New South Wales Supreme Court CITATION : Ostrovsky v Registrar of Titles Queensland [2010] NSWSC 220 HEARING DATE(S) : 15 March 2010 JUDGMENT DATE : 26 March 2010 JUDGMENT OF : Harrison J DECISION : 1. Order that the proceedings be transferred to the Supreme Court of Queensland. 2. Order that the second defendant's motion be dismissed. CATCHWORDS : CROSS VESTING - Jurisdiction of Courts (Cross-Vesting) Act 1987 – s 5(2)(b)(iii) – where plaintiff contributed capital to partnership conducted in Queensland – partnership dissolved by order of Supreme Court of New South Wales – plaintiff unable to recover losses from former partner – sale of land only prospect of recovery – land sold by former partner without plaintiff's knowledge or consent - breach of duty by Registrar of Titles, Queensland and former solicitors alleged – whether otherwise in the interests of justice that proceedings be determined by Supreme Court of Queensland – order made for transfer to Queensland Supreme Court – PRACTICE and PROCEDURE – UCPR 6.29 – misjoinder of a party – application by second defendant to be removed from proceedings – application conducted as if in nature of summary dismissal – application misconceived – motion dismissed. LEGISLATION CITED : Jurisdiction of Courts (Cross- vesting) Act 1987 Land Title Act 1994 (Qld) CATEGORY : Procedural and other rulings Bankinvest AG v Seabrook (1988) 14 NSWLR 711 BHP Billiton Ltd v Schultz [2004] HCA 61; (2004) 221 CLR 400 James Hardie & Coy Pty Ltd v Barry [2000] NSWCA 353; (2000) 50 NSWLR 357 CASES CITED : Montague Mining Pty Ltd v Gore [1998] FCA 1334 Ostrovsky v Burton [2007] NSWSC 1183 Ostrovsky v Burton [2009] NSWSC 1035 Uniting Church in Australia Property Trust (NSW) v Monsen [1978] 1 NSWLR 575 Valceski v Valceski [2007] NSWSC 440; (2007) 70 NSWLR 36 Alex Ostrovsky (Plaintiff) PARTIES : Registrar of Titles Queensland (First Defendant) Michael Geoffrey Roper (Second Defendant) Andrew Kenneth Gardiner (Third Defendant) FILE NUMBER(S) : SC 2009/297516 N Obrart (Plaintiff) COUNSEL : B Clarke SC with P Walsh (First Defendant) R Kouchoo (Second Defendant) ADL Legal (Plaintiff) SOLICITORS : G R Cooper, Crown Solicitor Queensland (First Defendant) Michael Geoffrey Roper (Second Defendant) DibbsBarker Lawyers (Third Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION HARRISON J 26 March 2010 2009/297516 Alex Ostrovsky v Registrar of Titles, Queensland, Michael Geoffrey Roper and Andrew Kenneth Gardiner JUDGMENT 1 HIS HONOUR: The first defendant moves the Court for an order that the whole of the proceedings be transferred to the Supreme Court of Queensland pursuant to s 5(2) of the Jurisdiction of Courts (Cross- vesting) Act 1987 and UCPR 44.5. The second defendant moves the Court for an order that he be removed from the proceedings pursuant to UCPR 6.29. I consider that the first defendant's motion should be granted for the reasons that follow. However, the second defendant's motion is misconceived and is otherwise attended with a series of procedural and evidentiary difficulties that mean it cannot succeed in its present form. These matters are also referred to in more detail below. Background 2 The plaintiff originally commenced proceedings in this Court in 1998 against Lindsay Keith Burton. Hamilton J decided the principal proceedings on 29 August 2007: see Ostrovsky v Burton [2007] NSWSC 1183. There was no appearance by the defendant. His Honour made certain declarations and orders as to the existence of a partnership between the plaintiff and Mr Burton and as to the extent of partnership property. Part of his Honour's reasons for judgment was as follows: "[7] Although the property was acquired as partnership property, title was taken in the name of the defendant only. After the dissolution of the partnership the defendant, without reference to the plaintiff, wrongfully sold the property and received the proceeds of sale to his own use. No accounting was made to the partnership or the plaintiff for those proceeds, although they were obviously, on the findings I have made, partnership property. [8] The property was sold to Construction Industry Advisory Service Pty Ltd and there is evidence from the director of that company that he considers that the property was sold to that company at an undervalue, the price being $295,000 and the real value of the property in his estimation, even allowing for it being in a run down condition, being some $350,000. [9] I therefore propose to declare that from 30 November 1990 the plaintiff and the defendant carried on in partnership the business of owning a property and making the same available to the horse breeding partnership; that the partnership was a partnership in equal shares; that the property purchased for the partnership was an asset of the partnership; and that the partnership was dissolved on 28 July 1999. I propose to order that the partnership be wound up under the