Phoenician Holdings Pty Ltd t/as Cadmus Lawyers v Rahme

[2012] NSWSC 1604

Supreme Court

New South Wales

Medium Neutral Citation:

Phoenician Holdings Pty Ltd t/as Cadmus Lawyers v Rahme [2012] NSWSC 1604

Hearing dates:

20/12/2012

Decision date:

21 December 2012

Jurisdiction:

Equity Division - Duty List

Before:

Rothman J

Decision:

(1)     The plaintiff withdraw the Caveat on payment of the Specified Amounts by settlement cheques (as defined in these orders) to be held in trust jointly by the solicitor for the plaintiff (as defined in these orders) and the solicitor for the defendants.

 (2)      The amount of $1.7 M so paid to the solicitor for the plaintiff as defined in these orders and the solicitor for the defendants be paid by those solicitors into a controlled money account.

 (3)      The amount so paid into a controlled money account and any interest on that amount not be paid out of that account other than with the consent of the parties or by further order of the Court.

 (4)      It shall be sufficient compliance with the requirement in order 1 that the payment be in cleared funds that the payment be by settlement cheque as defined in order 8.

 (5)      It shall be sufficient compliance with the requirement in order 1 that the plaintiff withdraw the Caveat that the plaintiff provide the defendants with a withdrawal of Caveat in exchange for cheques for the Specified Amounts.

 (6)      On the defendants giving the plaintiff no less than 48 hours’ notice (excluding Saturday, Sunday and any public holiday) of the proposed place and time for completion of the Contract, the plaintiff or the solicitor for the plaintiff shall attend at that time and place for the purpose of exchange of the Caveat for the Payment.

 (7)      The Court notes the plaintiff’s undertaking to pay damages to the defendants in the event that the plaintiff has been notified under order 6 of the proposed completion of the contract and the contract is not completed by reason of the failure of the plaintiff to provide a withdrawal of Caveat at completion.

 (8)      In these orders these terms (in any form) mean:

Bank	A bank as defined in the Banking Act 1959 (Cth), the Reserve Bank or a State bank
The Caveat	Caveat number AH9831 affecting the Property
Cheque	A cheque that is not postdated or stale
The Contract	The contract for the sale of the Property dated 27 October 2012 between the defendants as vendors and Sharon Tia Cooper as purchaser
The Payment	The payment to the solicitor for the plaintiff and the solicitors referred to in order 1
The Property	The property Folio Identifier 1/78239 known as 1 William Street Double Bay
Settlement Cheques	Unendorsed cheques made payable to the person to be paid and drawn on its own funds by:
- A bank; or
- A building society, credit union or other FCA Institution as defined in Cheques Act 1986 (Cth)
That carries on business in Australia
Solicitor for the plaintiff	A solicitor other than Georges Elias or the plaintiff itself, such solicitor to have been appointed, for the sole purpose of acting on behalf of the plaintiff in performing any functions under these orders, and to have confirmed acceptance of that appointment by notice in writing to the defendants no later than 16 January 2013
The Specified Amounts	$1.7 M, plus the amounts prescribed in order 9
Withdrawal of Caveat	A validly executed withdrawal of Caveat in the approved form for lodgement with the Registrar General

(9)      (a) Further to the amount of $1.7 M paid to the solicitor for the plaintiff, the defendants shall provide settlement cheques for the following amounts of invoice payable to each issuer of invoice:

Date	Title	Issuer of Invoice	Amount of Invoice
20 May 2011	Spincast v G&N Rahme Appeal to Full Court	D.D. Feller SC	$19,293.75
2 June 2011	Cavalock v Spincast	D.D. Feller SC	$5,344.38
22 November 2011	Webuildem P/L v Arab Bank of Australia	D.D. Feller SC	$962.50
8 March 2012	Webuildem ats Weston	David Murr SC	$36,256.00
26 June 2012	Webuildem Pty ltd & Ors ats Arab Bank of Australia Limited & Ors	Bernard Coles QC	$10,405.00
10 September 2012	Webuildem Pty Ltd & Ors ats Arab Bank of Australia Limited & Ors	Bernard Coles QC	$11,412.50

(b) The solicitor for the plaintiff shall deliver the Settlement Cheques specified in (a) above to each respective payee.

 (10)    The parties have liberty to address on an alternative form of security.

 (11)    Costs shall be costs in the cause.

 (12)    Otherwise, the motion is dismissed.

