Braude v Tauman

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FEDERAL COURT OF AUSTRALIA

Braude v Tauman [2018] FCA 1385

File number: NSD 250 of 2018
Judge: THAWLEY J
Date of judgment: 6 September 2018
Catchwords:

PRACTICE AND PROCEDURE – summary judgment application under r 26.01(1)(a) of the Federal Court Rules 2011 (Cth) – whether to exercise power under s 31A of the Federal Court of Australia Act 1976 (Cth) to dismiss part of the proceeding – whether applicants have no reasonable prospect of successfully prosecuting part of the proceeding – where factual issues capable of being disputed and in fact in dispute

PRACTICE AND PROCEDURE – strike out application under r 16.21 of the Federal Court Rules 2011 (Cth) –pleading not struck out

PRACTICE AND PROCEDURE – jurisdiction – where applicants pleaded cause of action under the Australian Consumer Law (ACL) and for breach of contract – whether ACL claim merely an artifice to attract the jurisdiction of the Court

COSTS – application for costs to be payable forthwith – whether Court should exercise discretion to disengage r 40.13 of the Federal Court Rules 2011 (Cth)

Legislation:

Competition and Consumer Act 2010 (Cth) sch 2 ss 18, 236

Federal Court of Australia Act 1976 (Cth) s 31A

Federal Court Rules 2011 (Cth) rr 16.21, 26.01, 40.13

Retail Leases Act 2003 (Vic) s 7
Cases cited:

Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd [2009] FCA 499

Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 13) [1995] FCA 1459

Australian Flight Test Services v Minister for Industry, Science and Technology [1996] FCA 1425

Australian Property Buyers Pty Ltd v Kowalski [2006] VCAT 24

Bailey v Beagle Management Pty Ltd (2001) 105 FCR 136

Benaych v Telcanti Pty Ltd (Building and Property) [2016] VCAT 1947

Clipsal Australia Pty Ltd v Clipso Electrical Pty Ltd [2016] FCA 37

Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (No 5) [2018] FCA 19

General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125

Imobilari Pty Ltd v Opes Prime Stockbroking Ltd (2008) 252 ALR 41

Life Airbag Company of Australia Pty Ltd v Life Airbag Company (New Zealand) Ltd [1998] FCA 545

McKellar v Container Terminal Management Services Ltd [1999] FCA 1639

Morris v IMF Bentham Limited [2018] FCA 1009

Spencer v Commonwealthof Australia (2010) 241 CLR 118

Takemoto v Moody’s Investors Service Pty Limited [2014] FCA 1081

Tanioria v Commonwealth of Australia (No 2) [2017] FCA 1117

Trade Practices Commission v Pioneer Concrete (Qld) Pty Ltd (1994) 52 FCR 164

Tropical Reef Shipyard Pty Ltd v QBE Insurance (Australia) Ltd [2011] FCAFC 145

Date of hearing: 6 September 2018
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Commercial Contracts, Banking, Finance and Insurance
Category: Catchwords
Number of paragraphs: 68
Counsel for the Applicants: Mr D A Lloyd
Solicitor for the Applicants: Salerno Law Pty Ltd
Counsel for the Respondents: Mr C R Northrop
Solicitor for the Respondents: Harwood Andrews Lawyers

ORDERS

NSD 250 of 2018
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Details
Case
[2018] FCA 1385
Decision Date

CaseChat Overview and Summary

In the matter of Braude v Tauman, the applicants sought summary judgment under rule 26.01 of the Federal Court Rules 2011, specifically addressing whether the court should exercise its power under section 31A of the Federal Court of Australia Act 1976 to dismiss part of the proceeding due to the applicants having no reasonable prospect of successfully prosecuting their Australian Consumer Law claims. The respondents argued that the applicants had no reasonable prospect of success and that the ACL claims were a mere artifice to attract the court's jurisdiction. Additionally, the applicants sought an order for costs to be payable forthwith, and the respondents contested the applicants' jurisdiction to bring the ACL claims.

The court considered the principles set out in Spencer v Commonwealth of Australia, which highlighted that the power to dismiss an action summarily is not to be exercised lightly, even when supported by evidence. The court noted that the presence of factual issues capable of being disputed and in dispute should not lead to summary dismissal if the applicant has more than a "fanciful" prospect of success. The court also reviewed the pleadings and documentary evidence to determine if there were genuine factual disputes that warranted a trial.

After examining the evidence, the court concluded that there were factual issues that needed to be resolved at a trial, and therefore, the applicants had more than a fanciful prospect of success on their ACL claims. The court held that the applicants had a reasonable prospect of successfully prosecuting their ACL claims and dismissed the respondents' summary judgment application. The court also rejected the respondents' argument that the ACL claims were a mere jurisdictional artifice.

The court ordered that the interlocutory application be dismissed and that the applicants' costs of the interlocutory application be paid by the respondents. The court further ordered that the applicants provide full particulars to paragraph 31 of the amended statement of claim, and set timelines for document production, defence filing, mediation, and case management hearing. The court did not exercise its discretion to order costs to be payable forthwith.

Orders

Orders of the court

1. The interlocutory application be dismissed.

2. The respondents pay the applicants’ costs of the interlocutory application.

3. The applicants provide full particulars to paragraph 31 of the amended statement of claim by 20 September 2018.

4. By 27 September 2018, the respondents serve on the applicants any request for informal production of documents not within the possession, custody or control of the respondents.

5. The respondents file and serve their defence to the amended statement of claim, and any cross-claim, by 4 October 2018.

6. Pursuant to s 53A of the Federal Court of Australia Act 1976 (Cth) and r 28.02 of the Federal Court Rules 2011 (Cth), the proceedings be referred to mediation to be conducted by a registrar of the Court, such mediation to be held no later than 18 October 2018.

