JUDGMENT
1 HIS HONOUR: The plaintiff, Permanent Custodians Ltd, has commenced proceedings in this Court for possession of a property at Earlwood of which the first three defendants are the registered proprietors. Those three defendants are brothers: Tony, Charbel and David Geagea. The second and third defendants, Charbel and David Geagea, have filed a motion pursuant to UCPR r 28.2 for an order for the separate decision of a question arising in the proceedings. That order is opposed by the plaintiff. Before turning to the question, it is necessary to sketch the nature of the proceedings and the issues arising in it.
2 It is convenient to refer to the first three defendants by their given names: Tony, Charbel and David. It is the plaintiff's case that the three of them entered into a loan agreement with it for a substantial sum to enable Tony to purchase another property at Clovelly, and that they mortgaged the Earlwood property to secure that loan. Following default in repayment of the loan, the plaintiff seeks possession of the Earlwood property pursuant to the mortgage (and other relief).
3 Both the loan agreement and the mortgage bear signatures purporting to be those of the three brothers. However, in their defences Charbel and David deny that they signed either document or authorised anyone else to do so on their behalf. It is their case that Tony forged their signatures on each document, and that they obtained no benefit from the transaction. These matters are in dispute. Tony is bankrupt and has not filed a defence.
4 The fourth, fifth and sixth defendants are the partners in a firm of solicitors acting for Tony on the purchase of the Clovelly property. It is the plaintiff's case that they acted for all three brothers in relation to the loan and the mortgage or, at least, held themselves out to do so. What is said to be the signature of Charbel on the mortgage appears to have been witnessed by a gentleman, not a party to the proceedings, who supplied an address at Greystanes. In fact, at that time Charbel was in custody in Lebanon in respect of a criminal charge, the nature of which need not concern us. (He is still in that custody and the charge has yet to be dealt with.) The signature of Tony and what appears to be that of David purport to have been witnessed by one of the solicitors, the fourth defendant. Obviously, David denies having signed the document in that solicitor's presence or, indeed, having had any dealings with him in relation to the matter.
5 Against this background, the plaintiff also claims damages from the solicitors for misleading and deceptive conduct under the Fair Trading Act 1987 or, alternatively, breach of a duty of care. The solicitors were represented by counsel at the hearing of the motion, but they neither opposed nor consented to the order sought and took no active part in the proceedings.
6 In their defences Charbel and David also raise other issues: in the case of each of them, whether he held his interest in the property as bare trustee for his parents, and in the case of David, whether the proceedings were instituted in contravention of the Credit (Home Finance Contracts) Act 1984. However, at the hearing their counsel, Mr Baird, told me that those issues would not be pursued and that the defences would be amended accordingly. David has filed a cross-claim against the plaintiff seeking relief under the Contracts Review Act 1980 and s 51AC of the Trade Practices Act 1974 (Cth), should he be found to be bound by the loan agreement and/or the mortgage. A cross-claim in similar terms by Charbel had been prepared, but not filed, at the time of the hearing. Mr Baird foreshadowed that both brothers would file cross-claims against the solicitors, effectively for the same relief as that sought against them by the plaintiff.
7 Any interest in the property conferred upon the plaintiff by the mortgage is indefeasible upon registration, by virtue of s 42 of the Real Property Act 1900. However, the assertion by Charbel and David that their signatures were forged raises the question of what that interest is. It becomes necessary to determine what indebtedness, if any, is secured by the mortgage. That turns upon the construction of the mortgage (and the accompanying documentation).
8 Hence the separate question upon which Charbel and David seek a decision. The question is expressed in this way:
"Whether upon the proper construction of [the mortgage], and on the assumption that the mortgage was not entered into by the second and third defendants or by anyone acting with their knowledge or approval and that they obtained no benefit from the monies advanced on the security of the mortgage, there is any amount owing to the plaintiff by the second and third defendants the payment of which is secured by the mortgage."
9 There is no need to review the authorities on this area of the law, which were helpfully analysed by Simpson J in Perpetual Trustees Victoria Ltd v English [2009] NSWSC 478 at [31] - [135]. Should the assumptions expressed in the question be established, and it is found that the mortgage secures nothing, then it is liable to be discharged. It is unnecessary at this stage to consider whether that would be a discharge in respect of the interest in the property of all three brothers, or only that of Charbel and David: Perpetual Trustees v English; cf Yazgi v Permanent Custodians Ltd [2007] NSWCA 240, examined by Simpson J in English at [85] - [104], [143] - [146].
