Beames v State of Queensland[2010] QSC 4

SUPREME COURT OF QUEENSLAND

1. MARGARET WILSON J: By an originating application filed on 4 November 2009 the applicant (“Mr Beames”), who is an undischarged bankrupt, seeks –

“1.……………… orders as the claimant under sections 188(1)(b) and 188(2) of the Land Title Act 1994 for compensation from the respondent for deprivation of the applicant’s title as a consequence of the respondent’s failure to guarantee or honour the indefeasibility of title of the applicant under section 184 of the Land Title Act 1994 as a registered owner.

2. ……………… orders as the claimant under sections 188B(1)(b), 188BB(3)(a) and 188B(3)(b) of the Land Title Act 1994:

(i)to cancel any indefeasible title issued to any person (including any mortgagee) recorded in the freehold land register as a direct or indirect consequence of the failure of the respondent referred to in the preceding paragraph 1;

(ii)to cancel any indefeasible title in any mortgagee despite redemption of that mortgage recorded in the freehold land register as a encumbrance or registered interest affecting the title; and,

(iii)create a new indefeasible title in the name of the applicant clear of any encumbrance, lien or interest not authorised by the applicant.

3. ……………… orders as claimant under section 188B(2) of the Land Title Act 1994, that the Court make the order it considers just.

4. [An order that] the respondent pay the applicant’s costs of the application.”

Background

2. Mr Beames was the registered proprietor of lot 29 on RP 12574 in the County of Stanley, Parish of Bulimba, which is land in Gillan Street, Norman Park adjoining Norman Creek. At all material times the adjacent riparian land has been the property of the State of Queensland.

3. On 29 August 1995 Mr Beames mortgaged the land to Law Mortgages (Noosa) Pty Ltd. The mortgage was registered on 12 October 1995 – registered no 700904049.

4. Mr Beames defaulted under the mortgage.

1. On 1 November 1995 he failed to pay interest which was due in the amount of $5,440, and on 20 November 1995 the mortgagee gave notice of exercise of power of sale. The default continued for more than a month after that notice was served.
2. On 16 February 1996 he failed to pay principal which was due in the amount of $384,000 and interest which was due in the amount of $19,040.  A further notice of exercise of power of sale was issued on 19 February 1996.
3. The mortgage was assigned to Geoffrey Ian Rigby as trustee on 31 October 1997. Subsequently, in late 1998, Mr Beames made payments totalling $5,940 only.

5. There has been a protracted dispute between Mr Beames and the State of Queensland as to the location of the boundary between lot 29 and the adjacent Crown land.

6. In March 1997 the Registrar of Titles refused to register a plan of resurvey showing an apparent increase in the area of lot 29. He asserted that the increase was the result not of natural accretion, but of reclamation work. His decision was set aside under the Judicial Review Act 1991,^[1] on the basis that it was not for the Registrar of Titles to assess the respective merits of the dispute between Mr Beames and the State.

7. The State of Queensland commenced a proceeding seeking declaratory relief as to the ownership of the additional land: proceeding S 7742/99. Mr Beames counterclaimed for declaratory relief as to the true area of lot 29 and the position of the boundary, and for damages totalling US $270 million. Mr Beames made an application for summary judgment, which was determined against him at first instance on 8 May 2001;^[2] his appeal against that decision was dismissed on 21 June 2002.^[3]

8. On 30 May 2002 Mr Beames was declared bankrupt on the petition of Mr Rigby. He remains an undischarged bankrupt, his bankruptcy having been extended to 26 June 2010.

9. On 21 November 2003, in proceeding S 7742/99, PD McMurdo J determined applications by the State resulting from Mr Beames’ bankruptcy.^[4] His Honour’s rulings, and his reasons therefor, may be summarised as follows:

(a)The State did not need leave to pursue its claim, as the proceedings were not in respect of a provable debt.^[5]

(b)The State was given leave to proceed against Mr Beames pursuant to UCPR r 72, and the trustees in bankruptcy were joined as additional defendants. His Honour declined to order that the trustees be substituted as defendants for the following reasons. Mr Beames was still the legal owner of lot 29, although equitable ownership was vested in the trustees. The trustees did not wish to contest the State’s claim. His Honour considered that Mr Beames should remain a defendant as it was likely that the Registrar of Titles would wish to have the certainty of a declaration against the registered proprietor before taking some step in relation to the plan of resurvey.  But it was the trustees’ property which was potentially affected, and the State should have the benefit of a determination binding them as well as Mr Beames.

(c)His Honour declined to dismiss the counterclaim. It had been stayed by s 60(2) of the Bankruptcy Act pending an election by the trustees to prosecute or discontinue it. Although the trustees were deemed to have abandoned the counterclaim because they had failed to make such an election,^[6] the underlying cause of action had not been destroyed.  It was the inverse of Mr Beames’ defence of the State’s claim, and there was a risk that its dismissal might give rise to a res judicata or otherwise put paid to that defence.

(d)Orders for the inspection of property were made.

