GB Lifestyles Pty Ltd v Resene Paints (Australia) Limited
[2010] FMCA 773
•12 October 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| GB LIFESTYLES PTY LTD v RESENE PAINTS (AUSTRALIA) LIMITED & ANOR | [2010] FMCA 773 |
| TRADE PRACTICES – Misleading and deceptive conduct – sale of industrial paint. COURTS AND JUDGES – Federal Magistrates Court – associated jurisdiction – jurisdiction to determine cross-claim – whether cross-claim is associated to main action – cross-claim based on deed of guarantee and indemnity. PRACTICE AND PROCEDURE – Cross-claim – whether cross-claim can be brought – whether to be heard together with main action. |
| Fair Trading Act 1987 (WA), s.10 Federal Court of Australia Act 1976 (Cth), s.32 Federal Court Rules (Cth), O 11 r.9 Federal Magistrates Act 1999 (Cth), ss.3, 14, 18, 42, 81 Federal Magistrates Court Rules 2001 (Cth), rr.1.03, 1.06, 28.01, 28.03, 28.04, 28.06 Trade Practices Act 1974 (Cth), ss.51AB, 52, 82, 87 |
| Australian Iron & Steel Pty Ltd & Anor v Jumbo Scheepvaart Maatschappij (Curacao) NV & Ors (1988) 14 NSWLR 507 Felton v Mulligan (1971) 124 CLR 367 In Re the Judiciary Act 1903-1920 and In Re the Navigation Act 1912-1920 (1921) 29 CLR 257 Johnson Tiles Pty Ltd & Ors v Esso Australia Pty Ltd & Anor (2000) 104 FCR 564; [2000] FCA 1572 Re Wakim; Ex parte McNally and Another (1999) 198 CLR 511; [1999] HCA 27 Smith v Marapikurrinya Pty Ltd [2010] FMCA 5 Standen v GH Varley Pty Ltd (1956) SR (NSW) 346 Taylor v CGU Insurance Limited (2005) 193 FLR 120; [2005] FMCA 1073 |
| Applicant/First Respondent on Cross-Claim: | GB LIFESTYLES PTY LTD |
| Respondent/Applicant on Cross-Claim: | RESENE PAINTS (AUSTRALIA) LIMITED |
| Second Respondent on Cross-Claim: | GEORGE GRAEME MALOUF |
| File Number: | PEG 14 of 2010 |
| Judgment of: | Lucev FM |
| Hearing date: | 13 July 2010 |
| Date of Last Submission: | 13 July 2010 |
| Delivered at: | Perth |
| Delivered on: | 12 October 2010 |
REPRESENTATION
| Counsel for the Applicant/First and Second Respondents on Cross-Claim: | Mr A Rumsley |
| Solicitor for the Applicant/First and Second Respondents on Cross-Claim: | Alan Rumsley, Commercial Disputes Lawyer |
| Counsel for the Respondent/ Applicant on Cross-Claim: | Mr T J Greig |
| Solicitors for the Respondent/ Applicant on Cross-Claim: | Clayton Utz |
ORDERS
That the Second Cross-Respondent’s plea under Order 11 Rule 9 of the Federal Court Rules be dismissed.
That the matter be adjourned to a further directions hearing at 9.30am on 18 October 2010.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 14 of 2010
| GB LIFESTYLES PTY LTD |
Applicant/First Respondent on Cross-Claim
And
| RESENE PAINTS (AUSTRALIA) LIMITED |
First Respondent/Applicant on Cross-Claim
| GEORGE GRAEME MALOUF |
Second Respondent on Cross Claim
REASONS FOR JUDGMENT
Introduction
In this matter GB Lifestyles Pty Ltd[1] applies to the Court under the Trade Practices Act 1974 (Cth)[2] alleging that the respondent Resene Paints (Australia) Limited[3] was engaged in misleading and deceptive conduct for which it was liable in damages in relation to the sale to GB Lifestyles of a particular kind of industrial paint. Resene Paints filed a Defence and Cross-Claim, and in the Cross-Claim has alleged that George Graeme Malouf[4] is liable for unpaid invoices for painting materials and supplies ordered by GB Lifestyles, the liability arising by way of a Deed of Guarantee and Indemnity.[5] Mr Malouf has pleaded that the Court has no jurisdiction to hear the Cross-Claim made by Resene Paints.
