Reliance Financial Services Pty Ltd v Leroy

Summary of conclusions 8 Reliance's onus of proof is determinative. Apart from one amount of $10,000 loaned by Reliance to Mr Elliott and another $1500 in fees, Reliance has not proved, on the balance of probabilities, that the charge secures any specific amount of money. To the contrary, despite the hearing being adjourned on 22 August 2016 until 9 November 2016 (the next mutually convenient date available to all parties), Reliance's evidence raises more questions than it answers. These questions arise in circumstances where the services said to have generated the fees owing are professional accounting services and Reliance or companies which are related to it must possess any information that exists to prove the specific amount secured by the charge. Given these circumstances, it is reasonable to expect that cogent evidence proving the amounts owed by Mr Elliott would be adduced. This has not occurred. The only explanation given for the inadequate nature of the evidence adduced, water damage to computer servers on multiple occasions, is unhelpful to Reliance because the material said to have been lost has not been specifically identified, and the material in fact relied upon is beset by difficulties. Given that it was within Reliance's power to call various witnesses (such as those who worked on the relevant accounts) and adduce such documentary evidence as it saw fit, I infer that such other evidence would not have assisted its case, and the limited and problematic evidence which Reliance has adduced is the best it can do. For the reasons below, Reliance's best is not good enough to prove the bulk of its case.

The deeds 9 The parties to the deeds include different entities related to Reliance. Reliance is the successor to those entities. It is not in dispute that Reliance is the current trustee of a trust and the assets of that trust include any moneys secured by the charge, despite the identity of the trustee having changed. For ease of comprehension I will refer to the parties to the deeds as a Reliance entity on the basis that it is not in issue that all rights arising under the deeds vested in Reliance on its appointment as trustee. 10 The first deed was executed on 10 October 2006 between, relevantly, a Reliance entity, Armstrong Scalisi Holdings Pty Ltd as trustee for another entity (which provided the accounting services), Mr Elliott and Apollo. The recitals refer to the sum of $11,500 owed on account of a loan of $10,000 and outstanding fees for accounting work of $1,500. Mr Elliott gave evidence of receipt of that amount and, despite some confusion about what he was handed (cash or a cheque that could be cashed), I accept this evidence. I accept also, based on this deed, that $1,500 was owed on account of professional fees. 11 By clause 1 of the deed, Armstrong Scalisi Holdings Pty Ltd agreed to provide accounting services "[s]ubject to the terms of the deed and any costs agreement". By clause 2, Mr Elliott and Apollo (referred to as the Clients) were jointly and severally liable "for fees payable…for work performed". By clause 4, Armstrong Scalisi Holdings Pty Ltd assigned all amounts owing and to be owed to Reliance. By clause 7, Mr Elliott and Apollo granted to Reliance a charge over any real property "owned by the Clients (or any of them) in their sole name or jointly" for "payment of amounts owing under this deed, including future incurred liabilities…in respect of and to the extent of moneys owing under this deed". By clause 13, liabilities under the deed became immediately due and payable on, relevantly, an act of bankruptcy. The deed has been stamped under the Duties Act 1997 (NSW) (the Duties Act) for an amount of $16,000 (consistent with a caveat that was registered over the land). 12 The costs agreement, also dated 10 October 2006, provides that fees would be billed as work progresses on a time cost basis and that the right to issue "subsequent bills in the event of any errors or omission in previous bills" was reserved. The costs agreements with Mr Elliott and Apollo also provided for a grant of a charge over real property "in respect of any moneys which you owe CAP Accounting" (CAP Accounting being the business name of Armstrong Scalisi Holdings Pty Ltd at that time). 13 A supplementary deed dated 23 November 2009 provides in clause 3 that the earlier deed was amended by including JTE as a party bound by the same terms as Apollo and Mr Elliott. Mr Elliott and JTE also agreed to clause 5 by which "secured by the securities they have they given", they are "liable to pay…all costs…incurred in the enforcement (and/or attempted enforcement) of this Deed, the Earlier Deed and any of the given securities".

