Dixon (as trustee of the bankrupt estate of Toufic Sassine) v Lennon
[2023] VSC 426
•24 July 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2022 02076
BETWEEN:
| STEPHEN ROBERT DIXON (as trustee of the bankrupt estate of TOUFIC SASSINE) | Plaintiff |
| v | |
| PATRICK LENNON | First Defendant |
| REGISTRAR OF TITLES | Second Defendant |
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JUDGE: | Barrett AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 27 October 2022 and 24 November 2022 |
DATE OF JUDGMENT: | 24 July 2023 |
CASE MAY BE CITED AS: | Dixon (as trustee of the bankrupt estate of Toufic Sassine) v Lennon & Anor |
MEDIUM NEUTRAL CITATION: | [2023] VSC 426 |
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REAL PROPERTY — Caveats — Application for removal of caveat under s 90(3) of the Transfer of Land Act 1958 (Vic) — Whether charge granted by tenants in common as security for legal services to be provided to the co-tenants or other family members up to $100,000 supports a caveatable interest – Failure to prove a fee agreement or any fees owing – Where charge contains agreement for caveator to lodge a caveat — Whether the balance of convenience favours the removal of the caveat — Application rejected.
REAL PROPERTY — Part IV of the Transfer of Land Act 1958 (Vic) — Mortgage — Application by trustee in bankruptcy of one of two tenants in common for removal of an all moneys mortgage and declaration of its invalidity — Whether failure to prove moneys owing under mortgage means mortgage invalid and should be discharged — Consideration of mortgagee’s rights as against co-tenant mortgagors — Fulton v 523 Nominees Pty Ltd [1984] VR 200 followed — Whether all co-tenant mortgagors are necessary parties to a proceeding to discharge mortgage —Application rejected.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Clarke | Celtic Legal Pty Ltd |
| For the First Defendant | Mr P Lennon, solicitor, appeared on 24 November 2022 | Lennon Lawyers |
| For the Second Defendant | No appearance |
TABLE OF CONTENTS
Application.......................................................................................................................................... 1
Background......................................................................................................................................... 1
The charge...................................................................................................................................... 3
The mortgage................................................................................................................................. 4
Requests for information.............................................................................................................. 8
Submissions...................................................................................................................................... 13
Consideration of the charge and caveat....................................................................................... 15
Principles regarding removal of a caveat................................................................................ 15
Does the reference to Lennon Lawyers in the caveat and not Patrick Lennon mean the charge does not support a caveatable interest?................................................................................... 15
Has there been a failure to prove a costs agreement and, if so, does that mean no caveatable interest has been established?.......................................................................................... 16
Is the reference to $100,000 unacceptably vague such that no caveatable interest is established?.............................................................................................................................................. 20
Does the balance of convenience favour maintenance of the caveat?................................. 21
Is the mortgage invalid?................................................................................................................. 22
Conclusion......................................................................................................................................... 25
HIS HONOUR:
Application
By originating process filed on 6 June 2022, the plaintiff, as trustee of the bankrupt estate of Toufic (also known as Tom) Sassine (‘Mr Sassine’), seeks a declaration that a mortgage lodged by the first defendant is invalid and orders removing the mortgage and a caveat also lodged by the first defendant from the title of land described as Lot 24 on Plan of Subdivision 434226C and identified in volume 10549 folio 946 (‘Land’).
In support of his application, the plaintiff relies on his affidavit sworn on 26 April 2022 and his written submissions filed on 20 October 2022 and 17 November 2022.
In opposing the plaintiff’s application, the first defendant relies on his affidavit sworn on 23 November 2022 and written submissions of the same date.
The second defendant, being the Registrar of Titles, has provided correspondence to the plaintiff’s solicitors, suggesting an appropriate form of orders if they are to be made, but otherwise indicating that it does not intend to appear.
Background
The plaintiff was appointed trustee of the bankrupt estate of Mr Sassine upon a sequestration order being made on 24 February 2021. Mr Sassine is a tenant in common as to one of two equal undivided shares of the Land with Andrew Sassine. By this proceeding, the plaintiff seeks to remove the impediments on the title held by Mr Sassine.
The first defendant is a legal practitioner. In his affidavit sworn on 22 November 2022, he describes himself as follows:
I am the principal and registered proprietor of Lennon Lawyers being a duly registered firm pursuant to the provisions of the Business Name Registration Act 2011 (Cth) …
It appears from this statement that the first defendant is a sole practitioner trading under the business name, Lennon Lawyers. The nature of the first defendant’s legal practice is significant for reasons that follow.
The first defendant describes his retainer and the security documents prepared in consequence of that retainer as follows:
3. On or around 20 November 2020 LL was retained to act for and on behalf of the Sassine family together with their related corporate entities. Toufic Sassine and Andrew Sassine are the joint registered proprietors (as tenants in common) of the property at 36 Edward Staff Drive, Kinglake (“the property”) and otherwise described as Certificate of Title Volume 10549 Folio 946. …
4. A Disclosure Statement and Costs Agreement dated 20 November 2020 was provided to Toufic and Andrew Sassine on or around that date (“the LL retainer”). …
5. To secure the payment of the provision of legal services by LL for the Sassine family, the Sassine family authorised Toufic Sassine and Andrew Sassine to execute a Deed of Charge in favour of LL over their interest in the property. Documents were executed by Toufic Sassine and Andrew Sassine on 20 November 2020, namely:- [sic]
(a) Deed of Charge dated 20 November 2020
(b) Mortgage and Memorandum of Common Provisions AA3553 (“MCP”) dated 30 November 2020.
