Gleeson as trustee for the bankrupt estate of Ren v Kong

[2018] NSWSC 1275

Supreme Court

New South Wales

Medium Neutral Citation:	Gleeson as trustee for the bankrupt estate of Ren v Kong [2018] NSWSC 1275
Hearing dates:	16 August 2018
Decision date:	16 August 2018
Jurisdiction:	Equity - Commercial List
Before:	Stevenson J
Decision:	Order that these proceedings be transferred pursuant to s 6 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) to the Federal Court of Australia. Order that the costs of today be costs in the proceedings.
Catchwords:	CIVIL PROCEDURE — Cross-vesting — Transfer to Federal Court - “special federal matter” – application by trustee in bankruptcy for appointment of trustees for sale – whether transfer from bankrupt to his former wife is voidable as against trustee
Legislation Cited:	Bankruptcy Act 1966 (Cth) Conveyancing Act 1919 (NSW) Family Law Act 1975 (Cth) Judiciary Act 1903 (Cth) Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth)
Cases Cited:	Baykal v Van Der Velde as trustee for the bankrupt estate of Tandogan [2017] NSWSC 36 CPPIB Credit Investments Inc v Ren (No 2) [2018] NSWSC 1016 CPPIB Credit Investments Inc v Ren [2017] NSWSC 771 Turner v Gorkowski [2014] VSCA 248
Category:	Principal judgment
Parties:	Bruce Gleeson as trustee for the bankrupt estate of Jerry Ren (Plaintiff/Applicant) Xia Kong (Defendant/Respondent)
Representation:	Counsel: G E S Ng (Plaintiff/Applicant) B J Skinner (Defendant/Respondent)   Solicitors: Ashurst (Plaintiff/Applicant) Manning Lawyers (Defendant/Respondent)
File Number(s):	SC 2018/215905

Judgment

1. Mr Bruce Gleeson is the trustee of the bankrupt estate of Mr Jerry Ren by reason of a sequestration order made on 5 April 2018 by the Federal Circuit Court. I shall refer to Mr Gleeson as “the Trustee”.

2. At the time of the sequestration order Mr Ren was the registered proprietor of a property at Warrawee as joint tenants with his former wife Ms Xia Kong.

3. The Trustee commenced these proceedings on 13 July 2018 seeking an order pursuant to s 66G of the Conveyancing Act 1919 (NSW) that trustees for sale be appointed in respect of the property.

4. The Trustee now seeks an order pursuant to s 6(1) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) that the proceedings be transferred to the Federal Court of Australia by reason of the fact that a matter for determination in the proceedings is a “special federal matter”.

5. I am satisfied that I should make such an order.

Background

6. Mr Ren and Ms Kong were married in China on 12 December 2006.

7. Mr Ren purchased the Warrawee property in his own name on 3 February 2011 for $11.5 million.

8. On 24 June 2014 Mr Ren transferred the property to himself and Ms Kong as joint tenants for a stated consideration of $1. That transfer was registered on 4 August 2014. The current state of the register is, as I have said, that Mr Ren and Ms Kong are registered proprietors of the property as joint tenants.

9. Mr Ren and Ms Kong were divorced under Chinese law on 18 September 2016.

10. On 4 November 2016 Mr Ren and Ms Kong executed a document which purports to be a Binding Financial Agreement for the purpose of s 90C of the Family Law Act 1975 (Cth) (“the Agreement”).

11. Pursuant to the Agreement Mr Ren agreed to do all things necessary to transfer his “right, title and interest” in the property to Ms Kong.

12. On 28 April 2017, on the application of CPPIB Credit Investments Inc, Ball J made a freezing order against Mr Ren and Ms Kong restraining them from dealing with the property otherwise than paying the proceeds of sale into Court.

13. On 16 June 2017 Ball J dismissed an application by Ms Kong in the CPPIB proceedings to dissolve the freezing order: CPPIB Credit Investments Inc v Ren [2017] NSWSC 771.

14. In doing so, Ball J held that the Agreement was not a “financial agreement” for the purposes of s 90C of the Family Law Act because, amongst other reasons, it was entered into after Mr Ren and Ms Kong divorced so that, at the time they entered the Agreement, Mr Ren and Ms Kong were not “parties to a marriage” as required by s 90C (see [18] to [21]).

