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Go To Court Lawyers Pty Ltd v Magee[2021] QDC 32

Go To Court Lawyers Pty Ltd v Magee[2021] QDC 32

DISTRICT COURT OF QUEENSLAND

CITATION:

Go To Court Lawyers Pty Ltd v Magee & Anor [2021] QDC 32

PARTIES:

GO TO COURT LAWYERS PTY LTD

(ACN 168 831 767)

(applicant)

v

PETER MICHAEL MAGEE

(first respondent)

and

ARMSTRONG SERVICES PTY LTD

(ACN 101 306 905)

(second respondent)

FILE NO/S:

BD No 1473 of 2020

DIVISION:

PROCEEDING:

Originating Application

ORIGINATING COURT:

District Court at Brisbane

DELIVERED ON:

5 March 2021

DELIVERED AT:

Brisbane

HEARING DATE:

8 October 2020 and 28 January 2021

JUDGE:

Jarro DCJ

ORDER:

  1. The application for leave to adduce further evidence is dismissed.
  2. There be judgment for the applicant in the amount of $355,898.38.
  3. I will hear from the parties as to the form of the order including costs.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – ENDING PROCEEDINGS EARLY – SUMMARY DISPOSAL – OTHER MATTERS – judgment on a compromise between the parties arising from contract of sale – whether judgment should be granted summarily

LEGISLATION:

Uniform Civil Procedure Rules 1999 (Qld), r 651 and r 173

CASES:

Davies v Davies & Anor (No 1) [2019] QSC 293

EB v CT (No. 2) [2008] QSC 306

General Credits (Finance) Pty Limited v Fenton Lake Pty Ltd [1985] 2 Qd R 6

Roberts v Gippsland Agricultural and Earth Moving Contracting Co Ltd [1956] VLR 555

Adams v Bank of New South Wales [1984] 1 NSWLR 285

COUNSEL:

B Kidston for the applicant

M K Condon SC with J Simpkins for the respondents

SOLICITORS:

GTC Lawyers for the applicant

Access Law Group for the respondents

  1. [1]
    By amended application, the applicant has sought an order that the respondents pay the sum of $396,888.90 as a debt, plus interest and costs. In essence, the amount is said to be “judgment on a compromise as well as some further amounts that have since fallen due” following the applicant’s purchase of a law practice.
  2. [2]
    This matter required two hearing days. The first return date involved the application (“substantive application”) and the second date related to an application by the applicant for leave to adduce further evidence (“application for leave”).

Application for Leave

  1. [3]
    It is convenient to first deal with the application for leave.
  2. [4]
    As to the approach to be taken in matters such as these, I was referred to Davies v Davies & Anor (No 1) [2019] QSC 293 at [7] to [10], where Bradley J stated:

“Legal principles

[7]As Sofronoff P explained in Mackellar Mining Equipment Pty Ltd & Ors v Thornton & Ors:

“The circumstances must be exceptional before a court may allow a case, having been closed and judgment reserved, to be reopened. The overriding principle is that the court must consider whether, taken as a whole, the justice of the case favours the grant of leave to reopen.”[1]

[8]The requirement of exceptional circumstances arises from the long-recognised need for finality in litigation.[2] It serves to maintain the efficient administration of justice, the discipline of hearings and the high standard of competence required of legal practitioners.[3] It is consistent with the purpose and objective of the court’s rules.[4] It maintains public confidence in the judicial system, as an efficiently-used and publicly-funded institution.[5]

[9]In Inspector-General in Bankruptcy v Bradshaw,[6]Kenny J identified four situations in which leave to re-open may be granted:

  1. (i)
    where fresh evidence, unavailable or not reasonably discoverable before, becomes known and available;
  2. (ii)
    where there has been inadvertent error;
  3. (iii)
    where there has been a mistaken apprehension of the facts; and
  4. (iv)
    where there has been a mistaken apprehension of the law.

[10]The situations in which a party may have leave to re-open and adduce further evidence are not limited to those in which leave has been granted in the past. So, the application may be judged against the relevant considerations that affect whether the justice of the case favours a grant of leave to re-open. The following relevant considerations have been identified in other recent authorities:[7]

  • The public interest in the finality of litigation;
  • The public interest (and the interests of the parties) in litigation being conducted efficiently and expeditiously;
  • The associated expectation that parties will advance all of their arguments at the time of the hearing and the need for a limit on the number of times a party can re-visit issues that have arisen in the course of the trial and have been addressed;
  • The need for fairness so that a party is entitled to know all of the evidence it has to meet before making forensic decisions about the cross-examination of witnesses and the extent of the evidence it will adduce on matters in issue;
  • The concern that the parties may take advantage of the re‑opening to develop parts of their respective cases that may not fall clearly within the prescribed limits of the re-opened case;
  • Whether there has been a change in the subject matter of the litigation orthe publication of a binding or persuasive judgment;
  • The significance of the proposed new evidence and submissions to the disposition of the proceeding;
  • The reasons for the evidence not being led at the trial;
  • Any delay in seeking leave to re-open;
  • The character of the matter on which judgment is reserved;
  • The likely prejudice to the opposing party if the application is allowed and the likely prejudice to the applicant if the application is refused;
  • The inadequacy of a costs order to cure the element of unfair prejudice occasioned by unnecessary delays in the resolution of litigation.”
  1. [5]
    A review of the material in support of the application for leave demonstrates to me that most of the further evidence sought to be adduced involves factual matters that occurred after the hearing of the substantive application. There has been no delay in bringing the application for leave and, indeed, the application has been made prior to the making of orders regarding the substantive application. The further evidence relates to the parties’ progression towards having an accounting expert determine a number of matters relevant to the applicant’s business purchase which has now become the subject of a significant dispute between the parties. The further evidence, however, does not materially affect the outcome of the substantive application as the matters contained within the material in support of the application for leave do not weigh as a factor to assist in resolving the ultimate issue of whether the applicant ought to be entitled to judgment.[8] The interests of justice do not warrant its admission and, therefore, the application for leave is dismissed.

