Guan v Li - [2022] NSWCA 173

No judgment structure available for this case.

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation: Guan v Li [2022] NSWCA 173
Hearing dates: 25 August 2022
Date of orders: 05 September 2022
Decision date: 05 September 2022
Before: Bell CJ at [1];
Ward P at [63];
Meagher JA at [64]
Decision:
(1)   Dismiss the summons for leave to appeal.
(2)   Grant leave to Ms Guan to file a fresh summons for leave to appeal within seven days.
(3)   Order that Ms Guan is to pay:
(a)   the costs thrown away by the making of any fresh application for leave to appeal, and
(b)   the costs of the hearing on 26 August 2022.

Catchwords:
APPEALS – jurisdiction of appellate court – Court of Appeal – cross-vesting – whether Court of Appeal had jurisdiction to determine appeal – whether proposed appeal involved a matter for determination arising under s 90K of the Family Law Act 1975 (Cth) – whether application for leave to appeal was required to be instituted in and could only be determined by Full Court of the Federal Court and Family Court of Australia – Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) s 7
COURTS AND JUDGES – jurisdiction – Court of Appeal – cross-vesting – whether Court of Appeal had jurisdiction to determine appeal – whether proposed appeal involved a matter for determination arising under s 90K of the Family Law Act 1975 (Cth) – whether application for leave to appeal was required to be instituted in and could only be determined by Full Court of the Federal Court and Family Court of Australia – Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) s 7

Legislation Cited:
Bankruptcy Act 1966 (Cth) ss 27(1) and 58(3)(b)
Civil Procedure Act 2005 (NSW) s 56
Family Law Act 1975 (Cth) ss 4, 90C, 90K
Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) s 7
Trade Marks Act 1995 (Cth)
Uniform Civil Procedure Rules 2005 (NSW) r 25.14

Cases Cited:
Anderson v Eric Anderson Radio & TV Pty Ltd (1965) 114 CLR 20; [1965] HCA 61
Boensch (as trustee of the Boensch Trust) v Pascoe (2016) 349 ALR 193, [2016] NSWCA 191
Bramco Electronics Pty Ltd v ATF Mining Electrics Pty Ltd (2013) 86 NSWLR 115; [2013] NSWCA 392
Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18
CGU Insurance Limited v Blakeley (2016) 259 CLR 339; [2016] HCA 2
Collins v Charles Marshall Pty Ltd (1955) 92 CLR 529; [1955] HCA 44
Eberstaller v Poulos (2014) 87 NSWLR 394; [2014] NSWCA 211
Felton v Mulligan (1971) 124 CLR 367; [1972] HCA 39
Grace v Grace (2014) 85 NSWLR 688; [2014] NSWCA 86
Grainger v Bloomfield & Anor (2015) 304 FLR 351; [2015] FamCAFC 221
Gully, State Tax Collector for Mississippi v First National Bank in Meridian (1936) 299 US 109
John Pfeiffer Pty Limited v Rogerson (2000) 203 CLR 503; [2000] HCA 36
Karlsson v Griffith University (2020) 103 NSWLR 131; [2020] NSWCA 176
Li v Tang [2021] NSWSC 1011
Phillips v Eyre (1870) LR 6 QB 1
PT Bayan Resources TBK v BCBC Singapore Pte Ltd (2015) 258 CLR 1; [2015] HCA 36
R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141; [1945] HCA 50

Category: Principal judgment
Parties: Yanjuan Guan (Appellant)
Weijian Lei (First Respondent)
Danny Tony Vrkic in his Capacity as Trustee for the Bankrupt Estate of Frank Tang (Second Respondent)
Representation:
Counsel:

M K Condon SC with G Gee (Applicant)
P D Reynolds (First Respondent)

Solicitors:
Auyeung Hencent and Day Lawyers (Applicant)
JC Legal Practice (First Respondent)

File Number(s): 2022/204603
Decision under appeal

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity

Citation:

[2022] NSWSC 834

Date of Decision:

15 June 2022

Before:

Cavanagh J

File Number(s):

2020/73666

HEADNOTE

[This headnote is not to be read as part of the judgment]

Mr Tang and Ms Guan are husband and wife, who claim to be separated although they continue to live together in the matrimonial property (the Oatlands property). On 1 September 2021, they purported to enter into a binding financial agreement (the BFA), in accordance with s 90C of the Family Law Act1975 (Cth). The BFA provided for the transfer to Ms Guan of Mr Tang’s interest in the Oatlands property, of which they were previously joint tenants.

On the day before the entry into the BFA, Schmidt AJ had entered judgment for Mr Li against Mr Tang in the sum of $1,909,356.39. Mr Li, unaware of the BFA, proceeded to register a writ of execution against the Oatlands property. Several weeks later, Mr Tang filed for bankruptcy and a trustee in bankruptcy was appointed. In March 2022, Ms Guan and the trustee entered into a deed of settlement and release (the Settlement Deed) pursuant to which the trustee agreed to transfer Mr Tang’s interest in the Oatlands property to Ms Guan for a consideration of $135,000. This amount was subsequently paid. On 21 April 2022, Ms Guan instituted proceedings in the Supreme Court seeking the removal of the writ of execution registered against the Oatlands property by Mr Li.

