HIS HONOUR: In these proceedings, the plaintiff claims to be entitled to a beneficial interest in proceeds of sale of a property at West Wollongong. The plaintiff is the mother of a Mr Hakan Tandogan who became bankrupt. She alleges that in about October 2005 she gave her son approximately $15,000 for the purpose of his paying a deposit, stamp duty and associated costs for the purchase of the West Wollongong property.
She alleges that the purchase of the property was $98,000 and it was purchased as a joint investment by her and her son, and that she expected to recover her investment from the sale of the property. She also alleges that she made payments for council rates, water rates and strata levies.
The plaintiff had lodged a caveat claiming an equitable interest in the land in question by reason of constructive trust arising from her contributions to the purchase of the property and making of other payments. The owner of the property became bankrupt, and his property became invested in the defendants Messrs Cronan and Van Der Velde by virtue of s 58 of the Bankruptcy Act 1966 (Cth).
The plaintiff commenced these proceedings on 13 December 2016 seeking an order for extension of the caveat. The caveat was extended up to 22 December 2016, but on that day, Slattery J sitting as Duty Judge made orders by consent which contemplated the completion of the sale of the property by the defendants, the trustees in bankruptcy.
His Honour ordered pleadings and made orders for the service of evidence, and the matter was stood over to the Duty List today to determine how moneys required to be paid into a controlled moneys account should be disposed of. One of the orders made on 22 December 2016 was that out of the proceeds of the sale of the property, the trustees could deduct reasonable commissions and expenses including certain named expenses.
The defendants were also required to serve a statement of their claimed remuneration and expenses which they claimed they would be entitled to deduct from the sale of the property, and times were fixed for the plaintiff to notify any dispute. The defendants have advised that they claim an amount of $63,969 by way of remuneration and disbursements which they claim to be entitled to receive from the proceeds of sale of the property. I was told that the plaintiff would oppose any such order which, if made, would affect the plaintiff's claim to a beneficial share of the proceeds of sale.
In her statement of claim, the plaintiff claims to be entitled amongst other relief to a declaration that property was held by her son as constructive trustee for her as to a 14.5 per cent share of the property, and she seeks an order that she be entitled to a further $24,889.41 from the proceeds of sale pursuant to the constructive trust that she asserts. She also seeks a further $15,000 from the proceeds of sale bringing the total amount of her claim to just under $40,000.
It was no doubt because of the smallness of the claim that orders were made to expedite the resolution of these matters. It would be in the interests of justice for this matter now to be determined without delay and without further costs. However, the first matter that I must be satisfied of is my jurisdiction to deal with the claim.
Under s 27 of the Bankruptcy Act, the Federal Court and the Federal Circuit Court have concurrent jurisdiction in bankruptcy that is exclusive of the jurisdiction of all Courts other than the High Court under s 75 of the Constitution or the Family Court under s 35 or 35A of the Bankruptcy Act.
Section 5 of the Bankruptcy Act provides that in that Act, unless the contrary intention appears, "bankruptcy" in relation to jurisdiction or proceedings means any jurisdiction or proceedings under or by virtue of that Act.
The present claim by the plaintiff does not invoke any particular provision of the Bankruptcy Act. Her claim arises under the general law and principles of equity but the claim seeks a determination of the extent of the property that is vested in the defendants as trustees in bankruptcy, which would determine what amounts were available to be distributed to creditors or to be paid to the defendants out of the bankrupt's property for their remuneration and expenses.
The authorities seem to have settled the question that the present proceeding does engage "jurisdiction in bankruptcy" within the meaning of s 27 of the Bankruptcy Act. (See Scott v Bagshaw (2000) 99 FCR 573 at 576-577; [2000] FCA 816; Turner v Gorkowski [2014] VSCA 248; and Truthful Endeavour Pty Ltd v Condon (2015) 233 FCR 174; [2015] FCAFC 70 at [32] and following.)
That does not mean that this Court is wholly deprived of jurisdiction. The Court has jurisdiction to deal with the matter pursuant to s 4 of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth). But if the present proceeding is a "special federal matter" within the meaning of s 3 of that Act, then I am required by s 6 of that Act to transfer the proceeding to the Federal Court, unless I were to make an order under subsection 6(3) that the proceeding be determined by this Court if satisfied that there were special reasons for doing so. But an order can only be made under s 6(3) if notice has first been given to the Attorney-General s 6(4). Moreover, there must be a special reason which arises otherwise than by reference to the convenience of the parties before such an order could be made.
I am told that no notice has been given to the Attorney-General pursuant to s 6(4). No-one has asked me to adjourn the proceeding for the purpose of the service of such notice, and in any event, it does not appear that there are any special reasons which would arise other than reasons of cost and delay, both of which are reasons relevant to the convenience of the parties and which are not to be had regard to under s 6(3).
