Marshall v Fleming

Supreme Court of NSW|2009-09-01|Before: Rothman J

CITATION : Marshall v Fleming [2010] NSWSC 86

DECISION : (ii) The defendants pay the plaintiffs' costs of the motion, as agreed or assessed;

(iii) The parties be granted liberty to apply for a different or special order for costs within 28 days of the date of this judgment.

LEGISLATION CITED : Civil Procedure Act 2005 Uniform Civil Procedure Rules 2005

Akai Pty Ltd v People's Insurance Co Ltd [1996] HCA 39; (1996) 188 CLR 418 Amin Rasheed Shipping Corporation v Kuwait Insurance Co [1984] AC 50 Bonython v The Commonwealth [1950] UKPCHCA 3; (1950) 81 CLR 486 Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35; (2000) 201 CLR 520 Distillers Co (Bio-Chemicals) Ltd v Thompson [1971] AC 458 CASES CITED : General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 Marshall v Carruthers; Marshall v Marshall [2002] NSWCA 47 Murakami v Wiryadi & Ors [2010] NSWCA 7 Puttick v Tenon Ltd [2008] HCA 54; (2008) 238 CLR 265 Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93 Voth v Manildra Flour Mills Pty Ltd [1990] HCA 55; (1990) 171 CLR 538

Margaret Lesley Marshall (First Plaintiff) Kim Neil Marshall (Second Plaintiff) Francis Fleming (First Defendant) Marc Moller (Second Defendant) Steven Pounian (Third Defendant) James Kreindler (Fourth Defendant) PARTIES : David Cook (Fifth Defendant) David Beekman (Sixth Defendant) Bianca Rodriguez (Seventh Defendant) Noah Kushlefsky (Eighth Defendant) Robert Spragg (Ninth Defendant) Brian Alexander (Tenth Defendant) Justin Green (Eleventh Defendant)

COUNSEL : P E Blacket SC / C J Bevan (Plaintiffs) P Braham / E Bishop (Defendants)

SOLICITORS : Turner Freeman Lawyers (Plaintiffs) Kennedys (Australasia) Pty Ltd (Defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION PROFESSIONAL NEGLIGENCE LIST

