Brott v Shtrambrandt & Ors
[2009] VSC 467
•19 October 2009
| Do Not Send for Reporting | ||
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 7374 of 2005
| ISSAC ALEXANDER BROTT (trading as Issac Brott & Co) | Plaintiff |
| v | |
| ELENA SHTRAMBRANDT FENEDISTO PTY LTD ARKADY SHTRAMBRANDT REGISTRAR OF TITLES LORYAN SHTRAMBRANDT | Defendants |
---
JUDGE: | BEACH J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 6-9, 12-13 and 15 October 2009 | |
DATE OF JUDGMENT: | 19 October 2009 | |
CASE MAY BE CITED AS: | Brott v Shtrambrandt & Ors | |
MEDIUM NEUTRAL CITATION: | [2009] VSC 467 | |
---
LEGAL PRACTITIONERS – Costs agreement – Bill of costs – Charge over property given to solicitor – Validity of charge – Identification of property to which charge attaches - Subsequent agreement to transfer property – Competing unregistered interests – Qui prior est tempore potior est iure.
CONSUMER CREDIT – Credit contract – Credit provided wholly or predominantly for personal, domestic or household purposes – Charge is or may be made for providing credit - Mortgage – Mortgage not describing or identifying property void – Consumer Credit (Victoria) Code, ss 4, 5, 6, 8, 11 and 40 – Consumer Credit (Victoria) Regulations, regulation 7(1)(c).
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr I.R. Jones SC with Mr A. Scriva | Felipe Tellez |
| For the First Defendant | No appearance | |
| For the Second Defendant | No appearance | |
| For the Third Defendant | In person | |
| For the Fourth Defendant | No appearance | |
| For the Fifth Defendant | No appearance |
HIS HONOUR:
Introduction
Mrs Elena Shtrambrandt (the first defendant) and Mr Arkady Shtrambrandt (the third defendant) were previously married and are now divorced. Between November 2000 and March 2005, Mr Issac Brott (the plaintiff) was Mrs Shtrambrandt’s solicitor. Mr Brott acted for Mrs Shtrambrandt principally in relation to Family Court proceedings between the Shtrambrandts. He also acted for Mrs Shtrambrandt in relation to a Supreme Court proceeding, the detail of which it is not necessary to consider further.
The present proceeding concerns a claim by Mr Brott to recover from Mrs Shtrambrandt his costs of acting for her. Mr Brott also seeks to enforce charges which he alleges were given by Mrs Shtrambrandt over two properties to secure the payment of his fees. As a result of a settlement of the Family Court proceeding entered into after Mr Brott ceased acting for Mrs Shtrambrandt, Mrs Shtrambrandt no longer has any interest in the properties alleged to be the subject of charges. The defendants who have an interest in resisting the enforcement of the alleged charges are Mr Shtrambrandt and his son, Loryan (the fifth defendant).
Fenedisto Pty Ltd (the second defendant) and the Registrar of Titles (the fourth defendant) took no part in the trial of this proceeding. The plaintiff’s claims against Fenedisto were resolved at an earlier hearing of this proceeding and the Registrar of Titles is content to abide the order of the Court.
For the reasons given below, Mr Brott is entitled to judgement in respect of his claim for costs against Mrs Shtrambrandt. However, Mr Brott’s claims in respect of the two properties must be dismissed.
The properties in dispute
During the course of their marriage, Mr and Mrs Shtrambrandt acquired a number of properties. The properties in dispute in this proceeding are:
(a) a property situate at and known as 6 Curraweena Road, Caulfield, being all of the land described in Certificate of Title Volume 10158 Folio 497; and
(b) a property situate at and known as Apartment 10, 131 Brighton Road, Elwood, being all of the land described in Certificates of Title Volume 8801 Folio 306 and Volume 8801 Folio 293.[1]
[1]Certificate of Title Volume 8801 Folio 293 is an accessory unit or car space in respect of Certificate of Title Volume 8801 Folio 306.
At all relevant times, the Curraweena Road property was owned by Mr and Mrs Shtrambrandt. The position with respect to the Brighton Road property is not so clear. The Certificates of Title in respect of the Brighton Road property show it to be owned by Mr and Mrs Shtrambrandt. However, Mr Shtrambrandt contends that at all relevant times the Brighton Road property was held by him and his former wife on trust for Loryan.
The Family Court proceeding
The Family Court proceeding commenced in 1999. At that time, Mrs Shtrambrandt’s solicitors were Pryles & Defteros. Some of the detail of this proceeding is set out in earlier decisions of this Court.[2]
[2]See Fenedisto Pty Ltd v Brott [2005] VSC 459, Shtrambrandt v Brott [2006] VSC 379 and Shtrambrandt v Brott (No. 2) [2006] VSC 483.
On 19 January 2000, the Family Court made orders by consent restraining the parties from dealing with a number of assets, requiring Mr Shtrambrandt to provide access to properties for the purposes of valuation, requiring Mr Shtrambrandt to authorise his accountants to release copies of certain financial documents, requiring Mr Shtrambrandt to pay lease payments in respect of a motor vehicle in the possession of Mrs Shtrambrandt and providing for certain procedural matters. Paragraph 1 of these orders relevantly provided:
“1. That the Husband and the Wife each be and are hereby restrained from encumbering, disposing of, mortgaging, charging, selling, dealing with, transferring or agreeing to dispose of, mortgage, charge, deal with, transfer or sell –
(a) …
(b) …
(c) …
(d) [The Brighton Road property]
(e) [The Curraweena Road property].
(f) …
(g) …
(h) …”
On 10 November 2000, Mrs Shtrambrandt changed solicitors and retained the plaintiff. Shortly after retaining the plaintiff, Mrs Shtrambrandt signed a costs agreement (“the first costs agreement”). The first costs agreement was contained in a letter dated 10 November 2000. The letter was headed “Re matrimonial matter” and provided:
“We understand that you wish us to act for you in connection with matters arising out of your marriage and proceedings connection (sic) therewith.
It is our experience that such family law litigation is both stressful and expensive.
Before you embark upon such litigation, we will give you information relating to what obligations you will have to us in relation to payment of legal costs, how much those costs might be, and what your rights are in relation to any dispute which may arise in the future with us in relation to the payment of costs.”
The letter then set out information concerning the rates at which various matters would be charged. In the course of setting out this information, the plaintiff noted that “Our charges are in excess of the scale of fees and charges set out in Order 38 of the Family Law Rules and schedule 2 of the Family Law Rules”.
