Fewin Pty Ltd v Burke

[2015] NSWSC 1411

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Fewin Pty Limited v John Christopher Burke [2015] NSWSC 1411

Hearing dates:

11 September 2015

Date of orders:

25 September 2015

Decision date:

25 September 2015

Jurisdiction:

Common Law

Before:

Wilson J

Decision:

The Court orders:

 

1. Leave to file an Amended Statement of Claim is refused;

 

2. The Statement of Claim of 13 August 2014 is dismissed; and

 3. Costs as agreed or assessed are awarded in the defendant’s favour.

Catchwords:

BANKRUPTCY – Trustee – Jurisdiction of Federal Court and State Supreme Courts – “special federal matter” – frivolous and vexatious proceedings – dismissal of proceedings etc. for want of due despatch

Legislation Cited:

Bankruptcy Act 1966
Civil Procedure Act 2005
Judiciary Act 1903
Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth)
Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW)
Uniform Civil Procedure Rules 2005

Cases Cited:

Chamberlain Group Pty Ltd v Kids for Life Pty Ltd [2015] NSWCA 241
Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46; (2013) 250 CLR 303; (2013) 303 ALR 199
Maria Gorkowski v Turner [2014] VSC 200; (2014) 285 FLR 66
Re Wakim, Ex parte McNally [1999] HCA 27; (1999) 198 CLR 511
Truthful Endeavours Pty Ltd v Conson [2015] FCAFC; (2015) 231 ALR 483
Turner v Gorkowski [2014] VSCA 248

Category:

Procedural and other rulings

Parties:

John Christopher Burke (Applicant/ Defendant)
Fewin Pty Limited (Respondent/First Plaintiff)
Ronald Michael Coshott (Respondent/ Second Plaintiff)
Ljiljana Coshott (Respondent/ Third Plaintiff)

Representation:

Counsel:
J.T. Johnson (Applicant)
G. Gee (Respondent)

  Solicitors:
O’Neil Partners (Applicant)
Martin Place Lawyers (Respondent)

File Number(s):

2014/00238068

Publication restriction:

None

Judgment

1. On 11 September 2015, the defendant made an application before the Court for the proceedings brought by the plaintiff to be dismissed for want of prosecution and an asserted lack of jurisdiction, pursuant to r 12.7 and r 13.4 of the Uniform Civil Procedure Rules 2005 (“UCPR”).

2. The principal submission of the defendant is that this Court does not have jurisdiction to hear, determine, or make orders in these proceedings. It is argued that s 27 of the Bankruptcy Act 1966 (Commonwealth) (“the Bankruptcy Act”) confers exclusive jurisdiction in relation to bankruptcy matters on the Federal Court and the Federal Circuit Court; and that as the proceedings should be characterised as a “special federal matter” this court is unable to assume jurisdiction via the relevant cross-vesting legislation.

3. The application is contested by the plaintiffs.

A Brief History of the Proceedings

4. On 7 November 2008 Robert Gilbert Coshott was declared bankrupt upon the making of a Sequestration Order by the Federal Magistrates Court of Australia. Subsequently, on 18 December 2008, the defendant, John Christopher Burke, was appointed trustee of Mr Coshott’s estate. The defendant was trustee in bankruptcy of the estate from that date until 25 February 2013, when the defendant resigned as trustee of the estate.

5. It appears that Fewin Pty Limited, being the first plaintiff, is a company under the control of Robert Coshott, and the second and third plaintiffs. The second and third plaintiffs are, respectively, Robert Coshott’s brother, and his wife.

6. As outlined in the Statement of Claim of 13 August 2014, the plaintiffs submit that at all material times between December 2008 and 25 February 2013, the defendant, as trustee of the estate, had duties to the plaintiffs as creditors of the estate, to the estate itself, and to others. The plaintiffs claim that the defendant had duties to:

1. Exercise all reasonable skill, care and diligence in the administration of the estate;

2. Administer the estate as efficiently as possible by avoiding unnecessary expense;

3. Exercise powers and perform functions in a commercially sound way; and

4. Incur only those costs that are necessary and reasonable.

7. The plaintiffs claim that during the period between December 2008 and 25 February 2013, the defendant breached and/or failed to perform these duties.

8. A Defence was filed on 17 September 2014. The Defence provided that any issue of claims arising from the conduct of the defendant was regulated by the provisions of the Bankruptcy Act and subject to the exclusive supervision of a court having jurisdiction under that Act. The Defence contends that the Supreme Court of New South Wales does not have any jurisdiction over the cause of action for this reason.

9. There have been a number of adjournments in this matter. Primarily, these adjournments have related to a request to re-plead the case and also join the matter. There have also been some issues in relation to changes in representation on behalf of the plaintiffs. As a result, the proceedings have effectively stagnated since the end of 2014.

10. On 31 July 2015, the matter was before the Common Law Registrar who made orders for the plaintiff to serve any proposed Amended Statement of Claim by 14 August 2015.

11. The matter was relisted on 21 August 2015. The Registrar noted that the proposed Amended Statement of Claim had not yet been served. She ordered the plaintiffs to serve the pleading by 28 August 2015.

12. The matter was stood over until 4 September 2015. At that date, the Amended Statement of Claim had still not been served. The Registrar made orders that the pleadings be served by 9 September 2015. A further order was made that if the plaintiffs failed to comply with the order for service the matter would be referred to the Duty Judge on 11 September 2015 for the plaintiff to show cause.

13. This is how the matter came to be before me.

14. The affidavit of the defendant, Mr Burke, was filed in Court on 11 September 2015. Annexure “C” to that affidavit attaches an email from Bruce Hocking, of Martin Place Lawyers, to John Burke (cc Mr G. Gee) at 7.13 pm on 9 September 2015. That email attached an unsigned copy of the Amended Statement of Claim (Annexure “D”).

15. The affidavit of Mr Burke outlines the basis on which the defendant seeks to have the proceedings dismissed. At [13] Mr Burke states that there are substantial issues as to jurisdiction, as well as the standing of the plaintiffs (or at least the second and third plaintiffs). Mr Burke seeks to have the proceedings summarily dismissed pursuant to r 13.4 of the UCPR. It is contended that the matter is an abuse of process, or constitutes proceedings that are frivolous or vexatious.

16. Rule 13.4 of the UCPR provides that,

“(1) If in any proceedings it appears to the court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings:

(a) the proceedings are frivolous or vexatious, or

(b) no reasonable cause of action is disclosed, or

(c) the proceedings are an abuse of the process of the court,

the court may order that the proceedings be dismissed generally or in relation to that claim.

(2) The court may receive evidence on the hearing of an application for an order under subrule (1).”

17. In the alternative, Mr Burke submits that the proceedings be dismissed for want of prosecution, pursuant to r 12.7 of the UCPR.

18. Rule 12.7 of the UCPR provides that,

“(1) If a plaintiff does not prosecute the proceedings with due despatch, the court may order that the proceedings be dismissed or make such other order as the court thinks fit.

