Ausurv Operations Pty Ltd v Swanston Joe Pty Ltd (Costs) [2017] VSC 389 (30 June 2017): statutory demand by solicitor, application to set aside under section 459 of Corporations Act 2001, indemnity costs paid by defendant
August 28, 2017 |
In Ausurv Operations Pty Ltd v Swanston Joe Pty Ltd (Costs) [2017] VSC 389 Associate Justice Gardiner considered an application to set aside a statutory demand issued by a former solicitor of a company.
FACTS
On 7 March 2017 Ausurv Operations Pty Ltd (‘Ausurv’) applied to set aside a statutory demand dated 14 February 2017 served on it by Swanston Joe Pty Ltd (‘Swanston Joe’) [1].
Swanston Joe were Ausurv’s former solicitors in 2015-2016. Mr Watson-Jones, for Swanston performed dealt with the former financial controller of the Ausurv Group, Mr Peter Giljohann [4]. In early February 2017, Ausurv terminated Giljohann. On 3 February 2017, Watson-Jones emailed the director of Ausurv stating that he would be immediately ceasing to act for Ausurv because of a conflict of interest, that also acted for Giljohann. Shortly afterwards, on 6 February 2017, Ausurv received a tax invoice for $8,520.40 from Swanston Joe [5].
Between 6 and 13 February 2017 there was email correspondence between the parties [6] notably:
- on 6 February 2017, a representative of Ausurv, requested from Swanston Joe a “proper itemised bill in taxable form” which prompted a response that the invoice was not a lump sum bill and satisfied the definition of “itemised.”
- on 13 February 2017, Ausurv requested Mr Watson-Jones to “re-submit the bill rendered for the further review and assessment if deemed appropriate by the company” and later stating “..in case my meaning was not plain or in any way ambiguous, and for the avoidance of doubt, the Company (Ausurv Surveyors Pty Ltd) requests an itemised account pursuant to s.187 of the Legal Profession Uniform Law” which prompted a quick reponse stating:
“The Company is entitled to request itemisation but the request in my view is disingenuous. The bill will be assessed at much more than what it is charged, the company will spend more time and money and it is therefore obvious that there is no desire to pay. That you sought advice on this issue is indicative of the lengths and costs you will go to Andrew.”
On 14 February 2017, Ausurv was served with the statutory demand and affidavit in support. The schedule to the demand described the debt as
“ Unpaid tax invoice no. 785 dated 6 February 2017 issued by the creditor to the company for services rendered.”
The affidavit accompanying the demand states there was no genuine dispute about the existence or the amount of the debt [8].
On 16 February 2017 Ausurv’s solicitors wrote, at [9], to Swanston Joe making the following points:
- on 13 February 2017 Ausurv requested an itemised account pursuant to s187 of the Legal Profession Uniform Law
- by issuing the statutory demand Swanston Joe appear to have ignored or rejected that request.
- Section 194(2) provides that a law practice must not commence legal proceedings to recover legal costs until at least 30 days after the client receives an itemised bill following a request made in accordance with s187.
- as a matter of public policy, statutory demands should not be used by legal practitioners as a method to recover costs
and it sought :
- that you provide evidence of your entitlement to be paid by AOPL for legal services, including:
(a) any written costs agreement;(b) any disclosure statement under LPUL s174 (or predecessor legislation);
- that you provide an itemised account (for the avoidance of doubt, this request is made pursuant to LPUL s187); and
- that you withdraw your statutory demand dated 14 February 2017.
If the statutory demand is not withdrawn by 4pm on Tuesday 21 February 2017, AOPL will apply to the Supreme Court of Victoria for orders setting aside the statutory demand without further notice. If the application is successful, AOPL will seek costs against you on an indemnity basis, in view of the above matters.
Swanston Joe’s response of 24 February 2017, at [10], if nothing else, direct :
(a) the plaintiff did not request an itemised account on 13 February 2017;
(b) the requested documents are in possession of Ausurv and will not be provided; and
(c) the request for an itemised account has been satisfied.
DECISION
Ausurv submitted that on and from 22 February 2017, when Ausurv lodged a complaint with the Legal Services Commissioner, Swanston Joe was aware of the mechanism available to the parties to resolve any dispute in respect of the costs they claimed [11]
The Court was quite scathing of Watson-Jones and Swanston Joe stating:
- it was highhanded and inappropriate to have served and maintained the statutory demand [12].
- the proper course would have been to provide a bill in itemised form and the other documentation sought by Ausurv.
- Ausurv was entitled under the Legal Profession Uniform Law to request a bill in itemised form as it did
- because Swanston Joe served the statutory demand Ausurv was then required to make application to set aside the demand to protect its position, with all the attendant legal costs.
- the expenditure in legal costs to make application to set the demand aside, probably of twice the debt claimed,were necessary to be incurred to prevent a presumption of insolvency coming into existence by operation of s 459C of the Act [13].
The Court was of the view, at [14], that the demand, for only $8,520.40, should never have been served by Swanston Joe and made an order for indemnity costs in favour of Ausurv is warranted becaus Ausurv’s solicitors:
- informed Swanston Joe in clear terms of the relevant case law relating to service of statutory demands in this context
- advised about the provisions of the Legal Profession Uniform Law as to the right to be provided with a bill in itemised form.
- invited Swanston Joe to withdraw the demand and
- indicated that indemnity costs would be sought in the event that an application to set aside the demand was successful.
The court ordered Swanston Joe pay Ausurv’s costs of the proceeding including reserved costs on an indemnity basis [15].
ISSUE
The Defendant learnt a very harsh lesson being ordered to pay the plaintiff’s costs on an indemnity basis. The Legal Profession Uniform Law is quite proscriptive and precise on the rights of clients to itemised bills. The other lesson here is that care must be taken to consider issues being taken with a statutory demand, particularly where it involves an invitation to withdraw. The cost of withdrawing early is far less than the court costs and a potential indemnity costs order.
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