Supreme Court New South Wales Medium Neutral Citation: Montgomery v Porter [2019] NSWSC 1524 Hearing dates: 30 October 2019 Date of orders: 06 November 2019 Decision date: 06 November 2019 Jurisdiction: Equity Before: Ward CJ in Eq Decision: (1) Order pursuant to s 6(3) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) that these proceedings be determined in this Court. (2) Dismiss the defendants' notice of motion filed 20 September 2019 insofar as it seeks an order that these proceedings be transferred to the Federal Court of Australia or otherwise permanently stayed. (3) Reserve the costs of the plaintiff's notice of motion filed 19 September 2019 and of the defendants' notice of motion filed 20 September 2019. Catchwords: CIVIL PROCEDURE — Cross-vesting — Transfer to Federal Court – application by the defendants for transfer of the proceedings to the Federal Court – in circumstances where the proceedings engage the jurisdiction in bankruptcy within the meaning of s 27 of the Bankruptcy Act 1966 (Cth) – whether there are "special reasons" under s 6(3) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) for the proceedings to be determined in the Supreme Court – held that the financial position of the plaintiff and her difficult financial circumstances constitute special reasons for the matter to be determined in the Supreme Court Legislation Cited: Bankruptcy Act 1966 (Cth), ss 27, 31(1)(f), 58, 123(3) Civil Procedure Act 2005 (NSW), s 56 Conveyancing Act 1919 (NSW), s 66G Family Law Act 1975 (Cth), s 79 Judiciary Act 1903 (Cth),s 39B Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth), ss 3(1)(e), 6(1), 6(3), 6(4) Property (Relationships) Act 1984 (NSW), ss 4(1), 5(1), 8, 9, 14, 20, 47(2) Real Property Act 1900 (NSW), s 90 Cases Cited: Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59 Baykal v Van Der Velde [2017] NSWSC 36 Deputy Commissioner of Taxation v TD Preece Pty Ltd [2013] FCA 1365 Draper v Official Trustee in Bankruptcy (2006) 156 FCR 53; [2006] FCAFC 157, Henry v Hancock [2016] NSWSC 71 Huen v Official Receiver [2008] FCAFC 117; (2008) 248 ALR 1 James v James (No.2) [2019] NSWSC 116 Kerr as trustee of the property of Janice Mary Kehlet (a bankrupt) v Kehlet [2019] FCA 1572 Mateljan v HTT Huntley Heritage Pty Ltd (in its own right and as trustee of the Huntley Trust) [2016] NSWCA 20; (2016) 111 ACSR 277 Pedersen v Delaveris [2010] FCA 536 Prentice v Cummins (2003) 134 FCR 449; [2003] FCA 1002 Preston v Diaspora Holdings Pty Ltd; Diaspora Holdings Pty Ltd v Owners Corporation of Strata Plan 68608 [2019] NSWSC 651 Scott v Bagshaw (2000) 99 FCR 573; [2000] FCA 816 Sharpless v McKibbin [2007] NSWSC 1498 Silvia (Trustee) v Williams, in the matter of Williams (Bankrupt) [2018] FCA 189 Truthful Endeavour Pty Ltd v Condon (2015) 233 FCR 174; [2015] FCAFC 70 Turner v Gorkowski [2014] VSCA 248 Wileypark Pty Ltd v AMP Limited [2018] FCAFC 143 Category: Procedural and other rulings Parties: Lynette Susan Montgomery (First Plaintiff) Jason Porter (First Defendant) Anne Meagher (Second Defendant) Representation: Counsel: J Baird (Plaintiff) A Spencer (Defendant) Solicitors: Keypoint Law (Plaintiff) O'Neill Partners (Defendant) File Number(s): 2019/00214287 Publication restriction: Nil Judgment 1. HER HONOUR: Before me for hearing on 30 October 2019 were two competing notices of motion: a notice of motion filed 19 September 2019 by the plaintiff (Ms Lynette Montgomery) seeking, among other relief, an order pursuant to s 6(3) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) (the Cross-vesting Act) that these proceedings be determined in this Court; and a notice of motion filed 20 September 2019 by the defendants (the trustees in bankruptcy of Mr James Docherty) seeking, relevantly, an order that these proceedings be transferred to the Federal Court of Australia or, alternatively, that these proceedings be permanently stayed. 2. The defendants' notice of motion also sought an order that Ms Montgomery provide security for costs in an amount to be determined, with liberty to increase that amount from time to time; however, that part of the defendants' application was not dealt with during the two hours set aside for the hearing of the respective motions. Instead, argument focussed on whether or not there are special reasons for these proceedings to be determined in this Court (in the absence of which it is not disputed that the proceedings must be transferred to the Federal Court). 3. During the course of argument on the competing motions, Ms Montgomery foreshadowed an application for leave to amend in order to join Mr Docherty as a defendant to the proceedings (on the basis that he is a necessary party to be joined in circumstances where orders are sought in relation to the relationship, still ongoing, between the two). Counsel for Ms Montgomery indicated that Mr Docherty did not oppose such an order. Nor was there opposition by the defendants (provided that the leave extended only to the proposed amended summons annexed to the proposed notice of motion and not be at large). Accordingly, and because such joinder would be necessary whatever the outcome of the competing motions, I gave leave for the filing in court of the amended notice of motion and made orders for the joinder of Mr Docherty as a defendant to the proceedings. 4. What follow are my reasons for the conclusion I have reached that there are special reasons for these proceedings to be determined in this Court. Background 1. Ms Montgomery's evidence in the substantive proceedings will be that she has lived in a domestic relationship with Mr Docherty since Good Friday 1991 (a period of over 28 years) at a property in Llandilo (the Llandilo property) which, prior to his bankruptcy, was owned by Mr Docherty in his sole name. Mr Docherty and Ms Montgomery are not married. 2. The Llandilo property was purchased in Mr Docherty's name shortly before Easter 1991. The evidence in the proceedings will be that Ms Montgomery's late father, from whom she was estranged, contributed $170,000 towards the purchase price (see Mr Docherty's affidavit sworn 15 August 2019 at [31]-[38]; and Ms Montgomery's affidavit sworn 10 July 2019 at [43], [44]). Ms Montgomery and Mr Docherty still live in the Llandilo property. 