…
7. A caveat was registered on the property by LL (in the name of Patrick Lennon) on 24 November 2020. A priority agreement was entered into with the registered first mortgagee i.e. the ANZ and having satisfied the requirements of the first mortgagee by entering into the priority agreement dated 1 February 2021, the [first] Defendant registered a second mortgage over the property on 1 March 2021. …
The first defendant exhibits to his affidavit a copy of a disclosure statement and costs agreement (‘costs agreement’), stated to be pursuant to div 3 of pt 4.3 of the Legal Profession Uniform Law (Vic) (‘LPUL’). The clients noted in the costs agreement are Mr Sassine and Mrs Angela Sassine. The matter is noted as being ‘(SUP) Our Ref: 20/0723.’ There is no description of the legal services to be provided. The contents and effect of the costs agreement are discussed further below.
The title search produced by the plaintiff relevantly records the following dealings:
(a) Mortgage AQ884647C, registered 4 April 2018 to the ANZ Bank;
(b) Caveat AT798325E dated 24 November 2020 with the following details:
Caveator: PATRICK LENNON
Grounds of Claim: AGREEMENT WITH THE FOLLOWING PARTIES AND DATE
Parties: THE REGISTERED PROPRIETOR(S)
Date: 20/11/2020
Estate or Interest: INTEREST AS CHARGEE
Prohibition: ABSOLUTELY
Lodged by: LENNON LAWYERS
and;
(c) Mortgage AU092728H dated 1 March 2021 in favour of Patrick Lennon.
The charge
The Deed of Charge is dated 20 November 2020 (‘Deed’). The parties to the Deed are Lennon Lawyers and Mr Sassine and Andrew Sassine, who are defined as the Sassines. It relevantly records as follows:
RECITALS:
A. Lennon Lawyers have provided and will continue to provide legal and other professional services (“the Services”) to the Sassine family and/or their corporate entities and business vehicles, including, but not necessarily limited to, Toufic Sassine (A.K.A. Tom Sassine), Angela Sassine, Saidah Sassine (A.K.A. Samantha Sassine), Andrew Sassine and Raymond Sassine.
B. The Sassines have agreed to charge in favour of Lennon Lawyers all of their properties (together with any property held in trust for Toufic Sassine) to secure the payment of the Services rendered by Lennon Lawyers on the terms and conditions set out in this Deed.
OPERATIVE PART:
1. Lennon Lawyers have provided and continue to provide the Services at the request of the Sassines on behalf of the Sassine family and/or their corporate entities and business vehicles up to the value of $100,000.
2. The Sassines hereby charge as security for the Services by Lennon Lawyers for the Sassine family and/or their corporate entities and business vehicles all of their interest in the property known as and situate [sic] at number 36 Edward Staff Drive, Kinglake VIC 3763 and more particularly described as Certificate of Title Volume 10549 Folio 946 (“the said property”) and each agree to execute a mortgage or mortgages in registrable form immediately upon being requested to do so by Lennon Lawyers. It is agreed that Lennon Lawyers shall register a caveat over the said property to better secure the Services in accordance with this Deed.
3. The Sassines shall further secure the Services by charging in favour of Lennon Lawyers all of their right, title and interest in any other property, whether real or personal, and the Sassines shall sign all and any documents that may be reasonably requested by Lennon Lawyers to enable Lennon Lawyers to better secure their interest in such properties.
(emphasis in original)
The mortgage
The mortgage is a standard form, two-page document, by the Victorian Land Titles Office. The details provided in it are as follows:
Estate and/or interest being mortgaged
FEE SIMPLE
Land Title Reference …
10549/946
Mortgagor
Given Name(s) TOUFIC
Family Name SASSINE
Given Name(s) ANDREW
Family Name SASSINE
Mortgagee
Given Name(s) PATRICK
Family Name LENNON
…
The mortgagor mortgages the estate and/or interest in land specified in this mortgage to the mortgagee as security for the debt or liability described in the terms and conditions set out or referred to in this mortgage, and covenants with the mortgagee to comply with those terms and conditions.
Terms and Conditions of this Mortgage
(a) Document Reference AA3553.
(b) Additional terms and conditions NIL
(emphasis in original)
The mortgage document appears to have been executed by each of the named mortgagors and the handwritten date 30 November 2020 appears below each of their signatures. There was no suggestion that they had not executed this document.
The standard form mortgage executed by the parties does not describe, or contain any reference to, any ‘debt or liability’. Nor does it contain any reference to any ‘advance’. However, it does incorporate, by reference, the Memorandum of Common Provisions AA3553 (‘Memorandum’) under s 91A of the Transfer of Land Act 1958 (Vic) (‘Transfer of Land Act’). The Memorandum contains standard terms of a mortgage that may be included by the parties by agreement. The relevant provisions include the following:
1.2 Repayment of all Secured Money
(a) The Mortgagor promises to pay all the Secured Money to the Mortgagee, to the extent it has not already been paid, on the Due Date.
(b) If no Due Date is specified on the Titles Office Form, the Mortgagor promises to pay all the Secured Money to the Mortgagee, to the extent it has not already been paid, within 3 months from service of a demand by the Mortgagee.
…
2.6 Discharge of Mortgage
(a) Mortgagee’s rights continue until Mortgagor released
Even if the Mortgagee has provided a discharge of this Mortgage, the rights of the Mortgagee continue under this Mortgage until the Mortgagee gives the Mortgagor an unconditional release from the Mortgagor’s personal obligations under this Mortgage.
(b) When is the Mortgagor entitled to a discharge?
