Talent v Official Trustee in Bankruptcy
[2019] ACTSC 274
•3 October 2019
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Talent v Official Trustee in Bankruptcy |
Citation: | [2019] ACTSC 274 |
Hearing Date: | 30 September 2019 |
DecisionDate: | 3 October 2019 |
Before: | Crowe AJ |
Decision: | See [27] |
Catchwords: | PRACTICE AND PROCEDURE – Cross-vesting legislation – application to transfer proceedings to the Federal Court – Family Provision Act claim – bankruptcy issue – whether the claim should be split to have the bankruptcy issue determined by the Federal Court – whether “special reasons” exist to allow the bankruptcy issue to be determined by the Supreme Court |
Legislation Cited: | Bankruptcy Act 1966 (Cth) ss 27, 33A, 54 Judiciary Act 1903 (Cth) s 39B Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) ss 3, 6 |
Cases Cited: | Adelaide Bank Limited v Phontos [2016] FCA 824 Computershare Ltd v Perpetual Registrars Ltd [No 3] [2000] VSC 286; 2 VR 666 Turner v Gorkowski [2014] VSCA 248; 46 VR 609 |
Texts cited: | Patrick Hall, ‘Matters arising: The interaction between cross-vesting and bankruptcy legislation’ (2019) 47 Australian Bar Review 300 |
Parties: | John James Talent (Plaintiff) Official Trustee in Bankruptcy (First Defendant) Nadia Joan Talent as Executor of the Estate of Joan Gwen Talent (Second Defendant) |
Representation: | Counsel T Crispin (Plaintiff) Z Rowling (First Defendant) R Patrick (Second Defendant) |
| Solicitors Ray Swift Moutrage and Associates (Plaintiff) Australian Government Solicitors (First Defendant) Gil-Jones Barker (Second Defendant) | |
File Number: | SC 414 of 2019 |
Crowe AJ
John James Talent (the plaintiff) is the son of the late Joan Gwen Talent. On
26 May 2000 he became bankrupt. It appears that by reason of his failure to provide a statement of affairs to the Official Receiver he remains an undischarged bankrupt. The plaintiff claims that due to irregularities in the way his bankruptcy has been handled, he should be discharged from bankruptcy.
The late Ms Talent died on 8 August 2018. She left a will pursuant to which she appointed her daughter (and the plaintiff’s sister), Nadia Joan Talent, as her executor and left the bulk of her estate to her (I will refer to her as the executor). Ms Talent did not leave anything to the plaintiff in her will.
By Originating Application dated 22 August 2019, the plaintiff commenced proceedings against the executor and also the Official Trustee in Bankruptcy (the Trustee). He sought relief pursuant to the Family Provisions Act 1969 (ACT) (Family Provisions Act) against the executor. In relation to the Trustee, he sought the following orders:
(1)A declaration to the effect that the bankruptcy of the plaintiff was discharged by no later than 26 May 2004.
(2)In the alternative to order 1:
(i)That the plaintiff file a Statement of Affairs pursuant to section 54 of the Bankruptcy Act 1966, forthwith; and
(ii)That pursuant to section 33A of the Bankruptcy Act 1966 that the Statement of Affairs in order 2.1 be treated as having been filed on
26 May 2004.
On 2 September 2019 the plaintiff sought interlocutory relief against the executor in relation to his accommodation. That application was returned before Mossop J on
6 September 2019, at which time orders were made by consent to preserve the situation in relation to the plaintiff’s accommodation for a time. These orders also set out a timetable for the filing of evidence. The matter was listed for further directions before the Deputy Registrar on 11 November 2019. His Honour noted that directions would be required in relation to the relief sought against the Trustee.
On 23 September 2019, the Trustee filed an Application in Proceeding (the application) seeking the following substantive orders:
(1)The Official Receiver be substituted as the first defendant in place of the Official Trustee in Bankruptcy
(2)The costs of the proceedings of the Official Trustee in Bankruptcy be the costs of the Official Receiver.
(3)The proceedings be transferred to the Federal Court of Australia pursuant to
s 6 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) and s 6 of the Jurisdiction of Courts (Cross-vesting) Act 1993 (ACT).
The application came before me for hearing on 30 September 2019.