15. On 22 November 2017 Judge Harper of the Federal Circuit Court ordered that Mr Ren take all necessary steps to transfer his interest in the property to Ms Kong by 2pm that day and ordered that, in default, a Registrar of the Family Court execute a transfer on Mr Ren’s behalf. Mr Ren did not comply with the order and, accordingly, a Registrar of the Family Court executed a transfer on Mr Ren’s behalf in favour of Ms Kong.

16. By reason of these matters, Ms Kong claims to be the equitable owner of the property.

17. On 10 April 2018 Ms Kong entered into a contract to sell the property to a third party. In early June, the purchaser purported to rescind that contract (see my judgment in CPPIB Credit Investments Inc v Ren (No 2) [2018] NSWSC 1016 at [7] and [8]).

18. A dispute between Ms Kong and the purchaser under that contract as to the deposit paid by that purchaser is currently fixed for hearing before McDougall J on 26 September 2018.

19. In the meantime, on 7 August 2018, Ms Kong entered into a contract with another third party to sell the property for $11 million. That contract is due to complete on 2 October 2018.

20. Ms Kong remains bound by the freezing order made by Ball J on 28 April 2017 to pay the proceeds of the sale of the property into Court.

The Trustee’s contentions

21. The Trustee does not oppose the completion of the sale of the property pursuant to the 7 August 2018 contract. Accordingly, he no longer presses for an order appointing trustees for sale.

22. Rather, the Trustee seeks an order that the balance of the proceeds be paid to him on the basis that Mr Ren remained the sole owner of the property at the date of his bankruptcy, and that his interest in the property vested in the Trustee by reason of s 58 of the Bankruptcy Act 1966 (Cth).

23. In that regard the Trustee’s contentions concerning the 24 June 2014 and the 22 November 2017 transfers are as follows.

24. The Trustee contends that the 24 June 2014 transfer is void or voidable against him at his election by reason of s 120 of the Bankruptcy Act because:

1. it took place within five years of the commencement of Mr Ren’s bankruptcy for the purposes of s 120(1)(a); and

2. the consideration purportedly given by Ms Kong for the transfer (stated on the transfer to be “$1.00”) was less than the market value of the property for the purposes of s 120(1)(b).

25. The Trustee does not seek any declaratory or other relief in these proceedings under s 120. However he has in his Commercial List Statement pleaded a case to the effect that I have set out. If that case is proven, the 24 June 2014 transfer will be shown to be void, or at least voidable against the Trustee at his election.

26. So far as concerns the Agreement, and the 22 November 2017 transfer purportedly made under it, the Trustee relies upon the decision of Ball J referred to at [13] - [14] above.

Transfer to the Federal Court

27. Against that background the Trustee submits, I think correctly, that these proceedings comprise a “special federal matter” within the meaning of the Cross-vesting Act.

28. The Trustee’s interest (as trustee of Mr Ren’s bankrupt estate) in the property arises by virtue of s 58 of the Bankruptcy Act and is thus a “special federal matter” (see for example Turner v Gorkowski [2014] VSCA 248 at [23] and [41] (Neave and Santamaria JJA) and Baykal v Van Der Velde as trustee for the bankrupt estate of Tandogan [2017] NSWSC 36 at [25]-[28] (White J)).

29. That is because it is a matter within the original jurisdiction of the Federal Court by virtue of s 39B(1A)(c) of the Judiciary Act 1903 (Cth) (which provides that the original jurisdiction of the Federal Court includes jurisdiction in any matter arising under any orders made by the Commonwealth Parliament) and also by virtue s 27 of the Bankruptcy Act (which provides that the Federal Court and the Federal Circuit Court have concurrent jurisdiction in bankruptcy which is exclusive of the jurisdiction of this Court). It follows that the matter is a “special federal matter” within the meaning of sub-paragraph (e) of the definition of that term in the Cross-vesting Act.

30. The effect of s 4 of the Cross-vesting Act is that this Court nonetheless has jurisdiction to deal with the Trustee’s claim (see Baykal at [13]).

31. However by reason of s 6 of the Cross-vesting Act I must transfer these proceedings to the Federal Court unless I am satisfied that there are “special reasons” for not doing so for the purposes s 6(3).

32. It was not submitted on behalf of Ms Kong that there were any such “special reasons”.

33. I see none.

Conclusion

34. Accordingly I order that these proceedings be transferred pursuant to s 6 of the Jurisdiction of Courts (Cross-vesting) Act to the Federal Court.

35. I order that the costs of today be costs in the proceedings.

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Decision last updated: 16 August 2018