Samana Estates Pty Ltd v La Rosa

Consideration and determination

The applicant's primary claim for relief is an order for the transfer of these proceedings under s 5(1) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW) (NSW Cross-Vesting Act), which provides: 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to as the relevant proceeding) is pending in the Supreme Court, and (b) it appears to the Supreme Court that: (i) (Repealed) (ii) having regard to: (A) whether, in the opinion of the Supreme Court, apart from any law of the Commonwealth or another State relating to cross-vesting of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 Federal Circuit and Family Court of Australia, 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 Federal Circuit and Family Court of Australia, (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be determined by the Federal Court or the Federal Circuit and Family Court of Australia, as the case may be, (iii) (Repealed) the Supreme Court shall transfer the relevant proceeding to the Federal Court or the Federal Circuit and Family Court of Australia, as the case may be.
I note that, on 14 July 2023 (the day of the hearing), s 5 of the NSW Cross-Vesting Act was amended so that the previous references to the "Family Court" were replaced by the "Federal Circuit and Family Court of Australia". Prior to that amendment, the reference in s 5(1) to the "Family Court" was to be read as a reference to the FCFCA (Division 1), which is a superior court of record and a court of law and equity: Comino v Kremetis [2023] NSWSC 32 at [43]; and Federal Circuit and Family Court of Australia Act 2021 (Cth), ss 8(1)-(2), 9(1) and 10(1).
As to the elements of s 5(1) of the NSW Cross-Vesting Act, the "relevant" proceedings are these proceedings for the purposes of s 5(1)(a).
These proceedings would not have been incapable of being commenced in this Court or incapable of being instituted in the FCFCA but for any cross-vesting law or accrued jurisdiction, and the matters for determination in these proceedings do not arise under or involve questions as to the application, interpretation, or validity of a Commonwealth law: NSW Cross-Vesting Act, ss 5(1)(b)(ii)(A) and (B).
There was also no dispute concerning the jurisdiction of the FCFCA. At the hearing, Counsel for the plaintiffs accepted that these proceedings fall within the accrued jurisdiction of the FCFCA, stating that he did not take issue with the authorities on this (T48.7-8). The applicant had submitted that the FCFCA has jurisdiction to determine the issues in these proceedings as they concern the quantum of her and the defendant's "estate" and that there is, in substance, a single justiciable controversy, referring to Valceski v Valceski (2007) 70 NSWLR 36; [2007] NSWSC 440 (Valceski v Valceski) at [28]-[30], [33] and [37]-[65].
Thus, the applicant's claim for a cross-vesting order falls to be determined by reference to s 5(1)(b)(ii)(C) of the NSW Cross-Vesting Act, namely, whether it is in the interests of justice for these proceedings to be transferred to the FCFCA and joined with the FCFCA Proceedings.
In determining where the interests of justice lie, the Court considers and identifies the "natural forum" for the "relevant proceeding", being the proceedings in this Court. This involves 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. The interests of justice are not the same as the interests of one party. In identifying the most appropriate forum, relevant considerations include the costs and efficient management of the proceedings in the respective jurisdictions and the connecting factors so that, judged objectively, it might be expected that the dispute would fall to be resolved in that forum, with concomitant judicial advantages and disadvantages for each party: Valceski v Valceski at [69]-[70] citing BHP Billiton Ltd v Schultz (2004) 221 CLR 400; [2004] HCA 61 at [14], [18]-[19] and [63]; and Bankinvest AG v Seabrook (1988) 14 NSWLR 711 at 727.
If it appears that one court is more appropriate than the other, however so slightly, then a transfer to the more appropriate court is mandatory and no question of discretion arises: Valceski v Valceski at [70].
The applicant submits that it is in the interests of justice for these proceedings to be transferred and joined with the FCFCA Proceedings because, in essence, sufficient concerns have been raised to question the validity of the plaintiffs' current claim and the defendant's acceptance of it, placing emphasis on the matters raised in the FCFCA's reasons (as summarised at [16] above) and the failure in these proceedings to disclose that the defendant was a director of Samana Estates at the time the impugned loan was allegedly provided to Natcorp Properties. She contends that the Loan Agreement may not have been made or called upon in good faith, challenges the defendant's assertion that he is liable for the amount claimed (including for the reason that he told her he had paid debts owed to his father) and reserves her rights to have the transaction set aside under s 106B of the Family Law Act 1975 (Cth) (Family Law Act).
The applicant's submissions refer to and characterise the plaintiffs' claim as not being about default in respect of a loan contract but, rather, being directed at "stripping value" and seeking to obtain a collateral advantage from creating an appearance that the defendant's liabilities exceed the asset pool subject to distribution in the FCFCA Proceedings, and contend that the FCFCA is the most appropriate venue for further investigation of these issues.
In support of these submissions, the applicant also pointed to the following matters: 1. the position of the defendant as a shareholder of Samana Estates and director until on or around 31 July 2021, and the lack of disclosure of that interest and function in the Statement of Claim; 2. the interest rate, which she asserted was not commercial (being calculated daily at a rate of 9% per annum); 3. the strong family connections and the defendant's control of "all companies" and to his "making changes to the structure and functions performed by the family members in Samana and in Natcorp at different times"; 4. the calling on the loan on the basis of an event of default that occurred some eight years prior, before the passing of the repayment date under the Loan Agreement and while the FCFCA Proceedings are on foot in relation to property; and 5. the lack of full disclosure by the defendant in the FCFCA Proceedings, including in relation to Samana Estates (referring to the matters described at [16] above).
Although the plaintiffs accepted that the FCFCA had accrued jurisdiction in relation to these proceedings, in opposing the cross-vesting application, they argued that there is no real connection between these and the FCFCA Proceedings as the FCFCA Proceedings do not concern the loan in any way. They pointed to the fact that the Loan Agreement is not the subject of any specific relief sought in the FCFCA Proceedings despite the applicant having been aware of it and having prosecuted an interim hearing on financial matters, and the plaintiffs not being parties to or having received any subpoena nor been asked for copies of financial statements as part of the FCFCA Proceedings. They submitted that it follows from this that there is no issue estoppel or Anshun estoppel between these and the FCFCA Proceedings.
The plaintiffs also submitted that the position in this case is on all fours with the position in Xue v Xue; Xue v Xue [2020] NSWSC 501 (Xue v Xue), a case in which Adamson J (as her Honour then was) refused an application for a cross-vesting order in relation to two sets of proceedings in this Court in which the father and brother-in-law of a husband involved in Family Court proceedings sought to recover amounts said to have been advanced to the husband under loan contracts between them.
I accept that there are similarities between the circumstances in Xue v Xue and this case, and that there is force to her Honour's reasons for concluding in that case that the interests of justice required that the proceedings remain in the Supreme Court as the natural forum. However, I am not persuaded by the plaintiffs' submission that there is no connection between the issues in these proceedings and those in the FCFCA Proceedings. I also consider that there are factors that distinguish this case from the position in Xue v Xue.
The FCFCA Proceedings involve the division of matrimonial property. That requires, as a first step, the identification and valuation of the property of the parties and necessarily involves determining the extent to which the defendant is indebted to a third party and the extent of any interest a third party has in the matrimonial property: Valceski v Valceski at [28]. It follows that the determination of the defendant's liability to the plaintiffs under the Loan Agreement and the plaintiffs' claimed interest in the Wamberal Property by reason of the Loan Agreement will be considered in the FCFCA Proceedings.
Like the applicant wife in Xue v Xue, the applicant in this case is not a party to the Loan Agreement and there is prima facie evidence, in the form of the written Loan Agreement, that the loan was entered into before their separation and, it appears, before their relationship commenced. As in Xue v Xue, the defendant in this case disclosed the existence of the Loan Agreement as part of the FCFCA Proceedings and has not put his indebtedness under that agreement in issue in the proceedings in this Court.
