Fortron Automotive Treatments Pty Ltd v Jones & Ors (No.4)
[2011] FMCA 854
•7 November 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FORTRON AUTOMOTIVE TREATMENTS PTY LTD v JONES & ORS (No.4) | [2011] FMCA 854 |
| TRADE PRACTICES – Alleged misleading and deceptive conduct – alleged product substitution scheme. |
| COURTS AND JUDGES – Validity of Federal Magistrates Act 1999 (Cth) – validity of establishment of Federal Magistrates Court – validity of commissions of appointment of federal magistrates – whether federal magistrates exercise judicial power of the Commonwealth. |
| CONSTITUTIONAL LAW – Validity of Federal Magistrates Act 1999 (Cth) – validity of establishment of Federal Magistrates Court – validity of commissions of appointment of federal magistrates – whether federal magistrates exercise judicial power of the Commonwealth – whether constitutional issue arises – whether notices under s.78B of the Judiciary Act 1903 (Cth) should issue. |
| Bankruptcy Act 1966 (Cth), ss.5(1) and (5), 129(2), 129A, 130 Constitution ss.71, 72, 79 Evidence Act 1995 (Cth), s.154 Federal Court of Australia Act 1976 (Cth) Federal Magistrates Act 1999 (Cth), ss.8, 13(3)(a), 39(1), (2), (3) and (6), 61(b) and (f), Federal Magistrates Court Rules 2001 (Cth), r.8.02(4)(a)-(e) Judges Pensions Act 1968 (Cth), s.4(1) Judiciary Act 1903 (Cth), ss.55ZF, 78B |
| Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd & Ors (1999) 95 FCR 292; [1999] FCA 1151 Conlan as Trustee of two bankrupt estates [2011] FMCA 849 Deputy Commissioner of Taxation vCumins [2007] FMCA 1841 Fortron Automotive Treatments Pty Ltd v Jones & Ors (2008) 222 FLR 1; [2008] FMCA 622 Fortron Automotive Treatments Pty Ltd v Jones & Ors (No.3) [2011] FMCA 467 |
| Hansard, Senate, 1 November 2011 Hansard, House of Representatives, 2 November 2011 Legal Services Direction 2005 |
| Applicant: | FORTRON AUTOMOTIVE TREATMENTS PTY LTD |
| First Respondent: | KENNETH JOHN JONES |
| Second Respondent: | TREBLEX AUTOMOTIVE PRODUCTS PTY LTD |
| Third Respondent: | SHEILA MARY JONES |
| Fourth Respondent: | WILLIAM PATRICK TULLY |
| Fifth Respondent: | HELEN GEORGINA TULLY |
| Sixth Respondent: | GAMMAR GROUPS (THAILAND) CO LTD |
| File Number: | PEG 172 of 2007 |
| Judgment of: | Lucev FM |
| Hearing date: | 3 November 2011 |
| Date of Last Submission: | 3 November 2011 |
| Delivered at: | Perth |
| Delivered on: | 7 November 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr M H Zilko SC and Mr G Rabe |
| Solicitors for the Applicant: | Stables Scott |
| Counsel for the Fourth Respondent: | Mr R L Hooker |
| Solicitors for the Fourth Respondent: | Robert Grayden Legal |
| First, Second, Third, Fifth and Sixth Respondents: | No appearance |
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 172 of 2007
| FORTRON AUTOMOTIVE TREATMENTS PTY LTD |
Applicant
And
| KENNETH JOHN JONES |
First Respondent
| TREBLEX AUTOMOTIVE PRODUCTS PTY LTD |
Second Respondent
| SHEILA MARY JONES |
Third Respondent
| WILLIAM PATRICK TULLY |
Fourth Respondent
| HELEN GEORGINA TULLY |
Fifth Respondent
| GAMMAR GROUPS (THAILAND) CO LTD |
Sixth Respondent
REASONS FOR JUDGMENT
(Published from Chambers pursuant to s.13(3)(a) of the Federal Magistrates Act 1999 (Cth))
Introduction
There is before the Court a matter which has involved lengthy hearings and proceedings in this Court, and the Federal Court (from whence the matter was transferred to this Court), dating back to 2006. There have been previous judgments of this Court as to:
a)whether an election is required in a no case to answer submission in this Court;[1]
b)whether or not there is a case to answer;[2] and
c)liability.[3]
[1] Fortron Automotive Treatments Pty Ltd v Jones & Ors (2008) 222 FLR 1; [2008] FMCA 622.
[2] Fortron Automotive Treatments Pty Ltd v Jones & Ors (No 2) [2009] FMCA 322.
[3] Fortron Automotive Treatments Pty Ltd v Jones & Ors (No 3) [2011] FMCA 467.
When the matter came on before the Court last Thursday morning the Court raised a preliminary issue with which it had been raised in an ex tempore judgment (subsequently reduced to writing) earlier that morning.[4] The issues raised were orally summarised for the parties by the Court from the judgment in Conlan. In Conlan the Court observed as follows:
[4] Conlan as Trustee of two bankrupt estates [2011] FMCA 849 (“Conlan”).
3. An issue arises concerning this Court. At the outset of the proceedings the Court raised with Counsel for the Trustee an article which had appeared in The Australian newspaper yesterday relating to issues concerning this Court.[5] It would appear that the article has its genesis in a matter raised in the Senate of the Commonwealth Parliament on 1 November 2011.[6] The matter was also raised in a judgment of this Court yesterday.[7]
[5] Chris Merritt “Suit puts ‘court’s decision at risk’”, The Australian November 2, 2011, page 3.
[6] Hansard, Senate, 1 November 2011, pages 96-98.
[7] SZQKE v Minister for Immigration & Anor [2011] FMCA 846 (“SZQKE”).
4. The issues raised concern proceedings apparently taken by 58 federal magistrates against the Commonwealth[8] in order to seek to resolve an issue about the exclusion of federal magistrates from the application of the Judges Pensions Act 1968 (Cth).[9] The federal magistrate constituting the Court for the purposes of these proceedings is not a party to the Federal Magistrates Litigation. It would appear from the reports in The Australian and Hansard that there has been a recent exchange of correspondence between the solicitors for the parties in the Federal Magistrates Litigation, and notwithstanding that that correspondence was apparently written on a without prejudice basis, it has now become public.
[8] “the Federal Magistrates Litigation”.
[9] “JP Act”. Under s.4(1) of the JP Act a “Judge means, amongst other things, “a Justice or Judge of a federal court (other than the Federal Magistrates Court)”.
5. The issues which have become public raise questions about:
(a) the validity of the Federal Magistrates Act 1999 (Cth);[10]
[10] “FM Act”.
(b) the establishment of this Court as a Chapter III Court;[11]
[11] FM Act, s.8.
(c) the validity of the commissions of appointment of all of the justices, styled federal magistrates, appointed to this Court;[12] and
[12] FM Act, s.8(4).
(d) the exercise of the judicial power of the Commonwealth by federal magistrates.
6. As the Court indicated to Counsel it would appear, based on the Hansard report,[13] that on 11 October 2011 the Australian Government Solicitor (presumably acting on behalf of the Commonwealth) wrote to the solicitors for the 58 federal magistrates involved in the Federal Magistrates Litigation, and put forward the following view:
[13] Evidence Act 1995 (Cth), s.154.
In any event, on the applicants’ [that is the 58 federal magistrates] pleaded case, it seems to us that one of three possible outcomes may follow as a result.
(a) The structure of the Federal Magistrates Court is deficient because it does not expressly provide for a life-long guaranteed pension for federal magistrates with the consequence that the Federal Magistrates Act 1999 (Cth) is invalid.
(b) If not (a), the federal magistrates’ appointments are constitutionally infirm (and always have been) because of incompatibility with the requirements of Chapter III. This outcome assumes the Federal Magistrates Act is valid because, properly construed, it provides a mechanism either for the Remuneration Tribunal or the Governor-General to determine that federal magistrates be provided with a life-long guaranteed pension.
