Supreme Court New South Wales Medium Neutral Citation: Patrick John Moloney v Maria Coppola & Anor [2012] NSWSC 728 Hearing dates: 08.06.12 Decision date: 02 July 2012 Before: Nicholas J Decision: Pars 41, 48 Catchwords: EQUITY - equitable charge - claim by solicitor under costs agreement - whether costs secured by a charge over defendants' properties - agreements not signed by defendants - whether charge enforceable - whether part performance - claim to "fruits of action" lien not disputed REAL PROPERTY - caveats - whether leave to lodge further caveats justified - turns on facts - no question of general principle Legislation Cited: Conveyancing Act 1919 Legal Profession Act 2004 Real Property Act 1900 Statute of Frauds 1677 (UK) Cases Cited: C J Redman Construction Pty Ltd v Tarnap Pty Ltd [2005] NSWSC 1011; (2005) 12 BPR 23,395 Fast Funds Pty Ltd v Coppola & Ors; Coppola v Hall & Ors [2010] NSWSC 470 Fleming v Beevers [1994] 1 NZLR 385 Firth v Centrelink [2002] NSWSC 564; (2002) 55 NSWLR 451 Graham H Roberts v Maurbeth Investments Pty Ltd [1974] 1 NSWLR 93 Grogan v Orr [2001] NSWCA 114 Jackson v Richards [2005] NSWSC 630; (2005) 12 BPR 23,091 Khoury v Khouri [2006] NSWCA 184; (2006) 66 NSWLR 241 Regent v Millett [1976] HCA 40; (1976) 133 CLR 679 Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 384 Category: Principal judgment Parties: Patrick John Moloney - plaintiff Maria Coppola - first defendant Elio Coppola - second defendant Representation: Counsel: M Hall - plaintiff F Santisi - defendants Solicitors: Moloney Lawyers - plaintiff Denison Toyer Solicitors- defendants File Number(s): 10/289697 Judgment 1By summons filed 31 August 2010 the plaintiff seeks declarations that the interests of the first defendant in properties of which she is the registered proprietor and a joint registered proprietor are charged to secure the costs charged by the plaintiff under costs agreements between the parties. The plaintiff also seeks consequential orders for the grant of leave to lodge caveats over the defendants' properties pursuant to the charging clause of the costs agreements. 2The proceedings in which the plaintiff acted as solicitor for the defendants principally concerned disputes arising out of loan transactions involving the defendants which were determined by Slattery J on 14 May 2010 (Fast Funds Pty Ltd v Coppola & Ors; Coppola v Hall & Ors [2010] NSWSC 470). Final orders were made by his Honour on 24 August 2010. In the result, the defendants obtained a substantial degree of success. 3The defendants are presently indebted to the plaintiff for the balance of unpaid legal costs for which, on 31 January 2011, judgment was entered for the plaintiff in the sum of $268,836.03. The relief sought in these proceedings is to facilitate the recovery of this debt. Background 4The first defendant is the registered proprietor of property known as "Airdale" ### ###, Colo Vale NSW comprising all of the land contained in folio identifier ##/### (the Colo Vale property). 5The first and the second defendants are the joint registered proprietors of the following land: (1)## ##, Concord NSW comprising all of the land contained in folio identifier ##/### (the first Concord property). (2)## ##, Coledale NSW comprising all of the land contained in folio identifier ##/### (the Coledale property). 6The second defendant is the registered proprietor of the following properties: (1)## ##, Concord NSW comprising all of the land contained in folio identifier ##/### (the second Concord property). (2)## ##, Stanmore NSW ## ##, comprising all of the land contained in folio identifier ##/### (the Stanmore property). 7By a written costs agreement between the plaintiff and the first defendant dated 25 September 2009 the plaintiff was instructed as follows: "B The work we have been instructed to do is: Advise and act on your behalf in respect to proceedings relating to various loan and mortgage transactions taken out with respect to your property including the property known as "Airdale" ## ## Colo Vale, NSW." 8Relevantly the agreement included the following provisions: "E4 On termination, we are entitled to retain possession of your papers and documents while there is money owing to us for our charges and expenses, unless and until security is provided for our costs. E5 Where any costs charged by us pursuant to this agreement remain unpaid and outstanding from the date of invoice for a period exceeding 30 days the payment of those costs shall be secured against any real property owned by you and charged with the payment of such costs. To facilitate the operation of this clause you hereby authorise the lodgement of a caveat recording the interest in the real property by way of security." 9Under the standard costs disclosure attached to the agreement, clause 3 provided an estimate of costs for obtaining injunctive relief to restrain the sale of property in the total amount of $16,000. 