Moloney v Marler[2004] QCA 310

SUPREME COURT OF QUEENSLAND

1. de JERSEY CJ:  I have had the advantage of reading the respective reasons for judgment of Williams JA and Mullins J.  I agree with the orders proposed by Mullins J, and with the reasons of their Honours.

2. WILLIAMS JA:  Although I agree with all that has been said by Mullins J in her reasons for judgment it is desirable that I state briefly my own reasons for concluding that the appeal should be dismissed.

3. I will refer to those persons who in about May 1998 made funds available for investment in the Sentry scheme as “the original investors”.

4. Having decided to invest in the Sentry scheme the original investors followed the procedure of depositing their investment monies in the trust account of the appellant’s solicitors in accordance with terms set out in a letter of instructions signed by each of those original investors. On receipt of the money the appellant firm became a trustee and the terms of the trust were set out in the letter of instructions. The funds were only to be released when the appellant held a “first mortgage known as the Melbourne Centre mortgage.” The appellant was also obliged to provide each of those investors “with an Epitome of Investment and complete documentation upon settlement.”

5. The appellant performed its obligations pursuant to that trust and provided each of the original investors with an “Epitome of Investment”; that document was prepared by the appellant. It indicated that “Security Documents” were held by the appellant.

6. In my view by forwarding that Epitome to each of the original investors the appellant acknowledged that it held on trust for those original investors the “Security Documents”.

7. The evidence establishes that the documents then held by the appellant meeting the description of “Security Documents” were the first registered mortgage number U562310V and the certificates of title to the Sentry land. On the evidence the only conclusion open, in my view, is that reached by the learned trial judge, namely that the appellant acknowledged that it was holding the mortgage document and the certificates of titles as security for the investment made by the original investors.

8. Senior counsel for the appellant endeavoured to make some mileage for his client out of the proposition that, as a matter of strict conveyancing law, it was not necessary in the course of the transaction for the certificates of title to be lodged with the appellant. To my mind that is beside the point. The critical fact is that the certificates of title came into the possession of the appellant and the appellant acknowledged to the original investors that it was holding those certificates of title as part of the “Security Documents”.

9. In other words at all material times the appellant acknowledged to the original investors that it was holding, or in possession of, the documents for a specific purpose, namely as security for their investment.

10. It has long been established that where documents are held for a special purpose the party in possession for that purpose is not entitled to claim a general lien over them. So much seems clear since the decision of the House of Lords in Brandao v Barnett (1846) 12 Cl & F 787; 8 ER 1622.  The headnote states that a “banker’s lien does not arise on securities deposited with him for a special purpose, as where exchequer bills are placed in his hands to get interest on them, and to get them exchanged for new bills.  Such a special purpose is inconsistent with the existence of a general lien.”  Lord Campbell said at 8 ER 1630: “Bankers most undoubtedly have a general lien on all securities deposited with them, as bankers, by a customer, unless there be an express contract, or circumstances that show an implied contract inconsistent with lien.”  He then quoted from other authorities passages supporting the proposition that there would be no lien over documents where a “particular security was received under special circumstances” or where “there had been an agreement, express or implied, inconsistent with a right of lien, as to return them absolutely, at all events, to the depositor”.

11. That the appellant-solicitors here were not entitled to a lien over the certificates of title is supported by the decision in In re Clark; ex-parte Newland (1876) 4 Ch D 515.  The critical facts in that case were that the solicitor received money on behalf of a client from certain persons for the purpose of paying it to others.  After making some of the payments the solicitor claimed a lien on the balance monies in his hands for costs due to him by the client who had absconded.  The solicitor in a memorandum to the persons entitled to receive the money indicated that he held the funds and was prepared to pay.  Chief Justice Bacon in holding that the solicitor was not entitled to a lien said at 518:  “If the money is in his pocket, still it is not his own money, but money belonging to other people.  There is a clear trust of it, which he has himself acknowledged by his circular to the creditors.”