(c) If not (b), then although the magistrates’ appointments are not invalid, they could not (and still could not) validly exercise Commonwealth judicial power unless first provided with a life-long guaranteed judicial pension.
7. The Court assumes that such matters would not be raised by lawyers acting for the Commonwealth (albeit in unrelated litigation to this) unless they were matters of and with substance. That is particularly so given that under the Commonwealth’s Legal Services Directions 2005, made under s.55ZF of the Judiciary Act 1903 (Cth),[14] the Commonwealth “consistently with the Attorney-General’s responsibility for the maintenance of proper standards in litigation” has an obligation to act as a model litigant,[15] which requires the Commonwealth:
[14] “Judiciary Act”.
[15] Legal Services Direction 2005, Appendix B, cl.1.
“to act … honestly and fairly in handling claims and litigations brought … against the Commonwealth”;[16] and
[16] Legal Services Direction 2005, Appendix B, cl.2.
to “… act with complete propriety, fairly and in accordance with the highest professional standards” which is an “expectation … recognised by the Courts”.[17]
[17] Legal Services Direction 2005, Appendix B, Note 2.
8. The Court therefore raised this matter, as it felt it must do so, because, if correct, the view apparently expressed by the Australian Government Solicitor (presumably on behalf of the Commonwealth) in the Federal Magistrates Litigation has implications for the validity of any delivery up order or property seizure warrant made in this matter by this Court. Further, if there is a serious constitutional issue arising from the issues raised in the Federal Magistrates Litigation it may be appropriate to:
(a) transfer this matter back to the Federal Court for determination by an “eligible judge” for the purposes of s.130(1) of the Bankruptcy Act; or
(b) adjourn the matter until such time as any issue with respect to the validity of the FM Act, the establishment of this Court, and the appointment and judicial power of federal magistrates is otherwise resolved; or
(c) consider whether the Court ought to issue notices under s.78B[18] of the Judiciary Act, and whether the proceedings ought to be adjourned pending the issuance of Section 78B Notices to the Attorneys-General of the Commonwealth and States.
[18] “Section 78B Notices”.
9. Section 78B of the Judiciary Act provides as follows:
(1) Where a cause pending in a federal court including the High Court or in a court of a State or Territory involves a matter arising under the Constitution or involving its interpretation, it is the duty of the court not to proceed in the cause unless and until the court is satisfied that notice of the cause, specifying the nature of the matter has been given to the Attorneys-General of the Commonwealth and of the States, and a reasonable time has elapsed since the giving of the notice for consideration by the Attorneys-General, of the question of intervention in the proceedings or removal of the cause to the High Court.
(2) For the purposes of subsection (1), a court in which a cause referred to in that subsection is pending:
(a) may adjourn the proceedings in the cause for such time as it thinks necessary and may make such order as to costs in relation to such an adjournment as it thinks fit;
(b) may direct a party to give notice in accordance with that subsection; and
(c) may continue to hear evidence and argument concerning matters severable from any matter arising under the Constitution or involving its interpretation.
(3) For the purposes of subsection (1), a notice in respect of a cause:
(a) shall be taken to have been given to an Attorney-General if steps have been taken that, in the opinion of the court, could reasonably be expected to cause the matters to be notified to be brought to the attention of that Attorney-General; and
(b) is not required to be given to the Attorney-General of the Commonwealth if he or she or the Commonwealth is a party to the cause and is not required to be given to the Attorney-General of a State if he or she or the State is a party to the cause.
(4) The Attorney-General may authorize the payment by the Commonwealth to a party of an amount in respect of costs arising out of the adjournment of a cause by reason of this section.
(5) Nothing in subsection (1) prevents a court from proceeding without delay to hear and determine proceedings, so far as they relate to the grant of urgent relief of an interlocutory nature, where the court thinks it necessary in the interests of justice to do so.