On 20 May 2022, Mr Li instituted proceedings in the Federal Circuit and Family Court of Australia (FCFCOA) seeking leave to commence proceedings against the trustee in bankruptcy. Leave has since been granted. In those proceedings, Mr Li seeks orders pursuant to ss 90K(1)(aa) and 90K(3) of the Family Law Act, with the intention of setting aside or overcoming the transfer of Mr Tang’s interest in the Oatlands property to Ms Guan. Also on 20 May 2022, Mr Li filed a notice of motion in the Supreme Court (since amended) seeking an order that Ms Guan be restrained from dealing with Mr Tang’s interest in the Oatlands property (the freezing order). On 15 June 2022, Cavanagh J granted the freezing order sought.

In opposing the orders sought before the primary judge, Ms Guan submitted that Mr Li did not have reasonable prospects of succeeding in his claim in the FCFCOA, as s 90K of the Family Law Act did not confer jurisdiction on the FCFCOA to set aside the Settlement Deed (as distinct from the BFA). In relation this issue, the primary judge said in his reasons for judgment that he was not satisfied that there was no reasonable argument that orders setting aside the Settlement Deed could be obtained in the FCFCOA. His Honour then proceeded to make the freezing order.

Ms Guan now seeks leave to appeal from the decision of the primary judge. The Draft Notice of Appeal relevantly included the following grounds:

“1    The primary judge erred in finding that Family Law Act1975, s 90K(3) conferred jurisdiction on the Federal Circuit and Family Court of Australia to set aside the Settlement Deed (J[62]).
2    The primary judge erred in failing to take into account the following matters in determining whether he could, and should, grant an asset preservation order:
a.    whether the respondent had established an arguable case to set aside the Settlement Deed;
b.    the strength of any such case;
…

6 The primary judge ought to have held that:
a. the respondent had not established an arguable case to set aside the Settlement Deed or, if he had, that such a case was weak…”

At the outset of the hearing, counsel for Ms Guan indicated that his client did not press ground 1 of the Draft Notice of Appeal.

Mr Li contended that this Court had no jurisdiction to hear the application for leave to appeal by reason of s 7(5) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth). The effect of that sub-section, for present purposes, is that where a matter for determination in a proceeding by way of appeal is a matter arising under the Family Law Act, any appeal lies to the Full Court of the FCFCOA and cannot be brought in this Court.

These reasons for judgment concern only the preliminary question of whether this Court is competent to hear the application for leave to appeal.

The Court held (Bell CJ, Ward P and Meagher JA agreeing):

The matters sought to be raised by grounds 2(a), 2(b) and 6(a) of the Draft Notice of Appeal were not matters for determination arising under the Family Law Act. These proposed grounds of appeal do not require the determination of a right or duty owing its existence to the Family Law Act, or which depends on that Act for its enforcement, even if and to the extent that they may involve some interpretation of s 90K of the Act. Accordingly, they did not deprive the Court of Appeal of jurisdiction by reason of s 7(5) of the Jurisdiction of Courts (Cross-Vesting) Act: [52]–[60] (Bell CJ); [63] (Ward P); [64] (Meagher JA).

Boensch (as trustee of the Boensch Trust) v Pascoe (2016) 349 ALR 193; [2016] NSWCA 191; Bramco Electronics Pty Ltd v ATF Mining Electrics Pty Ltd (2013) 86 NSWLR 115; [2013] NSWCA 392; Grace v Grace (2014) 85 NSWLR 688; [2014] NSWCA 86; Karlsson v Griffith University (2020) 103 NSWLR 131; [2020] NSWCA 176; R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141; [1945] HCA 50; CGU Insurance Limited v Blakeley (2016) 259 CLR 339; [2016] HCA 2; Anderson v Eric Anderson Radio & TV Pty Ltd (1965) 114 CLR 20; [1965] HCA 61; Felton v Mulligan (1971) 124 CLR 367; [1972] HCA 39; Collins v Charles Marshall Pty Ltd (1955) 92 CLR 529 at 537; [1955] HCA 44, considered.

It may be accepted that, in disposing of ground 6(a), it would be necessary for the Court to form a view about whether the interpretation of s 90K(3) sought by Mr Li in the FCFCOA was reasonably open. However, to do so is not to determine a matter arising under s 90K(3) of the Family Law Act: [55]–[56] (Bell CJ); [63] (Ward P); [64] (Meagher JA).