direction of the Court and that Garry Williams, Chartered Accountant, who has consented to the appointment, be appointed the receiver and manager of the partnership. I propose to make the usual orders that an account be taken of all the dealings and transactions of the partnership and of the partners in relation to it (I shall insert the words 'by an Associate Judge' in order 8) and that an inquiry be held as to what the assets of the partnership consist of and the respective interests of the partners in them. [10] Whilst I cannot make an order as sought for the payment of 50 per cent of the proceeds of the sale of the property by the defendant to the plaintiff, I think it appropriate to make an order under r 46.3 of the Uniform Civil Procedure Rules 2005 for the holding of an inquiry by an Associate Judge as to the consideration received by the defendant on the transfer by the defendant of the property and whether that consideration was equivalent to the market value of the property. Whilst I do not think that any head of power other than r 46.3 is necessary to justify the making of that order, it could equally be made under Schedule D Part 3 cl (4)(b) of the Supreme Court Rules 1970." 3 Mr Burton had purchased the property in Queensland, which came to be used for partnership purposes. He was the sole registered proprietor of that property. The plaintiff alleged that he had contributed a sum of money to its acquisition. Mr Burton sold the property to Construction Industry Advisory Services Pty Ltd in July 1999 without the plaintiff's knowledge or consent. Hamilton J found that the partnership was dissolved on 28 July 1999. The plaintiff has not received any of his money back either as a share of the proceeds of the sale of the property or as a distribution of partnership assets following its dissolution. Mr Burton is now either bankrupt or expected to be so within a short time. 4 It was in these circumstances that the plaintiff originally gave instructions for a caveat to be lodged against the title to the property. This occurred on 12 November 1998. That course proceeded upon the contention that the plaintiff's contribution to the cost of its acquisition gave him a proprietary interest in the land as opposed to an interest in it as a partner of the registered proprietor who had agreed on some terms to make it available for use in the partnership business. The third defendant in these proceedings lodged the caveat. He was instructed to do so by the second defendant on instructions received by him from the plaintiff. 5 In due course, allegedly on 20 June 2003, Mr Burton caused the first defendant to remove the caveat. The plaintiff did not learn about this before the property had been sold on 7 July 2003. He received no notification of the withdrawal of the caveat from any of the defendants. The plaintiff alleges in these proceedings that this has led him to suffer loss and damage, which has been caused by the defendants' respective breaches of duty. In summary the plaintiff alleges that the property would have operated, if not sold, as a potential source of funds to meet his claims against Mr Burton arising out of the failed partnership and his unrecovered contribution to its capital. In this respect it is to be observed that on 7 July 2009 Slattery J found in favour of the plaintiff against Mr Burton in the sum of $498,656.74 plus costs: see [2009] NSWSC 1035. 6 The plaintiff's chances of any recovery from Mr Burton would appear now to have evaporated. The plaintiff has, therefore, directed his attention to the present defendants. However, the statement of claim upon which the plaintiff relies for this purpose is a troublesome document and the precise nature of what is asserted by the plaintiff is not at all clear. For the reason that an understanding of the plaintiff's case is germane to the present applications, some analysis of the statement of claim is necessary as a preliminary matter. The statement of claim 7 The plaintiff has pleaded that the caveat was lodged by the third defendant "pursuant to an express or implied retainer with" him. No particulars of the retainer are given other than that as a result "the third defendant owed the plaintiff a duty to take reasonable care concerning the caveat and its maintenance on the Register". The third defendant is alleged to have breached the duty owed to the plaintiff by failing to advise him "as to the steps [he] was required to take to sustain the caveat" as well as failing to "ensure that [he] was informed of steps being taken by [Mr] Burton with respect to [its] removal" or "otherwise [to] ensure the caveat did not lapse or was not removed from the Register". 