10. Each of the above possibilities was raised with Counsel for the applicant at the hearing yesterday afternoon. The Court made it clear that if the matter was to proceed in this Court then the Court would be required to give consideration to whether Section 78B Notices ought to issue, which would entail consideration of:
(a) whether there is a matter arising under the Constitution raised;
(b) if there is a matter arising under the Constitution, whether the proceedings ought to be adjourned under s.78B(2)(a) of the Judiciary Act to allow the issuance of Section 78B Notices; and
(c) whether there are issues on which the Court may continue to hear evidence and argument by reason of s.78B(2)(c) of the Judiciary Act because they are matters severable from any matter arising under the Constitution and, if so, whether they ought to be heard separately.
12. It has come to the Court’s attention this morning that yesterday afternoon the Federal House of Representatives was informed by the Attorney-General that the correspondence from the Australian Government Solicitor in the Federal Magistrates Litigation referred to above was directed to narrowing the issues in those proceedings and to avoid doubts concerning the constitutional validity of this Court and its arrangements.[19] Be that as it may, the extract quoted above from the relevant correspondence expressly raises doubts about the constitutional validity of this Court and its arrangements, and they are matters which this Court is under a duty to consider where it is aware of them,[20] and also to raise with parties before the Court out of fairness to them.[21]
[19] Hansard, House of Representatives, 2 November 2011, page 62.
[20] See Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd & Ors (1999) 95 FCR 292 at 298-299 per French J; [1999] FCA 1151 at paras.16, 19 and 20 per French J (“Berbatis”).
[21] Conlan at paras.3-10 and 12 per Lucev FM (footnotes 5-20 are footnotes from the judgment in Conlan differently numbered and very slightly modified for the purposes of this judgment).
The Court raised these matters with Counsel at the outset of last Thursday’s hearing as:
a)it perceives that it is its judicial duty to raise an issue of jurisdictional competence, which has been put into in the public arena, and which has been raised, apparently seriously, by the Commonwealth (albeit in unrelated litigation to this matter);
b)courts have long held that the first duty of a court is to determine whether it has jurisdiction to deal with a matter;[22] and
c)it is only fair to litigants before the Court to alert them to the fact that there is in the public arena a possibly serious issue as to the constitutional validity of the FM Act, this Court and the appointment and exercise of judicial power by federal magistrates.
[22] R v Bolton [1835-42] All ER Rep 71 at 73-74 per Lord Denman CJ; Federated Engine-Drivers & Firemen’s Association v Broken Hill Proprietary Co Ltd (1911) 12 CLR 398 at 415 per Griffith CJ, at 428 per Barton J and at 454 per Isaacs J; Re Boulton; Ex parte Construction, Forestry, Mining and Engineering Union (1998) 73 ALJR 129 at 133 per Kirby J; Rentuza v Westside Auto Wholesale (2009) 236 FLR 231 at 237 per Lucev FM; [2009] FMCA 1022 at para.23 per Lucev FM; Conlan at para.30 per Lucev FM. Contrast SZQKE cited above where the issue of whether or not the Court has jurisdiction was not expressly considered, or it appears, argued.
The Court also drew to the attention of the parties some authorities in relation to the issue of the constitutional validity of this Court, and the appointment and exercise of judicial power by federal magistrates.[23]
[23] Re Bryant & Anor; Ex parte Guarino (2001) 178 ALR 57; [2001] HCA 5 (“Bryant”); Totev v Sfar & Anor (2008) 167 FCR 193 at 196 per Emmett J; [2008] FCAFC 35 at para.9 per Emmett J (“Totev”); Simandl v Deputy Commissioner of Taxation (2008) 167 FCR 501; [2008] FCA 450 (“Simandl”).
Submissions of the parties
Fortron submitted that the Court should proceed to hear the remainder of this matter because the judgments in Bryant and Simandl confirmed:
a)the validity of the establishment of this Court; and
b)the validity of the appointment of the federal magistrates of this Court,
and until those decisions were overturned the Court should proceed on the basis that it is validly constituted and that federal magistrates are validly appointed.
