Partnership split not good enough excuse for silence, court says

Modco and its liquidators at Hall Chadwick brought proceedings against a number of entities that provided trade services, alleging they received voidable unfair preference payments.

There were no steps taken to progress proceedings between the date of joinder orders in May 2025 and earlier this month, when the defendants’ application for summary dismissal was heard.

Lawyers for the defendants told the Federal Court they sent several emails and left a telephone message with the plaintiffs’ solicitor up until the application was filed, but received no response.

The court also tried to contact the solicitor but heard nothing.

The day before the application was to be heard, the plaintiffs’ solicitor filed what purported to be a notice of change of solicitor, but instead indicated the solicitor remained the same but had changed firms.

The notice also included an updated email address, but it had already been used by the defendants’ lawyers with no luck.

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On the day of the hearing, the plaintiffs’ solicitor filed an affidavit that “purported to address the delay in progressing the matter and the non-responsiveness to communications”, including that a member of Hall Chadwick had left the firm in mid-2025.

However, the evidence said nothing about why the liquidators “and officers of this court” did not reallocate the matter. It also says nothing of the lack of progress between mid-2025 and March.

Further, the plaintiffs’ solicitor also deposed to a “sudden partnership split” in October 2025 of the three partners of the firm she worked for, which saw her leave and join with one of those partners.

She said it led to disruptions, including moving to the new premises and her old email being inactive by mid-December 2025.

“I accept that this event may have caused some disruption, but I also assume that, as solicitors, the respective partners had contingencies in place to ensure their clients’ interests were protected.

“Such contingencies presumably included the checking and forwarding of emails. Otherwise, it is hard to imagine how clients’ interests were protected,” Justice Banks-Smith said.

During the hearing, the plaintiff’s solicitor accepted that she received the phone message and emails sent from the defendants’ lawyers.

There was no evidence as to why no communication was made either with the defendants’ lawyers or the court since the start of the year.

“In fairness to the plaintiffs’ solicitor, she properly apologised to the defendants’ solicitor and the court … and acknowledged the position of the defendants,” Justice Banks-Smith said.

Given that the cause for the delay rests with the solicitors, Justice Banks-Smith said it would be “unduly harsh” of the court to dismiss the proceedings without giving the plaintiffs the opportunity “to now move swiftly to litigate or resolve the matter”.

While the defendants lost their summary dismissal application, Justice Banks-Smith said they should have their costs because they had “little choice but to proceed in the manner in which they did”.

“I am of the view that this is one of those occasions where unreasonable conduct on the part of the plaintiffs or their solicitors makes it appropriate that an indemnity costs order be made,” Justice Banks-Smith said.

Citation: Modco Residential Pty Ltd (in liq) v Nextruss Steel Pty Ltd (No 2) [2026] FCA 283.