Samana Estates Pty Ltd v La Rosa

[2023] NSWSC 882

Supreme Court

New South Wales

Medium Neutral Citation:

Samana Estates Pty Ltd v La Rosa [2023] NSWSC 882

Hearing dates:

14 July 2023

Date of orders:

31 July 2023

Decision date:

31 July 2023

Jurisdiction:

Equity - Applications List

Before:

Henry J

Decision:

(1) Pursuant to s 5(1) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW), these proceedings be transferred to the Federal Circuit and Family Court of Australia (Division 1) and be joined to be heard together with proceedings SYC1747/2021 in that Court.

(2)   The costs of the parties in this Court and the applicant’s Notice of Motion filed on 20 April 2023 be reserved to the Federal Circuit and Family Court of Australia (Division 1).

Catchwords:

CIVIL PROCEDURE — cross-vesting — transfer to Federal Circuit and Family Court of Australia — where applicant and defendant are parties to proceedings in Federal Circuit and Family Court of Australia regarding division of property — where money claim in these proceedings subsequently commenced by father of defendant and family company on basis of default under a written loan agreement — whether in the interests of justice to transfer Supreme Court proceedings to the Federal Circuit and Family Court of Australia — application to transfer granted

Legislation Cited:

Family Law Act 1975 (Cth)

Federal Circuit and Family Court of Australia Act 2021 (Cth)

Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW)

Cases Cited:

Bankinvest AG v Seabrook (1988) 14 NSWLR 711

BHP Billiton Ltd v Schultz (2004) 221 CLR 400; [2004] HCA 61

Comino v Kremetis & Anor [2023] NSWSC 32

Valceski v Valceski (2007) 70 NSWLR 36; [2007] NSWSC 440

Xue v Xue; Xue v Xue [2020] NSWSC 501

Category:

Procedural rulings

Parties:

Samana Estates Pty Ltd (First Plaintiff/First Respondent)
Salvatore La Rosa (Second Plaintiff/Second Respondent)
Natale La Rosa (Defendant/Third Respondent)
Natasha La Rosa (Interested Party/Applicant)

Representation:

Counsel:
M Bennett (Plaintiffs/First and Second Respondents)

Solicitors:
Uther Webster & Evans (Plaintiffs/First and Second Respondents)
Sage Solicitors (Defendant/Third Respondent)

Self-represented:
Natasha La Rosa (Interested Party/Applicant)

File Number(s):

2023/00071519

Publication restriction:

Nil

JUDGMENT

1. These proceedings involve claims by the plaintiffs, Samana Estates Pty Ltd and Salvatore La Rosa, for declaratory relief and judgment against the defendant, Natale La Rosa, in the amount of $10,037,452.49 under a written loan agreement.

2. By Notice of Motion filed on 20 April 2023, the defendant’s former wife, Natasha La Rosa (applicant), seeks to be joined as a defendant to these proceedings for the transfer of these proceedings to the Federal Circuit and Family Court of Australia (FCFCA) to be joined with proceedings number SYC1747/2021 in that Court (FCFCA Proceedings) or, in the alternative, for a stay of these proceedings until further order of the Court.

3. The plaintiffs oppose the relief sought by the applicant’s Notice of Motion. The defendant neither opposes nor consents to the orders sought.

4. In support of the Notice of Motion, the applicant, who was self-represented at the hearing, relies on her affidavit sworn on 20 April 2023 and written submissions. The plaintiffs rely on affidavits from their solicitor, Vivian Evans, and the defendant, and written submissions that were supplemented by oral submissions at the hearing.

Background facts

5. The following background facts are taken from the evidence and the parties’ submissions. They should not be taken to be findings on any disputed issue of fact.

6. The defendant, Natale La Rosa, is the son of the second plaintiff, Salvatore La Rosa. He holds 50% of the shares of the first plaintiff, Samana Estates, and was a director of that company until about July 2021.

7. The applicant and the defendant commenced living together in 2005, were married in May 2006 and separated on 8 January 2019. They have one child, aged 13 years. Prior to their separation, they lived at the matrimonial home located in Wamberal, New South Wales (Wamberal Property). The Wamberal Property was purchased prior to June 2010 and is registered in the defendant’s name.