However, in contrast to the position in Xue v Xue, the alleged loan advance of $1,850,000 was not supported by contemporaneous business records showing bank transfers of funds from either of the plaintiffs to the defendant or to Natcorp Properties at or prior to 2004, or in the period after the date of the Loan Agreement.
There is a document annexed to Ms Evan's affidavit which she deposes is a "schedule of advances and repayments in respect of the Loan Agreement" (Schedule). The Schedule lists various sums that range in value from $148 to $480,000 and are variously described as "Advance", "Various Advances", "La Rosa Constructions", "ATO Payment", "Mercedes HP" and "Wages/Advances" between 30 June 2000 and 30 June 2014 and add up to $1,850,001. It also lists various sums, each described as "Drawdown", in each of the financial years 2006 - 2015 and during the period 17 February 2021 to 31 March 2022 and three amounts described as "Repayment" (of $54,188 in the 2017 - 2018 financial year; $600,000 on 6 October 2020; and $60,000 on 30 December 2021). There are also financial statements in evidence for Samana Estates for the financial year ending 30 June 2021 which refer to a non-current loan to the defendant in the amount of $1,503,325 for the 2021 financial year and $2,050,325 for the 2020 financial year.
However, on its face, the Schedule relates to advances made to "Natale La Rosa & related companies" and is taken from "Extracts from general ledgers of Samana Estates (2001 - 2004)". Neither the Schedule nor the evidence on this application identifies: the "related companies"; what (if any) amounts were advanced to the defendant, Natcorp Properties and to the other "related companies"; where the post-2004 amounts were extracted from; and the purpose of the funds referred to as "Advances" and "Drawdowns". The financial statements for Samana Estates are also unsigned and limited to 2020 and 2021. The documents do not refer to the second plaintiff at all.
Based on these documents and the affidavits read by the plaintiffs on this application, I do not accept the plaintiffs' submission that there is "significant evidence of the [l]oan, payments and repayments along the way as a credit facility of the parties, proper use of security for the advance and its use to benefit [the defendant] (and, if relevant, [the applicant]) in the usual way".
Unlike the position in Xue v Xue, I also consider it reasonable to infer that the plaintiffs have used the occasion of the demise of the marriage and the FCFCA Proceedings to assert their rights under the Loan Agreement and commence proceedings in this Court.
The plaintiffs issued their pre-litigation demand for payment based on an event of default that had occurred eight years earlier and in circumstances where the applicant and the defendant had been unable to resolve their financial dispute in the FCFCA Proceedings. They also waited 12 years after the charge under the Loan Agreement was apparently granted to lodge a caveat on the Wamberal Property.
The plaintiffs submitted that it was not until July 2022 that they became aware of the event of default. Leaving to one side that there is no evidence adduced on this application to support that submission and the close familial connection between the second plaintiff and the defendant, given the defendant's position as a 50% shareholder of the first plaintiff and a director of that company until mid-2021, it is to be inferred that the first plaintiff, at least, was aware of the two events of default in 2011 and 2014. No explanation was given as to why steps were not taken by the plaintiffs to call upon the loan sooner.
The plaintiffs submitted that the age of the second plaintiff and considerations of delay and expense favoured the claim remaining in this Court. They argued that they ought not have to wait further for the fruits of their judgment or incur the costs of being parties to the FCFCA Proceedings, particularly given the age of the second plaintiff and his desire to conclude his estate planning. They also submitted that these proceedings are otherwise concluded, the plaintiffs had brought expedition to their dealing with the matter in contrast to the applicant's approach and any further delays would be disproportionate to the issues germane to these proceedings.
While these are factors to take into account, I am not persuaded that they weigh so heavily in favour of the plaintiffs. This is primarily for the reason that the plaintiffs delayed commencing proceedings for the recovery of monies based on an event of default that occurred many years ago and in respect of a loan which provides for payment by June 2024.
