Johns v. Gruber

[2004] QDC 75

[2004] QDC 075

DISTRICT COURT

CIVIL JURISDICTION

JUDGE ROBIN QC

No D1051 of 2002

MAREE ANN JOHNS

Plaintiff

and

ANTONY DEAN GRUBER

and

PAUL NEWTON BRAKE (as trustee for the Estate of Antony Dean Gruber pursuant to the provisions of the Bankruptcy Act 1966 as amended)

First Defendant

Second Defendant

SOUTHPORT

..DATE 24/03/2004

ORDER

Catchwords:

- Plaintiff commences Magistrates Court claim for declaration as adjustment of property interests under (Qld) Property Law Act 1974, Part 19 - Defendant (former de facto partner) declares himself bankrupt on eve of trial - Defendant's trustee in bankruptcy served and ordered joined as a party - Magistrate transfers application to District Court (on basis of lack of equitable jurisdiction)- New District Court Statement of Claim names trustee as second defendant and he takes over conduct of proceeding - On eve of District Court trial trustee asserts for first time the Court has no jurisdiction, having regard to s27(1) of (Commonwealth) Bankruptcy Act - Assertion upheld - Plaintiff seeks transfer to Supreme Court - Whether Supreme Court has jurisdiction considered - Section 4 of (Commonwealth) jurisdiction of Courts (Cross-Vesting) Act held to confer jurisdiction - Whether proceeding "started" in District Court within s85(1) of District Court of Queensland Act so as to authorise transfer by District Court order - Proceeding ordered to be transferred to Supreme Court

HIS HONOUR:  The unfortunate plaintiff is a victim of the

unsatisfactory aspects of a Federal system - in particular,

the interaction of Commonwealth bankruptcy provisions

and the State provisions upon which she relies, which are in

Part 19 Division 4 of the Property Law Act 1974. She is

engaged in the relatively mundane pursuit of an order

adjusting property rights as between herself and her former de

facto partner, Mr Gruber, and/or obtaining a declaration of

their respective interests in property.  This applies in

particular to a residence the legal title to which is

presently in their joint names, albeit after an interesting

history.

According to the statement of claim, the property was

originally acquired by the plaintiff and her brother.

Subsequently the de facto relationship, which has produced a

child, led to the plaintiff buying out her brother and the

substitution of the defendant as a co-owner.  The Court, of

course, hasn't gone into the merits of the claim.  Suffice it

to say that except for contributions of a few thousand

dollars acknowledged, the plaintiff says the defendant made

none.

She hopes to establish that the property is hers exclusively

in equity, or ought to become hers, in reliance on sympathetic

features such as her having had effectively the sole care of

the child.  She depicts the defendant as having been

unemployed and brought in very little during the

relationship, which has now come to an end, and decisively so,

as it's pleaded that Mr Gruber is now married to someone else. 

(Against the plaintiff it is now suggested that Mr Gruber

operated in a trade on a wholly cash basis and kept or made no

records whatever, but made unspecified financial

contributions.  Mr Brake, who makes these claims, gives no

particulars.)

Proceedings were instituted in the Magistrates Court on the

7th of July 2001 by a claim seeking, inter alia, that the

defendant transfer to the plaintiff all his right, title and

interest into the property at 117 Monaco Street, Broadbeach.

The defendant filed a conditional notice of intention to

defend, disputing the jurisdiction of the Court on the ground

that the plaintiff's claim exceeded the monetary jurisdiction

of the Magistrates Court.

Matters have got complicated on or about the 11th of November

2002, which I understand was on the eve of a trial in the

Magistrates Court, speaking loosely, when the defendant

declared himself bankrupt.

On 11 December 2002 a Magistrate directed that Mr Brake, the

trustee in bankruptcy, be served with the application, which

was adjourned until 9 a.m. the following week.  On that

occasion Mr Brake, who I understand is an accountant and a

solicitor, appeared and an order was made as follows

according to the Magistrate's endorsement: "By consent, the

trustee, Paul Newton Brake, as trustee, be joined as party to

the action.  Leave to abridge time for service on the

defendant Gruber, and leave to proceed against Gruber.  Remit

the action to the District Court as this Court has no

equitable jurisdiction to deal with the declaratory relief

sought.  Costs of the application to be costs in the cause."

My own view, which I recall expressing in another matter,

is that the Magistrates Courts have jurisdiction in matters of

this kind, but, of course, it's subject to the monetary limit.

The Magistrates Court file became document 1 in District Court

file Southport CLD 1051 of 2002, which was opened on the 18th

of December 2002 - an indication of the expedition with

which such things can be achieved in a combined Registry.