12. Lord Esher MR said in Stumore v Campbell & Co [1892] 1 QB 314 at 316, applying Brandao v Barnett: “It is admitted that, being trustees, no lien would attach in their favour, because the money was intrusted to them for a specific purpose.”  To similar effect are statements by Lopes LJ and Kay LJ in separate judgments at 318.

13. Finally reference should be made to the decision of the High Court in Leeper v Primary Producers’ Bank of Australia Ltd (in voluntary liquidation) (1935) 53 CLR 250.  Rich, Dixon, Evatt and McTiernan JJ relevantly said at 256-7:

“Now, if the terms of this receipt express a condition binding on the father upon which the certificate of title was held by him, his lien is displaced.  A solicitor’s general lien extends to documents which have come into his possession in his professional capacity even for a particular purpose, at any rate after that purpose has been served.  But the undertaking to redeliver the instrument to the bank after completion of the registration of the transfer, and the limitation imposed by the word ‘sole’ upon the purposes of the bailment are together inconsistent with the retention of the certificate under a general lien.”

14. In the present case at all material times the original investors had not been repaid the amount of their investment and in consequence the appellant still held the certificates of title as security documents with respect to that investment. In other words the documents were at all material times held for a special purpose which was inconsistent with the right of the appellant-solicitors to retain those documents under a general lien.

15. It follows that the learned primary judge was correct in declaring that the appellant had no lien over the certificates of title in question.

16. The material discloses that the property the subject of the certificates in title in question has been sold and the respondents are holding the fund thereby brought into existence pending the determination of this appeal. Further, the respondents have at all times offered to pay the appellant the sum of $15,000.00 for costs properly incurred by the appellant in connection with the Sentry trust. Upon payment of that sum by the respondents to the appellant there should be no restriction on the respondents’ rights to utilise the fund brought into existence by the sale of the property in question.

17. I agree with the orders proposed by Mullins J.

18. MULLINS J:  On an application that was filed on 20 February 2004 by Gregory Michael Moloney and Peter Ivan Felix Geroff (“the respondents”) as court appointed liquidators and trustees of an unregistered managed investment scheme known as the Sentry Alliance scheme (“the Sentry scheme”) against the solicitors who had formerly acted in connection with the scheme when it was conducted by Atlantic 3-Financial (Aust) Pty Ltd (“A3”),   the learned trial judge declared that the solicitors had no lien over the title deeds described in the application.  The solicitors, Marler & Darvall, formerly CB Darvall & Darvall (a firm) (“the appellant”), seek to have that order set aside on this appeal.  The citation of the reasons for judgment of the learned trial judge (“the reasons”) is [2004] QSC 228.

Relevant facts

19. A3 was in the business of promoting investment schemes in which it would solicit moneys from investors to lend on first mortgage security. The Sentry scheme was one of those schemes.

20. Sentry Alliance Pty Ltd (“Sentry”) agreed with A3 that A3 would acquire for the sum of $199,067 the interest of the existing mortgagee in the mortgage granted by Sentry over land in Victoria on which it was developing storage units. The proposal was that the mortgage would be varied to provide for a further loan of $38,932 to fund the completion of construction of the storage units.

21. Dr Acker, a director of A3, contacted persons whom he knew would be interested in investing moneys on first mortgage security and provided them with a document which he described as a “write up”. It identified, in a general manner, the nature of the investment and the security to be granted in respect of it, but no copy of this document has been located in respect of the soliciting of the original investors.

22. Dr Acker arranged for each of the investors who agreed to participate in the scheme to send a letter of instructions to Mr Marler of the appellant which provided:

“I/WE hand you herewith [sum invested] for you to hold in your trust account.  You may release these funds when you hold on my account, a ________ interest in the first mortgage known as the Melbourne Centre mortgage.  I understand the terms are:

Payments:Interest only, monthly in arrears

Interest Rate:10.50% per annum

Term:One year

Title is to be vested as follows:[the name of the investor or its nominee]

You are instructed to register this mortgage as soon as possible.

