Khoury v Commonwealth Bank of Australia trading as Bankwest

Federal Court of Australia|2013-04-02|Before: Mr J, Farrell J

REASONS FOR JUDGMENT 1 The applicants in these proceedings are a married couple who entered into a number of financial arrangements with the Bank of Western Australia Ltd trading as BankWest between 2004 and 2008. In support of those arrangements, the applicants gave security over two properties, including their home at Dural (Dural Land). The Commonwealth Bank of Australia is the successor of the Bank of Western Australia and carries on business trading as BankWest. The second and third respondents are receivers and managers (Receivers) exercising powers pursuant to the terms of a mortgage over the Dural Land. 2 By an Amended Originating Application dated 29 November 2012 and a Second Amended Statement of Claim filed on 9 January 2013, the applicants seek: (a) an interim order pursuant to s 12GD(3) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) restraining the respondents from selling the Dural Land before the final determination of these proceedings; (b) declarations that the first respondent as successor to the Bank of Western Australia is liable to the applicants because of conduct of the Bank of Western Australia which was: (i) unconscionable within the meaning of ss 12CA, 12CB and 12CC of the ASIC Act; (ii) misleading or deceptive or was likely to mislead or deceive the applicants, in relation to financial services, within the meaning of s 12DA of the ASIC Act; and (iii) in breach of express and implied terms of the agreements and mortgages with the applicants; (c) an order setting aside the agreements between the applicants and the first respondent in whole or in part; (d) damages pursuant to s 12GF of the ASIC Act or alternatively at common law; and (e) interest and costs. 3 The hearing today was set down to consider three applications: (a) an interlocutory application filed by the respondents on 5 February 2013 seeking an order that these proceedings be transferred to the Supreme Court of New South Wales (Supreme Court) pursuant to s 5(4) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) (Cross-vesting Act) (Transfer Application); (b) an interlocutory application by the applicants filed on 29 November 2012 seeking an order restraining the respondents from selling the Dural Land (Restraint of Sale of Dural Land Application); and (c) an application by the first respondent for the costs of an application to strike out the Amended Statement of Claim. That strike out application was filed on 30 November 2012 and dismissed by consent on 14 February 2013 after the applicants filed a Second Amended Statement of Claim pursuant to orders made by Emmett J (to which the respondents consented).

Transfer Application 4 Annexed to the affidavit of Robert Moodie dated 4 February 2013 is a statement of claim which the Receivers (the second and third respondents) propose to file with the Supreme Court seeking possession of the Dural Land. Counsel for the respondents advised the Court that the only reason that that statement of claim has not yet been filed is because it was thought to be inappropriate to do so as the applicants oppose the transfer of the proceedings to the Supreme Court. The respondents felt it appropriate to make this application first. 5 The parties accepted that both the Federal Court and the Supreme Court have jurisdiction and power to determine the matters raised in the Amended Originating Application and the Second Amended Statement of Claim. They also accepted that an action for possession could be entertained by this Court if it were raised by way of a cross-claim in these proceedings. The question is: which system is more appropriate.

Applicants' position 6 The applicants oppose the Transfer Application on the grounds that: (a) The applicants have properly brought these proceedings and it is premature to make this order until the Restraint of Sale of Dural Land Application has been determined. (b) The Federal Court has jurisdiction and power to determine all issues, including a cross-claim for possession of the Dural Land by reason of ss 22, 23 and 32 of the Federal Court of Australia Act 1976 (Cth). (c) The applicants are entitled prima facie to have their action tried in the ordinary course of the procedure and business of this Court. It is a grave matter to interfere with that entitlement and to do so requires justification on proper grounds. The burden is on the respondents to show that it is just and convenient that the applicants' ordinary rights should be interfered with: see Cameron's Unit Services Pty Ltd v Kevin R Whelpton Associates (Australia) Pty Ltd (1984) 4 FCR 428 at 431 per Wilcox.J. (d) The applicants would be forced to give up the tactical advantage that they have as applicants (and not respondents) in this Court. The first respondent is more familiar and comfortable with the Supreme Court Possession List than the Federal Court. (e) The applicants provided an undertaking to the Court that they would vacate the Dural Land if these proceedings were determined unfavourably to them. (f) Section 12GK(1) of the ASIC Act applies to the transfer of proceedings in relation to the claims made in these proceedings under the ASIC Act, not s 5(4) of the Cross-vesting Act. The applicants accept that the same remedies are available in the Federal Court and the Supreme Court for the purposes of s 12GK(2). (g) The judges of the Supreme Court who sit in the Possession List are common law judges and thus less familiar with the equitable principles which are relevant to determine the applicants' general law claims and those made under the ASIC Act.

