Plaintiff v First Defendant

4 On 3 May 2018, Elizabeth filed a summons seeking an order that this proceeding be transferred to the Family Court of Australia pursuant to s 5(1) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Vic) ('the Act'). This judgment is in relation to that application.

5 The fourth defendant, the Registrar of Titles, indicated in a letter to the Prothonotary that he did not intend to appear in the proceeding.

6 The evidence before the Court in respect of the transfer application was not in dispute. Elizabeth relied on an affidavit by her solicitor, Chiara Giannini Bryan, affirmed on 22 May 2018. Aviel relied on affidavits affirmed by him on 10 April 2018 and 26 June 2018. By an affidavit affirmed on 13 June 2018, Chaim deposed that he agreed with Aviel's affidavit dated 10 April 2018. Chaim also adopted and agreed with the submissions made by Aviel at the hearing of the transfer application.

7 Aviel is a businessman based in Guangzhou in China and is neither a resident nor a citizen of Australia. In early 2017, he and Chaim - who resides in Melbourne - discussed the possibility of jointly undertaking property investment in Australia. They agreed to pursue a property investment strategy with two key elements.

8 First, they would locate a sufficiently large property in the suburbs of Melbourne in which Chaim wished to live that would permit the construction of two townhouses. The intention was for Chaim to live in one of them, with the other being sold for profit for Aviel's benefit. Aviel would provide the funds for this purchase and Chaim would sell his current family home and use the proceeds to pay half of the costs of the construction project. Secondly, Aviel wanted to pursue his own property investment opportunities through a corporate vehicle. To that end, it was agreed that Chaim would incorporate a company on behalf of Aviel and do everything required to create a platform for a property investment business in Australia, solely for Aviel's benefit.

9 On 1 May 2017, the brothers entered into a written partnership agreement which set out in some detail the agreed arrangements between them for the property investment. Amongst other things, it recorded that any property purchased with Aviel's funds which was not registered in Aviel's name would be held by Chaim on trust for Aviel.

10 On 15 May 2017, Chaim signed a contract of sale for a property in Elsternwick for a purchase price of $2 million. He is the registered proprietor of that property.

11 On 17 May 2017, Chaim signed a contract of sale for the purchase of a property in Moorabbin for a purchase price of $980 000.

12 On 30 May 2017, Chaim incorporated Geron Enterprises, with Aviel as the sole shareholder. Those shares were later transferred to Chaim. Geron Enterprises is the registered proprietor of the Moorabbin property.

13 In early 2018, Chaim told Aviel that he was not able to carry out his side of the partnership agreement because Elizabeth wanted a divorce and had lodged caveats against the Elsternwick property and their family home and intended to make a claim against the Moorabbin property. In response, Aviel informed Chaim that he was not prepared to forward any more money for the mortgage repayments on the investment properties and that he wanted Chaim's 'issues [to be] sorted out' in order to proceed with the development of the properties. On 9 April 2018, he gave notice to Chaim of the disillusion of the partnership pursuant to s 36 of the Partnership Act 1958.

14 Between May 2017 and the end of February 2018, Aviel paid a total of $772 128.06 towards the purchase of the investment properties. The remainder of the purchase price of the properties was funded by bank loans raised by Chaim using the investment properties as security. In addition to the above amount, Aviel has also paid $123 133.66 in respect of plans, permits, architect fees and other consultant fees in respect of the intended development of the investment properties, as well as some mortgage repayments.

15 The question of the source of the funds paid towards the partnership expenses and the other costs relating to the investment properties is in dispute. Aviel's evidence, with which Chaim apparently concurs, is that Chaim is not out of pocket and did not incur any expenses towards the purchase, holding costs, mortgage or other costs associated with the investment properties. Aviel's evidence is that the payments made by Chaim in respect of the investment properties were made on Aviel's behalf and that he later reimbursed Chaim in full in respect of all of those payments. This is disputed by Elizabeth. For the purposes of this application, it is unnecessary and inappropriate for me to resolve this controversy.

