These proceedings were commenced by Statement of Claim filed on 27 September 2016. The plaintiffs seek monetary judgments against Matthew Zillman and their daughter, Emma Zillman, for money claimed to be owing under a loan, and an order for the sale of a property in Turramurra, over which the plaintiffs hold an unregistered mortgage. The plaintiffs assert that, under the terms of the mortgage, the principal sum (and interest) is due and payable. They assert that a "repayment date" has arisen because Matthew Zillman and Emma Zillman, who are married to each other, have separated and continuously lived apart for at least 12 months.
Matthew Zillman has filed a Defence in which he denies that the principal sum (and interest) is thus due and payable. He further asserts that the principal sum has been repaid and, in the alternative, says that certain provisions of the loan agreement are void or unenforceable as penalties or due to uncertainty. He also filed a cross-claim, in which relief under the Contracts Review Act 1980 (NSW) is sought to declare void, in part, certain provisions of the loan agreement, and to vary certain provisions of the loan agreement.
Burman v Zillman [2017] NSWSC 229 | Case summary | Zoe
It seems that Emma Zillman does not seek to defend the proceedings.
In a Reply filed by the plaintiffs they assert that certain payments made to them by Emma Zillman were not repayments of the loan but were rather voluntary returns of dividends and, effectively, gifts to the plaintiffs.
By a Notice of Motion filed on 2 December 2016, Matthew Zillman seeks an order pursuant to s 5(1) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) that the proceedings be transferred to the Family Court of Australia, Sydney Registry.
On 1 September 2016, shortly prior to the commencement of these proceedings, Matthew Zillman commenced proceedings in the Family Court against Emma Zillman and the plaintiffs. In those proceedings, he seeks various orders in respect of property, including the Turramurra property. In particular, he seeks an order that the plaintiffs withdraw a caveat that they have lodged against the title to the Turramurra property and orders for the sale of the property and distribution of the proceeds of the sale in a particular manner. In essence, he seeks an order that the net proceeds of sale, after payment of expenses and the amount due to a registered mortgagee, be paid to himself and Emma Zillman equally; that is, no amount would be paid to the plaintiffs.
In response, in those proceedings, the plaintiffs and Emma Zillman contend that the amount owing to the plaintiffs under their mortgage should be paid out of the proceeds of any sale before any distribution to Matthew or Emma Zillman. The plaintiffs contend that their caveat should only be removed upon the payment of the debt they claim is owing to them. Emma Zillman further contends that any distribution to herself and Matthew Zillman should be on the basis of 65 per cent to herself and 35 per cent to him.
Section 5(1) of the Jurisdiction of Courts (Cross-Vesting) Act relevantly provides:
(1) Where:
(a) a proceeding (in this subsection referred to as the relevant proceeding) is pending in the Supreme Court of a State or Territory (in this subsection referred to as the first court); and
(b) it appears to the first court that:
(i) the relevant proceeding arises out of, or is related to, another proceeding pending in the Federal Court or the Family Court and it is more appropriate that the relevant proceeding be determined by the Federal Court or the Family Court;
(ii) having regard to:
(A) whether, in the opinion of the first court, apart from this Act and any law of a State relating to cross-vesting of jurisdiction and apart from any accrued jurisdiction of the Federal Court or the Family Court, the relevant proceeding or a substantial part of the relevant proceeding would have been incapable of being instituted in the first court and capable of being instituted in the Federal Court or the Family Court;
(B) the extent to which, in the opinion of the first 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 first court apart from this Act and any law of a 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 Family Court, as the case may be; or
(iii) it is otherwise in the interests of justice that the relevant proceeding be determined by the Federal Court or the Family Court;
the first court shall transfer the relevant proceeding to the Federal Court or the Family Court, as the case may be.
It is obvious that s 5(1)(a) is satisfied by the proceedings pending in this Court.
As for s 5(1)(b), Matthew Zillman relies particularly upon s 5(1)(b)(ii)(C) and submits that, having regard to the interests of justice, it is more appropriate for the proceedings in this Court to be determined by the Family Court, hence this Court should transfer the proceedings to that Court. Matthew Zillman submits that there is no particular forensic or procedural advantage to either party in the proceedings remaining in this Court, as the issues could be determined equally well in the Family Court and without any geographical or other inconvenience to anyone. He further submits that there would be a significant disadvantage to all parties, in terms of the duplication of proceedings, if the transfer were not made. It is submitted that a transfer would avoid duplication and, in addition, avoid the risk of inconsistent findings (including possibly as to credit) in the two courts. Matthew Zillman further contends that the Family Court is the more appropriate court because only it can resolve the whole justiciable controversy between the parties, and because the proceedings were commenced there first in time and some interlocutory steps have already taken place. Finally, Matthew Zillman submits that the Supreme Court proceedings themselves arise in the context of the marriage, in particular the breakdown of the marriage, between Matthew and Emma Zillman.