(2) If the defendant does not conduct the defence with due despatch, the court may strike out the defence, either in whole or in part, or make such other order as the court thinks fit.”

19. On 11 September 2015 the parties made oral submissions on the motion before the court.

20. Since the plaintiffs complained of the lack of notice of the defendant’s application, some further opportunity was given to the plaintiffs to file and serve any submissions relevant to the oral application by 16 September 2015; and the defendant was to file and serve any submissions in reply by 18 September 2015. Both of these orders were complied with.

Jurisdiction

21. In regards to jurisdiction, the defendant argues that this Court does not have jurisdiction to hear the issues in dispute, and that the “desire” by the plaintiffs to commence proceedings or to continue the proceedings when the Court does not have jurisdiction constitutes an abuse of process, or, at the very least, frivolous and vexatious litigation, contrary to r 13.4 of the UCPR. The defendant submits that both the existing Statement of Claim filed in August 2014 and the Amended Statement of Claim filed in September 2015 seeks relief in respect of which this Court has no jurisdiction.

22. Section 27 of the Bankruptcy Act provides that,

“(1) The Federal Court and the Federal Circuit Court have concurrent jurisdiction in bankruptcy, and that jurisdiction is exclusive of the jurisdiction of all courts other than:

(a) the jurisdiction of the High Court under section 75 of the Constitution; or

(b) the jurisdiction of the Family Court under section 35 or 35A of this Act.

(2) To avoid doubt, subsection (1) does not:

(a) confer jurisdiction in a criminal matter; or

(b) exclude the jurisdiction of a court of a State or Territory under the Judiciary Act 1903 in a criminal matter relating to this Act.”

23. The effect of s 27 is that the Federal Court of Australia and/or the Federal Circuit Court of Australia have exclusive jurisdiction in bankruptcy, save for some exceptions.

24. The plaintiffs rely upon provisions within the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) (“the Cross-vesting Act”) to establish this Court’s jurisdiction. The cross-vesting legislation as it was enacted purported to confer jurisdiction on the Federal and Family Courts and on the Supreme Courts of other States and Territories to hear and determine matters arising under State or Territorial law and providing for the transfer of proceedings between those courts.

25. The issue of cross-vesting was considered in Re Wakim, Ex parte McNally [1999] HCA 27; (1999) 198 CLR 511. In that matter, the High Court held that in so far as the State Acts purported to confer jurisdiction in State matters on the Federal or Family Courts, they were invalid, but that left untouched the provisions in the Commonwealth Act relating to conferral of federal jurisdiction on State courts (authorised by Ch III of the Constitution); the conferral by the States of jurisdiction in State matters on the courts of other States and Territories, and the provisions for transfer of proceedings between such courts.

26. Relevantly, s 6(1) of the Cross-vesting Act provides that,

“(1) If:

(a) a matter for determination in a proceeding that is pending in the Supreme Court of a State or Territory 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 paragraph (2)(b).

Note: This section has effect subject to section 6A (Special federal matters: Commonwealth authorities or officers acting under the laws of States).”

27. A “special federal matter” is defined in s 3 as,

“"special federal matter" means:

(a) a matter arising under Part IV of the Competition and Consumer Act 2010 (other than under section 45D, 45DA, 45DB, 45E or 45EA); or

(aa) a matter arising under the Competition Code (as defined in section 150A of the Competition and Consumer Act 2010 ) of the Australian Capital Territory or the Northern Territory; or

(ab) a matter arising under section 60G of the Family Law Act 1975 in a court other than the Family Court of Western Australia or the Supreme Court of the Northern Territory; or

(b) a matter involving the determination of questions of law on appeal from a decision of, or of questions of law referred or stated by, a tribunal or other body established by an Act or a person holding office under an Act, not being a matter for determination in an appeal or a reference or case stated to the Supreme Court of a State or Territory under a law of the Commonwealth that specifically provides for such an appeal, reference or case stated to such a court; or

(c) a matter arising under the Administrative Decisions (Judicial Review) Act 1977; or

(e) 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.”

28. The defendants submit that the proceedings should be characterised as a “special federal matter” as they are a matter within the original jurisdiction of the Federal Court by virtue of section 39B of the Judiciary Act 1903. Relevantly, s 39B(1A) provides,

“(1A) The original jurisdiction of the Federal Court of Australia also includes jurisdiction in any matter:

(a) in which the Commonwealth is seeking an injunction or a declaration; or

(b) arising under the Constitution, or involving its interpretation; or

(c) arising under any laws made by the Parliament, other than a matter in respect of which a criminal prosecution is instituted or any other criminal matter.

Note: Paragraph (c) does not prevent other laws of the Commonwealth conferring criminal jurisdiction on the Federal Court of Australia.”

29. In opposition to the claim by the defendants, the plaintiffs firstly rely on, in the event that the proceedings do not involve a “special federal matter”, s 4 of the Cross-vesting Act to invest the Court with jurisdiction over the proceeding, and s 5 for the court’s jurisdiction to resolve any question of transfer of the proceedings to a federal court.

30. Section 4 provides that,

“(1) Where:

(a) the Federal Court or the Family Court has jurisdiction with respect to a civil matter, whether that jurisdiction was or is conferred before or after the commencement of this Act; and

(b) the Supreme Court of a State or Territory would not, apart from this section, have jurisdiction with respect to that matter;

then:

(c) in the case of the Supreme Court of a State (other than the Supreme Court of the Australian Capital Territory and the Supreme Court of the Northern Territory)--that court is invested with federal jurisdiction with respect to that matter; or

(d) in the case of the Supreme Court of a Territory (including the Australian Capital Territory and the Northern Territory)--jurisdiction is conferred on that court with respect to that matter.

(2) Where:

(a) the Supreme Court of a Territory has jurisdiction with respect to a civil matter, whether that jurisdiction was or is conferred before or after the commencement of this Act; and

(b) the Federal Court, the Family Court or the Supreme Court of a State or of another Territory would not, apart from this section, have jurisdiction with respect to that matter;

jurisdiction is conferred on the court referred to in paragraph (b) with respect to that matter.

(3) Where a proceeding is transferred to the Federal Court, the Family Court or a State Family Court of a State, that court has, by virtue of this subsection, jurisdiction with respect to so many of the matters for determination in the proceeding as that court would not have apart from this subsection.

(4) This section does not apply to a matter arising under:

(a) the Conciliation and Arbitration Act 1904; or

(ab) the Fair Work Act 2009; or

(aba) the Fair Work (Building Industry) Act 2012; or

(ac) the Fair Work (Registered Organisations) Act 2009; or

(ad) the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009; or

(b) the Workplace Relations Act 1996; or

(ba) the Native Title Act 1993; or

(c) section 45D, 45DA, 45DB, 45E, 45EA,46A, 155A or 155B of the Competition and Consumer Act 2010; or

(d) a provision of Part VI or XII of the Competition and Consumer Act 2010 so far as the provision relates to section 46A, 155A or 155B of that Act.”

31. Section 5 relates to transfer of proceedings. It provides a basis for the Court’s jurisdiction to resolve any question of the transfer of the proceeding to a federal court.

32. Secondly, the plaintiffs submit that in the event that the proceedings involve a “special federal matter”, s 6(3) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW) gives jurisdiction to the Supreme Court to determine the proceeding, or to transfer the proceeding to a federal court as presumed by s 6(1).

33. Section 6(3) provides that,

“(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.”

34. This issue of jurisdiction in bankruptcy matters was considered in the Victorian Supreme Court in Maria Gorkowski v Turner [2014] VSC 200; (2014) 285 FLR 66. That case considered whether the Supreme Court of Victoria had jurisdiction to deal with a matter arising from bankruptcy. In those proceedings, the plaintiff, Ms Gorkowski, alleged that she had a beneficial interest in a property, the title of which had recently passed from her bankrupt son, Richard Gorkowski, to the defendant, Mr Turner, who was trustee for the estate of Mr Gorkowski. At [37] Vickery J held that pursuant to s 4(1) of the Cross-vesting Act, the Supreme Court could be invested with federal jurisdiction. The Court then considered whether the proceedings were a “special federal matter”. Critically, the Court found that bankruptcy was not “special federal matter” for the purposes of the Act. His Honour held that,

“38 Further, although the Bankruptcy Act by virtue of s 27 provides that the jurisdiction of the Federal Court of Australia and the Federal Magistrates Court is ‘exclusive of the jurisdiction of all courts other than the jurisdiction of the High Court under section 75 of the Constitution’ or ‘the jurisdiction of the Family Court under section 35 or 35A of’ the Act’, bankruptcy is not a ‘special federal matter’ for the purposes of Cross Vesting Act.

39 The definition of ‘special federal matter’ is set out in s 3 of the Cross Vesting Act. Matters arising under the Bankruptcy Act are not included within the definition.

40 The only potentially relevant section is sub-paragraph (e) of s 3 which states that a special federal matter means:

(e) a matter that is within the original jurisdiction of the Federal Court by virtue of section 39B of the Judiciary Act 1903.

41 Section 39B(1A)(c) of the Judiciary Act 1903 confers original jurisdiction on the Federal Court in any matter “arising under any laws made by the Parliament, other than a matter in respect of which a criminal prosecution is instituted or any other criminal matter”.

42 However, the present proceeding is not a matter ‘arising under’ the Bankruptcy Act.

43 The test for determining whether a matter “arises under a federal law” was set out by the High Court in R v Commonwealth Court of Conciliation; Ex parte Barrett [16] where Latham CJ said:[17]

... a matter may properly be said to arise under a Federal law if the right or duty in question in the matter owes its existence to Federal law or depends upon Federal law for its enforcement, whether or not the determination of the controversy involves the interpretation or validity of the law.

44 To similar effect is Felton v Mulligan, where the High Court considered what was necessary for a matter to arise under a Federal law.

45 Menzies J said in Felton: [19]

A matter arises under a law when it is necessary in litigation to determine whether that law confers a right or affords a defence which is an issue in the litigation. A matter arises under a law of the Parliament when in a proceeding it is necessary that there should be a decision upon a claim made by one of the parties to the litigation which is based upon that law.

46 In the same case, Windeyer J said to similar effect: [20]

In my view a matter does not arise for adjudication under a law made by the Commonwealth Parliament unless a statute is relied upon as giving a right claimed or as the direct source of a defence asserted.

47 In the present case, although the outcome of the proceeding will affect the property of the Trustee in Bankruptcy, the proceeding does not owe its existence to the Bankruptcy Act in the relevant sense. The issue in question in this proceeding does not owe its existence to any Federal law or nor will the outcome depend upon Federal law for its enforcement. No provision of the Bankruptcy Act is relied upon by either the Plaintiff or the Defendant in the pleadings either to found the Plaintiff’s causes of action or to provide a defence to the Defendant, other than paragraph [16] of the defence which pleads that this Court does not have jurisdiction to hear this dispute, founded upon s 27 of the Bankruptcy Act.

48 The proceeding involves the exercise of the Supreme Court’s general jurisdiction to determine equitable property rights between two individuals, one of whom happens to be a bankruptcy trustee.

49 Accordingly, the present proceeding is not a ‘special federal matter’ under the Cross Vesting Act and the Supreme Court of Victoria is invested with jurisdiction to determine it.”

35. Gorkowski v Turner was then considered, in obiter, in Truthful Endeavours Pty Ltd v Condon [2015] FCAFC 70; (2015) 231 ALR 483 per Allsop CJ, Katzmann and Gleeson JJ. The principal concern of the Court in this respect was the scope of the term “special federal matter”. The Full Court at [61] found that,

“With the utmost respect, Vickery J’s conclusions in Gorkowski that a proceeding of the kind before him was not a matter arising under the Bankruptcy Act, was not within the original jurisdiction of the Federal Court by virtue of s 39B of the Judiciary Act, and so was not a “special federal matter” within ss 3 and 6 of the Cross-vesting Act were wrong and should not be followed.”

36. The court considered the relationship of bankruptcy proceedings and state court jurisdiction at [32]-[61],

“32 Before turning to the primary judge’s reasons there is an antecedent matter which requires attention. That is the question of jurisdiction. In the court below, Truthful Endeavour filed an interlocutory application seeking to strike out the action as an abuse of process on the ground that the Court did not have the jurisdiction to hear it. The interlocutory application was not pressed and her Honour dismissed it without giving reasons. The proposition that the Court lacked jurisdiction was never revived, although the appellant’s written submissions (para 22) contended that the claim for a resulting trust was not within the exclusive jurisdiction of a court exercising jurisdiction under the Bankruptcy Act Still, it is the first duty of a court to be satisfied of its jurisdiction – its public authority to adjudicate: Federated Engine Drivers’ and Firemen’s Association of Australasia v Broken Hill Pty Co Ltd [1911] HCA 31; 12 CLR 398 at 415; Khatri v Price [1999] FCA 1289; 95 FCR 287 at [14]. Presumably the primary judge was so satisfied. In that she was undoubtedly correct. But there is a decision of the Victorian Supreme Court which might cast doubt on this matter. Even in the absence of challenge, any such doubt should be eliminated.

33 The essential character of the proceeding which brings it within federal jurisdiction is straightforward.

34 As we have already said, Mr Condon is the trustee of Mrs Rayhill’s bankrupt estate. He was appointed trustee under the authority of the Bankruptcy Act when the sequestration order was made. At that time Mrs Rayhill’s property vested forthwith in him and became divisible amongst her creditors: Bankruptcy Act, ss 58 and 116(1). “Property” in this context refers to property of “every description”: see the definition of “property” in s 5(1) of the Bankruptcy Act. It includes the right to a chose in action or debt and, relevantly, to an equitable charge by way of security. The application brought by the trustee was one “to declare for…the title of the trustee to any property”: Bankruptcy Act, s 31(1)(f). Section 27 of the Bankruptcy Act confers on this Court and the Federal Circuit Court of Australia concurrent jurisdiction “in bankruptcy” and provides that that jurisdiction is exclusive of all other courts except for the jurisdiction of the High Court under s 75 of the Constitution and of the Family Court under s 35 or 35A of the Bankruptcy Act. (As will be seen below, s 27 must now be read in the light of the Cross-vesting Act, s 4(1).)

35 For present purposes, it is unnecessary to discuss the operation of s 27 and the meaning of the phrase “in bankruptcy”, beyond referring to two Full Court decisions: Scott v Bagshaw [2000] FCA 816; 99 FCR 573 and Meriton Apartments Pty Ltd v Industrial Court of New South Wales [2008] FCAFC 172; 171 FCR 380. From those decisions, the former in particular, there would appear to be no doubt that an application of the kind referred to in s 31(1)(f) is a proceeding in bankruptcy for the purposes of s 27(1) and the definition of “bankruptcy” in s 5(1). In Scott v Bagshaw the trustee of a family trust (Scott) applied for a declaration that each of three properties was charged in his favour with the payment of moneys due under a loan agreement and for the appointment of a receiver to the properties to effect their sale and, to the extent of the debt, the payment to him of the proceeds of sale (after costs and expenses were deducted) and the balance to two of three respondents. The properties were held in the joint names of the first respondent, a bankrupt, and his wife, who was the second respondent (Mr and Mrs Bagshaw). The third respondents were the bankrupt’s trustees in bankruptcy. The primary judge found there was no federal jurisdiction and stayed the proceeding. The Full Court granted leave to appeal and allowed the appeal. After referring to ss 27(1) and 31(1)(f), the Full Court said at [19]‑[20]:

19 On the face of the pleadings, the claim is one to realise an equitable charge. The pleadings make no reference of any section of the Act and the matter may be capable of reaching judgment without reference to any section.

20 However, the undoubted effect of an order being made in the terms sought by the appellant would be that a declaration would be made against the title of the third respondents. Upon the third respondents becoming trustees, the title to the properties (and subsequently to the money representing part of the properties) became vested in them: subs 58(1) and s 132 of the Act. The consequence of any such order must therefore be that it would have a necessary adverse effect on the title of the third respondents to the extent that it established title to the appellant. That is a matter that falls within the jurisdiction in bankruptcy.

36 Further, in being a controversy as to what property vests in the trustee by the operation of s 58(1) and what is divisible amongst creditors under s 116(1), the matter can readily be seen as one that arises under a law of the Parliament for the purposes of s 76(ii) of the Constitution and s 39B(1A)(c) of the Judiciary Act 1903 (Cth).

37 Until recently, these propositions as to jurisdiction, and especially that contained in the preceding paragraph, needed little elucidation: if a proceeding is within the jurisdiction “in bankruptcy”, the “matter” of which the proceeding is part must be one arising under the law of the Parliament, that is, the Bankruptcy Act.

38 In Gorkowski v Turner [2014] VSC 200; 285 FLR 66, however, Vickery J in the Victorian Supreme Court held, in effect, that if the issues to be decided by the Court to resolve the controversy about a trustee’s title to property do not specifically involve a federal statute, but are ones which depend for their resolution upon general equity or common law, the matter will not be one which arises under a law of the Parliament. If that were right, it would deny the conclusions of Scott v Bagshaw and Meriton Apartments that the jurisdiction in such a case was “in bankruptcy”. If that were right, the coherent jurisdictional foundation of both this Court and the Federal Circuit Court to supervise and control the exercise of power of, and the estates held by, trustees in bankruptcy would be undermined. It is therefore necessary to identify why and to what extent, with respect, the decision in Gorkowski v Turner is wrong.

39 Gorkowski v Turner concerned a dispute in the Practice Court of the Supreme Court of Victoria about equitable title to land that had been in the name of the bankrupt, Mr Gorkowski. After some trouble and inconvenience (recounted by the judge at [4] of his reasons), the trustee in bankruptcy, Mr Turner, became the registered proprietor of the land in question, thus giving consequential effect to s 58(1) of the Bankruptcy Act. Mrs Gorkowski then filed proceedings in the Supreme Court seeking, amongst other things, a declaration that she owned the property in equity by reason of the dealings between her and her husband in the years before his bankruptcy. Thus, she asserted that the trustee held the property on trust for her. Such a claim had the necessary character of an assertion by her that, pursuant to s 116(2), the property was not divisible amongst the creditors of her husband’s bankrupt estate.

40 Mr Turner filed an application to strike out the proceedings on the basis that the Supreme Court had no jurisdiction because the matter was, by the definition of bankruptcy in s 5(1) and by ss 27 and 31(1)(f) of the Bankruptcy Act (being an application to declare against the title of the trustee of the property), within the exclusive jurisdiction of the Federal Court of Australia and the Federal Circuit Court of Australia. One argument of Mrs Gorkowski was that the Supreme Court was invested with federal jurisdiction by virtue of s 4(1) of the Cross-vesting Act. His Honour upheld that contention and then proceeded to consider the question of whether the proceeding was a “special federal matter” within the meaning of the Cross-vesting Act. Section 6 of the Cross-vesting Act requires a State or Territory Supreme Court in a pending proceeding which is a “special federal matter” (defined in s 3) to transfer the proceeding to the Federal Court (or, in an appropriate case, the Family Court or the Family Court of Western Australia or the Supreme Court of the Northern Territory) unless it makes an order that the proceeding be determined in the court in which it is pending. Such an order may only be made if the court is satisfied that there are special reasons for doing so in the particular circumstances of the case and after written notice has been given to the Attorneys-General of the Commonwealth and of the State or Territory where the proceeding is pending.

41 The judge first examined the Bankruptcy Act. His Honour concluded, in substance, that the proceeding was “an application to declare against the title of the trustee” for the purposes of s 31(1)(f) of the Bankruptcy Act and was therefore the exercise of jurisdiction “in bankruptcy”. Thus, prima facie the application was one in respect of which the Federal Court had exclusive jurisdiction. That conclusion involved the judge following, at this stage of his reasoning, Scott v Bagshaw and Meriton Apartments. (It is unnecessary to discuss the differences of opinion in Meriton Apartments between Branson and Greenwood JJ, on the one hand, and Perram J, on the other.)