At the end of the letter, various terms in relation to the first costs agreement were set out. The letter requested Mrs Shtrambrandt’s signature so as to “confirm [her] agreement to and understanding of the matters set out in [the] letter”. One of the terms set out provided:
“In consideration of the firm of Isaac Brott & Co agreeing to act on my behalf in the matters referred to above, I hereby charge all my estate, rights, title and interest in and to and entitlement to any real or personal property from a property lase (sic)[3] settlement with my husband and to:
(a) all of my estate, right title and interest in any other real or personal property, save and except for heirlooms, now or hereafter acquired by me;
in favour of Issac Brott & Co for the due and punctual payment of all moneys that may now or hereafter become due to Issac Brott & Co by reason of and pursuant to the terms of this agreement.”
[3]During argument it was suggested that this word might have been meant to be “case” or “law”. Neither is a particularly satisfactory replacement. Perhaps the better view is that the word (if not the clause) is unintelligible.
An issue arises in this case as to whether the first costs agreement applies only in respect of the Family Court proceeding – or whether it has application both in respect of the Family Court proceeding and the Supreme Court proceeding. I will return to this issue later.
Mr Brott gave evidence that later in November 2000 he reached the conclusion that a new costs agreement needed to be drawn. Mr Brott reached this conclusion after speaking with a member of counsel who drew his attention to Order 38 of the Family Law Rules. As a result of this, Mr Brott prepared a second costs agreement (“the second costs agreement”).
The second costs agreement was a more formal document than the first costs agreement. It recorded that Mrs Shtrambrandt had already retained the plaintiff in relation to the family law proceeding and “desire[d] to now retain [him] in relation to the continuation of [that proceeding] on the terms set out in this agreement”.
Clause 5 of the second costs agreement provided:
“You [Brott] may render interim accounts at any time, but not more than once in each calendar month and these accounts inclusive of counsel fees will not be payable by me until the completion of these proceedings (being a minimum of 180 days after settlement of the proceeding) or, alternatively, the termination of your services, whichever is the earlier.”
While Mrs Shtrambrandt was not liable to pay Mr Brott until the completion of the Family Court proceeding, clause 18 of the second costs agreement provided:
“I agree that I will be liable for all disbursements incurred by you but I will not have to pay your professional costs in the event that I do not obtain an order in my favour or I do not enter into a settlement with my former husband.”
Like the first costs agreement, the second costs agreement contained provisions purporting to give the plaintiff various charges. The charges were contained in clauses 9 and 10 of the second costs agreement. Clauses 9 and 10 provided:
“9. I hereby irrevocably charge all estates or interests in real estate which I, or any company in relation to which I have authority to exercise the power to charge real estate, now have or may hereafter acquire with payment of all moneys that may be or become due to you [Brott] under this Costs Agreement.
10. I further irrevocably charge all money and property whatsoever (sic) nature to which I may become entitled pursuant to any judgment or order obtained in, or by reason of any settlement of, any proceeding pursued by you with payment of all moneys that may be or become due to you under this Costs Agreement and I hereby agree that this charge shall be a first charge and shall not be deferred to any other solicitor or other person.”
The second costs agreement was signed by Mrs Shtrambrandt on 7 December 2000. It was signed after Mrs Shtrambrandt received independent advice from Efron & Associates and after amendments had been made which were suggested in a letter from Efron & Associates to the plaintiff.[4]
[4]Part of Exhibit E.
An issue arises as to whether the second costs agreement superseded the first costs agreement. The plaintiff contends that on and from 7 December 2000, both costs agreements were in force. I will return to this issue later.
Mr Brott continued to act for Mrs Shtrambrandt until March 2005. Whilst there is debate concerning the precise date of the termination of the retainer, it is tolerably clear that by 27 March 2005, Mr Brott was no longer acting for Mrs Shtrambrandt. At the time of the termination of the retainer in March 2005, the Family Court proceeding remained unsettled.
During the course of Mr Brott’s retainer, two important matters occurred in relation to the Family Court proceeding. First, Shop 4, 72-74 Church Street, Brighton (“Shop 4”) was placed on the market by consent and sold, with the net proceeds being paid to Mrs Shtrambrandt “by way of partial property settlement”. From the proceeds of this sale, it would appear that Mrs Shtrambrandt received some $407,960.37, Mr Brott received some $19,000 and two members of counsel received the sums of $7,000 and $3,500 respectively.
Secondly, during the course of a hearing before Carter J in the Family Court on 4 September 2002, her Honour asked Senior Counsel for Mrs Shtrambrandt (who was instructed by Mr Brott) whether any of the solicitors had a charge over a property recently purchased by Mrs Shtrambrandt in Briggs Road, Caulfield South. Senior Counsel for Mrs Shtrambrandt responded:
“I don’t believe so but I’ll find out. None of them have? No. Well, it’s a new property in any event so I would be surprised if the historical ones did but, no, Mr Brott doesn’t have a charge.”
After a short adjournment, Senior Counsel for Mrs Shtrambrandt (having received further instructions from Mr Brott) said:
“There is one other matter. I told Your Honour that Mr Brott did not have a charge over the property. He doesn’t, but inquiries over the break with the office determine that he has a right to take a charge out over the property. It hasn’t been effected or is in contemplation but that needed to be corrected.”
On 28 April 2005 (approximately one month after the termination of Mr Brott’s retainer), Mr Brott lodged caveats in respect of the Curraweena Road property and the Brighton Road property. According to the caveats, the interest claimed by Mr Brott in respect of each property was an “interest as chargee”.
On 4 May 2005, Mrs Shtrambrandt’s new solicitors (Susan Snyder) forwarded a section 90D financial agreement signed by Mrs Shtrambrandt, together with minutes of proposed consent orders and withdrawals of caveats lodged on behalf of Mrs Shtrambrandt. Section 90D of the Family Law Act 1975 provides for the making of financial agreements after a dissolution of marriage.
In May 2005, Mr Shtrambrandt had two solicitors acting for him: Hogg & Reid in the Family Court proceeding and Mr Gad Kolsky as his commercial solicitor. From an undated file note of Mrs Reid,[5] Mrs Reid’s file note dated 10 May 2005[6] and a certificate of independent legal advice signed by Mrs Reid,[7] it is apparent that Mr Shtrambrandt signed the section 90D agreement on 10 May 2005.[8] On 12 May 2005, Hogg & Reid wrote to the Registrar of the Family Court advising that the Family Court proceeding had “now resolved on a final basis”. Minutes of consent orders were provided. The consent orders were ultimately made on 27 May 2005.
[5]Exhibit Q.
[6]Exhibit R.
[7]Exhibit S.
[8]Notwithstanding that an email from Mr Shtrambrandt to Mr Kolsky sent on 9 May 2005 at 9.46am (Exhibit Z) suggests that Mr Shtrambrandt intended to signed the section 90D agreement on 9 May 2005.
The section 90D agreement
In the section 90D agreement, Mr and Mrs Shtrambrandt each admitted and acknowledged that they held the Brighton Road property “on trust entirely for Loryan and have always done so”. Under the section 90D agreement, amongst other things, Mrs Shtrambrandt agreed to transfer to Mr Shtrambrandt all her right, title and interest in the Curraweena Road property. Mrs Shtrambrandt also agreed to remove the caveats lodged on her behalf over the Curraweena Road property and the Brighton Road property.