16 The investment properties are currently vacant. Aviel's evidence is that he stands to lose approximately $300 000 if the investment properties are sold in their current state, being the shortfall after the mortgages are paid out. He therefore seeks that the properties be transferred to him to allow him to complete their development for immediate sale.

17 In her application to transfer the proceeding, Elizabeth relies solely on the 'interests of justice' ground in paragraph (C) of s 5(1)(b)(ii) of the Act. Section 5(1) provides as follows:

5 Transfer of proceedings

(1) Where -

(a) a proceeding (in this subsection referred to as the relevant proceeding) is pending in the Supreme Court; and

(b) it appears to the Supreme Court that -

...

(ii) having regard to -

(A) whether, in the opinion of the Supreme Court, apart from any law of the Commonwealth or another 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 Supreme Court and capable of being instituted in the Federal Court or the Family Court;

(B) the extent to which, in the opinion of the Supreme 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 Supreme Court apart from this Act and any law of the Commonwealth or another 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 -

...

the Supreme Court shall transfer the relevant proceeding to the Federal Court or the Family Court, as the case may be.

18 The operation of the Act was considered by the High Court in BHP Billiton Ltd v Schultz.[1] In Irwin v State of Queensland[2] Robson J set out a number of principles relating to the operation of the Act which may be identified from Schultz and from later decisions of this Court. As are presently relevant, his Honour referred to the following:[3]

(a) The Act requires that the [first] court should exercise the power of transfer whenever "it appears" that it is in the interests of justice that it should be exercised.

(b) It is not necessary that it should appear that the first court is a "clearly inappropriate" forum. It is both necessary and sufficient that it appears that, in the interests of justice, the second court is more appropriate than the first court.

(c) The Court is not concerned with the problem of a court, with a prima facie duty to exercise a jurisdiction that has been regularly invoked, asking whether it is justified in refusing to perform that duty. Rather, the Court is required by statute to ensure that cases are heard in the forum dictated by the interests of justice.

(d) The interests of justice are not the same as the interests of one party, and there may be interests wider than those of either party to be considered. Even so the interests of the respective parties, which might in some respects be common (as for example cost and efficiency) and in other respects conflicting, arise for consideration.

(e) The power to exercise the jurisdiction is not a discretionary power but a mandatory obligation. No question of discretion arises.

(f) It is inapt to speak of an applicant for an order for transfer as bearing a burden of persuasion analogous to an onus of proof. Rather the jurisdiction must be exercised when "it appears" to the court that "it is in the interests of justice" that the proceeding be determined in the Supreme Court of another State or Territory rather than the court of where the proceeding has been issued. Unless it so appears, the court does not have power under the Act to transfer the proceedings. To that extent it may be said that an applicant assumes some onus of persuasion.

(g) The court should adopt what has been described as 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.

(h) The appropriate court is the natural forum as determined by connecting factors to that forum.

(i) Relevant connecting factors include matters of convenience and expense such as availability of witnesses, the places where the parties respectively reside or carry on business, and the law covering the relevant transaction.

(j) In many cases there will be a preponderance of connecting factors with one forum so that it can readily be identified as the most appropriate of natural forum. In other cases, there might be significant connecting factors with each of the two different forums. Some of the factors might cancel each other out.

(o) The plaintiff's choice of forum by itself is not a relevant connecting factor.

(p) Each case depends on its own particular facts.

(q) The list of connecting factors is impossible to state exhaustively. Equally the weight to be given to each factor must vary from case to case.

19 I have applied these principles in considering the application before me.

20 Counsel for Elizabeth emphasised that her client strongly disputed that the investment properties were held on trust for Aviel. It was contended that Aviel did not have an enforceable claim in respect of the properties because the effect of his evidence was to acknowledge that the partnership was entered into for the purpose of perpetrating a fraud on the bank that had extended funding for their purchase. It was therefore argued that the only dispute in substance was between Elizabeth and Chaim, rather than Aviel.