In relation to order 1, Ms Rowling, who appeared for the Trustee, pointed out that the relief sought by the plaintiff in his Originating Application engaged the functions of the Official Receiver (see s 54(1) of the Bankruptcy Act 1966 (Cth))(the Bankruptcy Act). In that context, the Official Receiver is the appropriate person to respond to the plaintiff’s prayer for relief under the Bankruptcy Act.
Mr Crispin, who appeared for the plaintiff, did not oppose the joinder of the
Official Receiver. However, he contended that there was still a need for the Trustee to be a party. It was argued that this would ensure that the Trustee would be bound by any declaration which might be made should the plaintiff be successful in his Originating Application.
There was no real issue about order 2 as sought in the application. Moreover,
Mr Patrick, who appeared for the executor, did not oppose either order 1 or 2 as sought in the application.
As to order 3, Ms Rowling submitted that:
(1)Section 27 of the Bankruptcy Act, apart from some irrelevant exceptions, vests exclusive jurisdiction in relation to bankruptcy in the Federal Court of Australia and the Federal Circuit Court of Australia.
(2)By s 39B(1A)(c) of the Judiciary Act 1903 (Cth)(the Judiciary Act), the original jurisdiction of the Federal Court includes jurisdiction in any matter arising under any laws made by the Parliament, other than a matter in respect of which a criminal prosecution is instituted, or any other criminal matter.
(3)In sub-s 3(1)(e) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) (the Cross-vesting Act), a “special federal matter” is defined to mean (relevantly):
a matter that is within the original jurisdiction of the Federal Court by virtue of section 39B of the Judiciary Act 1903;
being a matter in respect of which the Supreme Court of a State or Territory would not, apart from this Act, have jurisdiction.
(4)The relief sought by the plaintiff in relation to his bankruptcy raises a “special federal matter” under the Cross-vesting Act.
(5)Subsections 6(1) and (1A) of the Cross-vesting Act require this Court to transfer to the Federal Court so much of the proceeding as is, in its opinion, within the jurisdiction (including the accrued jurisdiction) of that court.
Mr Crispin opposed the making of a transfer order. He argued that it would not be appropriate to transfer the Family Provision Act part of the litigation. To transfer the bankruptcy issue would lead to fragmentation of the matter with the associated potential for delay and extra costs for the parties. He submitted that the circumstances of the case here provided “special reasons” for rejecting the application for transfer.
Mr Patrick submitted that it would not be appropriate for the part of the litigation involving his client to be transferred to the Federal Court. She had no interest in the bankruptcy issues and would regard herself as bound by whatever decision the
Federal Court made, even though she was not a party to that proceeding.
Consideration
Subsections 6(1)-(6) of the Cross-vesting Act provide:
(1)If:
(a)a matter for determination in a proceeding that is pending in the Supreme Court of a State or Territory is a special federal matter; and
(b)the court does not make an order under subsection (3) in respect of the matter;
the court must transfer the proceeding in accordance with this section to the Federal Court or a court mentioned in paragraph (2)(b).
(1A)However, the court must only transfer so much of the proceeding as is, in the opinion of the court, within the jurisdiction (including the accrued jurisdiction) of the Federal Court, or the court mentioned in paragraph (2)(b), as the case may be.
(2)If the court orders that a proceeding or part of a proceeding be transferred, the proceeding or part of the proceeding must be transferred:
(a)if the matter for determination in the proceeding is a matter mentioned in paragraph (a), (b), (c) or (e) of the definition of special federal matter in subsection 3(1)—to the Federal Court; or
(b)if the matter for determination in the proceeding is a matter mentioned in paragraph (ab) of that definition—to whichever of the Family Court, the Family Court of Western Australia or the Supreme Court of the Northern Territory, in the opinion of the court, is appropriate in the circumstances.
(3)The Supreme Court may order that the proceeding be determined by that court if it is satisfied that there are special reasons for doing so in the particular circumstances of the proceeding other than reasons relevant to the convenience of the parties.
(4)Before making an order under subsection (3), the court must be satisfied that:
(a)a written notice specifying the nature of the special federal matter has been given to the Attorney‑General of the Commonwealth and the Attorney‑General of the State or Territory where the proceeding is pending; and
(b)a reasonable time has elapsed since the giving of the notice for the Attorneys‑General to consider whether submissions to the court should be made in relation to the proceeding.
(5)For the purposes of subsection (4), the court:
(a)may adjourn the proceeding for such time as the court thinks necessary and may make such order as to costs in relation to an adjournment as it thinks fit; and
(b)may direct a party to the proceeding to give a notice in accordance with that subsection.
