ALF Group Pty Ltd v Tucker [2011] FCA 379 (14 April 2011)

Last Updated: 15 April 2011

FEDERAL COURT OF AUSTRALIA

ALF Group Pty Ltd v Tucker [2011] FCA 379

Citation:		ALF Group Pty Ltd v Tucker [2011] FCA 379
Parties:		ALF GROUP PTY LTD (ACN 140 744 225) v DAVID ROBERT WALTER TUCKER AND RICHARD TERRICK COWEN TRADING AS TUCKER COWEN
File number:		NSD 1844 of 2010
Judge:		FOSTER J
Date of judgment:		14 April 2011
Catchwords:		CORPORATIONS – whether a Creditor’s Statutory Demand for Payment of Debt made pursuant to s 459E of the Corporations Act 2001 (Cth) should be set aside – whether, in the circumstances of the case, there was any genuine dispute as to the existence or the amount of the claimed debt – whether there was any offsetting claim – whether there was any other reason to set aside the demand – no reason to set aside the demand – application dismissed with costs
Legislation:		Corporations Act 2001 (Cth), ss 9, 46–51, 459E, 459G, 459H, 459J Legal Profession Act 2007 (Qld), ss 308, 311, Div 7 of Pt 3.4 of Ch 3
Cases cited:		BMG Poseidon Corp Pty Ltd v Adelaide Bank Ltd (No 2) [2009] FCA 404 applied Cachia v Isaacs (1985) 3 NSWLR 366 followed King Furniture Australia Pty Ltd v Higgs [2011] NSWSC 234 cited Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach (No 2) [2003] NSWSC 896 cited Ryan v Hansen (t/as Hansens Solicitors) [2000] NSWSC 354; (2000) 49 NSWLR 184 followed
Date of hearing:	7 April 2011
Place:	Sydney
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	53
Counsel for the Plaintiff:	Mr S Golledge
Solicitor for the Plaintiff:	Beazley Singleton Lawyers
Solicitor for the Defendants:	Mr D Tucker of Tucker & Cowen Solicitors

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1844 of 2010

IN THE MATTER OF ALF GROUP PTY LTD (ACN 140 744 225)

BETWEEN:	ALF GROUP PTY LTD (ACN 140 744 225) Plaintiff
AND:	DAVID ROBERT WALTER TUCKER AND RICHARD TERRICK COWEN TRADING AS TUCKER COWEN Defendants

JUDGE:	FOSTER J
DATE OF ORDER:	14 APRIL 2011
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The Application be dismissed.
2. The plaintiff pay the defendants’ costs of and incidental to the Application.
   

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website
.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1844 of 2010

IN THE MATTER OF ALF GROUP PTY LTD (ACN 140 744 225)

BETWEEN:	ALF GROUP PTY LTD (ACN 140 744 225) Plaintiff
AND:	DAVID ROBERT WALTER TUCKER AND RICHARD TERRICK COWEN TRADING AS TUCKER COWEN Defendants

JUDGE:	FOSTER J
DATE:	14 APRIL 2011
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. The defendants are the partners of a firm of solicitors based in Brisbane, Qld, which practises under the name “Tucker & Cowen Solicitors” (the solicitors).
2. On 29 January 2010, the solicitors received an email from James Warren Byrnes (Mr Byrnes). Attached to that email were various documents which related to a real estate development known as “the Reef Cove Resort” at False Cape, Cairns, Qld (the development). Those documents showed that a company called “ALF Group Pty Ltd” (ACN 140 744 225) (Group) and/or its nominee was looking to purchase the development from the receivers and managers of the vendor, Reef Coast Resort Pty Ltd (Receivers and Managers Appointed) (the vendor). Group is the plaintiff in this proceeding.
3. From the end of January 2010 until September 2010, the solicitors carried out work in respect of the proposed purchase, mostly on the instructions of Mr Byrnes. Occasionally, Catherine Gina Byrnes (Mr Byrnes’ wife), who was the sole director of Group for the whole of the period from 27 January 2010 to 7 June 2010, provided instructions to the solicitors. From about July 2010, instructions were also provided to the solicitors from time to time by Michael Adrian Pakula, who became an additional director of Group on 7 June 2010.
4. The solicitors rendered Memoranda of Fees to Group from time to time in the period between June and September 2010 for the work which they performed in relation to the proposed purchase.
5. By the end of September 2010, the solicitors had rendered fees and disbursements totalling $13,728.45 incl GST to Group. The amount of $13,728.45 was the total of the amounts rendered in the following Tax Invoices:

(a)	Tax Invoice No 35063 dated 30 June 2010 (in respect of the period from 1 February 2010 to 30 June 2010)	$8,694.16
(b)	Tax Invoice No 35294 dated 30 July 2010 (in respect of the period from 1 July 2010 to 31 July 2010)	$2,321.67
(c)	Tax Invoice No 35805 dated 31 August 2010 (in respect of the period from 1 August 2010 to 31 August 2010)	$1,730.42
(d)	Tax Invoice No 35989 dated 30 September 2010 (in respect of the period from 1 September 2010 to 30 September 2010)	$982.20
	TOTAL	$13,728.45

6. Each of those Tax Invoices was addressed to Group at Mr and Mrs Byrnes’ residential address in Bellevue Hill, a suburb of Sydney (the Bellevue Hill address).
7. On 13 August 2010, $1,500.00 was paid off the amount of the first Tax Invoice.
8. Each Tax Invoice was accompanied by a detailed breakdown of the fees charged. That breakdown listed the date when work was done, gave a brief description of the work that was done on each day, specified the identity of the person who did the work, specified the hours worked and specified the hourly rate of each of the persons who did the work described in the breakdown for which a charge was made.
9. The solicitors requested Group to pay the outstanding amount of $12,228.45 on several occasions. No payment was made.
10. On 6 December 2010, the solicitors served upon Group a Creditor’s Statutory Demand for Payment of Debt dated 2 December 2010 (the Statutory Demand) which they served pursuant to s 459E of the Corporations Act 2001 (Cth) (the Act). In that Statutory Demand, the solicitors claimed payment of the sum of $12,228.45 as a debt due to them. That debt was described as a debt for:

Outstanding legal services provided by [the solicitors] to [Group] between the period 1 February 2010 to 29 September 2010 at [Group’s] request.

11. On 24 December 2010, Group commenced the present proceeding. In this proceeding, Group claims an order setting aside the Statutory Demand. It relies upon s 459H and s 459J of the Act. No point was taken by the solicitors that the proceeding was not commenced within the time limited by s 459G(2) of the Act nor was any point taken that the application and affidavit in support were not served within the time limited by s 459G(3) of the Act.

THE GROUNDS RELIED UPON BY GROUP

12. In support of the relief which Group seeks, Mr Byrnes swore, filed and served an affidavit on 24 December 2010.
13. In that affidavit, Mr Byrnes said that a company called “ALF Property 1 Pty Ltd” (ACN 141 873 985) (ALF 1) had been incorporated on 5 February 2010 specifically for the purpose of purchasing the development and that ALF 1 was the only client for whom the solicitors had acted in relation to the proposed purchase. He said that Group had never been the client in that transaction. Mr Byrnes contended that two consequences flowed from that circumstance:

(a) The solicitors had not been retained by Group (or, at least, had not been retained by Group for very long) so that Group was not the client who was obliged to pay the outstanding fees; and

(b) Even if Group was the client, or, at least, a client, no disclosure of the basis of charging and of the other mandatory matters required by the Legal Profession Act 2007 (Qld) (the LPA) to be disclosed had been made by the solicitors to Group. Mr Byrnes said that no disclosure in writing had ever been received by Group. If such a disclosure was required to be made and had not been made, the client would not be obliged to pay the outstanding costs unless and until those costs had been assessed under Div 7 of Pt 3.4 of Ch 3 of the LPA.

