Liquidators of Uub Pty Ltd v NWO - [2020] SASC 121

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
LIQUIDATORS OF UUB PTY LTD & ANOR v NWO & ANOR
[2020] SASC 121
Judgment of The Honourable Justice Parker
1 July 2020
FAMILY LAW AND CHILD WELFARE - THE FAMILY LAW ACT 1975 (CTH) AND RELATED LEGISLATION - JURISDICTION - EFFECT OF CROSS-VESTING LEGISLATION - PARTICULAR CASES - WHEN TRANSFER REFUSED
COURTS AND JUDGES - COURTS - JURISDICTION AND POWERS - CONCURRENT JURISDICTION OF DIFFERENT COURTS - TRANSFER OF PROCEEDINGS UNDER CROSS-VESTING LEGISLATION
CORPORATIONS - WINDING UP - LIQUIDATORS - DUTIES AND LIABILITIES - IN VOLUNTARY WINDING UP
The first and second defendants were married in September 2007 and separated in December 2017. They have matrimonial property proceedings pending in the Family Court. In their respective Schedule of Assets and Liabilities filed in those proceedings, the defendants list, as a principal asset, funds held in two term deposit accounts. The second plaintiff in these proceedings (the company) was placed into voluntary liquidation in April 2019. At the time of liquidation, the first defendant was the company’s sole director and shareholder. In July 2019, the first plaintiffs (the liquidators) were granted leave to intervene in the Family Court proceedings. In August 2019, the liquidators and the company commenced proceedings in this Court alleging that funds of the company have been applied to purchase a series of residential properties for the defendants and to cover their personal and household expenditure. The plaintiffs allege that these payments were unreasonable director related transactions and voidable pursuant to the Corporations Act 2001 (Cth). Alternatively, they allege that the defendants have been unjustly enriched. The plaintiffs seek declarations, inter alia, that they are entitled to trace the proceeds from the sale of two residential properties into the fixed deposits and that a third property is held on constructive trust for the plaintiffs. The first defendant has consented to judgment being entered against him in these proceedings.
The second defendant seeks that the matter be transferred to the Family Court. She contends that, first, the proceedings should be transferred pursuant to s 1337H of the Corporations Act in the interests of justice to avoid the conduct of parallel proceedings. Secondly, the proceedings are a matrimonial cause and the Family Court has exclusive jurisdiction. Thus, s 4 of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) does not apply, and thirdly, if the Court does have jurisdiction under s 4, it should decline to exercise that jurisdiction.
Held, per Parker J, dismissing the application:
1. The proceedings in this Court are “in relation to” the proceedings in the Family Court. There is “a connection or association between the two proceedings” in the sense referred to by Gibbs CJ in Perlman v Perlman (1984) 155 CLR 474. The liquidators’ claim is a “matrimonial cause” within the extended meaning given to that term by paragraph (f) of the definition in s 4 of the Family Law Act.
2. Section 4(1)(a) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) operates so that this Court has Federal jurisdiction over the proceedings even though they relate to a matrimonial cause.
3. It is part of the core business of this Court to determine claims under the Corporations Act and in equity. The suggestion by the second defendant that the liquidators’ claim could be quarantined within the Family Court recognises that the claims advanced by the liquidators and the proceedings to apportion the matrimonial assets are, in truth, discrete matters.
4. It is not in the interests of justice under s 1337H(2) of the Corporations Act for these proceedings to be transferred to the Family Court. I am not persuaded that the Family Court is the more appropriate forum to decide the liquidators claim to recover funds held in the defendants’ term deposits.
Corporations Act 2001 (Cth); Family Law Act 1975 (Cth); Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth); Jurisdiction of Courts (Cross-Vesting) Act 1987 (SA) s 5, referred to.
Australia and New Zealand Banking Group Ltd v Ebsworth [2015] NSWSC 1456; BHP Billiton Ltd v Schultz (2004) 221 CLR 400; Cini v Pets Paradise Franchising (SA) Pty Ltd (2008) 102 SASR 177; Commonwealth Bank of Australia v Newhook [2015] NSWSC 41; Eberstaller v Poulos (2014) 87 NSWLR 394; Grace v Grace (2014) 85 NSWLR 688; Kavan & Mallery (2015) 296 FLR 326; Kennon v Spry (2008) 238 CLR 366; M v L [2017] SASC 39; Perlman v Perlman (1984) 155 CLR 474; R v Dovey (1979) 141 CLR 526; R v Falzon (2018) 264 CLR 361; Turner v Deepinghurts Pty Ltd [1999] WASC 155; Young v Lalic (2006) 197 FLR 27, applied.
Hani v Hani (Supreme Court of South Australia, Judge Bochner, 12 May 2016); Hayes v O’Sullivan (2001) 24 WAR 40, not followed.
Valceski v Valceski (2007) 70 NSWLR 36; C Pty Ltd v PGW (2011) 256 FLR 361, considered.

LIQUIDATORS OF UUB PTY LTD & ANOR v NWO & ANOR
[2020] SASC 121
Application

PARKER J: This is an interlocutory application made by the second defendant in which orders were initially sought that:
·the proceedings be dismissed because the Supreme Court has no jurisdiction to deal with the matter the subject of the proceedings, which matter is a “matrimonial cause” within the meaning of that phrase under the Family Law Act 1975 (Cth); or
·alternatively, that the proceedings be transferred to the Family Court pursuant to s 5(1) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (SA) (the SA Cross-Vesting Act); or
·further in the alternative, that the proceedings be dismissed as an abuse of process as they are parallel proceedings with Family Court proceedings.
By way of her Amended Summary of Argument, the second defendant seeks leave to amend her application so that the transfer order is sought under s 1337H of the Corporations Act 2001 (Cth) rather than under the SA Cross‑Vesting Act. That is because s 3A of the latter Act provides that the Act does not apply to the jurisdiction of courts dealt with in Division 1 of Part 9.6A of the Corporations Act.
Division 1 of Part 9.6A of the Corporations Act includes s 1337B(2). That provision confers civil jurisdiction upon this Court with respect to civil matters arising under the corporations legislation. Accordingly, I grant permission to amend the application so that it refers to the relevant statutory provision. I also note that although the application no longer relies upon the SA Cross-Vesting Act, it will be necessary to make extensive reference to the operation of the Commonwealth and State cross-vesting legislation.
The plaintiffs oppose the application. The first defendant has consented to judgment being entered against him in these proceedings.
For the reasons that follow, I would dismiss the interlocutory application made by the second defendant.
Background
The first and second defendant, NWO and NAO, were married in September 2007 and separated in December 2017. On 24 September 2018, the second defendant commenced matrimonial property proceedings against the first defendant in the Federal Circuit Court of Australia. On 18 February 2019, those proceedings were transferred to the Family Court of Australia (the Family Court proceedings).
UUB Pty Ltd, the second plaintiff in these proceedings (the company), was placed into voluntary liquidation on 9 April 2019. At that time, Mr J was appointed as liquidator. On 3 July 2019, in accordance with a resolution adopted at a meeting of creditors, Mr J was removed as liquidator and Mr NC and Mr DC, the first plaintiffs in these proceedings (the liquidators), were appointed as joint and several liquidators of the company.