21 Elizabeth contended that the controversy which was the subject of the proceeding was not merely between Aviel and Chaim, but one which had arisen in the context of the breakdown of her marriage with Chaim. It was that event which occasioned Aviel to commence this proceeding. Elizabeth relied on the following observation by Brereton J in Valceski v Valceski[4] that '...where strangers to a marriage use the occasion of its demise to assert a right against the property of one or the other (or both), they cannot reasonably complain if they become entwined in the matrimonial dispute.'[5] The circumstances of the current proceeding were said to be substantially similar to Valceski and the decision of Warren CJ in Kosmopoulos v Kosmopoulos.[6] Counsel for Elizabeth also emphasised Warren CJ's observation in Kosmopoulos that the interests of comity made it desirable that Valceski be followed.[7]

22 Elizabeth submitted that the resolution of Aviel's claims in the proceeding would necessarily have significant implications for her entitlements in the family law proceedings. The factual context of the two proceedings was said to overlap significantly. It was asserted that the transfer of the proceeding to the Family Court, being the forum able to deal with the totality of the dispute between the parties, would be in the interests of justice as it would avoid the duplication of evidence, resources and potentially witness evidence. Conversely, a refusal of the transfer application presented a risk of inconsistent findings, including potentially in relation to the credit of witnesses.

23 Elizabeth also submitted that the transfer of the proceeding would serve the interests of justice because it would avoid the risk of Aviel and Chaim colluding to defeat her claims. This was said to be a real risk given the 'commercially suspect' approach of the brothers to the properties, the similarity in the affidavits filed by them, the timing of the making of Aviel's application in this proceeding and the absence of any claim by Chaim of an interest in the properties.

24 Elizabeth also contended that the refusal of the transfer application would be unfair and prejudicial to her interests because she would have to fight to protect her interests on two fronts. Her solicitor estimated that Elizabeth would save approximately $30,000 in legal fees if the proceeding was transferred to the Family Court.

25 The case for the transfer of the proceeding to the Family Court is premised upon the proposition that there is a significant overlap between this proceeding and the family law proceeding. While there plainly is some overlap in the proceedings, for the reasons explained below, the extent of that overlap is exaggerated in Elizabeth's submissions. The arguments advanced in support of the transfer are significantly diminished once the separate nature of the issues raised in the two proceedings is properly recognised.

26 Although the question of whether the investment properties form part of the matrimonial assets is plainly within and directly relevant to the family law proceedings, the evidence filed in this proceeding indicates that the family law proceeding also extends to include controversies in respect of other matrimonial property, including the matrimonial home, the distribution of Elizabeth's superannuation and financial arrangements in respect of a vehicle.

27 More fundamentally however, despite the relevance to the family law proceeding of whether or not the investment properties form part of the matrimonial assets, in the circumstances of this case, the issues raised in respect of the investment properties concern entirely discrete and distinct questions to those which may arise in relation to other matrimonial assets such as the family home. The subject matter of this proceeding is a commercial undertaking engaged in by Aviel and Chaim late in the marriage between Chaim and Elizabeth and which, other than Elizabeth's claims about the source of the funds used for payment of the partnership expenses, appears to have no connection to the matrimonial relationship and the assets accumulated therein.

28 The facts of this case are relevantly analogous to those considered by Hansen J in Jane v Jane[8] which involved a relatively separate and discrete controversy which this Court was well able to determine and which determination would then inform and bind the Family Court in the matrimonial proceedings. In that case the Court refused an application by Laree Jane to transfer a proceeding initiated by her stepson Rodney Jane to the Family Court. The assets in dispute included units in a unit trust which were the subject of an application by Rodney for a declaration that his father held the units on trust for him. Justice Hansen refused the application for transfer on the basis that the proceeding involved a discrete issue and there was neither a substantial duplication of issues nor a prospect of inconsistent findings between the two cases.