8. During their marriage, the defendant conducted business as a property developer through various corporate entities.

9. The written loan agreement the subject of the claim in these proceedings (a copy of which is in evidence) is between Samana Estates and Salvatore La Rosa as lender, and Natcorp Properties Pty Ltd and Natale La Rosa as borrower, and is dated 20 July 2004 (Loan Agreement). It appears to be signed by the second plaintiff as “Salvatore La Rosa – Director of Samana Estates Pty Ltd” and by the defendant as “Natale La Rosa – Director of Natcorp Properties Pty Ltd”. At that time, the defendant was a director and 50% shareholder of Samana Estates, and the sole director and shareholder of Natcorp Properties.

10. The Loan Agreement provides as follows:

1. the lender will provide the loan amount of $1,850,000 to the borrower on the drawdown date of 23 July 2004;

2. the repayment date is between 24 July 2019 and 23 July 2024;

3. interest accrues daily at an interest rate of 9% per annum;

4. it is a condition of the Loan Agreement that a charge (defined to be a fixed and floating charge granted by the borrower over all its assets and undertaking in favour of the lender and personal guarantees) is executed, stamped and in registrable form; and

5. the appointment of an administrator, receiver or liquidator to the borrower is an event of default and, in such event, the loan amount outstanding and all other amounts payable including interest will, at the option of the lender, become due and payable immediately without the necessity for any demand or notice to the borrower.

11. The defendant deposes that the loan advanced pursuant to the Loan Agreement was drawn down prior to his relationship with the applicant.

12. On 29 July 2011, Natcorp Properties was placed into administration and its name was changed to NPTP Pty Ltd that day. On 13 June 2014, a liquidator was appointed to the company. Both of these events were events of default under the Loan Agreement.

The FCFCA Proceedings

13. On 12 May 2021, the applicant commenced the FCFCA Proceedings by way of Initiating Application.

14. The FCFCA Proceedings relate to both parenting and property matters. In relation to property, the applicant seeks a distribution of the overall matrimonial pool of assets of 65% to herself and 35% to the defendant, whereas the defendant seeks that the applicant receive 25% and he receive 75%. Issues have arisen in the context of the FCFCA Proceedings about the defendant’s financial position, financial disclosure and liabilities, including under the Loan Agreement.

15. Based on the evidence on this application, it appears that the applicant was unaware of the Loan Agreement during their marriage and became aware of it when it was included in the defendant’s financial disclosure documentation served prior to the commencement of the FCFCA Proceedings. The financial disclosure documentation served by the defendant included a copy of the written Loan Agreement but also referred to a personal loan from the second plaintiff in the amount of $6,738,593 (principal and interest as at 20 July 2019), a loan of $1.85 million plus interest in relation to the “La Rosa Group” and indicated that the defendant no longer had copies of the original bank statements evidencing the Loan Agreement principal in 2004 and further advances made. It appears that the applicant claimed that the loan had been paid out from the sale proceeds from a property development at Hoxton Park. The defendant says that he produced documents that showed that those sale proceeds had not been used to pay out or reduce the loan.

16. On 27 July 2021, interim property and spousal maintenance orders were made in the FCFCA Proceedings that required the defendant to vacate the Wamberal Property and pay periodic spousal maintenance and a lump sum payment to the applicant. The FCFCA’s reasons for making the interim orders refer to the defendant’s financial position, his financial disclosure and matters relating to Samana Estates and the Loan Agreement. The Court described the defendant’s financial position as “complex” and involving a number of corporate entities and trusts (including Samana Estates, of which the defendant was a director at the time), and the FCFCA stated that “[n]o real attempt was made by the husband to give a transparent account of his finances”. The reasons also state that the defendant had given no explanation for his failure to provide financial statements of Samana Estates that had been requested by the wife despite the fact that such documents were clearly within his control as a director, there was no evidence of the value, income or asset position of Samana Estates and that the defendant had transferred $600,000 to Samana Estates on 6 October 2020 but there was no evidence of any requirement to repay those funds as the document relied on to substantiate the indebtedness to Samana Estates “clearly states that repayment is to occur by 2024”, which I take to be a reference to the Loan Agreement described above.