On 23 August 2019, the liquidators and the company commenced proceedings in this Court seeking the relief referred to at [17] to [21] below.
As at the date of liquidation of the company, the first defendant was the company’s sole director and shareholder. The liquidators depose that the company owes creditors in the order of $5 Million. That debt comprises some $4.5 Million owed to 211 unsecured creditors, $217,000 owed to one secured creditor and a further $239,000 owed to three employees. Ten of the unsecured creditors are each owed more than $100,000. Of those, the Australian Taxation Office is owed $148,000. Other significant creditors include Return to Work SA and ASIC.
The liquidators reported to the creditors’ meeting that a local government authority in another State was claiming $3.2 Million from the company. The company had lodged a counterclaim for $932,000 together with a retention amount of about $300,000. This dispute was to be arbitrated. The liquidators also reported that the company had incurred losses in excess of $1.2 Million over the preceding 21 months.
In December 2008, the first and second defendants purchased the A property. The plaintiffs alleged that that was a residential property which had no connection to the second plaintiff or its business. However, the second defendant alleges that this property was a display home.
In March 2016, the first and second defendants purchased the B property. At that time, a mortgage in favour of the Westpac Banking Corporation was registered on the Certificate of Title for that property, as security for a loan for which the first and second defendants were liable. The B property was a residential property and, according to the plaintiffs, was purchased by the first and second defendants for their own occupation. The plaintiffs also allege that the B property had no connection to the second plaintiff or the business that it carried on.
In June 2016, a mortgage in favour of Westpac was registered on the Certificate of Title of the A property as security for a loan to the first and second defendants.
In December 2016, the first and second defendants entered into a contract to purchase the C property. That property was registered in the name of the second defendant. This was a residential property in which the defendants intended to reside. The plaintiffs allege that the property had no connection to the second plaintiff or its business.
In January 2017, the A property was sold and the Westpac mortgage discharged. The first and second defendants received the proceeds of sale in their personal capacities.
In March 2018, the first and second defendants sold the B property and discharged the mortgage. The proceeds of that sale were received by the first and second defendants and are presently held in the fixed deposit accounts. When the statement of claim was prepared in August 2019, the balance of the fixed deposits was respectively $605,205.00 and $252,176.00.
The plaintiffs allege that during the period from about 9 February 2016 until about 29 May 2019 the second plaintiff made payments in the total sum of $796,470.38 to third parties on behalf of the first and second defendants for expenses incurred in relation to each of the three properties. The first and second plaintiffs further allege that between 4 January 2016 and about 2 January 2018 the second plaintiff made various payments in the total sum of $352,009.13 on behalf of the first and second defendants for their personal expenses.
The first and second plaintiffs allege that the payments referred to in the preceding paragraph were each unreasonable director-related transactions within the meaning of s 588FDA of the Corporations Act. The plaintiffs also allege that, subject to one exception, the payments are voidable pursuant to s 588FE(6A) of the Corporations Act as they were each unreasonable director‑related transactions and made during the four year period ending on the relation‑back day. The relation‑back day is alleged by the plaintiffs to be 3 July 2019. The exception referred to by the plaintiffs comprises payments in the sum of $227,703.89 made prior to 3 July 2015. The plaintiffs also allege that the company was insolvent from at least 3 July 2017. They further allege that the impugned payments were uncommercial transactions within the meaning of s 588FB of the Corporations Act and also insolvent transactions within the meaning of s 588FC and voidable under s 588FE(3).
In the alternative, the plaintiffs allege that the first and second defendants have been unjustly enriched by the payments as the payments were made by the first defendant from the monies of the second plaintiff to and for the benefit of the first and/or second defendants for no consideration. The plaintiffs contend that by reason of those payments the first and/or second defendants obtained an enrichment at the expense of the second plaintiff. The sum claimed under the unjust enrichment and restitution grounds is $1,148,479.51.
The plaintiffs also allege that it was reasonably foreseeable to a person in a position of the first and second defendant that the making of the impugned payments would deprive the second plaintiff of the opportunity to use that money to reduce its debt and interest commitments and/or to be invested in the ongoing operations of the second plaintiff.
The plaintiffs seek relief by way of declarations and orders under the above-mentioned provisions of the Corporations Act to the effect that the first and second defendants pay the first plaintiff the sum of $1,148,479.51 or, alternatively, that they pay $512,061.85. The plaintiffs also seek a declaration that they are entitled to trace the proceeds from the sale of the B property and the A property into the Westpac fixed deposits and a declaration that the C property is held on constructive trust for the plaintiffs to the extent that the impugned payments relate to the C property. They also seek equitable compensation, including for the loss of the use of funds, interest and costs.
In their respective Schedule of Assets and Liabilities filed in the Family Court proceedings, both the first and second defendants list, as a principal asset, funds in the sum of $857,381 held in the two Westpac term deposit accounts. The first and second defendants both admit that the funds held in the term deposits comprise the proceeds of sale of the B property, and that that property was acquired with (substantially) the proceeds of sale of the A property.
On 27 May 2019, the second defendant filed an Application in a Case in the Family Court proceedings seeking orders that, inter alia, the funds held in the term deposits be paid into the trust account of her solicitor, pending further order of the Court.
On 17 July 2019, the liquidators filed a Notice of Intervention in the Family Court proceedings. In a supporting affidavit, the liquidators deposed that the company made numerous payments to third parties, totalling $667,049.53, on behalf of the defendants relating to the purchase of the A and B properties. Those properties were owned by the defendants and not connected to the business carried on by the company. The liquidators further contend in the Family Court proceedings that the payments amounted to loans and despite numerous demands by the liquidators, those loans have not been repaid by the defendants. The liquidators sought orders restraining the defendants from accessing the monies held in the term deposits, which they claim to be an asset of the company.
Also on 17 July 2019, Mead J granted leave to the liquidators to intervene. They are now named as parties to the Family Court proceedings. Her Honour also made orders restraining all parties in the Family Court proceedings from dealing with, inter alia, the monies held in the term deposits. That injunction continues.
On 9 October 2019, the second defendant filed the present Interlocutory Application.
The first defendant concedes that the monies received from the company in the impugned transactions were loans. He concedes that the proceeds of sale of the properties are held in the Westpac term deposit accounts. On 21 October 2019, he consented to judgment against him in the sum of the fixed deposits and the making of a declaration to the effect that the plaintiffs are entitled to trace that sum into the fixed deposits.
On 7 November 2019, the second defendant filed a Defence in this action. She relies on the defence under s 588FG of the Corporations Act. She asserts that she was not a party to the transactions of the company in respect of which orders are sought under s 588FF. She asserts that in the event that any of the payments or transactions are voidable, then any benefit she received from such payment or transaction was received in good faith and in circumstances where she had no reasonable grounds for suspecting the company was insolvent at that time or would become insolvent.
Second defendant’s submissions
The second defendant advances three main propositions in support of her application:
·First, it is not necessary to determine whether the proceedings in this Court are a “matrimonial cause” in order to succeed in the transfer application.[1] The proceedings should be transferred pursuant to s 1337H of the Corporations Act in the interests of justice to avoid the conduct of parallel proceedings;
·Secondly, the proceedings are a matrimonial cause and the Family Court has exclusive jurisdiction. Accordingly, s 4 of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) (the Cth Cross-Vesting Act) is not available;
·Thirdly, if the Court determines that it has jurisdiction under s 4, it should decline to exercise that jurisdiction.