14. The second ground raised by Mr Byrnes in his first affidavit was that the solicitors were not entitled to the fees and disbursements which they claimed because they had performed their work negligently. He also asserted that ALF 1 had a claim for damages in negligence or for breach of contract against the solicitors which was very likely to exceed the amount of the fees and disbursements claimed by the solicitors from Group. The alleged negligence was:

(a) The solicitors “... failed to advise [ALF 1] that they would be liable for failing to obtain FIRB approval”.

(b) The solicitors failed to advise [ALF 1] that the property was subject to rezoning applications by the relevant local authority.

15. Mr Byrnes also said that ALF 1 had paid a deposit of $150,000 to the vendor when contracts for the purchase of the development had been exchanged and that that deposit was at risk because of the solicitors’ negligence. He also suggested that ALF 1 had paid $102,000 in legal fees to HWL Ebsworth Lawyers in respect of a dispute between ALF 1 and the vendor in relation to that contract. Mr Byrnes, therefore, quantified ALF 1’s damages as being potentially as high as $252,000. Whether those damages turned out to be that high would depend upon whether the $150,000 deposit was forfeited by the vendor.
16. In a second affidavit (sworn on 7 March 2011), Mr Byrnes said that the solicitors had also been negligent by not ensuring that the contract contained a clause which allowed ALF 1 to terminate the contract at its sole election in the event that the existing development approvals could not be assigned to ALF 1 prior to or at completion of the contract. He also said that the solicitors had failed to advise ALF 1 in relation to this matter.
17. In his second affidavit, Mr Byrnes also said that the solicitors had never advised ALF 1 or him that the contract was “invalid” or that ALF 1 had had a right to terminate the contract at all times immediately after exchange. He said: “When the contract was terminated, [ALF 1] lost $75,000”.
18. The case advanced on behalf of Group, therefore, was that:

(a) There was a genuine dispute within the meaning of s 459H(1)(a) of the Act between Group and the solicitors about the existence of the whole of the debt claimed in the Statutory Demand because ALF 1, and not Group, was the client of the solicitors at all relevant times and was, therefore, the legal entity responsible for the payment of the outstanding fees and disbursements;

(b) There was a genuine dispute within the meaning of s 459H(1)(a) of the Act and also another reason why the Statutory Demand should be set aside within the meaning of s 459J(1)(b) of the Act because, in the event that Group is found to have been the relevant client and thus liable prima facie to pay the outstanding fees and disbursements:

(i) Group was not liable to pay any fees for work which was performed negligently; and

(ii) Group was not obliged to pay any part of the fees claimed because the solicitors had not made the necessary disclosure to it, as required by the LPA;

(c) In the event that Group is found to have been the client or, at least, a client at all relevant times and thus liable to pay the outstanding fees, it has an offsetting claim within the meaning of s 459H(1)(b) of the Act which was likely to exceed the amount of the debt by a substantial amount. That claim is the claim for damages in negligence which I have outlined at [14]–[16] above. I pause to note here that, in respect of all of the claims for negligence relied upon by Group, the legal entity to whom the duty of care was said to be owed was ALF 1.