10By a written costs agreement between the plaintiff and the defendants dated 29 September 2009 the plaintiff was instructed as follows: "B The work we have been instructed to do is: Advise and act on your behalf in respect to issues and proceedings relating to the various loan and mortgage transactions entered into with respect to your properties including but not limited to Supreme Court proceedings brought against you by Fast Funds Pty Ltd." 11The agreement was otherwise in the same terms as the agreement of 25 September 2009 except that the estimate provided in clause 3 under the standard costs disclosure related to the preparation and filing of a defence to the statement of claim, and was in the total amount of $5,000. 12Both agreements were signed by the plaintiff and provided to the defendants. The defendants did not sign these agreements. 13On 24 June 2010 Slattery J made orders, inter alia, as to costs in the proceedings before him. 14During the period 30 October 2009 to 5 July 2010 the plaintiff issued tax invoices to the defendants for legal services rendered in relation to what was described as the injunctive proceedings in respect of the Colo Vale property and the judicial sale proceedings. 15During the period 15 February to 13 August 2010 the plaintiff issued tax invoices to the defendants for legal services rendered in relation to what was described as the common law division proceedings. 16On 5 August 2010 the plaintiff lodged caveats on the titles to the defendants' properties. The caveat over the Colo Vale property of which the first defendant is the registered proprietor claimed a charge pursuant to the costs agreement of 25 September 2009; the caveat over the first Concord property and the Coledale property of which the defendants are the joint registered proprietors claimed a charge pursuant to the costs agreement of 29 September 2009; the caveat over the second Concord property and the Stanmore property of which the second defendant is the registered proprietor claimed a charge pursuant to the costs agreement of 29 September 2009. 17On 18 August 2010 the plaintiff was served with a lapsing notice in respect of each caveat. 18By summons filed 31 August 2010 the plaintiff commenced these proceedings. On 8 September 2010 various orders were made by consent which included extending the caveat over the Colo Vale property until further order. The document which recorded the consent orders and filed on that day was signed by the defendants. The first defendant undertook to complete the sale of the Colo Vale property within three months, and to pay into court the greater of $100,000 or 50 per cent of the balance of the proceeds from sale after payment of any sum secured under any mortgages and the reasonable costs of sale. The first defendant also agreed to charge these monies with the payment of the plaintiff's costs outstanding following assessment. This property remains unsold by the first defendant. 19On 21 September 2010 the defendants applied under s 328 Legal Profession Act 2004 to have the costs agreements set aside. The amount of costs in dispute was $447,487.42. 20On 21 December 2010 the application was determined by a court appointed costs assessor, Mr R M Hamwood. He found that the costs agreements were provided to, and accepted by, the relevant defendants. He declined to set them aside. 21On 25 January 2011 the costs assessor issued a certificate of determination of costs. Relevantly, it included: "1 THE APPLICATION IS DETERMINED BY ... SUBSTITUTING FOR THE DISPUTED COSTS, AS A FAIR AND REASONABLE AMOUNT OF COSTS TO BE PAID TO THE .... COSTS RESPODNENT, THE SUM OF FOUR HUNDRED AND FOUR THOUSAND, FIVE HUNDRED AND FORTY SIX DOLLARS AND 91 CENTS ($404,546.91). Note 1 Credit is to be given by the ... costs respondent to the costs applicants ... for the sum of $136,262.97 paid on account. ... 2 [sic] THE COSTS APPLICANT/COSTS RESPONDENT IS TO PAY TO THE COSTS APPLICANT/COSTS RESPONDENT THE SUM OF TWO HUNDRED AND SIXTY EIGHT THOUSAND TWO HUNDRED AND EIGHTY THREE DOLLARS AND 94 CENTS ($268,283.94)." 22On 31 January 2011 judgment in the sum of $268,836.03 was entered for the plaintiff against the defendants. 23At the outset of the hearing the defendants sought to raise but later, correctly, abandoned a preliminary issue as to whether or not the costs agreements had been provided to them. 24The essential issues for determination are whether the agreements were intended to charge the properties as security for unpaid costs, and whether they were enforceable notwithstanding that they were unsigned by the defendants. Equitable charge 25The plaintiff contended that under each cost agreement the terms of clause E5 operated to create an equitable charge. It was put that the clause, read in context of the whole agreement, and with regard to the surrounding circumstances, clearly identified the relevant debt and the property intended to secure it. 26The defendants disputed that the plaintiff's construction was correct. It was put that read in context with clause E4 which provided for a lien on termination whilst costs were unpaid, clause E5 did not evidence the intention to create a charge. They also submitted that clause E5 failed to identify with certainty either the debt or the property to be charged. It was also submitted that the clause did not operate to secure an interest in property at the time the agreement was made in that the charge was conditional upon costs remaining unpaid and outstanding for a period exceeding 30 days from the date of invoice. Accordingly, so it was put, the clause was ineffective to create an equitable charge over the defendants' properties. 