Mr Brott’s claim for costs
After some delay, Mr Brott finally delivered a bill in taxable form in relation to the Family Court proceeding.[9] The bill totals $261,123.05. However, in evidence, Mr Brott acknowledged that there was an error in item 2463. This item was apparently calculated using 15% of the total value of the other professional charges, when the true percentage figure should have been 10%. By my calculation, the proper amount for item 2463 should be $13,490.73 – and not the $20,240.60 claimed. Making this adjustment reduces the bill to an amount of $254,376.18.
[9]Exhibit A.
Mr Brott gave evidence of his compliance with Order 38 r 37 of the Family Law Rules concerning the service on Mrs Shtrambrandt of the bill and a notice of rights.[10] Further, he gave evidence that no request has been made by Mrs Shtrambrandt for a taxation of the bill. Mr Brott also gave evidence that there has been no notice disputing the bill.
[10]T60.25 - .29 and Exhibit M.
While Mrs Shtrambrandt attended Court on the first day, she took no active part in the defence of the proceeding. However, on two occasions (in response to questions from me), Mrs Shtrambrandt stated that she did not wish to defend the proceeding, nor say anything in opposition to judgment being entered against her in favour of Mr Brott for the amount of the bill and costs.[11] Further, Mrs Shtrambrandt was called during the course of Mr Brott’s case and was asked whether she contested or opposed any of the claims for relief brought by Mr Brott against her in the proceeding, to which she answered no.[12]
[11]T1.25 and 55.16 - .27.
[12]T183.31.
No part of Mr Brott’s bill has been paid. Mr Brott has established an entitlement to judgment for his costs of acting in the family law proceeding against Mrs Shtrambrandt in the sum of $254,376.18 and there will be judgment against Mrs Shtrambrandt accordingly.
The plaintiff’s claims in relation to the alleged charges
The plaintiff’s claims in relation to the alleged charges affect Mr Shtrambrandt in relation to the Curraweena Road property and Mr Shtrambrandt or Loryan (depending upon whether there is a trust) in relation to the Brighton Road property. Issues that arise include:
(a) whether the costs agreements (either the first or the second) applies only to the family law proceeding, or whether either of them have application to other work as well;
(b) whether the second costs agreement superseded the first costs agreement so that the first costs agreement has no application or operation after 7 December 2000;
(c) the validity of the charges;
(d) whether the Brighton Road property is subject to any of the charges (this issue includes the issue of the existence of any trust in favour of Loryan);
(e) whether the Curraweena Road property is subject to any charge, having regard to the existence of a prior mortgage over that property and/or the failure of Mrs Shtrambrandt to sever the joint tenancy between herself and Mr Shtrambrandt;
(f) if both Mr Brott and Mr Shtrambrandt have competing unregistered interests, the issue of which interest takes priority; and
(g) Mr Shtrambrandt’s issues in respect of “2,000 odd items” in the bill of costs.[13]
[13]T109.12.
The issues of whether or not any valid charge was created and any priority between competing unregistered interests include (according to Mr Shtrambrandt):
(a) the “debatability” said to exist in the circumstances in which any charge was granted or costs agreement was entered into (including the question of whether Mr Brott “knew or must be taken to have known of the terms of the Family Court order [of 19 January 2000] ”[14]);
[14]See paragraph 7A of the second further amended defence of the third defendant.
(b) the fact that “there was no evidence during the five years [of the Family Court proceeding] that there [was] a charge or any other dealings between Mr Brott and [Mrs Shtrambrandt]”;
(c) whether the circumstances of Mr Brott lodging baseless caveats entitled Mr Shtrambrandt to disregard any knowledge of Mr Brott’s caveats at the time he signed the section 90D agreement; and
(d) the question of whether Mr Brott should be prevented from enforcing any charge found to exist because he had previously had an alternative remedy available to him exercisable against moneys belonging to Mrs Shtrambrandt and held by him for a short time.
Before turning to the relevant issues, it is appropriate at this point to make some observations about the main witnesses, Mr Brott, Mr Shtrambrandt and Mrs Shtrambrandt.
Mr Brott, Mr Shtrambrandt and Mrs Shtrambrandt as witnesses
Mr Brott was a difficult witness. He gave every impression of being annoyed at the inconvenience of having to come and give evidence in support of his claims. Consequently, he appeared to be uncooperative at times and too willing to take a clever point to deflect the cross-examiner (Mr Shtrambrandt). Further, while he claimed to be unable to remember certain matters, he purported to have a detailed memory (without reference to notes) in respect of some matters that occurred more than eight years ago. In the end, I formed the view that I should not accept Mr Brott’s evidence unless it was supported by other evidence and/or seemed inherently probable having regard to the circumstances of the case.[15]
[15]For example, Mr Brott gave evidence that the 19 January 2000 orders “were far greater in extent than the normal Family Law Court restraint orders” (T42.10). This seemed unlikely – and was directly contradicted by the evidence of Mr D.B. Smith of counsel who gave evidence that the restraining orders were of the kind “often made” in family law cases (T219.24 – 220.1).
Mr Shtrambrandt cross-examined Mr Brott on a significant number of matters going to credit, with a view to persuading me that I should not accept Mr Brott’s evidence. As it turns out, much of this case can be decided without reference to the oral evidence of Mr Brott. The only real matter of significance in relation to Mr Brott’s evidence was his assertion that he was unaware of the restraining orders made by the Family Court on 19 January 2000 when he entered into the costs agreements with Mrs Shtrambrandt. I will return to that issue later.
Mr Shtrambrandt was a more cooperative witness than Mr Brott. However, he, too, appeared unwilling to give any evidence that might impact negatively upon his defence. Again, not too much turns on this, because (as will be seen from my reasons below) there was only one potentially critical issue upon which he gave evidence: namely, the existence of the trust and Loryan’s position in relation to the Brighton Road property.
Mrs Shtrambrandt was the most impressive of the three main witnesses. However, even her evidence suffered from an obvious animus between her and her former husband (Mr Shtrambrandt). This was particularly so in regard to the beneficial ownership issue in respect of the Brighton Road property. Again, I will return to this issue (and Mr and Mrs Shtrambrandt’s evidence in relation to it) below.
Does the first costs agreement have any application?
In my view, the first costs agreement has no application or relevance in this proceeding. The first costs agreement was entered into by Mrs Shtrambrandt without the benefit of independent legal advice. It is a document which has a number of difficulties, not the least of which is the unintelligibility of the clause purporting to charge Mrs Shtrambrandt’s property. While these matters of themselves may not affect the validity of the first costs agreement, when one examines the sequence of events which I have set out above, it seems tolerably clear that on and from 7 December 2000, neither Mrs Shtrambrandt nor Mr Brott regarded the first costs agreement as having any operative effect.