17. On 25 July 2022, the FCFCA Proceedings were placed in a pool of matters awaiting listing for trial directions before a Judge. The orders made that day note that the parties had attended a private mediation in relation to their property dispute on 22 June 2022.

18. On 28 April 2023, the FCFCA Proceedings were adjourned for another case management hearing on 31 August 2023, pending the outcome of the applicant’s Notice of Motion in these proceedings.

19. It is anticipated that the FCFCA Proceedings will be listed for hearing in late 2023 or, more likely, in mid-2024 unless there is an application made to expedite them.

Supreme Court proceedings

20. By letter dated 23 August 2022, the plaintiffs, by their solicitor, made a demand on the defendant to pay the outstanding amount under the Loan Agreement within 14 days or to otherwise provide a written plan for repayment, failing which they had instructions to commence proceedings without further notice. The demand was made on the basis that the liquidation of Natcorp Properties in 2015 was an event of default under the Loan Agreement, such that all amounts were immediately due and payable.

21. It appears that, a few days prior to the demand being sent, on 18 August 2022, the plaintiffs lodged a caveat on the Wamberal Property relying on the Loan Agreement as the basis for their interest in that property. According to the defendant’s evidence on this application, the Loan Agreement had initially included a charge over a property at Hunters Hill which was substituted for a charge over the Wamberal Property on 29 June 2010.

22. On 23 August 2022, the defendant’s solicitor wrote to the applicant’s solicitor to inform her of the letter of demand and stated:

“As you know, my client has been concerned that his family might decide to take this step and engage external lawyers, given that our respective clients have been unable to resolve their financial dispute to give Samana Estates confidence that its debt will be repaid.”

23. There is no evidence of any reply to that letter.

24. On 3 March 2023, the plaintiffs commenced these proceedings by Statement of Claim seeking declaratory relief in relation to an event of default and judgment against the defendant in favour of the plaintiffs (jointly and severally) for the sum of $10,037,452.49, which represented the principal sum of the loan of $1,850,000 plus daily interest at a compounding rate of 9% per annum as at 1 March 2023.

25. The Statement of Claim pleads that:

1. in or about July 2022, the lenders (defined as Samana Estates and Salvatore La Rosa) discovered that a liquidator had been appointed to Natcorp Properties. The particulars refer to an ASIC company search of Natcorp Properties dated 13 July 2022;

2. upon becoming aware of the appointment of a liquidator to Natcorp Properties, the lenders were entitled to exercise the option to call on the money on the basis of an event of default; and

3. the defendant has failed, refused or neglected to pay any part of the amount due as demanded.

26. On 30 March 2023, the plaintiffs’ solicitor sent draft Consent Orders to the defendant that provided for judgment against him in favour of the plaintiffs.

27. That day, the defendant’s solicitor sent a letter to the applicant’s solicitor advising that the defendant intended to sign the draft Consent Orders to resolve these proceedings.

28. The defendant has executed the Consent Orders that provide for judgment against him in favour of the plaintiffs (jointly and severally) in the amount of $10,105,470.33 (being the amount of the principal sum of the loan of $1,850,000 plus daily interest at a compounding rate of 9% per annum as at 31 March 2023) and for the plaintiffs’ costs to be paid by the defendant fixed at the sum of $20,000.

29. On 20 April 2023, the signed Consent Orders were provided to the Court. They have been placed in the Court file and have not been entered, presumably on the basis that the applicant’s Notice of Motion seeking a transfer of the proceedings was filed that day.

Other matters

30. The second plaintiff is 84 years old. According to Ms Evan’s evidence, he seeks recovery of the money as he wishes to finalise his estate planning and put his financial affairs in order. She also gives evidence that the plaintiffs do not wish to incur the unnecessary costs of being joined to the FCFCA Proceedings.

31. The defendant says that he consented to the judgment on the basis that he signed the Loan Agreement and understands that he has an obligation to repay the amount claimed.