No document in the Magistrates Court identifies Mr Brake in

its title.  The first document to do so is the second document

in the District Court file, an amended statement of claim,

filed the 29th of January 2003.

Matters proceeded towards the trial in the District Court, the

new second defendant, Mr Brake, being the only active

defendant.  Mr Gruber's inactivity has persisted today.  He

was not here when his name was called at the commencement of

the hearing.  Mr Brake filed a notice of intention to defend

and a defence and counterclaim whereby he claims relief from

the plaintiff, including an occupation rent for the period

since 20 October 2000 (when it's said Mr Gruber was excluded

from the Premises), appointment of trustees for sale and

distribution of the net proceeds for sale "as ordered by the

Court", also costs.  Nothing in Mr Brake's pleading hinted at

any problem about the Dictrict Court's jurisdiction.

I understand that he participated in a couple of interlocutory

proceedings and gave every appearance of cooperating, in the

matter's getting set down for trial today and for two days

following if needed.  Mr Brake signed a request for trial date

on the 25th of November 2003, which was filed five days later

as document 22 on the Court file.  This time the plaintiff's

unwelcome surprise on the eve of the hearing is Mr Brake's

contention that the Court has no jurisdiction because of the

bankruptcy.

I observed in the hearing that in the old days one would have

expected the Official Receiver, which had a monopoly of this

trustee work, to know everything that was to be known about

bankruptcy practice, and conduct litigation accordingly.  The

second defendant, having had from December 2002 to think about

it, has now identified the jurisdiction point.  It is created

by section 27(1) of the Commonwealth Bankruptcy Act, which

provides that, "The Federal Court and the Federal Magistrates

Court have concurrent jurisdiction in bankruptcy and that

jurisdiction is exclusive of the jurisdiction of all courts

other than the jurisdiction of the High Court under section 75

of the Constitution."

Notwithstanding Mr Stunden's arguments for the plaintiff, I

think it inescapable that "jurisdiction in bankruptcy" is

involved in the present matter.  The first defendant's

property is vested in Mr Brake.  He has become the legal

owner, along with the plaintiff, of the property at

Broadbeach.  The effect of what the plaintiff seeks is to

alter the prima facie implication of equal joint ownership,

which the state of the title would indicate, and authorities

pointed to by Mr Beacham (appearing for Mr Brake) which

establish his proposition are Scott v. Bagshaw (2000) 99 FCR

573 at [19] and [20] and Green v. Schneller (2001) 164 FLR 82

at 87-88.  Section 31(1)(f) was the focus of the Judge's

attention.  Without going into any detailed consideration, it

seems obvious that adjustment of property interest affecting

a bankrupt's estate, if possible at all, comes within s27.  I

do not accept the argument that a declaration of rights or

interests based on events that preceded the bankruptcy is

different.

Reference was made to the decision applying those authorities

in Denby (as Trustee in Bankruptcy of the Estate of SS Wing

Tam v Chun Wai Shum [2002] QSC 117 in which a Supreme Court

Judge determined that the Supreme Court had no jurisdiction in

a familiar type of proceeding to set aside a preference

brought by bankruptcy trustee. Such proceedings were formerly

common in the Supreme Court, which formerly was specifically

recognised in the counterpart of section 27 as having

jurisdiction.

I must accede to Mr Beacham's preliminary point that this

Court is shown to lack jurisdiction.  It's plain that the

proceeding bodes to affect the rights of those interested in

Mr Gruber's bankruptcy.  Mr Beacham's submission was that the

proceeding should be put out of its misery, perhaps a cruel

suggestion in light of its history; it's supervening events

that have brought the plaintiff the problems she is facing.

Mr Stunden, representing her, asks that the proceeding be

transferred to the Supreme Court under section 85 of the

District Court of Queensland Act 1967. Whether this Court has

jurisdiction to do that is contentious.  Subsection (1) of

section 85 provides that the section applies, "if the District

Court considers that the court does not have jurisdiction to

hear and decide a proceeding started in the court".  That is

not satisfied, in Mr Beacham's submission, because the

proceeding was not started in the District Court.  From one

point of view, that is clearly a correct proposition.  The

second requirement which Mr Stunden has to satisfy is set out

in subsection (2): "If the District Court considers the

Supreme Court has jurisdiction to hear the proceeding the

District Court may, by order, transfer the proceeding to the

Supreme Court."

It is contentious whether or not the Supreme Court has

jurisdiction.  Reliance was placed, in particular, on Denby.