Substantive Application

  1. [6]
    The substantive application has been brought pursuant to r 658(1) of the Uniform Civil Procedure Rules 1999 (‘UCPR’) which provides:

“General

  1. (1)
    The Court may, at any stage of a proceeding, on the application of a party, make any order, including a judgment, that the nature of the case requires.”
  1. [7]
    The rule is discretionary and should only be exercised in the clearest of circumstances. Therefore, if there is, for example, an arguable proposition of fact or law which would prevent or ought to prevent judgment being entered or granted at an earlier than usual stage, the application should be refused.
  2. [8]
    In support of the application, the applicant has contended that no substantive defence has been raised on the material and the respondents have admitted that they are liable to pay most of the amount sought. On the other hand, the respondents have contended that, for a number of reasons, the application is premature.
  3. [9]
    For the reasons that follow, whilst this is a finely balanced matter, I consider the applicant should have judgment now in relation to the amount of $355,898.38, with the remaining matters to proceed in the usual manner by way of proper pleadings. Whilst the respondents have admitted that they are liable to pay most of the amount sought, it is my view that there is an arguable proposition of fact and law which prevents judgment being obtained summarily at this point in time for the remaining amounts, but not the amount of $355,898.38.

Background Matters

  1. [10]
    The applicant purchased the business “Armstrong Legal” from the respondents pursuant to a business sale agreement dated 26October 2019 (“BSA”).[9] The purchase relevantly included Armstrong Legal’s work in progress (“WIP”), receivables and staff. Provisions in the BSA included as follows:

“…

Base Purchase Price means the amount listed in Item 7 of Schedule 3.[10]

…

Deferred Purchase Price Payment means the amount equal to:

  1. (a)
    the Purchase Price;
  2. (b)
    less the Base Purchase Price;
  3. (c)
    less any amounts to be adjusted under clause 11.8(b)(1);
  4. (d)
    plus any interest payable under clause 8.4.

…

Purchase Price means as at 11.59pm on the day of Completion the aggregate of all WIP and Receivables of the Business at Completion up to a maximum of $9,000,000.00 and as determined in accordance with clause 10.

…

Receivables means in relation to the Business, means the trade debts acquired in carrying on the Business (including and not limited to the Debtors) and owed to the Sellers at the Completion Date.

…

4.3Post-Completion payments

Once the Purchase Price has been determined in accordance with clause 10:

  1. (a)
    if the Purchase Price is greater than the Base Purchase Price, the Buyer must pay the Sellers the Deferred Purchase Price Payment in accordance with clause 4.5;
  1. (b)
    if the Purchase Price is less than the Base Purchase Price, the Sellers must pay the Buyer an amount equal to the:
  1. (1)
    the Base Purchase Price;
  1. (2)
    less the Purchase Price,

on the date which is 5 Business Days after the date on which the Purchase Price is finally determined in accordance with clause 10 or any other date agreed between the Sellers and the Buyer in writing; and

  1. (c)
    if the Purchase Price is equal to the Base Purchase Price, then no amount is payable by the Sellers or the Buyer.

4.4Estimated Purchase Price

  1. (a)
    No later than 3 Business Days before the Completion Date, the Sellers must deliver to the Buyer a notice setting out an estimate of the Purchase Price (Estimated Purchase Price), which must be prepared in good faith and must be accompanied by working papers and other supporting documentation showing how the Estimated Purchase Price was arrived at.

4.5Payment of Deferred Purchase Price

The Buyer must account to the Sellers on the 28th day of each month for an amount equal to 80% of all Receivables recovered by the Buyer in accordance with clause 5.1 on a monthly basis until the Buyer has paid the Deferred Purchase Price Payment to the Sellers in full.

…

5Receivables and Payables

5.1Entitlement and responsibility for Receivables

  1. (a)
    The Buyer is entitled to the Receivables subject to the terms of this clause 5.
  1. (b)
    The Sellers must deliver to the Buyer on Completion a list of Receivables.
  2. (c)
    The Buyer is responsible for the collection of the Receivables from the Completion Date. The Sellers must cease the collection of any remaining unpaid Receivables after Completion.
  3. (d)
    The Sellers agree not to commence legal proceedings or undertake any action which could jeopardise the Buyer’s trading relationship with customers and Clients in order to recover any Receivable.
  4. (e)
    The Buyer agrees to apply any payments received by the Buyer from customers and Clients in satisfaction of the Receivables before applying such payments to receivables and debtors accruing after the Completion Date.

…

6Liabilities and apportionment

…

6.2Arrears payments

If the Buyer makes:

  1. (a)
    any payment in arrears for goods or services supplied to the Business up to and including the Completion Date; and
  1. (b)
    any other payment of arrears in respect of the Business where the benefit was received by the Business up to and including the Completion Date,

the Sellers must reimburse the Buyer within 2 Business Days after the Sellers receives evidence of payment.

…

9Title and Risk

9.1Title and risk

Title and risk in the Assets and the Business passes to the Buyer on Completion.

…

10Calculation of Purchase Price

10.1Preparation and delivery of Completion Statement

  1. (a)
    The Buyer must prepare and deliver to the Sellers no later than 20 Business Days after Completion a draft statement of the Purchase Price (Completion Statement) in the form and including the items specified in Schedule 9 and prepared in accordance with:
  1. (1)
    the specific principles and policies set out in Part 2 of Schedule 9;
  1. (2)
    to the extent that the treatment of any item is not dealt with in the principles and policies referred to in clause 10.1(a)(1), those accounting principles, policies and practices adopted by the Business in the preparation of the Last Accounts as are consistent with the Accounting Standards in force at Completion; and
  1. (3)
    to the extent that the treatment of any item is not dealt with in the principles and policies referred to in clause 10.1(a)(1) or 10.1(a)(2), the Accounting Standards in force as at Completion.
  1. (b)
    Upon request by the Sellers, the Buyer must provide copies of all working documents and calculations used in reparation of a Completion Statement and in determining the Purchase Price.