Work done or work billed? 14 The terms of the deeds and costs agreement underpin my first conclusion against Reliance. Leaving aside clause 5 of the supplementary deed (which gives rise to separate issues), I do not accept that the charge created by the first deed (and extended by the supplementary deed) secured any money other than money which Mr Elliott, JTE and/or Apollo owed to Reliance before the sale of the land. Further, I do not accept that Reliance's internal running account of work it had carried out on behalf of Mr Elliott, JTE and/or Apollo proves any amount owed by them to Reliance. At best, Reliance's internal documents might prove the amounts which might be owed to Reliance if and when Reliance issued an invoice for the services. 15 I consider this conclusion follows from the terms of the documents which refer to "fees payable", "moneys owing under this deed", and "moneys which you owe". Moneys are owed or payable when there is an immediately enforceable obligation to pay an amount which is certain (Helou v PD Mulligan Pty Limited [2003] NSWCA 92; (2003) 57 NSWLR 74 at [26], Grocon Constructors (Victoria) Pty Ltd v APN DF2 Project 2 Pty Ltd [2015] VSCA 190 at [118]). 16 This conclusion is consistent with the costs agreement which bears the same date as the first deed, which provides for bills to be issued as work progresses. It is also consistent with common sense that, absent a provision for liability to pay arising on mere performance of the work, money will be owed and payable when billed and then in accordance with the terms of the bill. In the context of fees for professional services this would ordinarily be so (absent some specific contrary provision) because the amount owed may not be the same as the work done multiplied by the relevant time-cost. 17 Accordingly, leaving aside clause 5 of the supplementary deed, the charge secured the "fees payable", and the "fees payable" constituted the moneys owing under the deed. To be payable, the fees had to be billed. Despite the lack of invoices to Mr Elliot, JTE and/or Apollo being expressly raised as one of numerous evidentiary inadequacies by reason of which Reliance could not succeed on 22 August 2016, Reliance took no steps to remedy this deficiency by filing evidence of fees invoiced pursuant to the indulgence granted to it on that day enabling it to file further evidence. Instead, it filed further evidence of the systems it used for the creation of its internal time costing records. That evidence is considered below. 18 I should also note that to the extent that Reliance referred to the costs agreements as creating charges or a right to interest secured by those charges, until closing submissions it was not Reliance's case that the relevant charge was other than that created by the deeds. Reliance should not be permitted to depart from this case. Further, s 304 of the Duties Act provides that an instrument effecting a dutiable transaction is not admissible for any purpose and may not be presented in evidence in a court or tribunal exercising civil jurisdiction unless it is stamped as required. If the costs agreements created a separate charge from the deeds then the operation of s 304 would need to be addressed.

Proof - work done 19 My second conclusion against Reliance is that if my approach to construction of the deeds is incorrect and money was owing and payable merely by reason of work being done (as opposed to billed), then I am not satisfied that the internal records it has produced are reliable evidence of the work done or the amounts owing or payable by reason of the work done. 20 On 22 August 2016, at the conclusion of the hearing, I said that Reliance could not succeed on the basis of its evidence at that time given the: …lack of information about how, when and for what purpose so-called itemised accounts were prepared. Next, the fact that a person who has said to have prepared the itemised accounts has not been called. Third, inability of any person - and this is a really important one - to give evidence to attest to the correctness of the itemised accounts. Next, inconsistencies in the evidence as to how the itemised accounts were prepared either entry into an Excel spreadsheet apparently from some accounting system or perhaps directly produced by the accounting system. Next ..... on the face of the accounts including a conference with the person who was incarcerated at the time and various anomalies about the dates of preparation of the account information. …Next, the lack of any invoices or any other supporting material to provide any independent support for the itemised - so-called itemised accounts. 21 Reliance sought and was granted the indulgence of an adjournment to enable it to file and serve further evidence (by 5 September 2016) to address these issues. Reliance filed further evidence confined, however, to evidence of its usual processes for the creation of its internal accounting records. It is the totality of the evidence in respect of the internal records which I now consider. 22 Sam Cassaniti works for Reliance as a consultant. David Cassaniti, Sam's cousin, was the sole director of Reliance before he was made bankrupt earlier this year. The internal records are stored in or created by a system known as Practice Manager. 