8 The plaintiff does not actually plead that the first defendant owed a duty to him. The statement of claim simply asserts that the first defendant failed to do certain things "in breach of its statutory duties". The source of the duties is not indicated and their scope or content are so far a matter of speculation. The plaintiff, however, alleges that the first defendant breached these duties by failing to notify him of the steps being taken by Mr Burton to lapse the caveat and by removing it from the Land Register without giving notice to him. 9 The pleaded case against the second defendant is even harder to discern. It is alleged that he "was a solicitor acting for the plaintiff by a retainer in respect of the pleadings". Further, "pursuant to [his] retainer the second defendant owed the plaintiff a duty to take reasonable care to ensure that the caveat remained on the Register or to ensure that the plaintiff was informed of any steps to remove [it]". The plaintiff alleges that the second defendant breached that duty by failing "to exercise reasonable care in ensuring that the caveat remained on the Register for the duration of the proceedings". 10 Remarkably, none of the defendants has so far sought to challenge the plaintiff's statement of claim or to emphasise its deficiencies in any way. The first defendant's motion 11 Section 5(2) of the Jurisdiction of Courts (Cross-vesting) Act is in these terms: " 5 Transfer of proceedings (1) … (2) Where: (a) a proceeding (in this subsection referred to as the 'relevant proceeding') is pending in the Supreme Court (in this subsection referred to as the 'first court'), and (b) it appears to the first court that: (i) the relevant proceeding arises out of, or is related to, another proceeding pending in the Supreme Court of another State or of a Territory and it is more appropriate that the relevant proceeding be determined by that other Supreme Court, (ii) having regard to: (A) whether, in the opinion of the first court, apart from this Act and any law of the Commonwealth or another State relating to cross-vesting of jurisdiction, the relevant proceeding or a substantial part of the relevant proceeding would have been incapable of being instituted in the first court and capable of being instituted in the Supreme Court of another State or Territory, (B) the extent to which, in the opinion of the first court, the matters for determination in the relevant proceeding are matters arising under or involving questions as to the application, interpretation or validity of a law of the State or Territory referred to in sub-subparagraph (A) and not within the jurisdiction of the first court apart from this Act and any law of the Commonwealth or another State relating to cross-vesting of jurisdiction, and (C) the interests of justice, it is more appropriate that the relevant proceeding be determined by that other Supreme Court, or (iii) it is otherwise in the interests of justice that the relevant proceeding be determined by the Supreme Court of another State or of a Territory, the first court shall transfer the relevant proceeding to that other Supreme Court." 12 The authorities on this provision establish that the plaintiff's choice of jurisdiction is not per se entitled to independent weight when considering whether or not to make the order sought: see BHP Billiton Ltd v Schultz [2004] HCA 61; (2004) 221 CLR 400 at [14], [25], [27] and [77] as follows: "[14] In the context of the Cross-vesting Act, one is not concerned with the problem of a court, with a prima facie duty to exercise a jurisdiction that has been regularly invoked, asking whether it is justified in refusing to perform that duty. Rather, the court is required by statute to ensure that cases are heard in the forum dictated by the interests of justice. An application for transfer under s 5 of the Cross-vesting Act is brought upon the hypothesis that the jurisdiction of the court to which the application is made has been regularly invoked. If it appears to that court that it is in the interests of justice that the proceedings be determined by another designated court, then the first court 'shall transfer' the proceedings to that other court. There is a statutory requirement to exercise the power of transfer whenever it appears that it is in the interests of justice that it should be exercised. It is not necessary that it should appear that the first court is a 'clearly inappropriate' forum. It is both necessary and sufficient that, in the interests of justice, the second court is more appropriate. ***** [25] As to the first of those considerations, it is, as the appellant submits, redolent of the Australian forum non conveniens approach, which begins from the premise that a court whose jurisdiction has been regularly invoked needs to justify a refusal to exercise that jurisdiction. For the reasons explained earlier, and developed at some length in Bankinvest , that is not the starting point for a consideration of a transfer application under the Cross-vesting Act, where a court is simply applying a statute without any kind of presumption as to where the balance of the