3. Subsequently, in 2000, Mr Docherty bought another property at Kingswood (the Kingswood property), again in his name alone. The Kingswood property is presently occupied by Ms Montgomery's daughter, Rebecca. 4. In August 2009, Mr Docherty suffered a stroke. He has not worked since then. Ms Montgomery has been the "sole breadwinner" since at least March 2011. The evidence is that she supports Mr Docherty on a very small income (see Ms Montgomery's affidavit from [63]ff) . 5. On 2 August 2011, Mr Docherty was made bankrupt (on his own petition) and Mr Rod Sutherland was appointed as his trustee in bankruptcy. Subsequently, on 28 June 2017, Mr Jason Porter and Ms Anne Meagher (the first and second defendants when these proceedings were first commenced) were appointed as trustees in bankruptcy of Mr Docherty's bankrupt estate in place of Mr Sutherland. 6. On his bankruptcy, Mr Docherty's interest (as sole registered proprietor) in the Llandilo and Kingswood properties vested in equity in his trustee in bankruptcy (s 58 and s 132(3) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act)). 7. On 3 August 2014, Mr Docherty was discharged from bankruptcy. 8. On 4 April 2019, applications for transmission of the two properties, pursuant to s 90 of the Real Property Act 1900 (NSW) and s 132(3) of the Bankruptcy Act, were filed, which resulted in the trustees becoming registered on the titles to the Llandilo and Kingswood properties as sole proprietors. 9. Ms Montgomery then lodged caveats on the titles to the respective properties claiming an equitable interest in those properties. 10. On 10 July 2019, these proceedings were commenced by way of summons. Ms Montgomery has filed her evidence in support of the relief claimed in the summons, being her affidavit sworn 10 July 2019, the affidavit sworn 15 August 2019 by Mr Docherty, and an affidavit sworn 15 August 2019 of Mr Docherty's sister, Ms Elizabeth June Orel. Those affidavits were read on the present application not for the truth of their contents but as evidence of what the deponents have deposed to (so as to inform the court as to the evidence which will be relied upon at the hearing and the nature of the issues that will then arise). No evidence has yet been filed by the trustees in bankruptcy as to the issues in the substantive proceedings; however, three affidavits were filed and read by the trustees in bankruptcy on the present application (namely, the affidavits of Jamie-Lee Mounter affirmed 13 September 2019, 14 October 2019 and 28 October 2019 respectively). Ms Montgomery's claim 1. In her summons, Ms Montgomery seeks a variety of relief, including relief based on a handwritten "Financial Agreement" allegedly entered into by her and Mr Docherty on 21 December 1990, the execution of which was (on the face of the document and as deposed to by her) witnessed by Ms Orel. The trustees in bankruptcy have foreshadowed a challenge to the authenticity of that document and have indicated it is likely that they will seek to have it forensically examined. 2. The Financial Agreement document, in effect, provided for Ms Montgomery to obtain an equal interest in the Llandilo property (and, indeed, all of Mr Docherty's current and future assets), such interest to increase according to the length of time that Ms Montgomery lived with Mr Docherty and remained not married to him. The trustees in bankruptcy point to the fact that in his statement of affairs at the time of entry into bankruptcy, Mr Docherty did not disclose any interest on Ms Montgomery in the respective properties. 3. The relief sought by Ms Montgomery in her summons in these proceedings is identified as referable to a specific performance and estoppel claim, a Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59 claim and a Property (Relationships) Act 1984 (NSW) (Property (Relationships) Act) claim. Relevantly, the relief claimed is as follows: 1. a declaration that the Financial Agreement made between the Plaintiff and James Docherty ("Mr Docherty") made on or about 21 December 1990 ("the Financial Agreement") is valid and binding on the parties thereto, their successors in title and assign[ee]s; 2. In the alternative to order 1 above, a declaration that the Defendants [the trustees in bankruptcy] as the successors in title to Mr Docherty are estopped from denying that they are bound by the terms of the Financial Agreement, namely that in consideration of the promise by the Plaintiff that she would relinquish her place of residence, move in to the same residence as Mr Docherty and look after his children, and the performance by her of that promise, and on condition that she remain unmarried, she would be entitled to all Mr Docherty's property including the properties 10 Dodford St, Llandilo, NSW and 3/17 Algae Crescent, Kingswood, NSW ("the Properties"). 3. An order that the Defendants specifically perform their obligations under the Financial Agreement by transferring the Properties to the Plaintiff. 4. In the alternative to orders 1, 2 and 3 above, a declaration that the Defendants hold the Properties upon constructive and/or resulting trust for the Plaintiff. 5. An order that the Defendants do all such acts and things as are necessary or desirable to transfer the Properties to the Plaintiff. 6. in the alternative to orders 1, 2, 3, 4 and 5 above, a declaration that the Plaintiff and Mr Docherty are and have been from approximately Good Friday, 13 April 1991 in a domestic relationship for the purposes of the Property Relationships Act (NSW), 1984 ("the Act"), 7. An order pursuant to ss.14(1), 20(1) and/or s.47(2) of the Act that the interests of the Plaintiff and the Defendants in the Properties be adjusted with the result that the Properties are held as to: (a) 100% to the Plaintiff and 0% to the Defendants; or alternatively (b) such other percentage between them as to the Court may seem fair and equitable. 