19. It is clear from the terms of Mr Byrnes’ first affidavit that the victim of the solicitors’ alleged negligence was said by him to be the “purchaser” (ie the ultimate contracting party, ALF 1). This, of course, must be so because the transaction in respect of which the acts and omissions said to constitute the alleged negligence were committed was the proposed purchase of the development by ALF 1. The loss and damage (if any) which flowed from that negligence was suffered by ALF 1. There was no suggestion in any of the evidence tendered before me that Group had suffered any loss by reason of the alleged negligence relied upon by Group and by Mr Byrnes. Nor did Group run the case before me on the basis that it had suffered any such loss or damage. The duty of care (whether tortious or arising from contract or both) was said to be owed to ALF 1.
20. While it may have been theoretically possible that Group suffered some loss and damage by reason of the alleged negligence on the part of the solicitors, that was not the case that Mr Byrnes sought to make.
21. It follows from the observations which I have made at [19] and [20] above that Group does not have any offsetting claims as defined in s 459H(5) of the Act. On the evidence, the claim for negligence relied upon belongs to ALF 1, not Group. In those circumstances, Group cannot rely upon s 459H(1)(b) as a basis for seeking an order setting aside the Statutory Demand.
22. Some time was taken up during the hearing in dealing with the argument advanced by Group that the solicitors had failed to give the requisite disclosure as required by the LPA. Furthermore, a good deal of evidence was adduced by both the solicitors and Group directed to the question of whether or not the requisite disclosure had, in fact, been made. The solicitors put into evidence correspondence which they had sent to a business address in Australia Square in Sydney and to the Bellevue Hill address, under cover of which the requisite disclosures were apparently sent. Mr Byrnes testified that none of the correspondence which the solicitors submitted had been sent to those addresses had ever been received either by Group or by him personally.
23. Ultimately, it was common ground at the hearing that:

(a) At all relevant times, Group was a wholly owned subsidiary of ALF Group Holdings AG, a corporation incorporated in Switzerland; and

(b) ALF 1 was a wholly owned subsidiary of Group.

24. Under s 311(1)(c)(ii) of the LPA, disclosure under s 308 of that Act is not required to be made if the client is a foreign company or a subsidiary of a foreign company within the meaning of the Act. ALF Group Holdings AG is a foreign company within the meaning of the Act (see the definition of foreign company in s 9, Dictionary). Group is a subsidiary of ALF Group Holdings AG (see the definition of subsidiary in s 9 of the Act and see ss 46–51 of the Act). ALF 1 is a subsidiary of Group and is also therefore a subsidiary of the Swiss holding company.
25. In light of these matters, Counsel for Group quite properly conceded that s 311(1)(c)(ii) of the LPA was engaged and that the solicitors were not obliged to make any disclosure either to Group or to ALF 1 pursuant to s 308 of the LPA.
26. This concession removed from the case any argument that might have been available to Group based upon the alleged failure on the part of the solicitors to make the disclosure in writing to their client(s) as required by s 308 of the LPA.
27. I now turn to deal with the two remaining contentions advanced by Group.