11113/2009 Margaret Lesley Marshall & Anor v Francis G Fleming & Ors

JUDGMENT 1 HIS HONOUR: The defendants move to dismiss these proceedings, or have them permanently stayed, because the Court is not a convenient or the proper forum for the hearing of the proceedings. The matter, the defendants submit, should be heard in New York. The substantive proceedings involve allegations of breach of contract and breach of duty (tortious, contractual and statutory) by the defendants in their capacity as legal practitioners representing, amongst other persons, the two plaintiffs in these proceedings, as plaintiffs in proceedings for damages arising from an airline crash. The applicable rule is UCPR 11.7 of the Uniform Civil Procedure Rules 2005 ("UCPR"), under which the defendants move and which governs the Court's exercise of jurisdiction. The history is a little convoluted. 2 The plaintiffs are the wife and child of Neil Marshall, who was killed in the aeroplane accident. The accident occurred over the Spencer Gulf on a Whyalla Airlines flight. The deceased, Neil Marshall, had, before the accident, left his wife (Margaret Marshall) and formed a relationship with Ms Carruthers. That latter mentioned relationship commenced in or about 1995, and the aeroplane accident occurred on 31 May 2000. It should be noted that the deceased had a will, which was executed on 23 December 1992. 3 For reasons associated with liability for the accident, the plaintiffs proceeded against Textron Lycoming Inc, the manufacturer of the aeroplane. On advice, those proceedings (hereinafter "the Pennsylvania Proceedings") were commenced in the USA and, particularly, in Pennsylvania, in which State Textron was resident. The proceedings were resolved in Pennsylvania. Margaret Marshall was the personal representative and executrix of the estate of Neil Marshall. The defendants, in the proceedings now before the Court, are the members of a New York firm of attorneys, who represented the relevant plaintiffs in the Pennsylvania Proceedings. As may be obvious from that description, the defendants are resident in New York. The first plaintiff is an Australian citizen, resident, at the moment, in the UK, and the trustee of the deceased's estate, which trust estate, to the extent that it has residence, is resident in Australia. The second plaintiff, the son of the deceased, is a resident of Albury, in the State of NSW, Australia. 4 Apart from the residence of the parties to the proceedings, there are other factors, which determine whether this Court is a convenient forum for the hearing of these proceedings. Those factors depend upon, inter alia, the location in which the cause of action arose and other such criteria. In turn, these criteria depend on facts, which are necessary to summarise. Facts 5 The first plaintiff, Ms Marshall, married the deceased in or about 1967 and gave birth to the second plaintiff, Mr Kim Marshall, on 17 January 1980. On 23 December 1992, the deceased executed his last will and testament. 6 In about June 1995, the deceased left Ms Marshall and formed a relationship with Ms Carruthers. 7 On 31 May 2000, the deceased was killed in the accident, to which reference has been made, and which occurred over the Spencer Gulf in a commercial airline operation conducted by Whyalla Airlines. As one would expect, there was a coronial inquest. It is uncontroversial that the accident occurred because both engines of the airline failed and, while the pilot safely ditched the plane in the ocean, the occupants drowned while awaiting rescue. 8 As earlier stated, because of the residence of Textron and, albeit in bankruptcy, Piper Aircraft Corporation, the Pennsylvania Proceedings were to be commenced against the manufacturers in Pennsylvania. Piper Aircraft Corporation had been succeeded by The New Piper Corporation, which had its principal place of business in Florida, but conducted substantial business in Pennsylvania. Further, there existed a Piper Aircraft Corporation Irrevocable Trust, established by the United States Bankruptcy Court, Southern District of Florida in 1995, which was located and administered in Florida. The Pennsylvania Proceedings were settled between the parties. 9 Prior to the commencement of the Pennsylvania Proceedings, legal practitioners in Adelaide, South Australia ("the South Australian attorneys"), travelled to the United States of America on behalf of the plaintiffs in these proceedings, and other clients who were plaintiffs in the Pennsylvania Proceedings, and met with Kreindler & Kreindler ("the US attorneys"), the members of which are the defendants in these proceedings before the Court. There is some controversy as to the place at which the contract was formed under which the US attorneys acted on behalf of the plaintiffs in those proceedings. It is unnecessary for the Court to resolve this controversy finally, but it is necessary to form a preliminary view for the purpose of this motion. 10 In or about November and/or December 2001, the South Australian attorneys met with the US attorneys in New York and discussed the tactics associated with the Pennsylvania Proceedings. It was decided (and advised) that there needed to be a plaintiff who lived in the USA, that the matter would not be a class action and that each of the plaintiffs would need to issue proceedings against Textron in her or his own name. The payment of the US attorneys would be on a contingency fee arrangement, and there was an Australian litigation funder. The South Australian attorneys would be the agents of the US attorneys in Australia in order to facilitate efficient communication between the US attorneys and their Australian clients (including the plaintiffs). 11 On 7 February 2002, the South Australian attorneys provided a letter of advice to the plaintiffs, advising of the foregoing. On 22 February 2002, the New South Wales Court of Appeal confirmed the first plaintiff as the executor of the will of the deceased and found that the second plaintiff had sole entitlement as beneficiary under the will. 12 On 20 March 2002, the US attorneys drafted retainer agreements (presumably the drafting occurred in the US) between the US attorneys and their clients (which retainer agreements, insofar as the retainers relate to an agreement with the plaintiffs herein, will, hereinafter, be referred to as "the retainer agreement"). The US attorneys sent those agreements to their Australian agent, the South Australian attorneys, in order, it seems, for the South Australian attorneys to procure the execution of the retainer agreements by the US attorneys' clients in Australia. 13 The process of preparing the execution of the retainer agreements included the following advice to clients: "The [retainer agreement] is to be signed by one person on behalf of all plaintiffs claiming under a deceased. I am advised that this person must be the executor or administrator of the estate. In the States [sic] they are known as 'estate representatives'. These people sign on behalf of all plaintiffs even if they did not have any entitlement under the will or the Act. The ILF require that each potential adult plaintiff sign and if they have plaintiff dependants, then on their behalf also." 14 The reference to ILF is a reference to Insolvency Litigation Fund Pty Ltd, which was the Australian litigation funder. The plaintiffs' lawyers had been, at all relevant times, and continue to be, Turner Freeman. The plaintiffs attended the offices of Turner Freeman in Sydney and there executed litigation funding agreements with ILF and the retainer agreement with the US attorneys to conduct the Pennsylvania Proceedings. That retainer agreement, and the documents associated therewith, show the South Australian attorneys to be the agents of the US attorneys in relation to the Australian plaintiffs and in relation to the litigation funding agreements. 