Coastline Constructions (Aust) Pty Ltd v Kakavas

Supreme Court of NSW|2008-03-05|Before: Hislop J, McLelland J

Introduction 1 There are two applications before the Court. The first is an application by the defendant to transfer the proceedings to the Victorian Supreme Court pursuant to the Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW), s 5(2)(b)(iii). This application is opposed by the plaintiffs. The second is an application by the plaintiffs to transfer the proceedings to the Commercial List of the Equity Division of this Court. This application is opposed by the defendant.

The nature of the proceedings 2 The plaintiffs claim $5,250,000 plus interest in accordance with s 100 of the Civil Procedure Act 2005 for moneys which they allege the defendant has received but has refused and/or failed to repay. 3 It appears from the pleadings, as qualified by a proposed Commercial List statement, that the circumstances alleged to give rise to the dispute are essentially as follows:

(a) In June 2006 the defendant, as agent for Elite Property Investment Group Pty Ltd ("Elite"), agreed to sell to the third plaintiff, or his nominee, a property in Queensland, owned by Elite, for $14 million. Pursuant to that agreement, the first and second plaintiffs advanced a total of $4 million to the defendant. The transaction did not proceed. The $4 million has not been repaid. The defendant admits he received the money but denies it was received pursuant to the agreement or that it is repayable to the plaintiffs.

(b) On 29 September 2006 the third plaintiff advanced to the defendant $500,000 for the defendant to use to place a bet on a football final. The money was repayable within seven days. Only $250,000 of this sum has been repaid. The defendant does not admit he is liable to repay the balance.

(c) In October 2006 an agreement was made by William Kerwick to purchase a property in Queensland from Gerry Pilarinos and for Mr Pilarinos to purchase a Queensland property of the third plaintiff. The agreement was subject to Mr Pilarinos obtaining finance to purchase the third plaintiff's property. The third plaintiff advanced $2 million to Mr Kerwick as a deposit for the purchase of Mr Pilarinos' property. Mr Kerwick paid the $2 million to Mr Pilarinos as a deposit on the purchase of his property. It was agreed that if Mr Pilarinos was unable to obtain finance to purchase the property of the third plaintiff Mr Pilarinos would refund the $2 million deposit to Mr Kerwick and Mr Kerwick would repay the $2 million to the third plaintiff. Mr Pilarinos was unable to obtain finance and released the $2 million to the defendant, who appropriated the money to himself. The defendant does not admit he owes this money to the plaintiffs.

(d) On 10 November 2006 the third plaintiff assaulted the defendant. The assault occurred in Queensland, and was witnessed by a number of persons (the defendant's parents, the defendant's sister and brother-in-law, and Messrs Chryssafis, Boutsianis and Pariente) and recorded on video. The defendant's parents reside in Queensland, Mr Pariente in the United States. The defendant sustained bruising to the forehead in the assault. The third plaintiff admits the assault occurred and that he was the aggressor. Threats were made by the third plaintiff to cause physical harm to the defendant and his father to persons who conveyed the threats to the defendant on 10, 11 and 12 November 2006.

(e) On 12 November 2006 the defendant signed an acknowledgement of debt to the plaintiffs in the sum of $6,250,000. The defendant alleges the acknowledgement of debt was not signed by him voluntarily but as a result of fear for his own safety and that of his father as the result of the assault on 10 November 2006 and the threats made by the third plaintiff to cause physical harm to the defendant and his father.

(f) Repayments totalling $1 million in respect of the loan to Mr Kerwick were made between 14 November 2006 and 18 July 2007. The defendant asserts $750,000 of those payments were made from moneys he paid Mr Kerwick out of fear for his and his father's safety consequent upon the assault and threats of the third plaintiff.

(g) The defendant asserts that sometime between 6 and 10 March 2007 the third plaintiff and the defendant agreed that any moneys owed by the defendant to any of the plaintiffs would not be payable until judgment in, or settlement of, proceedings in the Supreme Court of Victoria, with interest accruing on any such moneys at nine percent per annum in the interim. The plaintiffs do not admit there was any such agreement.

(h) The defendant denies the plaintiffs, or any of them, are entitled to the amount claimed or to any amount at all.

(i) The plaintiffs have foreshadowed that an application will be made to join Mr Kerwick and Mr Pilarinos to the proceedings as defendants.

(j) The defendant has foreshadowed he will file a cross claim against the third plaintiff seeking damages for the assault on 10 November 2006 and recovery of the $750,000 referred to in (f) above.

