Andrew Sallway and Helen Newman in their capacity as liquidators of MB Australia Pty Ltd (In Liquidation) v Citadel Group Properties Pty Ltd

[2021] NSWSC 709

Supreme Court

New South Wales

Medium Neutral Citation:

Andrew Sallway and Helen Newman in their capacity as liquidators of MB Australia Pty Ltd (In Liquidation) v Citadel Group Properties Pty Ltd [2021] NSWSC 709

Hearing dates:

11 June 2021

Decision date:

11 June 2021

Jurisdiction:

Equity - Commercial List

Before:

Hammerschlag J

Decision:

Order that the proceedings be determined by this Court

Catchwords:

CIVIL PROCEDURE – cross-vesting – special federal matter – motion for an order under s 6(3) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW) that the proceeding be determined by this Court – requirement under s 6(3) that there be special reasons for doing so in the particular circumstances of the proceeding – this requires some pertinent non-trivial consideration or circumstance which takes the case of out the run of the mill and which warrants the case being held in this Court despite involving a special federal matter – HELD – there are special reasons warranting that the matter be determined by this Court

Legislation Cited:

Bankruptcy Act 1966 (Cth)

Corporations Act 2001 (Cth)

Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth)

Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW)

Real Property Act 1900 (NSW)

Cases Cited:

Henry v Hancock [2016] NSWSC 71

James v James (No.2) [2019] NSWSC 116

Montgomery v Porter [2019] NSWSC 1524

Preston v Diaspora Holdings Pty Ltd; Diaspora Holdings Pty Ltd v Owners Corporation of Strata Plan 68608 [2019] NSWSC 651

Category:

Procedural rulings

Parties:

Andrew Sallway and Helen Newman in their capacity as liquidators of MB Australia Pty Ltd (In Liquidation) – First Plaintiff
MB Australia Pty Ltd (In Liquidation) – Second Plaintiff
Citadel Group Properties Pty Ltd – First Defendant
Wentworth Capital Group Pty Ltd – Second Plaintiff
RS Family Holdings Pty Ltd – Third Defendant
Zalasam Pty Ltd – Fourth Defendant
Citadel Group Holdings Pty Limited – Fifth Defendant
James Schwarz – Sixth Defendant
Glenn Wein – Seventh Defendant
Tamir Haikin – Eighth Defen dant
Lilach Haikin – Ninth Defendant
MB Australia 2000 Pty Ltd – Tenth Defendant
MB Accumulation Pty Ltd – Eleventh Defendant
15-21 Doody Street Pty Ltd – Twelfth Defendant
Elite Luxury – Thirteenth Defendant

Representation:

Counsel:
D. Sulan with D. Levi – First and Second Plaintiffs
D. Monteith – First to Seventh Defendants
No appearance – Eighth to Thirteenth Defendants

Solicitors:
Hogan Lovells – First and Second Plaintiffs
Arnold Bloch Leibler – First to Seventh Defendants

File Number(s):

2020/328334

EX TEMPORE JUDGMENT

1. HIS HONOUR:   By Notice of Motion filed on 14 May 2021, the first plaintiffs, who are the joint liquidators of MB Australia Pty Ltd (In Liquidation) (the Company), and the Company, which is the second plaintiff, (collectively the plaintiffs) seek an order pursuant to s 6(3) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW) (the Act) that these proceedings be determined by this Court. References below to sections are, unless otherwise stated or the context otherwise indicates, references to the Act.

2. The Company operated chocolate cafés under the trade name “Max Brenner”. On 17 October 2018, it was placed under a winding up order by the Supreme Court of Queensland.

3. Sections 6(1), 6(3), 6(4) and 6(6) provide relevantly:

6   Special federal matters

(1)  If:

(a)  a matter for determination in a proceeding that is pending in the Supreme Court is a special federal matter, and

(b)  the court does not make an order under subsection (3) in respect of the matter,

the court must transfer the proceeding in accordance with this section to the Federal Court or a court mentioned in subsection (2)(b).

…

(3)  The Supreme Court may order that the proceeding be determined by that court if it is satisfied that there are special reasons for doing so in the particular circumstances of the proceeding other than reasons relevant to the convenience of the parties.

(4) Before making an order under subsection (3), the court must be satisfied that:

(a) a written notice specifying the nature of the special federal matter has been given to the Attorney-General of the Commonwealth and the Attorney-General of the State, and

(b) a reasonable time has elapsed since the giving of the notice for the Attorneys-General to consider whether submissions to the court should be made in relation to the proceeding.

…

(6) In considering whether there are special reasons for the purposes of subsection (3), the court must:

(a) have regard to the general rule that special federal matters should be heard by the Federal Court…

(b) take into account any submission made in relation to the proceeding by an Attorney-General mentioned in subsection (4).

…

4. Section 3(1) defines special federal matter to have the same meaning as in the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth). Section 3 of that Act defines special federal matter to include, relevantly, “a matter that is within the original jurisdiction of the Federal Court by virtue of section 39B of the Judiciary Act 1903...being a matter in respect of which the Supreme Court of a State or Territory would not, apart from this Act, have jurisdiction.”