15 On 22 March 2002, Turner Freeman, on behalf of the plaintiffs herein, returned the signed retainer agreement to the South Australian attorneys. In turn, the South Australian attorneys sent the retainer agreement to the US attorneys in New York and the litigation funder in Sydney. 16 No further signatures were placed upon the retainer agreement, and all of the parties operated as if the retainer agreement were binding on each of them. It would seem that the drafting of the retainer agreement by the US attorneys and its supply by the agents of the US attorneys to the plaintiffs was an offer, which, no later than the date of notification of its acceptance by the plaintiffs to the South Australian attorneys (being the agents of the US attorneys), formed the contract between the US attorneys and the plaintiffs. There may be facts, which, at a final trial, may be inconsistent with that approach. It is for that reason, amongst others, that the Court determines these issues only for the purpose of the interlocutory proceedings and not on a final basis. However, on the material before the Court, at this time, the contract, being the retainer agreement between the US attorneys and the plaintiffs, was formed in Australia. 17 Seemingly pursuant to the retainer agreement, on 29 May 2002, the US attorneys retained a Pennsylvania agent (Cliff Rieders) and, through that agent, commenced the Pennsylvania Proceedings. The South Australian attorneys sent copies of the initiating process to Turner Freeman. 18 On 30 July 2002, the US attorneys requested from Turner Freeman certain documents in order to respond to a notice of motion filed by Textron seeking an order striking out the Pennsylvania Proceedings. Turner Freeman, who had already been working on evidence for the Pennsylvania Proceedings, complied with that request. Affidavits were prepared, being affidavits of the first and second plaintiff, and sent by Turner Freeman to the US attorneys. 19 The email of 30 July 2002, from the US attorneys, advised as follows: "The action in the US have [sic] been, and had to be, brought by the personal representative of the decedent's estate, but are brought on behalf of the estate and the decedent's survivors. If the court applies US law, each dependent survivor will obtain an award for loss of support and an award will be made to the estate for the decedent's pre-death pain and suffering. If there are no dependent survivors, an estate accumulations award will be made to the estate and will go to the estate beneficiaries. The award for pain and suffering would not be a 'personal' recovery as I understand your question." 20 The foregoing email was a response to an email sent by Turner Freeman on 29 July 2002. The email from Turner Freeman made it clear that Turner Freeman were acting for the plaintiffs herein and not for Ms Carruthers. Further, the email asked a series of questions, one of which related to damages for pain and suffering of the deceased. Hence, the wording of the last sentence of the passage cited immediately above. 21 Between 13 February 2003 and 15 February 2003, an email exchange between Turner Freeman and the US attorneys occurred. I do not repeat it in full. Part of the exchange excited a question from Turner Freeman, sent at 1.54am on 13 February 2003, in which the US attorneys were asked who would be the recipients of the damages award, and the response is relevant. 22 According to the response from the US attorneys, wrongful death damages were not paid to the estate of the deceased, but to the survivors identified in the intestate law, namely, spouse, children and, in the absence of children, parents. Such damages are awarded based upon the survivor's loss. On the other hand, damages, awarded to compensate for pain and suffering of the deceased form estate assets and pass through the estate. In the case of a settlement, generally the court is asked to award little for pain and suffering because of US tax implications. 23 Further to the above, the US attorneys advised, although seemingly without much conviction, that US courts "would probably recognize a de facto marriage formed in Australia, if an Australian court would recognize the marriage." This opinion was expressed in the context that de facto wives, according to the US attorneys, are not entitled, in most US jurisdictions, to any wrongful death benefits. It was also the understanding of the US attorney, who authored the email, that Australian law recognised common law marriages. 24 On 26 March 2003, in further correspondence between the US attorneys and Turner Freeman, the US attorneys expressed the view that, under the applicable US law, Ms Carruthers, the de facto wife of the deceased, was entitled to receive part of the damages payable by Textron arising out of the Pennsylvania Proceedings, if Australian law recognised the relationship. 25 On 8 April 2003, Turner Freeman reminded the US attorneys that each law firm had mutual clients and that those clients (or one of them) acted as the sole executor and legal personal representative of the estate of the deceased. Turner Freeman also made clear that, in its view, the only persons with a legal interest in the settlement amount were the plaintiffs on whose behalf, alone, the action in Pennsylvania had been brought, because those persons were the only persons with a chose in action. 26 Further, Turner Freeman directed the US attorneys to distribute the amounts in accordance with the "explicit instructions" of their mutual clients, any departure from which would be a breach of professional obligations to those clients. And, in the same passage, Turner Freeman made clear to the US attorneys that treating any third party (i.e. apart from their mutual clients) as having an interest in, or claim upon, the settlement amount attributable to the deceased would involve a "clear and unequivocal conflict of interest". 27 Later on 8 April 2003, and possibly 24 hours later, because of the time differences, the US attorneys sent an email to the South Australian attorneys and Turner Freeman relating to the distribution of the settlement monies. In the earlier communication, Turner Freeman had specifically directed and/or instructed the US attorneys not to communicate with the South Australian attorneys in respect of any matters relating to the plaintiffs' interests. On receipt of this email, Turner Freeman reiterated the direction, and withdrew authorisation "to communicate matters relating to our clients to any other persons and that includes in respect of general emails and that includes generally and specifically." 28 On 11 April 2003, there was an exchange of correspondence between the US attorneys and Turner Freeman. It is appropriate to set out the relevant terms of that correspondence. The email from the US attorneys was, relevantly, to the following effect: "Your recent communications with my office have been rather unfair. First, I have not discussed the Marshall case with Australian lawyers. I am continuing to work on the other cases and you will note that the e-mail that you accuse me of sending on Marshall makes absolutely no mention of the Marshall case.