interests of justice might come down. The idea that a plaintiff's choice is not lightly to be overridden echoes the statement of Scott LJ in St Pierre that a right of access to a court must not be lightly refused. That idea is still influential in the Australian approach to forum non conveniens, but it is out of place in a decision about s 5 of the Cross-vesting Act. ***** [27] As we have already indicated, we do not suggest that the interests of justice properly to be taken into account will be unrelated to the interests of one party or another. We do not doubt that, in the case of Zunic , it was entirely appropriate for Sully J to take into account the plaintiff's short life expectancy, and the prospect of expedition in the Tribunal. There are cases in which justice may dictate that an interest of one party be given weight. Although in a different context, Lord Goff's discussion in Spiliada of the 'legitimate personal or juridical advantage' shows the kinds of consideration that might sometimes be relevant to a judgment as to the appropriateness of a forum. Yet, in the present case, the combination of the importance that was attached to the first respondent's choice of forum, and the treatment of s 11A as a factor relevant to the interests of justice, involved error in the application of s 5 of the Cross-vesting Act. ***** [77] The phrase 'otherwise in the interests of justice' in sub-par (iii) of s 5(2)(b) of the Cross-vesting Act requires the Supreme Court to determine a transfer application by identifying the more appropriate forum without any specific emphasis in favour of the choice of forum made by the plaintiff. That being so, error is disclosed in the treatment by the Supreme Court of BHP's application. The consequence is that the appeal to this Court should be allowed, unless this Court supports the primary judge's order on further or alternative grounds to those relied upon by his Honour. No such support appears." 13 Relevant considerations include the "connecting factors" like matters of convenience and expense such as the availability of witnesses, where the parties reside and the law governing the transaction. These may help to identify a "natural forum": BHP Billiton Ltd v Schultz at [19]. 14 The provision itself identifies two matters that are to be accorded weight. First, whether the matter is one which, but for the cross-vesting legislation, would not be within the jurisdiction of the Supreme Court of New South Wales but would be within the jurisdiction of the other State. Secondly, whether the matters for determination arise under or at least involve questions as to the application, interpretation or validity of the laws of that other State. 15 The interests of justice must also be considered. Relevantly this includes substantive connections with the forum, balance of convenience to the parties and witnesses and convenience to the court system: see generally James Hardie & Coy Pty Ltd v Barry [2000] NSWCA 353; (2000) 50 NSWLR 357 at [95] and Valceski v Valceski [2007] NSWSC 440; (2007) 70 NSWLR 36 at [9]. 16 When the proceedings were commenced, as well as at the present time, the plaintiff resided in New South Wales. He invested in a property-owning partnership in Queensland. These proceedings effectively arise out of that partnership. The first defendant was appointed under the provisions of a Queensland statute, namely the Land Title Act 1994 (Qld). The second defendant is a solicitor in practice in New South Wales. The third defendant was a Queensland solicitor. 17 The cause of action against the first defendant is in respect of duties said to be owed in Queensland under a Queensland statute. The alleged breaches took place in that State. The partnership was formed under the laws of Queensland and conducted in Queensland with the use of land in that State. The proceedings relate to the loss of a potential remedy against the plaintiff's former partner who resides in Queensland. 18 The cause of action created by the statute, alleging breach of statutory duties, is directed by that statute to be brought not against the Registrar of Titles but against the State of Queensland. The court with the jurisdiction to entertain such a cause of action would ordinarily be the Supreme Court of Queensland, by virtue of s 188B of the Land Title Act (Qld) (see in particular s 188A(1)(f)), which provides as follows: " 188B Order by Supreme Court about deprivation, loss or damage (1) For section 188 or 188A, a claimant may apply to the Supreme Court for an order-- (a) for compensation to be paid by the State; or (b) directing the registrar to take stated action. (2) The court may make the order it considers just. (3) Without limiting subsection (2), the court may by order direct the registrar to-- (a) cancel or correct an indefeasible title or other particulars in the freehold land register; or (b) create a new indefeasible title; or (c) issue a new instrument; or (d) do anything else. (4) The court may join any other person it considers appropriate in a proceeding under this section." 