The second costs agreement, having been entered into after Mrs Shtrambrandt received independent legal advice (and being the product of amendments as a result of that advice), was the document that regulated the relationship between Mrs Shtrambrandt and Mr Brott from 7 December 2000. Indeed, clause 4 of the second costs agreement provides that Mrs Shtrambrandt will pay costs “in respect of all work already done by [Brott] and all work yet to be done …”. Further, it is highly improbable that Mr Brott and Mrs Shtrambrandt intended that their relationship in relation to the Family Court proceeding be governed by two agreements covering the same field, but in different terms. It follows that any charge created by the first costs agreement ceased to have effect when Mrs Shtrambrandt signed and delivered the second costs agreement to Mr Brott.
To what work does the second costs agreement relate?
During the hearing, counsel for Mr Brott foreshadowed that there was work that had been performed by Mr Brott for Mrs Shtrambrandt and which was not referred to or dealt with in the bill of costs.[16] Further, it was foreshadowed that the plaintiff would seek to deliver a bill (or bills) in respect of this additional work and rely on the charges alleged to be created in the costs agreements so as to make those costs recoverable from sales of the Brighton Road property and the Curraweena Road property.
[16]Exhibit A.
Having regard to the conclusion I have reached in respect of the first costs agreement, it is strictly speaking not necessary to consider this agreement further. So far as the second costs agreement is concerned, on its face it relates only to the family law proceedings between Mr and Mrs Shtrambrandt. In the fourth line of the second costs agreement there is reference to the family law proceedings. There is no reference in the agreement to any other proceedings. Further, clause 4 of the second costs agreement notes that Mrs Shtrambrandt will pay costs in accordance with a schedule to be “substituted for Schedule 2 of the Family Law Rules as at 1 May 1993 and otherwise in accordance with the Family Law Rules in force on that day”. In my view, the second costs agreement deals only with the family law proceeding and has no application in respect of any other work that might have been performed by Mr Brott on behalf of Mrs Shtrambrandt.
While, as I said above, it is strictly speaking not necessary for me to consider further the first costs agreement, if (contrary to what I have held) the first costs agreement had any application after 7 December 2000, then, in any event, the first costs agreement was similarly limited to Mrs Shtrambrandt’s family law proceedings.[17] During final submissions, counsel for Mr Brott sought to persuade me that the first costs agreement applied not only to the Family Court proceeding, but also to other work (specifically the Supreme Court proceeding) performed by Mr Brott. Reliance was place upon the phrase “proceedings connection therewith” in the first sentence of the letter comprising the first costs agreement. However, the letter is headed “Re: Matrimonial matter” and commences “We understand that you wish us to act for you in connection with matters arising out of your marriage and proceedings connection (sic) therewith”. There is no basis for the construction contended for on behalf of Mr Brott. The first costs agreement deals specifically with the family law proceeding. There is no express reference to any other proceeding. Further, there are references to the Family Law Rules, the Family Court, the Principal Registrar of the Family Court and scales of costs applicable to the Family Court. The first costs agreement applied only to the family law proceeding. Similarly, the fact that the second costs agreement contains a recital that Mrs Shtrambrandt wishes Mr Brott to be retained “in relation to the continuation of” the family law proceeding does not leave any life in the first costs agreement – and certainly not in respect of a construction which the first costs agreement does not bear.
[17]The first costs agreement makes reference to order 38 and Schedule 2 of the Family Court Rules, and makes no reference to any other work that might be done by Mr Brott or any other proceedings in which he might act.
The validity of the alleged charge
Central to this proceeding is the question of the validity of clause 9 of the second costs agreement. Mr Shtrambrandt attacks this clause[18] on the basis of the “debatability” he says exists in the circumstances in which it was granted and/or in the circumstances in which the second costs agreement was entered into. Mr Shtrambrandt’s first point under this heading is that Mr Brott “knew or must be taken to have known” of the Family Court order of 19 January 2000.
[18]And to the extent necessary, any other charging clause entered into between Mr Brott and Mrs Shtrambrandt.
Mr Brott denies knowing of the prohibition by the Family Court upon Mr and Mrs Shtrambrandt charging or otherwise dealing with their property at the time when the first and second costs agreements were entered into. So far as the second costs agreement is concerned, Mr Shtrambrandt points to item 14 of Mr Brott’s bill, which notes that on 20 November 2000, 558 pages of documents were copied in preparation for a brief to counsel in the Family Court proceeding. Further, Mr Brott gave evidence that on 5 December 2000 he sent an articled clerk to the Family Court to “make sure we … got a full set of documents”.[19]
[19]T39.4 - .9.
In my view, it is probable that Mr Brott had a copy of the Family Court’s orders of 19 January 2000 in his possession at the time Mrs Shtrambrandt delivered a signed copy of the second costs agreement to him. However, this is far from saying that Mr Brott had actual or imputed knowledge[20] of the existence of the orders of 19 January 2000.
[20]While an allegation of constructive knowledge was made in an earlier version of the third defendant’s defence, the third defendant’s pleadings were amended before trial to delete this allegation in respect of this issue (see the particulars under paragraph 7A of the second further amended defence of the third defendant). Insofar as any allegation of constructive knowledge remains (cf paragraph 7N(d)), the construction and operation of the relevant charging clause cannot be governed by circumstances not within the actual knowledge of one of the parties.
There are many solicitors in respect of whom it could be said that if they took over a matter involving a proceeding on foot and obtained copies of the relevant Court orders, they would read and have knowledge of those orders within a day (if not hours) of being provided with the relevant documents. However, I am satisfied that Mr Brott does not belong to this class. In the circumstances, and notwithstanding my uneasiness about his evidence, I am not satisfied that Mr Brott knew or must be taken to have known of the existence of the 19 January 2000 orders at any time prior to the entering into of the second costs agreement. It follows that Mr Shtrambrandt’s arguments based upon Mr Brott’s alleged knowledge of the 19 January 2000 Family Court orders cannot succeed.
However, Mr Shtrambrandt’s argument in relation to the 19 January 2000 Family Court orders is put on two bases, the second of which does not require knowledge on the part of Mr Brott. Mr Shtrambrandt contends that the mere existence of these orders invalidates the charges relied upon by Mr Brott and/or takes the Curraweena Road property and the Brighton Road property outside their operation. There is no substance in this argument. The matter can be tested by considering what would happen if a charge (in breach of the 19 January 2000 orders) was given to a third party (for example, a bank). The giving of such a charge would constitute a contravention of the orders made on 19 January 2000. It may also constitute a contempt (although it is not necessary to finally resolve that matter in this proceeding). The short point is that any such breach or contempt cannot, without more, invalidate what would otherwise be a lawful charge. I turn now to consider the arguments concerning the validity of the charge based on the width of the language used.
