Gorczynski v Hale

Supreme Court of NSW|2018-05-03|Before: Ward CJ, Simpson J, Mr P, Mr J, Beech J, Palmer J

Judgment

HER HONOUR: This is an application before me in the duty list commenced by the filing of a notice of motion that I gave leave to file in court on 1 May 2018.
The application is for an order pursuant to s 74K(2) of the Real Property Act 1900 (NSW) extending the operation of a caveat until the final determination of substantive proceedings in a Common Law Division matter, matter number 2008/289619 or until further order of the Court.
On 1 May 2018, when the matter was before me ex parte, I made directions in relation to the service of the application on the parties named as the persons affected by the orders sought; these being Michelle Sarah Hale and Tammy Meyer. Ms Hale and Ms Meyer are the registered proprietors of the land at Brighton-le-Sands over which the caveat has been lodged. They hold title to the land in their capacity as executors of the estate of the late William Osmo.
The caveat in question was lodged on 16 January 2018 by the plaintiff, Mr Peter Gorczynski. The particulars of the interest or interest in the land which are sought in the caveat are as follows: The caveator claims an interest at law or in equity over the estate of William Osmo, which estate includes the subject land.
On an application for an extension of a caveat the onus is on the caveator to demonstrate that there is a serious question to be tried as to whether a caveatable interest exists: see Custom Credit Corporation Limited v Ravi Nominees Pty Ltd (1992) 8 WAR 42 and Jandric v Jandric [1999] WASC 22 at [5], both of which were referred to in Bashford v Bashford [2008] WASC 138 by Beech J. I refer also in this regard to the decision of Palmer J in Antar v Fairchild Development Pty Limited (mgrs and recs apptd) [2008] NSWSC 638.
If the court is satisfied that there is a serious question to be tried as to whether a caveatable interest exists, then other factors to be considered in an application to extend the operation of a caveat include the balance of convenience. In considering the balance of convenience, one factor that is significant is said to be the strength of the caveatable interest (see Hanson Construction Materials Pty Ltd v Roberts [2016] NSWCA 240 at [79] per Sackville AJA).