…

10.3Sellers response to Completion Statement

  1. (a)
    The Sellers (or their Attorney) must, within 20 Business Days after the Date on which it receives the Completion Statement, give to the Buyer either:
  1. (1)
    a notice stating that the Sellers agree with the Completion Statement; or
  1. (2)
    a notice (Dispute Notice) specifying that the Sellers do not agree with the Completion Statement and specifying:
  1. (A)
    each item in the Completion Statement that the Sellers dispute (Disputed Item);
  1. (B)
    the grounds on which the Sellers disputes each Disputed Item; and
  1. (C)
    the proposed adjustment to each Disputed Item.
  1. (b)
    If the Sellers gives notice under clause 10.3(a)(1) or if at the conclusion of the five Business Day period referred to in this clause 10.3 the Sellers have not given a notice under clause 10.3(a)(1) or a Dispute Notice under clause 10.3(a)(2), then the Completion Statement will constitute the Purchase Price for the purposes of this agreement.

10.4Negotiation of Disputed Items

  1. (a)
    If the Sellers give a Dispute Notice under clause 10.3(a)(2) then:
  1. (1)
    the Buyer and Sellers must use their reasonable endeavours to resolve each Disputed Item within 20 Business Days of the date of the Dispute Notice;
  1. (2)
    if any Disputed Item is not resolved in the timeframe in clause 10.4(a)(1) then either party may give a notice to the other stating that it requires the Disputed Item to be determined by an expert in accordance with clause 10.4(b);
  1. (b)
    Any expert determination of a Disputed Item must be conducted in accordance with the following provisions:

…

  1. (2)
    the Expert must make the determination in accordance with the terms of this agreement;
  1. (3)
    the Expert will act as an independent expert and not as an arbitrator;

…

  1. (9)
    the Expert must issue a written determination containing reasons;
  1. (10)
    the determination of the Expert will be final and binding in the absence of manifest error; and
  1. (11)
    the costs of the Expert will be borne by the parties in accordance with the Expert’s determination, having regard to the merits of the dispute, and the parties must instruct the Expert to make a decision on this matter. If the Expert is unable or unwilling to make such a determination, the costs of the Expert will be borne 50% by the Seller and 50% by the Buyer.

…

11.Employees

…

11.8Assumption of liabilities in respect of employee entitlements

  1. (a)
    Subject to clause 11.8(b), on and from Completion the Buyer must assume, pay, perform and discharge all Employee Entitlements.
  2. (b)
    In the event that a Transferring Employee leaves the employment of the Buyer within 3 months of Completion in circumstances where the Buyer has not terminated that Employee’s employment, then either, at the election of the Buyer:
  1. (1)
    the Deferred Purchase Price will be reduced by; or
  1. (2)
    the Sellers will reimburse the Buyer for,

an amount equal to:

  1. (3)
    70% of the monetary value of the annual leave entitlements of the Transferring Employee as at the Completion; and
  1. (4)
    70% of the monetary value of the long service leave liability of those Transferring Employee with more than 5 years’ service with the Seller and any predecessor of the Seller in any part of the Business by Completion.”
  1. [11]
    Notably the BSA provided that the maximum payment that may be due to the respondent sellers was $9,000,000 upon the final accounting being undertaken by the parties. The final accounting is still being undertaken by the parties. The BSA also identified provisions which included:
    1. (a)
      That post completion, the applicant was to review the total WIP and receivables it received and check it against the “agreed standard” so as to work out the WIP and receivables that were to be excluded for the purpose of calculating what it says is the ultimate purchase price.[11] As part of this, a “completion statement” was to be furnished to the respondents.
    2. (b)
      A mechanism for the parties to resolve disputes between them as to the calculation of the purchase price should they not agree (“expert determination”).[12]
    3. (c)
      The payment by:
      1. the applicant to the respondents of the amount by which the purchase price exceeded the amount paid on completion (up to a capped figure of $9,000,000);[13] or,
      2. the respondents to the applicant of the amount by which the amount paid on Completion exceeded the Purchase Price.[14]
  2. [12]
    On 6 December 2019, there was a telephone conversation between the applicant and the first respondent where the parties agreed to vary the BSA (“oral agreement”). The oral agreement was later confirmed in an email exchange between the two on 6 December 2019.[15] The parties were in dispute as to what was said during the telephone conversation and whether, in short, they agreed to:
    1. (a)
      vary the amount used to calculate the purchase price payable at completion (on account) but not the ultimate purchase price (calculated 20 business days after completion) payable pursuant to the BSA, as it was contended for by the applicant; or,
    2. (b)
      vary the amount used to calculate the purchase price payable at completion (on account) and the ultimate purchase price payable pursuant to the BSA as was contended for by the respondents.

(“oral agreement dispute”).