[1] M v L [2017] SASC 39 at [79] (Hinton J).
Whilst the second defendant seeks an alternative order dismissing the liquidators’ claim as an abuse of process, she did not advance discrete written or oral submissions on that topic. Rather, arguments relevant to that question appear to have been intermingled with those addressing the interests of justice.
Transfer of the proceedings
The second defendant submits that whilst the transfer order is now sought under the Corporations Act, and not under the SA Cross-Vesting Act, the authorities relating to s 5 of the latter Act remain directly relevant to consideration of the interests of justice and to the transfer application generally. I accept that to be the correct approach.
The second defendant contends that the Court should carry out the same exercise under s 1337H of the Corporations Act. That section relevantly provides as follows:
Transfer of proceedings by the Federal Court and State and Territory Supreme Courts
(1) This section applies to a proceeding (the relevant proceeding ) in a court (the transferor court ) if:
(a) the relevant proceeding is:
(i) a proceeding with respect to a civil matter arising under the Corporations legislation; or
(ii) a subsection 1337B(3) proceeding; and
(b) the transferor court is:
(i) the Federal court; or
(ii) a State or Territory Supreme Court.
(2)Subject to subsections (3), (4) and (5), if it appears to the transferor court that, having regard to the interests of justice, it is more appropriate for:
(a) the relevant proceeding; or
(b) an application in the relevant proceeding;
to be determined by another court that has jurisdiction in the matters for determination in the relevant proceeding or application, the transferor court may transfer the relevant proceeding or application to that other court.
…
The second defendant asserts that these proceedings stem from the decision by the first defendant to liquidate the company because he was unable to obtain the funds held in the Westpac term deposits by other strategies. There is no evidence before the Court of any statutory notice having been issued by a creditor of the company and there is no evidence of any threat by a creditor to put the company into administration. The first defendant’s actions in initiating the liquidation of the company has the effect of frustrating the Family Court proceedings for his benefit. This is his intended purpose. The second defendant further contends that these proceedings are merely a claim by the liquidators to appropriate the entire asset pool of the parties.

The second defendant points to the fact that the liquidators have not sought that this Court exercise Federal jurisdiction pursuant to s 4 of the Cth Cross‑Vesting Act, which includes the jurisdiction with respect to matrimonial causes.[2] There is also no application by the liquidators in the Family Court to transfer the family law proceedings to this Court. Thus, it is submitted that the liquidators clearly contemplate continuing parallel proceedings. The second plaintiff contends that the conduct of parallel proceedings will give rise to substantially similar and overlapping factual and legal controversies. Those controversies will be resolved by the evidence of the defendants. In the second defendant’s submission, the duplication is inappropriate.
[2] Ibid at [69]-[70].
The second defendant asserts that these proceedings require findings under Pt 5.7B of the Corporations Act:
·as to the existence of uncommercial transactions or unreasonable director related transactions (s 588FDA);
·the Court then being satisfied (s 588FF) that a transaction of the company is voidable (s 588FE); and
·the Court then making an order pursuant to s 588FF.
The second defendant asserts that the two preliminary adjudications will be resolved (substantially) on the competing evidence of the defendants. Similarly, if the Court reaches the stage of satisfying itself that an order should be made, whether the second defendant succeeds in making out a defence under s 588FG involves the same evaluation of the defendants. The good faith in which the second defendant received any benefit from the payments and transactions and the objective and subjective reasonableness of her having no grounds for suspecting the insolvency of the company are matters that will arise in the ordinary adjudication of the competing evidence of the parties to the Family Court proceedings. Those matters are more conveniently and expeditiously dealt with in that context. Further, whilst s 588FF contemplates an order for the payment of a sum of money to a party or parties, it does not involve the making of an order that deprives the money of its character as matrimonial property.
The first task of the Family Court in relation to property settlement under the Family Law Act will be to identify the asset pool available for distribution. This will require the Court to determine the assets and liabilities of the parties and whether a matrimonial party is indebted to (or is creditor of) a third party.[3] In that regard, both defendants contend in the Family Court proceedings that the principal asset of the parties is the monies held in the Westpac term deposit accounts. The liquidators do not contend otherwise. Presumably, they contend that this money should be used to meet any order made pursuant to their s 588FF application, if that application were to succeed. The second defendant contends that this is part of the ordinary fact-finding exercise of the Family Court in property settlement proceedings.
[3] Valceski v Valceski (2007) 70 NSWLR 36 at [28].
The second defendant contends that like many matters that come before the Family Court, the property dispute relates to assets that were acquired by the husband and wife through a corporate structure in circumstances where both parties worked for the company and both parties were entitled to derive an income. There is nothing exceptional about this case.
The second defendant also contends that the Family Court is able to quarantine the liquidators’ involvement in the Family Law proceedings from the other aspects of the proceedings in which they are not involved. This will preclude the liquidators from becoming involved in unnecessarily protracted or expensive litigation.
The second defendant further contends that the proceedings in this Court may be wholly inutile. Even if parallel proceedings are to continue, the exercise of powers to make orders directed to third party creditors pursuant to ss 90AE and 90AF of the Family Law Act may mean that the orders made in this Court will have no practical effect or the effect of them may be significantly altered. For example, the Family Court may make an order that enjoins the liquidators from recovering from the second defendant any award granted to the liquidators pursuant to s 588FF. The Family Court is the most appropriate forum to determine the liquidators’ claim.
Matrimonial cause
The second defendant’s alternative contention is that the liquidators claim is a matrimonial cause and is therefore within the exclusive jurisdiction of the Family Court. Subparagraphs (ca) and (f) of the definition of matrimonial cause contained in s 4 of the Family Law Act provides:
matrimonial cause means:
(ca)proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them, being proceedings:
(i)    arising out of the marital relationship;
(ii)     in relation to concurrent, pending or completed divorce or validity of marriage proceedings between those parties; or
(iii)    in relation to the divorce of the parties to that marriage, the annulment of that marriage or the legal separation of the parties to that marriage, being a divorce, annulment or legal separation effected in accordance with the law of an overseas jurisdiction, where that divorce, annulment or legal separation is recognised as valid in Australia under section 104; or
….
(f)any other proceedings (including proceedings with respect to the enforcement of a decree or the service of process) in relation to concurrent, pending or completed proceedings of a kind referred to in any of paragraphs (a) to (eb), including proceedings of such a kind pending at, or completed before, the commencement of this Act.
(Emphasis added)
Whilst the second defendant originally contended that the liquidators claim fell within both sub-paragraphs (ca) and (f) of the definition, the only sub‑paragraph pursued in oral submissions at the hearing of the application was subparagraph (f).
The second defendant referred the Court to the decision of Hani v Hani.[4] In that case, property was purchased in the name of the husband’s company. The property was treated by the husband and wife as their matrimonial home. The husband and wife separated and the wife commenced property settlement proceedings in the Family Court. The wife lodged a caveat under s 191 of the Real Property Act 1886 (SA), claiming a beneficial entitlement pursuant to a constructive trust. The husband applied for removal of the caveat. The wife then applied for an extension of time for the removal of the caveat.