23 I accept that it was not put to Sam or David Cassaniti that the internal records were false. However, having regard to the whole of the evidence I do not consider that the consequence of this is that I am bound to be satisfied that the internal records are reliable. Reliance bears the onus of proof. The onus, as noted, relates not only to the existence of the charge, but the amount secured by the charge. 24 Sam Cassaniti's evidence disclosed that he had no input into the creation of the internal records and no knowledge of their content. His evidence was that he did not prepare the internal records and had not read them before giving evidence. He said he was "was well aware of how much work was done. There were boxes and boxes of documents done for these - work done for these people". However, no such material is in evidence. He also said on 22 August 2016 that tax invoices had been issued for the work, but they were not in Court and he did not know where they were. 25 Michael Lowe, who works for Reliance and succeeded Sam Cassaniti as director, said that he arranged for a caveat to be registered over the land (which is stamped for $16,000) after checking the internal ledger and seeing that over $105,000 was recorded as fees for work done. However, he too had no involvement in the creation of the internal records. He said that he "wasn't necessarily too concerned about the exact dollar amount", did not look at any invoices, and did not check the internal ledger against any other records such as timesheets. He also was not involved in carrying out any of the work and did not speak to any of the people who had carried out the work. 26 On 22 August 2016 Mr Elliott said he had received invoices but they were "[p]robably at home". He could not recall being involved in any conferences or other discussions in respect of accounting issues other than that he had been into the office of Reliance for many things. As he said "Everything is a blur. I don't remember all this". He did not know if any of the internal records of Reliance were correct. He gave this evidence: Isn't it the case, sir, you really have no idea how much indebtedness you have to Reliance or Cap Accounting? I owe them hundreds of thousands. 27 No such figure appeared in Mr Elliott's affidavit. In respect of his statement of affairs dated 18 May 2012 which refers to him owing Reliance $150,000, Mr Elliott said he filled that amount in after "running through whatever I owed" but could not say he had looked at any invoices for that purpose and could not recall how he had reached that number. He was then asked who gave him the information about $150,000 owing and he said "a staff member" (I infer, of Reliance). 28 David Cassaniti's affidavit dealt only with the usual practice for recording information in Practice Manager. His evidence included that he had not "had much to do with" this matter and thus could not recall anything about Mr Leroy's requests for information or requirement to produce documents by various notices issued under s 77A of the Bankruptcy Act to entities related to Reliance in early 2012. He also did not know if any invoices had been issued to Mr Elliott, Apollo or JTE for accounting work on their behalf. He agreed paper based files and some handwritten timesheets existed for Mr Elliott, Apollo and JTE and assumed they would be in Reliance's office. No such documents are in evidence. He compared the internal itemised accounts (that is, the internal ledgers created from Practice Manager, not invoices) with the Practice Manager records but not with any other documents. He gave this evidence: So you don't actually know exactly who created the data or the records in Practice Manager or the actual records in relation to the Excel spreadsheets. No, well, the Excel spreadsheets are an image of this data. This data - the accountants at the time who did the work would have inputted the data. Kirsten, the assistants, would have inputted the data. But there were other people as well, weren't there, that would perform that task, not just Kirsten? No, just Kirsten. The names are there. And did you at any time, and by reference to the document behind tab K by way of example, check the entries on this document back to the handwritten or manual timesheets? No. 29 I remain unconvinced that the internal records are reliable. The following matters lead me to infer that those records, which I accept to be business records and thus admissible to prove the truth of the representations which they contain under s 69 of the Evidence Act 1995 (Cth), cannot be taken at face value, with the consequence that the records do not persuade me about any particular amount owing to Reliance: (1) The person responsible for entering the data, Kirsten Hardie, accounts manager, was not called to give evidence for Reliance. Although she left Reliance's employ in 2014 and there was evidence that Reliance did not have her current contact details, no effort was made to find her and contact Ms Hardie. (2) The evidence indicated that Ms Hardie left Reliance when she had a child. There is no suggestion she was not available to give evidence had she been located and asked. (3) No-one else who gave evidence had any direct involvement with the creation of the internal records relevant to