Daimler Chrysler Services Australia Pty Ltd Tollan Real Estate Pty Ltd

[2005] NSWLC 8

Local Court of New South Wales

CITATION:	Daimler Chrysler Services Australia Pty Ltd Tollan Real Estate Pty Ltd [2005] NSWLC 8
JURISDICTION:	Civil
PARTIES:	Daimler Chrysler Services Australia Pty Ltd Tollan Real Estate Pty Ltd Daimler Chrysler Australia Pacific Pty Ltd (Third Party)
FILE NUMBER:	2098/04
PLACE OF HEARING:	Downing Centre
DATE OF DECISION:	03/15/2005
MAGISTRATE:	Magistrate H Dillon
CATCHWORDS:	Jurisdiction - Trade Practices Act - Local Court has jurisdiction in relation to ss 71,73,74A - 74G, 75A - Statutory Interpretation - Interpretation of ss 71,73, 74A-74G, 75A, 75AS, 86 (2) of Trade Practices Act
LEGISLATION CITED:	Australian Securities and Investments Comission Act 2001 (Cth) s 12 ED Judiciary Act 1903 (Cth) s 39 (2) Jurisdiction of Courts (Cross vesting) Act 1987 (Cth) Local Courts (Civil Claims) Act 1970 (NSW) s 12 Trade Practrices Act 1974 (Cth) ss 4, 71, 73, 74A - 74G, 75A, 75A 75 AS, 86
CASES CITED:	Arturi v Zupps Motors Pty Ltd (1980) 33 ALR 243 E v Australian Red Cross Society (1991) 27 FCR 310 Polgardy v AGC Ltd (1981) 34 ALR 391 Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 Western Australia v Wardley Australia Ltd (1991) 102 ALR 213 Zalai v Cook Crawford (Retail) Pty Ltd [1980] 2 NSWLR 438
REPRESENTATION:	Ms Humphreys Humphreys & Feather Solicitors for Plaintiff Mr P Bruckner for Defendant Mr Bliim for Third Party Morgan Lewis Attorneys Solicitors for Defendant Riley, Grey-Spencer Lawyers for Third Party
ORDERS:	This matter is adjourned for hearing to 21 April 2005

JUDGMENT

In this matter, the plaintiff, Daimler Chrysler Services Australia Pty Ltd (“Daimler Chrysler Services”) brings its action alleging a breach of a lease agreement in respect of a Mercedes-Benz motor car by the defendant. The defendant, Tollan Real Estate Pty Ltd (“Tollan”) in turn has filed a cross-claim alleging, among other things, that the car was defective.

In its cross-claim, the defendant relies on various provisions of the Trade Practices Act 1974 (“TPA”). At [4] of its cross-claim it alleges that the cross-defendant supplied the motor vehicle “in the course of business” pursuant to s.71 of the TPA.

At [5] it alleges that, pursuant to s.73 of the TPA the cross-defendant is a “linked credit provider” with the Third Party, Daimler Chrysler Australia/Pacific Pty Ltd (“Daimler Chrysler Pacific”) and that the third party had an arrangement with the cross-defendant concerning the supply of the vehicle in question to Tollan.

In [6] it asserts that the vehicle was supplied to Tollan which was a “consumer” for the purposes of s.71 of the TPA. At [11] it alleges that in breach of the provisions of s.71 of the TPA the car supplied did not comply with its description, was not of merchantable quality and was not fit for its purpose.

At [14] Tollan states that it rescinded its agreement with the plaintiff pursuant to s.75A of the TPA (and the common law).

At [18] Tollan then asserts its claim pursuant to s.75A of the TPA for “the amount given for the vehicle as a debt” (which is a claim the meaning of which I have trouble understanding at this stage) and for damages and interest.

In its Third Party Notice the defendant also relies on various provisions of the TPA. Apart from sections of that Act that were pleaded in the cross-claim and adopted in the Third Party Notice, the defendant also seeks to rely on ss.74A, 74B, 74C, 74D and 74G.