[4] (Supreme Court of South Australia, Judge Bochner, 12 May 2016).
Judge Bochner held that the matter was a matrimonial cause either by operation of subparagraphs (ca) or (f). In her Honour’s view, these were clearly proceedings between parties to a marriage with respect to the property of the parties of the marriage and proceedings arising out of the matrimonial relationship. Her Honour was assisted by the definition of “property” in the Family Law Act which includes property to which a party “is entitled”. Her Honour also considered that the matter was “in relation to concurrent, pending or completed proceedings of a kind referred to in [paragraph (ca)]” in that the current proceedings in the Family Court clearly fell within (ca), being an application to alter the property interests of the parties. Judge Bochner also held that the Family Court had exclusive jurisdiction over matrimonial causes and this Court had no jurisdiction. In that respect, her Honour followed the decision of Roberts-Smith J of the Supreme Court of Western Australia in Hayes v O’Sullivan.[5] While an appeal was lodged against the decision of Judge Bochner, the parties reached a settlement before the appeal judgment was delivered.
[5] (2001) 24 WAR 40. I note that each of the authorities referred to by Roberts-Smith J was decided prior to the enactment of the Cth Cross-Vesting Act and the decision of Brereton J in Young v Lalic (2006) 197 FLR 27.
The second defendant also referred the Court to the decisions of C Pty Ltd v PGW,[6] Perlman v Perlman[7] and Kennon v Spry[8] as authority for the meaning of the phrase “in relation to” in sub-paragraph (f) of the definition of matrimonial cause.
[6] (2011) 256 FLR 361 at [74]-[76] (Strickland, Ainslie-Wallace & Murphy JJ).
[7] (1984) 155 CLR 474 at 484-485 (Gibbs J).
[8] (2008) 238 CLR 366.
In C Pty Ltd, the Full Court of the Family Court upheld the trial Judge’s findings that guarantee proceedings concerning monies paid by a guarantor to discharge a loan to the National Australia Bank were a matrimonial cause within sub-paragraph (f), in circumstances where the trial judge had also found that both property settlement proceedings and winding up proceedings were matrimonial causes and the guarantee proceedings were related to them. The Full Court was satisfied that the necessary connection was established. The connection being that the guarantee proceedings were a necessary part of the winding up process which ensures that the orders made in the property settlement proceedings can be adhered to.
The subject matter of these proceedings is the balance of two Westpac term deposit accounts held in the names of the defendants which, the second defendant contends, is the property of the parties to the marriage. These proceedings are in relation to the very same property as the Family Court proceedings. The term deposits comprise almost the entirety of the matrimonial property pool. The proceedings in this Court relate to three parties who are all parties to the Family Court proceedings. The proceedings concern the decision of the first defendant to liquidate the company due to his inability to get hold of the funds in the Westpac term deposits by any other strategy.
Lack of Jurisdiction
The second defendant initially contended that the liquidators cannot rely on s 4 of the Cth Cross-Vesting Act to have this Court assume matrimonial causes jurisdiction. Section 39(5) of the Family Law Act confers jurisdiction on the Supreme Court of each State and Territory to deal with matrimonial causes and certain other matters. Provision, however, is made under s 40(3) for the removal of the jurisdiction of the Supreme Court. In particular, ss 40(3) and (4) of the Family Law Act provide:
Limitations on jurisdiction of Family Court and of State and Territory Supreme Courts
…
(3)The Governor‑General may, by Proclamation, fix a date as the date on and after which matrimonial causes, and other proceedings, referred to in subsection 39(5) may not be instituted in or transferred to the Supreme Court of a State or Territory specified in the Proclamation, or may be so instituted or transferred only where specified conditions are complied with, and such a Proclamation may be expressed to apply only to proceedings of a specified class or specified classes and may be expressed to apply only to the institution of proceedings in, or the transfer of proceedings to, a particular Registry or Registries of a Supreme Court referred to in the Proclamation.
(4)The Supreme Court of a State or Territory shall not hear and determine proceedings under this Act instituted in or transferred to that Court otherwise than in accordance with any Proclamation in force under subsection (3), but nothing in this section invalidates a decree made by such a Supreme Court.
The second defendant asserts that s 40(4) should be construed as a statutory injunction to the Supreme Court that it shall not hear and determine a proceeding once the proclamation under s 40(3) is in force, otherwise than in accordance with the proclamation. She relies on the decision of Brereton J in Young v Lalic where his Honour examined the history of the Supreme Court’s exercise of jurisdiction in matrimonial causes and concluded that “[t]his new investing of State Supreme Courts with jurisdiction superseded the removal of jurisdiction by the proclamation of 1976 and 1983 pursuant [s 40(3) of the Family Law Act].”[9]
[9] (2006) 197 FLR 27 at [39].
Both proclamations purport to remove the Supreme Court’s jurisdiction to deal with matrimonial causes. Those proclamations have not been revoked. Accordingly, they continue to statutorily injunct the Supreme Court from exercising the jurisdiction with respect to matrimonial causes that it was given by and retains under s 39(5). Resort to s 4 of the Cth Cross-Vesting Act cannot arise in these proceedings. To construe the statutory provisions in any other way gives rise to a direct conflict between the terms of the relevant proclamations and s 4 of the Cth Cross-Vesting Act. This is the case notwithstanding that the Cth Cross‑Vesting Act came into operation 11 years after the first proclamation and four years after the second.
The second defendant points to the fact that in Hani, Judge Bochner noted that matrimonial causes are within the Family Court’s exclusive jurisdiction. Her Honour said:
[38] Two proclamations have been made by the Governor-General pursuant to s 40(3), the first on 27 May 1976 and the second on 23 November 1983. The effect of those proclamations is that matters referred to in s 39(5) of the Act can no longer be instituted on the State Supreme Courts. The defendant is correct, therefore, in his submission that, if the matter currently before me is a matrimonial cause, it is within the exclusive jurisdiction of the Family Court.
The second defendant contends that if the Court finds that these proceedings are not a matrimonial cause, an order for transfer of proceedings to the Family Court is required in the interests of justice. That will avoid parallel proceedings and the unnecessary duplication of adjudication and the real possibility of inconsistency of adjudication in separate courts.
Liquidators’ submissions
The transfer application is opposed by the liquidators. They contend that:
·First, the subject matter of these proceedings is not a matrimonial cause within the meaning of s 4 of the Family Law Act; and
·Secondly, the matter is more appropriately determined in this Court.
Jurisdiction
The liquidators contend that even if the matter is a matrimonial cause (which it denies), this Court has jurisdiction under s 4 of the Cth Cross-Vesting Act. The liquidators refer to Young v Lalic, where Brereton J concluded:
[37]In my opinion, this court has, since the [Cth Cross-Vesting Act], all the jurisdiction of the Family Court of Australia in matrimonial causes (subject to a limitation which is irrelevant for present purposes in respect of proceedings under Family Law Act, s 60G).