[1] “GB Lifestyles”.
[2] “TP Act”.
[3] “Resene Paints”.
[4] “Mr Malouf”.
[5] “Deed”.
The application and statement of claim
By way of an Application filed 25 January 2010, GB Lifestyles:
a)alleges misleading and deceptive conduct by Resene Paints contrary to s.52 of the TP Act;
b)seeks damages, under ss.82 and 87 of the TP Act;
c)seeks an indemnity in relation to actions arising from the conduct of Resene Paints; and
d)seeks interest and costs.
A Statement of Claim was filed on 25 January 2010 together with the Application. In the Statement of Claim, GB Lifestyles alleges that:
a)it purchased paint and materials from Resene Paints from about 1999;
b)part of its business was to apply paint to surfaces to meet client specifications (and it is apparent from later parts of the pleadings that this was done on a large industrial scale);
c)from 1999 to June 2009 GB Lifestyles was supplied by Resene Paints with a product – Bar-rust 236 – as an equivalent to International Interzone 954 – able to be applied at 450 microns dry film thickness in one coat, at a rate of one litre of paint per square metre of cover.[6]
[6] Statement of Claim, paras.3-7.
GB Lifestyles allege that in June 2009 a Resene Paints sales representative told a GB Lifestyles officer that Bar-rust 236 was no longer available from Resene Paints, and that the replacement product was Altra Build 536.[7] In essence, GB Lifestyles says that in response to a request to supply a product equivalent to International Interzone 954, representations were made by Resene Paints, through its employed sales representative, that Altra Build 536 was the equivalent of
Bar-rust 236, and met the specifications requested by GB Lifestyles, and referred to above.[8] GB Lifestyles says that the representations were made in July 2009 to Adrian Malouf, described as being “of the Applicant”.[9]
[7] Statement of Claim, para.8.
[8] See para.3(c) above.
[9] Statement of Claim, paras.9-10.
GB Lifestyles says that in reliance on the representations it ordered, and Resene Paints supplied, Altra Build 536 to be used to paint 5000 square metres of steel to 450 microns dry film thickness.[10] GB Lifestyles says that a problem arose with the application of Altra Build 536, and that in a meeting on 17 September 2009, Resene Paints gave advice about the amount of Altra Build 536, and the use of equipment to apply Altra Build 536.[11] GB Lifestyles says that it followed the advice, but the problem remained, and:
a)the work required additional coats to complete;
b)the additional work meant that its workshop was not able to do other work;
c)another product had to be used to complete the job, which was completed in December 2009.[12]
[10] Statement of Claim, para.11.
[11] Statement of Claim, paras.16-17.
[12] Statement of Claim, paras.18-24.
GB Lifestyles claims that the representations made to it by Resene Paints concerning Altra Build 536 were false, and therefore constituted misleading and deceptive conduct under s.52 of the TP Act. Damages are claimed under ss.82 and 87 of the TP Act.[13]
[13] Statement of Claim, paras.25-27 (“Trade Practices Claim”).
A Defence and Cross-Claim was filed on 26 March 2010.
From the Defence it does not appear that there is any dispute that from at least 2004 to June 2009 Resene Paints supplied GB Lifestyles with
Bar-rust 236.[14]
[14] Defence and Cross-Claim, para.5(a) and (b).
Resene Paints says that its sales representative told Adrian Malouf from GB Lifestyles that Altra Build 536 was the replacement product for Bar-rust 236.[15]
[15] Defence and Cross-Claim, para.8.
There is no dispute that GB Lifestyles placed an order for Altra Build 536 with Resene Paints in July 2009.[16] However, generally, Resene Paints denies:
a)the claims of misleading and deceptive conduct by it;
b)reliance on the alleged misleading and deceptive conduct by GB Lifestyles; and
c)GB Lifestyles’ claim for damages.
