Wing And Anor and Cleeve (No 2)

[2010] FamCA 419

FAMILY COURT OF AUSTRALIA

WING AND ANOR & CLEEVE (NO. 2) [2010] FamCA 419

FAMILY LAW – JURISDICTION – Forum

APPLICANT

Application filed 2 November 2009:
RESPONDENT
Application filed 30 November 2009:

Mr Wing

RESPONDENT: Ms Cleeve

APPLICANT

Application filed 30 November 2009:

Mr Chiu

INTERVENER
Application filed 23 April 2010
TRUSTEE IN BANKRUPTCY: Mr L

FILE NUMBER: SYC 3599 of 2008

DATE DELIVERED: 26 May 2010

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Cohen J

HEARING DATE: 27 April 2010.

REPRESENTATION

COUNSEL FOR MR CHIU: Mr Tregenza

SOLICITOR FOR MR CHIU: Austin Haworth & Lexon Legal

COUNSEL FOR THE HUSBAND: Mr Morahan

SOLICITOR FOR THE HUSBAND: Zhang Shijing Lawyers

THE WIFE: In Person

COUNSEL FOR TRUSTEE IN BANKRUPTCY: Mr Johnson

SOLICITOR FOR TRUSTEE IN BANKRUPTCY: Tresscox Lawyers

Orders

1. That the application of Mr Chiu filed 30 November 2009 is hereby dismissed.

2. That the application of Mr Wing filed 2 November 2009 is hereby dismissed.

3. That the application of the Official Trustee filed 23 April 2010 is hereby granted.

IT IS NOTED that publication of this judgment under the pseudonym Wing and Anor & Cleeve is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 3599 of 2008

MR CHIU

Applicant/Respondent

and

MR WING

Husband

and

MS CLEEVE

Wife

and

MR L

Trustee in Bankruptcy

REASONS FOR JUDGMENT

1. There are three matters currently before me, all the result of Applications in a Case. In order of their dates of filing, they are;

   (a) An application filed on 2 November 2000 by the husband to transfer the principal proceedings; that is the husband’s s79 claim to the Supreme Court of New South Wales.

   (b) An application filed on 30 November 2009 of Mr Chiu, the wife’s brother, to be joined in the s79 proceedings and to transfer those proceedings to the Supreme Court of New South Wales. Mr Chiu also seeks specified final orders which I shall refer to below.

   (c) An application filed on 23 April 2010 of Mr L, the trustee of the wife’s bankrupt estate, to become a party in the s79 proceedings.

2. The germane facts are not extensive. The parties divorced on 19 August 2008, the husband commenced the s79 proceedings on 12 September 2008. The parties had been married in 2006 and separated on 29 April 2006. They have no children. Pursuant to s79, the most relevant orders the husband sought are the sale of the former matrimonial home at T for not less than $3million and the payment to him of $1.5million of the proceeds of sale and another payment of $250,000.00. He conceded that the wife should keep the balance of the proceeds of sale of the T property as well as properties at R, S and M, the shares in her company, her superannuation, two cars and her personal effects. The wife’s response was to ask for the dismissal of all the husbands claim and for an order that the husband indemnify her for any judgment against her that her brother, Mr Chiu; might obtain in proceedings no…. in the Equity Division of the Supreme Court of New South Wales.

3. Mr Chiu had sued the wife and the husband in the Equity Division. In May 2009, he obtained judgement against the wife for more than $6.6million and for an additional US$512,110.00 and for sale of the T property, so far as net proceeds would permit and meet the judgement debt. The wife was also required to pay Mr Chiu’s costs. Mr Chiu failed in his claim against the husband. He appealed from this failure but also failed on the appeal.