Consideration and determination

32. The applicant’s primary claim for relief is an order for the transfer of these proceedings under s 5(1) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW) (NSW Cross-Vesting Act), which provides:

5   Transfer of Proceedings

(1)   Where:

(a)    a proceeding (in this subsection referred to as the relevant proceeding) is pending in the Supreme Court, and

(b)    it appears to the Supreme Court that:

(i)    (Repealed)

(ii)    having regard to:

(A)    whether, in the opinion of the Supreme Court, apart from any law of the Commonwealth or another State relating to cross-vesting of jurisdiction and apart from any accrued jurisdiction of the Federal Court or the Federal Circuit and Family Court of Australia, the relevant proceeding or a substantial part of the relevant proceeding would have been incapable of being instituted in the Supreme Court and capable of being instituted in the Federal Court or the Federal Circuit and Family Court of Australia,

(B)     the extent to which, in the opinion of the Supreme Court, the matters for determination in the relevant proceeding are matters arising under or involving questions as to the application, interpretation or validity of a law of the Commonwealth and not within the jurisdiction of the Supreme Court apart from this Act and any law of the Commonwealth or another State relating to cross-vesting of jurisdiction, and

(C)    the interests of justice,

it is more appropriate that the relevant proceeding be determined by the Federal Court or the Federal Circuit and Family Court of Australia, as the case may be,

(iii)    (Repealed)

the Supreme Court shall transfer the relevant proceeding to the Federal Court or the Federal Circuit and Family Court of Australia, as the case may be.

33. I note that, on 14 July 2023 (the day of the hearing), s 5 of the NSW Cross-Vesting Act was amended so that the previous references to the “Family Court” were replaced by the “Federal Circuit and Family Court of Australia”. Prior to that amendment, the reference in s 5(1) to the “Family Court” was to be read as a reference to the FCFCA (Division 1), which is a superior court of record and a court of law and equity: Comino v Kremetis [2023] NSWSC 32 at [43]; and Federal Circuit and Family Court of Australia Act 2021 (Cth), ss 8(1)–(2), 9(1) and 10(1).

34. As to the elements of s 5(1) of the NSW Cross-Vesting Act, the “relevant” proceedings are these proceedings for the purposes of s 5(1)(a).

35. These proceedings would not have been incapable of being commenced in this Court or incapable of being instituted in the FCFCA but for any cross-vesting law or accrued jurisdiction, and the matters for determination in these proceedings do not arise under or involve questions as to the application, interpretation, or validity of a Commonwealth law: NSW Cross-Vesting Act, ss 5(1)(b)(ii)(A) and (B).

36. There was also no dispute concerning the jurisdiction of the FCFCA. At the hearing, Counsel for the plaintiffs accepted that these proceedings fall within the accrued jurisdiction of the FCFCA, stating that he did not take issue with the authorities on this (T48.7–8). The applicant had submitted that the FCFCA has jurisdiction to determine the issues in these proceedings as they concern the quantum of her and the defendant’s “estate” and that there is, in substance, a single justiciable controversy, referring to Valceski v Valceski (2007) 70 NSWLR 36; [2007] NSWSC 440 (Valceski v Valceski) at [28]–[30], [33] and [37]–[65].

37. Thus, the applicant’s claim for a cross-vesting order falls to be determined by reference to s 5(1)(b)(ii)(C) of the NSW Cross-Vesting Act, namely, whether it is in the interests of justice for these proceedings to be transferred to the FCFCA and joined with the FCFCA Proceedings.

38. In determining where the interests of justice lie, the Court considers and identifies the “natural forum” for the “relevant proceeding”, being the proceedings in this Court. This involves a nuts and bolts management decision as to which Court, in the pursuit of the interests of justice, is more appropriate to hear and determine the substantive dispute. The interests of justice are not the same as the interests of one party. In identifying the most appropriate forum, relevant considerations include the costs and efficient management of the proceedings in the respective jurisdictions and the connecting factors so that, judged objectively, it might be expected that the dispute would fall to be resolved in that forum, with concomitant judicial advantages and disadvantages for each party: Valceski v Valceski at [69]–[70] citing BHP Billiton Ltd v Schultz (2004) 221 CLR 400; [2004] HCA 61 at [14], [18]–[19] and [63]; and Bankinvest AG v Seabrook (1988) 14 NSWLR 711 at 727.

39. If it appears that one court is more appropriate than the other, however so slightly, then a transfer to the more appropriate court is mandatory and no question of discretion arises: Valceski v Valceski at [70].