(6)In considering whether there are special reasons for the purposes of subsection (3), the court must:
(a)have regard to the general rule that special federal matters should be heard by the Federal Court or a court mentioned in paragraph (2)(b), whichever is appropriate in the particular case; and
(b)take into account any submission made in relation to the proceeding by an Attorney‑General mentioned in subsection (4).
It is clear that the relief sought by the plaintiff in with respect to his bankruptcy relates directly to the application of provisions of the Bankruptcy Act. This Court does not, apart from power found in the cross-vesting legislation, have jurisdiction to determine it. I did not understand Mr Crispin to contend otherwise. Nor did I understand him to contest the proposition that the determination of the bankruptcy issue was a “special federal matter”.
The real question, thus, is whether there are special reasons, other than those relevant to the convenience of the parties, for not transferring the bankruptcy issues to the Federal Court. The background to the change in the law in this area is helpfully discussed by Patrick Hall in, ‘Matters arising: The interaction between cross-vesting and bankruptcy legislation’ (2019) 47 Australian Bar Review 300. The author makes a good case for the proposition that the addition of s 39B(1A) to the Judiciary Act by the Law and Justice Legislation Amendment Act 1997 (Cth) has had the unintended consequence of requiring State and Territory Supreme Courts to transfer to the Federal Court, or Federal Circuit Court, disputes which raise issues under the Bankruptcy Act which might be seen as peripheral to the equitable relief sought in the substantive claim. An example of such an outcome is Turner v Gorkowski [2014] VSCA 248;46 VR 609.
Be that as it may, the issue which arises here is whether the potential for fragmentation of the case provides, in all of the circumstances, a sufficient basis for making an order under s 6(3) of the Cross-vesting Act.
In Computershare Ltd v Perpetual Registrars Ltd [No 3] [2000] VSC 286; 2 VR 666, Warren J referred to s 6(2) of the Cross-vesting Act prior to its amendment by the Law and Justice Legislation Amendment Act (No.3) 1992 (Cth), which substituted the “special reasons” test. Prior to the amendment the subsection provided:
(2) The Supreme Court of a State or Territory shall not make an order under sub‑section (1) that the court determine a proceeding unless it appears to that Supreme Court that, by reason of the particular circumstances of the case -
(a)it is not appropriate that the proceeding be transferred to the Federal Court; and
(b)it is appropriate that that Supreme Court determine the proceeding.
In considering whether there were “special reasons” in the case before her, her Honour said (omitting footnotes):
[85] Even under the wording of the cross-vesting legislation, there was a high threshold of satisfaction before a Supreme Court should determine not to cross‑vest a proceeding. In NEC Information Systems Australia Pty Ltd v Iveson [40] at 268, Black CJ, Lockhart and Gummow JJ stated:
"The effect of subs (2) has been described (Griffith QC, Rose and Gageler, 'Further Aspects of the Cross‑vesting Scheme' (1988) 62 ALJ 1016 at 10.21) as follows…
'Implicit in this provision is a requirement for a high threshold of satisfaction before a State court determines not to transfer a proceeding to the Federal Court' The importance given by the parliament to the observance of the criteria in subs (2) is emphasised by the reservation by subs (6) of the Jurisdiction of the Supreme Court to grant interlocutory relief which is so urgent that it is in the interests justice to do so"
[86] In Nilsen Industrial Electronics Pty Ltd v National Semiconductor Corporation [41], Ormiston J (as he then was) considered the effect of the previous wording of the Commonwealth Act in circumstances in which a defendant claimed in reply that a contract was an "exclusionary provision" and so was unenforceable because of s.45 of the Trade Practices Act (similar, and more substantial, issues exist in this proceeding). His Honour held that:
"The disputes raised on the pleadings are of a kind commonly tried in that court [the Federal Court] and so I cannot conclude that it is inappropriate. There will be no obvious additional delay which will face the parties to the proceeding, nor any other serious inconvenience to them, even if that be relevant. Nor from my understanding of the action, is it practicable to hear the plaintiffs claim before and separately from the third party claims, even if I were entitled to defer consideration of this question or to transfer only the third party proceedings".
