First Plaintiff v Second Defendant

"I hereby irrevocably charge all estates or interests in real estate which I, or any company in relation to which I have authority to exercise the power to charge real estate, now have or may hereafter acquire with payment of all moneys that may be or become due to you under this costs agreement" (the "charging clause").

4 Mr Brott acted as the solicitor for Mrs Shtrambrandt in the Family Court proceedings for a number of years. Earlier this year Mrs Shtrambrandt appointed another solicitor to act for her. A settlement of the longstanding Family Court proceedings followed soon afterwards. As a result, a binding financial agreement was signed by Mr and Mrs Shtrambrandt under the provisions of ss. 90D and 90G of the Family Law Act 1975 (Cth). Consent orders were then made terminating the Family Court proceedings.

5 Mr Brott says that he is owed a substantial amount of costs by Mrs Shtrambrandt arising out of his retainer in the Family Court proceedings. He estimates these costs at $480,000. At no time has Mr Brott given any particulars of how this amount is calculated or arrived at, except to say that it includes $80,000 in respect of counsels' fees, and $400,000 in respect of solicitor's fees. This is notwithstanding that the lack of any particularity has been referred to by those representing the owner of the property in question on a number of occasions. Further, I raised the lack of particularity of Mr Brott's claim, and the possible relevance of that lack of particularity for the purposes of the present application, at an earlier hearing in respect of proceedings commenced by Mr Brott.

6 In late April 2005, Mr Brott lodged caveats over a number of titles pursuant to the charging clause. First, a caveat was lodged over a property owned by Mr and Mrs Shtrambrandt, as joint proprietors, at Curraweena Road, Caulfield South. The binding financial agreement provides for this property to be transferred to Mr Shtrambrandt as sole proprietor. But the caveat prevents this. It was accepted by the parties that this property is worth about $600,000.

7 Second, a caveat was lodged over a property and accessory title owned by Mr and Mrs Shtrambrandt, as joint proprietors, at Brighton Road, Elwood. The binding financial agreement contains acknowledgements by Mr and Mrs Shtrambrandt that this property is owned by them on trust for their son, Loryan, and provides for the transfer to him of the property. Again, a caveat lodged by Mr Brott prevents this transfer occurring.

8 Third, caveats were lodged by Mr Brott over three titles in respect of property owned by Fenedisto Pty Ltd ("Fenedisto") in Cole Street, Brighton. These three titles are the result of a two lot plan of subdivision undertaken by Fenedisto. There are two principal titles and one accessory title to common property for the benefit of both principal titles. I was informed that this accessory title relates to a lift from an underground carpark.

9 By originating motion dated 26 July 2005, Mr Brott commenced proceeding No. 7374 of 2005 seeking declarations that he has the estate or interests claimed by him in the land the subject of each of the caveats. (I will refer to this as the "Brott proceeding".) When the trial of the Brott proceeding was called on for hearing before me on 11 November 2005, it was apparent that there were many issues which were not identified with reasonable particularity in the plethora of affidavits which had been filed. Further, a necessary party had not been joined and it appeared to me that discovery was necessary. Accordingly, I directed that the Brott proceeding continue as if commenced by writ, and made directions for its hearing and determination. A statement of claim is due to be filed on 2 December 2005.

10 By originating motion dated 16 November 2005, Fenedisto and Mr Shtrambrandt seek removal of some of the caveats lodged by Mr Brott. (I will refer to this as the "Fenedisto proceeding".) It appears that, by error, no claim has been made for the removal of the caveat over the accessory title to the Cole Street properties. I will allow an amendment to cure this error. No relief is sought in respect of the Elwood property, presumably because this is not beneficially owned by Mr Shtrambrandt. This caveat will be considered in the Brott proceeding, where I have ordered that the Shtrambrandts' son, Loryan, be joined as a defendant.

11 A summons on the originating motion in the Fenedisto proceeding is before me seeking removal, forthwith, of caveats over the Cole Street property and the Curraweena Street property.

12 Although there was evidence of a sale of the Curraweena Street property, I was informed at the commencement of argument that this sale will not be proceeding, and that no application to remove the caveat over that property is being pursued at this stage.

13 By consent, evidence in both proceedings was treated as being in evidence before me on the hearing of the summons on originating motion in the Fenedisto proceeding.

14 As I have said, the Cole Street properties are owned by Fenedisto. They are heavily mortgaged. Fenedisto owns the properties as trustee of a unit trust, which appears to have been established in 1997 to purchase the Cole Street properties. The evidence indicates that the purchase of the Cole Street properties by Fenedisto was financed with moneys borrowed by Mr and Mrs Shtrambrandt, jointly, from Colonial State Bank. This loan was secured by mortgages from Fenedisto over the Cole Street property, and Mr and Mrs Shtrambrandt over the Curraweena Road property. The evidence does not establish whether Fenedisto guaranteed the obligations of Mr and Mrs Shtrambrandt to repay the loan, but I infer that it probably did.

15 It appears that the original loan for the Cole Street property has been repaid and replaced with finance directly to Fenedisto, secured by a mortgage of approximately $2,100,000. This mortgage has been given to the National Australia Bank. I infer that the funds owing to the National Australia Bank have been used to develop the Cole Street property, as it appears that two substantial homes have been built on the two principal lots in the plan of subdivision.

16 An auction of lot 1 in the plan of subdivision of the Cole Street property is due to take place on 3 December 2005. The only things standing in the way of a sale being made and settled are the caveat over the accessory title and a "Notice of Action" noted by the Registrar of Titles on the titles to the Cole Street properties. The caveats over the two main titles have been removed pursuant to s. 89A of the Transfer of Land Act 1958.

17 The Registrar's Notice of Action relates to the Brott proceeding. According to correspondence from the Registrar of Titles, it is "an internal dealing lodged by the Registrar, when served or otherwise on notice of proceedings issued by the Court to restrain dealings on the affected folios and, in part, enables the Registrar to avoid inadvertently recording any dealing that may be restrained by an order of the Court." As this notice is endorsed on the title, it has the capacity to make prospective purchasers shy away from committing to purchase a property affected by such a notice. This may be so notwithstanding the removal of caveats lodged in respect of the claims made in the action which is the subject of the notation.

18 It is common ground that the balance of convenience favours the removal of the remaining caveat and the Registrar's "Notice of Action" and any sale made be settled so as to enable the proposed auction to proceed. The issue is whether the removal should be on terms requiring all or some part of the net sale proceeds to be held in trust, pending the hearing and determination of the Brott proceeding. The Registrar of Titles has informed the Court that she will abide the decision of the Court.

19 On behalf of Fenedisto, it was submitted that there was no arguable case to maintain the caveat over the accessory title to the Cole Street properties. Accordingly, the caveat should be removed without any condition as to the payment of any part of the net sale proceeds into trust, pending the hearing and determination of the claims made in the Brott proceeding.

20 On behalf of Mr Brott, it was submitted that there was an arguable case to maintain the remaining caveat. Two grounds were relied upon. First, it was submitted that, at the time of the charge, Mrs Shtrambrandt was a unit holder in the Fenedisto Unit Trust. As a unit holder, she had a beneficial interest in the trust fund sufficient to enable her to lodge a caveat on the Cole Street titles. Reliance was placed on Costa & Duppe Properties Pty Ltd v Duppe & Ors[1]. It was submitted that if Mrs Shtrambrandt had an interest sufficient to support a caveat by her personally, then she had an interest which was capable of being charged to Mr Brott.

21 Second, it was submitted that the Cole Street properties were purchased by Fenedisto with moneys borrowed solely by Mr and Mrs Shtrambrandt. Accordingly, Fenedisto acquired the Cole Street properties on a resulting trust for Mr and Mrs Shtrambrandt, either jointly or as tenants in common in equal shares.

22 I will deal first with the claim based on Mrs Shtrambrandt's unit holding at the time of the charge. In my view, this does not raise an arguable case for the maintenance of the caveat. This is because, pursuant to the binding financial agreement, Mrs Shtrambrandt has in fact transferred all of her unit holding in the Fenedisto Unit Trust to Mr Shtrambrandt, or at his direction. There was no restriction on her doing so, because Mr Brott took no charge over her unit holding. Accordingly, any possible basis for maintaining the caveat ceased when Mrs Shtrambrandt ceased to be a unit holder.

23 Further, there is no evidence that Mrs Shtrambrandt had, at any time, any authority to exercise the power of Fenedisto to charge real estate owned by Fenedisto. Nor is there any evidence to support an inference to this effect. In the first place, the evidence discloses that Mrs Shtrambrandt was never a shareholder, director or secretary of Fenedisto. Secondly, the only interest of Mrs Shtrambrandt in Fenedisto was as a unit holder. She has never been the sole unit holder. Indeed, at the time of the charge, she held only 2,000 out of 773,000 units on issue.

24 As a unit holder, Mrs Shtrambrandt was subject to the terms of the Unit Trust Deed. A review of the trust deed demonstrates that Mrs Shtrambrandt did not have the authority, as a unit holder, to charge the property of the trust. I refer in particular to cll. 6, 8, 18, 33, 35(c) and 35(d) of the trust deed.

25 I will next deal with the claim based on resulting trust. Even if it be assumed that Mr and Mrs Shtrambrandt provided the whole of the purchase moneys for the Cole Street property, and the probable guarantee of Fenedisto of the loan funds is put to one side, it is still necessary to look at the intention of the parties in determining whether a resulting trust was created, as contended on behalf of Mr Brott.

26 In Calverley v Green[2], Gibbs CJ stated:

"Where a person purchases property in the name of another, or in the name of himself and another jointly, the question whether the other person, who provided none of the purchase money, acquires a beneficial interest in the property depends on the intention of the purchaser. However, in such a case, unless there is such a relationship between the purchaser and the other person as gives rise to a presumption of advancement, that is, a presumption that the purchaser intended to give the other a beneficial interest, it is presumed that the purchaser did not intend the other person to take beneficially. In the absence of evidence to rebut that presumption, there arises a resulting trust in favour of the purchaser."

27 In this case, it is likely that the parties, who were then husband and wife, intended to benefit the Fenedisto Unit Trust. As I have said, the trust was formed to purchase the Cole Street land. The trust records show that, within a week or so of its formation, one half of the units were transferred by Mr Shtrambrandt to Mrs Shtrambrandt. As the evidence stands, it establishes a clear contrary intention to rebut the presumption referred to. Further, later on, units were issued to the trustee of the Family Superannuation Fund, of which both Mr and Mrs Shtrambrandt were then beneficiaries. This evidence tends to confirm the contrary intention to which I have referred.

28 However, the evidence in the matter is far from complete, and such evidence as does exist has not been tested. There has been no discovery. In my view, unless I can say that the evidence is incapable of establishing a resulting trust, I should exercise my discretion to order that part of the net sale proceeds of the sale of the Cole Street property which is proposed be held in trust, pending the hearing and determination of the Brott proceeding or further order. That amount should not exceed one half of the net sale proceeds.

29 As to the amount which should be held in trust, it was submitted on behalf of Mr Shtrambrandt and Fenedisto, that I should take account of the fact that Mr Brott's caveat remains over the Curraweena Road property, which property is worth approximately $600,000. Accordingly, Mr Brott has security over one half of the value of that property in respect of his claim for costs. However, as I have said, under the binding financial agreements, Mrs Shtrambrandt has agreed to transfer her joint interest in that property to Mr Shtrambrandt. Further, in the Brott proceeding, it has been submitted on behalf of Mr Shtrambrandt that Mr Brott's caveat over the Curraweena Road property is ineffective because Mr and Mrs Shtrambrandt hold the title jointly, and did so at the time the charge was granted. Reliance is placed in that proceeding by Mr Shtrambrandt on Lyons v Lyons[3]. In the face of this argument by Mr Shtrambrandt in the Brott proceeding, it is not, in my view, appropriate that I take the possible interest of Mrs Shtrambrandt in the Curraweena Road property into account in determining the amount of any net proceeds of the proposed Cole Street sale which should remain in trust pending the outcome of the Brott proceeding.

30 As to the amount of Mr Brott's claim, which may be secured by the charge, the evidence is most unsatisfactory. The evidence discloses a mere assertion by Mr Brott that he believes that a fair estimate of the total costs, less disbursements, is $400,000, and that there are counsel's fees of approximately $80,000, a total of $480,000. Despite numerous invitations to particularise this claim, including an invitation from me a week before the hearing, Mr Brott filed no evidence to support his claim as to the quantum of his costs.[4] This gives rise to a suspicion on my part that the costs estimate is, notwithstanding that which has been deposed to by Mr Brott, unreliable.

31 Furthermore, notwithstanding the fact that his retainer was determined many months ago, Mr Brott has not even served a lump sum bill on Mrs Shtrambrandt so that she may, as I infer she will, seek an itemised costs account under Part 19.6 of the Family Law Rules 2004. If she makes such a request for an itemised account, it must be provided within 28 days. On the hearing of the Brott proceeding on 11 November 2005, I was informed that steps had been taken, or were underway, to prepare an account of Mr Brott's costs.

32 This is a most unsatisfactory situation. In my view, it is open to infer that Mr Brott has deliberately refrained from serving a bill of costs on Mrs Shtrambrandt so as to provide flexibility in the relief which he seeks from this Court, in an attempt to preserve the status quo until the hearing and determination of the Brott proceeding. I accordingly intend to impose terms as to the quantification of Mr Brott's claim, and as to the resolution of any dispute between him and Mrs Shtrambrandt as to the quantum of that claim.