The question then is whether this is a special federal matter within the meaning of s 3. Section 3 provides that unless the contrary intention appears:
"special federal matter means:
(a) a matter arising under Part IV of the Competition and Consumer Act 2010 (other than under section 45D, 45DA, 45DB, 45E or 45EA); or
(aa) a matter arising under the Competition Code (as defined in section 150A of the Competition and Consumer Act 2010) of the Australian Capital Territory or the Northern Territory; or
(ab) a matter arising under section 60G of the Family Law Act 1975 in a court other than the Family Court of Western Australia or the Supreme Court of the Northern Territory; or
(b) a matter involving the determination of questions of law on appeal from a decision of, or of questions of law referred or stated by, a tribunal or other body established by an Act or a person holding office under an Act, not being a matter for determination in an appeal or a reference or case stated to the Supreme Court of a State or Territory under a law of the Commonwealth that specifically provides for such an appeal, reference or case stated to such a court; or
(c) a matter arising under the Administrative Decisions (Judicial Review) Act 1977; or
(e) a matter that is within the original jurisdiction of the Federal Court by virtue of section 39B of the Judiciary Act 1903;
being a matter in respect of which the Supreme Court of a State or Territory would not, apart from this Act, have jurisdiction."
The only paragraph of the definition of "special federal matter" which is engaged is para (e), that is, a matter within the original jurisdiction of the Federal Court "by virtue of" s 39B of the Judiciary Act 1903 (Cth). Section 39B of the Judiciary Act relevantly provides:
"39B Original jurisdiction of Federal Court of Australia
Scope of original jurisdiction
(1) Subject to subsections (1B), (1C) and (1EA), the original jurisdiction of the Federal Court of Australia includes jurisdiction with respect to any matter in which a writ of mandamus or prohibition or an injunction is sought against an officer or officers of the Commonwealth.
(1A) The original jurisdiction of the Federal Court of Australia also includes jurisdiction in any matter:
(a) in which the Commonwealth is seeking an injunction or a declaration; or
(b) arising under the Constitution, or involving its interpretation; or
(c) arising under any laws made by the Parliament, other than a matter in respect of which a criminal prosecution is instituted or any other criminal matter.
Note: Paragraph (c) does not prevent other laws of the Commonwealth conferring criminal jurisdiction on the Federal Court of Australia.
…
Jurisdiction for certain writs that relate to civil proceedings
(1EA) If:
(a) a civil proceeding is before the Family Court of Australia, the Federal Circuit Court of Australia or a court of a State or Territory; or
(b) an appeal arising out of such a proceeding is before the Family Court of Australia or a court of a State or Territory;
the following apply:
(c) the Federal Court of Australia does not have jurisdiction with respect to any matter in which a person who is or was a party to the proceeding seeks a writ of mandamus or prohibition or an injunction against an officer or officers of the Commonwealth in relation to a related civil proceeding decision;
(d) the following court is invested with, or has conferred on it, jurisdiction with respect to any such matter:
(i) if the civil proceeding or appeal is before the Family Court of Australia - that court; or
(ii) if the civil proceeding is before the Federal Circuit Court of Australia - that court; or
(iii) if the civil proceeding or appeal is before a court of a State or Territory - the Supreme Court of the State or Territory.
Jurisdictional rules to apply despite any other law
(1F) Subsections (1B), (1C), (1D), (1E) and (1EA) have effect despite anything in any other law. In particular:
(a) neither the Jurisdiction of Courts (Cross‑vesting) Act 1987, nor any other law, has the effect of giving the Federal Court of Australia jurisdiction contrary to subsection (1B), (1C) or (1EA); and
(b) neither section 9 of the Administrative Decisions (Judicial Review) Act 1977, nor any other law, has the effect of removing from the Supreme Court of a State or Territory the jurisdiction given to that Court by subsection (1B), (1C) or (1EA).
…
Definitions
(3) In this section:
civil proceeding has the same meaning as in the National Security Information (Criminal and Civil Proceedings) Act 2004.
…"
Section 39B(1A)(c) provides that the original jurisdiction of the Federal Court includes jurisdiction in any matter arising under any laws made by the Parliament other than criminal matters.
Section 39B(1EA) provides amongst other things that if a "civil proceeding" is before a Court of a State or territory, then the Supreme Court of the State or territory is invested with or has conferred on it jurisdiction with respect to any such matter. However, "civil proceedings" in that section has the same meaning as in the National Security Information (Criminal and Civil Proceedings) Act 2004 (Cth). That raises its own question of interpretation.
The National Security Information (Criminal and Civil Proceedings) Act 2004 provides in s 7 that "civil proceeding" has the meaning given by s 15A, and s 15A provides that in that Act, "civil proceeding" means any proceeding in a court of the Commonwealth, a State or Territory other than a criminal proceeding.