[38]Originally, under Family Law Act, s 39, matrimonial causes could be instituted in the Supreme Court of a State or Territory as well as in the Family Court of Australia [Family Law Act, s 39(1)], and the Supreme Courts were invested with federal jurisdiction with respect to matrimonial causes [Family Law Act, s 39(5)]. However, provision was made for the Governor-General to fix by proclamation a date from which matrimonial causes and other proceedings referred to in s 39(5) may not be instituted in or transferred to the Supreme Court of a State or Territory [Family Law Act, s 40(3)]. A proclamation dated 27 May 1976, published in Gazette 1976, No S86, 1 June 1976, fixed 1 June 1976 as the date on and after which proceedings of certain classes may not be instituted in, inter alia, the Supreme Court of New South Wales, so as effectively to make the jurisdiction of the Family Court in matrimonial causes exclusive from that date, except in relation to causes already pending or related to those already pending. A further proclamation dated 23 November 1983, published in Gazette 1983, No S288, 24 November 1983, fixed 25 November 1983 as the date on and after which proceedings that are the matrimonial causes referred to in s 39(5)(a) or (b), or proceedings referred to in [s 39(5)(c), (d) or (e)], may not be instituted in, inter alia, the Supreme Court of New South Wales. Its effect was to ensure that the Supreme Courts were divested of any jurisdiction they may have (probably unintentionally) acquired in relation to matrimonial causes within those paragraphs of the definition of matrimonial cause which had been added since the first proclamation, and thus might not have been covered by the first proclamation: see Perlman v Perlman (1984) 155 CLR 474 (per Gibbs CJ). That brought to an end the jurisdiction of this court in matrimonial causes, until the commencement in 1998 of the cross-vesting scheme created by the various Jurisdiction of Courts (Cross‑vesting) Acts of 1997 of the various States and the Commonwealth (“the Cross-vesting Acts”).
[39]However, the Commonwealth Cross-vesting Act, s 4(1), invests all State Supreme Courts with jurisdiction with respect to civil matters with respect to which the Family Court of Australia has jurisdiction (subject to a limitation in respect of “special federal matters”, of which the only relevant instance is that created by Family Law Act, s 60G). This new investing of State Supreme Courts with jurisdiction superseded the removal of jurisdiction by the proclamations of 1976 and 1983 pursuant to Family Law Act, s 40(3).
That conclusion has been adopted by the NSW Court of Appeal in Eberstaller v Poulos[10] and Grace v Grace,[11] and by the Full Court of the Family Court in Kavan & Mallery.[12]
[10] (2014) 87 NSWLR 394 at [19] (Beazley P, Meagher and Leeming JJA).
[11] (2014) 85 NSWLR 688 at [17] (Meagher JA with McColl and Barrett JJA agreeing).
[12] (2015) 296 FLR 326 at [27] (Bryant CJ, Finn and Strickland JJ).
Matrimonial cause
The liquidators assert that this is a claim by liquidators and a company against a director and his former wife to recover monies expended to their personal benefit, including for the purchase, maintenance and improvements of real property of which both defendants were registered proprietor, and to trace those monies (being company property) into the term deposits where both defendants admit that the proceeds of sale of the real property are held.
The liquidators contend that the monies in question, being primarily the monies in the term deposits, are company property. Those monies are directly traceable out of company funds through the properties purchased, straight into the term deposits. At no stage did the monies become property of the marriage and are not available to be divided up between the parties. These are not proceedings between parties to a marriage. They are proceedings between the liquidators of a company and that company on the one hand and the defendants on the other.
The liquidators further contend that there is not an appropriate relationship between these proceedings and the Family Court proceedings. The only matter of connection is the existence of the term deposits. The liquidators contend that this it is not sufficient or appropriate connection to render it a matrimonial cause. The proceedings are not a matrimonial cause.
More appropriate jurisdiction
The liquidators contend that the question for this Court is: which is the “more appropriate” jurisdiction to resolve the dispute the subject matter of these proceedings, by reference to the interests of justice. That is, which is the more appropriate jurisdiction for the dispute between the liquidators, the company and the defendants, and not the more appropriate jurisdiction for the entire dispute between the defendants. The liquidators submit that it is plainly this Court.
The liquidators assert that this Court has, and regularly exercises, jurisdiction under the Corporations Act and in equity in respect of restitution claims. Nothing in the Family Law Act excludes the jurisdiction of this Court over an action by a liquidator in respect of voidable transactions under the Corporations Act against defendants who happen to be parties to a marriage. The mere fact that the Family Court proceedings are on foot does not render all actions by third parties which are related to the property of the parties to the marriage within the exclusive jurisdiction of the Family Court. [13]
[13] R v Dovey (1979) 141 CLR 526 at 532-533 (Gibbs J, with Barwick CJ and Mason J agreeing).

The liquidators further assert that, simply because the Family Court has jurisdiction to hear and determine the liquidators claim does not render it the more appropriate forum. In fact, a substantial part of the liquidators’ claim is in equity for restitution, of which the Family Court would not have jurisdiction but for its accrued or associated jurisdiction.[14] It therefore cannot be said that the proceedings are more appropriately determined by the Family Court as opposed to this Court based on the scope of its original jurisdiction.
[14] See Family Law Act 1975 (Cth) s 31.
The liquidators contend that these are not proceedings arising out of the matrimonial relationship; the liquidators are strangers to the marriage of the defendants. These are proceedings arising out of the conduct and affairs of a company and the application of company funds to the benefit of the Director and his then wife. The proceedings concern numerous identified financial transactions of the company, the parties to those transactions, and whether they are voidable pursuant to the Corporations Act or whether the defendants have been unjustly enriched by the transactions. The factual matters in dispute are not intertwined or common to the Family Court proceedings. The liquidators do not seek relief in the Family Court. The only intersection between the Family Court proceedings and this action is the term deposits. The Family Court proceedings do not concern the internal dealings of the company, nor are the transactions the subject matter of these proceedings raised between the parties. Third parties ought not to become entangled inappropriately in the matrimonial disputes of others.[15]
[15] See, for example, Turner v Deepinghurts Pty Ltd [1999] WASC 155 (McKenchnie J); Commonwealth Bank of Australia v Newhook [2015] NSWSC 41 at [42] (Button J); Australia and New Zealand Banking Group Ltd v Ebsworth [2015] NSWSC 1456 at [66] (Hall J).
The first defendant has consented to judgment. Both defendants admit that the monies held in the fixed deposits constitute the proceeds of sale of the two relevant properties. Accordingly, the liquidators assert that the factual issues in dispute are limited to the fact of the transactions (which will primarily be proven by documentary evidence), and the legal issue in dispute is primarily the second defendant’s defence.
There is no overlap of the two disputes. The liquidators claim will consume one to two days trial in this Court. In contrast, the Family Court proceedings are estimated to consume five days. The result of a transfer would be a seven-day trial in the Family Court. The increased costs that the liquidator will be put to in the Family Court proceedings are significant. This would be to the detriment of creditors. Any return to the creditors will be reduced if they are required to participate in lengthy proceedings which are largely irrelevant to the matters in issue in these proceedings.
Furthermore, the liquidators contend that this Court has the ability to find a hearing date for a relatively short trial. In contrast, there are no trial programming orders in the Family Court proceedings. There is no indication that it is moving anywhere quickly. The matter can be dealt with more expeditiously and efficiently in this Court.
