Diakovasili v The Order of AHEPA NSW Incorporated

Applicable law 2 Section 5(4) of the Cross-Vesting Act relevantly provides: (4) Where: (a) a proceeding (in this subsection referred to as the relevant proceeding) is pending in the Federal Court or the Family Court (in this subsection referred to as the first court); and (b) it appears to the first court that: … (iii) it is otherwise in the interests of justice that the relevant proceeding be determined by the Supreme Court of a State or Territory; the first court shall transfer the relevant proceeding to that Supreme Court. 3 The considerations relevant to the transfer of proceedings from this Court were described by Derrington J in Shields v Williams [2019] FCA 413 at [5] to [6] (some citations omitted) in the following terms: The question calls for what might be described as "a 'nuts and bolts' management decision as to which court, in the pursuit of the interests of justice, is the more appropriate to hear and determine the substantive dispute": Bankinvest AG v Seabrook (1988) 14 NSWLR 711, 714… In respect of the question of the interests of justice, the applicant submits that this case qualifies for a transfer on the basis that it will reduce the costs of litigation, and because the parties consent, which is said to be an important factor… 4 In Federal Commissioner of Taxation v Residence Riverside Pty Ltd as Trustee for the D&J Discretionary Trust and as Trustee for the D&J Investment Trust [2013] FCA 720; 95 ATR 86 at [17] McKerracher J observed: In my view, ordinarily where cross-vesting transfer occurs, the factors in support of it would be obvious and a conclusion that the value judgment or decision about whether it is in the interests of justice for the proceeding to be dealt with in another court will be readily instinctive taking into account a variety of matters including: • the stage of the proceedings in the respective courts; • the commonality or diversity of the parties; • the nature of the proceedings; • the commonality or diversity of the issues; • the risk of conflicting findings of fact or conflicting orders; • a cost benefit analysis; • the potential unnecessary drain on judicial and other public and private resources; and • whether there is any particular judicial expertise residing in one court or the other.

Background 5 In the originating process, the plaintiff seeks, inter alia, an order pursuant to s 237 of the Corporations Act 2001 (Cth) granting the plaintiff leave to commence derivative proceedings on behalf of the defendant, declarations in respect of oppressive conduct under ss 232 and 233 of the Corporations Act, and that a receiver be appointed by the Court to the assets and undertakings of the defendant. 6 The defendant, the Order of AHEPA NSW Incorporated, is an association incorporated under the Associations Incorporations Act 2009 (NSW) (Associations Act). The plaintiff is a member of AHEPA. 7 Given the nature of this application, no submissions were addressed to the availability of relief under the Corporations Act in relation to AHEPA as an incorporated association. I note that although the Corporations Act does not, in its terms, apply to AHEPA, the effect of s 95(3)(a) of the Associations Act is that s 95(1) of the Associations Act does not apply to exclude the operation of Ch 2F of the Corporations Act in respect of the rights and remedies contained in ss 232, 233, 236 and 237 in the context of an incorporated association: Australian Federation of Islamic Councils Inc v United Muslims of New South Wales Inc [2021] NSWCA 311 at [73] (per Bathurst CJ, Bell P, and Meagher JA agreeing at [137] and [138] respectively). In the draft statement of claim in the proposed derivative proceedings, the plaintiff alleges, inter alia, various breaches of s 30A of the Associations Act, and breaches of various fiduciary obligations alleged to be owed by the defendants to AHEPA. The proposed first to ninth defendants in the proposed derivative proceedings are natural persons involved in the operation of AHEPA, including as members of a committee of the management of AHEPA. The proposed tenth defendant is a company, which is alleged to be an alter ego of one or more of the first to ninth defendants in the draft statement of claim. 8 Since 2015, there have been multiple proceedings commenced in the Supreme Court concerning AHEPA, its members, and other parties. There are presently two proceedings in the Supreme Court that involve AHEPA, both of which are before Black J in the Corporations List. Counsel for the defendant submitted that the litigation in the Supreme Court concerning AHEPA and the present proceedings arise from a dispute between two factions of AHEPA as to the proper construction of the rules governing AHEPA, and the manner in which AHEPA is being operated. The plaintiff in this proceeding is aligned with one of the factions, and the proposed first to ninth defendants in the proposed derivative proceeding are in the other faction. Although there is not a complete overlap between the identity of the parties in each of the extant proceedings, the proceedings broadly involve the two competing factions. Each faction is represented by the same solicitors in each of the extant proceedings. The protagonists from each faction in the respective proceedings are represented by the same firm of solicitors as for all other parties in the same faction. 9 In the extant Supreme Court proceedings, there is a concurrent timetable in place to bring the matters forward to hearing. In the present proceeding, neither the plaintiff nor the AHEPA has taken any substantive steps in the proceeding since the commencement of the proceeding on 1 September 2022.

Consideration 10 I am satisfied that it is in the interests of justice that this proceeding be heard and determined together with the extant proceedings in respect of AHEPA pending in the Supreme Court. Having regard to: (1) the procedural stage which the Supreme Court proceedings have reached compared to the nascent stage of the present proceedings; (2) the parties' mutual desire for the Court to transfer the proceedings for reasons of cost and efficiency; and (3) the risk of inconsistent judgments, I am satisfied that it is more appropriate for the Supreme Court to hear these proceedings and that to transfer the proceedings is in the interests of justice. 11 The proceedings in this Court, any future derivative proceeding (if leave is granted), and the proceedings in the Supreme Court (both past and pending) concern the proper construction of the rules governing AHEPA, in the context of a long-running factional division within AHEPA. The overlap in respect of the construction of AHEPA's governing rules in the present proceedings and the extant proceedings in the Supreme Court gives rise to a risk of inconsistent judgments between this Court and the Supreme Court if the proceedings are not transferred. 12 Finally, and for completeness, I note that the parties foreshadowed that if the proceedings are transferred they intend to approach Black J for directions. Noting the impending non-sitting period, and existing procedural timetables in the extant Supreme Court proceedings, it is my expectation that the parties will take steps to bring the proceedings before Black J promptly and before the last day of term.

Conclusion 13 For the reasons set out above, I made orders substantially in accordance with those sought by the parties. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman.