Jones v Baker

Supreme Court of NSW|2002-02-08|Before: Young CJ, Young J

CITATION : Jones v Baker [2002] NSWSC 89 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 1226/02 HEARING DATE(S) : 8 February 2002 [Then written submissions] JUDGMENT DATE : 12 February 2002

PARTIES : Warwick Pryce Jones (P) Victor William Baker (D) JUDGMENT OF : Young CJ in Eq

COUNSEL : T Davie (P) G Blake (D) SOLICITORS : Jones King Lawyers (P) Christopher M Edwards (D) CATCHWORDS : CONTRACTS [75]- Part performance- Ambit of doctrine- Applies beyond specific performance suits. PROFESSIONS [95]- Solicitor- Duty to client when taking security for own costs. Conveyancing Act 1919, s 23C Legal Profession Act 1987 LEGISLATION CITED : Real Property Act 1900, ss 74F(5) 74K, 74L Real Property Regulation 1998 Adamson v Hayes (1973) 130 CLR 276 ANZ Banking Group Ltd v Widin (1990) 26 FCR 21 Bush v Hanlon (Young J, 4 August 1998) Carr v McDonald's Australia Ltd (1994) 63 FCR 358 Connell v Bond Corp Pty Ltd (1992) 8 WAR 352 Drulroad Pty Ltd v Gibson (1992) NSW Conv R 55-637 Dykstra v Dykstra (1991) 22 NSWLR 556 Elibank-Murray v Dunne (1982) NSW Conv R 55-048 Gasiunas v Meinhold (1964) 6 FLR 182 Gummon v Barter (1899) 1 WALR 58 Hammon v O'Brien (1990) 5 BPR 11,163 Johnson v Fesenmeyer (1858) 25 Beav 88; 53 ER 569 CASES CITED : Kymbo Pty Ltd v Paxton Management Pty Ltd [2001] NSWSC 792 Langdon v Pearce (1899) 20 LR (NSW) (L) 329 Lyddon v Moss (1859 ) 4 De G & J 104; 45 ER 41 Mason v Clarke [1955] AC 778 McConville v Australian Telecommunications Commission (1991) NSW Conv R 55-602 O'Rourke v Hoeven [1974] 1 NSWLR 622 Shepherd v Houston [1927] SASR 144 Tolhurst v Crickett Pty Ltd [2001] NSWSC 1203 Troncone v Aliperti (1994) 6 BPR 13,291 Trowmet Pty Ltd v Lew (1992) V Conv R 54-427 Unimin Pty Ltd v Commonwealth (1977) 45 LGRA 338 Vandyke v Vandyke (1976) 12 ALR 621 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 DECISION : Summons dismissed.

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1226 of 2002 YOUNG CJ in EQ

Judgment 1 His Honour: The plaintiff seeks to extend a caveat which he placed upon the defendant's title to property at Kurrajong. He also seeks a declaration that he has an equitable interest in that property by virtue of an oral agreement allegedly made about 5 October 2001. 2 I heard the oral argument as Duty Judge last Friday. Plaintiff's counsel wished to expand his submissions. Accordingly, I set the matter down for judgment today and received further written submissions yesterday. The matter has some urgency as the defendant proposes to complete the sale of the relevant property this afternoon. 3 The plaintiff is a solicitor. He is a member of at least three firms of solicitors each trading under the name "Jones King Lawyers" in Brisbane, Sydney and Melbourne. Although the firms use the one letterhead, the evidence is that they consist of the plaintiff plus different other partners with respect to each firm. 4 The defendant is associated with a company, Vic Baker Power Steering Pty Ltd. That company was sued in the District Court. The plaintiff's firm, semble his Sydney firm, was retained to defend that action. They did so unsuccessfully. 5 On 17 November 2000, the firm sent a document headed "Engagement Agreement" addressed: "Mr Victor Baker Vic Baker Power Steering Pty Ltd 1-106 Newton Road WETHERILL PARK NSW 2164" 6 The document requested "you" to indicate that there was agreement with the terms of engagement by signing and returning one copy of the document. The document was executed as follows: "ACCEPTED this 20th November 2000, Client signature: V W Baker, Full name: Victor William Baker, Witness K Thomesen" and the common seal of Vic Baker Power Steering Pty Ltd was affixed. 7 The plaintiff says that on or about 5 October 2001, he had a telephone conversation with the defendant in which he complained to the defendant that the District Court action was in the list for hearing the following week yet he had not been put in funds. The plaintiff says that the defendant informed him that he would have enough to satisfy the solicitor from the sale of his Kurrajong property. The solicitor asked for a mortgage. The defendant was unwilling to supply it. 8 The conversation then proceeded, "Well you could consent to Jones King Lawyers placing a caveat over the property, that will secure our position so that the monies will be paid to us upon settlement of the property." The defendant said, "Agreed, I don't have a problem with that." The plaintiff then obtained details of the property and said "OK then Vic, I will let Karen know that we have reached an arrangement with respect to payment of our fees and outlays so that she can attend the hearing tomorrow and continue to instruct the barrister." The defendant replied, "Thanks mate." 9 The "Karen" referred to was Mrs Karen McLean, a solicitor then employed by the Sydney firm who has since left its employ. She did not give evidence before me. 10 There was in evidence a file note said to be contemporaneous with this conversation which comes close to what the plaintiff swore to in his affidavit. 11 The defendant filed an affidavit which was read. He was allegedly driving from Brisbane at the date of the hearing before me, but did not make it to Sydney in time to be cross-examined. In his affidavit he said that he had a conversation with Mrs McLean as to whether it would be satisfactory to pay the legal fees from the proceeds of the sale of his property. Mrs McLean said that she would speak to the plaintiff. The plaintiff rang back and there was a conversation. 12 The defendant says that he offered to pay from the proceeds of sale of his property, the plaintiff asked for a mortgage, but the defendant replied that that would be a waste of time as the property would have been sold by the time a mortgage was registered. Mr Baker then says that the plaintiff informed him that he had already signed an authority giving the firm the right to register a caveat when he signed a deed of arrangement. Mr Baker says he replied, "Well if I have signed that document, I guess you have the right to put the Caveat on the property." The plaintiff said, "OK then Vic, I will let Karen know that we have agreed and instruct her to proceed with the matter." 13 Mr Baker says that on 29 November, he asked Rebecca Fahey, a solicitor employed by the plaintiff who was Mrs McLean's successor for a copy of the document he signed giving her firm the right to lodge a caveat. Mrs Fahey said that it was dated in March 2001, but could not locate it in her file. This was in the presence of Mr Tannous, another former employee of the plaintiff who used to act for the defendant. Mr Tannous said that he could not remember any such document. Ms Fahey then said that it may have been a verbal agreement. 14 Ms Fahey did give evidence. She produced a contemporaneous file note of another conversation with Mr Baker in which she informed him that the caveat was placed on his title as a result of a verbal conversation between Jones and Baker. She was not cross-examined.

The caveat 8129306 was lodged on 19 November 2001. It is a curious document. The caveator is named as "Warwick Pryce Jones". The caveat is verified by statutory declaration of Ms Fahey. Schedule 1 is completed as follows [I have put the answers which are handwritten on the caveat in italics]:

"Nature of the estate or interest in the land …" - "Equitable Interest" "By virtue of the instrument referred to below - Nature of Instrument" - "Verbal" "Date" - "9 March, 2001" "Parties" - "Victor William Baker" "By virtue of the facts stated below" - By agreement to secure the creditor's interest in the debtor's assets." 15 The caveat purported to prohibit the recording of any dealing affecting the estate claimed by the caveator. 16 Ms Fahey says that the date was a mistake. She has not, however, explained how a solicitor could make such a mistake to which she certified to the Registrar-General by statutory declaration. 17 Ms Fahey's "mistake" gives some credence to the defendant's story that he was assured that he had already agreed in writing to the lodgement of a caveat. It was unfortunate that he was not available for cross-examination. The absence of evidence from Mrs McLean and Mr Tannous also does not make my task any easier. 18 Doing the best I can, I consider that it is more likely than not that the vital conversation took place in accordance with the file note of 5 October 2001. 19 On this basis, has the plaintiff established his case? 20 Under s 74K of the Real Property Act 1900 the Court may extend a caveat if it considers that the caveat may have substance. An order made under that section enures until the real question between the parties can be properly tried. If an extension of caveat were the only order sought, it may be that it ought to be made. However, the amended summons seeks a final determination of the real question between the parties, namely whether the plaintiff is entitled to an equitable interest in the defendant's land at Kurrajong. I must thus determine this question on a final basis. 21 One consequence of this is that many of the arguments as to the form or validity of the caveat go by the bye. However, I should deal with most of them in some detail as they were a prime focus of the argument before me. 22 Mr Blake of counsel for the defendant says that the caveat is so defective in form that it cannot be cured. Further, he submits that there are eight good reasons why there is no caveatable interest in the land held by the plaintiff and why the plaintiff is not entitled to the declaration he seeks. 23 I will deal with the matter of form of the caveat and then consider Mr Blake's eight reasons which are:

(1) Section 23C of the Conveyancing Act 1919 operates to deny the valid creation of any equitable interest in the plaintiff;

(2) No evidence that Baker was the client as opposed to his company;

(3) No evidence that the plaintiff was the person entitled to the interest;

(4) The plaintiff's invoices were not in accordance with the Legal Profession Act 1987;

(5) There is no charge on land when the charge operates only on the proceeds of sale;

(6) There is no evidence that Baker understood what permitting a caveat to be placed over his land entailed;

(7) Troncone v Aliperti (1994) 6 BPR 13,291 is distinguishable on the facts of the present case;

(8) Troncone v Aliperti was wrongly decided. 24 Mr Blake submitted that s 74F(5) of the Real Property Act 1900 and the Real Property Regulation 1998 make it clear what a caveat must contain and the present document fell woefully short of the standard. 25 There was some debate as to whether the name of the caveator had been stated. The facts are that, as at the date of the engagement, Mr Jones was the sole member of the Sydney firm, Jones king Lawyers. However, as at the date the work was performed by that firm, there was at least one other partner. As the caveat was to secure the cost of the work done by the firm, the caveators should have been named as all the partners of the current firm. 26 Mr T Davie, for the plaintiff, argued that Mr Jones was the caveator and that decisions such as that of the Full Supreme Court of Western Australia in Connell v Bond Corp Pty Ltd (1992) 8 WAR 352, 373 which I followed in Bush v Hanlon (4 August 1998, unreported) clearly show that a partner has an interest in each and every asset of the partnership. Thus, if a two partner firm is owed a debt, each partner has an interest in that debt and, if the firm has an equitable interest in property, each partner has an equitable interest in that property. 27 The type and quantum of the interest held by each partner has not, so far as I am aware, been decided. I will briefly return to this matter further under the third of Mr Blake's eight reasons. Mr Davie's argument was that there was no mistake in the name of the caveator and that person was one with a caveatable interest. I must accept that statement subject to the eight reasons. 28 The regulation makes it clear that a caveat claiming an interest in the nature of mortgage or charge must contain a statement of the amount if readily ascertainable charged on the land or, if this is not ascertainable, the nature of the charge secured on the land. 29 I have previously (cf Tolhurst v Crickett Pty Ltd [2001] NSWSC 1203) pointed out the general inconvenience if a caveat seeking to protect a mortgage interest does not indicate the amount for which the mortgage or charge extends. I appreciate that in some cases this is not possible as an all monies mortgage may extend to an indefinite amount. However, for duty purposes maximum amounts have to be specified, and I cannot see why ordinary mortgages should not at the very least nominate a figure and note that the amount may be increased in accordance with the mortgage. The regulation is partly drafted with this in mind. 30 The present caveat, not only does not mention a mortgage, it refers to a claim "to secure the creditor's interest in the debtor's assets". Creditor and debtor are not defined. What seems to be claimed is an equitable interest in the whole of Mr Baker's assets. 31 Although s 74L of the Act now commands the Court "to disregard any failure of the caveator to comply strictly" with the requirements of the Act and regulation as to form of a caveat, there is a point after which the departure is so far removed that the Court cannot disregard the non-compliance. 32 When exercising its powers in the light of s 74L, the Court usually gives effect to a caveat if the caveator has a caveatable interest despite even gross defects such as the failure to state the interest being protected or even failure to state the maximum amount secured by the charge. However, when the caveator is a solicitor who should know the rules and when the defects in the caveat may cause great inconvenience to people wishing to consider granting finance to the registered proprietor, the Court will be more strict. 33 It is clear that the purpose of s 74L was to overcome the effect of the cases cited and applied in Vandyke v Vandyke (1976) 12 ALR 621 where even small technical defects would operate to make a caveat ineffective. Despite the breadth of its language, s 74L was aimed at curing this mischief. It does not operate to compel the Court to treat as valid caveats which completely disregard the provisions as to form contained in the Act and regulation. 34 Had it been necessary to make a final decision on the matter, I would not have applied s 74L and would have held the caveat invalid as to form. It is, of course, unnecessary to do so in view of the final question to be determined, and, as will appear, because of some of the eight reasons to which I will now turn.

(1) Section 23C of the Conveyancing Act 35 This section by subsection 1(a) provides that no interest in land may be created except by writing duly signed. Subsections 1(b) and (c) amplify this, but it is not necessary to explore that in these reasons. 36 The majority of the High Court in Adamson v Hayes (1973) 130 CLR 276, took the view that s 23C(1)(a) applied to the creation of equitable interests in land as well as to the creation of legal interests. The contrary has not been argued before me. 37 Although Mr Davie initially submitted that the section did not apply to Real Property Act land, he later withdrew that submission and conceded that the section did so apply. 38 It is clear on the plaintiff's evidence which I have accepted and from the form of the caveat itself that there is no writing to support the alleged interest. 39 Mr Davie's sole submission to escape from the operation of the section is the doctrine of part performance. 40 Although the doctrine of part performance had a wider operation [part of which still applies (see Kymbo Pty Ltd v Paxton Management Pty Ltd [2001] NSWSC 792)], basically it only applies to permit a court to grant specific performance where there has been a non-compliance with the Statute of Frauds or its modern equivalent. The Court does so by salving the defendant's conscience by ordering him or her to bring into being a formal contract which complies with the Statute and then order specific performance of it. The Court does not ignore the Statute, but enforces a personal equity against the defendant; see Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 433. 41 Mr Davie says that the doctrine extends beyond the case of specific performance to any case where an equity lies against the defendant's conscience. 42 Mr Davie says that the inference from the evidence is clear. If Mr Baker had not agreed to provide a caveat over his property, Jones King Lawyers would not have continued to act for the company in the District Court proceedings. This circumstance acts against Mr Baker's conscience to make it equitable fraud to permit him to take advantage of s 23C. [Alternatively, Mr Davie relies on estoppel, a matter I will briefly deal with later]. 43 There is clear, though old authority for the proposition that part performance is confined to suits for specific performance; see eg Gummon v Barter (1899) 1 WALR 58, a decision of the Western Australian Full Supreme Court. 44 Meagher Gummow and Lehane, Equity Doctrine and Remedies 3rd ed (Butterworths, Sydney, 1992) at para [2044] say that there is no reason in principle why the doctrine should not apply in injunction cases. 45 The doctrine is, of course, of no relevance in an action at law: O'Rourke v Hoeven [1974] 1 NSWLR 622. 46 Mr Davie initially merely relied on a passage from Lindsay, Caveats Against Dealings in Australia and New Zealand (Federation Press, Sydney, 1995) page 76: "In Australia, the courts have adopted a straightforward attitude: if the Statute of Frauds is raised, the caveat will be removed if it is not reasonably arguable that there is (1) a memorandum in writing; (2) sufficient acts of part performance; or (3) an estoppel against the registered proprietor."

