Debt to Company's former solicitors
21 The evidence showed that the Company was indebted to its former solicitors, Kreisson, in the sum of either $242,091.52 or $321,346.52 under a series of invoices each of which required payment within a month. The last invoice was dated 8 May 2019. Kreisson lodged a proof of debt in respect of the larger amount with the liquidator on 21 January 2020. The smaller amount appears in the liquidator's report. Mr Galati claimed in his evidence that all of the invoices had been paid but this is inconsistent with the lodging of the proof of debt. Next he claimed in his most recent affidavit that the amounts claimed by Kreisson were disputed. Some email correspondence was exhibited which asserted that Mr Galati was unhappy with the way in which the Supreme Court proceeding had played out. That correspondence did not descend into any detail as to why Kreisson was not entitled to its fees. It may be assumed for the sake of argument that a solicitor who has performed his retainer negligently is not entitled to charge a fee in respect thereof. The allegations Mr Galati makes against Kreisson are set out in his email of 3 July 2019 which was annexed to his affidavit of 29 January 2020. They may be summarised as follows:
The Company had not engaged the firm but instead someone called 'Costa' had (I interpolate that 'Costa' is most likely Mr Costa Meitanis, who I discuss below). The invoices were in evidence and they appeared to suggest that the retainer was with the Company and Mr Galati. Mr Galati did not tender Kreisson's fee agreement to prove that the invoices were incorrect. In the absence of that agreement I do not accept that the retainer was not a joint one with the Company and Mr Galati.
The Company and Mr Galati had not followed instructions 'from day 1' but subject to the next points, none of these instructions were identified.
The Company and Mr Galati had instructed that the case was one of fraud and should have been put on that basis. In order to assess whether Kreisson had negligently failed to run a fraud case it would be necessary (a) to demonstrate what that fraud case was; and, (b) why Kreisson would have a proper basis for making such an allegation. This was not attempted.
The Company and Mr Galati had instructed Kreisson to take action against Mr Mark Fraser but this had not been done. But there was no evidence about Mr Fraser or why Kreisson should have taken action against him.
Kreisson had been requested to seek litigation funding but had not done so. Again, there is no material before this Court which would allow one to weigh whether this was so and, if it was so, whether it had been negligent of Kreisson not to seek litigation funding.
The Company had instructed Kreisson to seek payment of its fees from Costa. How it could give such an instruction when, on its first argument, its retainer was with Costa is not clear. In any event, it is not clear why any of this bespeaks negligence on Kreisson's part.
22 In those circumstances, I do not accept that it has been shown that the Kreisson accounts are not payable. It may be that if Mr Galati or Kreisson sought assessment of the bills that some other figure may be payable but neither party was obliged to take that step. Whilst I accept in principle that it is open to Mr Galati to argue that Kreisson are not owed their fees because of negligence this would require an evidentiary effort on his part which has not been in anyway undertaken. In that circumstance, I conclude that the Kreisson debt is due and payable.
23 Next Mr Galati claimed that the Company was not responsible for the payment of these accounts because the Company had the benefit of an indemnity granted to it in respect of its legal costs in the Supreme Court proceedings. This indemnity was said to have been granted by Mr Costa Meitanis under a heads of agreement dated 19 March 2018. However, the heads of agreement contains no such indemnity. It was submitted on his behalf that there was an implied term to that effect. I do not accept this. The heads of agreement records the creation of a partnership between Mr Galati and Mr Meitanis in effect to profit from the redevelopment of the Sydney Fish Markets. Mr Meitanis was required by cl 2 of the operative parts to pay $20,000 into a bank account which, by cl 3, could 'only' be used for fees in the Supreme Court proceedings, but there does not appear to have been any obligation to pay the entirety of the legal fees. It is true that cl 5 of the recitals says this:
Mr Meitanis is prepared to provide funding to prosecute those proceedings and contribute his interest in the bakery business owned by G, A & M Frelingos, and he wishes to initiate, participate in, and profit from the Sydney Fish Market's redevelopment with Mr Galati and Trading Australia Pty Ltd.
24 But this is not an operative provision and in fact all it says is that Mr Meitanis is 'prepared' to do so. I do not accept that it is necessary to give business efficacy to this agreement to require Mr Meitanis to be responsible for all of the legal bills. This is particularly so in light of cl 7 of the recitals which appears to suggest something more cooperative:
The parties have agreed to enter into partnership to combine their respective expertise and resources to carry on a business which (1) prosecutes the proceedings to successful resolution; (2) acquires the bakery business owned by G, A & M Frelingos; and (3) initiates, participates in, and profits from the Sydney Fish Market's redevelopment.
25 Even however if there was such an indemnity (and there is not) this would not mean that Kreisson's accounts were not due and payable. It would just mean that the Company had a right of indemnity from Mr Meitanis. There is no evidence of Mr Meitanis having honoured any such an indemnity and no substantial reason to think that the Company is in a position to pay these accounts because of it. It was not suggested that the Company had on hand cash sufficient to pay these accounts and, indeed, it is abundantly apparent that it does not. The best that could be said is that it has an interest in the Supreme Court litigation said in Mr Lissa's affidavit of 20 December 2019 to be worth many millions of dollars but taking the most charitable view of that matter, and assuming in the Company's and Mr Galati's favour that they will emerge from those proceedings victorious, any such proceeds will not be available any time soon. And, it need hardly be said, no effort was made to show that the Supreme Court proceeding was the legal El Dorado that his argument entailed. The Court knows nothing about the merits of this case.