The plaintiff's response is that in that case his Honour was

not asked to consider (and his reasons indicated he did not

consider) the cross-vesting legislation which applies as

between superior courts federally and in the States and

Territories of Australia.

This case is another of the illustrations that may be found of

the inconvenience caused from there being no equivalent

provisions in respect of other courts in our judicial system.

I don't think it is appropriate to go into too much detail

regarding the merits of Mr Stunden's proposal for making the

best of the difficult situation his client is in of a transfer

to the Supreme Court, as opposed to Mr Beacham's proposal

which is that the proceeding be "put out of its misery", as

already indicated.  It may well be that the neatest and

perhaps even cheapest approach is for the plaintiff to obtain

from Mr Brake some formal response to her claim and, if it is

unsatisfactory, appeal to the Federal Magistrates Court.  If

this proceeding remains on foot it may well end up there after

a quick detour via the Supreme Court and the Federal Court.

One would hope, if that is to happen, that, to the extent

possible, the parties would participate by consent orders.

One would be surprised if Supreme Court Judges or Federal

Court Judges proved in the least obstructive.  I do not think

the Court should lightly disregard the plaintiff's advisors'

considered view as to what the judicial system, which ought to

feel embarrassed about what is going on, can best do to assist

her to enjoy her day in Court.  I took Mr Beacham to submit

that s30(1) of the Bankruptcy Act gave Federal Magistrates the

necessary jurisdiction.  It would seem surprising that they

could exercise jurisdiction under Part 19 of the Property Law

Act.

I am persuaded by the authorities relied on by Mr Stunden that

the Supreme Court does have jurisdiction having regard to

section 4 of the (Commonwealth) Jurisdiction of Courts

(Cross-Vesting) Act 1987.  It provides:

(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
(b) the Workplace Relations Act 1996 ; or
(ba)the Native Title Act 1993 ; or
(c) section 46A, 155A or 155B of the Trade Practices Act 1974 ; or
(d) a provision of Part VI or XII of the Trade Practices Act 1974 so far as the provision relates to section 46A, 155A or 155B of that Act.

As was the case in the New South Wales Court of Appeal in

Collings Construction Co Pty Ltd v. Australian Competition

Consumer Commission (1998) 43 NSWR 131, a literal application

Of the provisions of section 4 overcomes the effect of

provisions in other Commonwealth legislation which in terms

make jurisdiction of specified courts "exclusive."  See

the helpful discussion by Cole JA at pages 135 to 138.

Stein JA and Sheppard AJA were in agreement.  The legislation

there in question was the Trade Practices Act 1974 of the

Commonwealth.

To similar effect, but not offering detailed reasoning, are

the decision of the Full Court of the Supreme Court of Western

Australia in Magenta Nominees Pty Ltd v. Pridmore 2354 of

1997, 8 October 1998, BC 9805209 and Porteous v. Donnelly

(2003) 200 ALR 274, especially at paragraph [11] and paragraph

[12]. Both decisions involved the Bankruptcy Act (which is

not included in s4(6) of the "Cross-Vesting" Act).

There may be special considerations regarding "Special Federal

matters" which limit or which stand in the way of universal

application of those authorities, but, in my opinion, they are

not applicable here.  Section 6 of the "Cross-Vesting" Act

deals with them.  Therefore, the Supreme Court of Queensland

is shown to have jurisdiction.

Returning to the underlying question of possible operation of

section 85, I have reached the view that subsection (1) is

satisfied, notwithstanding that, as it happens, there is no

claim filed in the District Court except for the one

transferred from the Magistrates Court and that the

proceeding, as indicated already, from one point of view may

be regarded as started in the Magistrates Court.  The latest

amendments to section 85 were part of more wide ranging

legislative changes which included the insertion in the

Magistrates Courts Act 1921 of section 5A. It has, in

subsection (1), a close equivalent of section 85.

It goes on to provide in subsection (2) that if the

Magistrates Court considers the District Court has

jurisdiction it may transfer the proceeding to the District

Court and in subsection (3): "If subsection (2) does not apply

and the Magistrates Court considers the Supreme Court has

jurisdiction to hear the proceeding the Magistrates Court may

by order transfer the proceeding to the Supreme Court."

Such provisions represented a radical departure from the

previous arrangements under which typically it was for the

court occupying a superior position in the hierarchy to

determine whether to take on proceedings from other courts.

It can be seen, with the benefit of hindsight, that the

Magistrate, doubtless with the encouragement of the parties,

made the wrong decision.  He ought to have transferred the

proceeding to the Supreme Court, which section 5A of the

Magistrates Court Act authorised him to do.

