Mortgage of convenience foils trustee’s recovery effort

Steve Dixon must be considering his options after a judge of the Supreme Court of Victoria refused the Hamilton Murphy partner’s application for orders declaring a mortgage invalid.

In Dixon (as trustee of the bankrupt estate of Toufic Sassine) v Lennon & Anor [2023] VSC 426 Associate Justice Matthew Barrett concluded – having spent eight months deliberating – that he couldn’t make the orders Dixon sought on a “balance of convenience” basis given a co-tenant in the contested property who wasn’t a party would be prejudiced.

“I do not consider that the failure to provide such information is a basis upon which to declare the mortgage invalid or discharge it, on the application of the trustee in bankruptcy of one tenant in common alone. That is particularly so where the other co-tenant is not a party to the proceeding.” Associate Justice Matthew Barrett.

The decision means Dixon as trustee is so far unable to get in a key asset of the bankrupt estate Toufic “Tom” Sassine, namely a half share in a property at 36 Edward Staff Drive, Kinglake, north east of Melbourne.

The stumbling block for Dixon has been the existence of a mortgage and caveat over the property, created in November 2020, a few months prior to his February 24, 2021 appointment as Sassine’s trustee.

The mortgage purports to provide security for any fees incurred by the Sassine family’s legal representative up to a sum of $100,000.

That representative is controversial Melbourne lawyer Patrick Lennon, who as of July 19, 2023 can no longer act for the Sassines or anyone else, having been relieved of his practising certificate by the Victorian Legal Services Board five days before Associate Justice Barrett delivered judgment.

From the commencement of his appointment Dixon has been frustrated by persistent non-compliance or incomplete compliance by Lennon in respect of requests for information about the security agreement, but that was insufficient cause for the court to rule the mortgage invalid, Barrett said.

” …. the first defendant has repeatedly failed to provide details of the extent of moneys, if any, owing and secured by the mortgage and the information that he has provided was provided very late and is inadequate,” Barrett said.

“However, I do not consider that the failure to provide such information is a basis upon which to declare the mortgage invalid or discharge it, on the application of the trustee in bankruptcy of one tenant in common alone. That is particularly so where the other co-tenant is not a party to the proceeding.”

Dixon’s counsel had argued that Lennon, who was the defendant in the proceedings, had failed to produce evidence of a costs agreement to justify the $40,000 he said he was owed by the Sassines.

“The plaintiff submits that the only agreement that could possibly be relevant is the alleged costs agreement, but there is no evidence of any agreement between Sassine and Lennon Lawyers,” he said.

“There is no evidence of any work undertaken, pursuant to any fee agreement or otherwise, and no evidence of any debt or liability under the mortgage and accordingly, there is no basis for maintaining the registration of the mortgage.

“However, the failure to establish that there was a binding costs agreement does not necessarily mean the charge does not support a caveatable interest.

“I do not consider that the failure to establish a binding costs agreement means the charge does not support a caveatable interest,” the judge concluded.

“The difficulty with the plaintiff’s submissions as to the costs agreement is that the charge does not purport to secure the provision of any costs that may be identified by, or referable to, any particular costs agreement alone, but rather, the charge secures such legal services as may be provided to the extended Sassine family and related entities, including costs incurred in the future.”

Given the Sassine family can no longer incur any costs with the de-certified Lennon, it’ll be interesting to see if Dixon appeals or finds another way to get his hands on Kinglake for the benefit of Sassine’s creditors.

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