this case. (4) There is evidence that employees either created hard copy documents, such as file notes or time recordings, of the work they did which they or Ms Hardie then entered into Practice Manager or they otherwise entered such information directly into Practice Manager. No hard copy documents, such as file notes or time recordings are in evidence. No person who had done any work on the relevant files, apart from Sam and David Cassaniti, gave evidence. Sam Cassaniti did not enter anything into Practice Manager but arranged for others to do so on his behalf, and no such other persons gave evidence. David Cassaniti gave no evidence relevant to the creation of the specific records as they relate to work done for Mr Elliott, Apollo and JTE and he did not know much about this matter. (5) Accordingly, there is evidence that Reliance holds hard copy documents relating to the work it had performed but no such documents are in evidence. There is also evidence that numerous people worked on the files in Reliance's office and either created the hard copy documents or inputted relevant information into Practice Manager. None of those people have been called. There is no evidence that any such person was not available to give evidence. (6) There are more than a few anomalies on the face of the electronic records including: (a) A meeting of three hours on 12 July 2007 is shown as involving Mr Sam Cassaniti but he was in prison at that time for an offence or offences relating to tax fraud. (b) Balance sheets for 30 June 2009 are shown as being finalised as at January 2009, six months before the end of that financial year. (c) Despite this, financial statements for 2008 to 30 June 2010 are shown as also being finalised at January 2010. (d) Thus, on their face, the records show accounts for two financial years (2008/2009 and 2009/2010) being finalised six months before the end of those years and accounts for 2008/2009 being finalised twice - once in 2009 and once in 2010. (e) Sam Cassaniti's explanation of (b) to (d) as relating to preparation of interim accounts is not persuasive as it does not match the descriptions and he is not shown on the records as a person having been involved in this work, and thus has no direct knowledge of the work done in this regard. (f) In early 2012 Mr Leroy sought information about the affairs of Mr Elliott including the charge said to support the caveat on the land, including by service of various notices under s 77A of the Bankruptcy Act, forwarding these requests and notices to the office of Reliance including by facsimiles to the attention of Sam and David Cassaniti. Nothing was received in response. Sam and David Cassaniti could not recall the requests or notices despite them having been sent to Reliance's office to their attention. Failure to comply with a notice under s 77A without reasonable excuse is an offence (s 265A of the Bankruptcy Act). The information sought to be relied upon by Reliance to prove its case in this proceeding ought to have been produced in answer to the notices but was not. (g) Work that Sam Cassaniti is recorded as doing appears to involve extraordinary amounts of time, such as 170 minutes to "peruse and consider documents from the Supreme Court of NSW regarding winding up of Apollo Fencing (NSW) on the grounds of insolvency". His explanation that more work was done than is recorded is unconvincing. Given his general lack of recollection of other matters when giving evidence, it is unbelievable that he could recall that more work was done in this specific instance than is shown in the description. (h) Mr Elliott's statement of affairs dated 18 May 2012 shows that he is a fencing contractor. It shows his income before tax for the previous year, being wages from JTE (Apollo having been placed in liquidation) was $34,003. His estimated income for 2012 was also $34,003. There is no reason to infer that his income was greater than this in earlier years. However, the internal records show work done totalling over $16,000 for Mr Elliott, over $63,000 for Apollo, and over $19,000 for JTE for the period 6 October 2006 to 26 July 2010. Accounting and advisory fees of around $100,000 over a four year period for such a business seem somewhat unreal. Of themselves, the amounts involved would warrant scrutiny of the records but, for the reasons above, these records do not withstand scrutiny. (7) The context is the provision of professional accounting services. If any person ought to be able to prove the accuracy of its records by a multiplicity of means, it is an entity providing such services. Yet the evidence relating to the reliability of the internal records remains in the lamentable state described. 30 For these reasons, if my construction of the deeds is incorrect, the difficulty for Reliance is that - although I accept that some work for Mr Elliott, Apollo and JTE was carried out as contemplated by the deeds - apart from the work underlying the fees of $1500 referred to above, I am not satisfied that the internal records are reliable evidence. It is not possible to identify any particular entry from the internal records which would support the making of a declaration that any specific sum is owed to Reliance and secured by the charge. 31 This brings me to the invoices.