Anderson v Eric Anderson Radio & TV Pty Ltd (1965) 114 CLR 20; [1965] HCA 61; PT Bayan Resources TBK v BCBC Singapore Pte Ltd (2015) 258 CLR 1; [2015] HCA 36, considered.

JUDGMENT

BELL CJ: Mr Frank Tang (Mr Tang) and Ms Yanjuan Guan (Ms Guan) are husband and wife, having married in China on 9 October 2010. They claim that, since 1 September 2020, they have been separated, albeit they continue to live in the matrimonial property at Oatlands (the Oatlands property) but occupy separate rooms.
On 1 September 2021, they purported to enter into a binding financial agreement (the BFA) in accordance with s 90C of the Family Law Act1975 (Cth). The BFA noted that the Oatlands property (of which Mr Tang and Ms Guan were joint tenants) had a value of $2,200,000 and was subject to two mortgages collectively totalling $1,381,000. The BFA made provision, inter alia, for the transfer of Mr Tang’s interest in the Oatlands property to Ms Guan.
On the day prior to entry into the BFA, Schmidt AJ had entered judgment for Mr Weijian Li (Mr Li) against Mr Tang in the sum of $1,909,356.39: Li v Tang [2021] NSWSC 1011 (the Tang proceedings). Ms Guan was also a defendant in those proceedings but no orders were made against her.
Mr Li, unaware of the BFA, proceeded to register a writ of execution against the title of the Oatlands property on 28 October 2021.
Subsequent to entry of judgment, on 19 November 2021, Mr Tang filed for bankruptcy and a trustee in bankruptcy was appointed. He subsequently called for proof of debts and, according to a preliminary report, Mr Tang’s estate had unsecured creditors whose claims amounted to $8 million.
Ms Guan’s solicitors wrote to the trustee, drawing attention to the BFA and calling on him to transfer Mr Tang’s interest in the Oatlands property to Ms Guan. Subsequently, in March 2022, Ms Guan and the trustee entered into a deed of settlement and release (the Settlement Deed) pursuant to which the trustee agreed to transfer Mr Tang’s interest in the Oatlands property to Ms Guan for a consideration of $135,000 payable in two instalments. These have subsequently been paid.
Relevant terms of the Settlement Deed included the following:

“3.1   This deed of settlement is made in full and final settlement of all outstanding issues between the Trustee and Guan.
3.2   Guan shall pay to the Trustee the Settlement Sum in two tranches:
(i)   The sum of $100,000.00 at the time of the Execution Date; and
(ii)   The sum of $35,000.00 to be paid on or before three-calendar months from the Execution Date of this deed.

3.3 Guan charges the Property to the Trustee and any proceeds of its sale with the payment of the Balance of Settlement Funds that remains unpaid under clause 3.2(ii).
3.4 Guan grants to the Trustee the right to lodge a consent caveat over the Property in favour of the Trustee describing the Trustees interest in the terms set out In clause 3.3. The Trustee will not lodge the Caveat unless the Balance of the Settlement Funds are not paid as required under clause 3.2(ii).
3.5 Any unpaid balance under Clause 3.2(ii) shall be immediately due and payable by Guan to the Trustee.
3.6 All rights and title in the Property (including Tang's bankrupt estate's interest held by the Trustee) shall vest in Guan subject to the security interest granted by Guan to the Trustee at clauses 3.3 and 3.4 for the Balance of Settlement Funds.
3.7 Upon execution of this deed the Trustee releases to Guan funds up to the sum of $15,000.00 held jointly with Tang in the account with National Australia Bank being BSB: 082622, Account number 427984483.
3.8 Guan will not claim on or lodge any proof of debt with the Trustee and shall not be entitled to receive any dividend which may become payable to unsecured creditors of Tang.
3.9 The Trustee shall remove the existing Caveat being dealing number AR699816 lodged by the Trustee on 9 December 2021 on the Property.
3.10   The Trustee will provide reasonable assistance to Guan to the lifting of the Writ by Weijian Li over the Property. Any costs incurred by the Trustee in doing so must be paid by Guan.
3.11   The Trustee will direct Tang to sign any necessary documents to assist with the transfer of Tang's interest in the Property to Guan; without warranty from the Trustee as to Tang's compliance. The Trustee agrees to provide reasonable assistance to Guan, at Guan's cost, for the transfer of Tang's title in the Property to her.
3.12   If Guan needs to sell the Property whilst Tang is still registered as a Joint Tennant on the Property Title the Trustee will request Tang to execute any document which in the Trustee's opinion are necessary to be executed to assist in the sales process.
3.13   If requested by Guan, and at Guan's costs, the Trustee will provide reasonable assistance to Guan for her application to Revenue NSW for exemption from stamp duty for the transfer of the Property from Tang or Tang's bankrupt or bankruptcy estate to her”.

