C B Darvall & Darvall (A Firm) v Moloney & Anor [2005] HCATrans 171 (21 March 2005)

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C B Darvall & Darvall (A Firm) v Moloney & Anor [2005] HCATrans 171 (21 March 2005)

Last Updated: 31 March 2005

[2005] HCATrans 171

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Brisbane No B53 of 2004

B e t w e e n -

C B DARVALL & DARVALL (A FIRM)

Applicant

and

JEFFREY MICHAEL MOLONEY (AS COURT APPOINTED LIQUIDATORS AND TRUSTEES OF THE UNREGISTERED MANAGED INVESTMENT SCHEME KNOWN AS THE SENTRY ALLIANCE SCHEME FORMERLY CONDUCTED BY ATLANTIC 3 – FINANCIAL (AUST) PTY LTD (IN LIQUIDATION)

First Respondent

PETER IVAN FELIX GEROFF (AS COURT APPOINTED LIQUIDATORS AND TRUSTEES OF THE UNREGISTERED MANAGED INVESTMENT SCHEME KNOWN AS THE SENTRY ALLIANCE SCHEME FORMERLY CONDUCTED BY ATLANTIC 3 – FINANCIAL (AUST) PTY LTD (IN LIQUIDATION)

Second Respondent

Application for special leave to appeal

McHUGH J
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON MONDAY, 21 MARCH 2005, AT 9.41 AM

Copyright in the High Court of Australia

__________________

MR F.L. HARRISON, QC: May it please your Honours, I appear with my learned friend, MR P.J. DUNNING, for the applicant. (instructed by Marler & Darvall)

MR D.A. SAVAGE, SC: May it please the Court, I appear with my learned friend, MR S.J. LEE, for the respondents. (instructed by Gadens Lawyers)

McHUGH J: Yes, Mr Harrison.

MR HARRISON: If the Court pleases. I propose to call the applicant’s client “A3” and the mortgagor “Sentry” for convenience and I will call the investors who put money into the so-called Sentry Scheme in 1988, the “original investors”, and the people who paid money to A3 purportedly on the security of the Sentry mortgage subsequently in 1999 and later, the “later investors”. Very briefly, the facts are that Dr Acker, a director of A3 - - -

McHUGH J: Well, I think we are well aware of the facts and you should not waste your time going into them unless you really think it is necessary. You would be better off going straight to your issues.

MR HARRISON: Well, your Honour, perhaps the one fact that does not appear clearly is that, in addition to the fact of the original investors investing, the rate of interest payable to A3 under the mortgage was higher than the rate of interest payable to the investors which gave it an interest, and, secondly, that in June 1998 A3 personally made an advance of $95,000 which, again, gave it a legal interest in the security.

Your Honour, the applicant, on receipt of the moneys, settled the purpose of the mortgage as solicitor for A3 and gave the original investors an epitome of mortgage, the terms of which are set out in the judgment of Justice Mullins at page 32, at paragraph [29]. It is submitted that by that epitome of mortgage the applicant acknowledged that it held security documents on the basis that it held a share in the first registered mortgage for each particular investor. It was an individual epitome given to each investor.

It is submitted that those brief facts bring the case squarely within the statement of Justices Rich, Dixon, Evatt and McTiernan in Leeper v Primary Producers Bank of Australia - - -

McHUGH J: Yes, but do you not have to face up to the realities of the situation? There is nothing in the materials to suggest $15,000 has not been paid to the applicant and it is nowhere suggested that the applicant’s costs exceeded $15,000. What is it that you hope to achieve in pursuing this matter?

MR HARRISON: Your Honour, what we hope to achieve is payment of our costs of other work done for A3, which Justice Mullins records as having been done at page 34, paragraph [37], line 9:

The appellant performed legal work for A3 in connection with the Sentry scheme and the other managed investment schemes conducted by A3 and for A3 in its own capacity. The appellant asserted that it was entitled to possession of certificates of title to the Sentry land as against the respondents to secure fees greater than the sum of $800,000 which the appellant claims to be due from A3 to it for work done for A3, other than in respect of the Sentry scheme.

Now, could I, your Honour, place a limitation on what we are seeking in this Court. In the court below, in the ground of appeal or ground of appeal 4, we contended that we were entitled to priority over both the original investors and the later investors. We only contend that we are entitled to priority over the later investors, and the basis for that is the doing of the legal work referred to in the judgment of Justice Mullins and the fact that, as was found, the investments of the further investors were made without the knowledge of my client.

So we say that the position of my client is that it obtained its lien over or subject to satisfying its obligations to the original investors without any knowledge of the subsequent investors. Their interest at most was equitable and could not prevail over our client’s lien. That is the gist of my client’s - - -

GUMMOW J: It is said against you that what we would be involved in is construing particular documents. There is no dispute about fundamental principles, so where is the special leave point?

MR HARRISON: Well, your Honour, what the Court of Appeal has done is convert a principle that where documents are obtained by a solicitor or by some other person who obtains the lien for a sole purpose, then that excludes the lien, to a situation where, if it is obtained for any purpose, it excludes the lien. Now, it is not possible to say that the documents came into the possession of my client for no purpose other than to look after the interests of the original investors, because it is found that they came into my client’s possession acting as solicitors in the conveyance. So there is no disputed finding of fact.

It is the characterisation of the subsequent statement by my client, “We hold an interest in the security for you, the particular original investor”, as obtaining the documents for a sole purpose. This, with respect, will lead to great confusion, because in every case now in which a document is obtained by a solicitor or anything is obtained by a solicitor for a particular purpose, it will be open to people to argue on the strength of this decision that that entirely excludes the solicitor’s lien.

McHUGH J: The decision turns on its facts. The Bar these days does not seem to be able to distinguish between decisions on questions of fact and decisions on questions of law. It is probably the product of the fact that so much rubbish is reported these days. Every decision is reported, whether it be law or fact. This is just a fact case. There is no special leave point in it, Mr Harrison, as Justice Gummow pointed out to you.

MR HARRISON: Your Honour, with respect, I would argue to the contrary, because if one were - - -

McHUGH J: Well, you formulate a general proposition of law that can be deduced from this judgment which is of general application.

MR HARRISON: Your Honour, the general proposition that can be deduced from this judgment is that where a solicitor takes a document for any specific purpose, the solicitor’s lien is excluded.

McHUGH J: Yes.

MR HARRISON: That is the false proposition that is established by the court. One could not have, despite the mass of surrounding facts, a simpler case of a document coming into the hands of a solicitor, or in the course of his acting as a solicitor, in which the solicitor acknowledges that he holds the documents for a particular purpose and the court has held that mere
acknowledgement for a particular purpose is sufficient to exclude the lien, by misreading cases such as Leeper, by misreading Brandao v Barnett, and, indeed, all the cases in relation to the exclusion of a lien when a person gives a specific undertaking to hold a document for a sole purpose. If it stays uncorrected, it will lead to submission in case after case that the existence of any other, any specific purpose, excludes the lien.

McHUGH J: Yes.

MR HARRISON: Those are my submissions, your Honour.

McHUGH J: Yes, we need not hear you, Mr Savage.

On the facts of this case, the Court is of the view that the judgment of the Court of Appeal was correct. The application will be dismissed with costs.

AT 9.52 AM THE MATTER WAS CONCLUDED