19 The first defendant submitted that apart from the cross-vesting legislation, the plaintiff's action could not have been instituted in this Court. 20 The remaining aspects of the proceedings also have a strong and substantial connection with Queensland. The Registrar of Titles, Queensland and his staff are potential witnesses, and are resident in that State. The same is true of the third defendant. The case against him is a claim for professional negligence in his capacity as solicitor in respect of legal work carried out in Queensland, concerning a breach of duty alleged to have occurred there. The loss may also have been incurred in that State. The law governing that claim would be the law of Queensland. 21 The claims for professional negligence will both require a consideration of proper practice in Queensland relating to the lodgement and withdrawal of caveats in that State. In Bankinvest AG v Seabrook (1988) 14 NSWLR 711 at 729, Rogers A-JA observed: "Although neglected in argument, it should not be forgotten that an important aspect of the cross-claim is the claim for negligence against the Queensland solicitors. Once again, it seems to me, that a determination whether or not a professional person has been negligent is much better gauged by a local tribunal more closely aware of local practice and the demands imposed on practitioners." 22 The first defendant submitted that the more appropriate forum for resolution of the dispute is the Supreme Court of Queensland. In particular, important questions of statutory construction weigh strongly in favour of a transfer to that Court. They include the following: 1. Whether the recording of the lapsing of the caveat was lawful. 2. Whether the plaintiff had a proprietary interest in the land that would have supported the lodgement of a caveat and whether findings in the proceedings before Hamilton J and Slattery J estop the plaintiff from asserting that he had such an interest. 3. Whether there is a causal connection between the alleged breaches of statutory duty and the claimed losses. 4. Whether any claim for compensation for loss and damage is maintainable in light of the terms of s 189(1)(a) of the Land Title Act (Qld) . 5. The proper interpretation of s 122, s 126, s 127, s 188, s 188A, s 189 and s 190 of the Land Title Act (Qld) . 23 The overwhelming weight of factors favours a transfer of the proceedings to the Supreme Court of Queensland. The third defendant supports the application. Despite helpful submissions on behalf of the plaintiff to the contrary, I am not satisfied that there are countervailing matters of any strength that can be raised in opposition to the first defendant's application. In my opinion, the interests of justice favour the transfer of the proceedings to the Supreme Court of Queensland. The second defendant's motion 24 UCPR 6.29 is in these terms: " 6.29 Removal of parties by order The court may order that a person: (a) who has been improperly or unnecessarily joined, or (b) who has ceased to be a proper or necessary party, be removed as a party." 25 The second defendant promoted his application as one falling to be determined pursuant to this rule. However, as the transcript of the proceedings before me will reveal, the second defendant appeared to approach the matter in quite a different setting. The issue of whether or not the plaintiff's case against the second defendant was fairly arguable was discussed at some length. If the question of the joinder is related to substantive issues of law that are fairly arguable, the proceedings should in general not be dismissed or stayed on grounds of misjoinder of a party: Uniting Church in Australia Property Trust (NSW) v Monsen [1978] 1 NSWLR 575 at 585. 26 The second defendant's submissions before me proceeded under the theme that the plaintiff's case against him was "hopeless" or that it "could not possibly succeed". This was said to be because the facts, when examined, did not even support the existence of the relationship of solicitor and client between him and the plaintiff, or the existence of any breach of the terms of that retainer or of a duty owed by him. As I have already indicated, the form of the statement of claim is such that it is not possible, or at least not easy, to make any proper assessment of precisely what the plaintiff's case against the second defendant is supposed to be. It is for that reason equally difficult to assess any application that purports to be based upon the perceived strengths of the second defendant's position. 