Proof - work billed 32 As noted, I consider that the moneys secured by the charge are confined to those moneys owing or payable in the sense that a demand for payment, by way of a bill, was made before sale of the land the subject of the charge. 33 Until 9 November 2016, the second hearing date, no such evidence was adduced. The evidence that was adduced on 9 November 2016, consisting of various invoices, appeared without notice, despite Reliance having been ordered to file and serve any further evidence by 5 September 2016. These circumstances are relevant to the issue of costs, but that is for another time. 34 My third conclusion against Reliance is that, for the reasons discussed below, the evidence in respect of the invoices is bedevilled by so many difficulties that it also does not persuade me that the charge over the land extended to any amounts shown in the invoices. 35 Sam Cassaniti said that some weeks before 9 November 2016 he asked someone in his office called Sue to go through some boxes and she gave him some tax invoices. He had not seen the invoices taken out of the boxes and did not known when they were created. He said he sent these invoices to the solicitors some weeks before 9 November 2016. 36 The invoices required payment within seven days. They are not marked as a copy of a document sent to the addressee. 37 Sam Cassaniti said that he compared these invoices to the internal records generated by Practice Manager and the information was consistent. He said at one point that he knew the invoices were sent to Mr Elliott because he was in the office when it was done, although he did not see it being done. At another point he accepted that he did not know what invoices were sent but recalled invoices being sent over the years. He assumed there was a mail-out book recording what was sent from the office but had not checked that book if it existed. There was no other record which he had indicating that the invoices were copies of documents that had been sent. 38 Sam Cassaniti's evidence that he recalled these invoices being sent is unpersuasive because the invoices purport to range from 2009 to 2012. The notion that he could recall each or any invoice being sent by hearing what others were doing in the office is unbelievable. Further, there is no explanation for inconsistency between the invoices he produced and invoices Mr Elliott produced (discussed below). If the Practice Manager records are consistent with these invoices (which became Exhibit 4) then those records cannot be consistent with the invoices Mr Elliott produced (which became Exhibit 5). 39 Mr Elliott said that the weekend before 9 November 2016 he looked in a cabinet he had for invoices because they had been raised during the hearing last time and he located a bundle of documents. He brought them to the hearing on 9 November 2016. The invoices Mr Elliott produced are: 30 June 2010 to Apollo for $55,000 for work said to relate to 2008 to 2010. 30 June 2010 to JTE for $22,000 for various matters. 30 June 2010 to Mr Elliott for $16,500 for " managing tax affairs for the financial year ending 30 June 2010". 20 June 2011 to JTE for $18,700 for work including fourth quarter BAS for financial year ending 30 June 2010. 8 December 2011 to JTE for $2,090 for draft financial and activity statements for the 2011 financial year. 7 September 2012 to JTE for $9,240 for work for the year ended 30 June 2012. 40 There are only two invoices in common between the bundle produced by Sam Cassaniti and the bundle produced by Mr Elliott, the invoices of 20 June 2011 to JTE for $18,700 and 8 December 2011 to JTE for $2,090. However, while the amounts on these two invoices are the same, the documents are different. Both invoices produced by Sam Cassaniti have additional information in the description section, which does not appear in the version produced by Mr Elliott. 41 Further, Mr Elliott produced an invoice dated 30 June 2010 to JTE for $22,000. Sam Cassaniti also produced an invoice dated 30 June 2010 to JTE for $13,200. The description of the work done on each invoice is the same. It is unlikely that JTE was sent two invoices of the same date for different amounts for the same work. The difference in amounts means that either the invoice produced by Mr Elliott is wrong or the Practice Manager records are wrong. 42 Again, it must also be recalled that Reliance's claim depends on performing professional accounting work. The idea that a service company providing professional accounting services has no clear record of invoices it has sent is difficult to comprehend. It casts significant doubt on the entire nature of the enterprise, at least insofar as proof for the purpose of this proceeding is concerned. 