On 21 April 2022, Ms Guan filed a notice of motion in the Supreme Court seeking the removal of the writ of execution registered on the title of the Oatlands property by Mr Li.
On 20 May 2022, Mr Li filed an application in the Federal Circuit and Family Court of Australia (FCFCOA) seeking leave to commence proceedings against the trustee in bankruptcy in accordance with ss 27(1) and 58(3)(b) of the Bankruptcy Act 1966 (Cth). That leave has since been granted.
In those proceedings, Mr Li seeks orders under s 90K(1)(aa) of the Family Law Act to set aside the BFA between the bankrupt Mr Tang and Ms Guan and, upon the Court setting aside the BFA, pursuant to s 90K(3) of the Family Law Act, for such order or orders as the Court considered just and equitable for the purposes of preserving or adjusting the rights of persons who are parties to the BFA and any other interested persons including:

"(1) An order that the registered proprietorship held by the Bankrupt’s trustee in bankruptcy in a 1/2 share in the property known as 145a Bettington Road, Oatlands, NSW 2117, being Lot 61 in deposited plan 605386 (Bankrupt’s Share of the Property) is by operation of section 42 of the Real Property Act 1900 (NSW) or otherwise paramount, has priority over, or is absolutely free from any interest, or right or entitlement to the same, held or purportedly held by Ms Guan;
(2) Further and in the alternative, an order that any right or entitlement held or purportedly held by Ms Guan in the Bankrupt’s Share of the Property is void or unenforceable against the trustee in bankruptcy or is subordinate or deferred to the interest held by the trustee in bankruptcy.”

Those proceedings are yet to be determined.

It is apparent that, by the FCFCOA proceedings, Mr Li seeks to use the provisions of the Family Law Act to set aside or overcome the arrangement which would result in Ms Guan owning all of the Oatlands property (subject to mortgages) in circumstances where, on the date of the judgment Mr Li secured against Mr Tang, he was a joint tenant of the Oatlands property.
Also on 20 May 2022, Mr Li filed a Notice of Motion (subsequently amended) in the Tang proceedings, seeking orders that Ms Guan be restrained from taking any steps to register the transfer of Mr Tang’s interest in the Oatlands property to Ms Guan and from taking any step to deal with or encumber Mr Tang’s interest in the property.
In this context, where a judgment has been given by the Supreme Court, Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 25.14(5)(a)(i) permits the Court to make a freezing order or an ancillary order or both against a person other than a judgment debtor (the third party) if the court is satisfied, having regard to all the circumstances, that there is a danger that a judgment will be wholly or partly unsatisfied because the third party holds or is using, or has exercised or is exercising, a power of disposition over assets of the judgment debtor. UCPR r 25.14 does not affect the power of the court to make a freezing order or ancillary order if the court considers it is in the interests of justice to do so: r 25.14(6).
By ex tempore judgment delivered on 15 June 2022 and upon Mr Tang through his counsel giving the usual undertaking as to damages, Cavanagh J (the primary judge) granted the freezing order sought: Li v Guan [2022] NSWSC 834.
In opposing the orders sought by Mr Li before the primary judge, Ms Guan advanced the submission that Mr Li did not have reasonable prospects of succeeding in his claim in the FCFCOA, as s 90K of the Family Law Act did not confer jurisdiction on the FCFCOA to set aside the Settlement Deed (as distinct from the BFA).
Section 90K relevantly provides:

“Circumstances in which court may set aside a financial agreement or termination agreement
(1)   A court may make an order setting aside a financial agreement or a    termination agreement if, and only if, the court is satisfied that:
…
(aa)   a party to the agreement entered into the agreement:
(i)   for the purpose, or for purposes that included the purpose, of defrauding or defeating a creditor or creditors of the party; or
(ii)   with reckless disregard of the interests of a creditor or creditors of the party;

…
(3) A court may, on an application by a person who was a party to the financial agreement that has been set aside, or by any other interested person, make such order or orders (including an order for the transfer of property) as it considers just and equitable for the purpose of preserving or adjusting the rights of persons who were parties to that financial agreement and any other interested persons.”

The term “financial agreement” is defined in s 4 of the Family Law Act to mean “an agreement that is a financial agreement under section 90B, 90C or 90D”, but does not include an ante-nuptial or post-nuptial settlement. It does not appear to be in dispute that the BFA was a financial agreement within the meaning of s 90C, but the Settlement Deed was not. Ms Guan submitted, therefore, that even if Mr Li were successful in setting aside the BFA in the FCFCOA, the transfer of Mr Tang’s interest in the Oatlands property would remain effective by virtue of the Settlement Deed.
Mr Li, on the other hand, contended that the power conferred upon the FCFCOA by s 90K(3), to make “such orders… as it considers just and equitable for the purpose of preserving or adjusting the rights of persons who were parties to [a] financial agreement and any other interested persons”, would authorise the Court to set aside the Settlement Deed after having set aside the BFA.