The Mortgagor is only entitled to a discharge of this Mortgage when all of the Secured Money has been paid and the Mortgagee is reasonably satisfied that:
(1) it will not have to repay, refund or give up any money; and
(2) the Mortgagee does not have any contingent liability arising:
(A) under this Mortgage;
(B) from the Mortgagee’s possession or receipt of revenue from the Land; or
(C) from the Mortgagee’s sale of the Land or any part of the Land.
…
5.2 Financial obligations
(a) Secured Money
The Mortgagor must pay the Mortgagee the Secured Money in accordance with this Mortgage. …
The definitions clause of the Memorandum (cl 11.1) contains the following definitions:
“Costs and Expenses” means:
(a) legal costs (including those of in-house lawyers) on a full indemnity basis;
…
(i) any other cost or expense incurred or paid by the Mortgagee in connection with this Mortgage.
…
“Secured Money” means:
(a) the Advance [which is defined to mean ‘the amount so specified in the “Advance” item in the Titles Office Form’];
(b) interest payable under this Mortgage;
(c) interest capitalised under this Mortgage;
(d) all amounts that are or may become owing to the Mortgagee under any agreement between the Mortgagor and the Mortgagee [(emphasis added)] now or in the future, including all amounts that the Mortgagor owes to the Mortgagee under:
(1) a loan or other agreement;
(2) a guarantee or indemnity …;
(3) a Security [defined to mean ‘a mortgage, guarantee, indemnity, bill of sale, charge, lien, pledge, deed or agreement of any kind’]; or
(4) this Mortgage;
(e) all money that any agreement says is Secured Money or which an agreement says is secured by this Mortgage; and
(f) all Costs and Expenses for which the Mortgagor is liable under this Mortgage.
Money is part of the Secured Money whether it is:
(a) advanced by the Mortgagee alone or with anyone else;
(b) advanced to the Mortgagor or Covenantor or anyone whose obligations the Mortgagor has guaranteed alone or with anyone else;
(c) owing immediately or at some time in the future;
(d) actually owing or not required to be paid until something else happens; or
(e) advanced before or after this Mortgage is signed or at some time in the future.
Having regard to those terms, the mortgage may be described as an ‘all-moneys’ mortgage, securing undefined legal costs incurred by the Sassine family and related entities up to a maximum of $100,000.
It appears from correspondence that has been produced that by letter dated 2 February 2021, the first defendant requested ANZ bank to execute a priority agreement, permitting him to lodge a second mortgage. By letter dated 9 February 2021, ANZ bank notified the first defendant that it agreed to, and had executed, a priority agreement regarding the registration of the mortgage in question as a subsequent mortgage on title.
As already mentioned, on 24 February 2021, a sequestration order was made and the plaintiff was appointed trustee of the bankrupt estate of Mr Sassine. A trustee has duties to determine what assets the bankrupt has that may be realised and distributed to creditors0F[1] and accordingly, it is critical for a trustee to be able to determine the extent of any security interest held over property belonging to the bankrupt. To that end, the Bankruptcy Act 1966 (Cth) (‘Bankruptcy Act’) contains several provisions granting power to the trustee to investigate the bankrupt’s examinable affairs1F[2] and seek information from anyone holding or asserting a security interest.2F[3] It is a reflection of the importance of such provisions that failure to comply with some of them attract severe penalties, including imprisonment.3F[4] In this matter, as described below, the trustee has attempted, on many occasions, to obtain information about the asserted security interest from the first defendant. The first defendant failed to respond for many months and when he did, the response was less than complete.
[1]Bankruptcy Act 1966 (Cth) ss 19, 116 (‘Bankruptcy Act’).
[2]Ibid s 19AA.
[3]Ibid ss 77, 77A, 77C.
[4]Section 267B of the Bankruptcy Act (n 1) provides a penalty of imprisonment for 12 months for failure to comply with a notice given under ss 6A(3), 77C(1), 77CA, or 139V.
Requests for information
On 26 February 2021, two days after the sequestration order was made, the plaintiff wrote to the first defendant and sought information pursuant to ss 90 and 91 of the Bankruptcy Act, in the following terms:
My investigations into the Bankrupt Estate disclosed that you hold a caveat against the … property[.]
…
Pursuant to Sections 90 and 91 of the Bankruptcy Act 1966 …, please forward my office the following details with respect to the above property:
·Copies of the relevant security documentation;
·Current amount of arrears (if any); and
·Details of any other security held and/or any other accounts operated by the Debtor.
Please provide requested records within twenty-one (21) days from the date of this letter to my office. I confirm that such records may be delivered electronically.
The first defendant did not respond to this letter, but three days later, on 1 March 2021, the first defendant registered mortgage number AU092728H, dated 20 November 2020, on the title to the Land.
On 16 March 2021, the plaintiff, by his solicitors, again wrote to the first defendant, seeking ‘copies of the documents that are the subject of the [mortgage]’. The first defendant did not respond to that letter.
On 9 April 2021, the plaintiff, by his solicitors, again wrote to the first defendant, seeking responses to the previous correspondence in the following terms:
On 26 February 2021, our client wrote to you seeking details with respect to:
1. The Caveat numbered AT798325E that you hold against the property known as 36 Edward Staff Drive, Kinglake VIC 3763; and
2. All matters of which your firm acts on behalf of the Bankrupts, including whether you hold any records or documentation, and/or any monies or other property in trust, on behalf of the Bankrupts.
…
Separately, we wrote to you on 16 March 2021 requesting details of the mortgage from your firm lodged on the abovementioned property. No response has been received.
