationship between Ms in de Braekt and Mr Gough was poor, and that may explain why Mr Gough did not confer on the question before writing to the Court. It is quite wrong, however, to suggest, as Ms in de Braekt does in her submissions, that Mr Gough acted 'behind the back of the other practitioner'. He copied the letter to the Civil Listings Officer to Ms in de Braekt. His communication with the Court was, therefore, appropriately disclosed to the opposing practitioner.

122 In our view, the use of the word 'request' in the context of the letter of 19 July 2007 was not misleading. It was a direct reference to Ms in de Braekt's own suggestion that the application to set aside the statutory demand should be heard and determined before the winding up application. Mr Gough was merely endeavouring to accommodate that suggestion. Ms in de Braekt's deposition that the letter to the Supreme Court was 'falsely based' and 'improper' was without foundation.

123 In the last paragraph of Ms in de Braekt's letter to Mr Gough of 20 July 2007 Ms in de Braekt said:

You and your client are put on notice that neither my client nor I will abide any submissions (oral or written) made on behalf of your client, in the Supreme Court, which do not accurately and properly represent the facts and truth of the matters in issue.

124 Ms in de Braekt justifies that comment on the basis that no practitioner or party has to abide any submissions which do not accurately and properly represent the facts and truth of the matters in issue. She submits that she had experienced earlier difficulties in that regard 'as evidenced in her correspondence' and there was nothing wrong with her saying that neither she nor her client would abide this occurring in the future.

125 In our view, whilst this paragraph of Ms in de Braekt's letter is gratuitously offensive and inappropriate, we are not prepared to draw the inference that it constitutes an allegation of intentionally misleading the court as alleged in para 18(d) of the application.

126 In her email of 7.15 pm on 20 July 2007, Ms in de Braekt made reference to the letter to the Supreme Court Listings Coordinator saying that it was 'totally misleading, and likely to constitute contempt of court'. For reasons which we have discussed in relation to para 33 of the affidavit of 23 July 2007, which contains the same allegation, we find that the email did constitute an accusation that Mr Gough had deliberately misled the Court, and that allegation was without any reasonable foundation.

127 Finally, the Committee relies on the passage of the email sent on 22 July 2007 set out at [50] above. The relevant passage complains of a failure to present relevant information accurately and completely and suggests that such documents 'would potentially mislead the court'.

128 In our view, that passage of the email, both standing alone or taken in such context as can be discerned, falls short of amounting to a complaint that Mr Gough had intentionally mislead either the Supreme Court or the Magistrates Court.

129 It follows that we are of the view that Ms in de Braekt did allege that Mr Gough had intentionally misled either the Supreme Court or the Magistrates Court in the communications referred to in paras 19(a), (c), and (e) of the application where she had no reasonable grounds for making that allegation.

Misleading in relation to who sent the statutory demand

130 Paragraph 19 of the application identifies four communications which the Committee says raise or imply the possibility that Mr Gough or Minter Ellison had sent documents to the directors of Pro Used in a manner intended to mislead Pro Used and the Supreme Court as to who sent the documents and when, without any reasonable ground for raising or implying such a possibility.

131 The first communication relied upon is contained in the second and third last paragraphs of the email from the practitioner to Mr Gough on 11 July 2007 set out at [20] above. In that email, Ms in de Braekt posed certain questions about the OHMS envelope. As we have already noted, the focus on the circumstances of receipt of the OHMS envelope by Mr Shaw created a false issue. The questions put in the email of 11 July 2007 related to that misguided focus. In Ms in de Braekt's submissions to the Tribunal in relation to the 11 July 2007 email, she maintained that the questions put were legitimate forensic enquires. It was not until the following day that Mr Gough advised Ms in de Braekt that nobody at Minter Ellison sent the OHMS envelope or arranged for it to be sent or had any knowledge of it. At that stage Ms in de Braekt appears to have considered it necessary to determine the source of the OHMS letter, and her enquiry was directed to that issue. In those circumstances, we do not think that the questions contained in the email of 11 July 2007 could be said to give rise to an implication of any intention by Mr Gough or Minter Ellison to mislead Pro Used or the Supreme Court as to who sent the documents. That is so even though Ms in de Braekt described the mailing and use of the OHMS envelope as 'a very serious matter'.

132 The second communication relied upon by the Committee on this issue is the email from the practitioner to Mr Gough dated 12 July 2007 which is set out at [24] above. As we have already noted, the demands made in that email are extraordinary. They demonstrate a completely disproportionate approach to what Ms in de Braekt perceived to be a relevant issue. The costs to both parties, if the demands had been acceded to, would have been quite disproportionate to the value of the litigation. The demands were made after Mr Gough had advised Ms in de Braekt that Minter Ellison had no involvement in sending the OHMS envelope, and indeed were a response to that advice. The clear implication is that Mr Gough and Minter Ellison were acting misleadingly in denying any involvement. The elaborate proposal for examination by forensic experts could only be sensibly viewed as being based upon Mr Gough's denial being misleading.

133 The third communication relied upon by the Committee is in the second last paragraph of the email from the practitioner to Mr Gough dated 13 July 2007 and sent at 2.48 pm. The relevant passages of that email are set out above at [29]. That email was a reinforcement of the demands contained in the email of 12 July 2007, and in our view, carried the same implication that Mr Gough and Minter Ellison had sent documents to the directors of Pro Used in a manner intended to mislead Pro Used and the Supreme Court. It can be noted that, in her affidavit filed in the Supreme Court proceedings, Ms in de Braekt deposes to having contacted Kennerlys on or about 13 July 2007, and that she was told that Kennerlys had received something from Pro Used on 9 May 2007 and someone had 'apparently forwarded it on to Proused [sic]'. Having been given that information, and having been advised by Minter Ellison that the documents had not been sent in the OHMS envelope by anyone at Minter Ellison, the most likely inference to be drawn was that the OHMS envelope had come from Kennerlys. In those circumstances, we do not consider that Ms in de Braekt had any reasonable basis for implying that Mr Gough or Minter Ellison had set out to mislead Pro Used or the Supreme Court.

