Frigger v Murfett Legal Pty Ltd
[2018] WASC 377
•13 DECEMBER 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: FRIGGER -v- MURFETT LEGAL PTY LTD [2018] WASC 377
CORAM: LE MIERE J
HEARD: 26 APRIL 2018
DELIVERED : 13 DECEMBER 2018
FILE NO/S: CIV 2723 of 2017
BETWEEN: HARTMUT FRIGGER
ANGELA CECILIA THERESA FRIGGER
Plaintiffs
AND
MURFETT LEGAL PTY LTD
Defendant
Catchwords:
Real property - Lodgement of Caveats - Application for declaration and compensation pursuant to Transfer of Land Act 1893 (WA) s 140 - Application for compensation pursuant to undertaking as to damages - Whether caveats lodged without reasonable cause - Existence of honest belief on reasonable grounds that caveator had caveatable interest - Whether damages proved
National Credit Code - Whether Code applies - Whether costs agreement is a credit contract - Whether code applies - Whether costs agreement is a contract under which credit is provided - Turns on own facts
Legal Profession Act 2008 (WA) s 272 - Whether provision gives rise to cause of action
Contract law - Whether charging clause void for uncertainty - Turns on own facts
Legislation:
Legal Profession Act 2008 (WA), s 260, s 272
National Consumer Credit Protection Act 2009 (Cth), Sch 1 s 3, s 4, s 6, s 13, s 44, s 124
Transfer of Land Act 1893 (WA), s 138B, s 140
Result:
Plaintiffs' claims dismissed
Category: B
Representation:
Counsel:
| Plaintiffs | : | In person |
| Defendant | : | Mr R J Lilley |
Solicitors:
| Plaintiffs | : | In person |
| Defendant | : | Douglas Cheveralls Lawyers |
Case(s) referred to in decision(s):
Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459
Kuper v Key West Constructions Pty Ltd (1990) 3 WAR 419
Murfett Legal Pty Ltd v Frigger [2015] WASC 406
Murfett Legal Pty Ltd v Frigger [No 2] [2017] WASC 262
Young v Rydalmere Credits Pty Ltd (1963) 80 WN (NSW) 1463
LE MIERE J:
Summary
The defendant law firm lodged caveats over land of which the plaintiffs were the registered proprietors, claiming an estate or interest as chargee by virtue of a costs agreement between the plaintiffs and the defendant and to secure a debt owing by the plaintiffs to the defendant for legal services rendered pursuant to the costs agreement. One caveat lapsed. The other caveat was withdrawn after the plaintiffs had paid to the defendant the amount owing to it. The plaintiffs now claim from the defendant damages or compensation arising from the lodging of the caveats. For the reasons which follow the plaintiffs' application will be dismissed.
The Costs Agreement
In September 2010 the plaintiffs, Mr and Mrs Frigger (the Friggers), engaged the defendant, Murfett Legal, to provide legal services in respect of a Supreme Court hearing. The Friggers and Murfett Legal executed a costs agreement dated 29 September 2010 (Costs Agreement). Murfett Legal provided legal services to the Friggers and on 18 October 2010 issued a bill to them. A portion of the bill was paid from monies held on trust by Murfett Legal but an amount of $12,772.96 was unpaid. The Friggers did not pay the outstanding amount despite demand by Murfett Legal. On 30 November 2012 the Supreme Court dismissed an application by the Friggers in which they sought leave to apply out of time to tax Murfett Legal's bill.
The caveats
In the meantime, on or about 4 November 2011 Murfett Legal lodged two caveats, each dated 3 November 2011. The first caveat, L775693, was lodged over land of which the Friggers were registered proprietors, being lot 539 on plan 1751 and the whole of the land in certificate of title volume 1206 folio 211 and known as 29 Gairloch Street Applecross. The second caveat, L775694, was lodged over two pieces of land: Lot 2 on strata plan 34790 being the whole of the land in certificate of title volume 2138 folio 254 and known as 2A Union Street Bayswater and land being lot 3 on strata plan 5876 being the whole of the land in certificate of title volume 1498 folio 911 and known as Unit 3, 61 Cale Street Como. The Bayswater and Como properties were each registered in the name of the second plaintiff, Mrs Frigger, only. Each caveat claimed an estate or interest as chargee by virtue of the Costs Agreement. Clause 11.1 of the Costs Agreement is:
You agree that to secure payment of all monies payable by you to us under this agreement. You hereby charge in our favour:
(a)all your estate and interests in all your real and personal property whatsoever, including but not limited to the land and improvements (if any) described in part D of this agreement.
Part D was not completed.