42 His Honour then considered the effect of the Cross-vesting Act, and first, the vesting of jurisdiction by s 4(1) of that Act. In short, his Honour reasoned, the effect of that (later) statute upon the (earlier) Bankruptcy Act was to impliedly repeal that part of s 27 of the Bankruptcy Act as provides for exclusive jurisdiction in the Federal Court and Federal Circuit Court. In so concluding at [21]-[37], his Honour relied on a decision of the Full Court of this Court in Re Wilcox; Ex parte Venture Industries Pty Ltd [1996] FCA 1497; 66 FCR 511 at 523-525 (Black CJ, Cooper and Merkel JJ). In Re Wilcox, the Court concluded that the investing of jurisdiction in State Supreme Courts by s 4(1) of the Cross-vesting Act was effective to “disturb” (for this language, see Re Wilcox at 525B, that is, impliedly repeal) the pre-existing regime of exclusive jurisdiction, unless a specific exclusion to the operation of s 4(1) was found in s 4(4) of the Cross-vesting Act, identifying matters arising under nominated statutes.

43 There is no call, here, to question the correctness of Re Wilcox or the judge’s reliance upon it to conclude that the Supreme Court had jurisdiction to hear Mrs Gorkowski’s application, notwithstanding the terms of s 27 of the Bankruptcy Act. The above essential reasoning in Re Wilcox can be seen to be reflected in that of the New South Wales Court of Appeal (Basten, Gleeson and Leeming JJA) in Hopkins v Governor-General of Australia [2013] NSWCA 365; 303 ALR 157 at [8]ff. However, the Court of Appeal disapproved of one aspect of Re Wilcox insofar as the Full Court (66 FCR at 525C-E) expressed the view that, notwithstanding the general approach to the operation of s 4(1) and (4) that they had outlined, the express restriction on State courts in s 9 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) to “review” survived s 4(1) of the Cross-vesting Act. It is unnecessary to enter this debate. It is the next issue with which Vickery J dealt, concerning “special federal matter”, which is controversial.

44 Having concluded that the Supreme Court was invested with jurisdiction by s 4(1) of the Cross-vesting Act (notwithstanding the terms of s 27 of the Bankruptcy Act), his Honour then proceeded to deal with the question of whether “bankruptcy was a special federal matter”: see the proposition at [38] and what follows at [39]-[49] of his Honour’s reasons. The only relevance for the posing and answering of that question was the operation (or not, as the case may be) of s 6 of the Cross-vesting Act concerning the transfer of matters to the Federal Court.

45 At this point, it is helpful to refer in a little more detail to investing of federal jurisdiction in State courts and to the Cross-vesting Act. Section 4(1) of the Cross-vesting Act provides, relevantly, that where the Federal Court has jurisdiction with respect to a civil matter (whether conferred before or after commencement of the Cross-vesting Act) and a Supreme Court would not, apart from this section, have jurisdiction with respect to the matter, then the Supreme Court is invested with federal jurisdiction in respect of the matter. State courts are invested (subject to various qualifications and conditions by the mechanics of withdrawal and simultaneous investing in s 39(1) and (2) of the Judiciary Act) with federal jurisdiction in all matters referred to in ss 75 and 76 of the Constitution. This includes s 76(ii) – any matter arising under any law made by Parliament. Specific statutes may qualify or restrict that general investing. An example is s 27 of the Bankruptcy Act which provides for exclusive jurisdiction of two federal courts in bankruptcy. The authority of Parliament to make jurisdiction in federal courts exclusive is contained in s 77(ii) of the Constitution. Section 4(4) of the Cross-vesting Act lists various statutes and statutory provisions to which “[t]his section does not apply to a matter arising under”. The Bankruptcy Act and provisions of it is, and are, not mentioned in s 4(4). Hence, on the reasoning of Re Wilcox, the judge concluded that s 4(1) operated to impliedly repeal s 27(1) of the Bankruptcy Act insofar as it provided for exclusive jurisdiction of the two named federal courts.

46 The policy of the Cross-vesting Act not only reached to identify matters in respect of which the exclusive jurisdiction of federal courts was not to be disturbed (s 4(4)), but also to identify matters that should be transferred to federal courts. This was done by the notion of a “special federal matter”.

It is thus crucial for the operation of the Cross-vesting Act and the policies that underlie it, to understand what a “special federal matter” is. That phrase is defined in s 3(1) of the Cross-vesting Act and identifies certain matters in respect of which the State or Territory court would not, but for the Cross-vesting Act have jurisdiction, as follows:

3 Interpretation and application

(1) In this Act, unless the contrary intention appears:

….

special federal matter means:

(a) a matter arising under Part IV of the Competition and Consumer Act 2010 (other than under section 45D, 45DA, 45DB, 45E or 45EA); or

(aa) a matter arising under the Competition Code (as defined in section 150A of the Competition and Consumer Act 2010) of the Australian Capital Territory or the Northern Territory; or

(ab) a matter arising under section 60G of the Family Law Act 1975 in a court other than the Family Court of Western Australia or the Supreme Court of the Northern Territory; or

(b) a matter involving the determination of questions of law on appeal from a decision of, or of questions of law referred or stated by, a tribunal or other body established by an Act or a person holding office under an Act, not being a matter for determination in an appeal or a reference or case stated to the Supreme Court of a State or Territory under a law of the Commonwealth that specifically provides for such an appeal, reference or case stated to such a court; or

(c) a matter arising under the Administrative Decisions (Judicial Review) Act 1977; or

(e) 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.

48 The closing clause of the definition (that the Supreme Court would not have jurisdiction apart from the Cross-vesting Act) is engaged by s 27(1) of the Bankruptcy Act.

49 As his Honour observed at [40], for an application of the kind brought by Mrs Gorkowski, the only relevant provision is para (e) of the definition in s 3(1).

50 Section 39B of the Judiciary Act deals with the original jurisdiction of the Federal Court. There are, of course, a very large number of statutes which contain individual conferrals of jurisdiction on the Federal Court. Section 27 of the Bankruptcy Act is an example. Section 39B(1A)(c) provides that the original jurisdiction of the Federal Court includes jurisdiction in any matter arising under any laws made by the Parliament (other than criminal matters). This provision operates according to its terms as a general conferral of jurisdiction: Transport Workers’ Union of Australia v Lee [1998] FCA 756; 84 FCR 60 at 67; National Union of Workers v Davids Distribution Pty Ltd [1999] FCA 1109; 91 FCR 513 at 520; Hooper v Kirella Pty Ltd [1999] FCA 1584; 96 FCR 1. It is not a gap filling provision or a bin for odds and ends of jurisdiction not previously given. As a general conferral of jurisdiction, it is to be construed liberally, eschewing limitation and implications not found in the words of the provision: see the cases referred to in ACTEW Corporation Ltd v Pangallo [2002] FCAFC 325; 127 FCR 1 at 23 [54] and [55].

51 Recognising the character of s 39B(1A)(c) as a general conferral of civil jurisdiction of matters arising under laws of the Parliament, it was necessary, for the purpose of determining whether there was a special federal matter, to enquire whether the matter (the controversy) was within the jurisdiction of the Federal Court “by virtue of s 39B”.