[16] Defence and Cross-Claim, para.9.
Resene Paints claims that, if found liable, any damages ought to be reduced under s.82(1B) of the TP Act, because it alleges that GB Lifestyles suffered loss and damage as a result of GB Lifestyles’ own failure to take reasonable care.
A significant point in the Defence and Cross-Claim, in the context of this interlocutory application, is that Resene Paints says that GB Lifestyles did place an order for Altra Build 536 in July 2009.[17] In particular, Resene Paints points to an invoice numbered 343502, dated 8 September 2009 in the amount of $41,539.31, said to be payable by 7 December 2009.[18]
[17] Defence and Cross-Claim, para.9.
[18] “8 September 2009 Invoice”.
The 8 September 2009 Invoice is significant because of the Cross-Claim, which claims against GB Lifestyles and Mr Malouf the sum of $94,867.52, plus interest and costs, for alleged failure to pay on 13 invoices dated from 5 May 2009 to 6 November 2009, 12 of which were payable from 3 November 2009 to 4 February 2010, and which were for the supply of paints and materials.[19]
[19] Defence and Cross-Claim, paras.29-33.
The Cross-Claim alleges that Mr Malouf entered into the Deed on 23 October 2003,[20] and:
a)guaranteed due payment of all monies to Resene Paints by GB Lifestyles;
b)agreed to indemnify Resene Paints in respect of all amounts payable by GB Lifestyles to Resene Paints; and
c)agreed to be liable to Resene Paints for all legal costs in respect of recovery under the Deed.[21]
[20] Defence and Cross-Claim, para.27.
[21] Defence and Cross-Claim, para.28.
Resene Paints says that GB Lifestyles failed to pay $94,867.52 said to be owing to Resene Paints, and further says that Mr Malouf failed to pay in accordance with the Deed.[22]
[22] Defence and Cross-Claim, paras.32-33.
GB Lifestyles filed a Defence to the Cross-Claim on 12 April 2010 and denies that Resene Paints is entitled to the sum claimed in the Cross-Claim, save for $9,271.24 that it says has already been paid. The basis of the denial is essentially that the entitlement to the sum claimed does not arise because of the alleged conduct relied upon by GB Lifestyles in the Trade Practices Claim, which it says was false in relation to the specifications of Altra Build 536.
Mr Malouf has not filed a Defence to Cross-Claim. Instead, in a plea filed 12 April 2010 he says that the Cross-Claim is a matter in respect of which the Court does not have jurisdiction.[23]
Jurisdiction
[23] A plea under O 11 r.9 of the Federal Court Rules (“FC Rules”).
Jurisdiction to determine jurisdiction
There is no dispute that the Court has jurisdiction, and at the very least limited jurisdiction, to determine whether it has jurisdiction.[24]
[24] Fernando v Minister for Immigration [2007] FMCA 724 at paras.30-32 per Lucev FM; Fisher v Minister for Immigration & Citizenship (2007) 162 FCR 299 at 303 per Stone J; [2007] FCA 591 at para.13 per Stone J; Khatri v Price (1999) 95 FCR 287 at 290 per Katz J; [1999] FCA 1289 at para.15 per Katz J; Federated Engine-Drivers and Fireman’s Association of Australasia v The Broken Hill Proprietary Company Limited (1911) 12 CLR 398 at 415 per Griffith CJ, at 428 per Barton J, at 454 per Isaacs J; Re Boulton; Ex parte CFMEU (1998) 73 ALJR 129 at 133 per Kirby J.
Jurisdiction in this case – submissions
Mr Malouf submits that:
a)this Court does not have jurisdiction to award damages for contractual claims, in the absence of an application within this Court’s primary jurisdiction;
b)if there is no matter within the primary jurisdiction, then associated jurisdiction under s.18 of the Federal Magistrates Act 1999 (Cth) cannot be invoked, and to hold otherwise would be to extend this Court’s jurisdiction beyond what would be regarded as the proper associated, or possibly accrued, jurisdiction of the Court; and
c)by reason of r.28.06 of the Federal Magistrates Court Rules 2001 (Cth),[25] the Cross-Claim against Mr Malouf is to be treated as if Resene Paints were the applicant in an original application, and, therefore, because an applicant in an original application could not bring a claim for contractual damages, in the absence of a matter within this Court’s primary jurisdiction, so a cross-claimant, in this case Resene Paints, cannot be in a better position.