43 These circumstances, combined with the vagueness and unreliability of the evidence of Sam Cassaniti, mean that I am not persuaded that any of the invoices he produced in fact reflect what might have been sent to Mr Elliott. 44 It follows that I am left with the invoices Mr Elliott produced. He gave evidence that he did not know when he received the invoices. He did not know if he had received them all in one envelope or not. He did not know if he received them before or after he became bankrupt on 26 July 2010. He said he had made a few payments but nothing significant. In his affidavit he said that JTE had paid a total of $1,740 between 8 November 2010 and 12 December 2014. Nothing in the evidence identifies that any payment JTE made relates to any particular invoice. 45 Mr Elliott, Apollo and JTE do not appear to have challenged any of the invoices produced by Mr Elliott. In the usual course they would be prima facie evidence that the invoiced amounts are payable. However, a number of circumstances displace this inference: (1) Mr Elliott cannot recall receiving the invoices, does not know whether he received them on or about the date they bear, and does not know whether he received them in one envelope or not. He does not know whether he received them before or after his bankruptcy or, indeed, at any time in particular. (2) No one who sent the invoices has been called to give evidence and no business records which would tend to prove the invoices were sent on or around the date they bear have been tendered, despite Sam Cassaniti saying that a business record in the form of a mail-out book or equivalent might exist. (3) There is no evidence that any payment has been made in respect of the invoices. Nor is there evidence that any attempt has been made to require payment at any time (but for this proceeding). (4) No one who prepared the invoices or had any involvement in their preparation has been called to give evidence. (5) The evidence is to the effect that such invoices as were sent were based on the internal accounting records. As discussed above, I am not satisfied that those records are accurate and it follows that I am not satisfied that the invoices that were sent to Mr Elliott necessarily accurately reflect the moneys owing or payable. (6) Sam Cassaniti said he had reconciled the invoices he produced with the internal accounting records and they were consistent but, as noted, the invoice held by Mr Elliott for 30 June 2010 for the same work as the invoice produced by Sam Cassaniti is for nearly $10,000 more and thus one of these cannot reflect the internal accounting records. (7) No invoices were produced in response to the requests or notices of Mr Leroy under s 77A of the Bankruptcy Act in early 2012. 46 For these reasons, I am not satisfied that the invoices produced by Mr Elliot prove moneys owing and payable to Reliance and secured by the charge.

Enforcement costs 47 For the hearing on 9 November 2016, David Cassaniti annexed to his affidavit a bundle of documents under cover of an invoice from Accolade Advisory Pty Ltd as trustee for the Accolade Advisory Trust (Accolade Advisory) to Mr Elliott for costs in the sum of $111,926.99. David Cassaniti had no knowledge of the bundle other than he thought Sam Cassaniti had given it to him to annex to his affidavit. 48 Reliance contends that by reason of clause 5 of the supplementary deed the charge secures the payment of some of the amounts comprising the $111,926.99 because the amounts represent costs incurred by Reliance in enforcing the security in the Supreme Court proceeding and this proceeding. 49 I disagree. 50 The invoice to Mr Elliott is from Accolade Advisory to Mr Elliott. Reliance accepts that this invoice is immaterial. It relies on that part of clause 5 of the supplementary deed which refers to "costs…incurred in the enforcement of…any of the given securities". 51 For completeness, I note that David Cassaniti was not sure what the arrangements were between Accolade Advisory and Reliance. Nor did he know what the arrangements were between Accolade Advisory and Mr Elliott. He merely assumed that the bundle consisted of documents "of costs that have been expended in this matter". 