  1. [13]
    The BSA completion date was 20 December 2019. The applicant paid to the respondents the amount of $7,743,561.53 in accordance with a “Completion Adjustments schedule”.[16] This was, in essence, an interim payment reflecting what the parties understood as to the WIP and receivables. According to the applicant, the amount was paid on the basis that the then outstanding receivables of Armstrong Legal would become the property of the applicant post settlement and would be collected by it.[17]
  2. [14]
    On 23 December 2019, a client of Armstrong Legal paid $340,498.38 into the first respondent’s bank account in relation to costs incurred by him to Armstrong Legal (“Bonett payment”). It is the Bonett payment ($340,498.38) which is sought to be recovered as part of this application. The applicant says that it acquired the receivable in respect of which the Bonett payment was made and that it is entitled to the Bonett payment, yet despite demand the respondents have refused to pay the Bonett payment to the applicant who insisted that it was in fact deposited on 20 December 2019.[18]
  3. [15]
    On 20 January 2020, the applicant sent to the respondents the completion statement in accordance with cl 10.1 of the BSA. The applicant calculated the purchase price as $7,010,290.84 (“the applicant’s purchase price”), as well as how it was calculated, and called for a refund of $989,709.16 (“adjustment payment”).[19]
  4. [16]
    The respondents disputed the applicant’s purchase price of $7,010,290.84, and, in accordance with cl 10.3(a)(2) of the BSA, served a notice disputing that amount.[20]
  5. [17]
    There was also an employee bonus system in place for the staff at Armstrong Legal which was paid quarterly in arrears. Commencing at the end of January 2020 and through February 2020, the staff bonuses were calculated in the sum of $58,589.61 and later paid by the applicant on 13 March 2020 in the amount of $67,348.75 (“bonus amount”).
  6. [18]
    On 18 March 2020, the applicant, in accordance with cl10.4(b)(1) of the BSA, gave notice to the respondents that the calculation of the purchase price and the dispute about the Bonett payment were to be determined by an expert.[21] The notice included as follows:

“…

  1. The Buyer gives notice to the Sellers that the following matters in dispute have not been resolved in the timeframe provided in clause 10.4(a)(1) of the BSA and that the Buyer requires these to be determined by an expert in accordance with clause 10.4(b) of the BSA:
  1. (a)
    the Completion Statement and calculation of the Purchase Price.
  1. Without limiting paragraph 3, the Buyer requires the expert to determine whether the amount received as cleared funds by the Sellers on 23 December 2020 totalling $340,498.38 (referred to as the Receivables Claim Amount) should have been included in the Completion Statement as a Receivable.”[22]
  1. [19]
    On 22 May 2020, the applicant filed an originating application relevantly seeking the Bonett payment ($340,498.38) and the bonus amount ($67,348.75).
  2. [20]
    On 30 June 2020, the respondents filed a cross-application challenging jurisdiction and seeking that the proceeding be stayed on the basis that the disputes were properly the subject of the expert determination process under the BSA and a choice of law clause (which specified New South Wales).
  3. [21]
    On 3 July 2020 by email exchanges, the parties agreed to compromise their disputes (“the compromise agreement”).[23] The compromise led to the consent order dated 6 July 2020 where the parties’ applications were adjourned to a date to be fixed.[24] The compromise agreement was in two parts. The first part involved the determination of the Bonett dispute, the bonus dispute and the oral agreement dispute by the legal expert. The second part of the compromise agreement involved the determination of the “disputed items” by the accounting expert having regard to the legal expert’s determination of the Bonett payment, the bonus dispute and the oral agreement dispute. The term “disputed item” was defined in the compromise agreement as follows:

“Disputed Item means, as relevant:

  1. (a)
    the matters specified in the notice given by the Buyer to the Seller dated 18 March 2020 under clause 10.4(a)(2) of the BSA to be determined by the Accounting Expert in accordance with clause 10.4(b) and any other matters referred to the Accounting Expert by the Legal Expert for determination;
  2. (b)
    the Bonett Dispute, the Bonus Dispute and the Oral Agreement Dispute to be determined by the Legal Expert in accordance with clause 10.4(c) and any other matters referred to the Legal Expert by the Accounting Expert for determination.”
  1. [22]
    On or about 18 August 2020, the parties each paid 50 per cent of the legal expert’s costs, subject to liability for those costs later being determined by the legal expert.
  2. [23]
    On 4 September 2020, the legal expert determined:
    1. (a)
      the Bonett dispute ($340,498.38) and the oral agreement dispute in favour of the applicant;
    2. (b)
      the bonus dispute in favour of the respondents.
  3. [24]
    The legal expert also determined that 70 per cent of the expert’s costs was to be borne by the respondent (“legal expert determination costs”). The legal expert determination costs results in a $15,400 adjustment in favour of the applicant.
  4. [25]
    By cl 10.4(c)(10) of the BSA, as varied by the compromise agreement, the determination of the legal expert is “final and binding in the absence of manifest error”. No challenge has been made by the respondents regarding the expert legal determination.