52 It should first be noted that, on the hypothesis thus far, the matter was within the jurisdiction of the Federal Court “under or by virtue of” s 27(1) and the definition of “bankruptcy” in s 5(1) of the Bankruptcy Act. Obviously, the Bankruptcy Act is a law of the Parliament. If a general conferral of jurisdiction such as s 39B(1A)(c) conferred jurisdiction on the Federal Court in matters arising under that Act, then the matter would be within the jurisdiction of the Federal Court both under or by virtue of the Bankruptcy Act and also by virtue of s 39B of the Judiciary Act. There being no reason to read para (e) of the definition of “special federal matter” in s 3(1) of the Cross-vesting Act as limited to matters within the jurisdiction of the Federal Court only by virtue of s 39B, if a proceeding such as Mrs Gorkowski’s application was a matter arising under a law of the Parliament (the Bankruptcy Act), then it was a special federal matter.

53 If, as Vickery J found (at [42] of his reasons), Mrs Gorkowski’s application was not a matter arising under the Bankruptcy Act, it is hard to see how it could be a “proceeding under or by virtue of the Act” and so within the federal jurisdiction “in bankruptcy”, in which case both Scott v Bagshaw and Meriton Apartments would have been wrongly decided.

54 His Honour was of the view that Mrs Gorkowski’s application was not a matter arising under the Bankruptcy Act, based on his reading of certain passages from R v Commonwealth Court of Conciliation; Ex parte Barrett [1945] HCA 50; 70 CLR 141 and Felton v Mulligan [1971] HCA 39; 124 CLR 367. The reasoning was at [42]-[49] (footnotes omitted):

42 [T]he present proceeding is not a matter “arising under” the Bankruptcy Act.

43 The test for determining whether a matter “arises under a federal law” was set out by the High Court in R v Commonwealth Court of Conciliation; Ex parte Barrett where Latham CJ said:

“ … a matter may properly be said to arise under a Federal law if the right or duty in question in the matter owes its existence to Federal law or depends upon Federal law for its enforcement, whether or not the determination of the controversy involves the interpretation or validity of the law.”

44 To similar effect is Felton v Mulligan, where the High Court considered what was necessary for a matter to arise under a Federal law.

45 Menzies J said in Felton:

“A matter arises under a law when it is necessary in litigation to determine whether that law confers a right or affords a defence which is an issue in the litigation. A matter arises under a law of the Parliament when in a proceeding it is necessary that there should be a decision upon a claim made by one of the parties to the litigation which is based upon that law.”

46 In the same case, Windeyer J said to similar effect:

“In my view a matter does not arise for adjudication under a law made by the Commonwealth Parliament unless a statute is relied upon as giving a right claimed or as the direct source of a defence asserted.”

47 In the present case, although the outcome of the proceeding will affect the property of the Trustee in Bankruptcy, the proceeding does not owe its existence to the Bankruptcy Act in the relevant sense. The issue in question in this proceeding does not owe its existence to any Federal law or nor will the outcome depend upon Federal law for its enforcement. No provision of the Bankruptcy Act is relied upon by either the Plaintiff or the Defendant in the pleadings either to found the Plaintiff's causes of action or to provide a defence to the Defendant, other than paragraph [16] of the defence which pleads that this Court does not have jurisdiction to hear this dispute, founded upon s 27 of the Bankruptcy Act.

48 The proceeding involves the exercise of the Supreme Court's general jurisdiction to determine equitable property rights between two individuals, one of whom happens to be a bankruptcy trustee.

49 Accordingly, the present proceeding is not a “special federal matter” under the Cross Vesting Act and the Supreme Court of Victoria is invested with jurisdiction to determine it.

55 To understand the meaning of the phrase “matter arising under” a law of the Parliament, it is first necessary to understand the width of the word “matter”. It is the whole justiciable controversy: South Australia v Victoria [1911] HCA 17; 12 CLR 667 at 675; and Re Wakim; Ex parte McNally [1999] HCA 27; 198 CLR 511 at [139]-[142]. In Gorkowski it was the claim by Mrs Gorkowski that she was the beneficial owner of property that Mr Turner said was vested in him by a law of the Parliament.

56 The two cases referred to by the judge (Ex parte Barrett and Felton v Mulligan) are two central cases on the meaning of the phrase “arising under” in this context, but they are not exhaustive of the enquiry. The passage from Latham CJ in Ex parte Barrett quoted by the trial judge is indeed central. If the “right in question” owes its existence to federal law, then the matter is one arising under the law, even if the matter can be resolved without involving its interpretation. That the resolution of Mrs Gorkowski’s claim was to be reached through an examination only of equitable doctrine (see [48] of the judge’s reasons) is not, with respect, to the point. Mr Turner’s ownership of the property owed its existence and character to federal law: ss 58(1) and 116(1) of the Bankruptcy Act; Mrs Gorkowski’s claim was that she was the beneficial owner of the property which was therefore not property divisible among the creditors of her husband’s estate for the purposes of s 116(2) of the Bankruptcy Act. The “right in question” claimed by Mr Turner derived from ss 58(1) and 116(1); the “right in question” claimed by Mrs Gorkowski derived from s 116(2).

57 With the utmost respect, [47] of the reasons confuses a proceeding owing its existence to a federal law, such as where a federal statute creates a cause of action (a quintessential example of a matter arising under a federal law), with a right created by federal law that is in question in, or the subject of, the proceeding. It was the latter to which Latham CJ was referring in Ex parte Barrett. Similarly, for the purposes of what Menzies and Windeyer JJ each said in Felton v Mulligan, the federal law vested the rights claimed which were in issue. Mrs Gorkowski challenged the existence of rights conferred on the trustee by federal law. For the matter to arise under a federal law it was not necessary for that challenge to be articulated by reference to federal law. That the challenge (and so the issues in the case) was (or were) based on equitable principle did not detract from the fact that what was in issue was Mr Turner’s title given by ss 58(1) and 116(1) of the Bankruptcy Act and Mrs Gorkowski’s claim that (because of equitable principle) she beneficially owned the property so that the property was not divisible amongst the creditors of the estate by reason of s 116(2) of the Bankruptcy Act.

58 The essential error that is contained in [47] of the reasons is the reasoning to the effect that for there to be a matter arising under the Bankruptcy Act, there must be either a proceeding founded on federal law or a dispute about federal law. If there were, there would, of course, be a matter arising under a federal law; but these matters are not the only matters arising under a law of the Parliament. In this respect, the judge did not, with respect, correctly apply the statements of Latham CJ, Menzies J and Windeyer J in Ex parte Barrett and Felton v Mulligan. His Honour erroneously equated the “issue in question” with the equitable principles or issues to resolve the dispute. Contrary to his Honour’s conclusion, the rights in issue were not the equitable principles or issues to resolve the dispute, but were Mr Turner’s claim to ownership or Mrs Gorkowski’s claim that the property was not divisible. Both of those rights owed their existence to federal law, in the former case to ss 58(1) and 116(1) of the Bankruptcy Act and in the latter to s 116(2). That the outcome of a controversy does not depend on federal law for resolution or enforcement is not determinative.