Please receipt these funds and provide me with an Epitome of Investment and complete documentation upon settlement.

These instructions are valid for a period of 14 days, after which time they may be extended by my directive. 

---------------------------------------------------------------- DATE”

23. The document was headed “Letter of Instruction”. It set out opposite the name and address of the addressee, details of the appellant’s trust account. The letter of instruction was accompanied by payment of the funds.

24. A3 gave instructions to the appellant to proceed with the acquisition of the mortgage in its name. On 13 May 1998 funds of $199,067.68 from the appellant’s trust account provided by investors who gave instructions in terms of the letter of instruction were used to effect the acquisition of the first mortgage over Sentry’s land in the name of A3. In due course the appellant received from its Melbourne agents the instrument of mortgage registered number U562310V (“the mortgage”) after the registration of the transfer of the mortgage in favour of A3 together with the certificates of title which were the subject of the mortgage.

25. The learned trial judge referred to the fact that the contemplated further advance of $38,932 was probably made shortly after 26 May 1998, the date on which the sum of $33,000 was received from the last to invest of the original investors. This is what had been deduced by Mr Marler (see paragraph 27 of his affidavit sworn on 15 June 2004). Mr Marler set out as exhibit WLM12 to this affidavit a copy of the variation of the mortgage which extended the due date for payment to 13 May 1999, reduced the lower interest rate to 11.5% and increased the amount of the advance by the sum of $38,932.32.

26. When Mr Marler gave evidence he referred to the number of original investors as six, as did the learned trial judge in paragraph [7] of the reasons. The trust ledger maintained by the appellant in respect of the file in the name of A3 relating to the advance to Sentry shows that four investors made payments for the Sentry scheme between 30 April and 11 May 1998, being the respective amounts of $50,000, $100,000, $25,000 and $30,000, and that a fifth investor made a payment of $33,000 on 26 May 1998. That also accords with Table 1 set out in paragraph 28 of Mr Marler’s affidavit sworn on 15 June 2004 which summarised the investments paid to the appellant’s trust account.

27. After the investment of $33,000 was received into the appellant’s trust account, the appellant expended funds held in the trust account on expenses in connection with the advance and most of the balance was paid to A3. The further advance of $38,932 to Sentry was therefore paid by A3, rather than directly from funds in the appellant’s trust account.

28. Mr Marler stated expressly in paragraph 8 of his affidavit sworn on 15 June 2004 that the appellant acted only for A3 and not for its investors. Mr Marler sent to each investor from whom the appellant received funds for the Sentry advance a letter in the following terms:

“Re: Atlantic 3-Financial (Aust) Pty Ltd – Advance to Sentry Alliance (Melbourne Centre)

We refer to the above matter and now enclose herewith the following:

1. Trust account Receipt for funds in the sum of [figure advanced] received by direct deposit on [or as the case may be]

2. Epitome of Investment.”

29. The Epitome of Investment which was drafted by Mr Marler or prepared from a template that was drafted by him provided:

“EPITOME OF INVESTMENT

Investor:[Investor’s Name]

Address:[Investor’s Address]

Mortgage Type:Interest only, payable monthly in arrears

Principal Amount:[$ Sum lent]

Funds Received:[Date]

Term of Investment:One year

Interest:10.5% per annum on the balance owing from time to time.

Security Description:Share of first registered Mortgage No. U562310V over:-

[The real property description of 18 lots is set out]

Registered Proprietor:SENTRY ALLIANCE PTY LTD

Security Documents

held by:C.B. DARVALL & DARVALL SOLICITORS”

30. In the case of one of the original investors the interest rate shown was 11%, rather than 10.5% which was shown for the others.