When this matter was reviewed by Magistrate Lulham on 8 February 2005, he granted the defendant leave to file an amended Notice of Grounds of Defence and Notice of Cross-claim on condition that the amended notices did not “raise substantive new issues but clarified existing defence and cross-claim”. He directed that amended defences to the cross-claim and third party notice be filed “by the hearing date on the basis that [those parties] will not raise fresh issues.” He then confirmed the hearing date and made other directions.

On 4 February 2005, the defendant filed amended notices. Objection is taken by the plaintiff and third party to those notices on the basis that they raise substantial new issues and that this was not within the contemplation of Magistrate Lulham when he made directions on 8 February 2005.

On 16 February 2005, I commenced hearing this case. The jurisdictional point was raised immediately by both the plaintiff and third party. Because, however, a witness had been called from interstate, his evidence was taken before I made a decision on the interlocutory points being argued. When it became clear that the interlocutory issues were complex and could not be determined within the time available to the Court I set a timetable for written submissions.

I directed that the defendant serve and file its submissions by 22 February and that the replies of other parties be served and filed by 1 March. I received the defendant’s submissions on 25 February and the third party’s on 9 March. I have received no written submissions from the plaintiff. It was plain, however, from what I heard on 16 February that, insofar as these interlocutory points are concerned those parties have a common attitude. A number of oral submissions were made on that day by the plaintiff indicating that was its position. I have therefore assumed that the arguments advanced in writing for the third party have been, in effect, adopted by the plaintiff.

The issues

Both the plaintiff and third party contend that this Court has no jurisdiction to entertain the cross-claim and Third Party Notice insofar as they rely on the TPA.

Second, there is a question whether the proceedings are to be conducted on the basis of the pleadings filed by the defendant on 4 February 2005.

The submissions concerning jurisdiction

The plaintiff and third party contend that s.86 of the TPA limits the jurisdiction of the Local Court in respect of actions brought under that Act. They argue that unless there is a specific provision of the TPA extending the jurisdiction of the NSW Local Court to matters included in Divisions 2 and 2A of Part V of the TPA, this Court has no jurisdiction to deal with the cross-claim.

Section 39(2) of the Judiciary Act 1903 (Cth) confers a general Federal jurisdiction on State courts on matters in which the High Court has or could have original jurisdiction. That this Court has a general Federal jurisdiction is not in question. The question concerns the limits of it.

Again, it is not in question that Federal jurisdiction is to be exercised within the jurisdictional limits imposed by State law. Section 12(1) of the Local Courts (Civil Claims) Act 1970 (NSW) provides:

Subject to this Part, a court sitting in its General Division has jurisdiction to hear and determine actions for the recovery of any debt, demand or damage (whether liquidated or unliquidated) in which the amount claimed is not more than $60,000, whether on a balance of account or after an admitted set-off or otherwise.

Section 86 relevantly provides as follows:

(1AA) A reference in this section to this Act, or to a Part or Division of this Act, is a reference to this Act, or to that Part or Division, as it has effect as a law of the Commonwealth.

(1) Jurisdiction is conferred on the Federal Court in any matter arising under this Act in respect of which a civil proceeding has, whether before or after the commencement of this section, been instituted under this Part…

(2) The several courts of the States are invested with federal jurisdiction within the limits of their several jurisdictions, whether those limits are as to locality, subject-matter or otherwise, and, subject to the Constitution, jurisdiction is conferred on the several courts of the Territories, with respect to any matter arising under Part IVA or IVB or Division 1, 1A or 1AA of Part V in respect of which a civil proceeding is instituted by a person other than the Minister or the Commission.

(3) Nothing in subsection (2) shall be taken to enable an inferior court of a State or Territory to grant a remedy other than a remedy of a kind that the court is able to grant under the law of that State or Territory.

(4) The jurisdiction conferred by subsection (1) on the Federal Court is exclusive of the jurisdiction of any other court other than:
(a) the jurisdiction of the Federal Magistrates Court under subsection (1A); and
(b) the jurisdiction of the several courts of the States and Territories under subsection (2); and
(c) the jurisdiction of the High Court under section 75 of the Constitution.