We are hereby instructed to request that you provide the relevant material, as requested, within seven days of this correspondence. Failing its provision, our client will have no option but to proceed on the basis that you refuse to provide the documents and we will action accordingly.
The first defendant did not respond to the 9 April 2021 letter.
On 20 April 2021, the plaintiff again wrote to the first defendant, this time seeking, pursuant to s 77A of the Bankruptcy Act, books and records set out in some detail in the attached Schedule A. That Schedule includes the following, which is set out in some detail because the plaintiff submits that inferences should be drawn from the first defendant’s failure to respond. In the schedules to the letter:
(a) ‘Associated Entities’ is defined in Schedule B as including:
(i) Toufic Tom Sassine (Sole Trader) — ABN 84 636 871 332;
(ii) A Sassine & S.S Sassine & T.T Sassine (Partnership) — ABN 56 728 054 882; and
(iii) Sassine Investments Pty Ltd (formerly trading as Bolton Pizza) (Deregistered) — ABN 36 166 717 826;
(b) ‘Associated Individual’ is defined in Schedule C as ‘Andrew Sassine (Brother and Son of the Debtors)’; and
(c) ‘Associated Property’ is defined in Schedule D as ‘36 Edward Staff Drive, Kinglake, VIC 3763’.
Schedule A identifies the information and documents to be produced as follows:
1. Details as to all matters in which you are currently acting on, or have previously acted on in the past five (5) years, on behalf of the Debtors, the Associated Entities …, the Associated Individual …, and/or the Associated Property …;
2. Copies of the relevant security documentation, current statement of account evidencing the amount outstanding, current amount of arrears (if any), and details of any security held, in relation to the caveat/mortgage lodged [on] the title of the Associated Property …;
3. Details of any monies and/or property held on trust on behalf of the Debtors, the Associated Entities …, the Associated Individual …, and/or the Associated Property …;
4. Details of any monies received from and/or sent to the Debtors, the Associated Entities …, and/or the Associated Individual …;
5. Details of any accounts known to you held by the Debtors, the Associated Entities …, and/or the Associated Entities …, including but not limited to the account names, account numbers and BSB of such accounts;
6. Details of any entities associated with the Debtors that are known to you and not listed in Schedule B, Schedule C, and/or Schedule D, and provide copies of any information or documentation held with respect to same;
7. Copies of all documentation in your possession that you hold on behalf of the Debtors, or Associated Entities …, the Associated Individual …, and/or the Associated Property …, in relation to their examinable affairs for the period 24 February 2016 to date;
8. Copies of all correspondence with the Debtors, the Associated Entities …, the Associated Individual …, and/or the Associated Property …, including but not limited to file notes, and emails for the period 24 February 2016 to date; and
9. Any other information and/or documents in your possession at the date of this correspondence with respect to the affairs of the Debtors, the Associated Entities …, the Associated Individual …, and/or the Associated Property ….
The 20 April 2021 letter also includes a section headed ‘Notes’, which provides an explanation of the requirement to produce documents pursuant to s 77A of the Bankruptcy Act, including a note that:
3.Failure to produce the above-mentioned books and records is an offence under Section 265A of the Act and punishable by imprisonment for 12 months, if convicted. …
The first defendant did not respond to this letter, nor did he provide any explanation at the hearing of this application for why he did not do so.
On 8 June 2021, the Australian Financial Security Authority (‘AFSA’) issued a notice (‘June notice’) to the first defendant pursuant to s 77C(1) of the Bankruptcy Act, requiring extensive information in relation to any legal services provided to Sassine and associated entities and businesses, including copies of all documentation relating to Sassine’s examinable affairs from 24 February 2016, copies of all correspondence received from or sent to Sassine from 24 February 2016 including file notes, emails and letters, and in relation to the caveat, copies of relevant security documentation, the current statement of account evidencing any amount outstanding, details of any arrears, and details of any other security held. A failure to comply with the requirements of a s 77C notice constitutes an offence under s 267B, with a penalty of imprisonment for up to 12 months.
On 15 June 2021, the plaintiff wrote to Mr Sassine, noting that the first defendant had failed to respond to enquiries and requesting copies of any mortgage document agreements in relation to the mortgage, statements and/or invoices in relation to the mortgage, details of the current balance owing, any valuation of the property, and copies of correspondence in relation to the mortgage.
By letter dated 18 June 2021, the first defendant finally responded, but provided only the following:
(a) the Deed between Mr Sassine and the first defendant for legal services up to the value of $100,000;
(b) a copy of a mortgage dated 30 November 2020; and
(c) a mortgage form lodged with PEXA Exchange on 24 February 2021.
The first defendant’s response did not comply with the requirements of the notice within the prescribed 21 days. The first defendant did not provide any details of any fee agreement, any work undertaken, any invoices issued or payments received in respect of those invoices, any balance outstanding under the mortgage, any valuation of the Land, or any correspondence or file notes in relation to the same.
On 13 December 2021, the plaintiff’s solicitor wrote to the first defendant, again seeking a response to the correspondence and notices and put the first defendant on notice that the plaintiff would apply to the Supreme Court to remove the caveat and declare the mortgage invalid unless the first defendant agreed to remove them all.
The plaintiff submitted that all of this correspondence was sent to the address nominated by the first defendant, which is also his place of business, so there can be no question about whether he received it. The first defendant, for his part, has not suggested he did not receive any of this correspondence or the notices.
On 31 January 2022, AFSA issued a further notice under s 77C of the Bankruptcy Act to the Sassines in substantially the same form as the June notice. It appears there has been no response.