31. Further funds were advanced by investors making payments directly to A3 between June and November 1999 and again between November 2001 and July 2002. Only the money lent by the original investors between 29 April and 26 May 1998 was paid into the appellant’s trust account. The appellant was unaware of the existence of the later loans. There were also some repayments of capital to some investors from time to time. It was common ground that the balance of investors’ funds which had been treated by A3 as invested in the Sentry scheme was $588,400 and that some of the original investors had not withdrawn their investments.

32. In about June 1999 the appellant, on instructions from A3, prepared a Deed of Priority and Postponement between Sentry, A3 and the second mortgagee of Sentry’s land in order to permit a further advance of $95,000 to be made by A3 to Sentry for completion of the building works. That further advance was made in June 1999 and it brought the total amount lent to Sentry from funds invested in the Sentry scheme to $333,000. A further variation of the mortgage was prepared extending the due date to 13 May 2000.

33. Sentry defaulted in its obligations under the mortgage and A3 entered into possession as mortgagee in 2001. Despite Sentry being in default, A3 continued to make interest payments to investors. It was asserted by Dr Acker that he and another director of A3 and A3 had made some of those interest payments and had met other expenses of A3 in relation to the Sentry scheme on A3’s behalf. The learned trial judge did not accept that Dr Acker, the other director or A3 contributed more to the Sentry scheme than they withdrew.

34. Dr Acker solicited investments from prospective investors at a time when Sentry was in default of its obligations as mortgagor, without informing potential investors of Sentry’s default. The investors who provided funds between November 2001 and July 2002 were admitted into the Sentry scheme when Dr Acker knew that would unlawfully dilute the interests of the existing investors or confer no interest on the new investors in the mortgage.

35. A3 to the knowledge of Dr Acker engaged in a course of conduct under which funds in respect of one scheme were mingled with funds collected in respect of other schemes. Moneys collected for a particular scheme were applied to the benefit of another scheme or other schemes without the consent of investors, and without the taking of appropriate security.

36. The respondents were appointed by order of the court on 27 May 2003 as investigative accountants of the managed investment schemes conducted by A3. They produced an investigative accountants’ report dated 24 June 2003 which identified 15 schemes conducted by A3, including the Sentry scheme. By an order made on 19 August 2003 the respondents were appointed liquidators “jointly and severally to wind up” five of the schemes, including the Sentry scheme. Under the order all right, title and interest in and to the assets of the schemes vested in the respondents as trustees for each of the schemes.

37. The appellant performed legal work for A3 in connection with the Sentry scheme and other managed investment schemes conducted by A3 and for A3 in its own capacity. The appellant asserted that it was entitled to possession of the 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.

38. In the points of claim the respondents asserted that the appellant had claimed the sum of $7,500 as being owed to it by A3 in relation to work performed by A3 relating to the Sentry scheme. In the points of defence the appellant asserted that it had delivered bills in respect of the Sentry scheme in the sum of $13,200.72. That was verified by Mr Marler in paragraph 48 of his affidavit sworn on 15 June 2004 in which he stated that on 31 March 2004 he had caused itemised bills of costs to be delivered to the respondents in the total amount of $13,200.72 in respect of which the appellant had received no objection. In the schedule of bills of costs delivered by the appellant to A3, which is exhibit WLM33 to the affidavit of Mr Marler sworn on 21 June 2004, the total of the bills delivered in respect of the Sentry scheme is shown as $14,590.35. It is not clear whether the bills relating to the Sentry scheme in that schedule subsume the bills delivered on 31 March 2004. Prior to bringing the application, the respondents had offered to pay the appellant the sum of $15,000 in respect of work done for the Sentry scheme.

Findings of the trial judge

39. The learned trial judge found (at paragraph [45] of the reasons) that the mortgage, when acquired by A3 with the funds provided by the original investors, became property held on trust for the original investors and that new investors were admitted to the scheme from time to time on the basis that they acquired an interest in the mortgage commensurate with the sum invested. It was found that the sums invested by investors in the Sentry scheme were received by A3 as trustee for the investors (at paragraph [47]).