[25] “FMC Rules”.
Resene Paints submits that:
a)by reason of r.28.01 of the FMC Rules it is entitled to make a cross-claim against GB Lifestyles instead of bringing a separate proceeding;
b)it is entitled to make a cross-claim against Mr Malouf because:
i)GB Lifestyles is also a party to the Cross-Claim;
ii)Resene Paints alleges that Mr Malouf is liable with GB Lifestyles for the subject matter of the Cross-Claim; and
iii)Resene Paints claims against Mr Malouf for relief relating to or connected with the subject matter of the Trade Practices Claim;
c)having regard to s.18 of the FM Act the Cross-Claim is an associated matter within the jurisdiction of this Court as the Cross-Claim is associated to the Trade Practices Claim by reason of:
i)both the Trade Practices Claim and Cross-Claim arising out of the same sale of paint; and
ii)the issue of whether the representations were made and whether they were relied upon needing to be determined in both the Trade Practices Claim and the Cross-Claim;
d)the principal authority relied upon by Mr Malouf for the proposition that this Court does not have jurisdiction to award common law damages under its associated, or any accrued, jurisdiction is not authority for that proposition and is distinguishable from the circumstances of the present case; and
e)this Court also has accrued jurisdiction to determine the Cross-Claim.
Jurisdiction in this case – consideration
Essential issue
Essential to the determination of this issue is a consideration of this Court’s jurisdiction to deal with and determine an “associated matter”, and whether the Cross-Claim raised by Resene Paints is an associated matter within jurisdiction, or possibly a matter within any accrued jurisdiction that the Court might have.
There is no dispute that if there is no matter within jurisdiction, the associated jurisdiction under s.18 of the FM Act cannot be invoked.[26]
[26] Carlton & United Breweries Ltd v Castlemaine Tooheys Ltd (1986) 161 CLR 543 at 553 per Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ; Johnson Tiles Pty Ltd & Ors v Esso Australia Pty Ltd & Anor (2000) 104 FCR 564 at 598 per French J; [2000] FCA 1572 at para.87 per French J; Taylor v CGU Insurance Limited (2005) 193 FLR 120; [2005] FMCA 1073 (“Taylor”); Welsh v Allblend Holdings Pty Ltd [2010] FMCA 281 at para.13 per Lucev FM (“Welsh”).
Associated matter jurisdiction – generally
In Welsh this Court dealt with the associated matter jurisdiction of this Court, observing that:
a)matters are associated if there is a common substratum of fact between the original matter within jurisdiction and the associated matter, and, if that is so, the associated jurisdiction of this Court may be invoked;[27]
[27] Welsh at para.14 per Lucev FM citing Philip Morris Inc v Adam P. Brown Male Fashions Pty Ltd (1981) 148 CLR 457 at 512 per Mason J (“Philip Morris”); Smith & Ors v Marapikurrinya Pty Ltd & Ors [2010] FMCA 5 (jurisdiction to deal with misrepresentations related to aboriginal heritage matters as associated with TP Act claims, but no jurisdiction to deal with matters under the Native Title Act 1993 (Cth) (“NT Act”) which were within the exclusive jurisdiction of the Federal Court under s.81 of the NT Act).
b)the nature of the associated jurisdiction of this Court was dealt with by the Federal Court in New South Wales Department of Housing v Moskalev.[28] In Moskalev, the Federal Court set out the law concerning this Court’s associated jurisdiction as follows:
[28] (2007) 158 FCR 206; [2007] FCA 353 (“Moskalev”).