52 Sam Cassaniti said the solicitors had asked for the bundle to be created and he had arranged for that to be done and sent to them. This evidence was given in various exchanges: This is a document that you understand the content of, isn't it? Yes, they're invoices. Yes. And do you know why it was included in your cousin's evidence? Not really, no. I was just asked to prepare it and I did it. … Now, did you read the document thoroughly before you handed it over? No, because I would have got Morgan to do it for me. I would have checked it to some degree, yes. Not thoroughly, but checked it, yes. To the best of your knowledge, does Accolade Advisory have any commercial arrangement with Reliance Financial Services? Yes, it pays some of its invoices. And does Accolade Advisory operate the software that is used to generate the various time records, the statements of account, the tax invoices? Yes. And is what you're saying is that Accolade Advisory pays some of Reliance's invoices? Yes. Do you know which invoices in the bundle behind tab N have been paid or not paid? Every one of them has been paid. And is there some evidence they've been paid: cheque, electronic transfer; receipt? I ensure that all the barristers are paid forthwith. … Do you work for Accolade Advisory? No. Yet, you organise to pay bills on its behalf? These invoices were paid by Reliance. They just put it on a - an Accolade Advisory letterhead. Yet, you would accept that the impression that this gives one is that Accolade Advisory is owed money by Mr Elliott. Are you saying it's Reliance Financial Services that's owed the money, or you're not sure? Reliance is owed the money, but - and it was - these invoices were paid by Reliance, but they put it on this - on these Accolade letterhead. … So what services did Accolade Advisory provide; it's $19,800, plus GST? It's listed behind. Sorry? It's listed there behind. Yes. So Accolade Advisory are charging for attendances at court? Yes. … So Mr Elliott has been charged for someone from Accolade Advisory attending. And is it the same with 13 August or 11 September? Yes. Now, 19 October: Preparation of draft affidavit of Teresa Elliott. That was done by Accolade Advisory, wasn't it? Preparation of what, sorry? The draft affidavit of Teresa Elliott; it was done by Accolade Advisory, wasn't it? We drafted, yes, we drafted some documents. … So is the case that Accolade invoiced Mr Elliott for the preparation of an affidavit, and that it was Mr Chi who drafted the affidavit? That's correct. Did the money - did the money ..... does it pass from Mr Elliott to Accolade and then to Mr Chi? Mr Elliott hasn't paid anything yet. I'm just asking how the process works? Mr Chi does the work and we pay him, otherwise we wouldn't ..... So, for example, the preparation of the draft affidavit of Sam Peter Cassaniti; that's your affidavit? Yes. Mr Chi prepared it? Yes. And it was Accolade Advisory that actually billed for it? He did it on behalf of Reliance. Accepting that? Yes. … What then happened: did Mr Chi then send the bill to Accolade Advisory? He actually sent it to Reliance. Then why is Accolade Advisory billing for these services? Accolade took over from CAP Accounting as an accounting firm, understand, so the girls in the office would have put that down as a - on that letterhead, but all the work is done by Reliance and Andrew Chi renders a bill every week to us. … So how does the relationship work: so are the legal representatives retained by Kemp Strang or are they retained through Accolade or through Reliance? I - I pay - well, we pay every barrister directly, Mr Ashhurst, Ms Dolenec, every one of them. (transcription errors corrected) 53 Mr Elliott gave this evidence: Well, you don't just simply get a bill for $111,000. Did you ever have any discussion with Reliance Financial Services or Accolade Advisory about being billed this money? Not off the top of my head. Do you even know who Accolade Advisory are? Yes, that's the company or - that - that Sam's office operates. … Are you a client of Accolade Advisory? Yes, I think so. Well, think so or know so? Not sure. … Have you ever signed a fee disclosure or a letter of engagement with Accolade Advisory? Can't remember off the top of my head. Well, you just received a bill for over $111,000. Didn't you think to yourself, "Well, this is rather large. Where is my paperwork about this?" Did you have any thought like that, or ? This is what I have got here, what is all through here. So this just turned up in the - in the mail to you? Yes. No discussion whatsoever? No, I don't think so. … MR EARDLEY: Did you ever sign an agreement with Accolade Advisory saying that you agree to pay their costs and disbursements? I don't - don't remember. Do you have a problem with your memory, sir? Yes, I do actually. A diagnosed condition, or just ? No, no. Just a bad memory? Just a bad memory. … And just to be absolutely clear about this, did you receive any costs agreements from any of the - the lawyers who have effectively had their fees collated as disbursements for the purposes of this bill? Not sure. Don't remember that one. … What I'm just trying to understand from you is your understanding of the arrangement that's in place in relation to this bill for a little over $111,000? Mm. Or is it the case you just simply have no idea? And I don't mean that disrespectfully, but you just have no idea? All of these invoices, I know that they are for previous