In our January Legal Update article,
What Must Receivers Reveal, we reported on an ongoing dispute
between companies in the Westpoint Group, and receivers appointed
to those companies in 2006. The founder of the Westpoint Group, Mr
Norm Carey, is trying to get the receivers to provide copies of
their invoices and invoices for the legal work done by their
lawyers, Corrs Chambers Westgarth, during the receivership.
Readers will no doubt recall that the Court of Appeal recently
held that the receivers were required to provide the detailed
invoices, subject to any claim for legal professional privilege
(LPP). The Court found that insufficient evidence had been put
forward to explain why the receivers were entitled to claim LPP,
but decided that the receivers should have an opportunity to put
forward further evidence.
A week after the publication of our January article, the Court
of Appeal handed down a supplementary decision. Although many of
the arguments against the receivers failed, the Court found that
most of the time before it had been spent on the issue of LPP,
where Mr Carey had enjoyed some success. The Court found that this
justified a cost order in favour of Mr Carey and the other
appellant, of 75% of the cost of the appeal, and 75% of the costs
of the original application.
In the cases referred to in our earlier article, the receivers
retained Mallesons Stephen Jaques (now King & Wood Mallesons)
to represent them in court.
Some of the Westpoint companies have now issued proceedings
against Mallesons, seeking to review the bills issued by Mallesons
for defending the receivers.
In WA, the Legal Profession Act 2008 gives the clients
of a legal practice the right to have their legal bills assessed by
a taxing officer in the Supreme Court. A person who is not a
client, but is liable to pay someone else's legal costs, is
known as a "third party payer", and they also have the
right to have their costs reviewed in this way.
The companies in the Westpoint Group argue that they are liable
to pay the invoices issued by Mallesons to the receivers in the
earlier dispute. The companies say that this means they are third
party payers and therefore entitled to call for those costs to be
A costs assessment can be a very time-consuming and
labour-intensive process. A taxing officer can make a variety of
orders about a legal bill in a costs assessment, including orders
that it be reduced if found to be excessive.
Mallesons responded to the proceedings by applying to have them
dismissed, saying that the action had no prospect of success and
that it should not have been commenced in the first place as
no-one, except the receivers, had any authority to cause the
companies to issue the proceedings. Mallesons claimed that the
costs of the application, and of the action, should therefore be
paid by the plaintiff's lawyers and those instructing them.
In a decision handed down earlier this month, the Supreme Court
found that the action was not so hopeless that it should be struck
out at this early stage, so the arguments must proceed to a full
hearing for determination.
The Court also declined to order that the lawyers or their
instructors pay Mallesons' costs.
These findings involved an interesting analysis of what the
director of a company can still do after the appointment of a
Unlike other forms of external administration, the appointment
of a receiver does not entirely suspend the powers of the
directors. When trying to determine what a director of a company in
receivership can and cannot do, the question is whether the
exercise by a director of a power in the name of the company will
interfere with the receivers doing their job.
The Court found that in this case, a request to the
receivers' lawyers to submit their bills for assessment would
not interfere with the conduct of the receivership. It could
therefore be within the powers of the directors to cause the
companies to make such a request and to initiate a costs
This latest action against the Westpoint receivers has only just
started and some of the findings made this month could go another
way at a full hearing of the matter. In any event it seems likely
that the receivership of the Westpoint Group will continue to test,
and possibly make, the law in this area for a little while yet.
This Update highlights two recent cases that considered circumstances where liens could take priority over a registered security interest.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).