Second, I am only acting in the interest of our respective client and am trying to avoid Mrs. Marshall being sued, either here or in Australia. As I understand it, you are advising a course of action by which Mrs. Marshall and Kim will take all of the settlement proceeds without the approval of any Court. While I would be happy that the Marshalls receive the settlement, you need to take care of this legally.

Third, you are wrong about the law, at least here in the United States. Because Mrs. Marshall has brought the action on behalf of the Marshall estate, she has a fiduciary duty to distribute the settlement proceeds to those persons who are entitled to receive the money. Only the estate personal representative has standing to bring the lawsuit here in the U.S., so even if a third party is entitled to settlement proceeds they have no standing to sue. For example, if a widow is appointed and sues on behalf of her late husband's estate, she brings the action on her own behalf and on the behalf of everyone who is entitled to receive wrongful death damages.

We have to come up with a plan that will not put the Marshalls at risk. Usually, the best course is to have the third party agree to the distribution, even if they do not receive anything. Is that possible? If not, a court of competent jurisdiction would have to rule on the distribution. That Court would have to be in Australia. If you are correct that Australian law would provide the full recovery to the Marshalls, it should be no problem getting a Court to order that distribution.

I suggest that we get an agreement that the entire net settlement be paid to Mrs. Marshall as estate representative and that settlement will be held in an interest bearing account until you get court approval to distribute it only to the Marshalls.

