Solicitors:
Ashurst Australia (Plaintiffs and Third and Fourth Defendants)
Automic Group* (First Defendant)
* The first defendant's legal representatives ceased acting on 19 November 2019
File Number(s): 2018/00196981
[2]
Judgment - Ex Tempore
The third plaintiff, Jianqiang Wang, brings these proceedings on behalf of the first plaintiff, Jin Niu Investments Pty Ltd, so as to facilitate the prosecution of various claims arising out of alleged breaches of a joint venture agreement between Mr Wang and the first and second defendants, Christine Wang and Ping Li, and the misappropriation of funds by Ms Wang and Ms Li.
On the Friday before the ten-day final hearing of the proceedings was scheduled to start, the first defendant, Ms Wang, was declared bankrupt and Barry Taylor was appointed the trustee in bankruptcy of her estate.
The proceedings were adjourned to enable the plaintiffs to obtain leave from the Federal Court, pursuant to s 58(3) of the Bankruptcy Act 1966 (Cth), to continue the proceedings. Justice Jagot granted leave to do so on 18 November 2019.
Before me this morning was a notice of motion dated 20 November 2019 filed by the plaintiffs seeking an order pursuant to s 6(3) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) that the proceedings be determined by this Court. After receiving submissions from the plaintiffs I indicated that I would make the orders sought in the notice of motion and give my reasons later in the day. These are my reasons.
Pursuant to s 6(1) of the Cross-Vesting Act, if 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 the Court does not make an order that the proceedings be determined by that Court under s 6(3), the Court must transfer the proceeding to the Federal Court.
Section 6(3) of the Cross-Vesting Act provides that the Supreme Court may order that a 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.
Before making an order under s 6(3), the Court must be satisfied that written notice specifying the nature of the special federal matter has been given to the Attorneys-General of the Commonwealth and the relevant State and that a reasonable time has elapsed since the giving of that notice for the Attorneys-General to consider whether submissions to the Court should be made in relation to the proceeding: s 6(4) of the Cross-Vesting Act.
The plaintiffs sent notices under s 6(4) of the Cross-Vesting Act to the NSW Attorney-General and the Commonwealth Attorney-General on 18 November 2019.
By letters dated 22 and 25 November 2019 the Attorneys-General have advised that they do not intend to make any submissions in relation to the proceedings.
I am, therefore, satisfied that the requirements of s 6(4) of the Cross-Vesting Act have been met.
The next issue raised by the notice of motion is whether the proceedings involve a special federal matter within the meaning of s 3(1)(e) of the Cross-Vesting Act.
Senior Counsel for the plaintiffs submits that, while not beyond doubt, the better view is that the present case is a special federal matter, as the relief sought will have a necessary adverse effect on the title of the trustee in bankruptcy to Ms Wang's estate.
In Truthful Endeavour Pty Ltd v Condon (2015) 233 FCR 174 the Full Court of the Federal Court held that a "controversy or matter manifested by a proceeding regarding beneficial ownership of property (by reference to equitable principles) claimed by a trustee in bankruptcy by force of ss 58(1) and 116(1) of the Bankruptcy Act is:
1. a matter in bankruptcy;
2. a matter arising under the law of the parliament for the purposes of s 39B(1A)(c) of the Judiciary Act 1903 (Cth);
3. a matter in respect of which the Supreme Court of the State or Territory would not, apart from the Cross-Vesting Act, have jurisdiction for the purposes of the definition of 'special federal matter'; and
4. by reason of (a) to (c) above, a special federal matter.
In Truthful Endeavour Pty Ltd v Condon (2015) 233 FCR 174, the respondent to the claim was a trustee of the bankrupt's estate and the proceedings were commenced after the appointment of the trustee in bankruptcy. The plaintiff has sought declaratory relief on the basis that the trustee in bankruptcy held his interest on trust for her.
The possibility of doubt that these proceedings involve a special Federal matter arises because Ms Wang's trustee in bankruptcy, Mr Taylor, is not a party to the proceedings and no claim is advance directly by or against him.
In Jakimowicz v Jax [2016] VSCA 42, the Victorian Court of Appeal, when considering an issue of standing by a bankrupt to prosecute a claim, concluded that the Court was not exercising jurisdiction in bankruptcy where the trustee had made no claim to the property and did not claim that the cause of action had vested in them. This was because the Court was not determining for or against the title of the trustee to the property as it must, of necessity, do so if the trustee was a party and makes a claim to the property or if the trustee claims the right to bring the action instead of the bankrupt (at [49] to [51]).
The trustee in bankruptcy in this case is on notice of the claims made but has indicated that he is not yet in a position to make a decision as to his joinder. He accepts that should there be a finding of trust against Ms Wang's property then s 116(2)(a) of the Bankruptcy Act would take that property out of the bankruptcy and that any finding as to an account or quantum of debt or damages due would be provable under s 68 of the Bankruptcy Act. He also accepts that he does not need to be joined to these proceedings in relation to proof of any of those matters.