Issue 1 – The Retainer Issue

28. Group argued that there was a genuine dispute within the meaning of s 459H(1)(a) of the Act as to whether or not Group was ever the client of the solicitors in relation to the proposed purchase of the development and that there was a genuine dispute as to whether Group was ever liable to pay the solicitors’ fees and disbursements.
29. The solicitors certainly took the view that they had been initially retained by Group alone and that, for that reason, irrespective of whether or not ALF 1 also subsequently became a client and thereby became jointly and severally liable in respect of the solicitors’ fees and disbursements, Group remained liable to pay those fees and disbursements. Group did not contact the solicitors at any time between February 2010 and September 2010 and draw their attention to the fact that they had rendered their Tax Invoices to the wrong corporation.
30. It was common ground between the parties at the hearing before me that it was Mr Byrnes who had initially engaged the solicitors in respect of the proposed purchase of the development.
31. Soon after being initially instructed, by letter dated 2 February 2010, the solicitors wrote to the vendor’s solicitors. The purpose of the letter was for the solicitors to convey to the vendor’s solicitors an offer to purchase the development on behalf of Group. The purchaser was described in that letter as “Group and/or its nominee”. That letter was sent one day after the author of the letter, Belinda Adams, had had a telephone conversation with Mr Byrnes in which some of the critical aspects of the proposed transaction had been discussed. The note of that conversation between Ms Adams and Mr Byrnes prepared by Ms Adams contains no record of any discussion as to the identity of the proposed purchaser. However, Ms Adams obviously knew by the time she sent her letter to the vendor’s solicitors that, as at 2 February 2010, the proposed purchaser was to be Group and/or its nominee. I infer from these circumstances that Ms Adams had ascertained from her reading of the draft contract which had been forwarded to her at the end of January 2010 that Group and/or its nominee was to be the purchaser of the development. The fact that Group and/or its nominee was to be the purchaser was most likely communicated to the vendor by Mr Byrnes. It certainly must have been conveyed by someone on behalf of Group.
32. The solicitors’ letter dated 2 February 2010 sent to the vendor’s solicitors was emailed to Mr Byrnes. Mr Byrnes did not suggest in his evidence that he did not receive that email. I find that he did receive that email. Mr Byrnes knew that both the solicitors and the vendor’s solicitors were working upon the basis that the purchaser was to be Group and/or its nominee. Mr Byrnes did not instruct the solicitors that this was incorrect.
33. The first mention in the evidence of ALF 1 is in an email from Mr Byrnes to the selling agent (copied to Ms Adams) sent at 9.33 pm on 18 February 2010. In that email, amongst other things, Mr Byrnes requested that the purchaser be ALF 1 instead of Group. Thereafter, ALF 1 was the entity which the group of companies represented by Mr Byrnes intended would be the purchaser of the development.
34. On 19 July 2010, the solicitors forwarded to Mrs Byrnes correspondence concerning the proposed purchase of the development. Under cover of that correspondence, they furnished to Mrs Byrnes a raft of documents, including the signed Contract for Sale in respect of the purchase of the development by ALF 1. Included with the material sent under cover of that letter was a further costs disclosure and proposed costs agreement. Those documents showed ALF 1 as the client for the purposes of the disclosure being made in those documents. Mr Byrnes asserted that Group did not receive this correspondence.
35. The Contract for Sale was exchanged on 8 June 2010.
36. I do not think that there is any genuine dispute about the identity of the corporation which retained the solicitors at the end of January 2010. From that time until 18 February 2010, all of the communications which Mr Byrnes had undertaken with the solicitors had been undertaken on behalf of Group. The draft Contract forwarded to him and then passed on by him to the solicitors showed Group and/or its nominee as the purchaser. The solicitors believed Group and/or its nominee would be the purchaser until instructed otherwise. The letter from the solicitors to the vendor’s solicitors dated 2 February 2010 recorded the fact that Group and/or its nominee was to be the purchaser. Mr Byrnes was aware of the terms of the draft Contract which he provided to the solicitors in late January 2010 and was also provided with a copy of the letter which they wrote to the vendor’s solicitors dated 2 February 2010. At no time before December 2010 did Mr Byrnes or any other person on behalf of Group suggest to the solicitors that Group was not one of the clients which the solicitors were representing in relation to the proposed purchase of the development. Nor did he ever suggest to the solicitors that Group would not accept the ordinary obligation of a solicitor’s client, namely, to pay the solicitor’s reasonable fees and disbursements. ALF 1 is a subsidiary of Group. It ultimately became Group’s nominee for the purposes of the proposed purchase, but Group remained as the main client.
37. It was submitted on behalf of Group that the fact that the solicitors forwarded a second Costs Disclosure to Mrs Byrnes on 19 July 2010 was a strong indication that the only client for whom the solicitors were acting in relation to the proposed purchase of the development was ALF 1 and that it was, therefore, ALF 1 who was responsible to pay their fees and disbursements.
38. In BMG Poseidon Corp Pty Ltd v Adelaide Bank Ltd (No 2) [2009] FCA 404 at [63]–[66], I endeavoured to summarise the relevant authorities as to the meaning of “genuine dispute” for the purposes of s 459H(1)(a) of the Act. I said:
    63. For s 459H(1)(a) to be engaged, the Court must be satisfied that there is a genuine dispute about the existence or about the amount of the debt. In order for a dispute of that kind to be raised, there must be more than the mere assertion of a dispute or the mere making of a claim (per Lindgren J in Rohalo Pharmaceutical Pty Ltd v RP Scherer SpA & Pharmagel SpA (1994) 15 ACSR 347, (1994) 13 ACLC 94 at 352/30–354/15, esp at 353/20–25).
    64. The dispute must have an objective existence the genuineness of which is capable of being assessed (Rohalo 15 ACSR 347, 13 ACLC 94 at 353/17–25). The test has been equated with the test as to whether the creditor would be entitled to summary judgment on the claim (Rohalo 15 ACSR 347, 13 ACLC 94 at 353/42–354/8).
    65. In Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787–788, (1994) 12 ACLC 669, McLelland CJ in Eq said:

It is, however, necessary to consider the meaning of the expression “genuine dispute” where it occurs in s 450H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the “serious question to be tried” criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit “however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be” not having “sufficient prima facie plausibility to merit further investigation as to [its] truth” (cf Eng Mee Yong v Letchumanan [1980] AC 331 at 341), or “a patently feeble legal argument or an assertion of facts unsupported by evidence”: cf South Australia v Wall (1980) 24 SASR 189 at 194.
But it does mean that, except in such an extreme case, a court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute. In Mibor Investments (at 366-7) Hayne J said, after referring to the state of the law prior to the enactment of Div 3 of Pt 5.4 of the Corporations Law, and to the terms of Div 3:
These matters, taken in combination, suggest that at least in most cases, it is not expected that the court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the court conclude that there is a dispute and that it is a genuine dispute.
In Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601 at 605 Thomas J said:
There is little doubt that Div 3 ... prescribes a formula that requires the court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the court will examine the merits or settle the dispute. The specified limits of the court's examination are the ascertainment of whether there is a “genuine dispute” and whether there is a “genuine claim”.
It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it), the court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another.
The essential task is relatively simple — to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).
I respectfully agree with those statements.

66. In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681; (1997) 76 FCR 452 at 461–464 a Full Court of this Court discussed the relevant principles by reference to a number of the relevant authorities. At 464F–G the Court said:

In our view a “genuine” dispute requires that:

• the dispute be bona fide and truly exist in fact;
• the grounds for alleging the existence of a dispute are real and not spurious, hypothetical, illusory or misconceived.
  

(See also Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach (No 2) [2003] NSWSC 896 (per Barrett J); and King Furniture Australia Pty Ltd v Higgs [2011] NSWSC 234 (per Ward J)).

39. In the present case, I do not think that there is any genuine dispute as to whether Group was a client of the solicitors in relation to the proposed purchase of the development. Nor is there any genuine dispute about its liability to pay the solicitors’ fees and disbursements. Group was clearly the solicitors’ client until 18 February 2010. In my view, it plainly remained their client thereafter. ALF 1 is a wholly owned subsidiary of Group and was inserted into the transaction at the behest of Group for its own purposes. It was incorporated especially for that purpose. I find that, on or about 18 February 2010, ALF 1 also became a client of the solicitors. From about that time, it was the legal entity which was to undertake the obligations as purchaser of the development. The correct complexion to place upon the undisputed relevant facts concerning the retainer is that, on and after 18 February 2010, both Group and ALF 1 were clients in respect of the proposed transaction and that both of them became jointly and severally liable to pay the solicitors’ fees and disbursements. I do not need to decide, however, whether ALF 1 ever became liable to pay those fees and disbursements. The important question for present purposes is whether Group was liable to pay those fees and disbursements. In my view, it clearly was and there is no genuine dispute about that liability.
40. I am fortified in that conclusion by the fact that no-one on behalf of Group or on behalf of ALF 1 complained about the fees and disbursements rendered by the solicitors until much later and also by the fact that, until the Statutory Demand was served, no-one had ever suggested that Group was not a client of the solicitors or that Group was not liable to pay the solicitors’ fees and disbursements. The notion that the tax invoices from the solicitors had been sent to the wrong corporation is very much a recent thought on the part of Mr Pakula and Mr Byrnes.
41. For these reasons, I find that Group was relevantly a client of the solicitors and was and is liable to pay their reasonable fees and disbursements.
42. No issue as to the reasonableness of the charges made or the basis upon which those charges were made was raised in the hearing before me.
43. Accordingly, Group fails on Issue 1. Subject to Issue 2, it has failed to persuade me that there is a genuine dispute as to its liability to pay the sum of $12,228.45, being the outstanding fees and disbursements rendered to it by the solicitors.