8. An order the Defendants do ail such things and sign all such documents as may be necessary or desirable to give effect to Order 6 above, including an order transferring the Properties to the Plaintiff upon payment by the Plaintiff to the Defendants of such amount as the Court may think fit. … 1. Pausing here, it is emphasised for Ms Montgomery that the making of the claim for relief under the Property (Relationships) Act meant that the proceedings were required to be commenced in this Court (or the Local Court) (see s 9 of the Property (Relationships) Act; T 21.45; T 22.48). Moreover, as Counsel for Ms Montgomery made clear, the claim could not be brought in the Family Court as Ms Montgomery and Mr Docherty are not separated. The issue for determination 1. It is accepted by Ms Montgomery that the claims made by her in the present proceedings (albeit not invoking any particular provision of the Bankruptcy Act but, instead, arising under the general law, principles of equity and the Property (Relationships) Act) involve a determination of the extent of the property that is vested in the defendants as trustees in bankruptcy of Mr Docherty's estate, which would in turn determine what amounts were available to be distributed to creditors of the bankrupt estate or to be paid to the defendants out of the bankrupt's property for their remuneration and expenses; and hence that the proceedings engage the jurisdiction in bankruptcy within the meaning of s 27 of the Bankruptcy Act (reference being made in this context to the decisions in Scott v Bagshaw (2000) 99 FCR 573; [2000] FCA 816, Turner v Gorkowski [2014] VSCA 248, Truthful Endeavour Pty Ltd v Condon (2015) 233 FCR 174; [2015] FCAFC 70 (Truthful Endeavour) and Baykal v Van Der Velde [2017] NSWSC 36 (Baykal)). 2. As is well known, jurisdiction in bankruptcy exclusively lies in the federal jurisdiction (exercised by the Federal Court of Australia and Federal Circuit Court). Pursuant to s 6(1) of the Cross-vesting Act, if a matter for determination in a proceeding that is pending in the Supreme Court of a State or Territory is a "special federal matter", and the court does not make an order under s 6(3) in respect of the matter, the court must transfer the proceeding to the Federal Court. 3. Section 6(3) of the Cross-vesting Act provides that the Supreme Court may order that the proceeding be determined by that court if it is satisfied that there are "special reasons" for doing so in the particular circumstances of the proceeding other than reasons relevant to the convenience of the parties. 4. Section 6(4) of the Cross-vesting Act provides that, before making an order under s 6(3), the court must be satisfied that written notice specifying the nature of the special federal matter has been given to the Attorney-General of the Commonwealth and of the relevant State and that a reasonable time has elapsed since the giving of the notice for the Attorneys-General to consider whether submissions to the court should be made in relation to the proceeding. In the present case, there is evidence from Ms Montgomery's solicitor that notices under s 6(4) of the Cross-vesting Act have been given to each of the Commonwealth Attorney-General and the Attorney-General for the State of New South Wales (on 23 September 2019) and each has replied advising of no interest in these proceedings; and evidence from the solicitor for the trustees in bankruptcy that the Attorney-General of all other states and territories in Australia have similarly been notified and have no interest in being heard on the present applications. 5. It being common ground that this is a "special federal matter" within the meaning of s 3(1)(e) of the Cross-vesting Act (and that being undoubtedly correct – see Baykal at [15]-[25] per White J, as his Honour then was; see also Truthful Endeavour at [50]-[61]; and Mateljan v HTT Huntley Heritage Pty Ltd (in its own right and as trustee of the Huntley Trust) [2016] NSWCA 20; (2016) 111 ACSR 277 (Mateljan) – the only relevant issue here for determination is whether I am satisfied that in the particular circumstances of this proceeding there are special reasons (other than reasons relevant to the convenience of the parties) for the proceeding to be determined by this Court). Relevant authorities 1. This issue has recently been considered in this Court by Slattery J in James v James (No.2) [2019] NSWSC 116 (James v James) and by Parker J in Preston v Diaspora Holdings Pty Ltd; Diaspora Holdings Pty Ltd v Owners Corporation of Strata Plan 68608 [2019] NSWSC 651 (Preston v Diaspora). 2. In James v James, Slattery J considered the operation of s 6(3) of the Cross-vesting Act (at [95]-[98]), finding that the term "special reasons" in s 6(3) should not demand that the circumstances must be "extraordinary" or "unique". His Honour referred with approval to the observation of Brereton J (as his Honour then was) in Henry v Hancock [2016] NSWSC 71 that "[c]ircumstances are special if they are unusual, uncommon or exceptional in character, quality or degree; if they differ from the ordinary or the usual; or if they are particular or individual; but they need not be unique". 3. His Honour also said (at [102]) that, on the proper construction of s 6(3), the "convenience of the parties" is not excluded from the court's consideration provided it is not the determining factor. 4. In James v James, relevantly his Honour concluded that the following were special reasons for the proceeding to be determined in this Court, being persuaded that such a determination overwhelmingly served the better administration of justice (albeit that it also served the convenience of the parties to a degree): that his Honour, who was familiar with the facts of the matter and the parties, was prepared to continue to hear the case; that the case had unusual features which strongly suggested that the continuity of a determination by this Court was appropriate; that there would inevitably be delays in the determination of the remaining issues in the proceedings if they were to be transferred to the Federal Court as progress in that court was less certain, whereas an immediate date for hearing in the next few months could be taken before him; that further delay also impacted on the administration of the bankrupt estate in the interests of creditors of that estate; and that the issues the court would be called upon to determine did not require it to draw upon any specialist expertise in bankruptcy. 