On 22 November 2022, the first defendant swore an affidavit in opposition. In the final paragraph to that affidavit, he states:
At the date of swearing this affidavit, LL is owed substantial fees for the provision of legal services which I believe to be in the order of at least $40,000. The costs include the costs necessary to defend this proceeding. The legal work necessitated by the difficulties the Sassine family have encountered are ongoing.
Submissions
The plaintiff seeks an order that the mortgage is ‘invalid’ and for removal of the caveat. The plaintiff’s arguments may be summarised as follows.
In relation to his application for the removal of the caveat pursuant to s 90(3) of the Transfer of Land Act, the plaintiff submits that the first defendant bears the onus of establishing it has an interest in the Land supporting the caveat and that the first defendant has failed to establish he has such an interest. The plaintiff notes that the grounds of the claim for the caveat is ‘agreement with the following parties and date’. The plaintiff contends that:
(a) the Deed is not an agreement as described in the caveat because the recital to the Deed asserts that Lennon Lawyers, and not the first defendant, have provided, and will continue to provide, legal and other professional services;
(b) while the Deed refers to the provision of professional services, there is no reference to a costs agreement. The plaintiff also submitted that the late fee agreement provided did not comply with the requirements for a valid and binding fee agreement. In those circumstances, it is submitted, the terms of the charge do not rise to proof of a caveatable interest; and
(c) the reference to providing services up to the sum of $100,000 is not a sum certain liability and is unacceptably vague.
In relation to the mortgage, the plaintiff submits that:
(a) the mortgage is expressed to be security ‘for the debt or liability described in the terms and conditions set out or referred to in this mortgage’, but that no debt or liability has been specified in the mortgage document; and
(b) the mortgage defines secured money as including ‘all amounts that are or may become owing to the Mortgagee under any agreement between the Mortgagor and the Mortgagee now or in the future …’. The plaintiff submits that the only agreement that could possibly be relevant is the alleged costs agreement, but there is no evidence of any agreement between Sassine and Lennon Lawyers. There is no evidence of any work undertaken, pursuant to any fee agreement or otherwise, and no evidence of any debt or liability under the mortgage and accordingly, there is no basis for maintaining the registration of the mortgage. I note that on 23 November 2022, the first defendant filed an affidavit sworn by him on 22 November 2022, which exhibits the disclosure statement and costs agreement described above. This was filed after the plaintiff’s submissions and despite the numerous earlier requests for such documentation outlined above.
By written submissions dated 11 November 2022, the plaintiff describes the orders sought as being that ‘the mortgage is discharged’. In support of this submission, the plaintiff relied on the decision of Hargave J in Perpetual Trustees Victoria Ltd v Xiao4F[5] for the proposition that if there is no underlying debt, then the mortgage secures nothing and ought be discharged.
[5][2015] VSC 21 (leave to appeal was refused by Beach and McLeish JJA and Dixon AJA in Xiao Hui Ying v Perpetual Trustees Victoria Ltd [2015] VSCA 124, [57]).
The first defendant submits:
(a) the plaintiff has not provided any material or proper legal basis for the declaration seeking to invalidate the first defendant’s mortgage. In particular, the first defendant submits that the Court has no power or jurisdiction to deal with the other co-tenant’s interest in property, which has been used by him as security for prospective legal services and that applies to the mortgage as well as the charge;
(b) there is ample evidence to support the validity and enforceability of the first defendant’s mortgage and its security underpinning the securities;
(c) the plaintiff has not adduced any evidence pointing to the need to dispose of the property nor to justify the relief sought; and
(d) there is at least a serious question to be tried and the balance of convenience clearly favours the first defendant because the consequence of granting relief would be to deprive the first defendant of the benefit of its security.
Consideration of the charge and caveat
Principles regarding removal of a caveat
The principles in relation to s 90 of the Transfer of Land Act regarding the removal of a caveat are not disputed and may be summarised as follows:
(a) it is for the caveator to satisfy the Court that the caveat should be maintained; and
(b) the test for maintaining a caveat is akin to the test for granting an interlocutory injunction to the caveator. That is, a caveator must show first that there is a prima facie case that it has the estate or interest claimed in the caveat, and secondly, that the balance of convenience favours the maintenance of the caveat until trial.5F[6]
Does the reference to Lennon Lawyers in the caveat and not Patrick Lennon mean the charge does not support a caveatable interest?
[6]Lee v Yap [2021] VSCA 297, [29] (Kyrou, McLeish and Walker JJA).
The plaintiff submits that the evidence of the charge, such as it is, does not establish to the requisite degree that the first defendant has a caveatable interest because the recital to the Deed asserts that Lennon Lawyers, and not the first defendant Patrick Lennon personally, have provided and will continue to provide legal and other professional services.
In his affidavit, the first defendant describes his practice and role as follows:
I am the principal and registered proprietor of Lennon Lawyers (“LL”) being a duly registered firm pursuant to the provisions of the Business Names Registration Act 2011 (Cth) and named Defendant in this proceeding.
The Business Names Registration Act 2011 (Cth) (‘Business Names Act’) permits a legal entity, such as a corporation, firm or individual, to register a business name and carry on business under that name. The purposes of the Business Names Act include to ensure those dealing with the business know what entity is carrying on the business, how to contact it, and to avoid confusion in the marketplace.