The plaintiff and third party argue that there is no extension of Federal jurisdiction to encompass matters which arise under Divisions 2 and 2A of Part V of the TPA, within which ss. 71, 73, 74A-74G and 75A fall. They contend that since the decision of the High Court in Re Wakim; Ex parte McNally & Ors (1999) 198 CLR 511. striking down the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) as unconstitutional there is no basis upon which the Local Court of NSW can hear Federal matters other than those referred to in s.86(2) of the TPA or in some other specific enactment.

One other specific enactment that supports this contention, according to the plaintiff and third party, is s.75AS of the TPA which reads:

Subsections 75B(2) and 86(1), (2), (3) and (4) and sections 86A and 86B operate in relation to an action under this Part as if:

(a) references in them to Part VI included references to this Part; and

(b) references in them to Division 1, 1A or 1AA of Part V included references to this Part; and

(c) references in them to the Minister were omitted

Section 75AS falls within Part VA of the Act. There is no similar provision extending the scope of s.86(2) to Part V. It submitted that, if this Court had general Federal jurisdiction under the Judiciary Act in relation to the TPA, by virtue of ordinary principles of statutory construction, namely that specific provisions override general provisions, s.86(2) cuts back any such notional general jurisdiction in this Court.

The cross-claimant makes different submissions in relation to the pleadings under s.71, 73, 74B-74G and 75A.

Section 71 of the TPA deals with implied undertakings as to fitness of a product. It states:

(1)
Where a corporation supplies (otherwise than by way of sale by auction) goods to a consumer in the course of a business, there is an implied condition that the goods supplied under the contract for the supply of the goods are of merchantable quality, except that there is no such condition by virtue only of this section:

(a) as regards defects specifically drawn to the consumer's attention before the contract is made; or

(b) if the consumer examines the goods before the contract is made, as regards defects which that examination ought to reveal.

(2)
Where a corporation supplies (otherwise than by way of sale by auction) goods to a consumer in the course of a business and the consumer, expressly or by implication, makes known to the corporation or to the person by whom any antecedent negotiations are conducted any particular purpose for which the goods are being acquired, there is an implied condition that the goods supplied under the contract for the supply of the goods are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied, except where the circumstances show that the consumer does not rely, or that it is unreasonable for him or her to rely, on the skill or judgment of the corporation or of that person.
(3)
Subsections (1) and (2) apply to a contract for the supply of goods made by a person who in the course of a business is acting as agent for a corporation as they apply to a contract for the supply of goods made by a corporation in the course of a business, except where that corporation is not supplying in the course of a business and either the consumer knows that fact or reasonable steps are taken to bring it to the notice of the consumer before the contract is made.

Relying on decisions of the Federal Court in Arturi v Zupps Motors Pty Ltd (1980) 33 ALDR 243. and E v Australian Red Cross Society (1991) 27 FCR 310., the cross-claimant argues that s.71 operates to imply terms into contracts entered by corporations supplying consumers. It does not give rise to a a cause of action per se. It therefore contends that the cross-claim is an action for breach of contract, some of the terms of which are implied by operation of s.71, and so is not caught by s.86(2).

Similarly, in relation to the pleading that refers to s.73 of the TPA the submission is that the cross-claim is an action in contract rather than under the TPA per se. Section 73 is a long and complex section but, in summary, provides for joint and several liability of a corporation and a “linked credit provider” in relation to loss or damage suffered as a result of misrepresentation, breach of contract, failure of consideration, breach of a term implied by ss. 70, 71 or 72 or breach of a warranty implied by s.74 of the TPA or s.12ED of the Australian Securities and Investments Commission Act 2001 (Cth). For the proposition that the action is one in contract rather than one arising under the TPA, the cross-claimant relies on the decision of the Full Federal Court in Western Australia v Wardley Australia Ltd. (1991) 102 ALR 213.

As to the pleadings relying on ss.74A-74G, the third party contends that those sections provide for causes of action independent of s.82 of the TPA. (Section 82 falls within Part VI of the TPA and provides for an action for damages for contraventions of Parts IV, IVA, IVB and V and s.51AC.) The cross-claimant, relying again on the decision in Arturi v Zupps Motors, argues that an action for compensation in relation to goods alleged not to be of merchantable quality is not an action for contravention of a provision in Part V of the TPA. It also relies on Zalai v Col Crawford (Retail) Pty Ltd in which Rogers J held that relevant actions under s.74B and following could be brought in State courts.