The plaintiffs oppose transfer of the proceedings. They submit that it is seriously arguable that the Family Court does not (or would not) have jurisdiction to determine the issues in the proceedings and, accordingly, it should not be regarded as a more appropriate forum for such determination. It is submitted that the claims in these proceedings do not form part of a single justiciable controversy with the claims in the Family Court proceedings. It is thus contended that the Family Court would not or at least might not have accrued jurisdiction to determine the claims made in these proceedings. The plaintiffs further submit that a transfer is not in the interests of justice because:
1. there can be no final determination of the Family Court proceedings until the matters in these proceedings are determined;
2. such determination is likely to occur in this Court before any hearing takes place in the Family Court; and
3. a judgment obtained in this Court can then be adopted in the Family Court and will assist in narrowing the issues in the Family Court proceedings.
It was emphasised that there is no suggestion that it is in any way inappropriate for this Court to determine the issues in the proceedings before it and, if this Court determined the proceedings, issue estoppels would arise in relation to the rights of the parties to the mortgage, and those issues would thus fall away from the Family Court proceedings. The plaintiffs would thereby be largely spared from having to be involved in the Family Court proceedings, which contain many issues about which they have no, or little, concern.
Turning to s 5(1)(b)(ii), there are three matters the Court is to have regard to, as set out in sub-paragraphs (A), (B) and (C). As to (A), it seems to me that, apart from the matters mentioned, no part of the proceedings in this Court would have been incapable of being instituted in this Court and capable of being instituted in the Family Court. This should be regarded as a factor in favour of this Court as the more appropriate court for the determination of the proceedings.
As to (B), it seems to me that the matters for determination in the proceedings are not matters that arise under or involve questions as to the application, interpretation or validity of any law of the Commonwealth, and are not matters that are not within the jurisdiction of this Court apart from laws relating to cross-vesting of jurisdiction. This should also be regarded as a factor in favour of this Court as the more appropriate court for the determination of the proceedings.
As to (C), which was the focus of the submissions of the parties, the first question is whether it is seriously arguable that the Family Court would not have jurisdiction to determine the issues in the proceedings if they were transferred to that Court. In essence, this question turns upon whether the Family Court would have accrued jurisdiction to determine those issues.
It is accepted that the Family Court has jurisdiction pursuant to s 31 of the Family Law Act 1975 (Cth) by reason of the institution of the proceedings in that Court. The proceedings commenced in the Family Court are a matrimonial cause under the Family Law Act. Orders are sought under s 79 of that Act for financial adjustment in respect of the property of the parties to the marriage. That property includes the Turramurra property.
Under s 31(1) of the Family Law Act, jurisdiction is conferred upon the Family Court with respect to matters arising under the Act in respect of which matrimonial causes are instituted under the Act, and also with respect to matters (not otherwise referred to in the sub-section) with respect to which proceedings may be instituted in the Court under the Family Law Act. The jurisdiction so conferred upon the Family Court, in respect of the "matter" that arises under federal law, extends to authority to determine the whole "matter". That is to say, the whole of the justiciable controversy between the parties, even where the justiciable controversy involves non-federal aspects (see Valceski v Valceski (2007) 70 NSWLR 36; [2007] NSWSC 440 at [39] and [59]). The jurisdiction to determine those non-Federal aspects is referred to as accrued jurisdiction.
The proceedings in the Family Court involve determining the extent of any interest which either matrimonial party has in the property vis-à-vis a third party, and whether a matrimonial party is indebted to a third party (see Valceski v Valceski (supra) at [28] and [64]). There is thus a considerable overlap between the issues to be determined in the Family Court proceedings and the issues to be determined in the Supreme Court proceedings, which concern the extent of the plaintiffs' rights as mortgagees in respect of the Turramurra property and as lenders to the matrimonial parties.