However, the National Security Information (Criminal and Civil Proceedings) Act 2004 only applies to a very small class of civil proceedings. Unless the Attorney General is a party to the civil proceeding, that Act does not apply to it unless the Attorney General gives notice in writing to the parties to the proceeding in the Court that the Act is to apply to it. (See s 6A.)
Construed literally, s 39B(1EA) might mean that the Supreme Courts of the State or Territory are invested with jurisdiction in any civil proceeding before those Courts because the defined meaning of "civil proceeding" in the National Security Information (Criminal and Civil Proceedings) Act is wide enough so to provide. But in that case, there would be no need to define "civil proceeding" in s 39B at all.
Read purposively, I think it is clear that the conferral of jurisdiction on Courts pursuant to s 39B(1EA) of the Judiciary Act is a conferral only in respect of civil proceedings to which the National Security Information (Criminal and Civil Proceedings) Act applies. It is therefore not of assistance to the parties in the present case.
When the Jurisdiction of Courts (Cross-Vesting) Act was enacted in 1987, the definition of "special federal matter" in s 3 included para (e) in the same terms as now appears, being a matter that is within the original jurisdiction of the Federal Court by virtue of s 39B. At that time, the jurisdiction conferred on the Federal Court by s 39B was less expansive. In substance, s 39B as it then stood conferred jurisdiction on the Federal Court in relation to the issue of prerogative writs or an injunction against an officer of the Commonwealth.
In 1997, s 39B was amended to confer original jurisdiction on the Federal Court in any matter arising under any laws made by the Parliament. It is not at all clear to me that it was then Parliament's intention that by enlarging the jurisdiction of the Federal Court in the way provided for by s 39B there would be an expansion of the scope of what is a special federal matter under the Jurisdiction of Courts (Cross-Vesting) Act to encompass bankruptcy jurisdiction.
There have been many cases in which questions of title of the trustee in bankruptcy to property that arise under the general law have been determined in State courts. However, it is now I think fairly clearly established that jurisdiction in bankruptcy is a special federal matter pursuant to para (e) of the definition of "special federal matter" in s 3. That was held to be the case by the Court of Appeal in Victoria in Turner v Gorkowki, and that decision on the same legislation is binding on me.
The Full Court of the Federal Court came to the same conclusion albeit without reference to the earlier decision of the Court of Appeal, of the Victorian Court of Appeal in Truthful Endeavour Pty Ltd v Condon at [50] - [61]. The Full Court observed that "by virtue of" in para (e) did not mean "only by virtue of" (see at [52]).
Were the matter free from authority, that may be an arguable question, particularly if a further consideration of the legislative history indicated that the inclusion of bankruptcy matters within special federal matters may have been an unintended consequence of the amendment of s 39B. However, the matter is governed by authority by which I am bound. The question has been alluded to by the Court of Appeal recently in Mateljan v HTT Huntley Heritage Pty Ltd [2016] NSWCA 20; (2016) 111 ACSR 277 in terms that did not cast doubt on the conclusions in Truthful Endeavour (see at [27]).
I am bound by authority, it seems to me, to conclude that this is a special federal matter that must be transferred to the Federal Court. It follows that I cannot deal with the defendants' application for payment of their remuneration and expenses out of the proceeds of sale, nor can I deal with the plaintiff's application for a determination that she is entitled to a beneficial interest in the proceeds of sale.
This is undesirable. It is a consequence of the conferral of exclusive jurisdiction in bankruptcy on the Federal Court and the Federal Circuit Court and the expansive interpretation of that conferral. The conferral of exclusive jurisdiction on courts always has the potential to engage litigants in costs and delays being the very matters which the Jurisdiction of Courts (Cross-Vesting) Act sought to address. If the inclusion of bankruptcy jurisdiction within special federal matters by reason of para (e) of the definition was unintentional, then it is a matter that calls out for urgent legislative amendment.
In a case of this small magnitude, it is a reproach to the administration of justice that the parties should be put to the additional costs and delays that will arise from the transfer of the proceedings to the Federal Court. Unfortunately, I consider that I am bound to transfer the proceedings. I will ask that a transcript of these reasons be provided to the Attorney General of the Commonwealth or other appropriate body for consideration as to whether law reform in this area is needed.
Nonetheless, for the reasons I have given, I order that these proceedings be transferred to the Federal Court of Australia. The costs of today's application will be costs in the proceedings.
[3]
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Decision last updated: 06 February 2017
Parties
Applicant/Plaintiff:
Tonbul Baykal
Respondent/Defendant:
Terry Van Der Velde as trustee for bankrupt estate of Hakan Tandogan