5. Section 27(1) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act), in turn, has the effect that the Federal Court and the Federal Circuit Court have exclusive jurisdiction in bankruptcy. By s 5, read with ss 31(1)(e) and (f) of the Bankruptcy Act, that jurisdiction includes “applications to set aside or avoid a charge, charging order, settlement, disposition, conveyance, transfer security or payment” and “applications to declare for or against the title of the trustee to any property”.

6. The motion is supported by the affidavit of Andrew Sallway, one of the liquidators, sworn 13 May 2021, and three affidavits of service.

7. On 21 May 2021, notice of this application was given to the Attorney-General for the Commonwealth and the Attorney-General for NSW. The former has communicated that she does not wish to make submissions. No communication has been received from the latter.

8. A reasonable time has elapsed since notice was given to allow the respective Attorneys-General to consider whether to make submissions, as required by s 6(4)(b).

9. The proceedings, which were commenced by Summons on 9 November 2020, concern a series of transactions to which the Company and other persons were party, one of the effects of which was, relevantly, to transfer a commercial property at 15-21 Doody St Alexandria owned by the Company to Citadel Group Properties Pty Limited (Citadel), the first defendant. Amongst others, it is alleged that the disposal of the property was at a substantial undervalue.

10. Initially only the first defendant was cited by the plaintiffs as a party. The additional defendants were joined by way of a Further Amended Summons filed 13 April 2021.

11. The second to seventh defendants are companies and individuals associated with Citadel, who played some role in, or who had some connection with, the transactions.

12. The eighth and ninth defendants are Mr Tamir Haikin and Mrs Lilach Haikin (the Haikins). Mr Haikin was a director of the Company at the relevant time. The Haikins are both undischarged bankrupts. This is the fact that gives rise to this application.

13. On 6 April 2021, the Federal Court granted the plaintiffs leave, pursuant to s 58(3)(b) of the Bankruptcy Act, to proceed against the Haikins.

14. The relief sought in the proceedings includes orders that the transactions have been rescinded, are void ab initio, or are voidable transactions pursuant to provisions of the Corporations Act 2001 (Cth), and that the Register, pursuant to the Real Property Act 1900 (NSW) (Real Property Act), record that the Company is the registered proprietor of the property, subject to a mortgage which the Commonwealth Bank of Australia holds over it. The transactions are identified in Schedule A to the Further Amended Summons.

15. The Haikins and entities associated with them provided guarantees and other securities to Citadel. These included general security deeds which charged all of their present and after acquired property.

16. It is possible that if the transactions (or some, or elements, of them) are held to be void, the guarantees and security provided by the Haikins may be affected so as to extinguish provable debts in their bankrupt estates. This could, in turn, mean that the title of their trustees to property in their bankrupt estates may be affected. If this were so, a matter for determination in the proceedings could be a special federal matter under s 6(1). It is not necessary for me conclusively to decide whether this is the case or not. I proceed on the assumption that it is.

17. Section 6(3) requires there to be special reasons for an order that the proceedings be determined by this Court, other than reasons relevant to the convenience of the parties.

18. Special reasons do not require that the circumstances must be extraordinary or unique. It is sufficient if they are unusual or uncommon in character equality or degree, if they differ from the ordinary or usual, or if they are particular or individual, but they need not be unique. Convenience of the parties is not excluded from the Court’s consideration, provided that it is not the determining factor: see Henry v Hancock [2016] NSWSC 71 (Brereton J); James v James (No.2) [2019] NSWSC 116 (Slattery J); Preston v Diaspora Holdings Pty Ltd; Diaspora Holdings Pty Ltd v Owners Corporation of Strata Plan 68608 [2019] NSWSC 651 (Parker J); Montgomery v Porter [2019] NSWSC 1524 (Ward CJ in Eq).

19. Thus, what is required here to be present is some pertinent non-trivial consideration or circumstance which takes the case of out the run of the mill and which warrants the proceedings being determined in this Court even though, generally, the special federal matter in this case (if there is one) should be heard by the Federal Court.

20. Special reasons within s 6(3) are present:

1. the principal proceedings were regularly instituted in this Court, are manifestly appropriate to be dealt with in this List and they will be dealt with expeditiously;

2. amongst others, they involve whether an order should be made with respect to the Register kept under the Real Property Act of this State;

3. the issues in the proceedings do not appear to require resolution of any significant question that would involve a special federal matter;

4. the Haikins are properly parties to the proceedings but they are only two of 15 parties and the potential special federal matter involved concerns only them and not the others;

5. the first to seventh defendants support this application;

6. the Haikins’ trustee (whom I was informed was present at the hearing of the motion) does not oppose the order sought;

7. there has been no submission put by the Attorneys-General against the making of the order sought.

21. Pursuant to s 6(3) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW), I order that the proceedings be determined by this Court.

Decision last updated: 16 June 2021