4. In another aspect of the proceedings in the Equity Division, Mr Chiu applied for an order to remove a caveat the husband had lodged over the T property on 11 June. On the 22 September 2009, the Equity Division ordered the lifting of the caveat on Mr Chiu lodging with the Court, from the proceeds of sale of that land, such sum up to a maximum of $400,000 received from the sale after discharging the bank mortgage. This was so much of the proceeds of sale to be sufficient to meet a claim against the wife by the husband if such a claim were to succeed. The requirement of lodgement was conditional on the husband giving an undertaking as to damages.  The husband’s claim had been for part of the value of the T property on the basis that he had contributed to the cost of its purchase and was entitled in Equity to a transfer of an interest in it as well as a s79 claim. It was recognised that both Mr Chiu and the wife could also claim all or part of this $400,000 in the s79 proceedings.

5. In the course of giving his judgement in this matter, the Supreme Court judge suggested there would be economies in the use of judicial time if the s79 and equitable claims of the husband were resolved in the Supreme Court, Equity Division, because a large part of the issues were already known to that Court. Presumably, his Honour was suggesting that he should hear these proceedings. It is because of his Honour’s suggestion that the husband and Mr Chiu have made the Applications of 2 November 2009 and 30 November 2009.

6. The wife filed a Debtors Petition on 1 March 2010 and thereby became bankrupt on that date. Her disclosed debts amount to about $7.35million. All her significant property has vested in the Trustee in Bankruptcy except her superannuation which, although regarded as property for the purposes of s79, is not available for division among the wife’s creditors under the Bankruptcy Act 1966. There is about $65,000.00 in superannuation.

7. In his financial statement of 12 September 2008, the husband claims to have substantial property. He said he has property in his name which he does not identify worth $1.9million and a 50% interest in property which is wholly held in the wife’s name; the T property of which he says his equitable interest is worth $1.6million. He also claims equitable interests in the wife’s car, in the shares in the wife’s business which is held by her company and in the home contents. These interests are said to be worth $270,000 to the husband. Of course, there is now the $400,000 held in the Supreme Court and the wife’s superannuation which could be subject to the husbands s79 claim. According to the Trustee of the wife’s bankrupt estate, the wife will get nothing after the administration of the bankruptcy except what is given to her from the superannuation under s79. Any other receipts will be claimed by her creditors. Thus, the trustee has a real financial interest in the s79 proceedings. In my opinion, he should therefore be joined as a party. The wife still has a real financial interest in these proceedings in that the husband is entitled to claim some of her superannuation.

8. The husbands claim to an equitable estate in the T property has not been decided in the Supreme Court. Thus, there are proceedings in that Court to which the s79 proceedings in the Family Court could be transferred. One must ask however, “From where does the power in the Family Court to transfer the proceedings come?” and “Does the Supreme Court have jurisdiction to hear such proceedings?”

9. One might, after some consideration, conclude that the Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW) and Jurisdiction of Courts (Cross- Vesting) Act 1987 (Cth) would provide both the power and the jurisdiction. There is doubt, because of Re Wakim; Ex parte McNally (1999)198CLR511, that the Commonwealth, by legislation, can confer federal jurisdiction on a state court. By s4 of the Commonwealth cross-vesting act, where the Family Court has jurisdiction with respect to a civil matter and the Supreme Court of a State would not otherwise have jurisdiction, that Supreme Court has jurisdiction in the matter. By the NSW cross-vesting act, s5(4), where a proceeding is pending in the Family Court of Australia and it appears to that Court that it is more appropriate that the proceedings be determined in the NSW Supreme Court, provided the Family Court has come to its decision on appropriateness having regard to whether the proceedings or a substantial part of them would have been capable of being instituted in the Supreme Court of NSW were it not for the State or Commonwealth cross-vesting legislation and subject to other matters to be considered in Court in reaching this decision, the Family Court shall transfer the relevant proceedings to the Supreme Court.

10. One is forced to consider the constitutional position on whether, by state legislation, the Family Court can be required to transfer matters within the jurisdiction of the Family Court. I am very dubious that s5(4) of the State cross- vesting act is valid. One could easily accept a provision giving power to the State Court to accept a transfer, but not one allowing or requiring the Family Court to make a transfer. This is a matter only within the domain of Commonwealth Statute or the Family Court itself.  