Moreover, it is in my view clear that those issues form part of a single justiciable controversy between the parties. The federal and non-federal aspects of the controversy arise out of common transactions and facts, in particular the acquisition of the Turramurra property by the matrimonial parties using mortgage finance provided by the plaintiffs. Further, the different claims of the parties in relation to that property are so related that determination of one is essential for the determination of the other. That is effectively conceded in the plaintiffs' submission that there can be no final determination of the Family Court proceedings until the matters in the Supreme Court proceedings are determined. Finally, it is in my view clear that if the proceedings were determined in different courts there could be conflicting findings (possibly as to credit) made on the issues that are common to, or overlap between, the two proceedings, subject of course to the possibility that issue estoppels may arise. By way of example, this risk exists in relation to the issues concerning the circumstances in which payments were made by Emma Zillman to the plaintiffs, and the characterisation of such payments. It also exists in relation to the issues concerning the circumstances in which the mortgage was entered into at the time of the acquisition of the Turramurra property.
In my opinion, the issues to be decided in the proceedings plainly form part of a single justiciable controversy between the parties concerning the Turramurra property. I do not think that it is seriously arguable that the Family Court would not have accrued jurisdiction to determine the issues in these proceedings if these proceedings are transferred to it. That being so, I accept the submission of Matthew Zillman that the Family Court can determine all of the issues that arise in the proceedings pending in this Court.
I consider that it would be undesirable for the parties to remain in two separate and significantly overlapping proceedings. The duplication would very likely lead to additional costs for all parties (but perhaps most of all for Matthew Zillman) and would give rise to the risk of conflicting findings that I have already referred to.
It is apposite to refer to the observations made by White J in Vaughan v Frost [2010] NSWSC 492 at [11]-[13] in this regard. His Honour there said:
It is almost always preferable that a controversy be determined in a single proceeding to avoid potentially conflicting findings and ultimately to reduce the costs for all parties.
The plaintiffs say that their costs will be increased if they are compelled to participate in the wider matrimonial cause in the Family Court. That is so partly because the proceedings between the defendants will raise issues with which the plaintiffs are not concerned, and also because even issues concerning the property of which they claim beneficial ownership will be dealt with in ways which the plaintiffs say will increase costs. In particular, valuations of the properties in question will be required in the Family Court, whereas such valuations would be irrelevant to their claim to be the beneficial owner of the property.
However, when the position of all parties is taken into account the general principle is, and experience teaches, that a single proceeding dealing with all issues is likely to minimise the overall burden of costs for all parties. If proceedings continue separately the defendants will be required to incur costs on matters of which there will be duplication.
As to the suggestion that the proceedings should be heard in this Court in advance of the Family Court proceedings, it is apposite to refer to his Honour's further observations made in Vaughan v Frost (supra) at [14]-[16]:
In saying that findings in this Court will create issue estoppels binding on all parties, I proceed on the assumption that if the present proceedings were not transferred, it is likely that the proceedings will be heard and determined before the Family Court proceedings. The evidence on this application suggests that that is very likely to be the position, unless orders were made by the Family Court restraining the plaintiffs from continuing with these proceedings.
In Valceski v Valceski, Brereton J said (at [76]) that it is usually inappropriate, if not vexatious, that the same issues be litigated in two different courts, and the fact that one court can resolve the whole of a controversy and the other cannot will usually indicate that the former is the more appropriate court.
If the current suit is not transferred but proceeds in this Court, the likely result is that the hearing of the proceeding in the Family Court will have to await the determination of issues in this Court including the determination of any appeal.
It may well be that transferring the proceedings to the Family Court will have the effect of delaying, to some extent, the determination of the plaintiffs' claims. It will also mean that the plaintiffs will need to participate in proceedings which contain a number of issues about which they have little or no concern. However, I do not regard these matters to be of great weight given that the loan and mortgage transaction was itself entered into in the context of the marriage between Matthew and Emma Zillman. That is reflected in the very term of the mortgage relied upon by the plaintiffs, which provides that the principal sum is repayable upon "the permanent separation (within the meaning of s 48 of the Family Law Act 1975) or divorce of Matthew Zillman and Emma Zillman". In these circumstances, the plaintiffs cannot reasonably complain that they have later become entwined in the broader matrimonial dispute between the parties to the marriage (see Valceski v Valceski (supra) at [77]).
Taking all of the circumstances into account, I consider that the interests of justice would be best served by having all of the issues between the parties determined in one proceeding in the one court. No party suggests that the Family Court proceedings should be transferred to this Court. In my view, the interests of justice are firmly in favour of the Family Court as the more appropriate court for the determination of the proceedings. Having regard to each of the three matters referred to in s 5(1)(b)(ii), I have come to the conclusion that it is more appropriate that the proceedings in this Court be determined by the Family Court. I would reach the same conclusion under s 5(1)(b)(iii), but it is not necessary to do so.
It follows that the Court is obliged to transfer the proceedings to the Family Court. The Court will make orders 1, 2 and 3 as sought in the Notice of Motion.
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Decision last updated: 10 March 2017