The liquidators contend that it is not in the interests of justice that they become mired in a protracted dispute in the Family Court focussed on matters irrelevant to their claim. It is in the interests of the creditors of the company that the claim against the second defendant and whether the funds in the Westpac fixed deposit accounts are property of the company be determined as quickly and cost efficiently as possible. That can occur in this Court.
Abuse of process
The liquidators assert that the proceedings are not an abuse of process. More than the existence of two sets of proceedings is required to make out an abuse of process. The same issues or question of liability must be in dispute in both proceedings. The liquidators have done no more in the Family Court proceedings than intervene to obtain orders protecting an asset of the company. The internal operations of the company and the various transactions that form the subject of the liquidators’ claim are not in issue in the Family Court.
There is no evidence to support the second defendant’s claim that the initiation of the liquidators’ claim is for the purpose of frustrating the Family Court proceedings. The winding up of the company occurred seven months after the Family Court proceedings commenced and prior to the second defendant’s application in that Court for access to the Westpac fixed deposit accounts. Whatever the motives of the first defendant, the winding up occurred in circumstances where there are significant creditors of the company and little by way of assets. The liquidators assert that these proceedings were commenced in furtherance of their statutory duty to ascertain and recover assets of the company, including the contents of the fixed deposits, which they assert are assets of the company.
Consideration
Whether a matrimonial cause
The second defendant contends that the present proceedings are a matrimonial cause and therefore within the exclusive jurisdiction of the Family Court. Although the second defendant had initially contended in her written submissions that the proceedings fell within paragraph (ca) of the definition of “matrimonial cause” in s 4 of the Family Law Act, that contention has not been pressed. Nevertheless, I will briefly deal with the point.
Paragraph (ca) refers to certain classes of proceedings between the parties to a marriage. As the plaintiffs have correctly noted, the proceedings in this Court are not between the parties to a marriage but between the liquidators and the company as plaintiffs and the husband and wife as defendants. On that basis, paragraph (ca) of the definition of “matrimonial cause” is not relevant. It is therefore necessary to consider whether the proceedings fall under paragraph (f).
Paragraph (f) of the definition of “matrimonial cause” relevantly refers to:
any other proceedings … in relation to concurrent, pending or completed proceedings of a kind referred to in any of paragraphs (a) to (eb) …
Save for one exception, paragraphs (a) to (eb) refer to matters such as divorce, annulment of marriage, maintenance and the like that are plainly not of present relevance. However, paragraph (ca) is potentially relevant. This paragraph refers to:
proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them, being proceedings:
(i)arising out of the marital relationship;
(ii)in relation to concurrent, pending or completed divorce or validity of marriage proceedings between those parties; or
(ii)…
There are proceedings on foot in the Family Court between the husband and the wife concerning the matrimonial property that arise out of the marital relationship. On that basis, I am satisfied that the Family Court proceedings fall within paragraph (ca).
Thus, the further question is whether the proceedings in this Court are in relation to the pending proceedings for a property settlement in the Family Court. If so, the proceedings will fall within the ambit of paragraph (f) of the definition of “matrimonial cause” in s 4 of the Family Law Act.
The parties have referred the Court to a number of authorities where the meaning of the phrase “in relation to” in paragraph (f) has been examined.
In C Pty Ltd, the Full Court of the Family Court referred to the leading High Court authorities on this question in the following terms:[16]
[74]That phrase has received a good deal of attention from the High Court, and two decisions in particular were cited to us by the appellant’s senior counsel, namely Perlman v Perlman (1984) 155 CLR 474 and Kennon v Spry (2008) 238 CLR 366. In the former case, Gibbs CJ said this (at 484-485):
The words “in relation to” import the existence of a connexion or association between the two proceedings, or in other words that the proceedings in question must bear an appropriate relationship to completed proceedings of the requisite kind… An appropriate relationship may exist if the order sought in the proceedings in question is consequential on or incidental to a decree made in the completed proceedings (so that, e.g., an application by a divorced wife for a settlement and transfer of property is a proceeding in relation to the completed proceedings for the divorce)… Proceedings brought to revoke an approval, in the limited circumstances permitted by s 87(6) of the Act, would be proceedings in relation to the completed proceedings for the approval. However, an application to enforce the maintenance agreement in the present case (i.e., the deed) was not consequential on or incidental to the order approving of the maintenance agreement and it did not vary, reverse or otherwise affect the order giving the approval… Although a grant of approval was a condition of the efficacy of the maintenance agreement, the subject of the present proceedings is not the approval but the agreement. There is a connexion between the present proceedings and the deed, since the present proceedings are brought to enforce the deed; there is none, except of a remote and indirect kind, between the present proceedings and the proceedings brought to obtain the approval. So far as the present proceedings are concerned, the proceedings brought to obtain the approval simply form part of the historical background. The proceedings in the present case are not proceedings in relation to the proceedings for the approval.
(Authorities and footnotes omitted)
[75]In the latter case, Kiefel J said this (at 440):
The expression “in relation to” is of wide and general import and should not be read down in the absence of some compelling reason for doing so. As Toohey and Gummow JJ said in PMT Partners Pty Ltd (In liq) v Australian National Parks and Wildlife Service, the words are prima facie broad and designed to catch things which have a sufficient nexus to the subject. The question of nexus is dependent upon statutory context. Amongst the examples given by their Honours was the consideration given by Gibbs CJ, in Perlman v Perlman, to the meaning of the words “in relation to” in the Family Law Act with reference to two sets of proceedings. His Honour said that they “import the existence of a connection or association between the two proceedings, or in other words that the proceedings in question must bear an appropriate relationship to completed proceedings of the requisite kind”.
(Footnotes omitted)
[16] (2011) 256 FLR 361 at [74]-[75].
In light of those authorities, the question is whether there is a connection or association between the proceedings in this Court and those in the Family Court so as to establish a sufficient nexus between the two proceedings. In essence, the plaintiffs contend that the two proceedings involve distinct and separate issues. Briefly stated, they contend that the funds of the second plaintiff (i.e. the company) have been applied to purchase the houses in which the first and second defendants resided. Ultimately, the proceeds of sale of those properties have been placed in the two term deposits. Those funds are recoverable by the first plaintiff in its capacity as liquidator of the second plaintiff and should be applied to meet the claims of the creditors of the first defendant. The fact that the several houses were used by the defendants as their matrimonial homes is not relevant to the liquidators’ claim to recover funds on behalf of the company and its creditors.
In contrast, the position of the second defendant is that she was an entirely innocent party in relation to the withdrawal of funds from the company. Thus, the liquidators have no basis to seek to recover those monies from her. Funds held in the term deposits are part of the pool of matrimonial assets and may be subject to an order in her favour under s 79 of the Family Law Act.
The first defendant has conceded that the funds held in the term deposits are properly the assets of the company and available to the liquidator.
As Kiefel J (as she then was) observed in Kennon v Spry the expression “in relation to” is of “wide and general import and should not be read down in the absence of some compelling reason for doing so”.[17] If the liquidators succeed in their claim, the funds available for distribution as matrimonial property will be greatly reduced or entirely eliminated. For that reason, I consider that there is “a connection or association between the two proceedings” in the sense referred to by Gibbs CJ in Perlman v Perlman.[18]Thus, I accept that there is a sufficient connection between the two proceedings to satisfy me that the proceedings in this Court can properly be regarded as “in relation to” the proceedings in the Family Court.
