Falcon Settlements Pty Ltd v Permanent Custodians Pty Ltd

[2012] WASC 370

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   FALCON SETTLEMENTS PTY LTD -v- PERMANENT CUSTODIANS PTY LTD [2012] WASC 370

CORAM:   CORBOY J

HEARD:   ON THE PAPERS

DELIVERED          :   8 OCTOBER 2012

FILE NO/S:   CIV 2128 of 2012

BETWEEN:   FALCON SETTLEMENTS PTY LTD

Plaintiff

AND

PERMANENT CUSTODIANS PTY LTD
First Defendant

THE REGISTRAR OF TITLES
Second Defendant

Catchwords:

Costs - Application to extend caveat - Costs of an application to extend a caveat that was dismissed by consent - Turns on its own facts

Legislation:

Nil

Result:

Plaintiff to pay the first defendant's costs of the originating summons

Category:    B

Representation:

Counsel:

Plaintiff:     Mr T M Petherick

First Defendant             :     Mr J C Kwok

Second Defendant         :     No appearance

Solicitors:

Plaintiff:     Peel Legal

First Defendant             :     Norton Rose Australia

Second Defendant         :     No appearance

Case(s) referred to in judgment(s):

Nil

CORBOY J:

The application

1. Falcon Settlements Pty Ltd (Falcon) commenced proceedings by originating summons dated 29 June 2012 seeking orders that:

   (a)caveat no L004160, lodged on 10 July 2009 and registered against the title to land located in Halls Head (the Land), continue to operate until further order of the court;

   (b)alternatively, an interlocutory injunction be granted restraining Permanent Custodians Pty Ltd from disbursing a specified sum of money.

2. The originating summons was supported by an affidavit sworn by Matthew Jaime Bassett‑Scarfe.  Mr Bassett-Scarfe stated in his affidavit that:

   (a)His 'firm' entered into a 'standard costs agreement' with Mr Tony Puls and Ms Sharen Higgins as 'beneficiaries of and in various other capacities of the Puls Family Trust' (par 3).  Mr Bassett-Scarfe did not identify his firm.  However, he annexed to the affidavit a document entitled 'Standard Costs Agreement' apparently made by Peel Legal and Mr Puls and Ms Higgins (annexure 'MJBS 12').  He referred later in his affidavit to Falcon trading as Peel Legal.  I inferred that Falcon conducted an incorporated legal practice.

   (b)Clause 16 of the standard costs agreement created a charge over the Land (par 3).

   (c)Peel Legal had been provided with various documents at the time that the costs agreement was made to substantiate that the Land was held beneficially by the Puls family trust (par 4).  The documents that were said to have been provided were annexed to the affidavit.

   (d)'I understand the position to be that a liquidator was appointed following a creditor's petition against the company, in the company's personal capacity' (par 6).  There was no evidence given in the body of the affidavit about the identity of the company to which that statement referred, the relevance of the matters stated in par 6 to the application made by Falcon and the circumstances in which Mr Bassett-Scarfe had formed his understanding.   Mr Bassett-Scarfe annexed to his affidavit a letter dated 8 October 2010 from Peel Legal to a firm of solicitors apparently acting for the liquidator of a company known as Neeeat Holdings Pty Ltd.  It was to be inferred that this was the company to which Mr Bassett‑Scarfe had referred in the body of his affidavit.   It was difficult to comprehend the circumstances in which the letter had been written from its contents (it referred, for example, to two letters that were not attached to Mr Bassett‑Scarfe's affidavit).  However, the letter mentioned Mr Puls and referred to Neeeat as acting as trustee for the TD Puls Family Trading Trust, the Puls Family Trust and the Puls Superannuation Fund.

   (e)On 8 November 2010, a deed of appointment and removal of trustee of the Puls Family Trust and a deed of trust were sent to the lawyers acting for the liquidator of Neeeat (par 8).  Copies of those deeds were sent to the Office of State Revenue on 15 November 2010 (par 7).  Again, the relevance of those matters to the application made by Falcon was not explained or apparent from the remainder of Mr Bassett-Scarfe's affidavit.

   (f)Falcon had ceased to act for Mr Puls and his related entities 'due to an inability to obtain adequate further instructions and relevant evidence in these matters' (par 9).

   (g)Mr Bassett-Scarfe had not been provided nor was he aware of any evidence 'showing that the Puls Family Trust does not in fact have the sole equitable ownership interest in the land' (par 10).