In the course of his reasons, the primary judge noted at PJ [47] that Ms Guan submitted that there was no evidence of a prima facie case that the Settlement Deed could be set aside, that Mr Li was not seeking any orders in the FCFCOA which would allow that Court to set aside the Settlement Deed and that the FCFCOA did not have the power to do so.
At PJ [53], his Honour emphasised that he was “not at this stage determining the meaning or effect of the application which the plaintiff is pursuing in the FCFCOA”.
In further response to this argument, his Honour said that he was not satisfied that there was no reasonable argument that orders setting aside the Settlement Deed could be obtained from the FCFCOA and noted that the issue was considered by the Family Court in Grainger v Bloomfield & Anor (2015) 304 FLR 351; [2015] FamCAFC 221 at [69]: PJ [56]–[57]. He continued by observing that (PJ at [59]–[63]):

“In Grainger, the appellant contended that the power in s 90K(3) was limited as being consequential to the setting aside of a financial agreement in order to reverse transactions effected under that agreement or to make adjustments to achieve a restoration in substance.
On the other hand, the respondent contended that the power was a broader power to make such orders as it considers just and equitable for the purpose of preserving or adjusting the rights of the parties to the financial agreement or other limited persons.
The plaintiff submits that, even on the more limited interpretation of s 90K(3), the orders sought by the plaintiff (which would include an order setting aside the deed of settlement and release) would fall within the more limited power. The position of the second defendant is that s 90K(3) would not permit the FCFCOA to make the orders sought by the plaintiff.
As set out in Grainger there may be some uncertainty as to the extent of the power under s 90K(3) but I accept that the plaintiff has at least a reasonable argument that the power conferred by s 90K(3) would extend to the making of an order setting aside not just the BFA but the deed of settlement and release.
I do not accept the no utility point raised by the second defendant.” (emphasis added; citations omitted)

The “no utility” point was an argument that had been advanced on behalf of Ms Guan as a reason why the primary judge would not exercise the discretion he had to make freezing or asset preservation orders in relation to her dealing with the Oatlands property.
As noted above, the primary judge made the freezing or asset preservation order sought by Mr Li. His dispositive reasoning at PJ [77]-[80] was as follows:

“77  In the end, I am satisfied that the orders sought by the plaintiff in the amended motion by way of a freezing or asset preservation order should be made.
78   I am satisfied that it is necessary to make such orders to prevent what may be an abuse of process by the first defendant in taking steps to dispose of his primary asset immediately after orders were made, the effect of which was a judgment of $1.9 million against him.
79   Again, it is not for me to say anything more about that other than to say that I am satisfied that the orders sought by the plaintiff are necessary to prevent a possible abuse of process. That is, the disposal of the primary asset by the first defendant to his wife under the Family Law Act, and then when a dispute arose with a trustee, entry into an agreement with the trustee by means of a payment of $135,000 for, in general terms, a 50% interest in a property valued at, as I understand it, $2.2 million.
80   In the circumstances of the undertaking of the plaintiff as to damages, I propose to make the orders sought in the plaintiff's amended motion for a preservation order.”

It is from this decision that leave to appeal is now sought.

The Draft Notice of Appeal

The Draft Notice of Appeal was in the following terms (with emphasis added):

“1   The primary judge erred in finding that Family Law Act 1975, s 90K(3) conferred jurisdiction on the Federal Circuit and Family Court of Australia to set aside the Settlement Deed (J[62]).
2   The primary judge erred in failing to take into account the following matters in determining whether he could, and should, grant an asset preservation order:
a.   whether the respondent had established an arguable case to set aside the Settlement Deed;
b.   the strength of any such case;
c.   whether the jurisdiction to make an asset preservation order was properly invoked where there was no evidence that the Trustee was engaged in conduct that might be characterised as an abuse of process; and
d.   whether the respondent would suffer significant prejudice if the asset preservation order was not made.

3   The primary judge erred in making findings of fact which attributed a value to Mr Tang's estate that was far greater than the true position [J[79]).
4   The primary judge did not act on the only evidence as to the quantum of claims that might be made by the unsecured creditors of Mr Tang's estate [J[76]).
5   The primary judge erred in placing no weight on the undertaking proffered by Ms Guan, in circumstances where, if that was accepted by the court, Mr Li would not be substantially prejudiced [J[73]).
6   The primary judge ought to have held that:
a.   the respondent had not established an arguable case to set aside the Settlement Deed or, if he had, that such a case was weak;
b.   the conduct of the Trustee in entering into the Deed could not be characterised as an abuse of process;
c.   by reason of the quantum of claims of other unsecured creditors against the estate of Mr Tang, the respondent would likely recover no more than 5.5 cents in the dollar;
d.   as such, the disadvantage to the appellant in granting the relief sought by the respondent far exceeded any prejudice the respondent might suffer if relief was refused.

7 The primary judge ought to have ordered the respondent to remove dealing AR531462, being the writ for levy of property registered against title reference 61/DP605386.”