33 Upon the first defendant, by his counsel, undertaking to prosecute his claim in proceeding No. 7374 of 2005 with all reasonable expedition, I will order as follows[5]:

(1) The plaintiffs have leave to amend the originating motion in the proceeding by including in the relief sought the following paragraph 5A:

"5A. An order in favour of the First Plaintiff that caveat number AD584903W recorded on Certificate of Title Volume 10864, Folio 669 be removed."

(2) Pursuant to s. 90(3) of the Transfer of Land Act 1958 (Vic) the second defendant, the Registrar of Titles, remove caveat AD584903W from the land comprised in Certificate of Title Volume 10864, Folio 669.

(2A) Pursuant to s. 103(1) of the Transfer of Land Act 1958 (Vic), the second defendant, the Registrar of Titles, remove notice of action AD776650F from the land comprised in Certificate of Title Volume 10864, Folios 667, 668 and 669.

(3) The first plaintiff pay into the trust account of its solicitors Hogg and Reid, from the net proceeds of any sale of the land comprised in any of Certificates of Title Volume 10864, Folios 667, 668 and 669, the amount (if any) of the itemised costs account provided by the first defendant to the third defendant pursuant to paragraph 4 hereof and which is the subject of an affidavit as provided for in paragraph 5 hereof, provided that such amount shall not exceed one half of the net proceeds of any such sale. If the net proceeds remain held subject to this order for more than 7 days Hogg and Reid are authorized to invest them with an Australian trading bank on an at call basis to derive interest applicable to such form of investment and the net proceeds so invested and the interest accrued thereon will remain subject to these orders.

(4) By 5.00 pm on Thursday 8 December 2005, the first defendant serve on the third defendant, and provide a copy to the plaintiffs, an itemised costs account within the meaning of Part 19.4 of the Family Law Rules 2004 (Cth) ("the itemised costs account") in respect of the costs claimed by the first defendant from the third defendant pursuant to the costs agreement dated 7 December 2000 which is Exhibit IAB-3 to the affidavit of the first defendant sworn 21 July 2005 in proceeding number 7374 of 2005 in this Court ("the costs agreement").

(5) By 5.00 pm on Thursday 8 December 2005, the first defendant file and serve on the third defendant and on the plaintiffs an affidavit sworn by a professional costs consultant of at least ten years experience and who is independent of the first defendant, such affidavit to verify that, in the opinion of the costs consultant, the itemised costs account complies with the provisions of Part 19.4 of the Family Law Rules 2004 (Cth) and, in particular, Rules 19.12 and 19.22.

(6) In the event that the first defendant does not comply with either paragraph 4 or paragraph 5 of these orders, paragraph 3 of these orders shall have no effect.

(7) In the event that the first defendant does comply with paragraphs 4 and 5 of these orders, any amount paid into the trust account of Hogg and Reid pursuant to paragraph 3 hereof and any interest thereon remain subject to paragraph 3 hereof until the hearing and determination of proceeding no. 7374 of 2005 or until further order.

(8) If the third defendant serves a Form 15 Notice under the Family Law Rules 2004 (Cth) in respect of the itemised costs account, the first defendant shall take all steps necessary to ensure that any dispute as to the quantum of that account is resolved as soon as possible, including but not limited to:

(a) filing the itemised costs account and Form 15 Notice in accordance with Rule 19.24(3) of the Family Law Rules 2004 (Cth);

(b) seeking that a Registrar of the Family Court of Australia fix the earliest possible date for an assessment hearing in respect of the itemised costs account under Rule 19.32 of the Family Law Rules 2004 (Cth).

(9) The parties have liberty to apply on notice to other affected parties.

(10) The costs of this application are reserved for determination by the Court in proceeding number 7374 of 2005.

[1] [1986] VicRp 9; [1986] VR 90.

[2] [1984] HCA 81; (1984) 155 CLR 242, at 246; see also per Mason and Brennan JJ at 255, and per Deane J at 266.

[3] [1967] VR 169.

[4] I note that, whilst I was delivering this judgment orally, Mr Sandbach of counsel for Mr Brott interrupted me and sought to refer to an affidavit sworn by Mr Brott on that day as to the quantum of his costs. That affidavit had not been filed and I did not entertain it. The hearing had concluded on the afternoon of Friday 18 November 2005, and it was only because of the convenience of counsel that I did not deliver judgment on the morning of Monday 21 November 2005. In any event, in discussion after I had completed delivering judgment, the issue was raised and Mr Sandbach did not seek leave to file the affidavit apparently sworn by Mr Brott on 23 November 2005.

[5] The orders set out below are the orders in fact made after discussion with counsel for the parties.