40. The applicant submits that it is in the interests of justice for these proceedings to be transferred and joined with the FCFCA Proceedings because, in essence, sufficient concerns have been raised to question the validity of the plaintiffs’ current claim and the defendant’s acceptance of it, placing emphasis on the matters raised in the FCFCA’s reasons (as summarised at [16] above) and the failure in these proceedings to disclose that the defendant was a director of Samana Estates at the time the impugned loan was allegedly provided to Natcorp Properties. She contends that the Loan Agreement may not have been made or called upon in good faith, challenges the defendant’s assertion that he is liable for the amount claimed (including for the reason that he told her he had paid debts owed to his father) and reserves her rights to have the transaction set aside under s 106B of the Family Law Act 1975 (Cth) (Family Law Act).

41. The applicant’s submissions refer to and characterise the plaintiffs’ claim as not being about default in respect of a loan contract but, rather, being directed at “stripping value” and seeking to obtain a collateral advantage from creating an appearance that the defendant’s liabilities exceed the asset pool subject to distribution in the FCFCA Proceedings, and contend that the FCFCA is the most appropriate venue for further investigation of these issues.

33. In support of these submissions, the applicant also pointed to the following matters:

1. the position of the defendant as a shareholder of Samana Estates and director until on or around 31 July 2021, and the lack of disclosure of that interest and function in the Statement of Claim;

2. the interest rate, which she asserted was not commercial (being calculated daily at a rate of 9% per annum);

3. the strong family connections and the defendant’s control of “all companies” and to his “making changes to the structure and functions performed by the family members in Samana and in Natcorp at different times”;

4. the calling on the loan on the basis of an event of default that occurred some eight years prior, before the passing of the repayment date under the Loan Agreement and while the FCFCA Proceedings are on foot in relation to property; and

5. the lack of full disclosure by the defendant in the FCFCA Proceedings, including in relation to Samana Estates (referring to the matters described at [16] above).

43. Although the plaintiffs accepted that the FCFCA had accrued jurisdiction in relation to these proceedings, in opposing the cross-vesting application, they argued that there is no real connection between these and the FCFCA Proceedings as the FCFCA Proceedings do not concern the loan in any way. They pointed to the fact that the Loan Agreement is not the subject of any specific relief sought in the FCFCA Proceedings despite the applicant having been aware of it and having prosecuted an interim hearing on financial matters, and the plaintiffs not being parties to or having received any subpoena nor been asked for copies of financial statements as part of the FCFCA Proceedings. They submitted that it follows from this that there is no issue estoppel or Anshun estoppel between these and the FCFCA Proceedings.

44. The plaintiffs also submitted that the position in this case is on all fours with the position in Xue v Xue; Xue v Xue [2020] NSWSC 501 (Xue v Xue), a case in which Adamson J (as her Honour then was) refused an application for a cross-vesting order in relation to two sets of proceedings in this Court in which the father and brother-in-law of a husband involved in Family Court proceedings sought to recover amounts said to have been advanced to the husband under loan contracts between them.

45. I accept that there are similarities between the circumstances in Xue v Xue and this case, and that there is force to her Honour’s reasons for concluding in that case that the interests of justice required that the proceedings remain in the Supreme Court as the natural forum. However, I am not persuaded by the plaintiffs’ submission that there is no connection between the issues in these proceedings and those in the FCFCA Proceedings. I also consider that there are factors that distinguish this case from the position in Xue v Xue.

46. The FCFCA Proceedings involve the division of matrimonial property. That requires, as a first step, the identification and valuation of the property of the parties and necessarily involves determining the extent to which the defendant is indebted to a third party and the extent of any interest a third party has in the matrimonial property: Valceski v Valceski at [28]. It follows that the determination of the defendant’s liability to the plaintiffs under the Loan Agreement and the plaintiffs’ claimed interest in the Wamberal Property by reason of the Loan Agreement will be considered in the FCFCA Proceedings.

47. Like the applicant wife in Xue v Xue, the applicant in this case is not a party to the Loan Agreement and there is prima facie evidence, in the form of the written Loan Agreement, that the loan was entered into before their separation and, it appears, before their relationship commenced. As in Xue v Xue, the defendant in this case disclosed the existence of the Loan Agreement as part of the FCFCA Proceedings and has not put his indebtedness under that agreement in issue in the proceedings in this Court.

