Skandar (aka Makari) v BSM Group Pty Ltd (as trustee for the BSM Discretionary Trust)

1. [1]

   HIS HONOUR: By Summons filed 24 March 2016 the plaintiff, Marcha Skandar, sought, pursuant to the terms of s 140 of the Civil Procedure Act 2005, an order transferring proceedings, initially commenced in the District Court, into this Court and, pursuant to the terms of s 5 of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (“the Act”) an order that the proceedings thus transferred into the Supreme Court be further transferred to the Family Court of Australia to be heard at the same time as proceedings currently before the Family Court of Australia between the plaintiff and the second defendant, Bakous Makari, the former husband of the plaintiff.

2. [2]

   The importance of the transfer is that proceedings between the plaintiff and second defendant are, as mentioned in the preceding paragraph, currently before the Family Court and, at the same time, the first defendant, BSM Group Pty Ltd (“BSM”) (as trustee for the BSM Discretionary Trust) (“the BSM Trust”), which is the trustee of a trust of which the second defendant is a named beneficiary, is suing the plaintiff for allegedly unpaid loan amounts, being amounts due, it is said, for the repayment of a loan to the plaintiff and second defendant during the course of their marriage.

Background

1. [3]

   In the District Court proceedings, BSM seeks to recover a debt said to be owing under the written Loan Agreement that, according to its terms, was repayable within three months of receipt of a notice from BSM for repayment.

2. [4]

   The loan in question was a loan purportedly provided to the plaintiff to assist in the purchase of property at Greystanes (“the Greystanes property”) and property at Oatlands (“the Oatlands property”). The Greystanes property was purchased in or about August 2005 and sold in December 2013. The Oatlands property was purchased in or about September 2005 and the plaintiff and her children continue to live there. Both properties were purchased unencumbered and one at least was the marital home.

3. [5]

   BSM is a company registered in New South Wales and, as earlier stated, is a trustee company of which the second defendant was a Director and the Secretary until approximately 2003. Currently, the sole Director is the brother of the second defendant.

4. [6]

   The second defendant’s mother holds 83% of the issued shares in BSM; the remaining shares being held by the second defendant’s father and brother. As is not unusual, the beneficiaries (including income beneficiaries, capital beneficiaries, default income beneficiaries and default capital beneficiaries) overlap in identity, but at least include the second defendant, his mother and his brother.

5. [7]

   The beneficiaries of the BSM Trust also include the second defendant’s father. The beneficiaries include any spouse of the second defendant and his brother, at least while the spouse retains that status. (See various Schedules to the Trust Deed).

6. [8]

   As is obvious from the foregoing, the trust is a discretionary trust with significant discretions available to the trustee.

7. [9]

   The properties at Greystanes and Oatlands were registered in the name of the plaintiff alone and were held unencumbered, at least until the separation of the plaintiff and the second defendant.

8. [10]

   The District Court claim is defended, inter alia, on the basis that the monies used for the purchase of the properties were obtained by the second defendant (presumably from the BSM Trust) and also from money withdrawn by the husband from the plaintiff’s bank account without her knowledge.

9. [11]

   The plaintiff alleges that all of the issues as to debt and the repayment thereof are related to the circumstances of the relationship between the plaintiff and the second defendant, the resolution of which is to be dealt with by the Family Court in the proceedings in that Court. As a consequence, the plaintiff seeks the calling up of the District Court proceedings and the subsequent transfer of the proceedings in the Supreme Court to the Family Court for the matters to be dealt with together.

Principles on Cross-Vesting Act

1. [12]

   It is not absolutely clear why it was necessary for the plaintiff to rely upon s 140 of the Civil Procedure Act. The provisions of s 8 of the Act permit the Court, in circumstances where a proceeding is pending in a court or tribunal of the State, to order that the proceedings be removed to the Supreme Court for the purpose of joinder with proceedings that are to be or should be transferred to the Supreme Court or are to be transferred under the Act to another Court. The terms of s 8 of the Act are as follows:

2. [13]

   Nevertheless, the plaintiff has sought to have the District Court proceedings removed to this Court for the purpose of transfer and, for the purpose of that transfer, relies upon s 5 of the Act, which is in the following terms:

3. [14]

   It is necessary, for reasons associated with the other provisions of the Act, to note that s 3 of the Act defines a “special federal matter” to have the same meaning as that term under the Federal law which is a counterpart to the Act, being the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) (“the Commonwealth Act”). The Commonwealth Act defines, relevantly, a “special federal matter” to include proceedings under s 60G of the Family Law Act 1975 (Cth), which deals with certain adoption proceedings.

4. [15]

   Section 60G of the Family Law Act is irrelevant for the purposes of the current proceedings. As a consequence, the proceedings in the Family Court are not special federal matters under the Commonwealth Act and not a special federal matter under the Act.

5. [16]

   In those circumstances, the Court has the power to deal with the Family Law proceedings. Each of the parties to these proceedings has concentrated on the desirability or otherwise of having the Family Court proceedings and the District Court proceedings heard at the same time. No attention has been directed to whether, if it were desirable, such a hearing ought to occur in the Supreme Court or in the Family Court. No party seeks an order removing the Family Court proceedings into this Court (in the Equity Division).

6. [17]

   Submissions were made by each side of this proceeding as to whether the Family Court possesses the jurisdiction to deal with the proceedings currently in the District Court: see Re Wakim; Ex parte McNally (1999) 198 CLR 511; [1999] HCA 27.

7. [18]

   The jurisdiction of the Family Court is principally conferred by s 31 of the Family Law Act and, includes matrimonial causes, including the respective property rights of the parties to a marriage and any matters relating to the resolution of those rights and/or the maintenance of any children of the marriage. The jurisdiction of the Family Court also extends to associated matters: s 33 of the Family Law Act.

8. [19]

   The principles to be applied in relation to the operation of the Act are well known and well established: see BHP Billiton Ltd v Schultz (2004) 221 CLR 400; [2004] HCA 61. The plurality judgment (Gleeson CJ, McHugh and Heydon JJ) at [14] sets out the principles in the following way:

9. [20]

   Also instructive on the question is the passage at [77] of BHP Billiton, supra, in the reasons for judgment of Gummow J, in which his Honour discusses, amongst other issues, the terms “the interests of justice” and “otherwise in the interests of justice”.

10. [21]

    As has been expressed on a number of occasions and in various decisions, the scheme embodied in the Act and its counterparts in the Commonwealth and other States does away with the previous requirements of the common law that hindered the efficient resolution of justiciable controversies between parties and imposed a relatively heavy onus on persons seeking a transfer from the court in which proceedings were initiated.

11. [22]

    Now, rather than requiring a moving party to show that the court is an inconvenient forum, it is necessary only to show that the tribunal to which the proceedings are to be transferred is a “more appropriate” tribunal or that the proceedings are more appropriately dealt with in the transferee tribunal as distinct from continuing in the court in which they have been commenced.

12. [23]

    In terms of legislation, it is necessary to refer in more detail to the Commonwealth Act. By s 4 of the Commonwealth Act, the Supreme Court of New South Wales has jurisdiction in respect to a civil matter to the same extent as the Family Court. The provisions of s 4 of the Commonwealth Act are in the following terms:

13. [24]

    The efficaciousness of the provisions of s 4(2) of the Commonwealth Act may be doubtful, given the terms and the underlying principles established by the High Court in Re Wakim, supra. Nevertheless, the validity of the terms of s 4(1) of the Commonwealth Act are beyond doubt. See also the provisions of s 15 of the Commonwealth Act which does no more than would be the effect of the Constitution, in any event. The foregoing is not intended to decide again the correctness of the principles applied by the High Court in Re Wakim, supra. The Court is bound by the judgment and applies it.

14. [25]

    As a consequence of the foregoing and the application of the judgment of the High Court in Re Wakim, supra, the jurisdiction of the Family Court depends upon whether the jurisdiction of the Family Court would include the determination of the debt upon which the first defendant sues in the District Court and/or whether that debt is an associated matter or gives rise to the accrued jurisdiction of the Family Court with the matrimonial cause that is before it. In that latter regard, the question will depend upon whether the debt underpinning the proceedings in the District Court arises from the same sub-stratum of facts as the justiciable controversy before the Family Court.

Associated and Accrued Jurisdiction

1. [26]

   The Family Court has jurisdiction in associated matters, pursuant to the terms of s 33 of the Family Law Act. This section is in the same or similar terms to the jurisdiction of the Federal Court of Australia to deal with associated matters conferred on it by s 32 of the Federal Court of Australia Act 1976 (Cth).

2. [27]

   Nevertheless, the confinement in relation to associated matters is a confinement to matters that arise under the laws of the Australian Parliament (assuming that the claim is bona fide and substantial): Adamson v West Perth Football Club (Inc) (1979) 39 FLR 199; [1979] FCA 122; Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd; United States Surgical Corp v Hospital Products International Pty Ltd (1981) 148 CLR 457; [1981] HCA 7; Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261; [1983] HCA 36.

3. [28]

   The provisions of s 23 of the Federal Court of Australia Act do not seem to have a Family Court equivalent. Nevertheless, the Family Court has accrued jurisdiction in relation to a matter that arises from the same substratum of facts as the matter in its original jurisdiction.