In her summary of argument in support of the Summons for Leave to Appeal, Ms Guan submitted, amongst other matters, that the primary judge should have held that s 90K(3) of the Family Law Act did not empower the FCFCOA to set aside the Settlement Deed.
In responsive submissions, Mr Li contended that ground 1 of the proposed appeal “raises, as a matter for determination, a matter arising under the [Family Law Act]”, and that, as such, this Court would have no jurisdiction to hear the application for leave to appeal by reason of s 7(5) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) (Cross-Vesting Act). That sub-section provides:

“Subject to subsections (7) and (8), where it appears that a matter for determination in a proceeding by way of an appeal from a decision of a single judge of the Supreme Court of a State or Territory (not being a proceeding to which subsection (6) applies) is a matter arising under an Act specified in the Schedule, that proceeding shall be instituted only in, and shall be determined only by:
(a) the Full Court of the Federal Court or of the Federal Circuit and Family Court of Australia (Division 1), as the case requires; or
(b) with special leave of the High Court, the High Court.”

The Schedule to the Cross-Vesting Act relevantly includes the Family Law Act.

Mr Li also submitted that proposed appeal grounds 2(a)-(b) and 6(a), which concerned the primary judge’s assessment (or otherwise) of the strength of Ms Guan’s case to set aside the Settlement Deed, involved the determination of a matter that arose under the Family Law Act and thus deprived this Court of jurisdiction.
In light of a question as to the Court’s jurisdiction to hear the application for leave to appeal having been raised, the parties were directed to file written submissions directed to the competency of the appeal in the event that leave to appeal were granted. This was consistent with the approach that has been taken in other cases: see, for example, Eberstaller v Poulos (2014) 87 NSWLR 394; [2014] NSWCA 211 (Eberstaller).
These reasons for judgment concern only the preliminary question of whether this Court is competent to hear the application for leave to appeal, or whether, as submitted by Mr Li, the application must be heard in the Full Court of the FCFCOA.

Parties’ submissions

At the outset of the hearing, Mr Condon SC, who appeared with Mr Gee for Ms Guan, indicated that his client did not press ground 1 of the Draft Notice of Appeal. That ground had been the principal focus of Mr Li’s jurisdictional attack in writing and, in submitting that the primary judge should have held that s 90K(3) of the Family Law Act did not empower the FCFCOA to set aside the Settlement Deed (see [26] above), it is plain that serious questions arose as to whether that ground constituted a matter for determination in the appeal proceedings which arose under the Family Law Act.
Mr Reynolds, who appeared for Mr Li, contended that the jurisdictional consequences of Ms Guan having formulated and included ground 1 in her Draft Notice of Appeal were fatal and could not be cured by its abandonment subsequent to the institution of the appeal proceedings. Mr Reynolds emphasised that the appeal proceedings should be taken to have been instituted by the filing of the Summons for Leave to Appeal, citing in support of this contention, this Court’s decision in Bramco Electronics Pty Ltd v ATF Mining Electrics Pty Ltd (2013) 86 NSWLR 115; [2013] NSWCA 392 at [49] (Bramco). That decision is undoubtedly authority for the proposition for which it was cited.
A logical difficulty arises. If s 7(5) of the Cross-Vesting Act is satisfied, the proceedings should never have been instituted in this Court. Plainly enough, however, they have been (as they had been in Bramco: see at [53]). It was in this context that I inquired of the parties whether the Court was not in the territory of s 7(7) of the Cross-Vesting Act which relevantly provides that where the Court of Appeal “commences to hear a proceeding by way of an appeal”, and before the Court determines the proceeding, it appears to the Court that the proceeding is a proceeding to which subsection (5) applies,

“the Court shall, unless the interests of justice require that the Court proceed to determine the proceeding, transfer the proceeding to the Full Court of the Federal Court or of the Family Court, as the case requires.”

Both parties, however, insisted that the relevant statutory provision was s 7(5), relying upon the difference between the institution of proceedings and the Court having commenced to hear proceedings. Their joint contention was that debate as to the competency of the application for leave to appeal did not mean that the Court had commenced to hear “a proceeding by way of an appeal” (notwithstanding the breadth of what is comprehended to be involved in the institution of the appeal). This fine distinction accords with the approach taken by the Court in Grace v Grace (2014) 85 NSWLR 688; [2014] NSWCA 86 (Grace) at [25] and in Eberstaller at [28], [32].
Mr Reynolds ultimately accepted that if, by reason of the inclusion of ground 1 of the Draft Notice of Appeal, this Court lacked jurisdiction to entertain any aspect of the application, it would be open to Ms Guan to file a fresh summons for leave to appeal omitting ground 1 from the Draft Notice of Appeal. Mr Reynolds accepted that his client could not claim to be prejudiced by that course, if it were followed. This concession was consistent with s 56(3) of the Civil Procedure Act 2005 (NSW).
With the possible exception of costs, therefore, nothing ultimately would turn upon Mr Condon’s abandonment of ground 1 of the Draft Notice of Appeal although procedural orders will need to be made to reflect the point raised by Mr Reynolds in [32] above. These are dealt with below.
Because, however, Mr Reynolds contended that the matters raised in appeal grounds 2(a) and (b) and 6(a) were also matters that would bring the proceedings within s 7(5) of the Cross-Vesting Act, it is convenient to deal with his contentions in that regard as if the Draft Notice of Appeal never contained ground 1.