The Applecross property was encumbered by a mortgage and property (seizure and sale) order. The Como property was encumbered by a mortgage. The Bayswater property was encumbered by a property (seizure and sale) order.
In December 2012 the Friggers caused the Registrar of Titles to issue Murfett Legal with a notice pursuant to s 138B of the Transfer of Land Act 1893 (WA) (TLA) to the effect that, unless Murfett Legal obtained an order of the court extending the operation of the caveats, the caveats would lapse. On 12 December 2012 Murfett Legal, by action CIV 3007 of 2012, applied to the court to extend the operation of the caveats. In support of its application Murfett Legal filed an undertaking as to damages in the usual form. On 18 December 2012 I ordered that the operation of the caveats be extended to 6 February 2013. At a hearing on 5 February 2013 I ordered that the operation of caveat L557693 over the Applecross property be extended until further order. I made no order in relation to the other caveat as a result of which it lapsed.
Murfett Legal obtains judgment for outstanding fees
In January 2013 Murfett Legal filed in the Magistrates Court a claim for $12,772.96 (the amount of the outstanding debt in respect of its bill for legal services) plus interest against the Friggers. On 29 April 2013 Murfett Legal's application for default judgment was dismissed on condition that $15,500 be paid into the court. On 9 May 2013 Mr Frigger paid $15,500 into court.
In January 2016 the Magistrates Court entered judgment for Murfett Legal in the sum of $12,772.96 plus interest and ordered that the sum of $15,500 paid into court by Mr Frigger be paid out to Murfett Legal in part payment of the judgment.
In January 2017 Bowden J in the District Court dismissed the Friggers' appeal. The Friggers paid the judgment debt. Murfett Legal withdrew caveat L775693.
The Friggers apply to remove caveat
In November 2014 the Friggers had applied to remove caveat L775693. They asserted that Murfett Legal did not have a caveatable interest in the land on the basis that the Friggers had a good defence to the claim against them for the outstanding legal fees because Murfett Legal had not adequately complied with the requirements of disclosure as to costs required by the Legal Profession Act 2008 (WA) s 260. The Friggers also said that the caveat failed to adequately specify the estate or interest in the land claimed by Murfett Legal. On 5 November 2015 I dismissed the Friggers' application: Murfett Legal Pty Ltd v Frigger [2015] WASC 406.
The Friggers apply for compensation under undertaking
On 14 July 2017 the Friggers filed a chamber summons in this court seeking compensation based on Murfett Legal's undertaking as to damages in CIV 3007 of 2012. Master Sanderson dismissed the application. The Master said:
If these proceedings are an attempt to seek damages pursuant to the undertaking given by the [defendant] then that claim must fail. The [defendant] succeeded in its action in the Magistrates Court. That being so it must be the case that it had a right to claim against the [plaintiffs]. There is nothing in the evidence or the findings of Justice Le Miere which suggests that it was not open to the [defendant] to rely upon the [plaintiffs] contractual undertaking to provide security when lodging the caveat. Before any claim for damages pursuant to the undertaking could be determined there would have to be a finding that the caveat was improperly lodged. At the moment there is nothing to suggest that is the case. If anything the evidence points to the [defendant] being entirely justified in lodging the caveat and maintaining it until they were paid their fees. [8]
Master Sanderson said that if the Friggers wish to seek damages in relation to caveat L775964, they must issue separate proceedings presumably in reliance upon s 140 of the TLA and it was not open to rely upon that section in CIV 3007 of 2012: Murfett Legal Pty Ltd v Frigger [No 2] [2017] WASC 262.
This proceeding
The Friggers commenced this proceeding by originating summons. On 24 April 2018 they amended their originating summons. At the hearing of the originating summons the Friggers orally applied to further amend their originating summons but did not press some of their proposed amendments. In the end, their amended summons claims:
1.An order pursuant to s 140 Transfer of Land Act 1893 declaring that the defendant lodged caveats without reasonable cause over the following properties of the plaintiffs in November 2011:
(a)3/61 Cale Street, Como
(b)2A Union Street, Bayswater
(c)29 Gairloch Street, Applecross
2.An order declaring that charging clause 11 in cost agreement between the parties dated 29 September 2010 is void pursuant to:
(a)s 272 Legal Profession Act 2009;
(b)further and or alternatively s 44 National Consumer Credit Code;
(c)further and or alternatively the general law.
3.Pursuant to:
(a)s 140 Transfer of Land Act 1893;
(b)further and or alternatively the defendant's undertaking to pay damages given by the defendant in CIV 3007/2012;
(c)further and or alternatively s 178 National Consumer Credit Protection Act 2009
The defendant do pay the plaintiffs' compensation damages to be assessed.