Catchwords:

REAL PROPERTY - Torrens title - Caveat against dealings - application for removal of valid Caveat to permit sale of subject land - significant agreement between parties - indisputable Caveatable interest - balance of convenience - replacement security - very limited undertaking as to damages

Legislation Cited:

Banking Act 1959 (Cth)
Cheques Act 1986 (Cth)
Competition and Consumer Act 2010 (Cth)
Contracts Review Act 1980
Real Property Act 1900

Cases Cited:

Buchanan v Crown & Gleeson Business Finance Pty Ltd [2006] NSWSC 1465
Eng Mee Yong v Letchumanan [1980] AC 331
J & H Just (Holdings) Pty Ltd v Bank of NSW [1971] HCA 57; (1971) 125 CLR 546
Liberty Funding Pty Limited v Steele-Smith [2004] NSWSC 1100

Category:

Interlocutory applications

Parties:

Phoenician Holdings Pty Ltd T/as Cadmus Lawyers (Plaintiff/Respondent)
George Maroun Rahme (First Defendant/First Applicant)
Nouha Rahme (Second Defendant/Second Applicant)

Representation:

Counsel:
D E Baran (Plaintiff/Respondent)
G A Elliott (Defendants/Applicants)
Solicitors:
Cadmus Lawyers (Plaintiff/Respondent)
Elias Gates & Associates (Defendants/Applicants)

File Number(s):

2012/273084

Publication restriction:

None

ex tempore Judgment

1. HIS HONOUR: These interlocutory proceedings concern an application that a Caveat be removed in order to allow the sale of property.

Short History

1. On 12 June 2012 the plaintiff, Phoenician Holdings Pty Ltd t/as Cadmus Lawyers (hereinafter "the respondent"), and the defendants, George and Nouha Rahme (hereinafter "the applicants"), executed a deed of charge and mortgage in relation to property (hereinafter "the property") owned by the applicants and used as their home.

1. Following certain financial difficulties suffered by the applicants, the deed of charge and mortgage was executed to secure legal fees for services rendered and to be rendered by the respondent to the applicants purportedly pursuant to cost agreements of 7 April 2010 and 12 September 2011 (Exhibits 3 and 4 respectively).

1. On 9 July 2012 the respondent lodged a Caveat over the property relating to its interest purportedly created by the charge and mortgage. On 10 July 2012, the respondent gave notice of the lodging of the Caveat to the applicants. Later that month a series of e-mails were sent by the respondent to the applicants relating to outstanding fees owed to the respondent and to counsel briefed by them.

1. On 2 August 2012, the applicants lodged an application for the Caveat to lapse. On 31 August 2012, the respondent filed a summons, commencing the substantive proceedings herein, seeking orders the effect of which would be, if successful, to allow the Caveat to remain in place and to remove another Caveat lodged to support a purported interest in the property by the applicants' son.

1. On 5 November 2012, the applicants filed a cross-summons seeking relief, under either or both of the Contracts Review Act 1980 and the Australian Consumer Law, being Schedule 2 to the Competition and Consumer Act 2010 (Cth), the effect of which was to avoid the deed of charge and mortgage, but not the legal fees which they purport to secure. The summons and cross-summons are listed for hearing, for three days, commencing 27 February 2013.

1. On 27 October 2012, the property was the subject of a contract of sale. The contract provides for a completion date of 90 days, in default of which either party to the contract can serve a notice to complete, which would require completion within a further 14 days. The completion date calculates to 25 January 2013, but after notice, no later than early February.

1. As a consequence of the need to provide good title to the purchaser of the property, the applicants move by motion filed 12 December 2012 for a withdrawal or removal of the Caveat.

The Issues

1. Notwithstanding that on this interlocutory hearing the parties have tendered four volumes of documents, various affidavits and other exhibits, the issues between the parties are within very short compass. It may be appropriate first to state some of the matters that are not in dispute, at least for these interlocutory purposes.

1. There is no dispute that legal services were provided by the respondent to the applicants. There is also no dispute that counsel were briefed and provided services for which payment is due. There is no dispute that the charge and mortgage were executed in order to secure legal fees (including costs of recovery thereof and interest) and that the Caveat was lodged to protect the interests created or purportedly created by that charge and mortgage. The parties also accept that the charge and mortgage, if valid, give rise to a "Caveatable" interest.

1. Further, there is no dispute between the parties that, as a matter of the proper exercise of the discretion of the Court, and, subject to appropriate security being provided, orders should be made the effect of which would be to allow the above-mentioned sale to proceed.

1. The issues between the parties are, as a consequence of the foregoing, confined to the form that any security should take, the method by which the security should be effected, the amount of any such security and whether, in obtaining that security, the respondent should give the usual undertaking as to damages.

Consideration

1. Much that was the subject of submissions does not, given the foregoing lack of dispute, seem particularly relevant. Nevertheless the Court will deal with some of the matters, albeit extremely briefly.