The authority for that proposition is given as (a) Gasiunas v Meinhold (1964) 6 FLR 182, 190 per P E Joske J; (b) Elibank-Murray v Dunne (1982) NSW Conv R 55-048 at 56, 289 per Powell J; (c) Trowmet Pty Ltd v Lew (1992) V Conv R 54-427 at 65,046 per Phillips J; (d) McConville v Australian Telecommunications Commission (1991) NSW Conv R 55-602 at pp 59,411-2 per McLelland J; (e) Drulroad Pty Ltd v Gibson (1992) NSW Conv R 55-637 at 59,643 per Hodgson J which the learned author says are "examples of cases where the court has accepted that acts of part performance or the existence of an estoppel can overcome the absence of a memorandum in writing and support a caveat." 47 At the oral hearing, Mr Davie merely referred me to this passage and left it at that. With respect, that was quite unhelpful. In a case where there is a crucial point involved, as this point clearly is, the Court expects counsel to proceed beyond the textbook and cite and explain the leading cases, the primary source of the proposition of law which must be established. I mention this because I have found more and more that counsel, presumably at high fee, fob the judge off with a set of textbook references and then make the judge do the research work. Counsel are involved to assist the judge to find the truth of fact and law and must not take this second rate short cut. 48 In his written submissions, Mr Davie went a little, but not much, further. He cited (f) ANZ Banking Group Ltd v Widin (1990) 26 FCR 21, 33; 102 ALR 289, 301 and then submitted, "By extension, it is submitted that there is no reason why a party should not be estopped from relying on the section." He then repeated the passage from Lindsay preceding it with the comment "It appears to have been accepted in NSW (and elsewhere) that …". 49 Mr Blake merely submitted that the doctrine of part performance is irrelevant except in a suit for specific performance. He said that specific performance was nowhere sought in the present proceedings. 50 It is necessary to consider the authorities that I have tagged (a) to (f) in my summary of Mr Davie's submissions. 51 Case (a) is no authority as it has been held on more than one occasion to be inconsistent with the mainstream of authority and not to be followed. In any event, it is a straight specific performance type case. 52 Case (b) involved the grant of a profit a prendre. Part performance failed as a defence on the facts. However the discussion is useful as showing that part performance is relevant in such a case. It is probably more helpful to go to the authority on which Powell J based his discussion, the decision of the House of Lords in Mason v Clarke [1955] AC 778, which was also followed in Australia in Unimin Pty Ltd v Commonwealth (1977) 45 LGRA 338. 53 Case (c) was a simple case leading to a suit for specific performance. 54 Case (d) is of no assistance in the present case. 55 Case (e) is a mortgage case. Part performance failed on the facts, but Hodgson J recognised its applicability. 56 Case (f) involved the situation where a bankrupt orally agreed to give the bank a mortgage. The bank advanced the money, but no mortgage was ever signed. The trustee sought a declaration that a registered mortgage was void against the trustee as having been granted within the proscribed six month period. This was successful at first instance (see (1990) 94 CLR 613). The question before the Full Federal Court was the date the mortgage became effective. Although Hill J spent the bulk of his reasoning on the question of what is unequivocal conduct necessary to constitute part performance, it is clear from FCR 34 and 37 (ALR pp 302 and 306) that he considered that part performance applied in that case even though it was not a case for specific performance. He said at 37-8 (306), "It would be unconscionable to permit the bankrupt or the trustee claiming through him to rely upon the legal invalidity of the contract on the faith of which the bankrupt induced the bank to become liable on (his) bills." Wilcox and Foster JJ agreed. 57 The Australian edition of Fisher & Lightwood on Mortgages (Butterworths, Sydney, 1995) para [1.23] accepts that part performance may provide an escape around s 23C relying on Widin's case. 58 Widin's case was followed by Burchett J in Carr v McDonald's Australia Ltd (1994) 63 FCR 358 in that his Honour applied part performance to a case of the grant of a franchise. However, the claim failed on the facts. 59 Another authority in point which was not cited to me is Hammon v O'Brien (1990) 5 BPR 11,163, 11,166, where, in a case involving the interest of a de facto spouse in the proceeds of sale of a property, M H McLelland J recognized that the 23C barrier could be surmounted if "she can establish that circumstances exist which render reliance by the plaintiff on s 23C, or the assertion by the plaintiff of a legal interest free of any equitable interest of the defendant, unconscionable." 60 On the basis that the authorities support the application of the doctrine, was there part performance in the instant case? It is more likely than not that the solicitors would not have done the work on the case after 5 October 2001 if they had not had Baker's agreement to provide a caveat. Furthermore, the evidence allows only of the conclusion (from any version of the vital conversation) that Mr Baker knew that that was the case. Accordingly, apart from the matters which I will consider under other reasons and which bear on the vital question as to whether it would be unconscionable in all the circumstances for Mr Baker to plead s 23C, there is sufficient part performance to surmount the barrier otherwise cast by s 23C. 61 Because of what I have just said, it is unnecessary to deal separately with estoppel. The same basic equity is involved. However, the court has been reluctant to allow free use of principles of estoppel to outflank the fundamental requirements of property law.

(2) Who was the client? 62 I have already set out the material part of the engagement agreement. It is quite equivocal as to who was the client, Mr Baker or his company. There is no doubt that the company was the litigant and that Mr Baker was an officer, if not the controlling officer of the company. The terms of engagement bear the company's seal, though not in the time honoured way of the expression "The Common Seal was hereunto affixed in the presence of …". 63 In my view, on the proper construction of the terms of engagement, the client was the company.