“In Philip Morris Incorporated and Another v Adam P Brown Male Fashions Proprietary Limited; United States Surgical Corporation v Hospital Products International Proprietary Limited and Others (1981) 148 CLR 457 at 474, Barwick CJ said of the application of s.32 of the Federal Court Act:
‘Thus, there may be circumstances in which the matter does not in substance itself attract federal jurisdiction, though that which attracts federal jurisdiction must in some way relate to the matter. Once federal jurisdiction is attracted, it is not lost because the claim or assertion which attracted it has not been substantiated or has been displaced by some countervailing fact. Once attracted, by whatever path attracted, the jurisdiction persists to enable the Court to resolve the matter.’
Since s.18 of the FMA is in virtually identical terms to s.32 of the Federal Court Act, his Honour’s observations are pertinent to the associated jurisdiction of the FMC.
There are however, limits to the type of matter which can properly be described as ‘associated’ with the jurisdiction of a federal court. Barwick CJ expressed the following caution at 474:
‘But the jurisdiction will not extend to any other matter, though that other matter might in some sense be an allied or associated matter. To be outside the accrued jurisdiction, however, the other matter must be separate and disparate from the matter in relation to or in connexion with which federal jurisdiction has been attracted.’
Gibbs J (as he then was) said of the extent of the jurisdiction of the Court to deal with matters, other than federal claims at 499:
‘The cases to which I have referred show that if a party claims relief on two different legal grounds, but the facts on which the relief is sought on each ground are identical, and the relief sought on each ground is the same in substance if not in form, there is only one matter for determination.’
Gibbs J made similar observations in Fencott and Others v Muller and Another (1983) 152 CLR 570 at 591:
‘It is now established by Philip Morris v. Brown that once a federal court is invested with jurisdiction with respect to a matter, it may determine all the questions which form part of that matter, even though they are questions which it would have no jurisdiction to entertain if they arose in separate proceedings.’
At 593 his Honour continued:
‘The question whether one claim is inseverable from another, so that both are part of one matter, is a question of fact and degree. The Constitution, however, makes it clear that the attached claim must be part of the matter that attracts jurisdiction; closeness of association is not enough.’
In Re Wakim; Ex parte McNally and Another; Re Wakim; Ex parte Darvall; Re Brown and Others; Ex parte Amann and Another; Spinks and Others v Prentice (1999) 198 CLR 511 at 585 Gummow and Hayne JJ said of the associated jurisdiction:
‘So, too, there is but one matter where different claims are so related that the determination of one is essential to the determination of the other (377), as, for example, in the case of third party proceedings or where there are alternative claims for the same damage and the determination of one will either render the other otiose or necessitate its determination. Conversely, claims which are "completely disparate" (378), "completely separate and distinct" (379) or "distinct and unrelated’ (380) are not part of the same matter.’
These authorities confirm that to enliven the associated jurisdiction of a court invested with federal jurisdiction, the facts must be common to each matter and the relief sought must be substantially the same.
Section 18 of the FMA provides a source of jurisdiction in associated ‘matters’. A ‘matter’ must be a justiciable dispute and not merely a legal proceeding. In Re the Judiciary Act 1903-1920 and In Re The Navigation Act 1912-1920 (1921) 29 CLR 257 at 265 the majority, having considered an argument that the word ‘matter’ in s 76 of the Constitution referred only to a legal proceeding, said:
‘We do not accept this contention; we do not think that the word "matter" in sec. 76 means a legal proceedings, but rather the subject matter for determination in a legal proceedings. In our opinion there can be no matter within the meaning of the section unless there is some immediate right, duty or liability to be established by the determination of the Court’;[29]
[29] Moskalev FCR at 211-212 per Cowdroy J; FCA at paras.26-31 per Cowdroy J. The original text of In Re the Judiciary Act 1903-1920 and In Re the Navigation Act 1912-1920 (1921) 29 CLR 257 at 265 has “proceeding” rather than “proceedings” in both places where it appears in this quote.
c)in Re Wakim; Ex parte McNally and Another[30] it was said:
[30] (1999) 198 CLR 511; [1999] HCA 27 (“Wakim”).
“What is a single controversy “depends on what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct in relationships”. There is but a single matter if different claims arise out of a “common transactions and facts” or a “common substratum of facts”, notwithstanding that the facts upon which the claims depend “do not wholly co-incide”.