However, I do not accept that there will be any substantial duplication if Rodney's proceeding remains in the Supreme Court. That is because, in my view, Rodney's proceeding involves a relatively limited enquiry as to the validity of the declaration of trust. I reject Laree's submission that there is a possibility of inconsistent findings. If the Supreme Court makes the declaration sought, then the units will be excluded from the pool of matrimonial assets. If the declaration is not made, then the units will be included in the pool of matrimonial assets. Either way, the Family Court will proceed on the basis that the Supreme Court's answer to the question binds all relevant parties. In those circumstances, I do not accept that witnesses will be required to give evidence about the same matters in two different proceedings. To the extent that the same witnesses are called in the two proceedings, there is always a possibility that there will be some overlap in evidence they give, and there may be some duplication of cost in terms of separate witness statements being prepared for each proceeding, nevertheless I consider that any such overlap or duplication is incidental rather than substantial. That is all the more so given that the Supreme Court's determination of one issue will effectively remove that issue from the matters in respect of which evidence needs to be given in the Family Court proceeding.

30 Analogously here, if this Court grants the relief sought by Aviel, then the investment properties will be excluded from the pool of matrimonial assets. Conversely, if Aviel is unsuccessful in his action, the investment properties would be included in the pool of matrimonial assets. In either case, the conclusion reached by the Supreme Court will bind all the parties in the Family Court proceeding.

31 This analysis provides an answer to Elizabeth's contention that the transfer of the proceeding would avoid duplication of evidence, resources and witnesses and the risk of inconsistent findings. If the proceeding is not transferred, no risk of substantial duplication of evidence and resources and inconsistent findings will arise because the issues raised in the current proceeding will need to be decided once only and by this Court. Any duplication or overlap is likely to be incidental rather than substantial.

32 I also do not accept Elizabeth's submission that this proceeding is substantially the same as Valceski and Kosmopoulos (which Warren CJ observed had a striking similarity to Valceski).[10] The issues raised in the equity suit in Valceski, which also arose in the matrimonial proceedings in that case, had a provenance in the facts which was both more complex than the present case and which was interwoven with family law issues. The following features may be noted. First, unlike the present case, one of the properties the ownership of which was in dispute was the matrimonial home. Secondly, that property had been purchased by the father of the husband in the matrimonial proceedings many years before the marriage of the matrimonial parties. Despite this, the property was placed in the joint names of the father and son (the husband). Thirdly, the proceeding also concerned a further property purchased at around the time the matrimonial parties married which was held in half shares by the father and son. Fourthly, the father and his wife sought orders setting aside a deed entered into very shortly before the matrimonial parties separated, which deed purported to transfer the father's rights, title and interest in the matrimonial home to the husband, subject to various provisions.

33 It is evident that Valceski raised complex issues of contribution and beneficial ownership of claimed matrimonial property. These issues were closely interwoven with and in part preceded the marriage of the matrimonial parties. In those circumstances, it is, with respect, readily apparent why the Court formed the view that the equity suit and the matrimonial proceeding significantly overlapped. In comparison, the issues raised in the present proceeding about the investment properties are discrete and are not interwoven with a history of dealings over the course of a marriage so as to justify the conclusion that there is a significant overlap with the matrimonial proceedings.

34 I am unpersuaded that any risk of collusion between Aviel and Chaim has the consequence of favouring the transfer of the proceeding in the interests of justice. It appears to me that the existence or otherwise of any such risk is independent of the forum in which the controversy about the investment properties is determined. How that risk would be obviated or mitigated by the transfer of the proceeding to the Family Court was unexplained. Further, in the event that the proceeding was not transferred to the Family Court, I do not see any reason why Elizabeth, as a party to the proceeding, would be precluded from using available forensic means, including cross examination of witnesses, to test allegations of collusion, assuming there is a proper basis for doing so.

35 A practical 'nuts and bolts' consideration which looms large in considering the interests of justice is whether the claims in this proceeding are likely to be heard more quickly in this Court or in the Family Court. The family law proceeding is at an early stage. At the time of hearing the transfer application, a 'judicial duty list hearing' in the Family Court had not yet occurred. Neither party submitted that the family law proceeding would be heard before this proceeding in the event that it was not transferred.