40. The learned trial judge found that it was unnecessary to consider whether the new investors were beneficiaries of a trust or trusts separate to the trust in which the original investors were beneficiaries and concluded at paragraph [49]:

“The beneficial entitlement to the mortgage vested in, and only in, the original investors or, alternatively, in the original investors and the new investors (or some of them) and has not passed to investors in other schemes.”

41. The learned trial judge was satisfied that the evidence disclosed that A3 and its directors were borrowers from the Sentry scheme rather than lenders overall to the Sentry scheme and that A3 did not appear to have any personal claims on the trust fund that could assist the appellant (at paragraph [51]). On the basis that it had not been established on the evidence before the learned trial judge that more moneys from other schemes were applied to the benefit of the Sentry scheme than were misapplied out of Sentry scheme moneys for the benefit of other schemes, the learned trial judge concluded that the appellant had failed to prove that A3’s conduct in relation to other schemes has resulted in a claim by A3 against the funds of a Sentry trust in respect of which the appellant enjoys a right of subrogation (at paragraph [54]).

42. In any case, the learned trial judge found that a lien over the title deeds did not come into existence, as the title deeds were not merely placed with the appellant by A3 for safe keeping, but were held by the appellant on the basis of the letter of instructions from each original investor to the appellant and, as each of those investors was not a client of the appellant, no lien in respect of the title deeds could therefore arise (at paragraphs [73] to [77]).

43. To reach this conclusion, the learned trial judge applied the proposition in respect of a solicitor’s retaining lien summarised in paragraph 2.34 of Tyler et al Fisher and Lightwood’s Law of Mortgage (Aust ed, Butterworths, 1995):

“The lien does not arise where documents or other property have been deposited with the solicitor for a special purpose, and accordingly he cannot detain them beyond that purpose:  Lawson v Dickenson (1724) 8 Mod 306; 88 ER 218; Young v English (1843) 7 Beav 10; 49 ER 965; Gibson v May (1853) 4 De GM & G 512; 43 ER 607; Re Clark; Ex parte Newland (1876) 4 Ch D 515; Stumore v Campbell [1892] 1 QB 314.  But to deprive a solicitor of his general lien, there must be a special agreement as to the purpose of the deposit.”

44. The learned trial judge relied on amplification or explanation of the proposition found in Duke Finance Ltd (in liquidation) v Commonwealth Bank of Australia (1990) 22 NSWLR 236, 245-246, Official Trustee in Bankruptcy v Kioussis [2000] NSWSC 248, 10 BPR 18,021, para [25], Re London and Globe Finance Corporation [1902] 2 Ch 416, 420-421 and Leeper v Primary Producers’ Bank of Australia Ltd (in voluntary liquidation) (1935) 53 CLR 250, 256-257.  

45. On the state of the evidence, the learned trial judge concluded that there was insufficient evidence to establish the existence of a valid claim by the appellant for a lien on the property of a Sentry trust, even to the extent of the sum of $7,500.

Issues on appeal

46. When opening the case for the appellant before the learned trial judge, Mr Dunning of counsel for the appellant stated:

“… it is not contended by me that in respect of the initial Sentry investors, the 98 investors, that there wasn’t an intention to create an interest of trust; that is, it was one of those occasions where there was both a debt relationship and a relationship of trust, and that’s clear from the documents.”

47. That opening accorded with the evidence given by Mr Marler who stated that the interest acquired by each original investor was an interest in a trust and the Epitome of Investment recorded the terms (at R129 line 46 – R131 line 24).

48. When reciting the appellant’s contentions in the reasons the learned trial judge stated at paragraph [32]:

“It is accepted that the mortgage and the deeds were held in trust for the ‘original investors’.”