48. However, in contrast to the position in Xue v Xue, the alleged loan advance of $1,850,000 was not supported by contemporaneous business records showing bank transfers of funds from either of the plaintiffs to the defendant or to Natcorp Properties at or prior to 2004, or in the period after the date of the Loan Agreement.

49. There is a document annexed to Ms Evan’s affidavit which she deposes is a “schedule of advances and repayments in respect of the Loan Agreement” (Schedule). The Schedule lists various sums that range in value from $148 to $480,000 and are variously described as “Advance”, “Various Advances”, “La Rosa Constructions”, “ATO Payment”, “Mercedes HP” and “Wages/Advances” between 30 June 2000 and 30 June 2014 and add up to $1,850,001. It also lists various sums, each described as “Drawdown”, in each of the financial years 2006 – 2015 and during the period 17 February 2021 to 31 March 2022 and three amounts described as “Repayment” (of $54,188 in the 2017 – 2018 financial year; $600,000 on 6 October 2020; and $60,000 on 30 December 2021). There are also financial statements in evidence for Samana Estates for the financial year ending 30 June 2021 which refer to a non-current loan to the defendant in the amount of $1,503,325 for the 2021 financial year and $2,050,325 for the 2020 financial year.

50. However, on its face, the Schedule relates to advances made to “Natale La Rosa & related companies” and is taken from “Extracts from general ledgers of Samana Estates (2001 – 2004)”. Neither the Schedule nor the evidence on this application identifies: the “related companies”; what (if any) amounts were advanced to the defendant, Natcorp Properties and to the other “related companies”; where the post-2004 amounts were extracted from; and the purpose of the funds referred to as “Advances” and “Drawdowns”. The financial statements for Samana Estates are also unsigned and limited to 2020 and 2021. The documents do not refer to the second plaintiff at all.

51. Based on these documents and the affidavits read by the plaintiffs on this application, I do not accept the plaintiffs’ submission that there is “significant evidence of the [l]oan, payments and repayments along the way as a credit facility of the parties, proper use of security for the advance and its use to benefit [the defendant] (and, if relevant, [the applicant]) in the usual way”.

52. Unlike the position in Xue v Xue, I also consider it reasonable to infer that the plaintiffs have used the occasion of the demise of the marriage and the FCFCA Proceedings to assert their rights under the Loan Agreement and commence proceedings in this Court.

53. The plaintiffs issued their pre-litigation demand for payment based on an event of default that had occurred eight years earlier and in circumstances where the applicant and the defendant had been unable to resolve their financial dispute in the FCFCA Proceedings. They also waited 12 years after the charge under the Loan Agreement was apparently granted to lodge a caveat on the Wamberal Property.

54. The plaintiffs submitted that it was not until July 2022 that they became aware of the event of default. Leaving to one side that there is no evidence adduced on this application to support that submission and the close familial connection between the second plaintiff and the defendant, given the defendant’s position as a 50% shareholder of the first plaintiff and a director of that company until mid-2021, it is to be inferred that the first plaintiff, at least, was aware of the two events of default in 2011 and 2014. No explanation was given as to why steps were not taken by the plaintiffs to call upon the loan sooner.

55. The plaintiffs submitted that the age of the second plaintiff and considerations of delay and expense favoured the claim remaining in this Court. They argued that they ought not have to wait further for the fruits of their judgment or incur the costs of being parties to the FCFCA Proceedings, particularly given the age of the second plaintiff and his desire to conclude his estate planning. They also submitted that these proceedings are otherwise concluded, the plaintiffs had brought expedition to their dealing with the matter in contrast to the applicant’s approach and any further delays would be disproportionate to the issues germane to these proceedings.

56. While these are factors to take into account, I am not persuaded that they weigh so heavily in favour of the plaintiffs. This is primarily for the reason that the plaintiffs delayed commencing proceedings for the recovery of monies based on an event of default that occurred many years ago and in respect of a loan which provides for payment by June 2024.