Issue 2 – Conduct Disentitling

44. There is a principle of long standing that solicitors who are negligent are not entitled to recover their fees and disbursements in respect of the matter in relation to which they were negligent (Cachia v Isaacs (1985) 3 NSWLR 366 at 370–371 (per Kirby J); and Ryan v Hansen (t/as Hansens Solicitors) [2000] NSWSC 354; (2000) 49 NSWLR 184). That principle is usually applied when the client who suffers loss and damage by reason of the solicitor’s negligence and the obligor in respect of the solicitor’s fees and disbursements are one and the same legal entity. That is not so in the present case. However, I do not think that that circumstance necessarily means that the principle has no application to the facts of the present case.
45. For this reason, I shall briefly state my views in respect of the allegations of negligence made by Mr Byrnes in his affidavits.
46. As to the assertion concerning the need to obtain approval from the Foreign Investment Review Board (FIRB), Ms Adams asked Mr Byrnes on 1 February 2010 whether there was a need to obtain FIRB approval and he told her: “No”. Mr Tucker knew Mr Byrnes. Mr Tucker believed Mr Byrnes to be a sophisticated investor who was well versed in matters involving the investment of funds in Australia by foreign entities. Once the issue was drawn to Mr Byrnes’ attention by Ms Adams, she was entitled to assume that Mr Byrnes was perfectly capable of making his own decisions concerning the need for any approval to be obtained from the FIRB.
47. As to the proposition that the solicitors have failed to advise Mr Byrnes that the property was subject to rezoning applications by the local authority, that allegation does not rise above mere assertion. In any event, cl 19 of the Contract for Sale made clear that the local authority was attempting to amend the various planning controls affecting the development. That clause made full disclosure of the Council’s plans. There is no suggestion in the evidence that any other planned rezoning was in play.
48. The suggestion that the solicitors had failed to advise Mr Byrnes of the need to protect the development approvals current as at June 2010 and had failed to ensure that the Contract contained appropriate clauses to protect ALF 1 in respect of those approvals is simply not borne out by the evidence. Clause 12.7 of the Contract provided that the parties would do all things necessary to protect and maintain the current development approvals.
49. As far as Mr Byrnes’ contention that the Contract for Sale was “invalid” is concerned, that contention does not rise above mere assertion.
50. Mr Byrnes’ quantification of the damages allegedly flowing from the solicitors’ negligence also fails to rise above mere assertion.
51. I find, therefore, that, should it be at all relevant for the Court to consider the assertions of negligence made against the solicitors by Mr Byrnes, those assertions do not have sufficient substance in the evidence to warrant a conclusion that the solicitors were or might have been negligent in any respect, let alone in the respects alleged by Mr Byrnes.
52. For these reasons, I do not think that there is any basis for concluding that the solicitors ought to be deprived of the fees and disbursements which they have rendered to Group by reason of any negligence committed on their part in the discharge of their retainer by Group and ALF 1.

CONCLUSIONS

53. Group has failed to establish any of the grounds upon which it relied in support of its application for an order that the Statutory Demand be set aside. Accordingly, the whole of the proceeding must be dismissed. Costs should follow the event.
    

I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster.

Associate:

Dated: 14 April 2011