(3) Who was the solicitor? 64 This again is an awkward question brought about solely by the way in which the plaintiff chose to carry on his various businesses. The letterhead was equivocal. Mr Jones resides in Brisbane, Mr Baker also presently resides there, however the litigation was in the NSW District Court, the company had its office in a Sydney suburb and Mrs McLean, who obviously wrote the letter, was the chief resident Sydney solicitor employed by the Sydney firm. 65 The factual matrix shows that the solicitor was the Sydney firm. 66 At the time of the engagement, Mr Jones was the sole proprietor of the Sydney firm. However, before the work under the retainer was completed, he took in at least one partner. 67 A pedant might argue that whenever a firm of solicitors takes in a new partner there must be a fresh set of costs agreement in order to comply with the Statute. Mr Blake did not so argue. It seems to me that when a client signs a cost agreement with "XYZ & Co, Solicitors", he or she agrees with the partners for the time being of that firm. Thus it is not necessary to debate whether Mr Jones only had a partial interest in any equitable property that was created.

(4) Were proper bills of costs rendered? 68 The answer to this question is probably "No". Indeed the invoices rendered by the firm bore at the foot the notation "If this invoice is unpaid within 14 days we reserve the right to withdraw this invoice and forward a Bill in taxable form". This is reminiscent of the old cases in which the solicitor sends a memorandum of fees marked "but, say, 50 guineas" where it has been held that this is not a bill, and the solicitor can send a greater bill, signed and in proper form for a greater amount; see eg Langdon v Pearce (1899) 20 LR (NSW) (L) 329. 69 Another problem for the plaintiff was that the invoices were merely initialled, not signed and that the cost agreement did not set out any hourly rate for Ms Fahey who in fact performed some work. Indeed, the terms of the engagement contained not one word allowing the hourly rate to be split into ten 6-minute units. 70 It may well be that the plaintiff could not sue for his fees because he had not rendered an account which complied with the Legal Profession Act 1987. However, as Mr Davie submitted, this is irrelevant to the existence of an equitable charge. The parties clearly intended that there would be an equitable charge from the time the caveat was lodged even before the work was completed, let alone proper bills rendered.

(5) Did the charge cover the land or the proceeds of sale? 71 Up until now, the plaintiff has won virtually every major point. However, here is where he fails. 72 On any version of the facts, the legal fees were to be paid out of the proceeds of sale. The authorities show that such an agreement does not give an equitable charge over the land, though it may provide some security over future property in equity, namely the proceeds of sale. 73 This has been decided time and time again in respect of caveatable interests. An interest in the proceeds of sale of Blackacre gives no right to lodge a caveat over Blackacre; see eg Shepherd v Houston [1927] SASR 144. The reason for this was explained by M H McLelland J in two recent cases, Hammon v O'Brien (1990) 5 BPR 11,163, 11,166 and Dykstra v Dykstra (1991) 22 NSWLR 556, 559. 74 In the former case, his Honour said of an agreement to sell property and divide the proceeds, " … it does not follow that prior to any such sale the defendant has any proprietary interest in the property itself. Until a sale takes place the rights and obligations created by the deed are in my opinion of a contractual, and not a proprietary, nature." 75 In the latter his Honour said: " … it is difficult to see how a caveat prohibiting the recording in the Register of any dealing … affecting the defendant's claimed interest as equitable mortgagee could be justified, when the fund from which the defendant claimed to be entitled to be paid could not come into existence until the completion of the sale of the property, which would necessarily involve the registration of a transfer to the purchaser, which certainly would affect the pre-existing equitable mortgage." 76 Likewise an agreement to give a mortgage over the proceeds of sale of Blackacre does not give a mortgage in equity over Blackacre. 77 It may be that, in some cases, and this might be one, though the point has not yet been argued and the amended summons makes no claim, that injunctions could be granted to restrain disposition of the proceeds of sale contrary to the agreement. A fortiori would this matter be relevant where the impecuniosity of a party made it clear that damages were not an adequate remedy.