…
Often, the conclusion that, if proceedings were tried in different Courts, there could be conflicting findings made on one or more issues common to the two proceedings will indicate that there is a single matter. By contrast, if the several proceedings could not have been joined in one proceeding, it is difficult to see that they could be said to constitute a single matter”;[31]
d)in Trainor v BMW Melbourne Pty Ltd and Others,[32] this Court applied the passage cited from Wakim immediately above to hold that a claim under s.51AB of the TP Act alleging unconscionable conduct was part of a single controversy which included a claim under s.52 of the TP Act which alleged misleading and deceptive conduct;
e)in Fox v Robinson & Anor,[33] this Court considered s.18 of the FM Act and said as follows:
Section 18 of the FM Act is almost identical to s.32(1) of the Federal Court of Australia Act 1976. That section was considered by the High Court in Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457. In that case Mason J stated in relation to that section which applied to the Federal Court the following:
“Plainly it was intended to vest a jurisdiction in the Federal Court to hear and determine matters not otherwise within its jurisdiction, matters that are ‘associated’ with matters in which the jurisdiction of the Court is invoked. The expression ‘To the extent that the Constitution permits’ suggests that s 32 is directed, not merely to jurisdiction to hear and determine matters arising under federal laws not otherwise vested in the Federal Court, but also to jurisdiction arising under State or other non-federal laws. Problems of constitutional validity arise in relation to the latter, but not in relation to the former. The opening words of s.32(1) would serve no purpose at all if the sub-section was exclusively directed to matters arising under federal laws.”
[31] Wakim at 585-586 per Gummow and Hayne JJ; [1999] HCA 27 at pars.140-141 per Gummow and Hayne JJ.
[32] [2003] FMCA 7.
[33] [2003] FMCA 107 (“Fox”).
In the Philip Morris case Mason J further states at p 512,
“Likewise, it may appear that the attached claim and the federal claim so depend on common transactions and facts that they arise out of a common substratum of facts. In instances of this kind a court which exercises federal jurisdiction will have jurisdiction to determine the attached claim as an element in the exercise of its federal jurisdiction”;[34]
f)in Fox this Court held that a claim for breach of contract was a claim within the associated jurisdiction in a matter also alleging breach of s.52 of the TP Act.[35]
[34] Fox at paras.33-34 per McInnis FM.
[35] Fox at para.40 per McInnis FM.
In TheBell Group Ltd & Ors v Westpac Banking Corporation & Ors,[36] claims were filed in the Federal Court based upon breaches of the general law, the former Companies Code of Western Australia and the Corporations Law of Western Australia under Commonwealth cross-vesting legislation. Subsequently, in Wakim the High Court held that the legislation giving the Federal Court cross-vested jurisdiction in State matters was invalid. Prior to the judgment in Wakim the respondents in Bell Group, by an amendment to their cross-claim, raised allegations of breaches by the applicants of s.52 of the TP Act. The Federal Court found that whilst there may have been no claim within federal jurisdiction before the cross-claim was filed, that did not prevent the Federal Court from obtaining jurisdiction, both in relation to the cross-claim and the applicant’s non-federal law claims, subject to the non-federal law claims being shown to be within the accrued jurisdiction of the Federal Court under well recognised principles.[37] In Bell Group the Federal Court applied the reasoning in an earlier judgment of the Full Court of the Federal Court in Westpac Banking Corporation v Paterson,[38] where the Full Court of the Federal Court said:
13. As a matter of principle, there is no reason why the Court cannot acquire jurisdiction in a matter arising under a law of the Commonwealth by the filing of a cross-claim which asserts a claim founded on the Commonwealth legislation. The filing of the cross-claim asserts the right and makes the claim to enforce the right part of the justiciable controversy between the parties. Provided the cross-claim is not "colourable", it attracts federal jurisdiction. This was the view of French J in Cambridge Gulf Investments Pty Ltd (in liq) v Dandoe Pty Ltd (1999) 32 ASCR 422, at [16], although his Honour considered that the cross-claim actually filed in that case did not properly raise such an issue.[39]
[36] (2000) 104 FCR 305; [2000] FCA 439 (“Bell Group”).