Background

The present application and the claim that the plaintiff contends supports the caveat have had a lengthy history. Some of that history is set out in the affidavit sworn by Mr Gorczynski on 29 April 2018. In that affidavit Mr Gorczynski refers to and seeks to rely upon an affidavit sworn by him on 20 March 2018 filed in the Common Law proceedings that have been identified above as well as an affidavit dated 27 March 2018 in those proceedings.
In the Common Law Division proceedings an amended notice of motion was filed on 19 March 2018 in which Mr Gorczynski seeks various orders, relevantly including (in prayer 5 of the amended notice of motion) an order pursuant to rr 5.3 and 5.4 of the Uniform Civil Procedure Rules 2005 (NSW) that the executors of the respective estates of William Osmo and Fortunee Toni Osmo and/or the executors' solicitor, Mr Robert Ebner, give discovery in relation to the business affairs of William Osmo and Fortunee Toni Osmo and the business affairs of any companies of which they were directors and/or members, being "business affairs" as defined in s 9 of the Corporations Act 2001 (Cth). The orders sought in that notice of motion form part of the background to the current application and are referred to in the affidavit material on which Mr Gorczynski relies.
I note as follows, without making any findings of fact in relation to these matters, that proceedings were commenced by Mr Gorczynski in May 2006 in the District Court against the company W & FT Osmo Pty Limited ACN 003 618 059. Mr Gorczynski describes those proceedings as proceedings relating to a claim of negligence concerning an alleged false building certification issued by the company, whose sole directors and members or shareholders were William Osmo and his wife, Fortunee Osmo. (In fact, as I understand it from the material before me, Mr William Osmo was the sole director of the company but both he and his wife were shareholders of the company.)
The damages claimed by Mr Gorczynski in those proceedings were particularised as being $316,816.77.
A copy of the statement of claim in the District Court proceedings is annexed to Mr Gorczynski's 29 April 2018 affidavit. Mr Gorczynski has deposed in his affidavit of 20 March 2018 in the Common Law Division proceedings to the fact that, by letter dated 4 July 2006, the company's solicitor, Mr Robert Ebner, informed him that the company was insolvent and was to be wound up and the company did not intend to defend the proceedings.
Mr Gorczynski obtained default judgment in those proceedings on 7 July 2006. On that date orders were entered for judgment for Mr Gorczynski against the defendant company for damages to be assessed and for costs and the matter was stood over for an assessment hearing on 10 August 2006 with an estimate of one hour and the plaintiff was directed to prepare an affidavit to be handed up on that occasion.
Those proceedings were transferred to the Supreme Court in 2008. That was on the basis that, on Mr Gorczynski's evidence as to the claimed damages, the estimated damages amount would be over $1 million, in excess of the District Court's monetary jurisdiction.
In Mr Gorczynski's affidavit of 20 March 2018 he sets out in some detail the history of the proceedings to explain what has taken place since July 2006.
Mr Gorczynski has deposed that in late 2009 he applied to have the company's insurer, QBE, joined as a co-defendant, having been informed, he says, in 2008 by QBE's lawyers that Mr Osmo had not forwarded the claim to his insurer, contrary to advice that Mr Gorczynski said Mr Osmo had given him by letter dated 29 May 2006.
The application for the company's insurer to be joined as a co-defendant was heard by Simpson J, as her Honour then was, sitting in the Common Law Division. Her Honour dismissed the application on 24 July 2009 (Gorczynski v W & FT Osmo Pty Ltd (Supreme Court (NSW), Simpson J, 24 July 2009, unrep).
Mr Gorczynski then sought leave to appeal from the decision of Simpson J. His application for leave to appeal and appeal from her Honour's decision were heard concurrently: see Gorczynski v W & FT Osmo Pty Ltd [2010] NSWCA 163. The Court of Appeal granted leave to appeal from her Honour's decision and dismissed the appeal. In dismissing the appeal Tobias JA said that the plaintiff's submissions on the limitation issue should be rejected and that those of QBE should be accepted (see [134] of the judgment of Tobias JA). Giles and McColl JJA agreed that the primary judge was in error in failing to find that the fact that the plaintiff's claim against W &FT Osmo Pty Limited was statute barred was unarguable.