Finally, in relation to the s.75A pleading, the cross-claimant argues that the section does not confer jurisdiction but creates a statutory remedy exercisable by a court of competent jurisdiction (in this case, the Local Court of NSW). It relies for that argument upon the decision of the Federal Court in Polgardy v AGC Ltd. (1981) 34 ALR 391.

In response to these arguments, the third party submits that the various decisions relied upon by the cross-claimant were all decided before the decision in Re Wakim and ought therefore be distinguished on that basis. It says that while some of the matters relied upon by the cross-claimant are properly classified as breaches of contract, the cross-claimant must rely on the relevant sections of the TPA and that, absent a specific grant of jurisdiction under the TPA, the Local Court cannot pick up jurisdiction to deal with them as they arise under the TPA.

Analysis and conclusions on jurisdiction

The TPA was enacted in 1974 and since then has been constantly amended. It so much of a is a legislative patchwork quilt that interpretation is not always straightforward or simple. Interpretation is not aided by the hodge-podge of drafting techniques applied to amend it in various ways at various times.

The plaintiff and third party both rely for their argument that the Court has no jurisdiction upon a narrow interpretation of s.86(2). In essence, the question for determination here is whether s.86(2) constitutes the entire conferral of jurisdiction upon the Local Court in respect of the TPA and limits its jurisdiction or whether it stands together with other Parts of the TPA in conferring Federal jurisdiction on the Court.

In relation to s.71 in Arturi v Zupps Motors Pty Ltd (1980) 33 ALDR 243., Brennan J (then a member of the Federal Court) said (at 246):

[A] breach of a condition which is implied by s.71 does not involve conduct in contravention of a provision of Part V… Section 71 takes effect by imposing an obligation upon one of the contracting parties as though the parties had embodied the obligation in their contract. No doubt it is right to say that the obligation is statutorily created for the condition can derive no force from an actual or implied consent of the parties whose freedom to exclude its imposition is removed by s.68. But by describing the obligation as an implied condition, s.71 defines the nature of the obligation. It an obligation which takes effect by a legal fiction, namely, that the parties made a contract which included the obligation. For the purposes of s.82, therefore, a breach of the obligation is not to be treated as a breach of an obligation imposed upon the obligor by the Act dehors the contract, but as an obligation imposed by the contract itself.

It follows that a proceeding for damages for breach of s.71 is not a proceeding falling within s.82. It would be startling if a breach of a s.71 condition were a contravention of the section, for on that hypothesis it would b, by virtue of s.79, be punishable on conviction. So absurd a consequence could not have been intended.

From this it is clear that s.71 imposes on corporations supplying goods to consumers in the course of business certain contractual obligations. Any cause of action arising from a breach of the terms of the contract implied by s.71 is therefore an action in contract and does not involve Federal jurisdiction.

The fact that Arturi (and the other authorities referred to by the cross-claimant) was decided before Re Wakim is irrelevant to the common law of contract. In any event, in Re Wakim the High Court decided that Federal courts could not, under the Constitution, be vested with State jurisdiction. It does not affect the conferral of Federal jurisdiction upon State courts pursuant to s.39 of the Judiciary Act.

Section 73 imposes liability upon corporate suppliers of goods and linked credit providers in relation to consumer contracts. It allows consumers to recover for loss and damage “in a court of competent jurisdiction.” The learned Mr Russell Miller comments:

The reference in s.73 to ‘a court of competent jurisdiction’ is a reference to State courts invested with Federal jurisdiction by s.39(2) of the Judiciary Act 1903(Cth)… Although s.73 is in Pt V a claim relating to the section is a claim for breach of contract, not a claim for contravention of Pt V. Miller’s Annotated Trade Practices Act (25th edn) Thomson Lawbook Co, Sydney 2004 p636 [1.73.10]

Further weight for the cross-claimant’s contention is added by the decision of the Full Federal Court in Western Australia v Wardley Australia Ltd (1991) 30 FCR 245. See also Arturi v Zupps Motors Pty Ltd (1980) 49 FLR 283 at 287., when it said (at 220), “Jurisdiction in respect of matters under ss. 73 and 74J has not been conferred on the Federal Court but is invested in State courts pursuant to s.39(2) of the Judiciary Act 1903 (Cth).” The decision of Rogers J in Zalai v Col Crawford (Retail) Pty Ltd to which I have referred above adds further authority if that is needed.