27It is necessary for the creation of an equitable charge that the agreement between a debtor and his creditor sufficiently identifies or specifies the fund from which the debt is to be paid, or the asset over which it is to be secured. In Jackson v Richards [2005] NSWSC 630; (2005) 12 BPR 23,091 White J observed: "18 An agreement between a debtor and his creditor that the debt owing shall be paid out of a specific fund coming to the debtor will create a valid equitable charge upon the fund and operate as an equitable assignment of it. (Rodick v Gandell (1852) 1 De GM & G 763 at 777, 778; 42 ER 749 at 754). However, for this principle to apply, there must be a specific fund from which the debt owing is to be paid. In Swiss Bank Corporation v Lloyds Bank Limited [1982] AC 584, Buckley LJ said (at 595): 'If the debtor undertakes to segregate a particular fund or asset and to pay the debt out of that fund or asset, the inference may be drawn, in the absence of any contra indication, that the parties' intention is that the creditor should have such a proprietary interest in the segregated fund or asset as will enable him to realise out of it the amount owed to him by the debtor.' 19 For such a charge to be created by an agreement to pay a debt out of a fund to come to the debtor, the parties must have agreed that the debtor would keep the fund separate from his other assets. (Moseley v Cressey's Co (1865) LR 1 Eq 405 at 409). 28In my opinion, upon its proper construction, the terms of clause E5 in each agreement unambiguously specifies the property which the parties intended should be provided as security for the payment of unpaid costs. The phrase "... those costs shall be secured against any real property owned by you" evidences the intention that the property to be charged was not confined to a particular (unidentified) parcel, but extended to any parcel of property which, under the agreement of 25 September 2009, was owned by the first defendant and which, under the agreement of 29 September 2009, was owned by the first and second defendants. 29Furthermore, I do not accept the defendants' submission that there is no charge under clause E5, and no caveatable interest, unless and until costs remain unpaid and outstanding for a period exceeding 30 days from the date of invoice. The question turns on the proper construction of clause E5, taken as a whole. 30In my opinion the interest in real property given by the clause does not depend upon it being established that at the time of lodgement of the envisaged caveat there was in fact an amount of costs unpaid under the agreement. The charge given by the clause extends to costs which remain unpaid after 30 days. It provides the plaintiff with an interest in the real property which he was entitled to protect against the possibility that costs would remain unpaid and outstanding, and enforceable under the charge in the future. The language of the second sentence namely "To facilitate the operation of this clause you hereby authorise the lodgement of a caveat recording the interest in the real property by way of security" effectively authorised the plaintiff at the time the agreement was made to lodge a caveat to record his interest in the real property by way of security. It is predicated on the basis that the existence of the charge is not dependent upon there being an amount of costs unpaid for over 30 days. In short, the clause gives to the plaintiff an interest in any property of the defendants which he is entitled to protect against the possibility that money will become enforceable under the charge at some future time. (cf: Graham H Roberts v Maurbeth Investments Pty Ltd [1974] 1 NSWLR 93; C J Redman Construction Pty Ltd v Tarnap Pty Ltd [2005] NSWSC 1011; (2005) 12 BPR 23,395, pars 28, 29, 30.) 31I accept generally the plaintiff's submissions on this issue. In this case, I find that clause E5 in each agreement was intended to create an equitable charge over, and an interest in, the various properties owned by the relevant defendant(s) which the plaintiff was entitled to protect by the lodgement of caveats. 