57. As for the second plaintiff, there is no evidence that he suffers from ill health and it is difficult to see how transferring these proceedings to the FCFCA and having the current claim resolved as part of the broader matrimonial property dispute, with the potential that he will not obtain judgment in his favour or such judgment will be delayed, would adversely impact his ability to carry out his estate planning.

58. Further, cross-vesting these proceedings does not necessarily commit the plaintiffs to the costs and time associated with representation throughout the entirety of the FCFCA Proceedings in which the defendant’s liability under the Loan Agreement is likely to be one of a number of issues to be determined by the FCFCA. If necessary, that issue could be heard and determined on an expediated basis as a separate issue or as part of the FCFCA’s consideration of the defendant’s indebtedness.

59. In my view, the following observations in Valceski v Valceski at [77] are apt in this case:

“… where strangers to a marriage use the occasion of its demise to assert a right against the property of one or other (or both) of the spouses, they cannot reasonably complain if they become entwined in the matrimonial dispute. Third parties who intervene in matrimonial disputes in this way – especially associates, such as parents and private companies, of one or other of the spouses – cannot complain if the dispute is treated as part of the larger matrimonial dispute which it normally is. Where third parties who assert rights against matrimonial property do so concurrently with pending matrimonial property proceedings, it will ordinarily be appropriate for those issues to be resolved in the matrimonial proceedings, and for the third party to join in those proceedings for that purpose, rather than to commence separate litigation, in another Court, which almost inevitably results in duplication of evidence, issues, time and costs.”

60. The relief sought by the plaintiffs in this case is limited to judgment and costs, and the applicant would not be bound by any issue estoppel if she is not joined to these proceedings. The plaintiffs have also proffered an undertaking not to enforce the judgment obtained in these proceedings until the earlier of: final orders being made in the FCFCA Proceedings; and 23 July 2024 (being the loan repayment date). In that context, and in circumstances where the defendant does not dispute his indebtedness to the plaintiffs, I acknowledge that there is some force to the plaintiffs’ submissions.

61. That said, and as Counsel for the plaintiffs accepted at the hearing, the FCFCA would be likely to consider the fact of a judgment in this Court to be a relevant factor and weigh against the applicant in the FCFCA’s determination of any argument that the applicant chose to deploy by way of challenge to the Loan Agreement or the defendant’s liability under it in the FCFCA Proceedings.

62. The applicant has also indicated that she wishes to be joined to these proceedings in the event the transfer application is not successful. By this, I understand the applicant to mean that she wishes to be joined in order to file a defence by way of challenge to the loan and the defendant’s liability under it, perhaps akin to pursuing a s 106B application in this Court. I do not consider that it would be desirable for those issues to be dealt with in separate proceedings in this Court, even assuming that the applicant has standing to do so.

63. Ultimately, the question of the defendant’s financial position, which is complex and involves a number of corporate entities, falls to be determined as part of the issue of the division of the matrimonial property in the FCFCA Proceedings. Having considered the submissions of the parties, and while finely balanced, for the reasons set out above, I have concluded that the FCFCA is the most appropriate forum for the determination of all issues touching on the question of the defendant’s liabilities and indebtedness to the plaintiffs under the Loan Agreement, and that it is in the interests of justice for these proceedings to be cross-vested and joined to the FCFCA Proceedings.

64. As to costs, the applicant seeks an order that the costs of her Notice of Motion be reserved for determination by the FCFCA or, in the alternative, that costs be reserved. I am satisfied that it is appropriate to make an order of that nature in the circumstances of this case, noting that s 12 of the NSW Cross-Vesting Act provides:

12   Orders as to costs

Where a proceeding is transferred or removed to a court, that court may make an order as to costs that relate to the conduct of the proceeding before the transfer or removal if those costs have not already been dealt with by another court.

65. For these reasons, I make the following orders:

1. Pursuant to s 5(1) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW), these proceedings be transferred to the Federal Circuit and Family Court of Australia (Division 1) and be joined to be heard together with proceedings SYC1747/2021 in that Court.

2. The costs of the parties in this Court and the applicant’s Notice of Motion filed on 20 April 2023 be reserved to the Federal Circuit and Family Court of Australia (Division 1).

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Decision last updated: 31 July 2023