3. The standard costs agreement annexed to Mr Bassett-Scarfe's affidavit:

   (a)described the instructions given by Mr Puls and Ms Higgins as follows:

   (i)'negotiation with Liquidators to uplift liquidation of Neeeat …';

   (ii)'release' the Land and another property 'being held as Trustee by Neeeat … and transfer the said properties to the new Trustees once appointed'; and

   (iii)draw all documents for the appointment of new trustees and all documents to 'achieve the transfer intrust of the properties to the new trustees';

   (b)provided, by cl 16, that Mr Puls and Ms Higgins charged their interest in the Land as beneficiaries (presumably of the Puls Family Trust) and another property 'with compliance of the terms of this Agreement and also without limitation with payment of all costs, charges and expenses payable by you to the Firm pursuant to this Agreement or otherwise by law'.  Contrary to the statement made by Mr Bassett-Scarfe in his affidavit, Mr Puls and Ms Higgins did not charge the Land by cl 16 of the costs agreement with payment of any fees owing to Peel Legal; they charged only their interest in the Land, whatever that interest might be. 

4. The originating summons was first listed for hearing on 6 July 2012.  Orders were made by consent at the hearing dismissing the application to extend the caveat and providing that surplus moneys from a sale of the Land were to be paid into an interest bearing account in the name of solicitors who appeared at the hearing for the first defendant (Permanent).  No provision was made for how the surplus was to be dealt with other than that the solicitors were entitled to deduct their reasonable costs of administering the surplus 'and any ongoing matters relating to these proceedings' from the money paid into their trust account.  The costs of the action were reserved with Falcon being given leave to make an application if it chose.

5. Subsequently, an application for costs was made by Falcon.  The application was opposed by Permanent.  It is that application which is now to be determined.

Falcon's submissions

1. Falcon submitted that:

   (a)It acted reasonably in relation to the conduct of the proceedings and it was likely that it would have obtained an order extending the caveat 'given the clear caveatable interest of [Falcon] as a charge over the relevant land' (par 1).

   (b)It had only agreed to the application by originating summons being dismissed as the arrangement for payment of the surplus into the trust account of the solicitors for Permanent protected its interests (par 2).

   (c)A previous offer from the solicitors acting for Permanent to hold funds in their trust account had been subject to a condition that the lawyers acting for the liquidator of Neeeat not commence proceedings to 'justify their Caveat, registered number L456725'.  It was appropriate for Falcon to commence proceedings given that condition as 'there had been no clarification of the position of [the liquidator's solicitors] until 5 July 2012, the day prior to the hearing of these matters' (par 3).

   (d)On the basis of 'that factual and legal background, … it is appropriate for the … court to exercise a discretion to award costs to [Falcon]' (par 4).  Further, Falcon had attempted to confer with Permanent regarding its reasonable legal costs without success (par 5).

   (e)It was unlikely that Permanent would succeed 'in its defence of the matters the subject of the current application in as much as the Plaintiff had a prima facie caveatable interest in the land' (par 7).

Permanent's submissions

1. Permanent submitted that:

   (a)The application had been misconceived as Falcon did not dispute Permanent's prior ranking mortgage or entitlement to sell the Land.  It only made a claim in respect of the anticipated surplus proceeds from the sale of the Land.  There was a dispute between Falcon and the liquidator of Neeeat regarding that surplus (par 3).

   (b)The Land was registered in the name of Neeeat.  There was 'nothing in the certificate of title or the mortgage given by Neeeat in favour of [Permanent] which authorised Tony Puls and Sharen Puls to charge the property in favour of [Falcon] as it had alleged' (par 4).

   (c)Falcon should bear the costs of the action as it had unjustifiably commenced proceedings against Permanent.  Costs had been unnecessarily or unreasonably incurred (pars 7 ‑ 8).

   (d)The solicitors for Permanent had requested Falcon and the liquidator of Neeeat to remove their caveats prior to the commencement of the proceedings to allow the Land to be sold.  Permanent had proposed that any surplus from the sale be paid into a trust account pending resolution of the dispute over who was entitled to the surplus.  No response had been received (pars 9 ‑ 10).  Further, the solicitors acting for Permanent had given undertakings to that effect subject to a condition that the liquidator of Neeeat not commence proceedings to justify its caveat.   However, Falcon had commenced its action despite that undertaking.

2. It should be noted that there was no evidence of the sale of the Land by Permanent as mortgagee or indeed, of a mortgage granted to Permanent.  Rather, the mortgage, the sale and disputes over any surplus from the proceeds of sale after discharge of the mortgage were referred to in the parties' submissions and in correspondence that formed part of a bundled of documents attached to the submissions provided by Falcon. 