That finding led to the decision, in the exercise of the court's discretion, that the plaintiff's application (under the provision to s 6(4) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW)) for leave to commence an action against QBE to enforce the charge under the insurance moneys payable under the policy under s 6(1) should be refused.
Mr Gorczynski said that after the Court of Appeal decision he suffered from personal and financial difficulties and that this explains the delay in what happened next. In particular, at [40] of his affidavit sworn 20 March 2018, Mr Gorczynski deposed that in about August 2010 he suffered what was subsequently diagnosed as a nervous breakdown caused by the stress of the litigation and the financial loss and that he became too stressed mentally and too ill physically to continue working or taking any further steps in the Osmo proceedings.
Subsequently, Mr Gorczynski sought advice and formed the view that he would have a cause of action against Mr Osmo and/or Mrs Osmo personally. He informed me that he and his lawyers looked at the way that the proceedings had been conducted and gave consideration to joining Mr and Mrs Osmo on causes of action, including fraud.
Mr Gorczynski says that he was looking to reformulate the claim in May 2017 and sought or was seeking leave to amend his statement of claim in the Common Law Division proceedings to include a claim in relation to fraud and breaches of director's duties by Mr Osmo and maybe Mrs Osmo.
Mr Gorczynski made various requests starting in June 2017 of Mr Osmo and others for information in relation to the company history and its connection with other subsequent companies. In that regard I note I was taken in the course of submissions to a document exhibited to Mr Gorczynski's 20 March 2018 affidavit, which appears to be a document on the letterhead of Osmo Consulting Pty Limited and which refers to: Will Osmo has been a consulting civil & structural engineer since 1978 when he opened his first consultancy business, trading under the name Osmo & Associates. Osmo & Associates was incorporated in 1988 and in 2000 the company merged with another entity to form TOP Consulting Group. In 2012 TOP Consulting Group was sold and TOP Consulting Group was formed.
Mr Gorczynski placed weight on the coincidence in timing of various events, including the merger of the entities referred to in that document and the evidence in relation to the purchase of the property at Brighton-le-Sands over which the caveat has been lodged.
Mr Gorczynski has handed up an historical title search from the New South Wales Land Registry Services in which the date of the transfer of the property at Brighton-le-Sands to William and Fortunee Osmo as joint tenants on 23 December 2009 is noted. Mrs Osmo died in about 2014 or 2015. In Mr Gorczynski's 20 March 2018 affidavit he refers to the date of Mrs Osmo's death as being 2014 but in his more recent affidavit he has put it as in or about 2015. Nothing turns on this.
Mr Osmo, to whom, as joint tenant in respect of the property, Mrs Osmo's interest would have passed by way of survivorship, became the sole proprietor of the property. Mr Osmo died in July 2017.
Ms Hale and Ms Meyer (as noted earlier) are the executors of the late Mr Osmo's estate and I am informed the beneficiaries of his estate. A copy of the will of Mr Osmo is an exhibit to Mr Gorczynski's 20 March 2018 affidavit. Under the terms of that will, the residue of the estate is to be held in trust to be divided equally amongst the beneficiaries. Those include but are not limited to Ms Hale and Ms Meyer.
Apparently the lodgement of the caveat that is now sought to be extended on 16 January 2018 was precipitated by the publication of notice of an intention by the executors of the estate to distribute the estate.
A copy of that notice of intended distribution of an estate is at p 17 of the exhibit to Mr Gorczynski's affidavit. That notice called for any person having any claim upon the estate of Mr Osmo to send particulars of the claim to the legal representative of his estate, Mr Robert Ebner. Mr Gorczynski has notified the legal representative of a claim in relation to the estate.
In the Common Law proceedings the matter at this stage rests with, I am told, the amended notice of motion seeking orders, including an order for discovery of matters in relation to business affairs of the company, to be heard on 27 June 2018.