[17] (2008) 238 CLR 366 at 440.
[18] (1984) 155 CLR 474 at 484.
Accordingly, the liquidators’ claim is a “matrimonial cause” within the extended meaning given to that term by paragraph (f) of the definition in s 4 of the Family Law Act.
Jurisdiction in respect of matrimonial causes
The second defendant contends that the Family Court has exclusive jurisdiction over matrimonial causes. Thus, she submits that this Court has no jurisdiction to hear and determine the claim made by the liquidators. For the reasons that follow, I reject that contention.
When the Family Law Act commenced operation, s 39(5) conferred jurisdiction in respect of matrimonial causes upon the Supreme Courts of the States. The position was reversed by the making of two proclamations under s 40(3) that expressly removed the jurisdiction of the Supreme Courts. Subsequently, s 4(1)(a) of the Cth Cross-Vesting Act restored the jurisdiction of the Supreme Courts over matrimonial causes.
Section 4(1)(a) of the Cth Cross-Vesting Act provides that where the Federal Court or the Family Court has jurisdiction with respect to a civil matter and the Supreme Court would not, apart from s 4, have jurisdiction, then the Supreme Court is invested with Federal jurisdiction with respect to that matter. While s 4(4) contains a number of exceptions to the conferral of Federal jurisdiction, none of the exceptions are relevant to this case.
The leading authority on the question of jurisdiction under s 4(1)(a) is the decision of Brereton J of the Supreme Court of New South Wales in Young v Lalic.[19] The plaintiff claimed an equitable interest in property, to which her mother‑in‑law held legal title. The plaintiff alleged that her estranged husband also had an equitable interest in the property. The plaintiff sought declaratory relief under s 78 of the Family Law Act. That provision empowers a court, in proceedings between parties to a marriage, to declare rights in respect of the subject property. A declaration could be made under s 78 in respect of property owned by a person who was not a party to the marriage.[20] Brereton J also noted to the extent that s 78 did not apply, the Supreme Court would plainly have power to make such a declaration.
[19] (2006) 197 FLR 27.
[20] Warby v Warby (2001) 166 FLR 319 at 356.
The defendants applied for the proceedings to be transferred to the Family Court. Brereton J rejected that application. His Honour noted that when the Family Law Act was first enacted matrimonial causes could be instituted in the Supreme Court of a State or Territory as well as in the Family Court. That was because s 39(5) of the Family Law Act invested the Supreme Courts with Federal jurisdiction with respect to matrimonial causes. However, s 40(3) empowered the Governor‑General to fix a date from which matrimonial causes may not be instituted in or transferred to a Supreme Court. Such a proclamation took effect from 1 June 1976. A further proclamation took effect from 25 November 1983. Brereton J noted that the effect of this second proclamation was to divest any jurisdiction that the Supreme Courts may have acquired, probably unintentionally, due to amendments made to the definition of a “matrimonial cause”. His Honour found that the effect of the proclamations was to bring to an end the jurisdiction of the Supreme Courts in matrimonial causes until the commencement of the cross‑vesting scheme in 1988.
Brereton J held that s 4(1) of the Cth Cross-Vesting Act operated to vest all State Supreme Courts with jurisdiction with respect to civil matters over which the Family Court had jurisdiction. The only exception related to “special Federal matters”. The only relevant special Federal matter was under s 60G of the Family Law Act. The effect of the conferral of jurisdiction on the Supreme Courts of the States was to supersede the removal of jurisdiction that occurred under the proclamations made in 1976 and 1983.
Brereton J also noted that it is a misconception that before the cross‑vested jurisdiction can be exercised the proceedings must first be “cross‑vested” under an application or order of either Court. The correct position is that Supreme Courts are invested by the Cth Cross-Vesting Act with the jurisdiction of the Family Court. His Honour further stated that the inappropriate invocation of the cross-vested jurisdiction is controlled by the power to transfer the matter to the appropriate court, conferred by s 5 of the Cth Cross‑Vesting Act. Thus, if a party were to commence family law proceedings in the Supreme Court, when the Family Court is clearly the appropriate forum, the Supreme Court would transfer the matter to the Family Court to entertain and determine the proceedings.
In Eberstaller v Poulos the New South Wales Court of Appeal followed the decision of Brereton J in Young v Lalic.[21] The Full Court of the Family Court reached the same conclusion in Kavan v Mallery.[22] In M v L Hinton J followed Young v Lalic and Kavan v Mallery.[23]
[21] (2014) NSWLR 394 at [19].
[22] (2015) 295 FLR 326 at [23]-[27].
[23] [2017] SASC 39 at [67]-[70].
While I am not bound by the decisions referred to in the preceding paragraph, the High Court has consistently stated that the decisions of intermediate appellate courts in other jurisdictions must be followed unless they are considered to be plainly wrong.[24] Far from being wrong, I consider that the decisions referred to in the preceding paragraph are plainly correct. I therefore reject the second defendant’s contention that the effect of the proclamations made under s 40(3) of the Family Law Act is that the Family Court has exclusive jurisdiction in respect of matrimonial causes. In that respect, the second defendant’s submission fundamentally misstated the decision of Brereton J in Young v Lalic and completely overlooked the endorsement of his Honour’s decision in the subsequent authorities. It necessarily follows that I consider that Hani v Hani and Hayes v O’Sullivan were decided on an incorrect basis. However, I think it very probable that in each case the result of the proceedings would have been the same if s 5 of the relevant Cross-Vesting Act had been applied. That is because the facts of each matter were such that it is very probable that they would have been transferred to the Family Court in the interests of justice.
[24] R v Falzon (2018) 264 CLR 361 at [49] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).
For completeness, I also reject the apparent suggestion by the second respondent that the two proclamations made in 1976 and 1983 under s 40(3) of the Family Law Act prevail over the cross-vesting legislation. While a proclamation made under a Commonwealth statute would prevail over inconsistent State legislation by force of s 109 of the Constitution, the relevant enactment is s 4(1)(a) of the Cth Cross-Vesting Act. Therefore, the question of s 109 inconsistency does not arise.
The Cth Cross-Vesting Act was enacted in 1987. Thus, it is later than the two proclamations made in 1976 and 1983 under s 40(3) of the Family Law Act. Accordingly, the two earlier proclamations must be regarded as having been rendered invalid, or at least inoperative, by the later contrary enactment.
Application of the Cross-Vesting Act

I have found that 4(1)(a) of the Cth Cross-Vesting Act operates so that this Court has Federal jurisdiction over the present proceedings even though they relate to a matrimonial cause as defined in paragraph (f) of the definition in s 4(1) of the Family Law Act.
The further question is whether the Court should exercise the power conferred by s 1337H(2) of the Corporations Act to transfer the proceedings to the Family Court on the basis that this is in the interests of justice. In deciding that question the authorities relating to the application of the cross-vesting legislation (i.e. the Commonwealth Act and those in force in each State) are highly persuasive in relation to the interpretation and application of s 1337H because it also applies an “interests of justice” test.