The lack of relevant evidence

1. The affidavit made in support of the originating summons was inadequate in significant respects.  The affidavit did not attach copies of any of the following documents:

   (a)the certificate of title to the Land;

   (b)the caveat said to have been lodged by Falcon;

   (c)any other caveat, mortgage or other encumbrance registered against the title to the Land;

   (d)any notice that had been issued under s 138B of the Transfer of Land Act 1893 (WA).

2. Further, the affidavit contained no evidence of:

   (a)the estate or interest claimed by Falcon in the Land;

   (b)the circumstances surrounding the creation of the claimed estate or interest - to the extent that the standard costs agreement annexed to the affidavit might have been thought to be relevant, there was no explanation as to how a costs agreement made on 15 November 2010 could have created a estate or interest in the Land in favour of Falcon that was capable of being protected by a caveat pleaded as having been lodged in July 2009;

   (c)the circumstances in which the caveat was lodged;

   (d)the circumstances in which an order preserving the caveat was necessary;

   (e)the circumstances in which an interlocutory injunction was sought or how that order might relate to the application to extend the caveat (since no order for a permanent injunction was claimed).

3. In short, the affidavit supporting the originating summons contained no evidence on which the orders claimed could have been made. 

4. It should be added, in light of the parties' submissions, that Mr Bassett‑Scarfe's affidavit made no reference to the sale or proposed sale of the Land or to any prior claim to or dispute over the proceeds from the sale of the Land and it contained no intelligible account of any dispute with the liquidator of Neeeat that might have explained the circumstances in which the orders claimed by Falcon had been sought.  The letter to the liquidator's solicitors annexed to Mr Bassett-Scarfe's affidavit apparently made no reference to those matters.

The caveat

1. A bundle of documents were attached to the submissions provided by Falcon in support of its application for costs.  The bundle included a copy of the caveat referred to in the originating summons. 

2. The caveat claimed an estate or interest 'as chargee'.  The interest was claimed by virtue of a 'client/lawyer costs agreement' made between Peel Legal and Neeeat on 7 July 2009.  That, of course, was not the standard costs agreement annexed to Mr Bassett-Scarfe's affidavit.  Further, Mr Bassett-Scarfe's affidavit made no reference to any cost agreement with Neeeat.  Rather, insofar as it was possible to discern the nature of any estate or interest claimed by Falcon from Mr Bassett-Scarfe, it related to a beneficial interest allegedly held by the 'Puls Family Trust' in the Land. 

Conclusion

1. As best as I can ascertain, the nature of claim asserted by Falcon in these proceedings was that:

   (a)Peel Legal had entered into a costs agreement on 15 November 2010 with Mr Puls and Ms Higgins;

   (b)the agreement contained a provision by which Mr Puls and Ms Higgins as beneficiaries charged all their right, title and interest in the Land with payment of all costs and expenses payable by them to Peel Legal;

   (c)the Puls Family Trust had a beneficial interest in the Land.

2. Those matters could never have established that Falcon was entitled to the orders sought in these proceedings.  Falcon claimed an interest in the caveat as chargee of a charge created by Neeeat over its interest in the Land.  Mr Bassett-Scarfe's affidavit provided evidence relating to a charge allegedly granted by Mr Puls and Ms Higgins over whatever interest they might have had in the Land. 

3. I should add that the trust deed for the Puls Family Trust annexed to Mr Bassett-Scarfe's affidavit (annexure 'MJBS 1') indicated that Mr Puls and Ms Higgins were among the specified beneficiaries of the trust but the trust was a discretionary trust.  Consequently, Mr Puls and Ms Higgins did not have a vested proprietary interest in the trust property nor, as discretionary beneficiaries, would they have had any vested interest in any surplus from the proceeds of sale of the Land.

4. The court has not been provided with a copy of the certificate of title to the Land or the mortgage granted to Permanent.  However, the assertion made in Permanent's submissions that it held a prior ranking interest to that claimed in the caveat was not disputed.  Accordingly, it would appear that Falcon's purpose in seeking to preserve the caveat was to maintain a claim over part of the proceeds of the sale of the Land.  A claim to the proceeds from the proposed sale of land does not create an interest in the land that is capable of being protected by a caveat.  The application made in the originating summons was misconceived as Permanent submitted. 

5. I find that Falcon should pay Permanent's agreed or taxed costs of the originating summons.  I am satisfied that Falcon's application had no prospect of success and that the application was unreasonably made having regard to the matters to which I have referred.