10 If the assumptions of the question are made out but it is found that there is an amount owing secured by Charbel's and David's interest in the property, then they may have recourse to the Torrens Assurance Fund under Pt 14 of the Real Property Act. That Fund is created by s 134, and the two brothers might be entitled to compensation from it by virtue of s 129(1)(e), on the basis that they were deprived of an "estate or interest in land as a consequence of fraud…". Claims for compensation may be made to the Registrar-General by an administrative process: s 131, or court proceedings may be commenced against the Registrar-General as nominal defendant by the leave of the Court or with the Registrar-General's consent: s 132(2)(b).
11 At this stage David and Charbel have not taken either course. If it were necessary for them to claim compensation from the Fund, the Registrar-General would be subrogated to them in respect of any right or remedy they might have against Tony or the solicitors for their loss: s 133(2). The Registrar-General, if joined in these proceedings, could pursue cross-claims against those parties: s 133(4). It is the prospect of David and Charbel seeking the joinder of the Registrar-General which is at the heart of the present case.
12 Mr Baird submitted that the question is one suitable for separate determination. He pointed out that is it a discrete issue which arises in the proceedings, that it turns upon construction of the relevant documentation, that its determination would not require oral evidence and that, indeed, it could be the subject of written submissions. Thus, he said, it could be dealt with expeditiously and would not involve undue delay or expense.
13 More importantly, he argued that a determination of the issue favourable to his clients could avert the need to join the Registrar-General. Of course, such a determination would not of itself entitle his clients to success in the proceedings, because it would still be necessary for the assumptions in the question to be established. (Although one of those assumptions is that Charbel and David obtained no benefit from the money advanced by the plaintiff, counsel focussed on the issue whether their signatures were forged or whether they had authorised someone to execute the mortgage on their behalf. It is convenient, then, to refer to the assumptions as the "forgery/authority issue".)
14 If Charbel and David succeeded on the construction issue and on the forgery/authority issue, they would not need to have recourse to the Fund. On the other hand, if they failed on the forgery/authority issue, they would have no entitlement to compensation from it. In either event, the Registrar-General would have no part to play in the proceedings. It would only be if the question were resolved adversely to Charbel and David that it would be necessary to join the Registrar-General.
15 Mr Baird referred to the decision of McCallum J in Perpetual Trustees Victoria Ltd v Menzies (Unreported, 16 October 2008) in which, in somewhat similar circumstances, her Honour directed the separate decision of a question framed in terms identical to the present question. Her Honour did so because the answer to the question might have determined whether the Registrar-General, who had been joined as a party, would need to remain so. As she put it (at p 5), the determination of the question "may quell the controversy" with the Registrar-General.
16 The principles governing the exercise of the discretion to order the separate decision of a question were summarised by Branson J in Reading Australia Pty Ltd v Australian Mutual Provident Society [1999] FCA 718, 217 ALR 495 at [8]. There is no need to set them out, although it will be necessary to refer to some of them.
17 Counsel for the plaintiff, Mr Docker, opposed the order on a number of bases. He submitted that the question is hypothetical in that, by its terms, it is posited upon certain factual assumptions. He supported his argument by reference to Bass v Permanent Trustee Co Ltd [1999] HCA 9, 198 CLR 334, in the joint judgment at [39] ff. In Reading v AMP, Branson J cited that case as authority for the proposition that the separate determination of a question "must involve a conclusive or final decision based on concrete and established or agreed facts for the purpose of quelling a controversy between the parties …": [8] (c).
18 This is not the occasion to examine the somewhat complex decision in Bass. It is sufficient to say that, in the relevant part of the joint judgment, their Honours were dealing with a trial judge's answers to certain questions, on the basis of which a declaration was made. The Court found that those answers, not being "based on facts, found or agreed" were "purely hypothetical": [49]. Their Honours continued:
"At best, the answers do no more than declare that the law dictates a particular result when certain facts in the material or pleadings are established. What those facts are is not stated, nor can they be identified with any precision. They may be all or some only of the facts. What facts are determinative of the legal issue involved in the question asked is left open. Such a result cannot assist the efficient administration of justice."
19 It was against this background that the Court referred (at [45] ff) to decisions dealing with the judicial function, in the context of proceedings for declaratory relief and for the separate determination of issues. I do not understand the judgment to be authority for the proposition that it would never be appropriate to determine a separate question upon the assumption that certain factual issues, clearly identified by the pleadings, would be resolved in a particular way at the trial. So much appears from the passage in Jacobson v Ross [1995] 1 VR 337 at 341 referred to in Bass at [53]. This was summarised by Branson J in Reading at [8] (d):
"… where the preliminary question is one of mixed fact and law, it is necessary that the question can be precisely formulated and that all of the facts that are on any fairly arguable view relevant to the determination of the question are ascertainable either as facts assumed to be correct for the purposes of the preliminary determination, or as agreed facts or as facts to be judicially determined."