36 In my assessment, given the early stage of the family law proceeding and the confined nature of this proceeding being of a type commonly dealt with by this Court, it is likely that this proceeding would be heard sooner than the proceeding in the Family Court. That is a consideration which, in the interests of justice, renders this Court the more appropriate forum to hear the proceeding brought by Aviel. In this regard, I note Brereton J's recognition in Valceski that '[i]f I could be confident the equity suit could be heard and determined before then without disrupting the preparation progress of the matrimonial proceedings, then there might be more to be said in favour of determining them in this Court ...'[11]

37 Elizabeth also contended that the refusal of her transfer application would be unfair and prejudicial to her because it would require her to fight on two fronts and would result in her incurring additional legal costs of approximately $30 000. While I accept in general terms that this is a consideration which weighs the interests of justice in favour of the Family Court as the appropriate forum to hear this proceeding, three points may be noted. First, the Court's task is to consider the interests of justice, not the interests of one party. Secondly, accepting that Elizabeth's interests do properly arise in assessing the interests of justice, the reality is that, regardless of where Aviel's claims are heard, she will inevitably incur additional costs relating to the issues raised in this proceeding aside from the remaining family law issues. Thirdly and relatedly, the estimate of $30 000 appears to overstate the additional cost which would be incurred by Elizabeth if the matter is not transferred. This cost estimate does not take into account the fact that, even if the proceeding is transferred, additional time and cost will inevitably be incurred in that proceeding in hearing and determining the claims in relation to the investment properties.

38 Lastly, Elizabeth's submissions disputing that the investment properties were held on trust for Aviel and the proposition that Aviel did not have an enforceable claim in respect of the properties are of little assistance in determining the present application. It is open for Elizabeth to advance these arguments at the trial of the current proceeding, whether that is heard in this Court or the Family Court. However, it is inappropriate for the Court to form a view about those claims at an interlocutory stage.

39 For the above reasons, the interests of justice do not lead me to conclude that it is more appropriate that this proceeding be determined by the Family Court.

40 As I have noted, in her application to transfer the proceeding, Elizabeth relies solely on the 'interests of justice' ground in paragraph (C) of s 5(1)(b)(ii) of the Act. After the hearing of the application, the Court drew the parties' attention to the decision of McDonald J of this Court in Tucker v State of Victoria,[12] delivered six days before the hearing of the present matter. In Tucker, McDonald J concluded that s 5(1)(b)(ii)(C) of the Act is not a stand-alone ground empowering the Court to transfer a proceeding to the Federal Court. His Honour considered that the interests of justice ground in s 5(1)(b)(ii)(C) only operates in circumstances where the criteria prescribed in s 5(1)(b)(ii)(A) or (B) are satisfied.[13]

41 The conclusion reached by McDonald J would apply equally to an application to transfer proceedings to the Family Court. The Court therefore invited the parties to provide further submissions on the power of the Court to grant the relief sought by Elizabeth in her application. Both Elizabeth and Aviel filed written submissions on that topic. Elizabeth invited me to conclude that Tucker was incorrectly decided and should not be followed.

42 I have found it unnecessary to address the correctness or otherwise of McDonald J's conclusion in Tucker because, for the reasons I have explained, I have determined that, even if s 5(1)(b)(ii)(C) is a stand-alone ground empowering the Court to transfer the proceeding to the Family Court as submitted by Elizabeth, the interests of justice do not lead me to conclude that it is more appropriate that this proceeding be determined by the Family Court.

43 Elizabeth's application filed on 3 May 2018 is accordingly dismissed. Within seven days, the parties are to submit any proposed orders as to costs and, in the absence of agreement, any short submissions on costs.

[1] [2004] HCA 61; (2004) 221 CLR 400 ('Schultz').

[2] [2011] VSC 291.

[4] [2007] NSWSC 440; (2007) 70 NSWLR 36 ('Valceski').

[6] [2008] VSC 402 ('Kosmopoulos').

[7] [2008] VSC 402 [29].

[8] [2008] VSC 341.

[12] [2018] VSC 389 ('Tucker').

[13] See in particular paras [27] and [31].