Section 116(2) of the Bankruptcy Act provides that s 116(1) (which identifies the property devisable amongst the creditors of a bankrupt) does not extend to property held by the bankrupt in trust for another person.
These proceedings involve claims by the plaintiffs that property in the name of Ms Wang is held on trust for them. If the plaintiffs succeed with those claims the relevant property will, therefore, be outside the scope of Ms Wang's bankruptcy. The proceedings also involve claims of breaches of a joint venture agreement, misappropriated funds, breaches of directors' duties and seek relief in the nature of damages and equitable compensation. Some of those claims, if successful, may need to be proved in Ms Wang's bankruptcy.
It follows that these proceedings involve claims which are likely to impact upon the extent of the property which vests in Mr Taylor as Ms Wang's trustee in bankruptcy under s 58(1) of the Bankruptcy Act and which is thus available to be distributed amongst creditors under s 116(1). Hence, the proceedings are likely to have an adverse effect on the title of the trustee and engage the jurisdiction in bankruptcy within the meaning of s 27 of the Bankruptcy Act: see Mateljan v HTT Huntley Heritage Pty Ltd [2016] NSWCA 20, at [26].
I am, therefore, persuaded by the submissions of senior counsel for the plaintiffs that the Court should approach this matter on the basis that the proceedings involve a special federal matter.
The remaining issue is whether there are special reasons for this Court to determine the proceedings rather than have them transferred to the Federal Court.
In considering whether there are special reasons, the Court must have regard to the general rule that special federal matters should be heard by the Federal Court and take into account any submissions made by the Attorneys-General: s 6(6) of the Cross-Vesting Act.
As noted above, the Attorneys-General has stated that they do not wish to be heard on the present application.
I am not persuaded that the general rule that special federal matters should be heard in the Federal Court should prevail over the special reasons which, in my view, exist in this case and justify the proceedings being determined in this Court.
Special reasons do not require extraordinary or unique circumstances to exist, rather there must be some matter which is unusual, uncommon or of an exceptional character, quality or degree and which differs from the ordinary or usual: James & Ors v James (No. 2) [2019] NSWSC 116 at [98]; Henry v Hancock [2016] NSWSC 71 at [60].
The convenience of the parties, while not the determining factor, is not a matter which is excluded from the Court's consideration of whether there are special reasons that justify the proceedings being heard in the Supreme Court: James & Ors v James (No. 2) [2019] NSWSC 116 at [97]; Preston v Diaspora Holdings Pty Ltd; Diaspora Holdings Pty Ltd v Owners Corporation of SP 68608 [2019] NSWSC 651; Montgomery v Porter [2019] NSWSC 1524.
It has also been recognised that issues of costs and delay can amount to special reasons and are not matters which are purely matters of convenience to the parties: Montgomery v Porter [2019] NSWSC 1524, at [60] and [65].
These proceedings are very well advanced, having been set down for a ten day final hearing a week ago. They were commenced in 2018 on an urgent ex parte basis when the Court made freezing orders prohibiting the removal from Australia or in any way disposing or dealing with assets in Australia of the bankrupt and Ms Li. Since that time there have been multiple directions hearings and interlocutory steps resulting in the filing and service of extensive material in support of the claims by the parties.
The plaintiffs are ready to proceed with their claims and would have done so on Monday, 18 November but for the appointment of Mr Taylor as trustee to Ms Wang's estate the Friday before. The Court has time available to hear the plaintiffs' claims over the next day or so.
It is inevitable that there would be delay and additional costs incurred if, at this late stage, the proceedings were now to be transferred to the Federal Court.
The efficient and cost effective conduct of litigation and use of the Court's resources is not merely a matter of convenience to parties to proceedings, but are matters going to the proper administration of justice. There is a need to avoid disruptions in the court lists to avoid consequential inconvenience to the Court and prejudice to the interests of other litigants waiting to be heard: Sali v SPC Ltd (1993) 116 ALR 625 as endorsed by the plurality in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 at [26] and [93]. In my view, determining the proceedings in this Court avoids inefficiency occasioned by the need to adjourn trials which may impact other litigants in this and other courts and thereby promotes the effective administration of justice.
Accordingly, I am also satisfied that there are also special reasons in this case which go beyond the mere convenience of the parties and justify this Court determining the proceedings.
For these reasons I make orders in accordance with the plaintiffs' notice of motion as follows:
1. order pursuant to s 6(3) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) that the proceedings be determined by this Court; and
2. the costs of the plaintiffs' motion are costs in the cause.
[3]
Amendments
02 December 2019 - Hearing date amended from 21 November to 25 November 2019
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Decision last updated: 02 December 2019