From time to time it is suggested that a charge over all of the real and personal property over which the chargor owns or may hereafter acquire may be too wide.[21] However, the better view appears to be that a charge over a chargor’s “real and personal property whatsoever and wheresoever” is not void for uncertainty, nor as being against public policy if it is possible at the time when the charge is sought to be enforced to point to the property comprised in it.[22]
[21]See for example Fisher & Lightwood’s Law of Mortgage (Australian edition) at paragraph 2.3.
[22]See generally Bridge Wholesale Acceptance Corporation (Australia) Limited v Burnard (1992) 27 NSWLR 415 at 421. See further, National Trustees Executors and Agency Co of Australia Limited v Lesser [1944] VLR 210; Tyson v Kelcey [1899] 2 Ch 530 at 532-3; Clark v Raymor (Brisbane) Pty Ltd (No. 2) [1982] QdR 790 at 795 and ALH Australia Limited v McGlinn (1996) 7 BPR 15179.
While there are difficulties with the intelligibility of the clause purporting to contain a charge in the first costs agreement, and while these difficulties might arguably preclude a Court from pointing to the property comprised in it, there are no such difficulties with clause 9 of the second costs agreement. Absent some statutory provision depriving clause 9 of the second costs agreement of any operative effect, in my opinion clause 9 is capable of operating in this case in respect of Mrs Shtrambrandt’s liability to Mr Brott in relation to the Family Court proceeding. I turn now to consider the relevant statutory provisions.
Legislative provisions capable of invalidating the charge
On the sixth day of the trial,[23] I gave leave to Mr Shtrambrandt to amend his defence to add paragraph 11R in the following terms:
“Further or in the alternative
(a) the provision in the first charging clause purporting to charge all interests of [Mrs Shtrambrandt] in estates or interests in real estate that are unspecified is void in contravention of s 98(1) of the Credit Act 1984 and/or s 40 of the Consumer Credit (Victoria) Code.
(b) the provision in the second charging clause purporting to charge all the interests of [Mrs Shtrambrandt] in estates or interests in real estate that are unspecified is void in contravention of s 98(1) of the Credit Act 1984 and/or s 40 of the Consumer Credit (Victoria) Code.”
[23]13 October 2009.
Section 19A of the Credit Act 1984 provides that (save for irrelevant exceptions) the Credit Act has no application to a credit contract made on or after the commencement of s 51 of the Consumer Credit (Victoria) Act 1995. Section 51 of the ConsumerCredit (Victoria) Act commenced on 1 November 1996. It follows that the Credit Act (including s 98(1)) has no application in this case. I turn now to consider the alternative plea under s 40 of the Consumer Credit Code.
Section 5 of the Consumer Credit (Victoria) Act 1995 provides:
“The Consumer Credit Code set out in the appendix to the Consumer Credit (Queensland) Act as in force for the time being –
(a) applies as a law of Victoria; and
(b) as so applying may be referred to as the Consumer Credit (Victoria) Code.”
Section 40 of the Consumer Credit Code provides:
“40. Mortgages over all property void
(1) A mortgage that does not describe or identify the property which is subject to the mortgage is void.
(2) Without limited sub-section (1), a provision in a mortgage that charges all the property of the mortgagor is void.”
The expression “mortgage” is defined in Schedule 1 of the Consumer Credit Code to include (amongst other things) “any interest in, or power over, property securing obligations of a debtor or guarantor”. As to the form of a mortgage, in order to make it enforceable, it “must be in the form of a written mortgage document that is signed by the mortgagor”.[24] Further, it is sufficient compliance with this requirement if the mortgage “is contained in a credit contract signed by the mortgagor”.[25]
[24]See s 38(1) of the Consumer Credit Code.
[25]See s 38(2)(a) of the Consumer Credit Code.
Section 8 of the Consumer Credit Code deals with the issue of mortgages to which the Code applies. Section 8 provides:
“(1) This code applies to a mortgage if –
(a) it secures obligations under a credit contract or a related guarantee; and
(b) the mortgagor is a natural person or a strata corporation.
(2) If any such mortgage also secures other obligations, this Code applies to the mortgage to the extent only that it secures obligations under the credit contract or related guarantee.
(3) The regulations may exclude, from the application of all or any provision of this Code, a mortgage of a class specified in the regulations.”
The expression “credit contract” is defined in s 5 of the Code. Section 5 provides:
“For the purposes of this Code, a credit contract is a contract under which credit is or may be provided, being the provision of credit to which this code applies.”
The provision of credit to which the Code applies is dealt with in s 6(1) of the Code. Section 6(1) provides:
“This Code applies to the provision of credit (and to the credit contract and related matters) if when the credit contract is entered into or (in the case of pre-contractual obligations) is proposed to be entered into -
(a) the debtor is a natural person ordinarily resident in this jurisdiction or a strata corporation formed in this jurisdiction; and
(b) the credit is provided or intended to be provided wholly or predominantly for personal, domestic or household purposes; and
(c) a charge is or may be made for providing the credit; and
(d) the credit provider provides the credit in the course of a business of providing credit or as part of or incidentally to any other business of the credit provider.”
The meaning of “credit” and “amount of credit” is dealt with in s 4 of the Code. Section 4 of the Code provides:
“(1) For the purposes of this Code, credit is provided if under a contract –
(a) payment of a debt owed by one person (the debtor) to another (the credit provider) is deferred; or
(b) one person (the debtor) incurs a deferred debt to another (the credit provider).
(2) For the purposes of this Code, the amount of credit is the amount of the debt actually deferred.
The amount of credit does not include –
(a) any interest charge under the contract; or
(b) any fee or charge –
(i) that is to be or may be debited after credit is first provided under the contract; and
(ii) that is not payable in connection with the making of the contract or the making of a mortgage or guarantee related to the contract.”
Mr Brott’s answer to Mr Shtrambrandt’s invalidity point based upon s 40 of the Consumer Credit Code is to deny the allegations in the new paragraph 11R of Mr Shtrambrandt’s defence and to say:
“(a)neither of the costs agreements constitute mortgages for the purposes of the Consumer Credit Code (“the Code”);
(b)if (which is not admitted) the costs agreements constitute mortgages, they are not mortgages for the purposes of the Code because:
(i) the credit provided under the costs agreements was not provided or intended to be provided wholly or predominantly for personal, domestic or household purposes;
(ii) no charges are or may be made under the costs agreements for providing the credit to Elena;
(iii) the charges in them arise by operation of custom;
(c) further, that:
(i) the charging clauses in the costs agreements do describe the property which is subject to the charging clause;
(ii) the charging clause in the 10 November cost agreement does not charge all the property of Elena as it excludes heirlooms;
(iii) the charging clause in the 7 December costs agreement does not charge all the property of Elena but only her real estate.”