Consideration of Matters

  1. [26]
    The applicant has contended that the respondents have failed or refused to pay the Bonett payment ($340,498.38) and the legal expert determination costs ($15,400) pursuant to the compromise agreement. In addition to these amounts, an amount of $5,747.21 (claimed as “entitlement adjustment”) as well as $11,330.53 (claimed as “barrister’s fees”) has been sought.[25] The total amount therefore being $372,976.12.
  2. [27]
    Reliance has been placed on the authority of General Credits (Finance) Pty Limited v Fenton Lake Pty Ltd [1985] 2 Qd R 6 where in straightforward matters the court may, on application in a proceeding, enter judgment on a compromise. McPherson J applied Roberts v Gippsland Agricultural and Earth Moving Contracting Co Ltd [1956] VLR 555 which concluded that, even though it may involve matters extraneous to the action, an agreement compromising the action may be summarily enforced by application in the action provided that the court is clearly satisfied that justice can be done under the summary procedure.[26]
  3. [28]
    The applicant submitted that summary judgment should be granted because the respondents have admitted they are liable to pay the Bonett payment ($340,498.38) and the legal expert determination costs ($15,400) and there is no need for discovery or any other interlocutory steps about these matters. For reasons to follow, I am persuaded by this submission to enable judgment to be obtained summarily for the amount of $355,898.38 because there is no arguable proposition of fact or law which should prevent judgment being entered at an earlier stage than usual due to the compromise agreement.
  4. [29]
    Regarding the other amounts pressed in the application, that is the amount of $5,747.21 (being the entitlement adjustment) and $11,330.53 (being the barrister’s fees), it was submitted by the applicant that such amounts, although not part of the compromise, permitted the applicant to recover same as, inter alia, damages for breach of contract. It was highlighted that no real defence has been raised and the respondents “largely expressly admit” same. In respect to the entitlement adjustment, reliance has been placed on cl 11.8(b) of the BSA. In respect to the barrister’s fees, reliance has been placed on cl 6.2 of the BSA. I have noted these provisions earlier in these reasons. My view for reasons soon to be apparent, is that judgment should not be entered for these amounts because same does not form part of the compromise reached by the parties and involves a more fulsome consideration of the terms of the BSA in circumstances where the respondents could have a potential set-off.
  5. [30]
    At the hearing of the substantive application, the applicant also advanced that, in the alternative to the amount originally sought of $396,888.90, the court could enter judgment for the respondents’ admitted sum (being $364,544.93 plus interest) and convert the balance of the proceeding to a claim with the three remaining disputed payments to proceed on pleadings. The alternative amount of $364,544.93 was identified in the respondents’ material being:
    1. (a)
      Bonett payment$340,498.38;
    2. (b)
      Legal expert’s costs$15,400.00;
    3. (c)
      Departed employee’s costs$8,646.55.[27]
  6. [31]
    It is convenient at this point in these reasons to note that as a secondary position, at the hearing of the substantive application, the respondents were prepared to pay the money (being $364,544.93) into court pending further order.[28]
  7. [32]
    The following nine matters were agitated on behalf of the respondents as to why judgment should not be entered at this stage:
    1. (a)
      Jurisdiction remains in issue given each party submitted to the non-exclusive jurisdiction of the courts exercising jurisdiction in New South Wales.[29] I accept that proposition to the extent that same involves disputes arising under the BSA, however the principal ground sought in the substantive application relates to the terms of the compromise agreement as opposed to the BSA; so therefore, for the applicant to succeed, I consider it is the compromise agreement more so than the jurisdictional ground of the BSA which should heavily factor as to whether judgment should be entered at this stage.
    2. (b)
      The terms of the relevant compromise agreement are yet to be fully worked through such that it is only once that has occurred that the sum payable by one party to the other, and who has to pay that sum, can be determined. On balance, I am not satisfied this factor presents an insurmountable obstacle for the applicant to be entitled to at least some of the amounts sought because there are two parts of the compromise agreement, the most pertinent of which is the legal expert determination sufficient to allow judgment at an earlier than usual stage.
    3. (c)
      Until the accounting expert makes a determination pursuant to cl 4.5 of the BSA, the applicant is required to account to the respondents for an amount equal to 80 per cent of all receivables recovered by the buyer until the buyer has paid the deferred purchase price payment to the sellers in full. Therefore unless and until it is determined by the accounting expert that the purchase price is not more than $8,000,000, the applicant would be required to account to the respondents for 80 per cent of the Bonett payment which the legal expert determined was the property of the applicant pursuant to clause 5.1 of the BSA. Like the previous factor, the overwhelming consideration is that the legal expert has already determined that the Bonett payment lies in favour of the applicant. Therefore, I consider the applicant to be entitled to, at least, some of the amount sought as there is no arguable proposition of fact or law which ought to prevent judgment being granted at an earlier than usual stage.
    4. (d)
      To the extent that the applicant’s claim is based on an alleged breach of contract, that matter needs to be specifically pleaded.[30] There is merit to this factor insofar as it relates to matters which were not the subject of the legal expert determination, vis-a-vis the compromise agreement.
    5. (e)
      Part of the new breach of contract claim is disputed. That dispute ought to be determined by a court with evidence. I accept this proposition only to the extent that it relates to the BSA. The legal expert determination on the other hand was ultimately a separate bargain which was struck by the parties pursuant to the compromise agreement for which judgment can be made as there is no arguable proposition of fact or law which ought to prevent judgment being granted at an earlier than usual stage.
    6. (f)
      This is not a case where justice can be done under the summary procedure permitted by r658 of the UCPR. I consider there to be some aspects which permit justice to be done under the summary procedure because the compromise agreement is a separate matter from the BSA.
    7. (g)
      The respondents hold genuine concerns about the solvency of the applicant. I am not satisfied this factor has been made out.[31] As a consequence, it is unnecessary to accept the respondent’s offer to pay an amount into a controlled monies account until further order.
    8. (h)
      The pursuit for further monies relating to payments to barristers was entirely unjustified. This factor alone is insufficient to dismiss the entire application.
  8. [33]