1. For reasons that may be clear to them, if not others, the applicants sought to submit that the Caveat created an interest in property. I am unclear as to the purpose of this submission. A Caveat operates, by virtue of the Real Property Act 1900, as a statutory injunction preventing the registration of dealings in property to which it applies without notice to the Caveator. The Caveat does not create an interest in property. It protects an interest in property that may otherwise have been created: see J & H Just (Holdings) Pty Ltd v Bank of NSW [1971] HCA 57; (1971) 125 CLR 546, per Barwick CJ. Further, and with great respect to Barwick CJ, it also gives notice of the claimed interest to those seeking to deal with the property: see Black v Garnock (2007) 230 CLR 438 at [76], per Callinan J.

1. Further, to the extent that it is in dispute, I accept that the applicants have the required degree of urgency in seeking the removal of the Caveat, which urgency is brought about by the contracts of sale. No issue is taken in these proceedings that, in part due to the financial issues with which the applicants are faced, the sale was necessary.

1. The Court accepts that the respondent has the onus of establishing that the Caveat should continue or not be removed: Buchanan v Crown & Gleeson Business Finance Pty Ltd [2006] NSWSC 1465 at [6], per Brereton J. Ordinarily, where the Court is required to consider whether a Caveat should remain on the register, the court will extend the Caveat if satisfied that the Caveator's claim has substance, or may have substance, and that the balance of convenience is in favour of the maintenance of the Caveat. In that respect, while recognising that the Court is exercising a statutory jurisdiction, the test is the same or similar to that for an interlocutory injunction: see Buchanan, supra; Eng Mee Yong v Letchumanan [1980] AC 331.

1. Given that there is no dispute that the applicants executed the charge and mortgage, it is difficult to see how the applicants could submit that the respondent does not have a sufficiently arguable case for a Caveatable interest.

1. The applicants do not, in these interlocutory proceedings, seek to establish their claim for relief under the Contracts Review Act or Australian Consumer Law. Nor do the applicants seek to establish an arguable case for relief under any such provisions. As a consequence, the charge and mortgage are extant and create an interest in the property that may be protected by the lodging of a Caveat.

1. I turn to the balance of convenience. It is accepted by all of the parties, and the Court, that the balance of convenience favours a course that would allow the applicants to complete the contract for sale. However, the balance of convenience overwhelmingly favours the protection of the respondent by appropriate security.

1. Some of the factors that have brought the Court to that view are that the final hearing will occur within a month or so of any substituted security; the lack of any real challenge in these interlocutory proceedings to the efficaciousness of the charge and mortgage; the acceptance that legal services have been rendered and that moneys are owed to senior counsel and should be paid out; and the existence of current security in the form of the charge and mortgage, which is sought to be replaced.

1. The applicants rely upon the application of the principle adumbrated by Palmer J in Liberty Funding Pty Limited v Steele-Smith [2004] NSWSC 1100 at [25]:

"The usual way in which a mortgagor can obtain a discharge where a contingent liability remains secured under the mortgage is to pay into Court the amount of the contingent liability or a reasonable estimation thereof if the amount cannot be fixed with certainty. So, for example, where a mortgage or threatens proceedings for the taking of an account, the mortgagee is entitled to retain the security to recover the anticipated reasonable costs of such proceedings and the mortgage or may obtain a discharge either by providing alternative security for such costs or by paying into Court an amount equal to the probable reasonable costs of the proceedings". (References omitted.)

1. I accept, with some possible qualifications, at least for present purposes only, that the foregoing approach should be applied as the test in determining the amount of security that should be ordered. However, it seems to me that the applicants misunderstand the foregoing reference by Palmer J to "the amount of the contingent liability". In this case, the applicants have agreed to a liability of up to $2 M, plus costs and interest. That is the amount of the contingent liability.

1. Nevertheless, the amounts suggested by the respondent as being owed to it, leaving aside fees to senior counsel, have not been appropriately supported by evidence. During the course of directions hearing before the Chief Judge in Equity, the respondent suggested that the amount owing was $1.35 M. It seems, from a proper analysis of the discussion with the Chief Judge, that $1.35 M was an estimate of fees, not including fees to senior counsel. To that amount must be added the costs of recovery and possible interest.

1. I do not intend to be precise. In accordance with the agreement between the parties, the Court will order that payment be made to senior counsel. Further, the Court will order security of a further amount to cover the estimated fees to the respondent and the fees to junior counsel, plus a buffer of $350,000 to cover the costs of recovery and interest. In other words, the Court will order security in the sum of $1.7 M together with the payments to senior counsel.