As for the second plaintiff, there is no evidence that he suffers from ill health and it is difficult to see how transferring these proceedings to the FCFCA and having the current claim resolved as part of the broader matrimonial property dispute, with the potential that he will not obtain judgment in his favour or such judgment will be delayed, would adversely impact his ability to carry out his estate planning.
Further, cross-vesting these proceedings does not necessarily commit the plaintiffs to the costs and time associated with representation throughout the entirety of the FCFCA Proceedings in which the defendant's liability under the Loan Agreement is likely to be one of a number of issues to be determined by the FCFCA. If necessary, that issue could be heard and determined on an expediated basis as a separate issue or as part of the FCFCA's consideration of the defendant's indebtedness.
In my view, the following observations in Valceski v Valceski at [77] are apt in this case: "… where strangers to a marriage use the occasion of its demise to assert a right against the property of one or other (or both) of the spouses, they cannot reasonably complain if they become entwined in the matrimonial dispute. Third parties who intervene in matrimonial disputes in this way - especially associates, such as parents and private companies, of one or other of the spouses - cannot complain if the dispute is treated as part of the larger matrimonial dispute which it normally is. Where third parties who assert rights against matrimonial property do so concurrently with pending matrimonial property proceedings, it will ordinarily be appropriate for those issues to be resolved in the matrimonial proceedings, and for the third party to join in those proceedings for that purpose, rather than to commence separate litigation, in another Court, which almost inevitably results in duplication of evidence, issues, time and costs."
The relief sought by the plaintiffs in this case is limited to judgment and costs, and the applicant would not be bound by any issue estoppel if she is not joined to these proceedings. The plaintiffs have also proffered an undertaking not to enforce the judgment obtained in these proceedings until the earlier of: final orders being made in the FCFCA Proceedings; and 23 July 2024 (being the loan repayment date). In that context, and in circumstances where the defendant does not dispute his indebtedness to the plaintiffs, I acknowledge that there is some force to the plaintiffs' submissions.
That said, and as Counsel for the plaintiffs accepted at the hearing, the FCFCA would be likely to consider the fact of a judgment in this Court to be a relevant factor and weigh against the applicant in the FCFCA's determination of any argument that the applicant chose to deploy by way of challenge to the Loan Agreement or the defendant's liability under it in the FCFCA Proceedings.
The applicant has also indicated that she wishes to be joined to these proceedings in the event the transfer application is not successful. By this, I understand the applicant to mean that she wishes to be joined in order to file a defence by way of challenge to the loan and the defendant's liability under it, perhaps akin to pursuing a s 106B application in this Court. I do not consider that it would be desirable for those issues to be dealt with in separate proceedings in this Court, even assuming that the applicant has standing to do so.
Ultimately, the question of the defendant's financial position, which is complex and involves a number of corporate entities, falls to be determined as part of the issue of the division of the matrimonial property in the FCFCA Proceedings. Having considered the submissions of the parties, and while finely balanced, for the reasons set out above, I have concluded that the FCFCA is the most appropriate forum for the determination of all issues touching on the question of the defendant's liabilities and indebtedness to the plaintiffs under the Loan Agreement, and that it is in the interests of justice for these proceedings to be cross-vested and joined to the FCFCA Proceedings.
As to costs, the applicant seeks an order that the costs of her Notice of Motion be reserved for determination by the FCFCA or, in the alternative, that costs be reserved. I am satisfied that it is appropriate to make an order of that nature in the circumstances of this case, noting that s 12 of the NSW Cross-Vesting Act provides: 12 Orders as to costs Where a proceeding is transferred or removed to a court, that court may make an order as to costs that relate to the conduct of the proceeding before the transfer or removal if those costs have not already been dealt with by another court.
For these reasons, I make the following orders: 1. Pursuant to s 5(1) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW), these proceedings be transferred to the Federal Circuit and Family Court of Australia (Division 1) and be joined to be heard together with proceedings SYC1747/2021 in that Court. 2. The costs of the parties in this Court and the applicant's Notice of Motion filed on 20 April 2023 be reserved to the Federal Circuit and Family Court of Australia (Division 1).

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