courts and bits that have gone on. But you don't know whether or not you signed an agreement with Accolade Advisory. You don't think you talked to David or Sam Cassaniti about the bill. You are very vague about aspects of the bill. You only glanced through it. Are you just not interested in the bill or are you just - it's all too much to deal with? What's - what is your? Well, it's all too much to deal with, yes. 54 The unsatisfactory state of this evidence is not solved by Reliance's decision not to contend that the charge extends to costs of Accolade Advisory or invoices sent by solicitors and barristers to Accolade Advisory. It is not apparent how an invoice from Accolade Advisory can give rise to any liability of Mr Elliott to Reliance. Sam Cassaniti's explanation does not assist in this regard. 55 Further, the invoice from Accolade Advisory to Mr Elliott is dated 6 September 2016, after the hearing on 22 August 2016, by which time it is apparent that the land had been sold. Before 6 September 2016, I infer that Mr Elliott had not been sent and had no knowledge of any of the costs being incurred as disclosed in the bundle. 56 No doubt, for these reasons, Reliance focused on the concept of costs incurred in the enforcement of the securities. This, however, involves other difficulties which are insuperable: (1) The invoices from Kemp Strang Lawyers are made out to Reliance and identify the subject matter as "John Elliot" but no more. There is no information which identifies the invoice as relating to this proceeding or enforcement of the charge. It is not apparent from the face of the documents, and no evidence has been adduced to the effect that, these are costs incurred in the enforcement of the charge as required by clause 5 of the supplementary deed. Three of these invoices also post-date the sale of the land. Clause 5 of the supplementary deed merely extends the scope of the security to relevant enforcement costs. It does not otherwise alter the nature of the charge which, by the terms of the first deed, is a charge over land owned by, relevantly, Mr Elliott. Mr Elliott did not own the land after 27 May 2016. Moreover, these costs were not "incurred" by Reliance at a time when Mr Elliot owned the land as required by the relevant provisions creating the charge. (2) The invoice from Mr Ashhurst SC dated 22 August 2016, on its face, relates to this proceeding, but cannot have created any liability secured by a charge over land which Mr Elliott did not own as at 22 August 2016. Nor were these costs "incurred" when Mr Elliott owned the land. (3) The invoice from Mr Allen is dated 7 September 2016 and thus suffers from the same problem as that of Mr Ashhurst SC. It also suffers from the same problem as the Kemp Strang invoices because while Mr Allen's invoice relates to "Reliance Financial Services Pty Ltd v Le Roy", which is presumably this matter, the narration relates to proceedings in the Supreme Court and no evidence explains the nature of what Mr Allen was doing in the Supreme Court or how it relates to enforcement of the charge. 57 For these reasons I am also not satisfied that Reliance has proved that any of the so-called enforcement costs are secured by the charge.

Conclusions 58 Reliance has proved only that the charge secured payment to it of the principal amount of $11,500 at the time the land was sold. However, allowance must be made for the $1740 paid by JTE. Reliance did not dispute Mr Elliot's evidence that he paid these amounts on the dates set out in his affidavit of 8 July 2015. As these must be taken to have been payments to reduce his indebtedness to Reliance, both the principal owing and the interest calculations must take this into account. 59 A question arises as to interest. Consistent with the conclusions above, I do not accept that the interest provisions in the costs agreements are relevant. Clause 6 of the first deed provides for interest at the rate of 15% per annum. It is not apparent how an inconsistent provision in the costs agreement for interest to be payable at a different rate may be secured as part of the charge created by the first deed (noting also that the costs agreements are not stamped and thus cannot be received as evidence of any dutiable transaction under s 304 of the Duties Act). Further, interest secured by the charge can accrue to the date of sale of the land but not thereafter. 60 The parties should file agreed or competing proposed orders within 14 days in accordance with these reasons for judgment, including a grant of leave under s 58(3) of the Bankruptcy Act and a timetable for resolution of any issue as to costs on the papers rather than by way of an oral hearing, if that is possible. I certify that the preceding sixty (60) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.