134 The final document relied upon in relation to this allegation is Ms in de Braekt's affidavit of 20 July 2007 paragraphs 43, 44, 47, 48, 50 and 51 all of which are set out above at [53]. The paragraphs relied upon do not include para 46 which recites the response from Minter Ellison on 12 July 2007 advising Ms in de Braekt that the firm denied any involvement in, or knowledge of, the OHMS envelope. When that context is taken into account, we agree that the recitation in the affidavit of the demands for forensic investigation carry the implication that the denial of involvement was misleading. For the reasons already discussed we consider that that implication lacked any foundation.

135 It follows that we consider that the communications referred to in paragraphs 19(b), (c) and (d), raise or imply the possibility that Mr Gough and Minter Ellison had sent documents in a manner intended to mislead Pro Used and the Supreme Court as to who sent the documents and when, and that there were no reasonable grounds for raising or implying such a possibility. We consider that that conduct amounts to unsatisfactory professional conduct.

136 In her submissions, Ms in de Braekt justifies her actions by asserting that she was making a legitimate forensic enquiry, and that legal practitioners should not be curtailed in pursuing information relevant to proceedings for fear of causing offence to a law firm or lawyers. While we accept that legal practitioners are entitled to pursue relevant information from other lawyers, and if necessary to do so robustly, it does not follow that practitioners are entitled to convey implications of serious misconduct by another practitioner, without carefully considering the basis upon which such suggestion or inference is made. The starting point for any practitioner is an expectation that other practitioners will tell the truth. That is their duty as officers of the Court. It is a serious matter for practitioners to do otherwise. There are occasions where it may be necessary for a practitioner to allege that another has made a statement which is misleading, or even untruthful. But that should only be done where a reasonable basis for the assertion exists. In this case, Ms in de Braekt appears to have simply developed a theory, contrary to the express denial by another practitioner, for which there was no foundation. That that is so, is evident from the fact that Mr Gough and Minter Ellison placed no reliance whatsoever on any delivery of the statutory demand to Mr Shaw at his home address on 18 June 2007. There was no logical reason why Mr Gough or Minter Ellison would have sent the envelope with the copy of the notice to Mr Shaw, or if they did, no logical reason for them to deny doing so. In those circumstances, Ms in de Braekt, cannot, in our view, justify her actions by asserting that the serious inferences against Mr Gough and Minter Ellison were based on some sound forensic purpose.

137 In her written submissions, Ms in de Braekt refers to the need for the Tribunal to be satisfied by cogent evidence of any alleged unprofessional conduct in the sense described in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336. That submission is undoubtedly correct.

138 The respondent contends that in order to establish an absence of grounds for the allegations which she made, it is necessary for the Committee to adduce affirmative evidence that she lacked any grounds. It is true that the burden of proving the allegations rests with the Committee. The Committee has, in our view, proved its case by adducing evidence of the history of dealings between Ms in de Braekt and Mr Gough. There is nothing in that history of dealings which suggests any reasonable basis for the allegations which we have found Ms in de Braekt to have made, or conveyed on behalf of her client. Ms in de Braekt chose not to give evidence, and therefore to indicate that there was some other information in her possession which gave her a basis for the allegations. In those circumstances, we are satisfied from the history of dealings, and the events as disclosed in the affidavits produced to us at the hearing, that no reasonable basis for the allegations and inferences which she made against Mr Gough, Minter Ellison and Smart Transit existed.

The practitioner's general approach to the litigation

139 In these reasons we have set out at some length the communications between Ms in de Braekt and Mr Gough, and relevant portions of affidavits made or prepared by Ms in de Braekt. Those documents reveal a troubling tendency in this litigation for Ms in de Braekt to write in intemperate and offensive terms in relation to the opposing solicitor and the opposing client. As we have found, a number of those communications went beyond the bounds of acceptable professional conduct. In the proceedings before the Master, he cautioned Ms in de Braekt 'to be extremely careful in relation to your dealings with other solicitors'. That is advice with which we agree. The interests of clients and the proper administration of the law are served by practitioners extending to each other proper professional courtesy. Resort to personal abuse leads to a loss of the objectivity that is necessary for proper legal representation, and results in distraction from the real issues in the client's dispute. This case is a good example of that proposition.

140 For the foregoing reasons, we find that Ms in de Braekt engaged in unsatisfactory professional conduct between 10 July 2007 and 8 August 2007 by:

1. Acting incompetently in the course of legal practice;
2. In the course of legal practice, making allegations, or alternatively conveying allegations of impropriety, unsatisfactory professional conduct or professional misconduct about another legal practitioner in circumstances where the practitioner had no, alternatively no reasonable, grounds for making or conveying such allegations.

141 The Tribunal will hear the parties in relation to the appropriate penalty.

1. The Tribunal finds that Ms Megan Maree in de Braekt engaged in unsatisfactory professional conduct between 10 July 2007 and 8 August 2007 by:
   1. Acting incompetently in the course of legal practice;
   2. In the course of legal practice, making allegations, or alternatively conveying allegations of impropriety, unsatisfactory professional conduct or professional misconduct about another legal practitioner in circumstances where the practitioner had no, alternatively no reasonable, grounds for making or conveying such allegations.
2. The matter is adjourned for directions at 9.30 am on 1 February 2011 in order to make directions as to determination of the question of penalty.

I certify that this and the preceding [141] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

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