I have carefully considered each of the authorities referred to by the parties in relation to the “interests of justice” question.[25] Those cases were largely decided on their particular facts and each can readily be distinguished on that basis. However, the principles to be applied in deciding where the interest of justice lie were identified by the High Court in BHP Billiton Ltd v Schultz.[26]Those principles were summarised by Bleby J in Cini v Pets Paradise Franchising (SA) Pty Ltd as follows: [27]
·    It is not relevant to ask whether this Court is justified in refusing to exercise the jurisdiction conferred on it. Rather, it must ensure that the case is heard in the forum dictated by the interests of justice.
·    The question is not whether this Court is an inappropriate forum. It is both necessary and sufficient that, in the interests of justice, the other Court is more appropriate
·    The Court is required to ensure that cases are heard in the forum dictated by the interests of justice. It is not a question of the exercise of a discretion.
·    The interests of justice are not necessarily the same as the interests of any one party.
·    Because it is necessary to identify the more appropriate forum, no specific emphasis can be given in favour of the choice of forum made by the plaintiff.
·    It is inapt to speak of the applicant for an order for transfer as bearing a burden of persuasion analogous to an onus of proof.
(Footnotes omitted)
[25] Turner v Deepenghurst Pty Ltd [1999] WASC 155; Lasscock v Macks [1997] SASC 6068.
[26] (2004) 221 CLR 400.
[27] (2008) 102 SASR 177 at [8].
Interests of justice
The second defendant contends that the proceedings in this Court have been commenced solely because of the decision by her husband, the first defendant, to place the company into liquidation because he was unable to obtain the funds held in the Westpac term deposits by any other means. That contention is said to be supported by the observation that no evidence has been placed before the Court of the issue of any statutory notice by a creditor of the company, and nor is there any evidence that a creditor has threatened to put the company into administration.
The second defendant also suggests that the first defendant’s action in initiating liquidation of the company has the potential effect of frustrating the proceedings in the Family Court for his benefit. She further suggests that his entire purpose in initiating the liquidation was to frustrate division of the matrimonial property by the Family Court. In that context, the second defendant also suggests that the liquidators are attempting to appropriate the entire matrimonial asset pool.
There is no evidence to support the preceding contentions. However, it is known that the company owes more than $5 Million to creditors, the overwhelming majority of whom are unsecured. It had also incurred a loss of $1.2 Million in the 21 months preceding its winding up. Given the very poor financial position of the company, and in particular the suggestion by the liquidators that it has been insolvent since from at least 3 July 2017, it is hardly surprising that the first defendant took steps to place the company into liquidation.
While the original liquidators were nominated by the first defendant, the current liquidators have been chosen by the creditors. There is no evidence to suggest anything other than that the liquidators are seeking to carry out their statutory duties to recover moneys due to the company for the benefit of its creditors. In that light, I reject the second defendant’s contention that the present proceedings merely involve an attempt by the liquidators to appropriate the entire asset pool of the first and second defendants. That will only occur if the liquidators persuade the Court that the funds in question are recoverable by them.
It is not apparent to me on what basis it is suggested that the decision by the first defendant to consent to judgment for a sum equal to the balance of the fixed deposits was intended to frustrate the Family Court proceedings. If the various claims made by the liquidators for repayment of the balance of the term deposits are successful, the inevitable result would seem to be that most, if not all, of the funds held in those two accounts would be recoverable by the liquidators. On the other hand, to the extent that the liquidators fail to recover funds held in the term deposits, that money will be part of the pool of matrimonial assets divisible between the husband and wife pursuant to s 79 of the Family Law Act.
The plaintiffs contend that the present proceedings concern the affairs of the company and do not arise out of the matrimonial relationship between the first and second defendants. While in a general sense that is arguably correct, I have found that the present proceedings fall within the extended definition of “matrimonial cause” in the Family Law Act. Consistently with that finding, the ultimate issue is whether the funds held in the term deposits are assets of the marriage or are recoverable by the liquidators on behalf of the company and its creditors. To that extent, but only to that extent, there is a commonality between the proceedings in this Court and the potential scope of the Family Court proceedings.
It is undoubtedly the case that the Family Court has jurisdiction to make any orders found to be appropriate under the Corporations Act. That Court could also deal with the equitable claims advanced by the liquidators in its ancillary or associated jurisdiction. Nevertheless, deciding matters under the Corporations Act and claims for equitable relief is part of the core functions of this Court but not of the Family Court. That consideration supports the dismissal of the application for transfer to the Family Court.
I acknowledge the correctness of the second defendant’s submission that it is commonplace to use a corporate structure to hold matrimonial assets. However, the issue in these proceedings is whether the use of company funds to purchase a series of matrimonial homes and to cover personal or household expenditure gives rise to a liability to repay under the Corporations Act or a valid claim for equitable relief.
The liquidators complain that if they are required to participate in the Family Court proceedings so as to pursue their claim for repayment of monies appropriated from the company, that will result in them incurring significant additional costs. The second defendant has responded with the observation that the Family Court could readily arrange for the determination of the liquidators’ claims to be quarantined from the broader family law issues. While that may well be possible, and there is certainly no information before this Court to indicate otherwise, the acknowledgement that it would be appropriate to quarantine the liquidators’ claim from the general family law matters provides strong support for the liquidators’ contention that their claim would be more appropriately dealt with in this Court.
The second defendant has also contended that if this Court were to make orders concerning the disposition of the funds held in the term deposits in favour of the liquidators, such orders might be effectively set aside by a Family Court order requiring the funds to be treated as part of the matrimonial assets and paid to the second defendant. I have absolutely no reason to expect that if this Court were to determine that some or all of the funds held in the term deposits were properly recoverable by the liquidators, that the Family Court would not give appropriate recognition to such an order with the result that the pool of matrimonial assets is to that extent reduced.
On balance, I consider that the interests of justice would be best served by the proceedings initiated by the liquidators remaining in this Court rather than being transferred to the Family Court. I have reached that conclusion because, first, it is part of the core business of this Court to determine claims under the Corporations Act and in equity. Secondly, the suggestion by the second defendant that the liquidators’ claim could be quarantined within the Family Court recognises that the claims advanced by the liquidators and the proceedings to apportion the matrimonial assets are, in truth, discrete matters. Moreover, it seems that if this claim is to be transferred to the Family Court that will inevitably expose the liquidators to some additional legal costs to give effect to that transition and the quarantining proposed by the second defendant.
I do not consider that the assertion by the second defendant in paragraph 3 of the interlocutory application that the liquidators’ claim is an abuse of process has any substance whatsoever. The liquidators have a statutory duty to identify and recover the assets of the company for the benefit of its many and substantial creditors. In that light, I am satisfied that the liquidators intervened in the Family Court action solely to ensure that, if necessary, they were able to pursue in that Court their claim to trace and recover company assets. Moreover, I have found that there is no evidence to suggest that the first defendant initiated the liquidation of the company in an attempt to frustrate the Family Court proceedings.
Conclusion
For the reasons stated at [106], I am not persuaded that it is more appropriate that the Family Court decide the claims made by the liquidator to recover the funds held in the term deposits. Thus, I find that it is not in the interests of justice under s 1337H(2) of the Corporations Act for these proceedings to be transferred to the Family Court.
I dismiss the interlocutory application made by the second defendant.