Application for extension of caveat

I turn then to the present application. I have set out already the terms in which the caveatable interest is expressed. Section 74K(2) of the Real Property Act provides that subject to subs (3) (which I note is not applicable since notice of the application has now been given) on the formal hearing of an application made under subs (1), the court may, if satisfied that the prospective claim has or may have substance, make an order extending the operation of the caveat for such period as is specified in the order or until further order of the court or may make such other orders as it thinks fit. If the court is not so satisfied it will dismiss the application.
I have already noted that the onus is on the caveator to demonstrate in an application for extension that there is a serious question to be tried as to whether a caveatable interest exists and I also note that a claim under a caveat to "an equitable interest" has been held to be defective in form insofar as it fails to specify the nature and extent of the interest (see Jandric at [40] and Cruz v Osborne [1999] WASC 8 at [9]-[10] applying Kerrabee Park Pty Ltd v Daley (1978) 2 NSWLR 222 at 230 to 232, which authority is referred to at [56] of the decision of Beech J, to which I have already referred).
In the present case the claimed caveatable interest is of "an interest at law or in equity over the estate of William Osmo". It fails to specify the nature and extent of that claimed interest.

Mr Gorczynski's submissions

In the course of oral submissions, the caveatable interest was said to arise in a number of ways. In particular, as I understand it, Mr Gorczynski's claim is that the property at Brighton-le-Sands was acquired through proceeds obtained by Mr Osmo out of the company, W & FT Osmo Pty Ltd, by way of fraud. That fraud is said to have arisen by reference to the fact that it had been asserted that the company was about to be insolvent and would be wound up whereas it still has not been wound up as at today.
I was taken to minutes of a meeting in 2017. I refer to p 25 and p 28 of the exhibit to Mr Gorczynski's 20 March affidavit in which a resolution was noted for the winding up of the company Top Consulting Osmo Group Pty Limited ABN 25 156 642 554. That meeting was held on 26 September 2017. This is the entity into which it is said that W & FT Osmo Pty Ltd (the named defendant in the Common Law Division proceedings) and another consulting group were merged.
Mr Gorczynski's suspicion is that funds from the defendant company, in respect of which he had obtained default judgment, have ended up in Mr Osmo's hands. He also asserts that Mr Osmo as director will be liable for the debts of the company on the basis that it was trading as insolvent. Mr Gorczynski says that, had it not been for Mr Osmo's death, Mr Osmo would have been personally liable to meet that debt and, Mr Osmo having died, Mr Gorczynski says he now has a claim against the estate and, since the subject property is part of the estate, he claims to have an interest in the subject property.
As I have noted, Mr Gorczynski places emphasis on the coincidence of timing of various events. He submits that the property was purchased at the same time that the defendant company was merged with another company and that other company has been sold. He suspects that funds from the sale of the companies which are indebted to him ended up paying out the mortgage of the Brighton-le-Sands property.
At various times Mr Gorczynski referred in his submissions to fraud and/or irregular conduct. Put in various ways, he believes he may have a caveatable interest in that funds have been passed from the company to Mr Osmo illegitimately and that Mr Osmo then used those illegitimate funds to purchase the property.
Mr Gorczynski says his difficulty has been that he has been asking for information which will allow him to decide exactly what the answer is to the question as to what his caveatable interest is and on what basis he can join the executors. He wants an answer to the question how it came to be that funds that appeared to him to have come from the sale of the defendant company have ended up, he believes, paying for the property which has now been passed to the executors. He suspects that money properly owed to him by the company ended up being used to purchase the land.
Putting it another way, he suspects that moneys that belonged to the company (assets of the company that was "supposedly" insolvent), have ended up with Mr Osmo, and that Mr Osmo then used that money to purchase the Brighton-le-Sands property. His view is that the purchase of the property was obtained by deception or fraud, because the money used to buy the property was somehow taken from the company by deception or fraud.
I have already referred to how it is that Mr Gorczynski argues that there was deception or fraud. He suspects that there was "Phoenix" activity with funds moving from one company to another in order to avoid creditors, but says that he does not know whether that is the case, and that that is why he is seeking discovery in the Common Law proceedings. He says the difficulty that he has is in trying to find out what has happened: that is, where did the money go, and whether it ended up in Mr Osmo's "pockets" to pay for the mortgage and to pass money on to his beneficiaries. The very reason why he sought discovery in the application that has apparently been listed for hearing on 27 June 2018 is to find out where the money went and how it ended up with Mr Osmo and whether it did end up in the purchase of the Brighton-le-Sands property.
One way or another Mr Gorczynski says he wishes decisively to satisfy himself that he does have an equitable interest in the property which came about in the way that he has explained from a series of what he characterises as fraudulent activities.
On the question of balance of convenience, Mr Gorczynski has a concern that if there is a finding against him in relation to the claim he may have against the estate, then this could give rise to an issue estoppel in a case against the executors in due course.
He also raises (by way of prejudice to him if an order extending the caveat is not made) his concern that the defendants will take steps to distribute the estate and that the only asset out of which he will be able to enforce any judgment obtained at the end of the day will be unavailable. He submits that the Brighton-le-Sands property is the only substantial asset in the estate.

Defendants' submissions

The application for an extension of the operation of the caveat is resisted by the defendants for the reason that it is futile to extend the operation of the caveat because there is no serious question to be tried as to the existence of an equitable interest.
Counsel for the defendants points to the fact that the caveatable interest is not properly described in the caveat itself (in that the caveat does not of itself identify the nature and extent of the interest claimed in the land but simply claims an interest at law and/or in equity over the estate as a whole, which includes the land).
It is submitted that the allegation sought to be made by Mr Gorczynski, and in respect of which Mr Gorczynski has explained his suspicions today, could not give rise to a caveatable interest in the land (those allegations including claims for insolvent trading or fraud or deception or for breach of director's duties or the like).
I interpose here to comment that Mr Gorczynski confirmed in reply submissions that he does not assert that the alleged insolvent trading gave rise to a caveatable interest. Rather, he emphasises that his claim is that, if moneys from the sale of the companies have somehow ended up in purchasing the property in question (the timing of which I have already noted he regards as significant in that regard) then he would have a claim in respect of the property in some way. Mr Gorczynski's concluding submission was that the way the property came to be purchased and subsequently the mortgage discharged was "certainly" irregular, if not fraudulent or deceptive, and that but for the conduct of Mr Osmo the property would not have come into existence.