The application to cross vest to Victoria 4 The defendant submitted that, in the interests of justice, the proceedings should be transferred to the Victorian Supreme Court as it was a more appropriate forum than this court for the following reasons:

(a) The defendant resides in Melbourne. The trial would last 4-5 days and, if it was held in Sydney, it would be necessary for the defendant to relocate to Sydney for the trial and two days preparation, at an estimated cost for travelling and accommodation of $2000;

(b) The defendant has five proposed witnesses who currently reside in Melbourne. Four of these witnesses would give evidence of the assault. If the proceedings remain in this court it would be necessary for those witnesses to travel to Sydney and stay overnight for the hearing, and it would be necessary for Sydney counsel and solicitors to travel to Melbourne to interview those witnesses at an additional cost of $9000-13,000 for 2-3 days. The solicitor for Mr Pilarinos deposed in an affidavit that Mr Pilarinos had informed him that he was presently convalescing from a heart attack and it would be more convenient for him if the proceedings were heard in Melbourne. There was no evidence that Mr Pilarinos will not make a full recovery;

(d) Negotiations in respect of the alleged agreement to postpone repayment had occurred in Melbourne, though it is unclear where the agreement was made;

(e) The proceedings have no connection with New South Wales save that the first and second plaintiffs were registered in New South Wales. 5 The contrary contentions, which I accept, are:

(a) There is no reason to treat the residence of either party as determinative. The third plaintiff and his wife reside in Queensland. The defendant had for some years resided in Queensland and in 2007 had chosen to move to Victoria. He has business interests in Queensland, and the principal place of business of his company remains in Queensland. He is a businessman, presumably used to interstate travel. His estimated travel and accommodation expenses are inconsequential, having regard to the amount in issue in the case. It is disputed the hearing will take four to five days;

(b) The assault is not central to the issues in dispute and the acknowledgement of debt, which was said to be the result of the assault and threats, is secondary to the circumstances of the advance of the moneys. The assault is recorded on video, the third plaintiff has admitted the assault and that he was the aggressor. It is improbable, as a practical matter, that all of the witnesses to the assault will be called to give evidence. Their evidence may not be contested. If they are called to give evidence then their evidence in chief will be short and probably in statement form, and will not necessitate them staying overnight in Sydney nor would Sydney lawyers require 2-3 days to interview them. The witnesses had relatively recently moved to Melbourne. It does not necessarily follow that they will be residing there when the matter comes on for hearing;

(d) It is of little, if any, significance that the negotiations for the alleged agreement to postpone payment occurred in Melbourne;

(e) At the time the principal transactions occurred the only connection with Victoria was that the defendant's company was registered in that State though its principal place of business was Queensland;

(f) The preparation of the plaintiffs' case is considerably advanced. It is being conducted by New South Wales lawyers. If the proceedings were transferred to Victoria the plaintiffs would either have to incur the expense of retaining Melbourne lawyers to conduct the matter, necessarily involving duplication of work already done, or incur the additional expense of its lawyers travelling to Victoria for the hearing. There would also be a cost detriment to the defendant to the extent he engaged Victorian lawyers who would have to replicate some work already done;

(g) There is no substantive or procedural advantage in the proceedings being heard in the Victorian Supreme Court;