Mr Brott’s answer contained in paragraph (b)(iii) above[26] is no doubt a reference to regulation 7(1)(c) of the Consumer Credit (Victoria) Regulations.[27] Regulation 7(1) relevantly provides:
[26]Paragraph 11R(b)(iii) of the plaintiff’s further reply filed 13 October 2009.
[27]As to which, see s 6(1) of the Consumer Credit (Victoria) Act 1995.
“The Code does not apply to the following mortgages –
(a) …
(b) …
(c) a lien or charge arising by operation of any Act or law or by custom.”
The short answer to this point is that the charge contained in clause 9 of the second costs agreement arises by agreement – and not by custom. Mr Brott seeks to enforce the charge contained in clause 9, not some other charge that might arise by custom (and in respect of which there was no evidence).
It is not necessary to consider Mr Brott’s answer contained in paragraph (c)(ii) above.[28] This is because I have already determined that the charging clause in the 10 November costs agreement (the first costs agreement) has no operation in this proceeding. The issues that need to be considered are:
[28]Paragraph 11R(c)(ii) of the plaintiff’s further reply filed 13 October 2009.
(a) whether the second costs agreement is a mortgage within the meaning of the Consumer Credit Code;
(b) whether the second costs agreement is outside the operation of the Consumer Credit Code because:
(i) the credit provided or intended to be provided was not wholly or predominantly for personal purposes (s 6(1)(b) of the Code);
(ii) no charge is or may be made for providing the credit (s 6(1)(c) of the Code);
(iii) clause 9 arises by the operation of custom;
(c) whether s 40 has no operation in this case because:
(i) clause 9 of the second costs agreement does describe the property which is subject to it;
(ii) clause 9 does not charge all the property of Mrs Shtrambrandt – but only her real estate.
Turning now to these issues, the first point to be made is that the second costs agreement satisfies the definition of “mortgage” in Schedule 1 of the Consumer Credit Code - being “any interest in, or power over, property securing obligations of a debtor”. From there, one goes to s 8 of the Consumer Credit Code. The requirement of s 8(1)(b) is satisfied in this case because Mrs Shtrambrandt “is a natural person”. The issue then becomes whether the second costs agreement “secures obligations under a credit contract” within the meaning of s 8(1)(a). From here, one goes to ss 4, 5 and 6 of the Code.
Before turning to these sections, it is necessary to refer to some of the provisions of the Code governing its interpretation and application. Section 11(1) of the Code provides:
“In any proceedings (whether brought under this Code or not) in which a party claims that a credit contract, or guarantee is one to which this Code applies, it is presumed to be such unless the contrary is established.”
Clause 7 of Schedule 2 of the Code provides:
“(1) In the interpretation of a provision of this Code, the interpretation that will best achieve the purpose of this Code is to be preferred to any other interpretation.
(2) Sub-clause (1) applies whether or not the purpose is expressly stated in this Code.”
Clause 8 provides for the use of extrinsic material if a provision is ambiguous or obscure, or if the ordinary meaning conveyed by the provision leads to a result that is manifestly absurd or unreasonable, or to confirm an interpretation conveyed by the ordinary meaning of the provision. Clause 10 provides that if an example is used in the Code, the example is not exhaustive and “the example does not limit, but may extend, the meaning of the provision”.
There is no doubt Mr Brott provided credit to Mrs Shtrambrandt within the meaning of s 4 of the Code in that the second costs agreement deferred the payment of a debt owed by Mrs Shtrambrandt to Mr Brott; alternatively, Mrs Shtrambrandt incurred a deferred debt.[29] So much was admitted by Mr Brott in his evidence-in-chief.[30] The issues that remain at this level of the analysis are whether the credit was provided wholly or predominantly for personal purposes and whether a charge was or may have been made for providing the credit.
[29]Cf the discussion in Geeveekay v Director of Consumer Affairs (2008) 19 VR 512 at paragraphs [34]-[92].
[30]See for example T30.31 – 31.11.
In my view, the credit was provided wholly for personal purposes, being the pursuit of Mrs Shtrambrandt’s interests in the Family Court proceeding. If I had any doubt on this issue, then in any event Mr Brott has not established the contrary as required by s 11(1) of the Code.[31]
[31]See Geeveekay v Director of Consumer Affairs (2008) 19 VR 512 at paragraph [137].
During the course of their final submissions, counsel for Mr Brott submitted that any credit provided by Mr Brott was not provided wholly or predominantly for personal, domestic or household purposes. Reliance was placed upon a decision of Master Harrison in Park Avenue Nominees Pty Ltd v Boon.[32] In that case, the Court held that the intention for which credit is provided is to be determined by an objective test, that is, “what a reasonable person standing in the shoes of the credit provider would have understood the predominant purpose for which the credit is provided”. Counsel for Mr Brott then submitted that “the provision of legal services of (sic) litigation in the Family Court by Mr Brott is a business-related enterprise rather than one associated with domestic purposes”.[33]
[32][2001] NSWSC 700.
[33]See paragraph 15 on pp 23 and 24 of the first version of the plaintiff’s written submissions and paragraph 15 on pp 18 and 19 in the final version of the plaintiff’s written submissions.
In further evidence-in-chief given by Mr Brott after leave was given to Mr Shtrambrandt to plead the Consumer Credit Code, Mr Brott was asked and answered the following questions:[34]
“Mr Brott, when you were conducting practise as a family lawyer did you frequently allow the deferral of fees in the payment?---Yes. All or some or a portion of, yes.
For what purpose or purposes did you allow the deferral of payment of fees in your practise?---To allow the litigation to proceed almost invariably in a family law proceeding there is one party who holds the purse strings and upon alienation that party uses that, they are not particularly benevolent as to funding. The lawyers who are acting for the other party almost always – well, we always acted only for wives. That was pretty much a policy we tried to adhere to.
How frequently did you enter into costs agreements which provided for the deferral of payment of fees in your practise?---I would say that every single matter acting on behalf of a wife. The only difference is that some would materialise and they wouldn’t need deferral which very occasionally you would find an enlightened husband, or reasonable or solicitors or barristers acting on behalf of the husband.”
[34]T260–1.
While counsel for Mr Brott relied upon this evidence, the evidence misses the point. The relevant purpose is the purpose of the debtor – not the purpose of the creditor. To hold otherwise would take every professional lender outside the operation of the Consumer Credit Code. Such an interpretation would not “achieve the purpose or object” of the Code, much less “best achieve” those purposes.[35]
[35]Cf clause 7 of Schedule 2 of the Consumer Credit Code.