7. The applicants file and serve any reply, and any defence to the cross-claim, by 18 October 2018.

8. Evidence be adduced by way of affidavit, except evidence of oral conversations, the substance of which are to be the subject of outlines of proposed oral evidence. The outlines of proposed oral evidence are not to be tendered at hearing or used in cross-examination.

9. The applicants file and serve any affidavit, and any outline of proposed oral evidence, by 1 November 2018.

10. The respondents file and serve any affidavit, and any outline of proposed oral evidence, by 29 November 2018.

11. The matter be listed for a case management hearing at 9:15 am on 30 November 2018.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The background facts which I set out below are taken in part from the allegations made in the amended statement of claim and in part from the affidavit and documentary material in evidence on the interlocutory application and are not to be taken as final findings of fact. They serve only to identify the facts as the applicants assert them to be for the purposes of their claims for relief in order to determine whether summary judgment should be granted in relation to the ACL claims or whether they should be struck out, and in relation to the question of this Court’s jurisdiction. BACKGROUND The respondents own and operate a pharmacy located in a shopping complex on the corner of Shaws Road and Tarneit Road, Werribee in the State of Victoria. On 1 March 2006, the first respondent, Mr Tauman, entered into a lease of premises known as “Shop 10” from Ziot Pty Ltd. The Shop 10 premises were located next door to the pharmacy. Mr Tauman agreed to sublease the Shop 10 premises to a third party, A & R Kazi Pty Ltd (ARK), for a period of five years. ARK operated a medical centre at the Shop 10 premises for the duration of the sublease. On about 1 March 2011, Mr Tauman approached the first applicant, Dr Braude, and informed him that ARK had been running the medical centre poorly, which was adversely affecting the pharmacy business operated by Mr Tauman, and asked Dr Braude to operate a medical centre at the Shop 10 premises. This appears to have occurred at or around the end of ARK’s sublease of Shop 10 from Mr Tauman. However, it is not clear at this stage of the proceedings when that sublease finally came to an end. An email sent by Dr Braude to Mr Tauman on 12 May 2011 suggests that Dr Braude and Mr Tauman may have reached some sort of understanding, or had at least been in discussion, on or before that day concerning their proposed arrangements. The email included (errors in original):hi ianjust a brief note to let you know re tarneit clinic.i have dr zaid working full time- a young male doctor, graduated from london.he already sees 40-50 patients per daydr naomi <a jewish lady dr from london> started this week twice a week –will build up very quickly to full time.i think it will take her 1 month at the most.i have a third male dr ,also from –yes you guest it-londan, starting in 1 month. by first of july i am aiming to have 2 male and 1 female doctors working full time.i am very happy with this progress-and i hope so are you.this is my understanding of our verbal arrangment [sic].form [sic] 1 june I have to start paying rent to landlord for both the medical clinic [Shop 10] and the “nail place” [Shop 9A]nail place is subleased to pathology.we do not have to worry about that.the rent for medical clinic is approximately 32,000+gst+outgoings.let’s say outgoings will be 3,000 per year.so overall rent is 35kit is my understanding that you will pay me half of that on monthly basis while i have 1 or 2 doctors working there and full 35k monthly once I have 3 full time doctors working there.we have not discussed what my payment will be past the 2 full time doctors.we will have a further discussion about this later.are we on the same page so far?

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

In summary, the respondents’ case is that “the ACL claim is manifestly deficient, both on its face and on the evidence that has been filed” and “is colourable and intended simply to clothe the dispute with federal jurisdiction”. Summary judgment Rule 26.01 sets out the circumstances in which a party may apply to the Court for an order for summary judgment:(1)A party may apply to the Court for an order that judgment be given against another party because:(a) the applicant has no reasonable prospect of successfully prosecuting the proceeding or part of the proceeding; or(b) the proceeding is frivolous or vexatious; or(c) no reasonable cause of action is disclosed; or(d) the proceeding is an abuse of the process of the Court; or(e) the respondent has no reasonable prospect of successfully defending the proceeding or part of the proceeding.…(4) If an order is made under subrule (1) dismissing part of the proceeding, the proceeding may be continued for that part of the proceeding not disposed of by the order. The respondents indicated in oral submissions that they seek summary dismissal of the ACL claim under r 26.01(1)(a). The power of this Court to dismiss a proceedings or part of a proceeding under paragraph (a) of r 26.01(1) comes from s 31A of the Federal Court of Australia Act 1976 (Cth) which includes:(2) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:(a) the first party is defending the proceeding or that part of the proceeding; and(b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.(3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:(a) hopeless; or(b) bound to fail;for it to have no reasonable prospect of success.(4) This section does not limit any powers that the Court has apart from this section. Relevant principles were recently summarised by Markovic J in Tanioria v Commonwealth of Australia (No 2) [2017] FCA 1117 at [26]-[28] by reference to the decisions in Spencer v Commonwealthof Australia (2010) 241 CLR 118 at [25] (French CJ and Gummow J) and [60] (Hayne, Crennan, Kiefel and Bell JJ), and Takemoto v Moody’s Investors Service Pty Limited [2014] FCA 1081 at [11]-[15] (Flick J). I gratefully adopt her Honour’s summary. The power to dismiss an action summarily is not to be exercised lightly: Spencer at [24] and [60]; Tropical Reef Shipyard Pty Ltd v QBE Insurance (Australia) Ltd [2011] FCAFC 145 at [31] (Edmonds, Jessup and Robertson JJ). This is no less true in cases where summary judgment is sought by an application supported by evidence: Spencer at [24]. As French CJ and Gummow J observed in Spencer at [25]:Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a “fanciful” prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue.

Ratio Decidendi

Legal Principle Established

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