5. In Preston v Diaspora, Parker J (at [47]) found that the proceeding (there concerning the validity of the purported appointment of Mr Preston as a director of the defendant company) was not a special federal matter merely because title to the relevant share had vested in the trustee in bankruptcy, noting (at [45]) the distinction between exercising jurisdiction "in bankruptcy" on the one hand and simply recognising the effect of provisions of the Bankruptcy Act on the other. In that case, as I will explain in due course, the proceeding had its genesis in earlier proceedings brought in the NSW Civil and Administrative Tribunal (NCAT) between the parties. 6. In obiter, Parker J considered (at [49]-[54]) whether, if he had determined that the proceeding involved a special federal matter, he would have been satisfied that there were special reasons for the proceeding being determined in this Court. Parker J agreed with the approach adopted by Slattery J in James v James (see at [52]). There being then two proceedings before him, Parker J noted that the parties had spent almost two years arguing about representation and said that "[i]t now falls to this Court to decide whether the diversion was justified". His Honour considered that retention of the proceedings in this Court appeared likely to result in a faster and more efficient determination of the dispute; and that this was not just convenient to the parties, but promoted the better administration of justice. 7. At [52]-[53], his Honour said: … Retention of the proceedings in this Court appeared likely to result in a faster and more efficient determination of the dispute. But there was an additional factor. Clearly it was in the interests of all concerned that the Appeal proceedings, which raised parallel issues to those raised in the Corporations proceedings, should be decided by the same court at the same time. But the Federal Court has no jurisdiction to entertain appeals from the Tribunal. The two proceedings could only be dealt with together if they were dealt with by this Court. In these circumstances, retention of the proceedings in this Court, where they could be promptly disposed of together with the Appeal proceedings, was not just convenient to the parties. As Slattery J said in James, it promoted the better administration of justice. 1. Accordingly, had it been concluded that the proceeding involved a special federal matter, his Honour would have ordered that they remain in this Court. Ms Montgomery's submissions 1. Ms Montgomery submits that the following amount to special reasons for this matter to be determined in this Court: that the better administration of justice is served by so doing; that this Court has particular expertise in and is well-equipped to hear matters under the Property (Relationships) Act (an expertise which it is said the Federal Court does not have – it being said that Counsel's researches had identified "no cases where the Federal Court has ever considered the [Property (Relationships) Act]" – T 34.45 – though my researches indicate that, at the very least, the Property (Relationships) Act has been applicable in matters before the Federal Courtsuch as, for example, Deputy Commissioner of Taxation v TD Preece Pty Ltd [2013] FCA 1365 and Pedersen v Delaveris [2010] FCA 536)); and that this Court's general expertise in equity (and hence, it is submitted, this Court is the natural forum for the proceedings); that there is no specialist issue of bankruptcy law involved in these proceedings; and that the proceedings are well advanced and are nearly in a position to be heard. 2. As to the last of those matters, it is said that all the plaintiff's evidence in chief has been filed and that it is not anticipated that there will be any substantial evidence from the defendants. Ms Montgomery contends that the issues between the parties are well ventilated and delineated and says that, apart from the likelihood of there being a statement of claim required, an early hearing date could be taken. Counsel for Ms Montgomery has estimated the duration of the hearing as two days. It is submitted that the position in the Federal Court as to a likely hearing date is not so certain and that there is the likelihood of further delay being occasioned by any transfer to that court. 3. Reference is also made by Ms Montgomery to the additional cost to the parties, particularly to her as plaintiff, in the event that the proceedings were to be transferred to the Federal Court. It is noted that, although the convenience of the parties is not determinative, it remains a factor to be considered (on the approach adopted by Slattery J in James v James). That said, Ms Montgomery submits that the likely additional cost, particularly in her financial circumstances (as to which she has deposed in her affidavit), is a factor to be considered which amounts to more than merely "the convenience of the parties". 4. In the course of oral argument, it was submitted that no good reason had been identified for the proceedings to be transferred to the Federal Court (T 35.15) and it was suggested that the trustees in bankruptcy had not put forward any reason for opposing the relief sought in Ms Montgomery's notice of motion. Pausing here, the question whether there is any good reason to transfer the proceedings is not the relevant question. Rather, that is what the legislation mandates shall occur unless the court makes an order under s 6(3) of the Cross-vesting Act. The relevant question is the converse, i.e., whether there are special reasons (other than convenience) for the proceeding to be determined by this Court. Thus, insofar as Ms Montgomery made a twofold submission that encompassed the former proposition (see T 37.11), I do not accept that is part of the question here to be determined. Submissions of trustees in bankruptcy 1. The trustees in bankruptcy oppose Ms Montgomery's application on the following bases: that the proceedings are an exercise of jurisdiction in bankruptcy and that an exercise of jurisdiction in bankruptcy is a special federal matter (both of which are accepted by Ms Montgomery); that the proceedings are at an early stage, having been commenced only in July this year; that it is unlikely (for the reasons I refer to below) that the court will ultimately have to deal with the Property (Relationships) Act claim; and, they submit, that there are otherwise no special reasons for the court not to transfer the proceedings. The trustees in bankruptcy have indicated that they intend to file a cross-summons for orders for possession to enable them to realise the real estate