Claim under TLA s 140 not established
Section 140 of the TLA is:
Any person lodging any caveat with the Registrar either against bringing land under this Act or otherwise without reasonable cause shall be liable to make to any person who may have sustained damage thereby such compensation as a judge on a summons in chambers shall deem just and order.
The onus is on the applicant, in this case the Friggers, to prove that Murfett Legal lodged the caveat without reasonable cause. The Friggers must establish:
1.Murfett Legal had no caveatable interest; and
2.Murfett Legal did not have an honest belief based on reasonable grounds, that it had a caveatable interest.
The test of honest belief on reasonable grounds is partially subjective and partially objective. The subjective component requires an examination of the caveator's belief and whether it was honestly held. The objective component requires that the belief is held on reasonable grounds.
The effect of cl 11.1 of the Costs Agreement is that the Friggers charged all their estate and interest in all their real property to secure payment of all monies payable by them to Murfett Legal under the Costs Agreement. All their estate and interest in all their real property included their interest in the Applecross, Bayswater and Como properties. It is established by the judgment of the Magistrates Court that the amount of $12,772.96 plus interest was payable by the Friggers when Murfett Legal lodged the caveats. It follows that Murfett Legal had a caveatable interest in each of the properties when it lodged the caveats.
In any event, Murfett Legal did have an honest belief based on reasonable grounds that it had a caveatable interest in each of the Applecross, Bayswater and Como properties.
There is authority that a caveator, who actually has a caveatable interest, can nevertheless be found liable to pay compensation under s 140 of the TLA if the caveat was lodged for an ulterior or improper purpose: Young v Rydalmere Credits Pty Ltd (1963) 80 WN (NSW) 1463 cited with approval by Malcolm CJ in Kuper v Key West Constructions Pty Ltd (1990) 3 WAR 419 [433‑434], Pidgeon and Seaman JJ agreeing. Murfett Legal say that there is contrary authority: Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459 [475] Clarke JA and [479] Waddell AJA. It is unnecessary to explore that matter. The evidence does not establish that Murfett Legal had any ulterior or improper purpose. Murfett Legal's interest was to secure the debt owing to it. Mr De Silva, a director and shareholder of the firm, had a financial interest in the profit of the firm. That does not establish an improper purpose.
The caveat lodged over the Bayswater and Como properties lapsed on 6 February 2013. I declined to extend the operation of the caveat not because Murfett Legal did not have a caveatable interest in the land, but because caveat L775693 and the charge over the Applecross property provided sufficient security for the debt owing to Murfett Legal. When Murfett Legal lodged the caveat over the three properties, Murfett Legal did not know the net equity of the Friggers in those properties. They were subject to mortgages and property (sale and seizure) orders. Murfett Legal had no collateral or improper purpose in lodging the caveats.
The plaintiffs' claims for declarations pursuant to s 140 of the TLA and for compensation or damages pursuant to s 140 of the TLA must be dismissed.
Legal Profession Act s 272 gives rise to no cause of action
Section 272 of the Legal Profession Act 2008 (WA) is:
A law practice may take reasonable security from a client for legal costs (including security for the payment of interest on unpaid legal costs) and may refuse or cease to act for a client who does not provide reasonable security.
That provision does not give rise to any cause of action in itself. Insofar as it is relied upon to establish that Murfett Legal lodged the caveat without reasonable cause, it does not do so. At the very least Murfett Legal had an honest belief that it had a caveatable interest based on the charging clause in the Costs Agreement. Even if the Legal Profession Act s 272 might give rise to some claim that the charging clause was unenforceable, the existence of such a possible claim did not make Murfett Legal's belief that it had a caveatable interest cease to be based on reasonable grounds.
National Credit Code (the Code) does not apply
The Code is sch 1 to the National Consumer Credit Protection Act 2009 (Cth). Section 13 of the Code provides that, in any proceedings in which a party claims that a credit contract is one to which the Code applies, it is presumed to be such unless the contrary is established. Section 4 provides that for the purposes of the Code, a credit contract is a contract under which credit is or maybe provided, being the provision of credit to which the Code applies. Section 3 provides that, for the purposes of the 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).
Clause 6 of the Costs Agreement includes:
[6.1]you authorise us to render interim accounts for our services (excepting disbursement accounts referred to in cl 6.2) as and when we consider reasonable, and you agree to pay such accounts upon receipt or in accordance with any credit arrangement we may extend in writing to you.