32Under prayer 1 of the summons, the plaintiff seeks a declaration that the interest of the first defendant as the registered proprietor of the Colo Vale property, and her interest as a joint registered proprietor of the first Concord property and the Coledale property is charged to secure the costs charged by the plaintiff under the agreement between them of 25 September 2009. The claim raises the question whether the charge is binding and enforceable against the first defendant under an agreement which was not signed by her. Its determination requires consideration of the following provisions of the Conveyancing Act 1919 (the Act): "23C Instruments required to be in writing (1) Subject to the provisions of this Act with respect to the creation of interests in land by parol: (a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person's agent thereunto lawfully authorised in writing, or by will, or by operation of law, ... 23E Savings in regard to secs 23B, 23C, 23D Nothing in section 23B, 23C, or 23D shall: ... (d) affect the operation of the law relating to part performance. ... 54A Contracts for sale etc of land to be in writing (1) No action or proceedings may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action or proceedings is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged. (2) This section applies to contracts whether made before or after the commencement of the Conveyancing (Amendment) Act 1930 and does not affect the law relating to part performance, or sales by the court. (3) This section applies and shall be deemed to have applied from the commencement of the Conveyancing (Amendment) Act 1930 to land under the provisions of the Real Property Act 1900." 33A contract within s 23C(1)(a) or s 54A is enforceable only if part performance is established. This requires that there must be acts done under and by force of the contract that are unequivocally and in their own nature referable to some such agreement as that alleged (Regent v Millett [1976] HCA 40; (1976) 133 CLR 679, pp 682-683; Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 384, p 432; Khoury v Khouri [2006] NSWCA 184; (2006) 66 NSWLR 241, pars 16, 54, 83-86). 34The circumstances in which the acts were done are to be considered in order to consider whether the acts pass this test (Khoury par 17). 35Where there is a composite contract, in part disposing of land and in part having other effects, part performance of the latter aspects is capable of being part performance of the transaction as a whole and thus of the land aspect (Fleming v Beevers [1994] 1 NZLR 385, p 392). 36The plaintiff submitted that each of the agreements had been partly performed by the parties in that the plaintiff continued to provide legal services to the defendants, and the defendants continued to instruct him until the proceedings before Slattery J were concluded. Accordingly, it was contended that upon the application of s 23E(d) of the Act the agreements were enforceable although not signed by the defendant(s) as required by s 23C(1). In addition, without accepting that these proceedings were in respect of agreements for the disposition of any interest in land within s 54A(1), the plaintiff similarly submitted that part performance attracted the application of s 54A(2) so that the agreements were enforceable. 37In opposition, the defendants submitted that part performance was not established on the evidence and, hence, the charge was unenforceable. On my understanding, the defendants' submission was that, to the extent that the parties acted under the agreements, their performance was referable to that component relating to the provision of, and payment for, legal services, and not to the discharge of obligations under clause E5 under which a charge was given. It was argued that for the application of s 23E(d) and/or s 54A(2) it was necessary that performance be referable to a transaction which created an interest in land, and did not apply in this case in which performance was referable to agreements for the provision of, and payment for, legal services. 38In evidence were eight tax invoices sent by the plaintiff to the defendants for legal services rendered between 30 October 2009 and 13 August 2010 in respect of the proceedings before Slattery J. Although the actual amount is unclear from the evidence, it appears that the defendants made some payment to the plaintiff for costs which was taken into account by the costs assessor in ruling that credit should be given to them for the amount of $136,262.97 paid on account. Furthermore, the defendants accepted (T p 35) that payments had been made by them from time to time towards their legal costs. 39As to the application of s 54A(1), the effect of the costs agreement is for a charge over the defendants' land. They are agreements for the creation of a new, equitable interest in land and are agreements for the disposition of that interest. It is well established that an agreement for a mortgage or charge of land was within s 4 Statute of Frauds 1677 (UK) prior to the enactment of s 54A (Khoury par 5 per Handley JA; pars 44, 50, 60 per Bryson JA). 