59 The error is evident when one considers LNC Industries Ltd v BMW (Australia) Ltd [1983] HCA 31; 151 CLR 575, an authority to which his Honour does not appear to have been taken. In that case two companies were in dispute over quotas for the import of vehicles under import licences. The claims were based in contract and trust. The action was started in the NSW Supreme Court where Rogers J found for the defendant (BMW). The plaintiff (LNC Industries) applied for leave to appeal to the Privy Council. If Rogers J had been exercising federal jurisdiction, s 39(2)(a) of the Judiciary Act would have precluded any appeal to the Privy Council. The Attorney-General for the Commonwealth had the case removed to the High Court which held that federal jurisdiction was being exercised because the subject matter of the controversy (the quotas) owed its existence to federal law. The “right in question” owed its existence to federal law; it was not the contractual and equitable principles by reference to which the matter was resolved. The Court said the following at 581-582:

It is true to say that a matter does not arise under a law made by the Parliament merely because the interpretation of the law is involved: Felton v. Mulligan. On the other hand, a matter may arise under a law of the Parliament although the interpretation or validity of the law is not involved: R. v. Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett. The conclusion reached by Latham CJ in that case, and stated in a passage that has often been cited with approval, is “that a matter may properly be said to arise under a federal law if the right or duty in question in the matter owes its existence to federal law or depends upon federal law for its enforcement, whether or not the determination of the controversy involves the interpretation (or validity) of the law”. Equally, there is a matter arising under a federal law if the source of a defence which asserts that the defendant is immune from the liability or obligation alleged against him is a law of the Commonwealth: Felton v. Mulligan.

When it is said that a matter will arise under a law of the Parliament only if the right or duty in question in the matter owes its existence to a law of the Parliament that does not mean that the question depends on the form of the relief sought and on whether that relief depends on federal law. A claim for damages for breach or for specific performance of a contract, or a claim for relief for breach of trust, is a claim for relief of a kind which is available under State law, but if the contract or trust is in respect of a right or property which is the creation of federal law, the claim arises under federal law. The subject matter of the contract or trust in such a case exists as a result of the federal law. In R. v. Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett, Latham CJ said that the view which he expressed was in accordance with Federal Capital Commission v. Laristan Building and Investment Co. Pty. Ltd. [11] where Dixon J. said:

“The Seat of Government is an integral part of the Federal System, and I see no reason for denying the application of sec. 76 to laws made pursuant to sec. 52(I). It would follow that a law of the Parliament conferring jurisdiction on the High Court is warranted by sec. 76(II), at least in relation to matters which arise as the result of enactments of the Parliament. It may well be that all claims of right arising under the law in force in the Territory come within this description, because they arise indirectly as the result of the Seat of Government Acceptance Act 1909 (see sec. 6), and the Seat of Government (Administration) Act 1910 (see secs. 4 to 7 and 12). But it is at least clear that a claim to a right conferred by or under ordinances made by the Governor-General in Council under sec. 12 of the Seat of Government (Administration) Act is a matter arising under an enactment of the Parliament.”

This view conforms with what was said by Walsh J. in Felton v. Mulligan and with the judgments of members of this Court in Moorgate Tobacco Co. Ltd. v. Philip Morris Ltd.

The contracts in the present matter were concerned solely with entitlements under the Regulations. The object of the plaintiff's claim was identified in the statement of claim as “any benefit accruing” after a certain time as a result of the utilization of a quota under the Regulations. It is common ground that the “benefit” mentioned is any “benefit” which might accrue under the Regulations. The subject matter of the contracts and of the action arose under and existed only by reason of the provisions of the Regulations and the Act in pursuance of which the Regulations were made. The Act was of course a law of the Parliament and the Regulations were made under it.

The present case is not, to use the words of Windeyer J. in Felton v. Mulligan, one in which the Regulations are merely “lurking in the background”. The very subject of the issue between the parties is an entitlement under the Regulations. In substance the plaintiff's primary claim is to the benefit of rights and privileges under the Regulations. In these circumstances the matter involved in the action arose under laws made by the Parliament. The Supreme Court was therefore exercising federal jurisdiction in dealing with it and it follows that s. 39(2)(a) of the Judiciary Act precludes an appeal to Her Majesty in Council.

(Footnotes omitted; emphasis added.)

60 If a controversy or matter manifested by a proceeding regarding beneficial ownership of property (by reference to equitable principles) claimed by the trustee in bankruptcy by force of ss 58(1) and 116(1) did not arise under the Bankruptcy Act, then what was said by the Full Court in Scott v Bagshaw at [20] would have been wrong. The Full Court was not wrong. In such a case a matter does arise under the Bankruptcy Act. It is a matter in bankruptcy; it is a matter that arises under a law of the Parliament (the Bankruptcy Act); it is a matter within the original jurisdiction of the Federal Court; it is a matter in respect of which the Supreme Court of a State or Territory would not, apart from the Cross-vesting Act, have jurisdiction within the closing clause of the definition of “special federal matter” in s 3(1) of the Cross-vesting Act; and it is a “special federal matter” for the purposes of the Cross-vesting Act, in particular s 6 of that Act.

61 With the utmost respect, Vickery J’s conclusions in Gorkowski that a proceeding of the kind before him was not a matter arising under the Bankruptcy Act, was not within the original jurisdiction of the Federal Court by virtue of s 39B of the Judiciary Act, and so was not a “special federal matter” within ss 3 and 6 of the Cross-vesting Act were wrong and should not be followed.”

37. In his oral submission, counsel for the defendants stated,

“The Court has to satisfy itself it has jurisdiction before it can do anything. We say that where it is a matter that clearly arises as a consequence of duties by a trustee, where the Bankruptcy Act provides (a) the duties and (b) the consequences upon failure to comply with those duties, which were matters that were clearly dealt with in Truthful Endeavour, which was a case involving ownership of property by the way not a conduct issue. Very few of them are conduct issues but it is more, we say, where it is dealing with conduct and where conduct is directly conduct under the Bankruptcy Act.

Where that is the case, this Court does not have jurisdiction…” (T11:41-50)

38. This conclusion is in accordance with the obiter of the Federal Court in Truthful Endeavour, at [(iii)],

“…the matter arose under a law of parliament for the purposes of s 76(ii) of the Commonwealth Constitution and s 39B(1A)(c) of the Judiciary Act 1903 (Cth), such that the Federal Court had jurisdiction. This was so even if the matter was to be resolved on the basis of general equity or common law; that did not deprive the matter of its character as a matter arising under a law of parliament, since the fact that the outcome of a controversy does not depend on federal law for resolution or enforcement. Rather, if a right in question or the subject of the controversy owes its existence to federal law, then the matter is one arising under the law, even if the matter can be resolved without involving the interpretation of the federal law…”

39. Applying the reasoning of the Federal Court to the facts in this matter, establishes that this Court does not have jurisdiction to determine the proceedings. Despite the fact that the proceedings are in common law, specifically negligence, the subject of the controversy, Mr Burke’s duties as trustee of the estate, owe their existence to federal law…” as it “arises under” the laws of Parliament. The relief sought in negligence is, accordingly, a “special federal matter”.