pursuant to their duties and powers under the Bankruptcy Act. 2. The trustees submit that, although in both James v James and Preston v Diaspora the court noted that one of the factors which amounted to special reasons was the necessary delay occasioned by the transfer of the proceedings, in each case that was in the context of a "convoluted procedural history predating the application which had already occasioned significant delay and expense". It is submitted that, without more, the short delay likely to be caused by a transfer of the present proceedings could not be said to be "unusual, uncommon or exceptional in character, quality or degree", such delay occurring, as it does, as a necessary consequence of any transfer made under the legislation. It is further submitted that in Preston v Diaspora, the additional fact that the two sets of proceedings could be determined together in this Court was a matter of some importance in considering the administration of justice. 3. In the present case, the trustees submit that, on a plain reading of the text of the various sections of the Property (Relationships) Act, the legislation "would seem to have no application". They point to the definition of "de facto relationship" in s 4(1) of the Property (Relationships) Act: For the purposes of this Act, a de facto relationship is a relationship between two adult persons: (a) who live together as a couple, and (b) who are not married to one another or related by family. and to the definition in s 5(1) of "domestic relationship": For the purposes of this Act, a domestic relationship is: (a) a de facto relationship, or (b) a close personal relationship (other than a marriage or a de facto relationship) between two adult persons, whether or not related by family, who are living together, one or each of whom provides the other with domestic support and personal care." 1. They also point to s 8 of the Property (Relationships) Act, which provides that 8(1) Without limiting the generality of section 7, in proceedings between parties to a domestic relationship with respect to existing title or rights in respect of property, a court may declare the title or rights, if any, that either party to the relationship has in respect of the property. (2) … (3) An order under this section is binding on the parties to the relationship but not on any other person. 1. The trustees argue that the combination of either s 4(1) or s 5(1) and s 8 limits applications in relation to declarations of existing title or rights in respect of property to proceedings between the parties to that relationship and to property; and that the Property (Relationships) Act has no application in relation to any claim for a declaration of existing rights as between the parties to the present proceedings (being a person and the trustee of her partner's bankrupt estate). 2. Further, the trustees point to s 14 (which, as does s 20, falls within Part 3 of the Property (Relationships) Act), which provides that: Applications for orders under this Part (1) Subject to this Part, a party to a domestic relationship may apply to a court for an order under this Part for the adjustment of interests with respect to the property of the parties to the relationship or either of them or for the granting of maintenance, or both. (2) An application referred to in subsection (1) may be made whether or not any other application for any remedy or relief is or may be made under this Act or any other Act or any other law. 1. The trustees submit that a plain reading of s 14 suggests that "the adjustment that the section contemplates is in relation to property that is owned by one or both of them at the time the adjustment is made" (i.e., "the divisible pool of property" – referring to the judgment of Brereton J, as his Honour then was, in Sharpless v McKibbin [2007] NSWSC 1498 at [3]-[4]). They submit that the same suggestion can be drawn from s 20, provides that: Application for adjustment (1) On an application by a party to a domestic relationship for an order under this Part to adjust interests with respect to the property of the parties to the relationship or either of them, a court may make such order adjusting the interests of the parties in the property as to it seems just and equitable having regard to: (a) the financial and non-financial contributions made directly or indirectly by or on behalf of the parties to the relationship to the acquisition, conservation or improvement of any of the property of the parties or either of them or to the financial resources of the parties or either of them, and (b) the contributions, including any contributions made in the capacity of homemaker or parent, made by either of the parties to the relationship to the welfare of the other party to the relationship or to the welfare of the family constituted by the parties and one or more of the following, namely: (i) a child of the parties, (ii) a child accepted by the parties or either of them into the household of the parties, whether or not the child is a child of either of the parties. (2) A court may make an order under subsection (1) in respect of property whether or not it has declared the title or rights of a party to a domestic relationship in respect of the property. 1. Reference is also made to s 47(2), which provides: (2) Where, on an application by a party to a domestic relationship for an order under Part 3, a court is satisfied that there is a domestic relationship agreement or termination agreement between the parties to the relationship, but the court is not satisfied as to any one or more of the matters referred to in subsection (1) (b), (c), (d) or (e), the court may make such order as it could have made if there were no domestic relationship agreement or termination agreement between the parties, but in making its order, the court, in addition to the matters to which it is required to have regard under Part 3, may have regard to the terms of the domestic relationship agreement or termination agreement. 1. It is submitted that the power contemplated by s 47(2) is, on its face, limited to the circumstances and kinds of orders that could otherwise be made under Part 3 (which, it is said, does not include an order dealing with property that no longer belongs to either party to the domestic relationship). 