Tony Barakat caught in last minute trust manoeuvre ... Attempt to diddle creditors thwarted as funds frozen ... Stacks win $300,000 costs order from Keddies for hopeless professional negligence action ... Court of Appeal dumbfounded by Scott Roulstone's evidence
Barakat: shifty
THE dividend from Tony Barakat's "bankrupt" estate has suddenly shot-up by 10 cents in the dollar as a result of quick action by the trustees at PPB Advisory.
On August 10 the trustees successfully applied for an urgent Federal Court order to freeze about $1.6 million held in an account called Vanair Pty Ltd.
The company is trustee for the Vanair Trust, which is a Barakat family trust.
PPB Advisory's first report to creditors showed that the former Keddies' partner had $2.6 million squirreled in the trust.
But that is not the full story.
Just before he filed his debtor's petition Barakat shifted $1.6 million into the Vanair account to repay a "loan" the trust had made to him.
NAB confirms that $1,582,000 is in the account and has been frozen.
Details of the claim were not disclosed in the first report from PPB Advisory to creditors to avoid tipping off the sneaky solicitor about the intended recovery.
Barakat's statement of affairs disclosed he had $503,000 cash in the bank, however only $483,156 has been recovered and the trustees are "investigating the discrepancy".
Independent valuations of between $51,000 and $66,000 for the three motor vehicles given to his wife and children in March and April are now to hand, and the family members have been asked to make offers to compensate the estate.
Debtors are required to stump-up about $1.2 million for the estate by September 7.
See PPB's circular to creditors
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Maurie Stack: awarded indemnity costs
MAURIE Stack and his far-flung chain of law shops stand to trouser $300,000 in costs awarded as a result of an appeal judgment just to hand in a long-running professional negligence tussle between Stacks and Keddies.
It is probable the money will come from LawCover and that Maurie & Co won't have to stand in-line with other creditors for crumbs from the table.
LawCover these days usually insists that the insured pays upfront the excess to the panel solicitor. With any luck the excess was paid before the bankruptcies.
Against counsel's advice Keddies blundered on with a disastrous professional negligence case against Stacks, alleging that Stacks Goudkamp Pty Ltd had settled a nervous shock claim in November 2002 for too little ($10,000), too quickly and without a psychiatric report.
Andrew Marshall's claim for damages arose from a car accident in which his teenage son, Matthew, had been killed.
On behalf of Andrew Marshall, Keddies brought a case against Stacks before Judge Andrew Colefax in the District Court.
Colefax found it was commenced without reasonable prospects of success, largely because the plaintiff had instructed the firm to settle the matter quickly.
He made a costs order against Marshall.
See More improper conduct from Keddies
Seeking to indemnity the unfortunate plaintiff, Stacks successfully applied under s.348 of the Legal Profession Act for costs against Keddies.
Keddies took it to the Court of Appeal and the decision came down on Friday (Aug 17).
See judgment Keddie & Ors v Stacks/Goudkamp
Beazley, Barrett and Sackville dismissed the appeal and allowed a cross-appeal expanding the recoverable damages.
Costs for the s.348 notice of motion were ordered on an indemnity basis and the costs of the appeal and the cross-appeal were awarded to Stacks.
Margaret Beazley took time to explore and explain the "reasonable prospects of success" provisions of the LPA and, in the process, tore into Keddies.
Before the matter went to trial the barrister instructed by Keddies, Kelvin Andrews, wrote to the firm on December 11, 2007 saying:
"It is my opinion, however that [Mr Marshall] will have severe difficulty in proving his claim in this matter ...
This is not a matter I would recommend should ever be allowed to go to court and it should be settled at the first available time."
Two days before the scheduled hearing Andrews again wrote, on June 24, 2009, and referred to the multiple difficulties facing the case.
During an adjournment Andrews pointed out in a letter of July 3 a whole string of problems, including that Marshall would not be entitled to non-economic loss and that a doctors assessment of whole person impairment was erroneously based on the WorkCover guidelines rather that the Motor Accidents Compensation Act guidelines.
"In relation to [Marshall's] evidence, it should be noted that it is my opinion that he will not succeed with this claim."
When the case came back on (November 2, 2009) Andrews told Keddies that he could not continue having regard to the reasonable prospects of success requirement of s.345.
Keddies ceased to act on November 5, 2009.
At no stage had Andrews said the case had reasonable prospects of success.
Despite all the advice Keddies partner Scott Roulstone, incredibly, said in an affidavit before the Court of Appeal, that at the time the trial commenced before Colefax he continue to hold the view that Marshall had reasonable prospects of success.
Even after Andrews' letter of July 3, 2009, Roulstone said he still believed the case had reasonable prospects of that it would be successful.
Beazley JA said:
"This evidence is difficult, if not impossible, to reconcile with the content of that letter."
Strangely, at no time did Keddies' lawyers or partners attempt to establish from Marshall whether he would have been prepared to have seen a psychiatrist.
After all, this was one of the basic elements that had to be proved in the professional negligence case - that Stacks had been negligent in not obtaining a psychiatric report.
Keddies' argument was that Stacks should have refused to act or arranged for independent legal advice.
Stacks had advised the client that to settle early was "premature" given the absence of a psychiatric report.
Beazley said:
"In my opinion ... a solicitor has no right to compel a client to undergo a psychiatric assessment ...
I do not know of any legal principle that requires a solicitor to cease to act merely because a client has failed to follow advice."
Then there was this crunch line:
"Although the Keddies solicitors each swore an affidavit that he had a reasonable belief as to the reasonable prospects of success of Mr Marshall's professional negligence proceedings against Stacks, the mere incantation of a reasonable belief is not sufficient for the purposes of s.345.
A reasonable belief must be based upon a reasonably arguable view of the law and upon provable facts."
Costs were awarded on an indemnity basis for the s.345 notice of motion and Stacks are to be paid their costs for the appeal and cross-appeal.
Good night Irene and good night Keddies.
Oh, there's one more thing.
Colefax had referred Keddies to the Legal Services Commissioner, but that "investigation" went cold while the appeal was pending.
Now that the investigation will be back on, the excitement is unbearable.