40. Although neither party drew my attention to the case, I note that the decision of Gorkowski v Turner went to the Victorian Court of Appeal. In Turner v Gorkowski [2014] VSCA 248, Neave and Santamaria JJA considered whether an application seeking a declaration for or against the title of the trustee to a trustee in bankruptcy under s 58(1)(a) of the Bankruptcy Act was a “special federal matter” within the meaning of s 6(1) of the Cross-vesting Act. The court appeared to reach a similar conclusion to the Federal Court. At [41],

“Although the matter is not without difficulty, we consider that his Honour should have held that the proceeding was a ‘special federal matter.’  We reach that conclusion because it was necessary for the trustee in bankruptcy to rely on the sequestration order made under the Bankruptcy Act and the title conferred on him as a consequence of that order, to resist Mrs Gorkowski’s claim. Although his title was not ‘a defence’ to Mrs Gorkowski’s claim, s58 of the Bankruptcy Act, which vested the property of the bankrupt in him, was the basis on which the proceedings had to be brought against him. The onus lay on Mrs Gorkowski to establish her interest in the property, which the trustee claimed was vested in him. This was not a case where the bankruptcy was simply ‘lurking in the background’ to the proceedings.”

41. The plaintiffs submit that if this court agrees with the findings in Truthful Endeavours, that is, that the proceedings involve a “special federal matter”, then they rely on s 6(3) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW) to determine the proceeding, or whether to transfer the proceeding to a federal court as is presumed by s 6(1). As noted above, s 6(3) provides that,

“(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.”

42. The plaintiffs have not provided any submissions on why this court should be satisfied that are “special reasons” for the proceedings to be determined by this court.

43. The plaintiffs further submit that at [21],

“It is not necessary on the present application to resolve whether the proceeding is a “special federal matter”. This application should be dismissed on the basis that the Court has jurisdiction to retain jurisdiction over matters involving questions of federal law including “special federal matters”, as well as the jurisdiction to transfer such proceedings. How the Court should exercise that jurisdiction is, the plaintiffs submit, a question for another day, on appropriate notice, with an appropriate opportunity to serve evidence and prepare submissions in advance of the motion.”

44. The plaintiffs make two further submissions in regard to the application under r 13.4. These objections go to procedural issues more generally, as opposed to jurisdictional concerns.

45. The first submission is that an application under r 13.4 should be dismissed on the basis that there was no notice of such an application.

46. The second submission is that the defendant’s submissions on the application were directed to perceived inadequacies of the proposed Amended Statement of Claim and how the proposed pleading was said to contravene r 13.4. The plaintiffs argue that there were no submissions made regarding the inadequacies of the Statement of Claim filed in 2014. They submit that the question to be answered by r 13.4 is in relation to proceedings generally or to any claim for relief in proceedings. As such, they claim that the material before the court does not warrant the dismissal of the whole of the proceedings under r 13.4.

47. Whilst the plaintiffs concede some “regrettable instances of non-compliance” with orders of the Court, it is submitted that the delay in moving this matter forward is not so grievous as to engage the Court’s powers pursuant to r 13.4 UCPR.

Determination

48. There are two issues to be determined, that of jurisdiction, and the question of whether the proceedings should be dismissed. Having considered the evidence before the Court, the submissions of the parties, and the authorities and legislation to which the Court has been referred, both issues must be determined in favour of the defendant.

49. The issue of jurisdiction has been a live issue since September 2014. Despite that length of time, the plaintiffs have not previously responded to the defendant’s concerns over that threshold question, or sought to deal with it in any way. Had they done so, it may be that the matter would have proceeded as an application for transfer to the Federal Court. No such application has been made.

50. The plaintiffs’ claim is one founded upon the fulfilment of duties by the defendant while acting as trustee under the Bankruptcy Act. The statutory source of his duties and obligations is the same Act. Section 27 of that legislation provides that the Federal Court of Australia and/or the Federal Circuit Court of Australia have exclusive jurisdiction, save for some exceptions. The exceptions are not relevant for present purposes.

51. I do not believe that this Court has jurisdiction to determine the plaintiffs’ claim. That jurisdiction rests in the Federal Court.

52. Even was that not my conclusion, the issue of the dismissal of the claim pursuant to r 12.7 or r 13.4 remains.

53. The plaintiffs have not acted expeditiously to finalise the pleading of the claim, and ready the matter for hearing. Whilst it is accepted that the whole of the delay in this matter is not attributable to the plaintiffs, a very substantial part of it is. As the party bringing the action against the defendant, there rests a particular burden on the plaintiffs to be ready to proceed with their claim in good time.

54. It is not an appropriate use of this Court’s resources to utilise the Court as something of a holding venue whilst investigations and inquiries are conducted that should have been carried out prior to or very quickly after the commencement of the proceedings.

55. Order after order of this Court with respect to filing necessary documentation has been ignored, leading to costs incurred without progress made. Ultimately, it was the dilatory approach of the plaintiffs and their casual lack of response to the orders of the Registrar, as repeatedly extended, that led to the matter being referred to the Duty Judge for consideration of the dismissal of the claim.

56. The plaintiffs were on notice of that possibility, raised not just by the defendant but also by the Registrar. It should not be overlooked that this Court may, of its own motion, act to ensure the proper use of its resources, and thus an adverse outcome could be visited on a dilatory party.

57. All litigants have a duty pursuant to s 56 of the Civil Procedure Act 2005, a duty which must be fulfilled: Chamberlain Group Pty Ltd v Kids for Life Pty Ltd [2015] NSWCA 241 at [16]-[17]; Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303; (2013) 303 ALR 199; [2013] HCA 46 at [51]-[59], per French CJ, Kiefel, Bell, Gageler and Keane JJ.

58. The tardiness of the conduct of the case has doubtless also led to the defendant needlessly incurring costs and a degree of anxiety over the outstanding litigation. In endeavouring to do justice to both parties, prejudice to a defendant occasioned by delay must be taken into consideration.

59. Taking those matters into account, had I concluded that the Court was vested with jurisdiction, I would have dismissed the plaintiffs’ claim as frivolous or vexatious (r 13.4(1)(a)), or for want of prosecution (r 12.7(1)).

ORDERS

60. The orders that the Court makes are these:

1. Leave to file an Amended Statement of Claim is refused;

2. The Statement of Claim of 13 August 2014 is dismissed; and

3. Costs as agreed or assessed are awarded in the defendant’s favour.

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Amendments

28 September 2015 - at [35], [36], [38], [40], [41], [57] typographical error corrected; at [35], [40] error corrected regarding case citation.

Decision last updated: 30 September 2015