2. The trustees in bankruptcy note that Ms Montgomery seeks to disturb their position (as legal and equitable owners of both properties) by demonstrating: that the agreement purportedly made on 21 December 1990 had the effect of transferring the entirety of the equitable interest in the properties to her; alternatively, that an analysis of the respective contributions made by Ms Montgomery (or on her behalf) and Mr Docherty entitles her to an order that the trustees hold the properties on trust for her; and, further in the alternative, that, under the provisions of the Property (Relationships) Act, she is entitled to an adjustment of the properties in her favour; and they submit that each of those claims contemplates an analysis of the circumstances of the relationship between Mr Docherty and Ms Montgomery from about 1990 to the present. 3. As to the claim for relief under the Property (Relationships) Act, the trustees in bankruptcy submit that: there are sound policy reasons why the provisions of the Property (Relationships) Act should be read as contemplating proceedings between the parties to a relevant relationship and orders only affecting their rights (and not as purporting to deal with property in the hands of a bankruptcy trustee). They accept that, Mr Docherty having been discharged from bankruptcy in 2014, the court could make an order under the Property (Relationships) Act dealing with property held by either of them (but, as I understand it, their submission is that there is no such power in relation to property held by them as Mr Docherty's trustees in bankruptcy). 4. Thus, the trustees in bankruptcy submit that "there is little likelihood" that the Property (Relationships) Act claim "can go forward". They therefore submit that no great weight should be placed on the fact that there has been such an application made in these proceedings (or on any asserted difference in expertise between judges of this Court when compared to the Federal Court specifically in respect of that claim). 5. It is submitted that one indication that the Property (Relationships) Act was not intended as a State Act, to intersect with bankruptcy (and not intended to give the court power to make orders in relation to bankruptcy trustees where the apportionment asked for is not between the parties to the relationship but between one party to the relationship and the other party's bankruptcy trustee(s)) can be seen in the fact that amendment was required to be made to s 79 of the Family Law Act 1975 (Cth) to empower the Family Court to deal with that part of bankruptcy that "intermeshed' with family law (see T 25.45). 6. Furthermore, it is said that, absent the claim under the Property (Relationships) Act, as a matter of comity there ought not be a finding that there is a real difference in the expertise of the two courts when dealing with equity and trusts (noting that the Federal Court deals routinely with bankruptcy matters involving constructive and/or resulting trusts and referring by way of example in this regard to Prentice v Cummins (2003) 134 FCR 449; [2003] FCA 1002; Draper v Official Trustee in Bankruptcy (2006) 156 FCR 53; [2006] FCAFC 157; Huen v Official Receiver [2008] FCAFC 117; (2008) 248 ALR 1; Silvia (Trustee) v Williams, in the matter of Williams (Bankrupt) [2018] FCA 189; Kerr as trustee of the property of Janice Mary Kehlet (a bankrupt) v Kehlet [2019] FCA 1572). It is submitted that neither court could be described as "a more natural forum for a dispute involving property of the bankrupt estate". 7. As adverted to above, the trustees in bankruptcy cavil with the proposition that the present proceeding is particularly far advanced. Apart from expressing some scepticism that the plaintiff's evidence is presently complete (see T 32), it is said that the trustees in bankruptcy need time to gather evidence about events that took place so long ago; and it is foreshadowed that comprehensive discovery of the financial records of Ms Montgomery and Mr Docherty will be necessary; as well as the issue of subpoenas to various other parties in relation to the financial positions of Ms Montgomery and Mr Docherty; the trustees in bankruptcy also foreshadowing a likely forensic examination of the "Financial Agreement" (T 32.11). 8. It is noted that the present application was "flagged" at an early stage (and was filed a little over two months after the proceedings were commenced); and it is said that that two month period, and the time taken for the application to be heard, cannot be material ("otherwise the mere fact that a matter was commenced in a state court would become a factor on the application"). 9. The trustees in bankruptcy concede that there will be some "small" additional cost involved in the proceedings being transferred but it is submitted that that additional cost may be "little more than one directions hearing" and it is noted that there is no suggestion that any of the work done by Ms Montgomery's solicitors will have been wasted. It is thus submitted that the court could not be satisfied that costs of that magnitude would cause any significant hardship to Ms Montgomery. Determination 1. Section 6 of the Cross-vesting Act relevantly provides that: (1) If: (a) a matter for determination in a proceeding that is pending in the Supreme Court of a State or Territory is a special federal matter; and (b) the court does not make an order under subsection (3) in respect of the matter; the court must transfer the proceeding in accordance with this section to the Federal Court or a court mentioned in paragraph (2)(b). Note: This section has effect subject to section 6A (Special federal matters: Commonwealth authorities or officers acting under the laws of States). (1A) However, the court must only transfer so much of the proceeding as is, in the opinion of the court, within the jurisdiction (including the accrued jurisdiction) of the Federal Court, or the court mentioned in paragraph (2)(b), as the case may be. … (3) The Supreme Court may order that the proceeding be determined by that court if it is satisfied that there are special reasons for doing so in the particular circumstances of the proceeding other than reasons relevant to the convenience of the parties. (4) Before making an order under subsection (3), the court must be satisfied that: (a) a written notice specifying the nature of the special federal matter has been given to the Attorney-General of the Commonwealth and the Attorney-General of the State or Territory where the proceeding is pending; and (b) a reasonable time has elapsed since the giving of the notice for the Attorneys-General to consider whether submissions to the court should be made in relation to the proceeding. (5) … (6) In considering whether there are special reasons for the purposes of subsection (3), the court must: (a) have regard to the general rule that special federal matters should be heard by the Federal Court or a court mentioned in paragraph (2)(b), whichever is appropriate in the particular case; and (b) take into account any submission made in relation to the proceeding by an Attorney-General mentioned in subsection (4). 