It appears from the first defendant’s affidavit that the name ‘Lennon Lawyers’ used in the charge is the name the first defendant uses to carry on his legal practice as the principal and registered proprietor. In other words, he is the legal entity carrying on business under the name, ‘Lennon Lawyers’. In those circumstances, I do not consider that the use of the name ‘Lennon Lawyers’ in the charge (rather than the use of ‘Patrick Lennon’ as noted in the caveat) means that any proprietary or security interest recognised by the charge does not support the caveat.
Has there been a failure to prove a costs agreement and, if so, does that mean no caveatable interest has been established?
The second basis upon which the plaintiff challenges the charge is that there is no reference to a costs agreement and no costs agreement has been produced. I note that this submission was made prior to the late production of the costs disclosure by the first defendant.
As noted above, the first defendant failed to provide a copy of this agreement for several months despite several formal requests by the plaintiff. The document that the first defendant exhibited to his affidavit is headed ‘Disclosure Statement and Cost Agreement, pursuant to division 3 of part 4.3 of the Legal Profession Uniform Law (Victoria)’. Part A of the agreement is headed ‘Disclosure Statement’ and part B is headed ‘Costs Agreement’. This document was provided shortly before the hearing. The document identifies the law practice as Lennon Lawyers and the clients as Mr Sassine and Mrs Angela Sassine. The matter reference is ‘(SUP) Our Ref: 20/07[/]23’. I note that the parties to the document are different to the parties to the mortgage. The parties to the mortgage are Mr Sassine6F[7] and Andrew Sassine.
[7]Toufic (also known as Tom).
Division 3 of pt 4.3 of the LPUL sets out various requirements for a valid costs agreement. I find that the first defendant has not established there was a binding costs agreement for two reasons.
First, the first defendant has not established that the clients named in the costs agreement accepted the offer. It is sufficiently clear that the document produced constitutes an offer to provide legal services, albeit unspecified, up to a value of $100,000. Consistently with cl 180(3) of the LPUL, the agreement provides that it may be accepted
by writing to us indicating your acceptance, by returning a signed copy of this document as provided in the Acknowledgement at the end of this document or by continuing to give us instructions in this matter.
The agreement has not been signed and there is no evidence that a signed copy was returned. Accordingly, the question is whether Mr Sassine and Angela ‘continued to give [the first defendant] instructions in this matter’. Again, the closest the first defendant comes to providing any evidence in relation to any acceptance of the offer to provide legal services is the final paragraph of his affidavit sworn 22 November 2022, where he states:
At the date of swearing this affidavit, LL is owed substantial fees for the provision of legal services which I believe to be in the order of at least $40,000. The costs include the costs necessary to defend this proceeding. The legal work necessitated by the difficulties the Sassine family have encountered are ongoing.
The first sentence does not state who owes the said fees or pursuant to what agreement, if any, those fees are owed. The final sentence fails to identify whether the first defendant has been retained to perform any work and if so, what that work is, and pursuant to what, if any, retainer the first defendant has been engaged.
Secondly, the first defendant has not established that, as required by cl 174(3) of the LPUL, he took
all reasonable steps to satisfy [him]self that the client has understood and given consent to the proposed course of action for the conduct of the matter and the proposed costs.
There is no evidence of any relevant communications with the clients at all.
The plaintiff submits that having regard to the failure to give or adduce relevant and available evidence, the inference should be drawn that there is no debt outstanding and therefore, no sustainable mortgage. The relevant principles as to inferences were discussed in Chong v CC Containers Pty Ltd,7F[8] commencing with Lord Mansfield’s maxim, and which is typically described as the rule in Jones v Dunkel,8F[9] that:
[A]ll evidence is to be weighed according to the proof which it was in the power of one side to have produced and in the power of the other to have contradicted.9F[10]
[8](2015) 49 VR 402, [206]–[212] (Redlich, Santamaria and Kyrou JJA) (‘Chong’).
[9](1959) 101 CLR 298.
[10]Chong (n 8) [207], quoting Blatch v Archer (1774) 1 Cowp 63, 65; 98 ER 969, 970.
Insofar as the onus is on the first defendant to establish that the fee agreement was entered into and legal services have been provided pursuant to it, the first defendant has not discharged that burden. If Mr Sassine and Angela provided the first defendant with a signed copy of the costs agreement, then it would have been a simple thing for the first defendant to produce the document, either in response to the many requests for documents from the plaintiff or in the context of this proceeding. I also note that if the first defendant held a signed copy of the costs agreement or held written instructions or file notes of such instructions constituting acceptance of the costs agreement, then it is to be expected that he would have produced them. The fact that he has not produced them supports the inference that he does not have any such documents. I also note that in relation to many of the documents requested in the s 77A notice sent to him on 20 April 2021, the first defendant has neither produced them nor stated whether or not he has them. In the absence of direct evidence, I draw the inference that he has no such documents and consequently, there is currently no monetary amount owing to the first defendant that is secured by the charge or mortgage. The particular documents requested in the s 77A notice have already been set out at paragraph 25 of these reasons. Neither the first defendant’s production of an unsigned costs agreement nor his brief, opaque, and passive statement as to fees owing are sufficient to displace that inference.
However, the failure to establish that there was a binding costs agreement does not necessarily mean the charge does not support a caveatable interest. The difficulty with the plaintiff’s submissions as to the costs agreement is that the charge does not purport to secure the provision of any costs that may be identified by, or referable to, any particular costs agreement alone, but rather, the charge secures such legal services as may be provided to the extended Sassine family and related entities, including costs incurred in the future. The description of what is secured by the terms of the charge have already been described at paragraph 11 of these reasons.