[87] More recent cases dealing with the "special reasons" wording recognise the intention of the legislatures that there is a stricter test for a Court to determine not to cross‑vest a special federal matter. In Pridmore v Magenta Nominees Pty Ltd [42] Scott J of the Supreme Court of Western Australia considered that, where a matter was appropriate for transfer to the Federal Court under the former wording of section 6 of the Commonwealth Act, "The position is strengthened by reason of the amendment and the need for the demonstration of 'special reasons'." In Re An Application for WMs of Certiorari and Mandamus against the Honourable Daryl Williams,[43] Anderson J of the Supreme Court of Western Australia also had occasion to consider the issue of "special reasons" and considered that the court:
" … should not make an order under s.6(3) that the proceedings be determined by this Court unless I have a high degree of satisfaction that there are special reasons for doing so";
it was not
" … possible to construe s.6(3) in a way that would require the transferring court to inquire at all into the merits of the proceeding (as distinct perhaps from its competence) in a search for 'special reasons'. To do so would be to retain and to exercise jurisdiction as to the merits, contrary to the main theme of s.6, which is that special federal matters are for the Federal Court to determine".
[88] The decision in Re Wakim does not lower the hurdle faced by a party endeavouring to satisfy the Court that there are "special reasons" as to why a proceeding should not be cross‑vested. In Telstra Corporation Ltd v CXA Communications Ltd [44], Chernov J (as he then was) had occasion to consider the present Commonwealth Act and whether "special issues" existed in circumstances in which Part IV of the Trade Practices Act issues were raised by way of defence. His Honour initially was minded to order that the proceeding not be cross‑vested to the Federal Court. After receiving submissions from the Attorney‑General, His Honour transferred the proceeding. Chernov J noted the principal factors submitted by the Attorney‑General as to why there were no "special reasons" for the Supreme Court to retain the proceeding as follows:
"(a) The Federal Court has created a list of specialist judges who hear and determine Part IV cases. This, it is said, is likely to increase the prospect of establishing a degree of uniformity in the interpretation of this special legislation which operates nationally. This would be best achieved generally by Part IV of the Trade Practices Act 1974 (Cth) being considered and its meaning determined by, judges specialising in the matter.
(b) The scheme of the legislation is that, generally, the Federal Court is to hear "special Federal matters" unless there are special reasons applicable to the particular proceeding justifying its retention in the State Court.
(c) The principal dispute between the parties will revolve around the 'special Federal matter', notwithstanding that general law claims are also raised by the parties. The proceeding it is said, is not one where the Part IV defence has been brought in as an afterthought, nor can its bona fide be properly attacked.
(d) Hanimex Pty Ltd v Foster (unreported) Debelle J, 26 March 1996, in which His Honour refused to cross vest the proceeding before him notwithstanding that it raised a "special Federal matter" can be readily distinguished from the present case because there, the question was not aired until approximately two years after the issue of proceedings, whereas here, the point was raised shortly after the proceeding was issued".
These considerations apply with their full force to the present case.
[89] Chernov J went on to state:
"In my view, the factor which is of significance in the resolution of the present question, is that the Federal Court is in a position to provide a means whereby a degree of uniformity in the interpretation of Part IV of the Trade Practices Act 1974 (Cth) could be achieved on a national basis. It is, I think, desirable to facilitate this object. It is in this context that the question, 'What are the special reasons why this court should deal with the matter', is to be considered."
... The question of whether there are any 'special reasons' why this Court should deal with the proceeding is to be considered against the background of the statutory intention to which I referred and the circumstances surrounding this case, including the policy of the Federal Court to provide a degree of uniformity in the interpretation of the relevant legislation."
... I take 'special reasons' to mean reasons which are peculiar to the case and not general reasons of convenience, a matter to which the legislation itself refers.
... In my view, in order for the reasons to be 'special', the circumstances of the case must be such as to take it out of the mainstream of the legislative intent that such cases be heard in the Federal Court."
[90] I am satisfied that I should adopt the same approach…
Although her Honour was dealing with a matter in which issues under Pt IV of the Trade Practices Act 1974 (Cth) were being considered, it seems to me that the principles discussed in the above extract are equally applicable to the circumstances of this case, where the plaintiff seeks relief under the Bankruptcy Act.