1. A "special federal matter" is defined by the Cross-vesting Act to include "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". 2. Section 27 of the Bankruptcy Act confers concurrent jurisdiction "in bankruptcy" on the Federal Court and the Federal Circuit Court of Australia and provides that that jurisdiction is exclusive (save for certain exceptions that are not relevant for present purposes). A matter in which a declaration is sought for or against the title of the trustee in property falls within the jurisdiction in bankruptcy (s 31(1)(f) of the Bankruptcy Act). 3. In Mateljan, the Court of Appeal said: While it is not altogether easy to discern in some cases, there appears to be a distinction between, on the one hand, exercising jurisdiction under or by virtue of the Bankruptcy Act by simply recognising the effect of the Bankruptcy Act and, on the other, exercising "jurisdiction in bankruptcy". Central to the jurisdiction in bankruptcy is the authority to decide what property is, and what property is not, vested in the trustee in bankruptcy. An application for orders that "would have a necessary adverse effect on the title of" the Trustee is a matter in bankruptcy. [footnotes omitted] 1. Accordingly, as noted above, the only issue on the present applications is whether there are special reasons for this proceeding to be determined in this Court. Although there was a suggestion in the course of oral argument for Ms Montgomery that the Federal Court would not have jurisdiction (if the matter were to be transferred to it) to deal with the Property (Relationships) Act claim, and, indeed, that transferring the proceedings would be fatal to such a claim – see T 21.45; T 22.48; that cannot be the case having regard to s 4(3) of the Cross-vesting Act. As clarified in reply submissions, the position of Ms Montgomery in this regard (having pointed to the jurisdictional provisions of the Property (Relationships) Act) was, rather, to emphasise that there had been no ability for her to commence proceedings elsewhere than in this Court (other than, of course, the Local Court but, there, other jurisdictional limits would arise) insofar as an application for relief was to be made under the Property (Relationships) Act (see T 35.45). Hence, as I understand it, the submission is that additional costs would now unnecessarily be incurred if the matter is to be transferred to the Federal Court. It was submitted that if, in every case involving a Property (Relationships) Act claim, the proceedings were required to be transferred once a party became bankrupt, at additional cost, this would not be consistent with the just, quick and cheap resolution of the real issues in dispute (see s 56 of the Civil Procedure Act 2005 (NSW)) (T 36.2). That, however, seems to me to ignore (or place insufficient weight on) the mandatory wording of the legislation: it is clear that where there is a special federal matter the proceedings must be transferred unless there are "special reasons" not to do so. 2. It is not appropriate at this stage to enter into debate as to whether a claim under the Property (Relationships) Act is maintainable or could ultimately "go forward" against the trustees in bankruptcy (i.e., as to the question of the intersection between this Act and the bankruptcy law); not least because it seems to have been accepted by the trustees in bankruptcy that the bankrupt's property as vested in them would be impressed by equities affecting that property. Although it was submitted to the trustees in bankruptcy that it "may be" that the question of the intersection of the Property (Relationships) Act with the Bankruptcy Act is a question of some importance to which bankruptcy expertise might become relevant (T 33.40), it was conceded that at this stage that was difficult to tell. 3. I am not persuaded that there is a sufficient concern that a specialist issue of bankruptcy law will here arise such as to weigh against a conclusion that the matter should remain in this Court. I do have regard to the general rule that special federal matters should be heard in the Federal Court, but I consider it is relevant to note that none of the Attorneys-General has considered it necessary to intervene to make any submissions in this regard. 4. Whether there are "special reasons" for the proceeding to be determined in this Court ultimately in my opinion comes down to the related issues of cost and delay. The present case seems to me to be in a quite different category from the situations that were before the court in James v James and Preston v Diaspora, respectively. In James v James, the history of the proceedings began with the appointment of trustees of sale for the property (under s 66G of the Conveyancing Act 1919 (NSW)) by Emmett AJA at a time before Ms James became bankrupt. There followed disputes to the value of improvements to the property and the issue of a writ of possession again before Ms James became bankrupt. The proceedings before Slattery J in 2019 related to disputes as to the expenses the trustees for sale had charged and as to the apportionment of the proceeds of sale. Ms James then disputed the position taken by her trustee in bankruptcy in relation to the apportionment of the proceeds of sale. There was no doubt that there was a convoluted history to the proceedings, with there having been multiple directions hearings; and the complication that certain of the litigants were self-represented. 