Mr Tully also submitted that the remainder of the matter ought to be heard, and broadly agreed with the submissions made by Fortron, subject to one qualification about how any constitutional issue arising may operate. Mr Tully submitted that it was an important consideration in the exercise of the Court’s discretion as to the conduct of the matter that the judgments in Bryant and Simandl were binding until overturned and that they confirmed the constitutional validity of the Court.
Mr Tully also submitted that it may be that where a matter had commenced in the High Court and was now on remitter to the Federal Court, as the Federal Magistrates Litigation appears to be, and the nature of the issues was such as identified in Conlan, that it would appear on the face of it that there is a serious constitutional issue that does need to be tried. However, Mr Tully went on to submit that the words “duty of the court” in s.78B(1) of the Judiciary Act meant that in a matter such as this, where the proceedings were substantially resolved and the only issues which remained were:
a)the extent to which any, and if so, what, compensation ought to be awarded to Fortron in relation to the findings against Mr Tully; and
b)what orders ought to be made in respect of the sixth respondent, Gammar Groups (Thailand) Co Ltd, which did not appear in the proceedings,
that the “duty of the court” had to be read in a practical purposive way so as to enable the Court to dispose of the remainder of this matter.
At the conclusion of the brief submissions by the parties last Thursday morning the Court indicated that it intended to continue to hear the matter, and that it would publish its Reasons for Judgment on the jurisdictional issue at a later time.
Consideration
Does a matter arise under the Constitution?
It is a matter for the Court to determine whether there is a matter arising under the Constitution based upon the cause or matter before the Court.[24]
[24] Berbatis FCR at 298-299 per French J; FCA at paras.16, 19 and 20 per French J (and cases there cited).
In Bryant the High Court was dealing with an application seeking an order nisi for prohibition and certiorari against the then Chief Federal Magistrate on the ground that her appointment was unconstitutional. The unconstitutionality was said to pertain to ss.71, 72 and 79 of the Constitution.[25] In Bryant, the High Court observed as follows:
Section 79 of the Constitution provides:
"The federal jurisdiction of any court may be exercised by such number of judges as the Parliament prescribes."
[25] Bryant ALR at 57 per Hayne J; HCA at para.4 per Hayne J.
Section 79 is, therefore, concerned with whether federal jurisdiction is to be exercised by a court constituted by one or by more than one judge.
Section 11(1) of the Act provides:
"For the purposes of the exercise of the jurisdiction of the Federal Magistrates Court, the Federal Magistrates Court is to be constituted by a single Federal Magistrate.”
It is not arguable that this provision offends s 79. Indeed, it is a provision of the very kind for which s 79 is intended to provide. True it is, as Mr Guarino pointed out in oral argument, s 79 uses the word "judges" and does not use the word "magistrate". Nevertheless, it is clear when regard is had to s 71 and the power given to the Parliament to create "other federal courts" that the title given to the judicial officer by Parliament in creating such another federal court is not determinative of the constitutional reach of s 79 and the other provisions in Ch III. The constitutional reach of s 79 extends to the Federal Magistrates appointed to serve in the court created by the Parliament by the Act.[26]
[26] Bryant ALR at 58-59 per Hayne J; HCA at paras.7-8 per Hayne J.
Finally, the High Court observed in Bryant that:
There is no reason to consider it arguable that the constitutional expression “Justice of a court created by the Parliament” does not extend to Federal Magistrates. There is, therefore, no reason to consider that the provisions made in s 9 and Sched 1 of the [FM] Act about the term of office and conditions for resignation or removal from office of Federal Magistrates are invalid.[27]
[27] Bryant ALR at 60 per Hayne J; HCA at para.13 per Hayne J.