It may be that one could, on the basis of some notional

appeal against what the Magistrate did, justify an order in

this Court to rectify matters by substituting for the actual

order the one the Magistrate ought to have made which would be

one transferring the matter to the Supreme Court.

Mr Beacham pointed to the distinctions in language between

section 85 (1) and other provisions such as section 82 (1) and

section 83 (1) - and, indeed, an earlier version of s85 itself

- which refer to proceedings pending in the District Court. 

That is not what the draftsperson who most recently looked at

section 85 or the legislature did.

Nevertheless, I am of the view that section 85 (1) may and

should be read as if it referred to a proceeding pending or

underway in the District Court.  (Reference might be made to

Pellas v Breslauer (1871) LR 60B 438; of Turner v Jacarande

Clubs Ld (1953) 1WLR 961.) I do agree with Mr Beacham that

"the court" where it last appears means the District Court.

I do not regard it as indefensibly artificial to regard the

present proceeding as having been started twice, once in the

Magistrates Court and again in the District Court.  I have not

taken the trouble to examine the provisions that may be found

in the Acts Interpretation Act calculated to encourage courts

to interpret legislation in a practical and helpful way.

There may well be arguments available here.  I do not find it

necessary to resort to them.

I consider that section 85 (1) is satisfied and that for

reasons already indicated this is a proper case in which to

order transfer of the proceeding to the Supreme Court.

It is for the parties to decide whether, on mature reflection,

they wish to go on in that way or try another one.

I indicate again my sympathy for the plaintiff, who, I would

say without any fault whatsoever on her part, has got caught

in a costly procedural nightmare.  It is hardly fair that she

be required to make important decisions as to how to proceed

in this latest emergency situation in haste.

The disparate positions of the principal litigants as they now

are, may be noted.  Mr Brake has the luxury, unless it can be

shown that he's personally at fault in some way (I have no

enthusiasm for exploring issues like that today) of litigating

with other peoples' money.  On the figures I've heard, there

may be plenty of it there, depending on how things ultimately

turn out.  It may turn out that it's the plaintiff's money

Mr Brake is litigating with.  It would be a scandal should she

ultimately be "successful", yet end up bearing his own costs

and Mr Brake's.

I have indicated the principal orders.  My inclination is to

reserve costs.  You are asking for them, Mr Beacham,

but how do you justify Mr Brake's claim for costs at the

moment?  You haven't beaten the plaintiff on the merits.

MR BEACHAM:  With respect, your Honour, we have in a sense
that the jurisdiction point-----

HIS HONOUR:  I know; not as to what are her relative interest, and
Mr Gruber's, in the property.

MR BEACHAM:  And in light of your Honour's decision-----

HIS HONOUR:  Yes, you've beaten her on the legal argument.

MR BEACHAM:  Yes.

HIS HONOUR:  But in an ideal world that might have happened in
December 2002.

MR BEACHAM:  Yes.  I'm not pressing for a claim for costs of
the entire action.

HIS HONOUR:  If you want to get something on record as to why
- well, what are the costs that you want and basically why?

MR BEACHAM:  Only the costs thrown away by reason of the fact
that this trial won't proceed.  So effectively treating this
as if it is an adjournment, which in effect it is because now
it will go up to the Supreme Court.  It can't be heard.

HIS HONOUR:  That clarifies your application.  That clarifies
the extent of your application, doesn't it?

MR BEACHAM:  For costs?

HIS HONOUR:  Yes.

MR BEACHAM:  And, in my submission, for the simple reason is
this, up until the point at which it was raised, both parties
were - it's accepted, were proceeding in ignorance of the
point that's now been accepted by your Honour.  Guilty.

HIS HONOUR:  If I'm to ask whose ignorance is the more to be
condemned, it's surely Mr Brake's?

MR BEACHAM:  But-----

HIS HONOUR:  Isn't it?

MR BEACHAM:  The point is this, your Honour, is that Mr Brake
should get credit for the fact that he has raised it, because
what the plaintiff's - they resisted the jurisdictional point
so the plaintiff-----

HIS HONOUR:  How long have they known about it for?

MR BEACHAM:  I think probably about a week.  But the point is,
they came along here-----

HIS HONOUR:  Well, that's right.