5. In Preston v Diaspora, there was again a convoluted history to the proceedings. They began life as a dispute over car spaces in a strata scheme. That dispute was before NCAT. The strata corporation initially made an application seeking an injunction restricting the company's use of the car spaces. Mr Preston brought an application by way of appeal to NCAT and also commenced separate proceedings in NCAT. The strata corporation successfully challenged the retainer of the company's solicitors and the validity of Mr Preston's purported appointment as director. Proceedings were then brought in this Court (one in the Corporations List seeking declaratory orders and another appeal against NCAT's decision). Not only was the court managing two sets of proceedings (delayed by a retainer dispute) but it was clear that the appeal from the decision of NCAT could only be determined in this Court, which gave rise to the real possibility of two separate sets of proceedings in two separate courts if the proceedings involving the trustee in bankruptcy were to be transferred. 6. By contrast, this is not a case where there have been multiple hearings already; or where there are related issues (such as the NCAT appeal issues) that would not be able to be determined together with these proceedings were these proceedings now to be transferred. Nor is it a case where the continued hearing of this matter by a particular judge already well apprised of the complicated procedural background to the matter is a relevant factor; nor one where the difficulties that had been occasioned by the fact that certain of the parties were self-represented would here arise. 7. I accept that the present proceedings are not particularly far advanced. It seems to me inevitable that this matter would need to proceed by way of pleadings (having regard to the constructive trust, resulting trust and estoppel claims sought to be propounded), as foreshadowed by Ms Montgomery; and the matter is not yet at a stage where the trustees in bankruptcy have been required to serve their evidence. It is also likely that the trustees in bankruptcy will need to avail themselves of the compulsory processes of the court and the procedures for pre-trial discovery in order to be apprised of the factual matrix against which Ms Montgomery's allegations are to be tested; and they have foreshadowed a challenge to the authenticity of the "Financial Agreement" which may require expert evidence. Thus, it does not seem likely to me that the matter could yet be allocated a hearing date in this Court. 8. I do not accept that there is a material difference in the expertise of judges in the respective courts that would factor into the equation in the present case; nor would it be appropriate, as a matter of comity between courts (the importance of which cannot be overstated – see Allsop CJ in Wileypark Pty Ltd v AMP Limited [2018] FCAFC 143 at [11]) to embark upon a process of comparison in that regard. True it is that, under the Property (Relationships) Act, applications for relief can only be made to this Court (or the Local Court). However, as the trustees in bankruptcy point out, judges in the Federal Court commonly hear matters raising estoppel, constructive trust or resulting trust claims, or other equitable issues of the kind raised in the present proceedings (and, indeed, judges in the federal jurisdiction also hear family law matters that raise very similar kinds of issues to those under the Property (Relationships) Act). 9. Leaving aside (as it is clear from the legislation that this cannot be a determinative factor), the convenience of the parties, is there a special reason for this proceeding to be determined in this Court? With some hesitation, I have concluded that there is – and that is the financial position of Ms Montgomery (which I consider goes beyond a mere matter of convenience). Given her difficult financial circumstances, I accept that even a relatively small additional cost (coupled with what is accepted would inevitably be at least some delay) of transferring the proceeding to the Federal Court, is a special reason for the matter to be determined in this Court (particularly where it can be case managed in the applications list with a view to it obtaining a hearing, if at all possible, this year). For that reason (and not because of any issue as to the relative expertise of the respective courts or the relative advantages or otherwise of the case management processes in the respective courts) I consider that it is in the interests of the better administration of justice for the matter to be determined by this Court. I emphasise that this conclusion would by no means follow in all cases where a claim under the Property (Relationships) Act is made and one party to the claimed relationship is or becomes bankrupt. Hence I do not consider that a "floodgates" argument arises either way. 10. Accordingly, I consider that the relief sought by Ms Montgomery should be granted. Insofar as the trustees in bankruptcy have sought an order for the proceedings to be transferred to the Federal Court of Australia or for the proceedings to be stayed, I will dismiss their application. I will make directions for the hearing of their application for security for costs if that is still to be pressed. 11. I am presently inclined simply to reserve the costs of the respective motions, since (although Ms Montgomery was successful in obtaining the relief sought in her notice of motion) an application would have needed to be made for a determination of the kind here sought in any event (since it is common ground that the proceedings involve a special federal matter which, absent such a determination would be required to be transferred). Orders 1. For the above reasons, I make the following orders: 1. Order pursuant to s 6(3) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) that these proceedings be determined in this Court. 2. Dismiss the defendants' notice of motion filed 20 September 2019 insofar as it seeks an order that these proceedings be transferred to the Federal Court of Australia or otherwise permanently stayed. 3. Reserve the costs of the plaintiff's notice of motion filed 19 September 2019 and of the defendants' notice of motion filed 20 September 2019. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 November 2019