(6) The understanding of Mr Baker 78 Mr Davie submitted this issue did not arise as there was no evidence from Mr Baker suggesting that he did not understand what agreeing to give a caveat over his land entailed. There is some validity in the submission, but it tends to reverse the onus of proof. 79 The plaintiff, a solicitor, is seeking a declaration that he has an equitable charge over the property of his client, or a director of his client. Traditionally, equity has looked at such transactions with great care, because of the influence which a solicitor has over a client. 80 Mr Davie says that, in the instant case, it was the influence of the client over the solicitor which induced the solicitor to do more work on the client's case. There is again an element of truth in this. However, in respect of past work, the solicitor sought to gain security when previously he had none. 81 It is necessary to delve briefly into the history of equity's attitude to solicitors taking security from their clients to secure costs. 82 Prior to 1881, courts scrutinized very carefully any agreement between a solicitor and client whereby the solicitor took mortgage security for his costs. Unless the court was satisfied that the solicitor had fully explained the transaction to the client and that he or she understood it, the security would not be enforced; see eg Lyddon v Moss (1859) 4 De G & J 104; 45 ER 41. The approach was not, however, always uniform; cf Johnson v Fesenmeyer (1858) 25 Beav 88; 53 ER 569, where a solicitor had put pressure on a client shortly before the latter's bankruptcy and obtained a mortgage which survived examination. 83 The English Act 44 & 45 Vic ch 44 s 8 intervened by setting out a procedure whereby such a charge could be ethically granted. The legislation was taken up in s 212 of the Conveyancing Act 1919, later repealed and replaced by what is now s 191 of the Legal Profession Act 1987 which section does not include any safeguards for the client. 84 The law must now be taken to be that it is permissible for the solicitor to take security for costs from a client. However, the old law has not entirely disappeared. Solicitors are still in a position of influence over clients and the courts of equity will take care to see that unconscionable advantage is not taken over clients. 85 The question here is whether the solicitor who asserts an equitable charge over his client's property needs to give some evidence that he or she explained the transaction to the client who appeared to understand it, or, whether the transaction stands unless the client raises the question of probity. 86 In the instant case, Mr Davie says that the client has never said that he did not understand what a caveat was, thus there is no need for evidence. 87 As the matter was not fully argued, and there has been limited time to consider my reasons, it would be wiser not to decide the point. My present inclination is that the solicitor should give some evidence to show that not only did the client agree, but that the transaction was properly explained to him or her.

(7) Is Troncone v Aliperti distinguishable? 88 It is important to realize that Troncone v Aliperti was simply a case involving the question as to whether a caveat had validity. As I said earlier, all that the Court has to do is determine whether the caveat might support a valid claim. The Court does not go further and find that the interest claimed in fact or in law exists. 89 Troncone v Aliperti decides that a promise (at least in writing) to give a caveat may carry with it an implied promise to give an equitable interest in the land, because, unless this were present, the promise would be nugatory. 90 If I were merely deciding a question under s 74K of the Real Property Act, I could simply follow Troncone v Aliperti. However, I need to go further and deal with what interest was granted in order to make or refuse the declaration sought in the amended summons. On that matter Troncone v Aliperti is of little guidance as it does not deal with the question as to the nature of the relevant interest, nor does it deal with the problem as to whether, on examination of all the facts and circumstance, the Court can make a decision, on a final basis, that the parties indeed intended an equitable interest to be created. 91 A further point of distinction is that in Troncone v Aliperti, the person granting the equitable interest was a (former) solicitor. There could be no doubt at all that his legal training would fix him with full knowledge of the nature of a caveat. Such knowledge is not necessarily to be imputed to lay clients, even experienced business men or women.

(8) Is Troncone v Aliperti wrongly decided? 92 Mr Blake only posed this question to preserve appeal rights. The decision, being a decision of the Court of Appeal is binding on me. I must thus answer this question, "No". 93 It follows that, principally because of Reason 5, the plaintiff had no caveatable interest nor any estate in the Kurrajong land. The proceedings thus ought to be dismissed with costs. The exhibits are to be returned. 94 In the event it is unnecessary to consider whether any other persons holding encumbrances over the property should have been made parties to the suit. 95 However, because the Court has a duty to deal with all matters that arise between the parties in the relevant dispute, it is wiser not to pronounce that order until 2 pm. This will give the parties an opportunity to examine these reasons and, if considered appropriate, for the plaintiff to apply to amend the summons further to make some injunctive claim with respect to the proceeds of sale of the property.

[At 2 pm the order for withdrawal of the caveat was made, leave was given to amend the summons further and the proceedings were stood over to 13 February 2002 on the basis that the contract would not be completed until then.

On 13 February counsel advised that as prior encumbrances appeared to account for the whole of the proceeds of sale, there was no point in continuing. The summons was then dismissed with costs]

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Judgment (28 paragraphs)

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Cases Cited (11)