Respondents position 7 The respondents argued that: (a) The court has a wide power to transfer proceedings whenever it is satisfied that the "interests of justice" renders another court a "more appropriate" forum. It is a "nuts and bolts" management decision as to which Court, in the pursuit of the interests of justice, is more appropriate to hear and determine the substantive dispute": see Bankinvest AG v Seabrook (1988) 14 NSWLR 711 at 713-714 per Street CJ. (b) Both these proceedings and the proposed Supreme Court proceedings relate to matters arising from loan agreements and a mortgage between the first respondent and the applicants involving the Dural Land. The matters pleaded by the applicants in these proceedings are directly related to, and will be relevant to, their defence in the proposed Supreme Court proceedings to be commenced by the second and third respondents. There is no basis to think that the matters should be split between two courts. (c) The loan agreements the subject of the dispute contain a jurisdiction clause which, in effect, provides that they are governed by the laws in force in New South Wales and each party has irrevocably and unconditionally submitted to the non-exclusive jurisdiction of the courts of New South Wales. (d) The Uniform Civil Procedure Rules 2005 (NSW) (UCPR) sets out rules governing the possession of land in New South Wales including pleadings, service of claims, judgment, orders and execution of writs for possession of land. Under r 45.4 of the UCPR, proceedings commenced in the Supreme Court seeking orders for the possession of land are entered into the Supreme Court's specialist Possession List. Practice Note SC CL 6 sets out an efficient and cost-effective process for dealing with these claims. (e) The judges who sit in the Possession List of the Supreme Court are experienced in dealing with claims for possession of land and the defences which are raised to such claims. The defences are commonly of the same kind as the claims made by the applicants in this proceeding. Since the Supreme Court Act 1970 (NSW) was enacted, all judges of the Supreme Court have had the power to grant remedies available at common law and in equity. The specialist nature of the Possession List would be advantageous to all of the parties in these proceedings. (f) Commencing an action for possession in the Supreme Court is a more appropriate course for the respondents to take than to cross-claim in these proceedings. This is because of the advantages of the specialist nature of the Possession List and the fact that the enforcement procedures (should they become necessary) may require the Sheriff of New South Wales to exercise its enforcement powers. While a successful cross-claim in the Federal Court would be able to employ the assistance of the Sheriff to enforce a judgment, it would involve additional administrative steps that would not be required if this matter were dealt with in the Supreme Court. It is not true that the respondents' preference for commencing possession proceedings in the Supreme Court is based on greater familiarity with that jurisdiction. (g) The undertaking given by the applicants to the Court offering up vacant possession of the Dural Land if they are unsuccessful in these proceedings does not in its terms contemplate an action for possession by the respondents. (h) These proceedings are not significantly advanced. In light of the submissions of the applicants in support of their interlocutory application it is likely that the applicants will seek to amend their statement of claim for the third time in five months. The Restraint of Sale of Dural Land Application can be heard as effectively in the Supreme Court. (i) The applicants would not lose any tactical "first mover" advantage that they may think they have by being the applicants in these proceedings. Any transfer of the proceedings would not put the applicants in the position of defendants in Supreme Court proceedings. Instead, it would be up to the Supreme Court to case manage the transferred proceedings and the possession proceedings - most likely by treating evidence given in one proceeding as evidence in the other. This would have the advantage that one court could resolve the whole controversy without duplication of evidence and issues: see Valceski v Valceski (2007) 70 NSWLR 36 at [75] per Brereton J. Further, the applicants' choice of venue and subjective preferences for it are not relevant matters to be taken into account: BHP Billiton Limited v Schultz (2004) 221 CLR 400. Nor is there any presumption that the court whose jurisdiction has been invoked should exercise that jurisdiction: Midland Montagu Australia Ltd v O'Connor (1992) 109 FLR 285 at 293 per Kearney J. 8 In response to the applicants' argument concerning s 12GK of the ASIC Act, the respondents sought leave to amend their application to apply for transfer of the proceedings under that provision out of an abundance of caution. The applicants did not oppose that amendment. 9 Counsel for the respondents referred the Court to the recent decision of Robertson J in Byrne v Australia and New Zealand Banking Group Limited [2013] FCA 233. There, his Honour transferred the application pending in this Court to the Supreme Court on the application of the respondent bank. That case turned largely on its own facts and, importantly, involved a situation where an action for possession was already on foot in the Supreme Court. 10 Although the second and third respondents have not yet commenced an action in the Supreme Court, they have provided an undertaking that a statement of claim (substantially in the form of that annexed to the affidavit of Robert Moodie dated 4 February 2013) will be filed in the Supreme Court within 7 days.