The Costs Agreement is not a credit contract; it is not a contract under which credit is or may be provided. Clause 6.1 of the Costs Agreement does not mean or have the effect that payment of a debt owed by the Friggers to Murfett Legal is deferred, or that the Friggers incur a deferred debt to Murfett Legal.
The tax invoices issued by Murfett Legal state:
This account is due and payable within 14 days of receipt.
That does not provide credit; it does not provide for a payment of a debt being deferred nor create a deferred debt, that is create an existing debt payable in the future. Section 6 of the Code provides that the Code does not apply to the provision of credit which is limited to a total period that does not exceed 62 days, the maximum amount of credit fees and charges that may be imposed or provided for does not exceed 5% of the amount of credit, and the maximum amount of interest charges that may be imposed or provided for does not exceed an amount (calculated as if the Code applied to the contract) equal to the amount payable in the annual percentage rate was 24% per annum.
The Friggers further claim is that by not taking proceedings to recover the debt owed to them until January 2013, Murfett Legal deferred the debt owing to it and thereby provided credit. Merely not commencing proceedings to recover a debt for some time is not deferring a debt. Murfett Legal did not, by entering into the Costs Agreement, issuing the invoices or not commencing enforcement proceedings for some time provide credit. There was no contract between Murfett Legal and the Friggers under which credit is or maybe provided. The Code does not apply.
Claim under the Code s 44
The Friggers claim that the charge in cl 11.1 of the Costs Agreement was void by reason of s 44 of the Code is not established, because the Code does not apply to any transaction between the Friggers or Murfett Legal.
Claim under National Consumer Credit Protection Act 2009 (Cth) not established
Any claim which the Friggers may have based on s 124 of the National Consumer Credit Protection Act cannot succeed because Murfett Legal did not provide credit to the Friggers and the Act does not apply to the transactions between Murfett Legal and the Friggers.
Charging clause not void for uncertainty
The Friggers also claim that the charge in cl 11.1 in the Costs Agreement is void pursuant to the general law. The Friggers' claim is that the charging clause is void for uncertainty. It is not. Clause 11.1 charges in favour of Murfett Legal all the Friggers' interest in all their 'real and personal property whatsoever, including but not limited to the land and the improvements (if any) described in Part D of this agreement' (emphasis added). The clause is not rendered uncertain by Part D being left blank.
No entitlement to compensation under undertaking
Finally, the Friggers claim compensation pursuant to Murfett Legal's undertaking to pay damages given in CIV 3007 of 2011. That claim has already been dismissed by Master Sanderson. In any event, it is not sustainable. Murfett Legal had a caveatable interest in the land, the subject of each caveat. The debt which they sought to secure by lodgement of the caveat was legally enforceable. Murfett Legal obtained judgment in respect of that debt in the Magistrates Court.
The caveat lodged over the Bayswater and Como properties lapsed on 6 February 2013. I declined to extend the operation of the caveat not because Murfett Legal did not have a caveatable interest in the land, but because I considered caveat L775693 and the charge over the Applecross property provided adequate security for the debt owing to Murfett Legal. When Murfett Legal lodged the caveat over the three properties, the properties were subject to mortgages and/or property (sale and seizure) orders. Murfett Legal did not know the net equity of the Friggers in those properties. Murfett Legal had no collateral or improper purpose in lodging the caveats.
The court may order such compensation as the court may in its discretion consider in the circumstances to be just. I find it is not just to order Murfett Legal to pay compensation to the Friggers.
Damages not proved
All of the Friggers' claims fail. It is unnecessary to assess the compensation or damages to which the Friggers would be entitled if they had made out any of their claims. However, if the Friggers had made out any of their claims, the evidence of the alleged damages adduced by the Friggers is insufficient. There is no basis for concluding that the Friggers have suffered any loss that flows from Murfett Legal lodging its caveats.
In her affidavits, Mrs Frigger puts forward a number of documents and assertions in support of her claim for damages or compensation. The claims are not supported by the documents; they do not demonstrate any loss. There is no evidence of any causal connection between Murfett Legal's caveats and any loss alleged to flow from the purchase of houses by the Friggers' children. There is no causal connection established between the lodging of the caveats and the Friggers' sale of shares to complete the purchase of a property in Hobart. The spreadsheets created by Mrs Frigger do not provide evidence of losses and any causal links to the lodging of the caveats.
The plaintiffs' claim in relation to legal costs in the Magistrates Court and the Federal Court in relation to bankruptcy proceedings are not made out. There is no causal connection between those expenses and the lodging of the caveats.
Conclusion
The plaintiffs' claims will be dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
RK
ASSOCIATE TO THE HONOURABLE JUSTICE LE MIERE
13 DECEMBER 2018
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