Further, an examination of the facts in Park Avenue Nominees[36] discloses that the decision cannot be put to the use suggested for on behalf of Mr Brott. Ultimately, the Court concluded that, applying the objective test, a reasonable person in the shoes of the credit provider would have understood the predominant purpose for which the credit was provided in that case was for running a cattle enterprise. This was the purpose of the borrower – not the purpose of the lender. In any event, the issue was put beyond doubt by the Queensland Court of Appeal in Shakespeare Haney Securities Limited v Crawford[37] when Muir JA[38] said in relation to s 6(1)(b):[39]
“Plainly ‘the purpose’ for which credit is provided or intended to be provided has nothing to do with the lender’s general commercial purposes: the reference is to the use to which the credit is to be put. In the great majority of transactions there would be no difficulty in determining the relevant purpose by reference to the terms of the application for credit and of the approval. If the borrower requests credit for a stated purpose and the lender approves the request and makes the loan, there should be no difficulty in concluding that the purpose for which the loan was made was the purpose for which it was requested.”[40]
[36]Supra.
[37][2009] QCA 85.
[38]With whom Mullins and Douglas JJ agreed.
[39]At paragraph [31].
[40]See further Dale v Nichols Constructions Pty Ltd [2003] QDC 453; Linkenholt Pty Ltd v Quirk (2000) ASC 155 – 040 at [153]; Jonsson v Arkway Pty Ltd (2003) 58 NSWLR 451 at [30] and Beckley v Consumer, Trader and Tenancy Tribunal [2009] NSWSC 703.
While the correctness of an approach requiring an objective test (namely, what a reasonable person standing in the shoes of the credit provider would have understood the predominant purpose for which the credit is provided) has been debated (and may continue to be debated) in the authorities, in this case the issue is of no moment. This is because, whether one applies this test (or one that might be thought more favourable to the debtor), the same result is achieved. Obtaining credit for the purpose of conducting Family Court proceedings against one’s spouse (or former spouse) falls within the rubric “personal, domestic or household purposes”.
I turn now to consider the requirements of s 6(1)(c) of the Consumer Credit Code. So far as the issue of whether “a charge is or may be made for providing the credit” is concerned, I note that in clause 4 of the second costs agreement it is provided:
“I {Mrs Shtrambrandt] acknowledge that those rules [Family Law Rules] admit (sic) you to add up to 10% loading to the costs set out in the Schedule hereto having regard to the complexity of the proceedings, the difficulty or novelty of the matters raised in the proceedings and/or the special skill, knowledge or responsibility of and the demands placed on you by the proceedings.”
Further, in clause 7 it is stated:
“I will pay all accounts rendered by you upon the completion of these proceedings or, alternatively, upon the termination of your services, whichever is the earlier. In the event that I fail to pay any such account as hereinbefore mentioned, I will pay interest on the outstanding amount at the rate of 12.3% per annum from the date on which such an amount was rendered until payment”.
This clause appears to contemplate the payment of an interest fee from the date when an account was rendered, notwithstanding that by clause 5 of the second costs agreement the account might not be payable at that time.
In my view, clause 4 on the one hand and clauses 5 and 7 in combination on the other hand each disclose that when the second costs agreement was entered into, the second costs agreement was an agreement in respect of which a charge is or may be made for providing the credit. Even if I was not so satisfied, Mr Brott has failed to establish the contrary as required by s 11(1).[41]
[41]See Geeveekay v Director of Consumer Affairs (2008) 19 VR 512 at paragraph [137].
During the course of final submissions, counsel for Mr Brott sought to contend that clauses 5 and 7 of the second costs agreement do not permit a charge to be made within the meaning of s 6(1)(c) of the Consumer Credit Code. However, the argument required the word “rendered” in the fifth line of clause 7 to be interpreted as “due in accordance with clause 5”. There is no basis for doing such violence to the language of clause 7. The effect of clauses 5 and 7 of the second costs agreement is that bills may be rendered from time to time during the course of the retainer, and even though they are not payable until the conclusion of the matter, interest may be payable from the time the accounts were rendered if they are not paid “upon the completion of these proceedings or, alternatively upon the termination of [Mr Brott’s] services”.
It follows from what I have said that the second costs agreement is a mortgage within the meaning of s 40 of the Consumer Credit Code. The question that now arises is whether it is void because it “does not describe or identify the property” which is subject to it.
If one looks at clauses 9 and 10 of the second costs agreement, it is apparent that they purport to charge:
(a) all Mrs Shtrambrandt’s interests in any real estate which she now has or may acquire;
(b) all interests in real estate which any company in relation to which Mrs Shtrambrandt has authority to exercise the power to charge real estate now has or may acquire; and
(c) all money and property of whatsoever nature to which Mrs Shtrambrandt might become entitled by reason of any judgment or settlement in the family law proceeding or any other proceeding pursued by Mr Brott on her behalf.
Clause 13(4) of Schedule 2 of the Code provides that in the Code “words in the singular include the plural”. Applying that clause and clause 7 of Schedule 2, if two or more provisions in a mortgage charge all the property of the mortgagor, then they are void. On one view, it could be said that clauses 9 and 10 of the second costs agreement charge all the property of Mrs Shtrambrandt because anything Mrs Shtrambrandt becomes entitled to retain after the completion of the family law proceeding could be said to be an entitlement pursuant to a judgment or settlement of that proceeding.
However, I prefer to base my decision on grounds which are not so narrow. In my view, clause 9 of the second costs agreement is caught by s 40(1) of the Consumer Credit Code. Property is neither described nor identified within the meaning of that section by the use of general words encompassing all estates or interests in real estate which the mortgagor now has or may acquire.[42] Further, a mortgagee’s position is not enhanced by the breadth of the charge being widened to include all estates or interests in real estate which any company in relation to which the mortgagor has authority to exercise the power to charge real estate now has or may acquire.
[42]Cf Considine v Citicorp Australia Limited [1981] 1 NSWLR 657.
Neither the Consumer Credit Code nor the extrinsic material in relation to it[43] disclose the purpose or object[44] of s 40. However, one likely purpose would appear to be to ensure that a mortgagor’s obligations are not open-ended and to ensure that a mortgagee cannot claim, or place restrictions on, property of greater value than the mortgagee might otherwise have a right to under the credit contract.[45] This purpose (or object) would obviously not be achieved (or not be best achieved, to use the language of clause 7 of Schedule 2) by the construction posited on behalf of Mr Brott.
[43]Cf clause 8 of Schedule 2 of the Code.
[44]Cf clause 7 of the Code.
[45]Cf paragraph 8.109 of the explanatory memorandum of the National Consumer Credit Protection Bill currently before the Commonwealth Parliament (and in which it is proposed to enact a national credit code in which s 44 is in identical terms to s 40 of the Consumer Credit Code).
Finally, even if one was to accept Mr Brott’s submission that “the charging clause in the [second] costs agreement does not charge all the property of [Mrs Shtrambrandt] but only her real estate”, this is not an answer in the circumstances of this case. Section 40(2) is a provision expressed to be enacted “without limiting sub-s (1)”. In this case, the charging clause relied upon by Mr Brott is void because it does not describe or identify the property which is subject to the mortgage.