I was referred to the decision of Slattery J in James v James (No 2) [2019] NSWSC 116 (James), where his Honour decided that there were “special reasons” for making an order under s 6(3). His Honour said:
[97] Cross-vesting Act, s 6(4) (sic) presents something of a puzzle. Its qualification that the retention of the proceedings in this Court must be justified by “special reasons” that are “other than the convenience of the parties” does not suggest that the parties’ convenience is wholly irrelevant. Rather, the provision suggests that there must be some decisive factor telling against the transfer to federal jurisdiction, which is not the convenience of the parties. But a decision not to transfer may still be compatible with the convenience of the parties, provided that is not the sole basis for the decision not to transfer.
[98] The Cross-vesting Act does not itself attempt to define the term “special reasons” used in s 6(3). The term should not demand that the circumstances must be “extraordinary” or “unique”. In a different context, Brereton J (as his Honour then was) considered the meaning of the phrase “special circumstances in relation to an extension of time applications”: Henry v Hancock [2016] NSWSC 71. His Honour said (at [60]):
“The use of the formula “special circumstances” reflects an intention that judicial discretion not be confined by a list of relevant factors, by capturing circumstances of potential relevance which are so various as to defy precise definition. Circumstances are special if they are unusual, uncommon or exceptional in character, quality or degree; if they differ from the ordinary or the usual; or if they are particular or individual; but they need not be unique…”
His Honour referred to the special circumstances which he saw as important at [103]-[110]. Suffice to say that the circumstances in that case were very different from those present here.
Applying the “high threshold of satisfaction” required, I am not persuaded that the circumstances of this case constitute “special reasons”. I take account of the following:
(1)This case (unlike James) is in its infancy. There is no evidence to suggest that there will be any undue delay in the plaintiff obtaining a hearing in the Federal Court. It should therefore be possible for the plaintiff to pursue his Bankruptcy Act claim in that Court as a preliminary issue that must be determined before this Court can make finally determine his Family Provisions Act claim;
(2)The claim for relief under the Bankruptcy Act does, arguably, engage the specialist Bankruptcy jurisdiction of the Federal Court (unlike James);
(3)The Bankruptcy issue here is quite discrete from the Family Provision Act claim (again, unlike the circumstances in James).
(4)Mr Crispin relied on the decision of Robertson J in Adelaide Bank Limited v Phontos [2016] FCA 824 at paragraph [73], where his Honour said: “…a purpose of the Jurisdiction of Courts (Cross-vesting) Act is to prevent or minimise the fragmentation of civil processes between specified courts.” I agree with that comment. However, while it is preferable not to fragment proceedings between courts, the correct application of s 6 here makes that unavoidable, unless I order the transfer of the whole proceedings to the Federal Court.
The Trustee in the application seeks an order that “the proceedings” be transferred to the Federal Court. However, having regard to s 6(1A), I do not consider it to be appropriate that the Family Provision Act claim made by the plaintiff should be transferred. No party submitted that it should be. Indeed, I did not understand any of the parties to submit that the Family Provision Act claim would fall within the accrued jurisdiction of the Federal Court. That claim arises from an entirely different factual substratum to the bankruptcy matter.
In these circumstances, I consider that it is appropriate to grant the relief sought by the Trustee in orders (1) – (3) of its application. This transfer to the Federal Court should, however, be limited to that part of the proceedings in which the plaintiff seeks relief under the Bankruptcy Act. The effect of the transfer will be that the plaintiff must pursue his bankruptcy relief against the Official Receiver in the Federal Court. The executor will not be party to those proceedings. At the same time, the plaintiff will be able to pursue his Family Provision Act proceedings in this Court. The Official Receiver will not be party to those proceedings.
I do not see the need at this stage for the Trustee to remain a party to the bankruptcy proceedings. I will therefore make an order substituting, rather than adding, the Official Receiver as a party. If for some reason it becomes necessary to add the Trustee as a party again, this can be done after the matter has been transferred to the Federal Court.
I will hear the parties as to costs.
Orders of the Court
The orders of the Court are as follows:
(1)The Official Receiver be substituted as the First Defendant in place of the Official Trustee in Bankruptcy.
(2)The costs of the proceedings of the Official Trustee in Bankruptcy be the costs of the Official Receiver.
(3)The proceedings between the plaintiff and the Official Receiver in which the plaintiff seeks relief under the Bankruptcy Act 1966 (Cth) be transferred to the Federal Court of Australia.
(4)The question of the costs of the Application in Proceeding, filed 23 September 2019, is reserved.
| I certify that the preceding twenty-seven [27] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Acting Justice Crowe. Associate: Date: 3 October 2019 |
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