In my opinion the effect of the charge is that, prior to any particular retainer, the charge may not secure an extant monetary liability, but it is a security that is available to be employed between the parties in accordance with the terms of their agreement. And significantly, that agreement includes a term that ‘Lennon Lawyers shall register a caveat over the said property to better secure the Services and in accordance with this Deed’. In Crampton v French,10F[11] Harper J applied the New South Wales Court of Appeal decision in Troncone v Aliperti11F[12] in holding:
A caveat cannot be entered against the land unless the caveator has the relevant proprietary interest in the land. It follows that, unless there be evidence of an intention to the contrary, the grant (by a borrower to its creditors) of an authority to lodge a caveat carries with it by implication the grant of such an estate or interest in the land affected by the caveat as is necessary to successfully resist its removal.
[11][1996] ANZ ConvR 156.
[12](1994) 6 BPR 13, 291 (Mahoney JA, Priestley and Meagher JJA agreeing at 293).
I also note that the recovery of legal fees does not depend upon the existence of a valid and enforceable fee agreement. If a fee agreement does not satisfy the requirements of the LPUL, the consequence may be that the agreement is void (see cl 178(1)(a)), but that does not necessarily mean no fees are recoverable. Clause 178(1)(b) of the LPUL provides that in such circumstances, a client ‘is not required to pay the legal costs until they have been assessed or any costs dispute has been determined by the designated local regulatory authority’.
In those circumstances, I do not consider that the failure to establish a binding costs agreement means the charge does not support a caveatable interest.
Is the reference to $100,000 unacceptably vague such that no caveatable interest is established?
The plaintiff also submits that the reference to providing services up to the sum of $100,000 is not a sum certain liability and is unacceptably vague.
The first answer to this submission is that it is not necessarily fatal that a charge does not secure a sum certain liability. An ‘all moneys’ mortgage is a common example of a security where the sum is not certain. Secondly, there is nothing necessarily improper about an all moneys mortgage securing potential legal fees up to a particular sum.12F[13] By way of example, in Re Nelson and the Legal Practitioners Act 1970,13F[14] the Court considered what steps a solicitor who subsequently became bankrupt could properly have taken to secure the payment of his fees. The Court held that:
It is not improper, and may be in the client’s interests, for a potential liability for costs and disbursements to be secured otherwise than by a cash payment to be retained in trust until costs are incurred and become payable.14F[15]
…
There should have been an “all moneys” mortgage up to a maximum of $120,000 expressed as being for legal costs to be incurred in the litigation in question and remaining unpaid as at the date an account for such work was rendered.15F[16]
[13]Re Nelson and the Legal Practitioners Act 1970 (1991) 106 ACTR 1, 17–18 (Higgins and Foster JJ, Miles CJ agreeing at 4).
[14]Ibid.
[15]Ibid 17.
[16]Ibid 18.
There may be questions as to whether Mr Sassine and Andrew Sassine were given suitable advice as to the mortgage and also whether the first defendant acted appropriately in that regard, but they are not issues that are raised in this proceeding and there is no evidence that either of Mr Sassine or Andrew are making any such complaints.
In my opinion, for the reasons stated above, there is at least some probability that the first defendant will be found to have the equitable rights or interest in the Land asserted by him in the caveat and that probability is sufficient to justify the practical effect that the caveat has on the ability of the plaintiff to deal with the property in question.
Does the balance of convenience favour maintenance of the caveat?
Having concluded that there is such a probability, it is necessary to balance the prejudice to the plaintiff arising from non-removal of the caveat against the prejudice to the first defendant arising from removal of the caveat.
In my view, the prejudice to the first defendant if the caveat is removed outweighs the prejudice to the plaintiff if it stays. The particular factors that lead to that conclusion are:
(a) the caveat operates to secure payment of such fees as are incurred in accordance with the terms of the charge. The loss of such security would expose the first defendant to an increased risk of not recovering such fees;
(b) it is unlikely that the caveat will continue as an operative prejudice to the plaintiff because for reasons stated below, the mortgage will prevent the plaintiff dealing with the title in any case; and
(c) the continuation of the caveat does not limit such rights as the plaintiff has to seek relief by way of partition16F[17] or redemption of the mortgage.17F[18]
[17]See pt IV of the Property Law Act 1958 (Vic), which provides for such a proceeding to be issued in VCAT and requires that all co-owners be parties (see s 226).
[18]See Bankruptcy Act (n 1) s 136.
I note also that the benefit of the charge potentially accrues to the other co-tenant who is not a party to the proceeding.
For those reasons, I am not satisfied that the caveat should be removed.
Is the mortgage invalid?
The plaintiff has two primary arguments for seeking an order that the Court should declare the mortgage invalid. The first is that the mortgage is expressed to be security ‘for the debt or liability described in the terms and conditions set out or referred to in this mortgage’, but that no debt or liability has been specified in the mortgage document. The relevant terms of the mortgage have already been set out at paragraph 12 of these reasons.
While it is correct to say that the mortgage document itself does not contain any reference to any specific debt or liability, it does incorporate, by reference, the Memorandum under s 91A of the Transfer of Land Act, creating what might properly be called an ‘all moneys’ mortgage.The relevant terms of the Memorandum include the repayment of all secured money (cl 1.2) and financial obligations in respect of secured money (cl 5.2).18F[19] The relevant definitions are at cl 11.1 of the Memorandum.19F[20] Relevantly, the terms of the mortgage are very broad and include ‘all amounts that … may become owing to the Mortgagee under any agreement between the Mortgagor and Mortgagee now or in the future’.
[19]See [14] of these reasons.
[20]See [15] of these reasons.