11. Nevertheless, s39(5)(s), Family Law Act has invested the Supreme Court of New South Wales with Federal jurisdiction over matrimonial cases instituted under that Act subject to the balance of Part V of the Act. Also in Part V is s40. Subsection (3) of that section permits the Governor General, by proclamation, to fix a date on and after which matrimonial causes may not be transferred to the New South Wales Supreme Court. S39 was introduced into the Family Law Act as a substitute for a different s39 in 1983. After that introduction, a proclamation which was made on 23 November 1983 fixed 25 November 1983 as the date on and after which proceedings that are a matrimonial cause as specified in s39(5)(a) of the Family Law Act may not be transferred to the Supreme Court of New South Wales. The proclamation was published in the Gazette on 24 November 1983. This legislation seems to me to be more specific in its application to these proceedings than any cross vesting legislation is. In these proceedings it appears to prevail over the cross-vesting legislation.

12. The above seems to me to provide a highly arguable case that the Court cannot transfer to the Supreme Court. These matters were neither argued nor adverted to at the hearing of the applications. Unfortunately, the modest sum which, at best, would be available to the parties in s79 proceedings makes these applications quite unsuitable for exploration of the arguments which one would expect to be advanced if the issues were to be fully explored. Without making any finding on the correctness of the arguments , I am satisfied that the safe course; that is, the course which provides certain jurisdiction for the s79 proceedings between the husband, wife and official trustee, is to refuse to transfer the proceedings to the New South Wales Supreme Court. As the Supreme Court does not have Bankruptcy jurisdiction, there is an additional benefit in this course. The Family Court has such jurisdiction in the circumstances here. It can therefore make orders under the Bankruptcy Act if they become needed, if it is more convenient or appropriate to the parties to approach this Court.

13. Mr Chiu, in view of the bankruptcy of the wife and the sale of the land and realisation of the secured part of her debt in his favour, no longer has any right over the balance of the proceeds of sale of the land at T as against the husband. Mr Chiu’s rights are now as an unsecured creditor for the balance of the wife’s debt to him. The husband may have rights as against Mr Chiu and the official trustee. He asserts the T property is in 50% his property in Equity because he provided funds for its purchase. The proceedings in which he asserts this right to proceeds of sale of this land against Mr Chiu are in the Supreme Court but they are incidental to the s79 proceedings because they will affect the quantum of the husband’s property. They could, under the Family Courts’ incidental power, be heard conveniently in the Family Court if the parties choose to discontinue the Supreme Court proceedings. If they do not, it will not cause any significant injustice for the s79 proceedings to be delayed pending the outcome of the Supreme Court action. Any claim of the husband for further proceeds of sale of the T land against the Official Trustee could, on my understanding, be brought in the Supreme Court in the same proceedings as those between himself and Mr Chiu or in the Family Court as part of the s.79 proceedings because they are clearly incidental to them. Because the husband could pursue his claim for an equitable interest in the proceeds of sale of the T land in the Family Court, Mr Chiu could become a party to the s79 proceeds.

14. As the husband has not to date made such a claim in the Family Court there is, at the present stage of the s79 proceedings, no basis for making Mr Chiu a party to them. At present, the Official Trustee has the duty to protect the rights of the wife’s creditors, including Mr Chiu. There is no suggestion by Mr Chiu that he has failed or might fail in this duty. Thus, it is not now appropriate to permit Mr Chiu to become a party to the s79 action because he is a creditor of the wife and because the husband has claimed a beneficial interest in equity as to the T property.

15. Thus, I shall dismiss both the application to transfer the s79 proceedings to the Supreme Court of New South Wales and Mr Chiu’s application to become a party in the s79 proceedings and grant the Official Trustee’s application to become a party in the s79 proceedings.

I certify that the preceding fifteen (15) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cohen

Associate:     

Date:              26 May 2010