It is noteworthy that where the Federal Court is referred to in the TPA it is called “the Court” or “the Federal Court”, not “a court of competent jurisdiction”. See s.4 and the Act passim. In the context of the TPA, it seems clear, therefore, that the Commonwealth Parliament, when it referred to courts “of competent jurisdiction”, was referring to State courts invested with Federal jurisdiction. If the Commonwealth Parliament had intended to limit the jurisdiction of State courts in accordance with the interpretation of s.86(2) argued for by the plaintiff and third party, it seems likely that it would have amended s.73 to exclude the jurisdiction of State courts. That the Commonwealth Parliament enacted s.75AS without amending s.73 seems to me to strengthen the cross-claimant’s argument rather than that of the plaintiff and third party. I have not been assisted by counsel with aids to interpretation such as Explanatory Memoranda, Second Reading speeches and the like but s.86(2), while it is certainly a specific provision, appears to me to add to, insofar as the Commonwealth Parliament saw necessary, a wider jurisdiction already granted to this Court pursuant to s.39(2) of the Judiciary Act. In relation to s.73, therefore, I consider that this Court has jurisdiction.

Sections 74B, 74C, 74D, 74E, 74F and 74G all provide for actions to recover for loss and damage in respect of various wrongs in courts “of competent jurisdiction”. For the reasons I have given above, it seems plain enough that this Court has jurisdiction in respect of such actions.

Section 75A creates a statutory right of rescission. In Polgardy v AGC Ltd, Toohey J said (at 393-394):

The object of the section is to create a statutory right of rescission to meet some of the problems that have arisen under the Sale of Goods Acts. Section 75A(4) preserves any other rights or remedies that may exist. Section 75A does not refer to the Federal Court nor, as do some sections, to a court of competent jurisdiction. It gives a court otherwise seized of a matter, authority to recognize and give effect to rescission in accordance with the section.

The section is not jurisdictional as such. It simply places another arrow in the quiver of remedies of a court exercising proper jurisdiction.

To summarise, this Court has, in my opinion, jurisdiction to deal with the matters pleaded by the cross-claimant.

Amendment to the pleadings

I did not, unfortunately, have access to a transcript of what transpired during the review conducted by Magistrate Lulham on 8 February 2005. It is not clear to me that he was aware of the amendments proposed by the defendant in its pleadings filed on 4 February 2005. Those pleadings would not necessarily have reached the court file placed before him by the time the review was conducted. It is the frequent experience of magistrates that a file is not brought up to date for some days due to the volume of document that flow into the Registry.

The hearing was listed for 16 February 2005. I think that the order made by Magistrate Lulham shows that he was not aware of the amendments as they appeared in the filed pleadings and was prepared to allow amendments at that stage only on the basis that cosmetic rather than substantial amendments were foreshadowed.

The amended pleadings on which the defendant hopes to proceed seem to me to be far more substantial than those Magistrate Lulham thought were proposed and which he was prepared at that late stage to allow. They include, among other things, a whole new cause of action. In my opinion, such pleadings do not fall within Magistrate Lulham’s grant of leave. The question now is whether a fresh grant of leave ought be made.

The hearing of this matter is set to resume on 21 April 2005. It may be this now allows for the amendments to be made without untoward or incurable prejudice towards the plaintiff and third party. I am well aware of the general principles concerning amendments. See, inter alia, Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146. Given that there now appears to be reasonable time within the plaintiff and third party can meet any prejudice caused by the amendment, a situation considerably different from that confronting Magistrate Lulham, it may be appropriate to grant leave, subject to any order for costs if necessary, to enable the real issues to be determined. I propose to invite the parties to address me on the question of prejudice before determining whether further leave to amend ought be granted.

Hugh Dillon