In Totev the Full Court of the Federal Court was dealing with the nature of a review by this Court of a registrar’s order in bankruptcy proceedings. One judge of the Full Court of the Federal Court observed as follows:
The rationale for the review regime briefly described above is that the making of a sequestration order involves the exercise of the judicial power of the Commonwealth. Under Ch III of the Constitution of the Commonwealth, that power cannot be exercised otherwise than by a justice appointed under Ch III. A registrar of the Federal Magistrates Court is not a justice. On the other hand, judges of the Federal Magistrates Court are justices appointed under Ch III.[28]
[28] Totev FCR at 196 per Emmett J; FCAFC at para.9 per Emmett J.
In Simandl a single judge of the Federal Court dealt with a challenge to the nature of this Court and the federal magistrates comprising this Court. In Simandl the Federal Court said that:
The Federal Magistrates Court is a court created pursuant to the power contained in s 71 of the Constitution, and s 77 of the Constitution permits Parliament to make laws defining the jurisdiction of any federal court it has created. The Federal Magistrates Court exercises the judicial power of the Commonwealth invested under Ch III of the Constitution. Section 10 of the FMA invests the Federal Magistrates Court with such original jurisdiction as is vested in it by laws made by Parliament either by express provision or by application of s 15C of the Acts Interpretation Act 1901(Cth). The Federal Magistrates Court is a court of record and is a court of the law and equity (see s 8(3) of the FMA).[29]
[29] Simandl FCR at 504 per Cowdroy J; FCA at para.9 per Cowdroy J.
The Federal Court went on to observe that the High Court’s judgment in Bryant “determined that the Commonwealth possesses power to appoint Federal Magistrates”, and further observed that the decision in Bryant was binding on the Federal Court.[30] The Federal Court went on to observe that both the creation of this Court and its constitutional validity had been determined in Bryant.[31] The Federal Court said that it followed that the applicant’s submissions concerning the constitutional validity of the appointment of federal magistrates and of this Court were to be rejected.[32]
[30] Simandl FCR at 504 per Cowdroy J; FCA at para.11 per Cowdroy J
[31] Simandl FCR at 505 per Cowdroy J; FCA at para.14 per Cowdroy J.
[32] Simandl FCR at 505 per Cowdroy J; FCA at para.15 per Cowdroy J.
The judgments in Bryant and Simandl, in particular, make it clear that neither the High Court nor the Federal Court presently entertain any doubt as to the constitutional validity of the FM Act, this Court, the appointment of federal magistrates, or that federal magistrates exercise judicial power, and in particular the judicial power of the Commonwealth.
As courts superior to this Court in the hierarchy of federal courts, the High Court’s and the Federal Court’s judgments in Bryant and Simandl are binding on this Court.[33] Bryant and Simandl deal with the jurisdictional issues raised earlier in this judgment, and because they are binding, ought to be followed by this Court. Therefore, this Court has no doubt as to the constitutional validity of the FM Act, the establishment of this Court, the appointment of federal magistrates, or that federal magistrates exercise judicial power, and in particular the judicial power of the Commonwealth. Consequently, the constitutional issues raised give rise to no serious constitutional issue, either at all or for the purposes of s.78B of the Judiciary Act.
[33] R v Casey; R v Smythe [1977] Qd R 132 at 134 per Wanstall SPJ, Douglas and Dunn JJ; Minister for Immigration and Multicultural and Indigenous Affairs v SZANS (2005) 141 FCR 586 at 592 per Weinberg, Jacobson and Lander JJ; [2005] FCAFC 41 at paras.38-39 per Weinberg, Jacobson and Lander JJ; Williams v MacMahon Mining Services Pty Ltd (2009) 231 FLR 59 at 74 per Lucev FM; [2009] FMCA 511 at para.71 per Lucev FM (upheld on appeal: see MacMahon Mining Services Pty Ltd v Williams (2010) 201 IR 123; [2010] FCA 1321).
It was for the above reasons that the Court continued to hear this matter last Thursday, and will now go on and determine the remaining outstanding issues in the matter.
I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Lucev FM
Date: 7 November 2011
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