Pass this e-mail on to Mrs. Marshall and Kim Marshall. Please contact my office so that we can set up a telephone conference with the Marshalls at their first convenience so that we can deal with this problem." 29 The reply from Turner Freeman was direct and sent by facsimile on the same day as Turner Freeman received the foregoing letter. After castigating the US attorneys about costs being imposed on the plaintiffs by their action, Turner Freeman agreed to a telephone conference with the US attorneys, but only on the condition that the US attorneys undertook that they had read the material that had been sent to them by Turner Freeman. Turner Freeman also indicated that Turner Freeman knew what the legal situation was in Australia. Turner Freeman made it clear that they did not perceive that the US attorneys were acting in the interests of their clients. Further, they reminded the US attorneys that Ms Marshall had already been sued, had succeeded on appeal and there had already been (and continued to be) a judicial determination of the matters that seemed to concern the US attorneys. This was a reference to the judgment of the NSW Court of Appeal of 22 February 2002: Marshall v Carruthers; Marshall v Marshall [2002] NSWCA 47 (per Hodgson JA, Young CJ in Eq and Palmer J). 30 The response from the US attorneys (by letter dated 15 April 2003) is comprehensive and, relevantly for the interlocutory proceedings that are now before the Court, recites the following: "Pennsylvania, where the Marshall action is pending, is a hybrid loss to survivors and loss to estate jurisdiction. Two statutes control death actions. The first is the Wrongful Death statute under which the personal representative of the decedent brings the action on behalf the surviving spouse, children or next of kin for their pecuniary losses. 42 Pa. Cons. Stat. s 8301. Damages are not apportioned according to the relative degree of their respective loss but rather are distributed to the beneficiaries in the proportion that they would take under the intestacy statute -- not the decedent's will. Damages recovered are NOT part of the decedent's estate but rather are to compensate individual family members for their loss. Under Pennsylvania law, since Ms. Carruthers has been recognized by an Australian court as the de facto spouse, she would have a claim to the wrongful death recovery assuming that Australian law treats de facto spouses as de jure spouses in these types of actions. The second statute is the survival action which is liberally construed by Pennsylvania courts to permit the estate itself to recover its loss of accumulations. The Survival Action continues, in the decedent's personal representative, the right of action which accrued to the decedent for decedent's pain and suffering between injury and death and loss of gross earning power from the date of injury until death, less probable personal consumption and any amount awarded for wrongful death. Survival damages do flow into the estate and would be distributed under the will. I note, however, that the U.S. Court has not passed on what law governs the action and, if called to do so, would probably rule that Australian law governs. Early on we were informed that Australia does not recognize survival damages such as recovery for the decedents' pain and suffering. Accordingly, if we have to obtain a ruling from the U.S. Court to allocate the settlement, the Court would likely provide the settlement proceeds to whoever is entitled to a wrongful death recovery under Australian law.