Determination

Mr Gorczynski referred in his submissions to a decision of Lindsay J in Makrypodis v Eleisawy [2014] NSWSC 1429. In that case his Honour was considering the existence of a serious question to be tried as to whether there was a caveatable interest and as to whether the balance of convenience favoured an order for an extension of the caveat's operation. Mr Gorczynski emphasised that at [34] his Honour said that "[t]he Court is thus, ultimately, directed to consider whether a caveator's claim 'has or may have substance'" (my emphasis).
Mr Gorczynski maintains that his claim may have satisfied this standard. The difficulty with reliance on what was said in Makrypodis is that that was a case where the parties were agreed that if the contract had not been properly rescinded there was a caveatable interest, and that if there were contracts on foot for the acquisition of property, that would have supported the lodgement of a caveat; the issue in question was whether or not the rescission of the contract(s) was wrongful or otherwise. (That is not the position here; in that it is not conceded that if Mr Gorczynski's allegations are made out there would be a caveatable interest.) Mr Gorczynski relies upon this case as supporting his contention that until he has obtained discovery and is able to satisfy himself as to the factual basis in relation to the business affairs of the company the caveat should be extended.
I have concluded that Mr Gorczynski has not established that there is a serious question to be tried as to whether a caveatable interest exists. As I have already noted, the description of the claim in the caveat is defective in form in failing to specify the nature and extent of the interest claimed. I am not satisfied that Mr Gorczynski has established that a claim against Mr Osmo's estate based on the liability of Mr Osmo, as a former director of the company, in debt (by reference to the alleged insolvent trading) or a claim for damages for fraud, in relation to the circumstances in which the default judgment was entered or the company came to remain in existence at a time when it had been represented that the company would be wound up, gives rise to any interest in land.
I accept the submission for the defendants that if there were a claim for fraudulent or deceptive conduct arising out of the representation of an intention to wind up a company that sounded in any damages, that is not a claim which gives rise to an interest in the land nor would any of the claims contemplated by Mr Gorczynski against the estate of Mr Osmo or Mrs Osmo in relation to any intentional breaches of director's duties or otherwise in respect of the transfer of funds that Mr Gorczynski suspects took place in order to enable the purchase of the property.
In those circumstances, the question of balance of convenience does not arise. However, I note that insofar as a factor in assessing the balance of convenience is the strength of the caveator's claim for an interest in land, I have difficulty seeing how the claims that Mr Gorczynski considers he may have in relation to or against the estate of Mr or Mrs Osmo could give rise to an interest in the land.
Insofar as the concern has been raised by Mr Gorczynski that there may be an issue estoppel arising out of my determination of this application, I am of the view that that is not likely to be the case. I am not making a determination in any way in respect of the claim that Mr Gorczynski considers he has or he may have against the estate of Mr Osmo or the company or the estate of Mrs Osmo. I am simply making a determination as to whether I am satisfied that there is a serious question to be tried that there is a caveatable interest in the land and therefore, in terms of the issue estoppel point, had the matter come to the question of balance of convenience I would not have regarded that as a factor weighing in favour of the extension of the operation of the caveat.
In those circumstances, I dismiss the application for an extension of the caveat and dismiss the notice of motion filed on 1 May 2018. I dismiss the proceedings in the Equity Division and order the plaintiff to pay the defendants' costs of the proceedings.
There was an application for the costs of the defendants to be payable forthwith. There was also an application by the defendants for costs to be paid on an indemnity basis and in that regard reference was made to the fact that the proceedings were misconceived and to the fact that allegations of fraud had been made.
I am of the view that the ordinary order for costs ought to apply and that the plaintiff should pay the defendants' costs of the notice of motion and of the proceedings which I will now dismiss. I do accept that the application for extension of the caveat was misconceived, in circumstances where there was no caveatable interest that was identified with sufficient particularity in the caveat and no caveatable interest in the land has here been able to be articulated, but I take into account that the plaintiff is self-represented and in those circumstances I will not make an order for indemnity costs.

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. Decision last updated: 15 May 2018

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