    The accounting expert is in the process of making a determination now that the legal expert determination has occurred. If, as the respondents have submitted, the expert accountant finds money due and payable to the respondents pursuant to the exercise which is currently being undertaken, the respondents could have a set-off which will have substantive effect. It will therefore have substantive effect as a matter of law because it is an equitable set-off which has the effect of diminishing the liability asserted by the applicant. If there is a set-off which is equitable in nature, it is not merely a procedural defence, but rather it is a defence of substance. It will reduce the alleged liability the respondents have to the applicant insofar as it relates to the BSA. My view is that it is correct therefore in those circumstance to wait until the matter has been properly litigated, however I take a different view on matters concerning the compromise agreement, and more particularly the Bonett payment where there is no compelling reason, including a potential set-off, to hold the applicant out of this amount.
  9. [34]
    The respondents have accepted, as it was determined, inter alia, by the legal expert that “the amount owed by Mr Bonett was still a Receivable on 20December 2019, and became the property of the Buyer pursuant to cl 5.1 and cl 9.1 of the BSA”.[32] However it was submitted by the respondents that the issue concerning the calculation of WIP and debtors in order to determine the calculation of the purchase price as contemplated by cl 10 of the BSA has not yet been determined. Nonetheless I consider this to be a separate and independent process now that the legal expert has made her determination. The parties have agreed to be bound by the legal expert’s determination and part of the legal expert’s determination resolved the Bonnet payment in the applicant’s favour.
  10. [35]
    The respondents contend that whilst the legal expert has determined the Bonett dispute, the bonus dispute and the oral agreement dispute, cl 3 and cl 4 of the compromise agreement were relevant to the extent that they impact upon the BSA, and more particularly the calculation of the ultimate purchase price. Clause 3 of the compromise agreement provided that:
    1. (a)
      The disputed items “be determined by the Accounting Expert pursuant to cl 10.4(b) of the BSA (subject to the determination of the issues referred to the Legal Expert) and the Legal Expert pursuant to cl 10.4(c) of the BSA; and,
    2. (b)
      “The Accounting Expert will prepare the Completion Statement and calculate the Purchase Price …”.
  11. [36]
    Clause 4 of the compromise agreement removes cl 10.4(b)(5) of the BSA and stipulates that “…the Accounting Expert’s determination must resolve the Disputed Items having regard to the Legal Expert’s determination of the Bonett Dispute, the Bonus Dispute and the Oral Agreement Dispute”. Therefore what remains is that the accounting expert is required to prepare the completion statement and calculate the purchase price, having regard to the legal expert’s determination. A necessary function of the accounting expert determination will therefore involve calculating WIP and debtors in order to determine the calculation of the purchase price, in light of the legal expert’s determination. My view is that the accounting expert determination is not conditional upon judgment being entered in relation to the Bonett payment and the costs of the legal expert’s determination. Therefore the applicant is entitled to these amounts under the summary procedure afforded under r 651.
  12. [37]
    I accept that the applicant’s completion statement is a calculation which is in dispute. Part of the dispute between the parties is the amount set out as being “the amount of WIP and Receivables which is to be excluded for the purpose of calculating the Purchase Price in accordance with the principles in Part 2 of Schedule 9 of the BSA, being $1,781,808.44”.[33] The applicant has deducted this amount from what it purports to be $8,792,099.28 representing the aggregate WIP and receivables (as at 21 December 2019). Yet the respondents contend that the aggregate WIP and receivables, which was not the subject of any cross-examination, was approximately $9,175,000.[34] As such the respondents submitted that there is a dispute which is factual in nature and arises from the true construction of Part 2 of Schedule 9 of the BSA.[35]
  13. [38]
    If the respondents’ position is accepted it will in effect mean that the applicant’s obligations under the BSA will see the outstanding debtors or receivables reduce. If it is not, and the funds are returned to the applicant, the final payment to the respondents will increase given the receivables or outstanding debtors of the practice will increase.[36] A potential scenario could arise where the purchase price (to be determined by the accounting expert[37]) is greater than $8,000,000 and therefore the respondents will be required, by cl 4.3(a) of the BSA, to pay the difference between the estimated purchase price ($8,000,000) and the purchase price, up to a cap of $1,000,000. That is because the purchase price payable under the terms of the BSA is the aggregate of all WIP and receivables at 11.59pm on the day of completion, up to a maximum of $9,000,000. Further should the accounting expert determine that the purchase price is greater than $8,000,000, the respondents will have a set-off against the monies and amounts presently claimed by the applicant, upon which the respondents would be entitled to rely.[38] A court will then have to determine that issue.
  14. [39]
    So if, for example, the accounting expert determines money is due and payable to the respondents, the set-off will have effect. That is because on the day of completion, according to the respondent, the total WIP and debtors of Armstrong Legal were approximately $9,175,000.[39] If that is the case, it is an equitable set-off which has the effect of diminishing the liability asserted by the applicant. If the set-off applies, there would be no existing liability.
  15. [40]
    The respondents accept what the legal expert has determined but liability has not been determined once and for all. It was submitted that to allow judgment now will ignore the substantive effect of an equitable set-off and as such, the court should not entertain what is in substance an application for summary judgment until a proper defence has been determined on its merits which has yet to be sufficiently litigated. It was highlighted that the legal expert has determined that the Bonett payment is a receivable and thus must, in accordance with the BSA, be paid by the respondents to the applicant. If it was paid and received by the applicant and if the applicant owed money to the respondents by reference to the first purchase time, a fact which the accounting expert is to determine, the applicant, in the meantime, must remit 80 per cent of the Bonett payment to the respondents.[40] In other words, it would be available to the respondents to set-off. Therefore it was submitted that it was incorrect as the applicant argued that the Bonett payment represented a liability owed by the respondents to the applicant, leaving aside the defence of set-off and, on the assumption, that the applicant owed the money to the respondents. Accordingly such matters ought not be resolved, nor should they, until the accounting expert determination. It was apparent therefore, and as has been submitted by the respondents, that the substantive application was “not a straightforward matter” as was the case in General Credits (Finance) Pty Limited v Fenton Lake Pty Ltd.[41] However I consider this matter to be straightforward in the sense that the compromise agreement struck by the parties, and indeed separate from the BSA, ultimately permits payment of some amounts to the applicant. The legal expert determined as such. The parties have agreed to that determination. In that respect it is similar to a summary judgment application where judgment can be permitted in the clearest of cases. Matters of dispute pertaining to the BSA can evolve in due course by way of pleadings.
  16. [41]
    The respondents placed reliance upon the analogy of taking accounts in that it is well established in that context that:

“… a party cannot, as it were, have little bits of accounts. There is one account and one account only and the issue is what is owed and what is not owed. The declaratory procedure cannot be used to get declarations about little bits of accounts because the proceedings may become, in relation to a total account, otiose.”[42]

  1. [42]
    The approach taken by the applicant, whilst not typically ideal, does not require a complete accounting to be undertaken. Complete accounting is not required in this instance given the nature of the two discrete matters: the first relates to the compromise agreement; the second relates to matters outstanding under the BSA which are yet to be resolved and, to an extent, is dependent upon the accounting expert determination. Accounting is required for the latter matter and there is no disadvantage to be occasioned to the respondents because they will still be permitted to comprehensively ventilate any potential set-off in relation to matters which properly arise under the BSA, other than the legal expert determination.
  2. [43]
    Additionally, the respondents relied upon the defence of circuity of action. It was submitted that it should not be obliged to repay money to the applicant which it owes them.[43] It was submitted that the terms of the relevant compromise agreement are to be fully worked through. Only once that has occurred, the sum payable by one party to the other, and who has to pay that sum, can be finally determined. That may be so for the accounting expert determination, and in that instance, the proper course is to wait and not permit judgment at this point in time for matters not pertaining to the legal expert determination. The remaining obligations arise between the parties under the BSA which necessitates examining the parties’ rights as at completion but, all in all, I see no compelling reason why the applicant should not be held out of what the parties agreed by way of the compromise in terms of having the legal expert determine the Bonett payment ($340,498.38) and the costs of the legal expert determination ($15,400). After all, this is what the parties agreed by way of the compromise. That seems to me to be sufficiently clear cut and it is appropriate to grant judgment under the summary procedure in relation to these amounts.
  3. [44]
    Insofar as the remaining amounts are concerned, I am not so persuaded that those amounts should be entered into at this juncture. Instead the appropriate course would be to allow these disputed amounts to be part of a claim to proceed by way of proper pleadings. In doing so, such procedure will enable the terms of the BSA to be ventilated and permit the respondents to properly agitate a potential equitable set-off regarding additional amounts. The applicant referred me to r 173(3) of the UCPR but I am not satisfied that it is appropriate, at this point in time, for a set-off to proceed as the respondents may have some defence or counter-claim which should initially and fairly be brought in the usual way. It is not appropriate in those circumstances for the applicant to have “little bits of accounts” because in my view those matters are properly within the framework of the BSA, as opposed to the compromise reached by the parties and more importantly the specific determinations reached by the legal expert. I am satisfied that the Bonett payment and the legal experts costs can now, clearly, be given to the applicant because on 23 December 2019, the respondent took the sum of $340,498.38 which was the property of the applicant.[44] Over 12 months has now passed following the respondents having received $8,000,000 under the BSA and the Bonett payment does not have any bearing as to the accounting expert determination process. The Bonett payment is an asset which has been determined in favour of the applicant by the legal expert determination and does not form part of any amounts which the accounting expert is to take into account. I am satisfied therefore that this amount should be made in favour of the applicant at this point in time together with the associated costs from the legal expert determination. The remaining amounts can otherwise be adjudicated and determined in the usual course by delivery of pleadings. I envisage that process will commence with the filing of a claim within a certain period of time for the amount still pressed by the applicant, save for the Bonett payment and the legal expert determination costs. The bargain struck by the parties on the compromise agreement contemplated a determination specifically regarding the Bonett payment and the legal expert’s costs of which I am persuaded that, on this occasion, it is clear judgment can be permitted under the summary procedure of r 651. It is only fair given the Bonett payment was ultimately the property of the applicant at the time of settlement. As for the remaining amounts, being counsel fees and employee entitlements, whilst noting that same are payable on demand, I consider the terms of the BSA still remain in sufficient dispute, together with any necessary set-off, such that I am not satisfied at this juncture that judgment should be granted under the summary procedure of r 651.
  4. [45]
    Whilst I recognise that the respondents have admitted, in the application for leave to adduce further evidence, that the sum of $735,874.93 is undisputed, that represents part of an amount which I consider to be properly within the realm of the BSA.
  5. [46]
    Finally another material consideration is the fair and complete resolution of all issues between the parties. There needs to be clarity with respect to the purchase price which should follow from the accounting determination and I am not satisfied that the dispute between the parties has been finalised to enable judgment on that part of the amount sought. Accordingly I only order that judgment be permitted in the amount of $355,898.38. I will hear from the parties as to the form of the order, including costs.

Footnotes

[1] [2019] QCA 77 at [58].

[2] Bailey v Marinoff (1971) 125 CLR 529 at 539 (Gibbs J).

[3] Spotlight Pty Ltd v NCON Australia Ltd (2012) 46 VR 1 at [17] (Harper and Tate JJA and Beach AJA).

[4] Uniform Civil Procedure Rules 1999 (Qld), r 5(1), (2).

[5] AON Risk Services Aust Ltd v Australian National University (2009) 239 CLR 175 at 182 [5] (French CJ).

[6] [2006] FCA 22 at [24].

[7] FYD Investments Pty Ltd v Promptair Pty Ltd [2017] FCA 1097 at [32] (White J), Bendigo and Adelaide Bank Ltd v Clout (No 2) [2016] FCA 561 at [25] (White J) and Westgem Investments Pty Ltd v Commonwealth Bank of Australia Ltd (No 5) [2019] WASC 310 at [93] (Tottle J).

[8] See for instance EB v CT (No. 2) [2008] QSC 306.

[9] Affidavit of James Terrence Stevens affirmed 17 June 2020 at “JTS-1”, pp 23-126. The BSA was later varied by a deed of variation dated 20 December 2019: see Affidavit of James Terrence Stevens affirmed 17 June 2020 at [9] and “JTS-1”, pp 127-131.

[10] Item 7 of Schedule 3 defines “Base Purchase Price” as “the lesser of the Estimated Purchase Price and $8,000,000”.

[11] “Purchase Price” is defined in the BSA to be “as at 11.59pm on the day of Completion the aggregate of all WIP and Receivables of the Business at Completion up to a maximum of $9,000,000.00 and as determined in accordance with clause 10”. Clause 10 of the BSA is entitled “Calculation of Purchase Price” and identifies the steps to calculate same.