49. This reflected how the case was conducted before the learned trial judge which was on the basis that both the instrument of mortgage and certificates of title were treated as the security documents.

50. On appeal, Mr Harrison QC who led Mr Dunning of counsel for the appellant, sought to distinguish between the mortgage instrument and the certificates of title as separate items of property for the purpose of determining whether the appellant had a lien over the certificates of title. Mr Savage SC who led Mr Derrington of counsel for the respondents submitted that it was not open to the appellant to depart from the common basis on which the parties conducted the application before the learned trial judge, as if it had been apparent at that stage that the appellant sought to treat the certificates of title differently from the mortgage, the respondents may have taken different action in respect of the proposal by Dr Acker to acquire the mortgage to enable a pay out to be made to the investors in the Sentry scheme. As will become clear from these reasons, it is not necessary to deal with this submission made on behalf of the respondents.

51. The questions which the appellant pursued on the appeal were framed as:

1. whether, for the transaction for the original investors, the appellant obtained a solicitor’s general lien over the certificates of title received in the course of settling the transaction with the mortgagor;

2. whether they lost that lien by reason of A3’s subsequent conduct, of which they were unaware, and over which they had no control;

3. whether any lien which would otherwise have arisen in (a) did not arise or was lost because the investors instructed the appellant to hold the certificates of title in safe custody on their behalf.

52. There was therefore no challenge to the proposition applied by the learned trial judge that a solicitor’s lien does not arise where documents have been deposited with the solicitor for a special purpose agreed with the solicitor. What the appellant attacked was the findings of the learned trial judge that allowed that principle to be applied.

53. The finding of the learned trial judge that the appellant did not establish a valid claim for payment to support the lien was also challenged on the appeal.

The basis on which the certificates of title came into the appellant’s possession

54. When the question is whether there is a lien in favour of the appellant over the certificates of title, the starting point must be to determine why the certificates of title came into the appellant’s possession and any conditions on which they were held by the appellant.

55. With respect to the original investors, the appellant facilitated the Sentry scheme of obtaining funds from those investors that were to be pooled to acquire the mortgage in A3’s name by receiving the letter of instructions from each of the original investors together with the funds for investment in the mortgage, acting on behalf of A3 in effecting the acquisition of the mortgage in the name of A3 and issuing the Epitome of Investment to record each investment.

56. The certificates of title came into the appellant’s possession, because the appellant was acting on behalf of A3 in respect of the acquisition of the mortgage, in order to implement the Sentry scheme. It was common ground on the appeal that, as between Sentry and A3, A3 had the right to possession of the certificates of title pursuant to the memorandum of common provisions that applied to the mortgage.

57. Reliance was placed by the appellant on the conclusion of Ryan J in Andersen v Lockhart [1991] 1 Qd R 501 that in the case of a mortgage registered under the Real Property Acts, the mortgagee did not have a statutory entitlement to possession of the title deeds of the mortgaged property as against the mortgagor, as no transfer of title was involved.  It was therefore submitted that A3, as the legal mortgagee, did not obtain any proprietary interest in the certificates of title that were the subject of the mortgage and the certificates of title could not be the subject of the trust that existed (and was conceded by the appellant to exist) in favour of the original investors. 

58. Andersen v Lockhart was concerned with the rights of a mortgagee to demand possession of the relevant certificates of title which were held by the solicitors for the mortgagor.  In this matter the appellant did obtain the certificates of title in carrying out its role in the Sentry scheme.  It is therefore irrelevant to analyse what occurred in terms of entitlement.

59. Although the appellant was careful to treat A3 only as its client, the appellant was aware that the funds that A3 was using were obtained from the original investors and that the appellant could disburse them only in accordance with the letters of instruction from each of the original investors. Those letters of instruction required the appellant to ensure that the appellant held on account of each of the original investors an “interest” in the mortgage. The only reason that the appellant held the certificates of title was as a result and in support of the mortgage. The mortgage was held for the original investors. The appellant would not have complied with the instructions given by the original investors, if it held the certificates of title for A3, rather than the original investors.