Pennsylvania law provides that the powers, duties and liabilities of an estate's personal representative (e.g., executor, administrator) in this type of action are identical to those of trustee. 20 Pa. C.S.T. s7133. Moreover, the personal representative's powers over a wrongful death claim do not include settlement of a wrongful death action without the consent of the statutorily specified beneficiaries. Zielinski v. McGovern , 17 Pa. D.& C.3d 16, 18 (1980). The statutory beneficiaries are the real parties in interest." 31 On 24 April 2003, Turner Freeman indicated to the US attorneys that their advice on the entitlement of Ms Carruthers was inconsistent. Further, the US attorneys were reminded not to communicate with the South Australian attorneys. Despite that latter request, on 25 April 2003, the US attorneys provided information, alleged by Turner Freeman to be confidential, to the South Australian attorneys. An email communication occured between the US attorneys and the South Australian attorneys, relating to the rights of Ms Carruthers relative to the plaintiffs herein, without including Turner Freeman. 32 Some time later, namely, on 1 May 2003, after the US attorneys had received the settlement monies from the Pennsylvania Proceedings, the US attorneys informed Turner Freeman of the claim made by or on behalf of Ms Carruthers. There was an exchange of correspondence, between the US attorneys and Turner Freeman, about the accounting for settlement monies, the rights of the workers compensation insurer to indemnity, and the rights of Ms Carruthers to parts of the settlement monies. 33 On 25 June 2003, Turner Freeman undertook, upon receipt of the settlement monies from the Pennsylvania Proceedings, not to release any part of the fund without an order of the Supreme Court of New South Wales authorising said release, to commence proceedings before the Court and to serve such proceedings on Ms Carruthers. 34 On 30 April 2004 proceedings were commenced in this Court, in its Equity Division, the result of which was that orders were issued by consent by which Palmer J declared, in effect, that Ms Carruthers was not entitled to any part of the settlement monies. For the purpose of those proceedings, one of the US attorneys executed an affidavit, dealing, inter alia, with the need for a resolution by this Court of the "competing" interests of Ms Carruthers and the estate of the deceased. The orders of Palmer J issued on 27 June 2008, together with a short ex tempore judgment. 35 That which remained of the settlement monies, by then held by Turner Freeman, were then distributed, the conditions precedent expressed or implied in the undertaking having been satisfied. 36 On 27 February 2009, the statement of claim commencing these proceedings was filed and shortly thereafter, in accordance with the rules, notice was given to the defendants herein, served in New York in accordance with the rules, which notice alerted them to their rights to set aside service on the basis that the Court is an inappropriate forum for the trial. By the notice of motion with which the Court is now dealing, the defendants seek to exercise that right and they request the Court, on that basis, not to deal with the cause of action. 37 The plaintiffs' causes of action in these proceedings depend upon breach of contract (being the retainer agreement), negligence or breach of duty of care, breach of fiduciary duty, and conspiracy. It is unnecessary to summarise the manner in which damages have been calculated, or to comment thereon. The Court is not concerned to determine, if there be an arguable case, the strength of that case. The foregoing factual recitation is included solely for the purpose of outlining the background material upon which the issue in the notice of motion must be determined. 38 As earlier stated, the contract was complete when Turner Freeman accepted the offer made by the US attorneys. Turner Freeman accepted it either by communicating that acceptance to the South Australian attorneys or by the execution of the offer document being the draft retainer. The contract was formed in either New South Wales or South Australia. It was not formed in any State of the United States. As a consequence, the proper law of the contract is the common law of Australia: Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35; (2000) 201 CLR 520 at 549, per Callinan J; Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93 at 112, per Dixon CJ and Fullagar J. The Court reiterates that, unlike in the United States, in Australia there is one common law, which is the same in each State and is finally determined by the High Court of Australia. However, if the contract were formed in South Australia, then the proper law of the contract may be South Australia, not New South Wales. The defendants do not suggest that the proceeding should be transferred to South Australia, or that South Australia is the convenient forum. 39 The proper law of the contract is not always the place in which the contract was formed. The proper law of the contract, as has been authoritatively stated, is "the system of law by reference to which the contract was made or that with which the transaction has its closest and most real connection": Bonython v The Commonwealth [1950] UKPCHCA 3; (1950) 81 CLR 486 at 498; [1951] AC 201 at 219, per Lord Simonds. As Lord Diplock pointed out, the "or" in that comment is disjunctive (Amin Rasheed Shipping Corporation v Kuwait Insurance Co [1984] AC 50 at 61): see also Akai Pty Ltd v People's Insurance Co Ltd [1996] HCA 39; (1996) 188 CLR 418 at 440-441, per Toohey, Gaudron and Gummow JJ. The work to be performed under the contract was to be performed, predominantly, in Pennsylvania. And the State of Pennsylvania was the necessary element in the decision to instruct the US attorneys. 40 The cause of action in negligence may be based, in part, upon negligent advice as to the content of Pennsylvania law. The advice, which is alleged to be negligent, was drafted in New York and communicated to the agent of the plaintiffs (Turner Freeman) in Sydney. The negligent act, if it were negligent, was not complete until it was communicated. The damage, which is necessary to complete the tort, occurred in New South Wales. 41 Further, the "negligence" (for which read "tortious liability"), it seems, is also based upon improper conduct of the US attorneys, which conduct is a breach of the duty of care they owed to the plaintiffs. That improper conduct occurred, it seems, in New York. 42 The cause of action in conspiracy depends, even more, on the particular facts that may be proved at trial. There are a number of possibilities or permutations that may arise from the facts alleged. If the conspiracy were confined to acts that occurred in New York, then, plainly, the tortious act has been committed in New York. However, the allegations are not so confined. The conspiracy allegation relates, inter alia, to a conspiracy between one or more of the US attorneys with one or more of the South Australian attorneys and, as a consequence, depending upon the findings of fact of the trial judge, if a conspiracy were committed, the tortious act may have occurred in South Australia. 