Bingham v Boensch

Supreme Court of NSW|2023-09-11|Before: Peden J, Richmond J

JUDGMENT

The plaintiff, John David Bingham, is a solicitor. In 2019, he provided legal services to the defendant, Franz Boensch.
On 12 June 2023 Mr Bingham registered caveat AP338562 (Caveat) over the defendant's property in Rydalmere, New South Wales (Property).
The Caveat secures an alleged equitable interest over the Property pursuant to an unregistered mortgage executed by Mr Boensch on 8 March 2019 and dated 12 March 2019. The mortgage was granted by Mr Boensch to Mr Bingham as security for the continuing provision of legal services.
On 27 October 2021, Mr Bingham received a lapsing notice and on 8 November 2021 commenced these proceedings by way of Summons, which was amended in minor ways on 10 November 2021. In substance, Mr Bingham seeks a declaration that the Caveat is valid and ought remain on title and that the mortgage binds the parties.
On 7 December 2021, the Court made orders that the Caveat be extended until further order. The Court also ordered that the proceedings continue on pleadings.
On 22 February 2022, Mr Boensch filed a cross-claim which sought the following relief: 1 Declare the Caveat AP338562 subject to these proceedings, containing a Mortgage and attached a costs agreement (attachment "A") between the Plaintiff and Defendant. 2 Declare the costs agreement contained in the Mortgage attachment "A" was only secured in specific and limited circumstances agreed and outlined in the Costs agreement (attachment "A"), 3 Declare that the terms of the Costs agreement (attachment "A") had been breached and dishonoured by the Plaintiff/ Cross claimant and 4 Declare that therefore that the conditional security provided through the Mortgage and attachment "A" nil and void. 5 Declare that no other valid costs agreement exists between the parties. 6 Order the caveat AP338562 is removed expeditiously. 7 Order compensation for loss and damages for actions by the Plaintiff following the breach of the attachment "A". 8 Costs.

Background

These proceedings are one chapter in extensive litigation between the parties in various courts over many years. There is other litigation on foot.
In other proceedings, Richmond J has recently provided a useful summary of the history of litigation between the parties in Boensch v Bingham [2023] NSWSC 1152 at [5]-[43]. That judgment concerned Mr Bingham's motion to strike out Mr Boensch's statement of claim that broadly sought relief about the manner in which Mr Bingham conducted Mr Boensch's litigation, including allegations of misleading and unconscionable conduct and professional negligence.
The following is a shorter background.
In 2005, Mr Boensch was declared bankrupt because of an unpaid debt. Various litigation ensued. Mr Bingham represented Mr Boensch in his appeal to the High Court in relation to that bankruptcy: Boensch v Pascoe (2019) 268 CLR 593.
In 2019, Mr Bingham also provided legal services to Mr Boensch in his claim that sought to set aside a decision of the Costs Review Panel that was determined in favour of his previous solicitors, Somerville Legal: see eg Boensch v Somerville Legal Pty Ltd [2019] NSWCA 249.
On 15 October 2020, Mr Bingham applied for an assessment of his costs of legal services provided to Mr Boensch, including those of barrister, Christopher Bevan.
On 12 May 2021, a Certificate of Determination in the sum of $358,234.71 was emailed to Mr Bingham and Mr Boensch.
On 4 June 2021, Mr Bingham registered the Certificate of Determination as a judgment of the District Court (District Court Judgment).
On 23 June 2021, the District Court Judgment was issued in a total sum of $372,674.84, including interest and costs.
On 6 September 2021, a bankruptcy notice was served on Mr Boensch by Mr Bingham.
On 4 February 2022, Judge Manousardis set aside the bankruptcy notice for various reasons, to which it will be necessary to return: Boensch v Bingham (No 2) [2022] FedCFamC2G 47. Mr Bingham's appeal from that decision was dismissed: Bingham v Boensch [2023] FCA 117 (Abrahams J). Mr Boensch's submissions in both matters were summarised by Abrahams J at [7] as: Mr Boensch claimed that his liability, if any, to pay Mr Bingham's costs of the appeal to the High Court were entirely regulated by the terms of a mortgage he and Mr Bingham executed in March 2019. Mr Boensch submitted that, under the terms of that mortgage: any liability to pay the costs would be limited to $100,000; Mr Bingham could enforce such liability only to the extent it could be satisfied out of a property in Rydalmere in which Mr Boensch was the trustee (the Property); and Mr Bingham could not enforce the liability until 1 March 2024. Accordingly, Mr Boensch submitted that he was not indebted to Mr Bingham for the costs, meaning it had not been open to Mr Bingham to apply to have them assessed and to register the Costs Certificate as a judgment of the District Court: see PJ [3].
On 21 October 2022, the Certificate of Determination was referred to a Costs Review Panel: [2022] NSWSC 1432.
On 29 March 2023, the Costs Review Panel issued two new certificates, together with its reasons. The certificate of costs was issued in a $nil amount with reasons, including the following: 5.15 … the Panel accepts that s198(1) requires that when an application for assessment is made the costs have to be payable at that time., accordingly the Panel determines that at the time the application was filed by Mr Bingham, Mr Boensch had no liability to pay any costs and hence the Costs Assessor had no jurisdiction to determine the application. 5.16 When the liability under the Mortgage crystallises, Mr Bingham can make another application.
In these proceedings, Mr Bingham seeks an extension of the Caveat and a declaration that the Mortgage is security for costs to be assessed and payable "on 1 March 2024".

Defence and cross-claim

Mr Boensch represented himself at all times in these proceedings. He prepared his own defence, cross-claim, written submissions and made oral submissions at the hearing.
While some of his documentation employed language alleging deceit, fraud and professional negligence of Mr Bingham, those issues were abandoned orally. Mr Boensch stated: Your Honour, all those when I use the words "deceit" or "fraud", they just do allow me to show on what basis the contract was breached. It's all about breaching the contract. … And that's why I refer to those things. That's the only purpose, your Honour…
Mr Boensch did not seek any finding in these proceedings that Mr Bingham had been professionally negligent or fraudulent. He has commenced other proceedings in this Court seeking relief in relation to those allegations: see Boensch v Bingham [2023] NSWSC 1152.
In his written submissions, Mr Boensch provided eight reasons why the Caveat ought to be removed from title and why the mortgage had no work to do. Each are dealt with in turn.

Reason 1

Mr Boensch submitted that the mortgage only secured the costs agreement, which Judge Manousardis and Abrahams J had been determined to be void.
It is correct that Mr Bingham's alleged costs agreements have not been accepted in the Federal Court as an agreement that binds the parties. However, instead, Judge Manousardis and Abrahams J have determined that the mortgage is the binding costs agreement between the parties. In Boensch v Bingham (No 2) [2022] FedCFamC2G 47, Judge Manousardis stated: [83] The Costs Determination on the basis of which the Costs Certificate was issued was premised on the Cost Assessor's finding that Mr Boensch and Mr Bingham entered into costs agreements on the terms contained in the Solicitor's February and October costs disclosures. The evidence before me, however, not only gives rise to a substantial reason for questioning that finding; it leads me to conclude that Mr Boensch and Mr Bingham did not enter into any such costs agreements, and that the only costs agreement they entered into in relation to the payment of the HC Costs is the agreement constituted by the Mortgage. [84] I rely on the following findings and conclusions: (a) In February 2019 Mr Bingham provided to Mr Boensch the Solicitor's February and the Barrister's February costs disclosures; and Mr Boensch and Mr Bevan informed Mr Boensch they would require a mortgage over the Property as security for the payment of their costs. (b) The Solicitor's February costs disclosure cannot by itself evidence the terms of a costs agreement. At most it evidences an offer by Mr Bingham to provide legal services to Mr Boensch on the terms set out in the Solicitor's February costs disclosure. Before such offer can be found to have been converted into a costs agreement, however, there must be evidence that Mr Boensch engaged in conduct that could be taken to constitute an unqualified acceptance by him of the terms contained in the Solicitor's February costs disclosure. (c) There is no evidence Mr Boensch engaged in any conduct that could be characterised as the unqualified acceptance by him of the offer constituted by the Solicitor's February costs disclosure. On the contrary, the evidence shows Mr Boensch, on the one hand, and Mr Bingham and Mr Bevan, on the other, held discussions and exchanged emails that led to Mr Boensch and Mr Bingham executing the Mortgage. (d) The effect of the Mortgage is as follows: (i) Mr Boensch granted a mortgage over the Property as security for the "debt or liability described in the terms and conditions set out or referred to in this mortgage", the terms and conditions being those identified in Annexure 'A' to the Mortgage. (ii) The only clause in Annexure 'A' to the Mortgage that is capable of being construed as describing a debt or liability is cl 6, which refers to the "legal costs incurred by the Mortgagor (that is, Mr Boensch) as the client of the Mortgagee and as trustee of the Boensch Trust". The Mortgage itself does not further identify the "legal costs incurred by the Mortgagor". Given that this constitutes one of the subject matters of the Mortgage, extrinsic evidence is admissible to identify the incurring of legal costs to which cl 6 refers.[91] That evidence would at the very least include the Solicitor's February costs disclosure, and in particular that part which identifies the legal work Mr Bingham would perform, and the rates at which he would perform the work. (iii) In addition to describing the debt or liability, Annexure 'A' to the Mortgage identifies the capacity in which Mr Boensch is to assume the debt or liability, namely as "trustee of the Boensch Trust" (cl 4); it limits the extent of the debt or liability "to the sum of one hundred thousand dollars ($100,000)" (cl 6); it limits the means by which Mr Bingham can enforce such debt or liability, namely, "only to the extent which it [that is, Mr Boensch's debt or liability under the Mortgage] can be satisfied out of the secured property" (cl 4); and it defers the time the liability or debt may be so enforced "until 1 March 2024" (cl 2). (e) Given the terms of Annexure 'A' to the Mortgage I identify in (d), the Mortgage constitutes "an agreement about the payment of legal costs".[92] It is therefore a "costs agreement" for the purposes of the LPU Law; and, being a "costs agreement", s 184 of the LPU Law provides that, subject to "this Law," the Mortgage "may be enforced in the same way as any other contract". That includes the right Mr Boensch has to set up the terms of the Mortgage as a defence to a claim for the payment of the HC Costs that purports to be based on an asserted costs agreement other than the agreement that is constituted by the Mortgage. (f) The Solicitor's October costs disclosure is incapable of constituting the terms of any costs agreement or updated costs agreement. Mr Boensch communicated his rejection of those terms as being contrary to what had been agreed in March 2019; and Mr Boensch did so on the same day he received the Solicitor's October costs disclosure. (g) The Costs Assessor did not purport to set aside or vary the Mortgage, or otherwise find the Mortgage to be unfair or contrary to the LPU Law. That means that, on the evidence, the Mortgage is the only agreement between Mr Boensch and Mr Bingham about the payment of legal costs; and Mr Boensch's liability to pay the HC Costs is to be determined by reference to the terms of the Mortgage. (h) The right the Mortgage gives to Mr Bingham to recover "out of the secured property" no more than $100,000 has not accrued, because 1 March 2024 has not arrived. For this reason alone, and assuming such right can properly be characterised as a liability by Mr Boensch to pay anything to Mr Bingham, Mr Boensch is not, and, when Mr Bingham issued his invoice dated 6 December 2019 Mr Boensch was not, liable to pay Mr Bingham any amount on account of the HC Costs. Thus, at the time Mr Bingham lodged his application for assessment of his costs, no legal costs were payable to him, and the Costs Assessor had no authority to undertake any costs assessment of Mr Bingham's or Mr Bevan's costs. (i) Given the terms I identify in (d), it cannot be said Mr Boensch assumed any personal liability to pay any amount to Mr Bingham in relation to the HC Costs. Mr Bingham's rights are restricted to seeking satisfaction "out of the secured property", not by a personal action for judgment against Mr Boensch. [85] The Judgment Amount, therefore, does not represent any debt that is payable by Mr Boensch to Mr Bingham. In truth Mr Boensch owes no debt to Mr Bingham in relation to the HC Costs; and no legal costs were payable to Mr Bingham at the time he applied for the assessment of his costs. The Costs Assessor, therefore, purported to embark on an assessment of legal costs he had no authority to undertake, and he therefore purported to make a costs determination in relation to the HC Costs he had no jurisdiction to make. The Costs Determination, therefore, is incapable of having any legal effect. Further, given the Mortgage is a "costs agreement" which Mr Boensch has the right to enforce, and Mr Boensch enforced his rights under the Mortgage by relying on its terms before the Costs Assessor as an answer to Mr Bingham's application for the assessment of legal costs, it was not open to the Costs Assessor to ignore, as he did, the terms of the Mortgage; and his having ignored the terms of the Mortgage is incapable of altering the rights and obligations Mr Boensch and Mr Bingham have in relation to the HC Costs as provided for by the terms of the Mortgage.
Dismissing the appeal, in Bingham v Boensch [2023] FCA 117, Abrahams J stated at [85]-[86]: 85. … the terms of the mortgage, which are recited at [18] above, properly read, cap the costs at $100,000. The effect of the mortgage is accurately described by the primary judge at PJ [84(d)] recited above at [38]. There is nothing in that document (or elsewhere) which suggests that the respondent accepted that he would pay anything other than that amount, or that he would be personally responsible for any additional amount. To the contrary, the inference from the terms of the mortgage is that $100,000 is the maximum, noting also that it is approximately the figure that was estimated as the costs of the appeal process by Mr Bingham and Mr Bevan (including special leave and a full hearing) at the time the mortgage was executed. 86. Mr Bingham's submission to the Costs Assessor, which appears to have been accepted, that the mortgage secured all legal costs claimed is, as the primary judge correctly observed at PJ [51], not supported by the terms of the mortgage. The mortgage only secured Mr Bingham's costs in so far as those costs were capped at $100,000. As the primary judge concluded at PJ [51(c)]: The only liability in Annexure 'A' to the Mortgage can reasonably be construed to describe is the liability described in cl 6, namely the "principle sum for legal costs incurred by" Mr Boensch as a client of Mr Bingham, and his capacity as trustee of the Property, which would have to be read with cl 6, which provides that the liability so incurred "shall be limited to" $100,000.
Mr Boensch accepted that those judgments bind him and that he has always asserted that the mortgage was the binding agreement between him and Mr Bingham. Further, after having had the opportunity over the luncheon adjournment to revisit those paragraphs of the judgments, Mr Boensch orally accepted that he no longer agitated for a finding that the mortgage was not the binding agreement between the parties.
For completeness, I also consider that in circumstances where the costs agreement were determined to be void, Mr Bingham would not be barred from the opportunity to claim his fees on a quantum meruit basis: see e.g. Wentworth v Rogers; Wentworth and Rogers (2006) 66 NSWLR 474 at [55]-[56] (Santow JA).

Reason 2

Mr Boensch submitted that because Mr Bingham did not adhere to the mortgage terms and conditions, the mortgage can no longer operate, either because it is void or has terminated.
Mr Boensch identified the breaches, upon which he relied, as the following conduct by Mr Bingham: 1. Suing Mr Boensch for more than $100,000, contrary to the mortgage cap; 2. Seeking payment before the obligation had crystallised on 1 March 2024; and 3. Seeking payment other than by way of sale proceeds of the Property.
Mr Boensch submitted that, had he been aware that Mr Bingham would breach the mortgage terms, then he never would have signed that document and never would have engaged Mr Bingham to provide legal services.
I do not accept that the mortgage agreement has been validly avoided or terminated. I do not accept that when a contractual party asserts a right wrongly, such as suing for more than a sum identified in a contract, the party has necessarily repudiated the contract. Even if Mr Bingham did repudiate the mortgage, Mr Boensch never notified Mr Bingham that he was accepting that repudiation and terminating the mortgage agreement. Further, even if he had, when a contract is terminated for breach, including repudiation, all unconditionally accrued rights, including as to payment, remain on foot: McDonald v Denny Lascelles Ltd (1993) 48 CLR 457 (at 477 per Dixon J). Mr Boensch has not demonstrated why Mr Bingham's entitlement to payment for legal services performed at the request of Mr Boensch would cease to be enforceable by reason of any breach or termination.
As already noted, Mr Boensch has repeatedly informed various courts that he considers the mortgage agreement binding, as has been found in the Federal Court, and has never asserted that he has terminated it.
I note that Mr Boensch's submissions also referred to relief pursuant to the Contracts Review Act 1980 (NSW). However, no relief pursuant to that legislation was pleaded. Mr Boensch clarified orally that the conduct, upon which he relied to avoid the operation of the mortgage agreement, was only the breaches he had identified. He did not submit that there was any conduct at the time of formation that would give rise to any remedy under that legislation. Therefore, the same reasoning as above applies.

Reason 3

The same matters canvassed in Reasons 1 and 2 were repeated, namely that Mr Bingham has no valid costs agreement and he has breached the mortgage terms.
Further, Mr Boensch submitted that because in August 2023 the Costs Review Panel provided an assessment of "$Nil", it is no longer possible for there to be another costs assessment because the costs agreement is invalid. I do not accept that submission for the following reasons.
First, as set out above, the costs assessment process was determined to be invalid because there were no costs "payable" at the time of the assessment; there was a jurisdictional error. However, Mr Boensch did not provide any clear reason why another application for assessment would not be available to Mr Bingham after 1 March 2024 as noted by the Costs Review Panel. There is nothing to suggest the entitlement to have costs assessed and enforced has been lost forever.
Secondly, Mr Boensch now accepts that the mortgage agreement has been found to be the binding costs agreement between the parties, without the costs agreement, upon which Mr Bingham previously relied.

Reason 4

This was also numbered "Reason 3" in Mr Boensch's written submissions.
Mr Boensch submitted that the judgment certificate had no effect and could not support the Caveat. Mr Bingham does not rely on that judgment certificate, and it is not necessary to consider this further.

Reason 5

This was numbered "Reason 4" in Mr Boensch's written submissions.
Mr Boensch submits that Mr Bingham cannot rely upon the Caveat and mortgage in circumstances where he issued a bankruptcy notice. To support this submission he relies upon the fact that Somerville Legal withdrew a caveat it had lodged to protect payment of legal fees, where it had issued a bankruptcy notice: see Somerville Legal Pty Limited and v Franz Boensch; Franz Boensch v Somerville Legal Pty Limited [2019] NSWSC 267.
Somerville Legal withdrew its caveat and discontinued the proceedings after Mr Bingham sent a letter on 18 February 2019 to Somerville Legal on his behalf alleging Somerville Legal's conduct was a "statutory election" under s 41 Bankruptcy Act 1966 (Cth): …to surrender your rights under the costs agreements, tax invoices, Deed and Mortgage pleaded… A NSW lawyer abandons their right to sue for their fees at common law on the costs agreements with the client when it elects to seek the assessment of their costs by a costs assessor and furthermore, when it thereafter seeks enforcement of the judgment registered in reliance upon the costs assessor's certificate determination. … It is contended that it is an obvious abuse of process to retain the benefit of that judgment by seeking to enforce it by bankruptcy proceedings in one of the Federal Courts and to concurrently sue on your costs agreements and tax invoices in order to enforce your alleged rights at common law and under the mortgage and caveat provisions of the Real Property Act 1900 on the other hand. The abuse of process which you are perpetrating is with the greatest of respect to you, self-evident. …
None of the detail concerning Somerville Legal's claim against Mr Boensch was in evidence and no submissions were made by Mr Boensch explaining how the facts in that litigation were as he submitted "almost mirror like" to those here. It is not possible to make a finding to that effect.
Further, the alleged abuse of process and election or waiver asserted in the letter concerned concurrent proceedings for legal costs. That is not the situation here. When Mr Bingham caused the bankruptcy notice to be issued following the original costs assessment determination and District Court judgment, he did not, at the same time, commence proceedings seeking to enforce the costs agreements and mortgage. Mr Bingham no longer relies on the District Court judgment. Instead, he is seeking to protect the rights provided in the mortgage agreement, including indefinitely extending the operation of the Caveat.

Reason 6

This was numbered "Reason 5" in Mr Boensch's written submissions and was abandoned orally.

Reason 7

This was numbered "Reason 6" in Mr Boensch's written submissions.
Mr Boensch submits that because he has other proceedings on foot against Mr Bingham alleging "professional misconduct, negligence, deception and unjust enrichment due to fraud", which could lead to a damages award in his favour, and because currently there is not a valid costs assessment, and the terms of the mortgage were breached, the mortgage secures a speculative claim to fees and the Caveat ought to be removed.
In support of this submission, Mr Boensch referred to Boensch v Pascoe (2019) 268 CLR 593 at [90]-[91] (citations omitted): [90] In some of the older authorities, the nature of the interest sufficient to have that effect was described in terms of the "most remote possibility of interest" or "any thing from which a benefit to the creditors would result" or "might result". Thus, as Littledale J summarised the position in Carvalho v Burn: "It is quite clear that the assignment [in bankruptcy] vested in the assignees all the personal estate and effects in which the bankrupt was, at the time of the act of bankruptcy, beneficially interested (with the statutory exceptions, [6 Geo IV c 16, ss 81, 82, 86, 112]); but as the object of the assignment of the bankrupt's property is, that it may be applied to the payment of his debts, it is equally clear that nothing passed by it which the bankrupt then held in trust for others, or in which he had only a mere legal interest, Scott v Surman, Winch v Keeley, Carpenter v Marnel, Gladstone v Hadwen; but if, at the time of the act of bankruptcy, the bankrupt possessed a possibility of interest, from which a benefit to his creditors might result, if he had the legal interest in any property, and it was uncertain whether he would hold any part of that property, or if any, what part, as a trustee for others, the whole would pass by the assignment: it could not remain in the bankrupt subject to be transferred on a future contingency: and if it did pass to the assignees, it could not be divested out of them in whole or in part by the happening of events subsequent to the act of bankruptcy, which might make them hold the whole, or some specific part as trustees merely; for there is no provision in the statute which takes a right out of the assignees, that has once been vested in them." [91] It should be understood, however, that such terms bore a different meaning at that time. According to current acceptation, terms such as "the most remote possibility of interest", or anything from which a benefit to creditors "might result", might be thought to suggest the mere possibility that the bankrupt may have or acquire a beneficial interest in the property. But, consistently with the historical usage outlined above, they are properly to be understood as describing a contingent beneficial interest which is extant and valid; and as recognising that such an interest is capable of being immediately realised for the benefit of a bankrupt's creditors, even if it is likely to vest after the period of bankruptcy[68]. Accordingly, where the bankrupt has such a contingent interest - or, a fortiori, a vested beneficial interest - in property, the property itself will pass in bankruptcy, subject to the equities in favour of third parties. By contrast, where the bankrupt has but a mere expectancy, or a "possibility of becoming entitled in the future to a proprietary right"[69], no property can pass unless and until it is acquired by or devolves upon the bankrupt during the period of bankruptcy, as indeed this Court held in Caraher v Lloyd. As the Court of Exchequer in effect held in Parnham v Hurst, nothing passes where there is merely the forensic possibility of a beneficial interest in the bankrupt being established.
Mr Boensch also relied on a decision of Parker J who refused leave to Mr Boensch's trustee in bankruptcy to discontinue proceedings: Bailey v Boensch [2020] NSWSC 1391. At [39]-[44] Parker J stated: [39] The Trustees' motion sought leave to discontinue on the basis that they would pay Mr Boensch's costs of the proceedings. This was a shift in favour of Mr Boensch from the proposal in Ms Naidenov's letter of 3 September. [40] Counsel for the Trustees drew attention to the evidence from Mr Bailey about the practical difficulties facing the Trustees. Counsel submitted that the Trustees had no real alternative but to discontinue. Counsel relied on case law authority which emphasises the importance of trustees not incurring legal costs unnecessarily: see for example Kyriackou v Shield Mercantile Pty Ltd (No 2) [2004] FCA 1338. [41] But although the Trustees had no current intention of continuing the claim against Mr Boensch in these proceedings, they wished to be able to reinstate the claim should the Federal Court proceedings be resolved in their favour. Counsel made it clear that the Trustees did not wish to have the proceedings dismissed, because of the possibility that dismissal could work some res judicata which would prevent them from pursuing the claim in future. This question was not fully debated, but I proceeded on the assumption that dismissal could have that effect. [42] Counsel for the Trustees contended that on Mr Boensch's side there was no disadvantage to the discontinuance. Counsel acknowledged that the effect of the proceedings being discontinued would be that the caveat would lapse and the Trustees would be unable to lodge a fresh caveat without leave of the Court: see RPA s 74O. Counsel also noted that the ANZ remains on the title as first mortgagee and there are two other caveators claiming an interest in the property. [43] For his part, Mr Boensch contended that the Trustees clearly had no entitlement to be registered. Mr Boensch quoted from the High Court decision at [91] (footnotes omitted): … where the bankrupt has but a mere expectancy, or a "possibility of becoming entitled in the future to a proprietary right", no property can pass unless and until it is acquired by or devolves upon the bankrupt during the period of bankruptcy. … As the Court of Exchequer in effect held in Parnham v Hurst, nothing passes where there is merely the forensic possibility of a beneficial interest in the bankrupt being established. [44] In Mr Boensch's submission, the present case was simply a case of a "forensic possibility", namely that, upon investigation, the Trustees would be able to establish the existence of unreimbursed expenses giving rise to a right of indemnity. [45] Mr Boensch's point was that the Trustees had to be precise about their claim. On Mr Boensch's argument, the question was what particular expenses, if any, had been incurred by Mr Boensch and not reimbursed to him out of the assets of the Boensch Trust. While the usual investigations into a bankrupt's affairs might possibly touch on this, a separate and specific investigation was required to address it properly. [46] It was not clear to me that the Trustees, in lodging their caveat, had appreciated that their proprietary interest was limited in its quantum. …
I do not accept that a trustee in bankruptcy's entitlement to lodge a caveat over trust property is equivalent to Mr Bingham's situation. Neither do I accept that Mr Bingham's interest is merely contingent or a "forensic possibility".
Here, Mr Boensch accepted that when the mortgage was executed it was open to Mr Bingham to lodge a caveat, even though the amount of legal fees secured was not known. Merely because the quantum of legal fees has not been finally determined does not mean the mortgage agreement does not secure fees yet to become payable. It is a common situation that lawyers and others obtain a mortgage or other security from clients before commencing to provide legal services. The purpose is to ensure security for the payment of fees once the quantum is known and demanded, if not paid. Here, there is no dispute that Mr Bingham provided legal services to Mr Boensch and therefore it cannot be said that no fees at all would be payable. Even if there is an offsetting claim, that does not avoid Mr Bingham's prima facie entitlement to some payment.

Reason 8

While not advanced in writing, Mr Boensch orally submitted that Mr Bingham had not demonstrated that the mortgage agreement was valid, because there was some uncertainty around the witnessing of Mr Bingham's signature.
The witness to Mr Bingham's signature was Mr Michael Birrell, who described himself as a chartered accountant and registered justice of the peace. His unchallenged affidavit evidence was that he witnessed Mr Bingham's signature and wrote his JP number next to his signature. However, the JP number he provided in his affidavit is not the same as that written onto the mortgage. Further, his evidence is a little confusing in terms of where he signed the mortgage and annexure to the mortgage. However, read in context of the whole mortgage document, it is apparent that his evidence was that he signed at each of the places where his signature appears.
While Mr Hazan conceded that there was an anomaly in the JP number provided, I am not prepared to make a finding that Mr Birrell's evidence was either false or incorrect. He was not cross-examined and Mr Boensch did not rely upon any evidence to suggest Mr Birrell did not hold the qualifications, to which he deposed.
Further, Mr Boensch has previously positively asserted that the mortgage is binding between the parties and the Federal Court has so found.
Mr Boensch did not otherwise suggest that the mortgage did not provide Mr Bingham with a caveatable interest.

Conclusion

For the reasons above, the mortgage agreement binds the parties. No sum of money for fees is yet payable by Mr Boensch. Nevertheless, it is appropriate to make declarations resolving the dispute between the parties and extend the Caveat.
I do not accept that Mr Boensch is entitled to any of the relief sought in his cross-claim.
Mr Bingham did not make any submissions as to the particular form of any costs order, nor seek to be heard later about costs. I consider it appropriate that Mr Boensch pay Mr Bingham's costs on the ordinary basis as agreed or assessed.

Orders

For the reasons above the appropriate orders are: 1. Declaration that the unregistered mortgage dated 12 March 2019 between John David Bingham and Franz Boensch secures costs incurred for the provision of legal services provided to Franz Boensch between February and December 2019, the quantum of which is currently unknown. 2. Declaration that John Bingham is entitled to enforce the terms of the mortgage in relation to payment of fees, if they have been finally quantified by the assessment process pursuant to the Legal Profession Uniform Law, after 1 March 2024, and only from the proceeds of sale of the property in folio identifier Lots 37-38 in DP14244, having Land Title Reference Auto Consol 7366-5. 3. The Cross-Claim is dismissed. 4. Franz Boensch to pay John Bingham's costs of the Amended Statement of Claim and Cross-claim on the ordinary basis as agreed or assessed.

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: 09 October 2023

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