It follows that Mr Brott’s claims with respect to the Brighton Road property and the Curraweena Road property must fail.
Other issues
In light of the conclusions which I have reached, it is not necessary for me to consider the other arguments advanced by the parties. However, having regard to the course the proceeding took, it is appropriate that I express briefly my conclusions in relation to the remaining issues set out in paragraphs [32] and [33] above.
First, in my view, even if a valid charge existed, it did not cover the Brighton Road property. While Mr Shtrambrandt sought to defend this proceeding in relation to the Brighton Road property on the basis that the property was held on trust for Loryan, the evidence on this point was far from clear-cut. There was no declaration of trust and the evidence disclosed that from time to time both Mr and Mrs Shtrambrandt treated the Brighton Road property as a matrimonial asset to be divided up between them. Nevertheless, I am satisfied that on and from Loryan’s 21st birthday the Brighton Road property was treated by the family as belonging to him. To the extent that Mrs Shtrambrandt’s evidence differed from Mr Shtrambrandt’s evidence on this issue, I prefer the evidence of Mr Shtrambrandt; it accords with the terms of the s 90D agreement.[46] In the circumstances, I am not prepared to conclude that (on the assumption the alleged charge was valid) the Brighton Road property was or contained an estate or interest in real estate which Mrs Shtrambrandt “now ha(d)” within the meaning of clause 9. That is, in giving any charge, Mrs Shtrambrandt was only purporting to charge property held by her beneficially – rather than any property she might have held on trust (notwithstanding the absence of any formal trust document). Further, Mrs Shtrambrandt certainly was not purporting to charge property to which she was not beneficially entitled.[47]
[46]See also paragraph 33 of Mr Shtrambrandt’s affidavit sworn in the Family Court proceeding on 12 June 2002.
[47]Notwithstanding whatever might be the correct construction of the words “or any company in relation to which I have authority to exercise the power to charge real estate” in clause 9 of the second costs agreement (this being an issue that does not require resolution in the present proceeding).
Secondly, the arguments of Mr Shtrambrandt concerning there being no evidence during the five years of the Family Court proceedings that there was a charge or any other dealings between Mr Brott and Mrs Shtrambrandt must be rejected. If clause 9 of the second costs agreement created a valid charge (contrary to my findings above), then the charge was in respect of (so far as this proceeding is concerned) only the Curraweena Road property. There was no relevant lack of evidence during the five year period referred to. Further, Mr Shtrambrandt entered into the s 90D agreement with Mrs Shtrambrandt in full knowledge of the existence of Mr Brott’s caveats. It was no answer for Mr Shtrambrandt to say that he could somehow disregard these caveats because of some lack of notice of the existence of any charge prior to May 2005.
In the circumstances, if there had been a valid charge over the Curraweena Road property, then the events that occurred during the time when Mr Brott acted for Mrs Shtrambrandt would not have had the effect of defeating Mr Brott’s claims.
Thirdly, the fact that Mr Brott may have had an alternative remedy available against Mrs Shtrambrandt is of no moment. Either Mr Brott had a valid charge over the Curraweena Road property or he did not. Any failure by Mr Brott to exercise other rights he may have had in respect of the property of Mrs Shtrambrandt (assuming there to have been such a failure) is not to the point.
Fourthly, the existence of a prior mortgage over the Curraweena Road property, again, would not have been a disentitling matter so far as Mr Brott’s claims were concerned. If one joint tenant (Mrs Shtrambrandt) charges her interest in a property to a stranger (Mr Brott) and subsequently transfers her interest in the property to the other joint tenant (Mr Shtrambrandt), the transferee (Mr Shtrambrandt) is bound by the charge because he claims under the transfer. The position would be different if Mrs Shtrambrandt had charged the Curraweena Road property to Mr Brott and then died before Mr Shtrambrandt. In those circumstances, Mr Shtrambrandt would not be bound by the charge because his claim would be based upon survivorship.[48]
[48]See generally Lyons v Lyons [1967] VR 169 at 176-7. See also Guthrie v Australia & New Zealand Banking Group Limited [1991] 23 NSWLR 672 at 679-680 and Capital Finance Australia Limited v Struthers (2008) 14 BPR 26,179.
It follows that if there had been a valid charge in respect of the Curraweena Road property, the charge would have been in respect of Mrs Shtrambrandt’s interest after payment of the prior mortgage. Further, as between the competing unregistered interests, Mr Brott’s (as first in time) would have taken priority over Mr Shtrambrandt’s.[49] It was no answer for Mr Shtrambrandt to say that he could somehow disregard Mr Brott’s caveats because (as asserted by Mr Shtrambrandt) Mr Brott had lodged caveats in the past which were “baseless” or unintelligible or lodged in circumstances where Mr Brott had no entitlement to lodge them and/or because Mr Brott was acting (or had acted) contrary to law. If the second costs agreement gave rise to a valid charge, then that interest would have taken priority over Mr Shtrambrandt’s interest – there being no relevant disentitling behaviour or features.
[49]Moffett v Dillon [1999] 2 VR 480.
Finally, Mr Shtrambrandt’s plea that he entered into the section 90D agreement “as a bona fide purchaser for value without notice”[50] must fail for a number of reasons. However, it is sufficient at this stage to note that Mr Shtrambrandt did not enter into the section 90D agreement without notice of Mr Brott’s alleged interests. If (contrary to my findings) there had been a valid charge, then the remaining issue would then have been the amount of the charge.
[50]See paragraph 11O of the third further amended defence of the third defendant.
Mr Brott sought to argue that the bill of costs (not having been disputed, or the subject of a request for taxation, by Mrs Shtrambrandt) was conclusive against Mr Shtrambrandt. Mr Brott contended that Mr Shtrambrandt should not be provided with any opportunity to challenge the family law bill because:
(a) Mr Shtrambrandt was not a party to the costs agreements;
(b) Mr Shtrambrandt was not liable for any amount owing to Mr Brott; and
(c) the charge did not extend to Mr Shtrambrandt’s interests in either of the properties the subject of this proceeding.
Had it been necessary to determine this matter, I would have rejected this submission. The bill on its face appears to contain a significant number of items about which there could be debate as to whether they relate to the family law proceeding and whether (in any event) they were reasonable. Mr Shtrambrandt wanted to contest approximately 2,000 items in the bill. I did not permit this to occur during the course of the trial. Instead, I concluded that if any inquiry was necessary, then a mechanism for determining this issue could be fashioned when judgment on the principal claims was delivered. However, in the light of my findings, it is not necessary to consider this matter further.
Conclusion
It follows from what I have said above that Mr Brott is entitled to judgment for the amount of his costs against Mrs Shtrambrandt. However, there should be judgment for the third and fifth defendants in relation to the claims affecting them. I will hear the parties on the appropriate form of orders and the issue of costs.
6
6
0