40The evidence establishes, and I find, part performance of the costs agreements by the parties, and each of them. Contrary to the defendants' submission, the question of part performance must be considered with regard to each agreement taken as a whole. It is the composite transaction of which part performance must be demonstrated, not that aspect alone which relates to land. With reference to these agreements it is unrealistic for the purposes of the doctrine of part performance to sever the aspect which involves the creation of the interest in land from the other aspect (Fleming p 392). Clause E5 relates to the charge over property, and is addressed to the consequence where costs remain unpaid. The work done by the plaintiff was under an agreement which provided him with protection by way of a charge against the possibility that the defendants left his costs unpaid and outstanding. 41I find that the acts done by the parties being the continued rendering of legal services by the plaintiff, and the making of payments by the defendants, are acts unequivocally referable to their respective obligations under the costs agreements. In the circumstances, the provisions of s 23E(d) and s 54A(2) operate to enable the plaintiff to enforce the equitable charge given under the costs agreements notwithstanding the fact that the defendants had not signed them. Accordingly, I find the plaintiff is entitled to a declaration in terms of prayer 1 of the summons. 42This conclusion renders it unnecessary to determine the plaintiff's alternative contention that an enforceable charge was created by the undertakings and agreements of the first defendant recorded in pars B and D of the consent orders of 8 September 2010. 43The plaintiff also advanced an alternative claim that he is entitled to a charge by way of a solicitor's "fruits of action" lien on the defendants' properties in respect of his unpaid costs. Reliance was placed on the principles explained in Grogan v Orr [2001] NSWCA 114, and Firth v Centrelink [2002] NSWSC 564; (2002) 55 NSWLR 451, pars 33-44. The fruits of the litigation were the properties preserved for the defendants as an outcome of the proceedings before Slattery J. The entitlement of the plaintiff to the lien as claimed was not contested by the defendants (T p 65). In my opinion, the plaintiff is entitled to a declaration to that effect. The caveats 44The plaintiff seeks an order under s 74K Real Property Act 1900 that caveat no. AF678121 lodged over the Colo Vale property be extended until further order. Also sought are orders under s 74O Real Property Act 1900 giving leave for the lodgement of caveats in respect of the first defendant's interest in the first Concord property and the Coledale property claiming interest under the charge given by the agreement of 25 September 2009, and for the lodgement of caveats in respect of the second defendant's interest in the first Concord property, the second Concord property, the Stanmore property, and the Coledale property, claiming an interest under the charge given by the agreement of 29 September 2009. 45Section 74O operates to restrict the lodgement of further caveats without the leave of the court if an earlier caveat lapses or has been withdrawn. 46As set out in par 16 above, on 5 August 2010 the plaintiff lodged caveats on the titles to the defendants' properties. Following the service of lapsing notices on 18 August 2010, the plaintiff commenced these proceedings. Under the consent orders made on 8 September 2010 the caveat over the Colo Vale property was extended until further order. Relevantly, the agreement incorporated in the consent orders included the following: "I This agreement is not in substitution for the rights of the plaintiff under the costs agreements or any lien at law or in equity the plaintiff may have and such rights are to continue." 47The defendants accepted (T p 59) that, subject to leave, the effect of clause I is to afford the plaintiff the right to lodge a caveat over any property of the defendants to protect his security under the costs agreements. 48In my opinion the circumstances of the case entirely justify orders giving leave to the plaintiff to lodge further caveats over any of the properties owned by the defendants, or either of them. The evidence establishes that the administration of justice in this case requires opportunity be afforded the plaintiff by the lodgement of further caveats to protect his equitable interest in the properties which the defendants agreed to provide. Consistently, the plaintiff is also entitled to an order extending the caveat over the Colo Vale property until further order. 49The parties should have the opportunity to agree upon the final terms of the declaration and orders to be made to give effect to these reasons, following which the plaintiff is to bring in short minutes of order. 50The question of costs remains outstanding. My prima facie view is that the appropriate order is that the defendants should pay the plaintiff's costs of these proceedings. However, absent agreement, the parties should have the opportunity to make submissions on the issue. 51The parties are directed to arrange with my associate by 4pm 9 July 2012 for the matter to be re-listed for the purpose of making final orders, and for the directions as to any argument as to costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 03 July 2012