Consideration

The issue for the Court’s consideration therefore reduced to one of whether grounds 2(a), 2(b) and 6(a) of the Draft Notice of Appeal raised matters for determination in the appeal which arose under the Family Law Act. The first two of those grounds related to whether the primary judge had erred in not taking into account whether Mr Li had established an arguable case to set aside the Settlement Deed pursuant to s 90K(3) of the Family Law Act and the third of the grounds went directly to the strength of any such case.
Mr Reynolds’ short contention was that these matters which fell for determination were matters which arose under the Family Law Act.
I do not agree. Just because a matter may involve or relate to a particular statute, does not mean that it arises under that statute.
Consideration of the concept of when a matter arising under a particular enactment in the context of s 7(5) of the Cross-Vesting Act has been considered by this Court on numerous occasions. It is necessary to look at all the issues arising on appeal, before they are determined; if one of them is a matter arising under a specified federal enactment, the section applies: Boensch (as trustee of the Boensch Trust) v Pascoe (2016) 349 ALR 193; [2016] NSWCA 191 at [18] per Leeming JA (Boensch). The analysis necessarily turns upon the nature of the appellant’s claims in the appeal: Boensch at [20].
In Bramco, Meagher JA held (at [5]) that the expression “arising under” in s 7(5) of the Cross-Vesting Act is to be given the same meaning as it has in Chapter III of the Constitution; see also Grace at [16].
In Karlsson v Griffith University (2020) 103 NSWLR 131; [2020] NSWCA 176, Payne and White JJA considered whether a claim was one arising under the Trade Marks Act 1995 (Cth). Their Honours observed that s 7 of the Cross-Vesting Act presupposed that an appeal may contain a number of matters for determination and operates if any matter that falls for determination in the appeal is one that may be said to arise under a specified enactment: at [10].
In R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141 at 154; [1945] HCA 50, Latham CJ famously observed of the words “arising under” in s 76(ii) of the Constitution 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.”

In CGU Insurance Limited v Blakeley (2016) 259 CLR 339; [2016] HCA 2 at [29], the plurality elaborated on this observation, stating that:

“It is a particular application of that general statement to say that a matter will arise under a federal law if it involves a claim at common law or equity or under a law of a State where the claim is ‘in respect of a right or property which is the creation of federal law’. If the source of a defence to a claim at common law or equity or under a law of a State is a law of the Commonwealth, then on that account also the matter may be said to arise under federal law.”

Particular emphasis was placed by Mr Condon on the decisions of the High Court in Anderson v Eric Anderson Radio & TV Pty Ltd (1965) 114 CLR 20 at 45; [1965] HCA 61 (Anderson) and Felton v Mulligan (1971) 124 CLR 367; [1972] HCA 39 (Felton) which emphasised the distinction between a matter arising under an enactment and a matter involving its interpretation.
In Anderson, Windeyer J rejected the contention that a State court was exercising federal jurisdiction when it entertained a claim in tort which had occurred in the Australian Capital Territory. (This was at a time when the choice of law rule for torts for the purposes of conflict of laws in Australia was governed by the double-actionability rule associated with Phillips v Eyre (1870) LR 6 QB 1; now see John Pfeiffer Pty Limited v Rogerson (2000) 203 CLR 503; [2000] HCA 36.) Windeyer J said (at 45):

“The argument that the District Court was exercising federal jurisdiction in this case was based upon an assertion that the case before it was a matter arising under a law made by the Commonwealth Parliament. But that, it seems to me, is a mistaken view. The appellant sued upon a cause of action known to the law of New South Wales. True it is that, by the law of New South Wales, he could only prosecute his action successfully if the defendant's conduct were wrongful where it occurred, that is in the Australian Capital Territory; and that therefore the New South Wales Court must notice what the law there was. But, let it be assumed that the law there was to be found in a law made by the Commonwealth Parliament — that does not mean that the matter before the New South Wales Court arose under a law of the Commonwealth Parliament. It arose under the law of New South Wales.”

In the same case, Taylor J said at 37 that the plaintiff sued to enforce a right given him by the law of New South Wales before going on to say that:

“True it is that no right of action existed according to the law of that State unless, inter alia, the conduct of the defendant was not justifiable according to the law of the Territory but the circumstance that this enquiry was necessary was not, in my view, sufficient to enable the action to be characterized as one which involved a "matter" arising under a law made by Parliament.”