Relevant legislation 11 Section 5(4) of the Cross-vesting Act relevantly provides as follows: (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. 12 Section 12GK of the ASIC Act relevantly provides as follows: Transfer of matters (1) If: (a) a civil proceeding instituted by a person is pending in the Federal Court; and (b) a matter for determination in the proceeding arose under: (i) this Division; or ... the Federal Court may, subject to subsection (2), upon the application of a party or of the Federal Court's own motion, transfer the matter to a court of a State or Territory and may also transfer to that court any other matter for determination in the proceeding. (2) The Federal Court must not transfer a matter to another court under subsection (1) unless the other court has power to grant the remedies sought before the Federal Court in the matter and it appears to the Federal Court that: … (b) it is otherwise in the interests of justice that the matter be determined by the other court. … 13 In substance, the test for transfer (for present purposes) under the Cross-vesting Act and the ASIC Act is the same.

Conclusion 14 I am satisfied for the purposes of s 5(4)(b)(iii) of the Cross-vesting Act and s 12GK(2)(b) of the ASIC Act that it is in the interests of justice that these proceedings be transferred. I do so for the reasons advanced by the respondents. In summary, I consider that the transfer of these proceedings is likely to lead to the most expeditious resolution of these proceedings and the proceedings for possession proposed by the respondents. Accordingly I will make the orders pursuant to s 5(4) of the Cross-vesting Act and s 12GK(1) of the ASIC Act. It is not necessary, for the reasons explained in paragraph [13] above to determine whether s 12GK(1) of the ASIC Act applies to the exclusion of s 5(4) of the Cross-vesting Act.

restrainT OF sale of Dural Land application 15 As a result of my decision that these proceedings should be transferred to the Supreme Court, I did not hear argument or make orders concerning the Restraint of Sale of the Dural Land Application. I consider that it is more appropriate for the Supreme Court to deal with this interlocutory application as part of its administration of the transferred proceedings.

Costs of strikeout application 16 The first respondent correctly contends that the application to strike out the Amended Statement of Claim was in substance successful. I agree with the first respondent's contention that the application was necessary in order to expedite action by the applicants on the issues which eventually led to the amendments expressed in the Second Amended Statement of Claim. Accordingly the respondents are entitled to the costs of that application. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Farrell.

Jurisdiction of Courts Act 1987(Cth)s 5(4)

Since the Supreme Court Act 1970(NSW)

Australian Securities and Investments Commission Act 2001(Cth)s 12GK(1), ss 12CA, 12CB, 12CC, 12GD, 12GF, 12GK

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