60. As the learned trial judge observed in paragraph [76] of the reasons:

“This conclusion is strengthened by the statement in the ‘Epitome of Investment’ that security documents were held by the [appellant].  I accept the submission, on behalf of the [respondents], that the point of this was to provide an assurance to investors as to the safety of their investments.”

61. The Epitome of Investment was the appellant’s own document. There is no basis on which the appellant can justifiably draw a distinction now between the mortgage and the certificates of title, when the appellant clearly did not seek to do so at the time of disbursing the original investors’ funds in accordance with the letters of instructions from the original investors.

62. Another way of analysing what occurred, if account is taken of the instructions given by A3 to the appellant to obtain the certificates of title in support of the mortgage, is that there was implicit agreement between A3 and the appellant that the possession of the certificates of title by the appellant was for the special purpose of providing security to the original investors in respect of their investments. This followed from A3 procuring the letters of instructions from the original investors and that the Epitomes of Investment were issued to the original investors in accordance with instructions from A3.

Conclusion

63. Although the hearing before the learned trial judge canvassed much activity in respect of the Sentry scheme after the disbursement of the funds lodged with the appellant by the original investors, nothing occurred between the appellant and those original investors who did not withdraw their investments to change the basis on which the certificates of title were held by the appellant.

64. It follows that the appellant cannot show that it has a possessory lien in respect of those certificates of title that can be relied on to claim payment of the fees owed to it by A3 for work done on matters other than in respect of the Sentry scheme.

65. As the conclusion of the learned trial judge on the conditions on which the appellant held the certificates of title is unimpeachable, it is not necessary to deal with the alternative basis on which the learned trial judge made the declaration that no lien existed in favour of the appellant over the certificates of title. It is also unnecessary to deal with the express questions that were framed by the appellant for the appeal.

66. Because the respondents had made an open offer to pay the appellant the sum of $15,000 in respect of the work done by the appellant in respect of the Sentry scheme, no attention was given to the quantum of appellant’s costs for the work done in respect to the Sentry scheme during the hearing before the learned trial judge. One of the orders sought in the originating application was that the appellant deliver up the certificates of title to the respondents in exchange for payment of the sum of $7,500. Because of the offer that had been made prior to the bringing of the application, Mr Marler was not cross-examined on the quantum of fees claimed in respect of the Sentry scheme.

67. Prior to the appeal, the appellant had cooperated with the respondents by delivering up to the respondents the certificates of title, without prejudice to the appellant’s claims, in order to facilitate the winding up of the Sentry scheme by the sale of the mortgage. The respondents have held the proceeds of the sale of the mortgage, pending the determination of the application. The learned trial judge made a direction on 21 July 2004 in the following terms:

“The applicant be at liberty to utilise the fund brought into existence through the disposition of the land the subject of the property over which the subject lien was claimed but stay the effect of such direction until the determination of an appeal from this decision or earlier order.”

68. In view of the open offer made by the respondents prior to the bringing of the application and the concession on the appeal that there was no issue in respect of the quantum of fees claimed by the appellant up to the sum of $15,000, the direction made by the learned trial judge should be varied by adding at the commencement the words “Subject to the payment by the applicants to the respondent of the sum of $15,000,”.

Costs

69. The appellant has been unsuccessful on the substantive issue on the appeal. The variation that is proposed to be made to the direction is minor in comparison to the substantive issue which dominated the appeal. The appellant should therefore pay the costs of the appeal.

Orders

70. The following orders should be made:

1. The direction made by the learned trial judge on 21 July 2004 be varied by adding at the commencement the words “Subject to the payment by the applicants to the respondent of the sum of $15,000,”.         

2. The appeal be otherwise dismissed.

3. The appellant pay the respondents’ costs of the appeal to be assessed.