20 This is not to deny that the fact that the question in the present case is hypothetical in that sense is relevant to the exercise of my discretion. As will be seen, I do have regard to it in that way.
21 Mr Docker pointed to a difficulty which could arise if the question were decided in favour of Charbel and David but the forgery/authority issue were resolved against them. It may be that the decision on the question would effectively be unappealable, even though it would stand as a precedent for the construction of a mortgage such as that involved in the present case. Leave to appeal against the decision in advance of the trial might be refused, because it might not be necessary to decide the separate question for the disposal of proceedings. On the other hand, leave to appeal might also be refused after the final hearing because it would then be clear that the decision was not necessary to determine the final outcome. This is a matter properly to be considered, although there is force in Mr Baird's argument that the construction issue is relatively straight forward and is now the subject of a clear line of authority.
22 Mr Docker rightly expressed concern about the delay in the progress of the proceedings, which were instituted in December 2005, and the fact that the accrued debt exceeds the value of the property. Hopefully, the matter will proceed expeditiously in the hands of Mr Baird and his instructing solicitors, who came into it early last year. However, Mr Docker's submissions about the delay and additional costs which might be occasioned by the determination of the separate question should be understood against this background. He questioned whether that determination would save any time.
23 He pointed out that a decision on the question would not finalise the proceedings and argued that, given its contingent nature, it would not necessarily narrow the issues between the parties. If Charbel and David succeeded on the construction issue but failed on the forgery/authority question, it would be necessary to pursue their cross-claims. On the other hand, if the construction issue were decided in favour of the plaintiff, it would still be necessary to decide the forgery/authority question because it would remain relevant to the cross-claims as they are pleaded.
24 For these reasons, Mr Docker submitted, to order the determination of the separate question would be inconsistent with what was described by French J (as he then was) as the "overarching consideration informing the discretion", efficient case management: Olbers Co Ltd v Commonwealth (No 3) [2003] FCA 651 at [8]. Factors bearing on that consideration were enumerated by Branson J in Reading at [8] (f) and (g). Mr Docker relied upon the familiar passage from the joint judgment of Kirby and Callinan JJ in Tepko Pty Ltd v Water Board [2001] HCA 19, 206 CLR 1 at [168]:
"The attractions of trials of issues rather than of cases in their totality, are often more chimerical than real. Common experience demonstrates that savings in time and expense are often illusory, particularly when the parties have, as here, had the necessity of making full preparation and the factual matters relevant to one issue are relevant to others, and they all overlap."
25 Confined to the cause between the plaintiff and Charbel and David, these are compelling arguments which could well lead to the dismissal of the motion. However, I see the possible joinder of the Registrar-General as the determinative question. In this respect the present case is analogous to Perpetual Trustees v Menzies, and I have been assisted by the approach of McCallum J in that case. The fact that in Menzies the Registrar-General had been joined, whereas that has not as yet occurred in the present case, is not to the point. That said, I appreciate that my task is to exercise my own discretion in the light of the matters raised before me.
26 If the separate question were decided in favour of the plaintiff, it might be that the Registrar-General would consent to being joined as a party. If not, I would think it likely that leave for the joinder would be granted. What is certain, however, is that there would be no occasion to join the Registrar-General if the question were resolved in favour of Charbel and David. In that event, of course, there would be a significant saving of time and cost.
27 In response to this, Mr Docker referred to the administrative process for a claim against the Registrar-General. By that process, he argued, any right of Charbel and David to recourse to the Fund could be protected, while the progress of the present proceedings would not be delayed. If an administrative application were successful, the Registrar-General's statutory right of subrogation could be pursued in separate proceedings. However, as Mr Baird pointed out, that right would be much more efficiently exercised by the joinder of the Registrar-General in the present proceedings, thereby avoiding the time and expense of separate litigation.
28 Having weighed up these competing considerations, I am satisfied that it is in the interests of justice that the separate question be determined in advance of the trial. That determination could be made in the expeditious manner suggested by Mr Baird. Accordingly, I make the order sought in the motion. I shall consult the parties as to whether any directions should be made at this stage and, if necessary, hear them on costs.