[12] Clause 10.4 of the BSA.

[13] Clause 4.3(a) and 5.1 of the BSA.

[14] Clause 4.3(b) of the BSA.

[15] See affidavit of Peter Michel Magee sworn 26 June 2020 at pp 602 and 603.

[16] Affidavit of James Terrence Stevens affirmed 17 June 2020 at [12]. (Cf applicant’s written submissions [19]).

[17] Affidavit of James Terrence Stevens affirmed 17 June 2020 at [13].

[18] The respondents are prepared to pay $340,498.38 representing the Bonett payment into court pending further order: see affidavit of William Thomas Ellicott sworn 7 October 2020 at [54].

[19] Affidavit of James Terrence Stevens affirmed 17 June 2020 at “JTS-1”, pp 165 and 166.

[20] Affidavit of James Terrence Stevens affirmed 17 June 2020 at “JTS-1”, pp 219 – 226.

[21] Affidavit of Peter Michael Magee sworn 26 June 2020, pp 609 – 611.

[22] Affidavit of Peter Michael Magee sworn 26 June 2020, p 611.

[23] Affidavit of Johannes Hermanus Jordaan sworn 22 September 2020 at “JHJ-2”, pp1 – 6.

[24] Order of Richards DCJ, Court Document 23.

[25] Originally the amount of $29,660.53 was sought for what was called the entitlement adjustment. However, on the first day of hearing, given a dispute in relation to the amount, such amount was varied.

[26] At 10.

[27] On the second day of hearing, the amount of $375,874.93 was specified given the ‘concessions’ made in the respondents’ material: see for instance affidavit of William Thomas Ellicott, sworn 13 January 2021 at [58].

[28] On the second day of hearing, the amount of $375,874.93 was offered into a control monies account, if required.

[29] BSA cl 22.8(b).

[30] Rule 150(1)(a) of the UCPR.

[31] In reaching this view, I have placed no weight on the affidavit of Michelle Makela affirmed 27 January 2021 disclosing a valuation report of the applicant.

[32] Affidavit of William Thomas Ellicott, sworn 28 September 2020 at [17].

[33] Clause 5(b) of the completion statement dated 20 January 2020 at JTS-1, page 166.

[34] See affidavit of William Thomas Ellicott sworn 28 September 2020 at [21(a)].

[35] See affidavit of Peter Michael Magee sworn 26 June 2020 at pp 355 – 357.

[36] See affidavit of Peter Michael Magee sworn 26 June 2020 at [44] and [45].

[37] The process of which has been underway since 2 October 2020 when an accounting expert was nominated by the Australian Disputes Centre.

[38] Clause 4.3(a) of the BSA which effectively imposes an obligation on the applicant to pay the respondents the difference as determined.

[39] See affidavit of William Thomas Ellicott sworn 28 September 2020 at [21(a)].

[40] Clause 4.5 of the BSA. This has not occurred.

[41] Supra.

[42] Adams v Bank of New South Wales [1984] 1 NSWLR 285, 296.

[43] Affidavit of Peter Michael Magee sworn 26 June 2020 at [74].

[44] Clause 9.1 of the BSA.

Close

Editorial Notes

  • Published Case Name:

    Go To Court Lawyers Pty Ltd v Magee & Anor

  • Shortened Case Name:

    Go To Court Lawyers Pty Ltd v Magee

  • MNC:

    [2021] QDC 32

  • Court:

    QDC

  • Judge(s):

    Jarro DCJ

  • Date:

    05 Mar 2021

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Adams v Bank of New South Wales (1984) 1 NSWLR 285
2 citations
Jump To
Cite 1 - (1984) 1 NSWLR 285
Cite 2 - (1984) 1 NSWLR 285
Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175
1 citation
Jump To
Cite 1 - (2009) 239 CLR 175
Bailey v Marinoff (1971) 125 CLR 529
1 citation
Jump To
Cite 1 - (1971) 125 CLR 529
Bankruptcy v Bradshaw [2006] FCA 22
1 citation
Jump To
Cite 1 - [2006] FCA 22
Bendigo and Adelaide Bank Ltd v Clout (No 2) [2016] FCA 561
1 citation
Jump To
Cite 1 - [2016] FCA 561
Davies v Davies [2019] QSC 293
2 citations
Jump To
Cite 1 - [2019] QSC 293
Cite 2 - [2019] QSC 293
EB v CT (No 2) [2008] QSC 306
2 citations
Jump To
Cite 1 - [2008] QSC 306
Cite 2 - [2008] QSC 306
FYD Investments Pty Ltd v Promptair Pty Ltd [2017] FCA 1097
1 citation
Jump To
Cite 1 - [2017] FCA 1097
General Credits (Finance) Pty Ltd v Fenton Lake Pty Ltd[1985] 2 Qd R 6; [1984] QSC 109
2 citations
Jump To
Cite 1 - [1985] 2 Qd R 6
Cite 2 - [1985] 2 Qd R 6
Mackellar Mining Equipment Pty Ltd v Thornton [2019] QCA 77
1 citation
Jump To
Cite 1 - [2019] QCA 77
Roberts v Gippsland Agricultural and Earth Moving Contracting Pty Ltd (1956) VLR 555
2 citations
Jump To
Cite 1 - (1956) VLR 555
Cite 2 - (1956) VLR 555
Spotlight Pty Ltd v NCON Australia Ltd (2012) 46 VR 1
1 citation
Jump To
Cite 1 - (2012) 46 VR 1
Westgem Investments Pty Ltd v Commonwealth Bank of Australia Ltd (No 5) [2019] WASC 310
1 citation
Jump To
Cite 1 - [2019] WASC 310

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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