43 Whatever be the place where the tortious conduct has occurred, the damage has been suffered in New South Wales. That conclusion is generally uncontroversial. Likewise, the damage arising from the breach of contract and the "improper conduct" (sometimes labelled "negligence") occurred in New South Wales. Appropriateness of Service in the US 44 The first issue with which the Court must deal is the allegation that the Uniform Civil Procedure Rules do not provide a basis for the service of the originating process in the United States. UCPR Part 11 deals with overseas service. Under UCPR 11.2, originating process may be served outside Australia in circumstances described in Schedule 6. In turn, Schedule 6 provides for a number of bases upon which service may be effected outside of Australia. Relevantly, they include: "Originating process may be served outside Australia in relation to the following circumstances: (a) if the proceedings are founded on a cause of action arising in New South Wales, (b) if the proceedings are founded on a breach in New South Wales of a contract (wherever made), whether or not the breach is preceded or accompanied by a breach (wherever occurring) that renders impossible the performance of any part of the contract which ought to be performed in New South Wales, (c) if the subject-matter of the proceedings is a contract and the contract: (i) is made in New South Wales, or (ii) is made on behalf of the person to be served by or through an agent carrying on business or residing in New South Wales, or (iii) is governed by the law of New South Wales, or (iv) is one a breach of which was committed in New South Wales, (d) if the proceedings are founded on a tort committed in New South Wales, (e) if the proceedings, wholly or partly, are founded on, or are for the recovery of damages in respect of, damage suffered in New South Wales caused by a tortious act or omission wherever occurring, (j) if the subject-matter of the proceedings, so far as concerns the person to be served, is property in New South Wales,…." 45 None of the foregoing bases for service outside Australia ought be given a narrow construction. In relation to Schedule 6(a), it is not necessary that all of the events giving rise to the cause of action have occurred in New South Wales: Distillers Co (Bio-Chemicals) Ltd v Thompson [1971] AC 458. In this case, the damage has occurred in New South Wales and, at least, in relation to the formation of the contract and the provision of information or advice as to the conflict that underpins the alleged "improper conduct" and the "conspiracy", all that conduct and/or any omission occurred in New South Wales. 46 It is alleged that the contract was breached in New York when the US attorneys refused to perform their contractual and fiduciary duties. On the other hand, the refusal to pay settlement monies was a refusal to pay monies into an account held in New South Wales, which would mean that the breach and/or omission that completed the tortious act occurred in New South Wales. It is unnecessary to decide this question. 47 The conduct that did occur in New York required Turner Freeman to undertake to hold settlement monies in trust for three years until this Court made declarations that satisfied that undertaking. The demand for the undertaking as a condition precedent, and the fulfilment of the condition precedent, each occurred in New South Wales and rendered impossible the performance of the retainer in New South Wales. I consider that Schedule 6(b) has been satisfied, on the evidence available to the Court as at this interlocutory hearing. 48 The rules of private international law determine the ascertainment of the proper law of the contract and whether or not, pursuant to Schedule 6(c), the law of New South Wales governs the contract. Schedule 6(c)(i) requires, in relation to the contract, the contract to be made in New South Wales. It is unnecessary to determine finally this issue. It is at least arguable that the contract was formed in New South Wales by the acceptance of the offer forwarded by the South Australian attorneys as agents of the US attorneys. Alternatively, the contract was formed when the acceptance was notified (i.e. received) to the offeror, in this case, the South Australian attorneys, as agents of the US attorneys, in South Australia. 49 Because, on any analysis, the retainer, which forms the contract, was required to be performed, at least in part, in New South Wales and the alleged breach of contract rendered impossible that performance, the contract claim was one, which was capable of being served outside Australia. Strictly, therefore, it is unnecessary to determine whether the contract was made in New South Wales or South Australia, at least for the purposes of determining whether there was a basis for serving the originating process outside Australia. 50 In relation to the alleged tortious acts, of whatever category, it is beyond doubt that the damage was suffered by the plaintiffs in New South Wales; the first plaintiff, in her capacity as trustee of a trust resident in New South Wales; and the second plaintiff, in his capacity as the sole beneficiary of that trust and of the estate. As a consequence, Schedule 6(e) provides the basis for the service of the originating process, insofar as it alleges conspiracy, improper conduct and/or negligence. 51 As a consequence of the foregoing, it is unnecessary for me to deal with the submissions of the plaintiffs as to the application of Schedule 6(d) and (j). There is a proper basis for the service outside of Australia of each of the causes of action pleaded in the originating process. The defendants more strenuously agitated the dismissal and/or stay of the proceedings on the basis that this Court is not a convenient forum. Convenience of Forum 52 Of itself, the fact that the law to be applied to a cause of action is a law other than that which applies in New South Wales is not a basis for determining that this Court is not a convenient forum. This Court, particularly because of the federal structure of Australia and the capacity of State courts to exercise federal jurisdiction, deals daily with the application of laws other than those that emanate from the New South Wales jurisdiction and with torts committed and contracts made outside the State. But the law to be applied is a factor, together with others, which the Court takes into account in determining whether it is a convenient forum. 53 The defendants relied upon a number of factors to submit that this Court is not a convenient forum. Those factors are: that the defendants are uninsured for an award of damages made by this Court but are insured for an award of damages made in a US court; the proper law of the plaintiffs' causes of action is not in New South Wales; the cost of proceeding in New South Wales and the residence of the lay and expert witnesses; the existence of jurisdiction in the courts of New York and Pennsylvania; the cost of the defendants attending court in New South Wales; and the residence of the plaintiffs. Further, the defendants raise the inability of the plaintiffs, if successful, to enforce the judgment of this Court in New York. This Court will deal with each of these factors, in no particular order, but will deal with the plaintiffs' residential factor first because it is relatively simple and affects other considerations. Before doing so, it is necessary to recite the fundamental principle, which governs the exercise of the discretion to dismiss and/or to stay these proceedings on the basis of forum non conveniens. 54 The test to be applied in determining whether to stay and/or dismiss proceedings on the basis that the Court is forum non conveniens, is of long standing and has been clarified on a number of occasions by the High Court of Australia. The High Court in Puttick v Tenon Ltd [2008] HCA 54; (2008) 238 CLR 265, citing with approval its judgment in Voth v Manildra Flour Mills Pty Ltd [1990] HCA 55; (1990) 171 CLR 538, said: "[27] In Voth v Manildra Flour Mills Pty Ltd , the Court held that a defendant will ordinarily be entitled to a permanent stay of proceedings instituted against it and regularly served upon it within the jurisdiction, if the defendant persuades the local court that, having regard to the circumstances of the particular case, and the availability of an alternative foreign forum to whose jurisdiction the defendant is amenable, the local court is a clearly inappropriate forum for determination of the dispute. The reasons of the plurality in Voth pointed out that the focus must be 'upon the inappropriateness of the local court and not the appropriateness or comparative appropriateness of the suggested foreign forum'." (Per French CJ, Gummow, Hayne and Kiefel JJ.)