4. [29]

   In this case the difficulty is that the District Court proceedings involve different parties. The plaintiff, at the time that the purported loan was effected, was a beneficiary under the BSM Trust. The trustee had the power to advance and lend monies to any person, whether or not the person was a beneficiary: see clause 4(f) of the Trust Deed.

5. [30]

   The Family Law Act seems to have dealt with at least some of these issues in Part VIIIAA of the Family Law Act. The provisions of the Part (particularly Division 1) purport to extend the jurisdiction of the Family Court in making orders under s 79 or s 114 (including the granting of injunctions) relating to the alteration of the rights to property or liabilities of a third party.

6. [31]

   By s 90AC of the Family Law Act, the Part has effect despite anything to the contrary in any trust deed or law (whether written or unwritten) and, by s 90AD of the Family Law Act, the meaning of matrimonial cause is purportedly affected by treating a debt owed by a party to a marriage as property for the purposes of the definition in s 4 and, likewise, s 114(1)(e) is expanded by including in the definition of “property” a “debt owed by a party to a marriage”.

7. [32]

   There may be discretionary aspects as to whether or not a debt, wholly unrelated to the relationship between parties, should be treated as property for the purposes of paragraph (ca) of the definition of “matrimonial cause” (s 4 of the Family Law Act) or for the purposes of s 114(1)(e) of the Family Law Act. Further, the expanded definition does not make clear whether the debt is treated as an asset or a liability of the party to the marriage for the purpose of realigning or altering the relative property interests of the party.

8. [33]

   Moreover, assuming for the purpose of this discussion as to jurisdiction only, that the loan to the plaintiff was a loan to each of the plaintiff and second defendant or was ordered to be a loan the repayment of which was shared by the second defendant, given the relationship between the second defendant and the lender (BSM), any such order may nevertheless implement an unfairness.

9. [34]

   However, since the Family Court has the capacity to alter the property interests, to the extent it considers it appropriate, of all of the property of the parties to a marriage, or either of them, it would be possible, assuming the validity of the extended meaning of the term “property” provided by s 90AD of the Family Law Act, for the Family Court to order that the debt of the first plaintiff be the debt of the second defendant in the course of orders under the Family Law Act.

10. [35]

    The difficulty with the foregoing proposition is the extent to which the constitutional powers could be utilised in a way that abrogated the debt otherwise owed by the plaintiff to the first defendant, as distinct from the interests inter se of the persons in the marriage that was otherwise before the Family Court.

11. [36]

    Some argument was addressed to the Court, in these proceedings, based upon the proposition that the Family Court would not have jurisdiction to deal with the claim by BSM against the plaintiff. It was said that the claim by BSM against the plaintiff was not a matter involving the same facts or the same substratum of facts as the Family Court proceedings.

12. [37]

    Accrued jurisdiction is an implied incident of the exercise of judicial power that enables courts, exercising federal power in particular, to resolve the whole of the justiciable controversy completely. But the power may be exercised only in circumstances where the non-federal aspect of the proceeding is part of the justiciable controversy.

13. [38]

    Notwithstanding the test of a common basis of fact (Fencott v Muller (1983) 152 CLR 570; [1983] HCA 12), the non-federal matter may include proceedings against a third party: Kennedy v Australasian Coal & Shale Employees Federation (1983) 78 FLR 252; [1983] FCA 325.

14. [39]

    The answer to the controversy was summarised in the joint judgment of Gummow and Hayne JJ in Re Wakim, supra, at [140]:

15. [40]

    In the current factual circumstance, BSM has lent money to a party to a marriage who was, at the time of the loan, as a result of that marriage, a beneficiary of the trust for which BSM is the trustee. The money borrowed was used for the purchase of housing, including the matrimonial home.

16. [41]

    As a consequence, it would seem, even without the evidence that would be necessary to determine fully the relationship between each of the parties (including BSM) and their conduct, that the debt by the plaintiff to BSM is a debt which arises from the same substratum of facts as the resolution of property rights between the former married couple.

17. [42]

    Nevertheless, the difficulty for the Court is that it must deal with the matter by way of “impression” in circumstances where all of the evidence that would ultimately be adduced has not been. The Court in this application must deal with the jurisdiction of the Family Court on a preliminary basis. In that regard, the comments in the joint judgment, recited above, are apposite.

18. [43]

    Thus, to use the deprecated term in Fencott, supra, the Court, as presently constituted, has the “impression” and would as a matter of “practical judgment” take the view that the Family Court has jurisdiction to deal with the debt claim by BSM against the first plaintiff in the District Court. Nevertheless, whether that is the case will depend on the evidence ultimately adduced. It is not without doubt.

19. [44]

    If it were necessary to come to a final conclusion at this preliminary stage, the Court, as presently constituted, would take the view that the Family Court does have jurisdiction to deal with the controversy embodied in the District Court proceedings.

20. [45]

    Again, bearing in mind the state of the evidence and the preliminary nature of the hearing at this point, that is the finding of the Court. Yet, that finding, were it the basis for the transfer, would not bind the Family Court if objection to jurisdiction were taken. A fortiori, it would not bind a court on appeal therefrom or the High Court thereafter.

Application of Principles

1. [46]

   As can be seen from the foregoing, the question of whether the Family Court has jurisdiction in relation to the matters raised in the District Court proceedings is a matter that is arguable. The Court, as presently constituted, prefers the view that it does. Nevertheless, the issue is not without difficulty.

2. [47]

   On the other hand, it is wholly uncontentious that the Supreme Court, in its Equity Division, has jurisdiction conferred by the Commonwealth Act to deal with the issues that are currently before the Family Court in the Family Court proceedings.

3. [48]

   Similar issues were dealt with by Brereton J who, in Valceski v Valceski (2007) 70 NSWLR 36; [2007] NSWSC 440, said:

4. [49]

   As the first defendant has submitted, the Court is incapable of transferring the proceedings in the District Court to the Family Court, if the Family Court were not to have jurisdiction. I am of the view that the Family Court does have jurisdiction, but it is not without doubt. As was expressed by Brereton J in the passages which I have just recited, it is not in the interests of justice to order that proceedings be transferred if there be a real question about jurisdiction in the Family Court, the jurisdiction of which is likely to be challenged.

5. [50]

   If the Court were to transfer proceedings to the Family Court and the first defendant persisted with its objection to the jurisdiction of the Family Court, which is likely, then the proceedings will be subverted and delayed by challenges to that jurisdiction.

6. [51]

   The Court, as presently constituted, is overwhelmingly of the view that it is desirable for the District Court proceedings and the Family Court proceedings to be heard and determined at the same time and by the same tribunal. There are at least one of four courses available to the Court:

7. [52]

   If, in the exercise of its jurisdiction under the Act, the provisions of s 56 and following of the Civil Procedure Act apply, it cannot be expeditious to remove the proceedings into the Family Court in circumstances where the jurisdiction of the Family Court to determine the “trust” issues will be the subject of jurisdictional challenge and, presumably, appeals from any first instance judgment. Likewise such a course would not be cheap or just.

8. [53]

   Moreover, the likelihood of such a challenge would significantly undermine the “appropriateness” of any transfer to the Family Court. However, the plaintiff correctly raises the possibility, if not likelihood, of inconsistent judgments in the Family Court and in the District Court or Supreme Court.

9. [54]

   If the different proceedings were finalised separately, it is highly likely that inconsistent orders may issue. An obvious example is that the Family Court may order that the debt to BSM be met by the second defendant, and the District Court might order the plaintiff to pay the amount.

10. [55]

    I assume, given that the law to be applied for each cause of action is the same, regardless of the Court exercising the jurisdiction, that the ultimate outcome of each proceeding will be within a range that would be consistent, regardless of the court or tribunal that was determining the issues. While there may be different outcomes depending upon different judicial officers, that outcome or that difference does not depend upon the Court in which the judicial officer sits, but fits the usual range for a discretionary judgment.

11. [56]

    The most appropriate and expeditious manner in which these proceedings can be dealt with and still give weight to the view the Court has concluded that the matter should be dealt with by the same judicial officer at or about the same time, or be structured so as to avoid inconsistent results is for one or other of the following outcomes to occur:

12. [57]

    The Court is not empowered to stay the Family Court proceedings. It does have the jurisdiction to stay the District Court proceedings pending the outcome of the Family Court proceedings.

13. [58]

    Notwithstanding the foregoing view, the Court notes that none of the parties have sought a transfer of the Family Court proceedings to the Supreme Court to be heard in the Equity Division. Moreover, even if the Court, as presently constituted, possessed the jurisdiction to make such an order in these proceedings (given that it has the power to determine proceedings in a manner different from that which is sought by the parties), it ought not do so before giving each of the parties an opportunity to be heard on the appropriateness, or otherwise, of that course.

14. [59]

    In the circumstances, the Court will issue orders removing the District Court proceedings to the Supreme Court, to be heard in the Equity Division and will stay, subject to any further order of the Court, those proceedings, pending the outcome of the Family Court proceedings.

15. [60]

    Further, the Court will give liberty to one or other of the parties to these proceedings to make application to the Court or the Family Court for orders for the transfer of the Family Court proceedings to the Supreme Court, or to facilitate that course, to be heard together with the proceedings transferred from the District Court.

16. [61]

    I will hear the parties on the latter aspects and the form of any orders.