The principles of construction of ‘all moneys’ clauses were discussed in Oversea-Chinese Banking Corp Ltd (OCBC) v Malaysian Kuwaiti Investment Co (MKIC) (‘OCBC v MKIC’),20F[21] where Redlich J held:
“all monies” clause[s] must be construed in the light of the actual language used and having regard to the context in which this mortgage came to be executed and its commercial purpose.21F[22]
[21][2003] VSC 495 (‘OCBC v MKIC’).
[22]Ibid [36] (citations omitted). See also Olympic Holdings Pty Ltd v Windslow Corporation Pty Ltd (in liq) (2008) 36 WAR 342, 353–60 [29]–[44] (Buss JA, Steytler P agreeing at 346 [1]).
Questions that arise in relation to the scope of an all moneys clause generally arise out of circumstances where later advances are distinct in character from the original advance, or where the liability has arisen between parties other than the original parties to the mortgage, such as where debts are assigned.22F[23] In the present circumstances, there is no issue as to the character of the liability (being solely for alleged legal fees and disbursements) or the parties between whom the liability arose.
[23]See discussion in Re Clark’s Refrigerated Transport (In Liq) [1982] VR 989, 995–6 (Brooking J); Estoril Investments Pty Ltd v Westpac Banking Corp (1993) 6 BPR 13, 146 (Young J).
Accordingly, there does not appear to be any reason to read down the terms of the mortgage to exclude any future liability that may arise as a result of any of the Sassines or related entities engaging the first defendant to provide legal services as described in the charge. That interpretation is consistent with the language used in the charge, as secured by the all moneys mortgage, and is also consistent with what at least may be inferred to be the commercial purpose of the charge; that is, to provide security for the provision of legal services to the Sassines. As Redlich J observed in OCBC v MKIC:
Where the further debt was found to be for a commercial purpose of the same nature or kind as that originally secured by the terms of the mortgage there has been a disposition by the Courts to give effect to the literal meaning of the words of an “all monies” clause.23F[24]
[24]OCBC v MKIC (n 21) [35] (citations omitted).
As noted above,24F[25] the plaintiff submits that the only moneys that could be secured by the mortgage are moneys owing pursuant to a fee agreement, but there is no evidence of any work undertaken, pursuant to any fee agreement or otherwise, and no evidence of any debt or liability under the mortgage and accordingly, there is no basis for maintaining the registration of the mortgage.
[25]At [38(b)].
The plaintiff also submits that the mortgage only operates to the extent it secures some payment. It is contended that this mortgage does not secure any payment and so, it ought be discharged. The language used in this context is liable to confuse the issue. The plaintiff submits that the mortgage is ‘invalid’ and ought to be ‘removed’. While it is correct to say that a mortgage that secures nothing ought be discharged, that is not because upon payment of all amounts owing under the mortgage, or because no amount is yet payable, the mortgage becomes invalid. Rather, it is because when all amounts owing under the mortgage have been paid, the mortgagor is entitled to redemption, if necessary, by compelling the mortgagee to provide a discharge of the mortgage. The right to redeem is a fundamental right held by a mortgagor. Generally speaking, the right is legal and contractual up to the date required for repayment and equitable thereafter, prior to foreclosure. In addition, where a mortgagor becomes bankrupt, the trustee has rights under s 136 of the Bankruptcy Act to redeem on six months’ notice or upon paying six months’ interest in lieu of notice.
In this case, cl 2.6 of the Memorandum provides when the mortgagor is entitled to a discharge:
The Mortgagor is only entitled to a discharge of this Mortgage when all of the Secured Money has been paid and the Mortgagee is reasonably satisfied that:
(1) it will not have to repay, refund or give up any money; and
(2) the Mortgagee does not have any contingent liability arising:
(A) under this Mortgage;
(B) from the Mortgagee’s possession or receipt of revenue from the Land; or
(C) from the Mortgagee’s sale of the Land or any part.
Where tenants in common have mortgaged a property, the mortgagee is entitled to security of the whole and proceedings between tenants in common cannot affect the mortgagee’s interest in the entirety.25F[26] Accordingly, if a co-tenant mortgagor obtains partition of title, the mortgage will affect each severed portion and if a co-tenant wishes to redeem the mortgage, it is necessary to redeem the entire mortgage.26F[27] Where, as here, a co-tenant is bankrupt, the bankruptcy operates to vest the equity of redemption in the trustee in bankruptcy27F[28] and the trustee can seek to redeem pursuant to s 136 of the Bankruptcy Act.But again, that requires redemption of the whole.
[26]ELG Tyler, Peter Young and Clyde Croft, Fisher and Lightwood’s Law of Mortgage (LexisNexis, 3rd ed, 2014) 321, citing Fulton v 523 Nominees Pty Ltd [1984] VR 200, 205 (Tadgell J).
[27]Ibid.
[28]Bankruptcy Act (n 1) ss 5(1), 58. See also Tyler, Young and Croft (n 26) 750 [32.23], citing Spragg v Binkes (1800) 31 ER 751.
It does not appear that the plaintiff has offered to redeem the mortgage, although that is entirely understandable in the circumstances. As already observed, the first defendant has repeatedly failed to provide details of the extent of moneys, if any, owing and secured by the mortgage and the information that he has provided was provided very late and is inadequate. However, I do not consider that the failure to provide such information is a basis upon which to declare the mortgage invalid or discharge it, on the application of the trustee in bankruptcy of one tenant in common alone. That is particularly so where the other co-tenant is not a party to the proceeding.
Conclusion
For the above reasons, the plaintiff’s application must fail.
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