The observations of Barwick CJ at 24, Kitto J at 30–31 and Menzies J at 39 were to similar effect.

In Felton at 388, Windeyer J referred to his earlier observations in Anderson and also cited the observations of Cardozo J in Gully, State Tax Collector for Mississippi v First National Bank in Meridian (1936) 299 US 109 that “[n]ot every question of federal law emerging in a suit is proof that a federal law is the basis of the suit” and that it is not so if “[t]he most one can say is that a question of federal law is lurking in the background”. His Honour went on (at 388-9) to observe that:

“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. It is not easy to formulate with precision criteria which will suffice in every case.” (emphasis added)

Menzies J in the same case observed at 382 that “a matter may arise under a law made by the Parliament in a proceeding which does not arise under that law”, citing Collins v Charles Marshall Pty Ltd (1955) 92 CLR 529 at 537; [1955] HCA 44. His Honour had also observed (at 382) that:

“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.”

Medium Neutral Citation:	Guan v Li [2022] NSWCA 173
Hearing dates:	25 August 2022
Date of orders:	05 September 2022
Decision date:	05 September 2022
Before:	Bell CJ at [1]; Ward P at [63]; Meagher JA at [64]
Decision:	(1) Dismiss the summons for leave to appeal. (2) Grant leave to Ms Guan to file a fresh summons for leave to appeal within seven days. (3) Order that Ms Guan is to pay: (a) the costs thrown away by the making of any fresh application for leave to appeal, and (b) the costs of the hearing on 26 August 2022.
Catchwords:	APPEALS – jurisdiction of appellate court – Court of Appeal – cross-vesting – whether Court of Appeal had jurisdiction to determine appeal – whether proposed appeal involved a matter for determination arising under s 90K of the Family Law Act 1975 (Cth) – whether application for leave to appeal was required to be instituted in and could only be determined by Full Court of the Federal Court and Family Court of Australia – Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) s 7 COURTS AND JUDGES – jurisdiction – Court of Appeal – cross-vesting – whether Court of Appeal had jurisdiction to determine appeal – whether proposed appeal involved a matter for determination arising under s 90K of the Family Law Act 1975 (Cth) – whether application for leave to appeal was required to be instituted in and could only be determined by Full Court of the Federal Court and Family Court of Australia – Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) s 7
Legislation Cited:	Bankruptcy Act 1966 (Cth) ss 27(1) and 58(3)(b) Civil Procedure Act 2005 (NSW) s 56 Family Law Act 1975 (Cth) ss 4, 90C, 90K Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) s 7 Trade Marks Act 1995 (Cth) Uniform Civil Procedure Rules 2005 (NSW) r 25.14
Cases Cited:	Anderson v Eric Anderson Radio & TV Pty Ltd (1965) 114 CLR 20; [1965] HCA 61 Boensch (as trustee of the Boensch Trust) v Pascoe (2016) 349 ALR 193, [2016] NSWCA 191 Bramco Electronics Pty Ltd v ATF Mining Electrics Pty Ltd (2013) 86 NSWLR 115; [2013] NSWCA 392 Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18 CGU Insurance Limited v Blakeley (2016) 259 CLR 339; [2016] HCA 2 Collins v Charles Marshall Pty Ltd (1955) 92 CLR 529; [1955] HCA 44 Eberstaller v Poulos (2014) 87 NSWLR 394; [2014] NSWCA 211 Felton v Mulligan (1971) 124 CLR 367; [1972] HCA 39 Grace v Grace (2014) 85 NSWLR 688; [2014] NSWCA 86 Grainger v Bloomfield & Anor (2015) 304 FLR 351; [2015] FamCAFC 221 Gully, State Tax Collector for Mississippi v First National Bank in Meridian (1936) 299 US 109 John Pfeiffer Pty Limited v Rogerson (2000) 203 CLR 503; [2000] HCA 36 Karlsson v Griffith University (2020) 103 NSWLR 131; [2020] NSWCA 176 Li v Tang [2021] NSWSC 1011 Phillips v Eyre (1870) LR 6 QB 1 PT Bayan Resources TBK v BCBC Singapore Pte Ltd (2015) 258 CLR 1; [2015] HCA 36 R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141; [1945] HCA 50
Category:	Principal judgment
Parties:	Yanjuan Guan (Appellant) Weijian Lei (First Respondent) Danny Tony Vrkic in his Capacity as Trustee for the Bankrupt Estate of Frank Tang (Second Respondent)
Representation:	Counsel: M K Condon SC with G Gee (Applicant) P D Reynolds (First Respondent) Solicitors: Auyeung Hencent and Day Lawyers (Applicant) JC Legal Practice (First Respondent)
File Number(s):	2022/204603
Decision under appeal	Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Citation: [2022] NSWSC 834 Date of Decision: 15 June 2022 Before: Cavanagh J File Number(s): 2020/73666