MR BEACHAM:  And said to your Honour-----

HIS HONOUR:  That's right.  And whoever decides costs
ultimately will take that into account.  This will all be
transcribed, and readily available to whoever that is-----

MR BEACHAM:  But in my submission that's the distinction Mr
Brake has in his favour, that he has raised the jurisdictional
point, and it was one that couldn't be left alone once it was
discovered, because if the Court doesn't have jurisdiction it
was pointless to run a three-day trial here and waste all
those costs when-----

HIS HONOUR:  All right.  So Mr Stunden should have accepted what was going to happen a couple of days ago.  All right, maybe so.

MR BEACHAM:  That, and also the fact that in terms of the fact
that the parties have proceeded to the point where the
jurisdictional point was raised in ignorance, the way that the
plaintiff and the defendant can be separated is that it is the
plaintiff who inevitably chose the jurisdiction that she did.
The defendant-----

HIS HONOUR:  By that you mean the District Court.  Well, she
was right in going to the Magistrates Court, wasn't she?

MR BEACHAM:  Originally, yes.

HIS HONOUR:  If she had a great success she might have been
disappointed when the Magistrate said, "Well, I can only give
you $50,000 worth."

MR BEACHAM:  Precisely, yes, but apart from that the point
is-----

HIS HONOUR:  In fact, that's what Mr Gruber was saying, he
alluded to that problem at the beginning and she decided to
ignore it.

MR BEACHAM:  Yes.  But what the plaintiff did do is choose
this Court, and that was no fault - well, it's the plaintiff
who decided to apply to move it up to the District Court.

HIS HONOUR:  Well, I don't get any feeling that the Magistrate
was tossing up whether to make it this Court or the Supreme
Court.

MR BEACHAM:  Precisely, because the plaintiff didn't want
that.

HIS HONOUR: Probably didn't know section 5A was there.

MR BEACHAM:  The plaintiff didn't put that option there and I
suppose my point is that it was the plaintiff who chooses the
jurisdiction.  The defendant doesn't have any choice about it.
The defendant is brought to the claim and so it is the
plaintiff's obligation or responsibility to make sure when it
starts or continues to proceeding in Court that that Court has
jurisdiction.  The defendant, fair enough, has raised the
point late, but the plaintiff should have given him-----

HIS HONOUR:  As it happens, I did a lot of practice in
bankruptcy.  I started writing things about it, so I like to
think, if it was me, once I got a whiff of bankruptcy, alarm
bells would have been ringing, but I hesitate to say at the
moment that that applies to all practitioners, and even to say
that it applies to trustees in bankruptcy, as I said earlier.

MR BEACHAM:  Yes.  Those are my submissions.  Your Honour
would be-----

HIS HONOUR:  Well, another feature that moves me is that I
think it's a cruel thing to inflict the additional wound on
the plaintiff at this stage of an order for costs.  For the
second time she has lost her trial.  Still I'm inclined to
reserve costs.  Do you want to say anything about it, Mr
Stunden?

MR STUNDEN:  Yes, your Honour, if your Honour is inclined to
just reserve the costs.

HIS HONOUR:  There might even be jurisdictional problems.
What you say is Mr Brake should have raised these matters
sooner, so he should pay the costs?

MR STUNDEN:  As the historical - as the procedural history
makes clear, your Honour, he acquiesced all the way through
and at a very late stage-----

HIS HONOUR:  All right.  Well, I asked the question whether he
could effectively acquiesce so as to give jurisdiction and you
haven't persuaded me that he could.  You haven't even tried to - although you mounted an argument that the District Court does have jurisdiction.

MR STUNDEN:  Well, your Honour - and in my respectful
submission, it's certainly arguable.  We lose that, sure,
but-----

HIS HONOUR:  The reason you lose it is because of the primacy
of Federal legislation.

MR STUNDEN:  Indeed.  And we accept that position, of course,
but the true position is that the trustee in bankruptcy was
telling us not only have you got a jurisdictional problem, but
we are going to strike you out and make you pay all our costs.

HIS HONOUR:  Yes.

MR STUNDEN:  And that's an astonishing position to take, given
he has acquiesced for so long and has never budged from his
position, that he is entitled to nothing less than 50 per cent
of the property.

HIS HONOUR:  But the way it works is that because he is not on the side where there is a bankruptcy, he can go ahead.  You're on the other side, you can't.

MR STUNDEN:  And that's the problem that my client has and my
client is impecunious, and as your Honour says, this has
false-started twice now.

HIS HONOUR:  Well, I wish everyone luck.  I'll reserve
costs.

MR STUNDEN:  Thank you.

HIS HONOUR:  Thanks, gentlemen.  You won't be back here
tomorrow, of course.

MR STUNDEN:  No.

MR BEACHAM:  No.

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