(h) The natural forum is Queensland. The plaintiffs have foreshadowed joining Mr Kerwick as a defendant. There is no evidence as to whether Mr Kerwick would seek to have the proceedings transferred to Queensland. 6 In my opinion, when the alternatives of the proceedings continuing in this court or being transferred to the Victorian Supreme Court are compared, particularly having regard to the above factors, neither emerges as more compatible with the interests of justice than the other. Accordingly, I refuse the application to transfer the proceedings to the Supreme Court of Victoria. 7 There is a second ground to refuse the application. 8 The Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW) provides: "5. (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: (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." 9 Sub-section 5(2)(b)(iii) refers only to the "interests of justice". However the test that has been applied under this paragraph involves the determination of which forum is "more appropriate" - James Hardie & Co Pty Ltd v Barry (2000) 50 NSWLR 357 at [4] per Spigelman CJ. 10 In BHP Billiton Limited v Schultz [2004] HCA 61; 221 CLR 400 Kirby J said: "[161] …the clear purpose of the residual criterion expressed by the legislatures of Australia in the common form of the cross-vesting Acts has been, for this purpose, to follow the approach of Lord Goff [in Spiliada Maritime Corporation v Cansulex Limited (1987) AC 460]… [163] …This was to the effect that 'more appropriate' forum was the 'natural forum' for the trial of the action. This was described as being 'that with which the action had the most real and substantial connection'… [170] …Normally, 'the interests of justice' of all parties within Australia will require the transfer of proceedings to be determined by the Supreme Court of another State or of a Territory where that Court, rather than the court of the forum selected by the plaintiff, is the 'natural forum' being that 'with which the action has the most real and substantial connection'." 11 His Honour observed (at [164]) that: "…An exception is allowed where it is clear that 'substantial justice' cannot be done to the plaintiff in what is otherwise the 'appropriate' forum. However, [that exception] scarcely applies to courts within the Australian Commonwealth…" 12 The above approach is perhaps reflective of the provisions of recital (c) at the commencement of the statute which sets out the objectives of the legislation as follows: "Whereas it is desirable: (c) if a proceeding is instituted in a court that is not the appropriate court, to provide a system under which the proceeding will be transferred to the appropriate court." - James Hardie & Co Pty Ltd v Barry at [4] 13 In the present case, the natural forum is Queensland. The agreements for the advance of the total amount of $6.5 million were made in Queensland and the moneys were advanced in that State. The records of the advances are held in Queensland and the properties involved in the transactions are all located in Queensland. At the time of each agreement, the parties to it were resident in Queensland and conducted considerable business in that State. The acknowledgement was signed and received by the third plaintiff in Queensland. The third plaintiff and his wife, Mr Kerwick and the defendant's parents all reside in Queensland. Mr Pariente resides in the United States. The defendant, his sister and brother-in-law and Chris Chryssafis and Mr Boutsianis all resided in Queensland at the relevant time, though they now currently reside in Victoria. The only connection at the time of the transactions with Victoria was that Elite was registered in that State, though company records reveal its principal place of business was in Queensland. The only connection with New South Wales at that time was that the first and second plaintiffs were registered there though each carried on substantial business in Queensland. 14 In my opinion, the Queensland Supreme Court is the appropriate forum. As none of the parties before me has sought to transfer the proceedings to that court, I refrain from exercising the power to do so pursuant to s 5(7). However, in my opinion, the existence of a court, other than this court and the Supreme Court of Victoria, which is the appropriate forum precludes an order for transfer to the Victorian Supreme Court being made, the exception noted by Kirby J having no application in this case.

The application to transfer to the Commercial List 15 Proceedings in the Equity Division of the court may be entered in the Commercial List where they are "proceedings arising out of commercial transactions" or "proceedings in which there is an issue that has importance in trade or commerce" - r 45.6 Uniform Civil Procedure Rules, 2005. 16 Section 54 of the Supreme Court Act provides a discretion to transfer proceedings from one division of the court to another. 17 The present proceedings arise out of commercial transactions between businessmen and would appear to fall within the ambit of r 45.6. 18 However, entry into the Commercial List is discretionary. In the exercise of my discretion I decline to order the transfer of the proceedings into the Equity Division, Commercial List for the following reasons:

(a) The proceedings were properly commenced in the Common Law Division;

(b) The application to transfer was not made as soon as practicable after the proceedings commenced;

(c) The commercial aspects of the matter do not appear complex and do not require the particular expertise of a Commercial List judge;

(d) The proposed cross claim for damages for assault (and the issue of assault in the principal proceeding) makes it appropriate the proceedings remain in the Common Law Division as that Division has more experience in dealing with such claims and the calculation of damages for personal injury;

(e) There is no difficulty in obtaining a hearing date in the Common Law Division once the case is ready for hearing and the Common Law Division has power to case manage and expedite the proceedings if appropriate;

(f) In Giorgi v European Asian Bank Aktiengesellschaft (McLelland J, unreported, NSWSC, 3 March 1996) (quoted with approval by Rogers CJ Comm D in Challenge Bank Ltd v Raine & Horne Commercial Pty Ltd (1988) 17 NSWLR 297 at 308 it was held "The orderly conduct of the business of the court requires that proceedings properly commenced in one Division remain in that Division unless a sufficient case for transfer to another Division has been made out." 19 In my opinion, a sufficient case for the transfer of these proceedings to the Equity Division, Commercial List has not been made out. I dismiss the application.

The defendant is to pay the plaintiffs' costs of that application.

The plaintiffs are to pay the defendant's costs of that application.

The proceedings will be listed for directions before the registrar on 8 May 2008. ***********

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.

CITATION : Coastline Constructions (Aust) Pty Ltd v Kakavas [2008] NSWSC 388

James Hardie & Co Pty Ltd v Barry (2000) 50 NSWLR 357 CASES CITED : BHP Billiton Ltd v Schultz [2004] HCA 61; 221 CLR 400 Giorgi v European Asian Bank Aktiengesellschaft (McLelland J, unreported, NSWSC, 3 March 1996) Challenge Bank Ltd v Raine & Horne Commercial Pty Ltd (1988) 17 NSWLR 297

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