1. The trial judge will have the capacity, at the conclusion of the hearing in February, to alter significantly the terms of any interlocutory order. As a consequence, these interlocutory orders will be in place for approximately one month or slightly more. At the moment, there is no undertaking by the respondent as to damages. In my view, for the short period for which these orders are likely to operate, there should be no requirement on the respondent to give any such undertaking and, in so doing, put themselves in a worse position than would be the case if the Caveat continued. In those circumstances, I will not order or require that the respondent give an undertaking as to damages, except in the unlikely event that the respondent causes the contract for sale not to complete by reason of its non-attendance at the notified completion appointment.

1. The Court makes the following orders:

(1)   The plaintiff withdraw the Caveat on payment of the Specified Amounts by settlement cheques (as defined in these orders) to be held in trust jointly by the solicitor for the plaintiff (as defined in these orders) and the solicitor for the defendants.

(2)   The amount of $1.7 M so paid to the solicitor for the plaintiff as defined in these orders and the solicitor for the defendants be paid by those solicitors into a controlled money account.

(3)   The amount so paid into a controlled money account and any interest on that amount not be paid out of that account other than with the consent of the parties or by further order of the Court.

(4)   It shall be sufficient compliance with the requirement in order 1 that the payment be in cleared funds that the payment be by settlement cheque as defined in order 8.

(5)   It shall be sufficient compliance with the requirement in order 1 that the plaintiff withdraw the Caveat that the plaintiff provide the defendants with a withdrawal of Caveat in exchange for cheques for the Specified Amounts.

(6)   On the defendants giving the plaintiff no less than 48 hours' notice (excluding Saturday, Sunday and any public holiday) of the proposed place and time for completion of the Contract, the plaintiff or the solicitor for the plaintiff shall attend at that time and place for the purpose of exchange of the Caveat for the Payment.

(7)   The Court notes the plaintiff's undertaking to pay damages to the defendants in the event that the plaintiff has been notified under order 6 of the proposed completion of the contract and the contract is not completed by reason of the failure of the plaintiff to provide a withdrawal of Caveat at completion.

(8)   In these orders these terms (in any form) mean:

Bank	A bank as defined in the Banking Act 1959 (Cth), the Reserve Bank or a State bank
The Caveat	Caveat number AH9831 affecting the Property
Cheque	A cheque that is not postdated or stale
The Contract	The contract for the sale of the Property dated 27 October 2012 between the defendants as vendors and Sharon Tia Cooper as purchaser
The Payment	The payment to the solicitor for the plaintiff and the solicitors referred to in order 1
The Property	The property Folio Identifier 1/78239 known as 1 William Street Double Bay
Settlement Cheques	Unendorsed cheques made payable to the person to be paid and drawn on its own funds by:
- A bank; or
- A building society, credit union or other FCA Institution as defined in Cheques Act 1986 (Cth)
That carries on business in Australia
Solicitor for the plaintiff	A solicitor other than Georges Elias or the plaintiff itself, such solicitor to have been appointed, for the sole purpose of acting on behalf of the plaintiff in performing any functions under these orders, and to have confirmed acceptance of that appointment by notice in writing to the defendants no later than 16 January 2013
The Specified Amounts	$1.7 M, plus the amounts prescribed in order 9
Withdrawal of Caveat	A validly executed withdrawal of Caveat in the approved form for lodgement with the Registrar General

(9)   (a) Further to the amount of $1.7 M paid to the solicitor for the plaintiff, the defendants shall provide settlement cheques for the following amounts of invoice payable to each issuer of invoice:

Date	Title	Issuer of Invoice	Amount of Invoice
20 May 2011	Spincast v G&N Rahme Appeal to Full Court	D.D. Feller SC	$19,293.75
2 June 2011	Cavalock v Spincast	D.D. Feller SC	$5,344.38
22 November 2011	Webuildem P/L v Arab Bank of Australia	D.D. Feller SC	$962.50
8 March 2012	Webuildem ats Weston	David Murr SC	$36,256.00
26 June 2012	Webuildem Pty ltd & Ors ats Arab Bank of Australia Limited & Ors	Bernard Coles QC	$10,405.00
10 September 2012	Webuildem Pty Ltd & Ors ats Arab Bank of Australia Limited & Ors	Bernard Coles QC	$11,412.50

(b) The solicitor for the plaintiff shall deliver the Settlement Cheques specified in (a) above to each respective payee.

(10)   The parties have liberty to address on an alternative form of security.

(11)   Costs shall be costs in the cause.

(12)   Otherwise, the motion is dismissed.

**********

Decision last updated: 21 December 2012