(e)Liberty to apply was given.  His Honour did not give any reason for doing so; nor did he limit it to the effect of the stay of the counterclaim or to the orders for the inspection of property. This may have been an acknowledgement that circumstances might arise which would make it just to lift the stay.^[7]

10. Proceeding S 7742/99 has been dormant since then. The State has taken no step to activate it.

11. On 2 June 2004 the mortgagee entered into a contract of sale with Ward and Topatig as purchasers. That contract was subsequently completed, and lot 29 was transferred to the purchasers on 16 July 2004. There is apparently no subsisting dispute between the State and the new registered proprietors about the boundary of the land.

This application

12. The present application was made without the consent of the trustees in bankruptcy, who have no interest in it.

13. When the Crown Solicitor wrote to Mr Beames contending that the proceeding should have been commenced by claim and statement of claim, he responded it was unnecessary to do so -

“…because of my existing counterclaim for damages in the moribund proceeding S 7742/99…That counterclaim is enlivened by this application, and, as the State of Queensland has no defence to that counterclaim, this proceeding is purely to assess the quantum of damages payable by the State.”

The Crown Solicitor responded that compensation pursuant to the Land Title Act is entirely separate from the proceeding commenced in 1999.

14. It is not necessary to determine the extent to which the damages the subject of the counterclaim overlap with those presently claimed.

15. While Mr Beames remains an undischarged bankrupt, he does not have standing to bring this application or to prosecute the counterclaim. The causes of action on which he relies are property divisible amongst his creditors and are vested in his trustees in bankruptcy.^[8] Although the trustees are deemed to have abandoned the counterclaim, the underlying cause of action remains vested in them, and will continue to be so after Mr Beames is discharged from bankruptcy.^[9] It would be open to the trustees to assign the claim for damages to Mr Beames and for him to pursue it after his discharge from bankruptcy – but that is a matter for the trustees.^[10]

16. There has been no step in the counterclaim since the judgment of PD McMurdo J on 21 November 2003. A party otherwise entitled to proceed with the counterclaim would need to obtain the leave of the Court before doing so, pursuant to UCPR r 389(2).^[11] There is no application before the Court for such leave.

17. Counsel for the State of Queensland submitted that Mr Beames needed to obtain leave to bring the present application pursuant s 60 of the Bankruptcy Act.  However, that section does not provide for the giving of such leave.  As I have already observed, by subsection (2) the counterclaim was stayed upon Mr Beames becoming bankrupt.  By subsection (4) a bankrupt is allowed to continue a limited class of proceedings (namely, proceedings for damages for personal injuries or loss of dependency) he or she had commenced before becoming bankrupt.  Otherwise the section does not provide for any circumstances in which a bankrupt may continue proceedings previously commenced, let alone commence fresh proceedings.

18. Counsel for the State of Queensland submitted also that Mr Beames would need leave pursuant to UCPR r 72. Sub-rule (1) of r 72 provides that if a party becomes bankrupt during a proceeding a person may take a further step for or against that party only with leave and if the person follows the Court’s directions on how to proceed, and sub-rule (2) provides that the Court may order the trustee in bankruptcy to be included or substituted as a party. Those provisions are subject to the Bankruptcy Act. Under the Bankruptcy Act, the cause of action underlying the counterclaim is vested in the trustees in bankruptcy, and while it remains so, rule 72 of UCPR does not empower the Court to give Mr Beames leave to proceed with the counterclaim without the trustees’ consent.

19. Mr Beames relied on PD McMurdo J’s observation that the counterclaim was the inverse of his defence to the State’s claim to assert that it had not been stayed by his bankruptcy. As I understand his Honour’s reasons, it was because of the risk of res judicata or otherwise putting paid to the defence that he declined to dismiss the counterclaim.  He did not suggest that, because the same issues arose in the defence, the counterclaim was not stayed by the operation of s 60(2) of the Bankruptcy Act, or that that stay was not still in place. In my respectful opinion there is simply no substance in Mr Beames’ submission.

20. The land has now been transferred to the purchasers. In these circumstances, Mr Beames no longer has legal title to it, and if proceeding S 7742/99 were ever reactivated by leave under UCPR r 389(2), there would seem no utility in his continuing to be a party to it.

21. Mr Beames has made allegations of official corruption stemming from the State’s refusal to pursue S 7742/99 or to resolve it with him. These are not matters able to be dealt with on this application. Even if they were made out, Mr Beames would still face the insuperable hurdle of his bankruptcy in his attempt to pursue matters the subject of the counterclaim.

22. Finally, Mr Beames questioned the authority of the Crown Solicitor to represent the State in this application. He brought the application against the State of Queensland as respondent. The Crown Solicitor is the solicitor for the Crown in right of the State of Queensland. Under s 19 of the Crown Proceedings Act 1980 documents required to be served on the Crown^[12] are to be served on the Crown Solicitor. The Crown Solicitor is the head of the Crown Law Office, which is funded by the fees paid for its legal services by “clients” comprised only of Queensland Government departments, agencies and instrumentalities.^[13] The point sought to be taken by is Mr Beames is without foundation.

23. The application should be dismissed. Costs should follow the event.