"[43] The test stated in Voth v Manildra Flour Mills Pty Ltd turns on the following matters:

'First, a plaintiff who has regularly invoked the jurisdiction of a court has a prima facie right to insist upon its exercise. Secondly, the traditional power to stay proceedings which have been regularly commenced, on inappropriate forum grounds, is to be exercised in accordance with the general principle empowering a court to dismiss or stay proceedings which are oppressive, vexatious or an abuse of process and the rationale for the exercise of the power to stay is the avoidance of injustice between parties in the particular case. Thirdly, the mere fact that the balance of convenience favours another jurisdiction or that some other jurisdiction would provide a more appropriate forum does not justify the dismissal of the action or the grant of a stay. Finally, the jurisdiction to grant a stay or dismiss the action is to be exercised "with great care" or "extreme caution".'

The Court also said that in applying those principles the discussion by Lord Goff of Chieveley in Spiliada Maritime Corp v Cansulex Ltd of relevant 'connecting factors' and 'a legitimate personal or juridical advantage' provides valuable assistance." (Per Heydon and Crennan JJ.) 55 It is these principles that must be applied. The question is not decided by determining which of a number of jurisdictions is more appropriate than NSW (or the most appropriate place for the hearing), but by determining whether this Court and this jurisdiction is clearly inappropriate. Further, the jurisdiction to stay or dismiss proceedings is to be exercised "with great care" and "extreme caution" and from the position that a plaintiff who has regularly invoked the jurisdiction of the Court has a prima facie right to insist upon its exercise. 56 The contention of the defendants that the plaintiffs reside in the UK is not supported on the evidence before the Court. The second plaintiff, the sole beneficiary of the estate and trust and, in some respects, the only plaintiff that may have suffered ultimate damage, lives in Albury, in the State of New South Wales, of which there is independent documentary evidence. The first plaintiff, the personal representative of the estate and the trustee, currently lives in the UK, but is an Australian permanent resident. The estate is an Australian resident for Australian tax purposes and, as has already been stated, the first plaintiff is the mother of the second plaintiff, she is an Australian citizen and she lived in Sydney at all material times during the plaintiffs' retainer of the defendants. In terms of the residence of the plaintiffs, New South Wales is the location with the closest connection, notwithstanding that the test is not a comparative one. 57 As earlier stated, the defendants raise the inability of the plaintiffs to enforce the judgment of this Court in New York. Firstly, this must be a matter that primarily concerns the plaintiffs, rather than the Court. The plaintiffs must take their own advice as to the efficaciousness of any judgment of this Court. However, there is no evidence before the Court that would suggest that the courts in New York exercise their common law jurisdiction in any manner differently than it is exercised in New South Wales. Therefore, this Court must assume that the law is the same. Some material has been put before the Court, which material indicates that the tests are, more or less, the same. Assuming this Court has jurisdiction in accordance with private international law principles, the courts in New York will enforce the judgment of this Court, as long as it has been obtained otherwise than by fraud or by a denial of natural justice. The Court is not satisfied that, assuming, as one must, that this Court will exercise its jurisdiction appropriately and properly, the New York courts will not enforce the judgment. 58 The material before the Court evidences a practice that the New York courts will enforce the judgment, on registration in New York. Registration of the judgment in New York renders the judgment a judgment of the New York courts and enforceable as such. As a consequence, the argument of the defendants as to the lack of insurance disappears. The judgment of the New York court is a judgment for a money amount enforcing damages, and the insurance policy, it would seem, would cover such a judgment in the same way that it would cover a judgment originally made by a New York court. 59 It would be surprising, given the international practice of the US attorneys, if the insurance policy did not apply. The approach in the immediately preceding paragraph may explain the application of the insurance policy and its wording in relation to liability to overseas clients. In other words, the insurance policy covers the US attorneys in circumstances where the US courts are prepared to enforce the judgment of the overseas court. 60 Further, the defendants have not established, as a fact, that the insurance policy does not cover a judgment for damages made in an overseas court. The insurance policy does not cover punitive or exemplary damages, but that limitation applies equally to New York courts and this Court. While there are exemptions that may be applicable to some of the causes of action, it is inappropriate for the Court to conclude a view as to whether, for example, the allegations amount to "dishonest, fraudulent or malicious acts" or "intentional" acts. These are all matters that are unnecessary to determine at this stage, and may be issues between the defendants and their insurer. If the causes of action were to involve, necessarily, dishonest, fraudulent, malicious or intentional acts, then the insurance policy would not, it seems, cover liability, whether the proceedings were prosecuted in this Court or in New York. 61 I refer then to the factor relating to the cost of expert witnesses. At least in relation to the proper party to the proceedings in Pennsylvania, and the justiciability of a claim by Ms Carruthers in the Pennsylvania courts, it would seem that the expert evidence that would be required would be expert evidence relating to the law of Pennsylvania. This may have significant similarities to the law of New York, but it is not the law of New York. It may have some similarities with the law of New South Wales, but it is not the law of New South Wales. 62 Every exercise of discretion must have regard to the policies embodied in the Civil Procedure Act 2005 ("the Act"). Amongst other things, this involves exercising discretion in a manner, which gives effect to the overriding purpose of the Act, as contained in s 56 of the Act, namely, "to facilitate the just, quick and cheap resolution of the real issues in the proceedings". Further, the practice and procedure of this Court is required to be implemented with the object of resolving issues between the parties in a way that the cost to the parties is proportionate to the importance and complexity of the subject matter in dispute: s 60 of the Act. 63 In proceedings such as these, involving, as they do, a total claim for damages of a little over $1 M, the Court must bear in mind directions that allow the costs to be proportionate to the amount involved. However, the mere fact that expert evidence of Pennsylvania law is required, does not mean that the expert must derive from Pennsylvania. There are a number of academics and legal practitioners in Australia who are expert in US and/or Pennsylvania law. Even if the expert were required to be resident in Pennsylvania and called in these proceedings, this litigation will occur in the second decade of the 21st century. Courts have the capacity to adduce evidence by video link and without necessitating the attendance in Australia of an expert from the US. Moreover, it would be unusual if there were a significant contest as to the content of the law in Pennsylvania, and if there were, no doubt, the Court would order a joint report and/or witness conferencing. 64 As to the allegation of improper conduct, assuming for this purpose that the improper conduct relates to standards of behaviour in New York, then expert evidence would be required of the professional standards of US attorneys practising in New York. The immediately preceding analysis, as to the cost of an expert from Pennsylvania, applies with equal force to an expert from New York. 65 The next criterion, urged on the Court by the defendants as a factor evidencing the lack of convenience of this Court as the forum to hear this justiciable controversy, relates to the cost of attendance at the Court proceedings by each and all of the defendants. Frankly, in the absence of sworn evidence by each of the defendants that they intended to attend on all the days on which the proceedings would be heard, the proposition that every partner in a law firm would attend every day of proceedings, the liability for which arises from the actions of one partner, is difficult to accept. 66 Proceedings occur regularly against large law firms (and other professional practices) of which there are hundreds of partners. It is difficult to imagine that if there be sufficient trust in a partner to allow that partner to engage in conduct that creates a liability, there would be insufficient trust in one or two partners to oversee the conduct of the litigation relating to liability. Nevertheless, the cost of attendance by the defendants in New South Wales is, as a matter of principle, no different from the cost of attendance of the plaintiffs in New York. Of course, there are more defendants than there are plaintiffs. But there seems to be no good reason why each of the partners, i.e. each of the defendants, would need to attend. 67 Lastly, the Court deals with the proper law to be applied in the proceedings. It is assumed, in all that has already been discussed, that the New York courts would have jurisdiction to hear this justiciable controversy, as would the courts of Pennsylvania. That assumption is a little controversial. The plaintiffs submit that, for reasons associated with limitation of action, neither the courts of New York nor the courts of Pennsylvania have a relevant practical capacity to hear and determine the justiciable controversy. Nevertheless, the existence of a time limit to proceed in New York or Pennsylvania, and the consequential inability of the plaintiffs to proceed in either one of those States, is not a factor that the Court takes into account in determining that either New York or Pennsylvania would not be an appropriate jurisdiction. 68 Reference has already been made to the possible arguments relating to the proper law of the contract and the lex loci delicti. In relation to the lex loci contractus, it would appear, on the material available to the Court at this time, that the contract was formed in New South Wales, although it may have been formed in South Australia. At least one part of the duty of care, assuming the validity of the allegations, was breached in New York, and another part may have been breached in New South Wales. The damage was suffered in New South Wales. The conspiracy (allegedly committed between US and Australian attorneys) occurred outside of New South Wales, namely, in either South Australia or New York. Again, the damage was suffered in New South Wales. The alleged breach of a fiduciary relationship, which allegedly required monies to be paid to the plaintiffs, was breached, at least in part, in New South Wales, where the monies were not paid. 69 In other words, there is no one cause and no one applicable law. At least arguably, the law of New York applies to none of the causes of action. On one view, the law of South Australia may predominate and apply to both the contractual cause of action and the conspiracy. It may be, although, on the evidence currently before the Court, it is unlikely, that the law of New South Wales is inapplicable to any one of the causes of action. It is impossible, at the current stage, to determine that question finally. Nor is it appropriate for the Court to determine finally the law that should be applied at trial. This is particularly so, because the facts determined by the Court will necessarily impact on the proper law to be applied. 70 Nevertheless, it cannot be said, at this stage, that the law of New South Wales will not apply to some of the pleaded causes of action and that NSW is clearly an inconvenient jurisdiction, because none of the applicable law is the law of New South Wales. Overall, none of the factors raised by the defendants on this notice of motion establish sufficient grounds for the Court to conclude that the Court is an inconvenient forum for the determination of the litigation. This is true whether each factor is taken individually, or all of them together. 71 I have not dealt substantially with a ground advanced by the defendants that the claim against them is vexatious and/or arguable. The ground was argued faintly. The latter comment is not a criticism. There is much to be said for the defendants' position in this litigation. The withholding of monies arguably owing to a beneficiary of an estate may be proper and appropriate, rather than improper. 72 Further, it may not amount to a breach of contract. Much will depend on the knowledge of the plaintiffs of the fact that the US attorneys were acting for Ms Carruthers, or required to protect her interests, and how that knowledge, if there were knowledge, impacts on the retainer and the duties under it. It is further complicated by the interposition of a litigation funder for the Pennsylvania Proceedings. 73 But the test to dismiss on that basis is that outlined by the High Court in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 and the long line of cases following. The defect, if any, in this case must depend upon the evidence at trial and is not, therefore, clearly established. There is a triable issue; one where there is a genuinely arguable contest, involving, it seems, a difference of fact. 74 Since the foregoing was drafted, the Court has had occasion to peruse the judgment of the Court of Appeal in Murakami v Wiryadi & Ors [2010] NSWCA 7 (15 February 2010), which restates and applies the principles established by the High Court of Australia for determining an issue such as the present. Nothing in that judgment alters the foregoing consideration. 75 The Court makes the following orders:

(ii) The defendants pay the plaintiffs' costs of the motion, as agreed or assessed;

(iii) The parties be granted liberty to apply for a different or special order for costs within 28 days of the date of this judgment.

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Judgment (24 paragraphs)

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Cases Cited (15)