27 What I suspect that the second defendant intended to achieve was more appropriately the subject of an application for summary dismissal of the plaintiff's claim pursuant to UCPR 13.4. It may also be in the mind of the second defendant to raise an issue concerning the present form of the statement of claim pursuant to UCPR 14.28. However, I have no particular knowledge of that. If the second defendant was intending to have the plaintiff's claim summarily dismissed, then the application to do so should have made that clear both to the plaintiff and to the Court. I do not consider that it is either appropriate or fair to permit the second defendant to convert the present application to something quite different to its original configuration. The plaintiff's response to that course may well have been different to his response to an application simply to have the second defendant removed from the proceedings upon the basis of his misjoinder. 28 The second defendant relied upon an affidavit sworn by him on 23 February 2010. He also gave unchallenged evidence before me. That material reveals that the second defendant instructed the third defendant about the lodgement of a caveat against the title to the property in Queensland in accordance with the plaintiff's instructions to do so. The plaintiff apparently said to him, "do whatever Stan Rafty [a Queensland solicitor] requires". The second defendant thereafter said this: "5 I am not sure if proceedings had been commenced by the plaintiff at that time, but I sent a copy of the brief pleadings to Stan Rafty which to the best of my knowledge and belief, were lodged by him at the office of the Queensland Registrar of Titles, the first defendant". 29 He later deposed to the following matters: "11 At no time was I ever instructed in relation to the lodgement and or the prevention of the lapsing of the caveat. 12 In about late 2005, I had a conversation with Stan Rafty during which he said to me words to the effect: 'I just can't figure out how the caveat could have lapsed. This caveat comes under s 126 of the Queensland Land Title Act and won't lapse until Ostrovsky's NSW proceedings are complete and so, the caveat can only be removed when Ostrovsky's court case is done'. 13 I was never instructed to give notice to Registrar of Titles in Queensland in relation to the proceedings in New South Wales. ***** 15 I have never received any notice that the caveat could be or was about to be removed. 16 I have never received a notice of a lapsing caveat in relation to the caveat. 17 I have never received a notice of a lapsing application or a request in relation to the caveat from anyone, including Lindsay Burton or any of his representatives or agents. 18 I have never received any instructions from the plaintiff as to the protection of the caveat, since, to the best of my knowledge and belief, at all material times Gardiners Lawyers were in total control of such matters. 19 The address for service of notices for the caveator was the office of Gardiners Lawyers. …" 30 At face value this material goes some considerable distance to explaining the second defendant's involvement with the caveat or, on another view, the lack of it. It suggests that he had nothing to do with matters that appear to energise the plaintiff's case against him. On the other hand, it is not possible considering this evidence to say that the case raised by the statement of claim is unarguable. The plaintiff sought to support this to some extent by a submission that his case against the second defendant will draw upon the notion that the second defendant's duty of care included matters of assumed responsibility and that an obligation to discharge the duty may on occasion require a solicitor to initiate action: see Montague Mining Pty Ltd v Gore [1998] FCA 1334. The precise terms of that action have not so far been identified in a specific way. Furthermore, there is some suggestion that a large number of documents in the possession of all defendants that may be relevant to this claim are yet to be produced and that the plaintiff's position will be enhanced when this occurs. Unfortunately, this all remains in the realm of speculation. As I have indicated, the current form of the statement of claim dictates that no meaningful assessment or analysis of these matters can be undertaken at this stage. 31 The second defendant's application, as it was prosecuted before me, was misconceived and should be dismissed. Whether or not some further or other application is made remains to be seen. It is not beyond the realms of possibility that the plaintiff may now consider that the wisdom of pursuing the second defendant in the circumstances as they have unfolded is questionable. These are all matters that I am not called upon to determine. Orders 32 I consider that the following orders should be made. 1. Order that the proceedings be transferred to the Supreme Court of Queensland. 2. Order that the second defendant's motion be dismissed. 33 I will hear the parties on the question of the costs of the motions if required. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.