[37] Bell Group FCR at 314 and 316 per Carr J; FCA at paras.30 and 38 per Carr J.
[38] (1999) 95 FCR 59; [1999] FCA 1609 (“Paterson”).
[39] Paterson FCR at 62 per Branson, Sackville and Kiefel JJ; FCA at para.13 per Branson, Sackville and Kiefel JJ.
In Bell Group it was also argued that although the claims made in the cross-claim might have been within the Federal Court’s jurisdiction if made in the originating application they could not be made in a cross-claim. The Federal Court rejected that submission, saying that the raising of the matter in the cross-claim “invoked the Court’s jurisdiction. If there was any defect or irregularity, it was one which the Court could remedy and did not go to jurisdiction.”[40]
[40] Bell Group FCR at 316 per Carr J; FCA at para.41 per Carr J.
In Welsh, Ms Welsh had been dismissed by Allblend Holdings and brought an action alleging failure to pay annual leave and notice under federal statutory law. In a cross-claim the respondent company alleged that Ms Welsh had contravened duties that she owed to the company as an officer under the Corporations Act, as well as breaching her fiduciary duties and breaching her duty of care as an employee to exercise reasonable care and skill in the performance of her work. In that case all of the claims in the cross-claim were held to be within the associated jurisdiction of this Court because the facts and circumstances which were said to give rise to the right to dismiss her were the same facts and circumstances relied upon to allege contravention of Corporations Act duties, fiduciary duties and negligence.[41]
[41] Welsh at paras.26-28 per Lucev FM.
Taylor
Significant reliance is placed by Mr Malouf upon this Court’s decision in Taylor. It is said to be authority for the proposition that this Court does not have jurisdiction specifically to award damages for contractual or tortious negligence or money paid out under mistake of law, and that those additional claims do not fall within this Court’s associated, or any accrued, jurisdiction, and that to hold otherwise would be to extend this Court’s jurisdiction beyond its proper associated, or any accrued, jurisdiction.[42]
[42] Taylor FLR at 138 per McInnis FM; FMCA at para.38 per McInnis FM.
Taylor was a case in which Mr Taylor’s claim against CGU Insurance Ltd had been dismissed with costs, and Mr Taylor then sought an order that his former solicitors pay those costs, and brought an action seeking damages and declaratory relief against his former solicitors for alleged contractual or tortious negligence or, alternatively, monies paid under a mistake of law or, alternatively, for contravention of s.10 of the Fair Trading Act 1987 (WA). The reason that this Court found that it did not have jurisdiction to award damages and to deal with the other claims made following the dismissal of Mr Taylor’s application was twofold, namely:
a)that the allegations made by Mr Taylor against his former solicitors were not matters arising out of the substratum of facts in a manner which would attract federal jurisdiction;[43] and
b)it would require an invoking of accrued jurisdiction after the substantive application had been heard and determined.[44]
[43] Taylor FLR at 138 per McInnis FM; FMCA at para.36 per McInnis FM.
[44] Taylor FLR at 137-138 per McInnis FM; FMCA at para.35 per McInnis FM.
Read properly and in context Taylor is not authority for the blanket proposition asserted by Mr Malouf that this Court does not have jurisdiction to make an award for a claim for damages in contract, and that such a claim is not within this Court’s associated, or any accrued, jurisdiction. The comments made in Taylor concerning this Court not having jurisdiction related specifically to the distinguishable facts of the case in Taylor. Further, having established those facts, this Court applied them in an orthodox manner to find that there was no federal jurisdiction because they did not arise out of the same substratum of facts as the original application which had been dismissed. Taylor is not a case which assists Mr Malouf in any way in this matter.
Associated matter jurisdiction – this case
It is this Court’s view that the Trade Practices Claim and the Cross-Claim:
a)are related, in as much as the alleged misleading and deceptive conduct under the Trade Practices Claim relates to the sale of industrial paint by Resene Paints, and the Cross-Claim relates to the liability to pay for, or indemnify against losses in relation to, the sale of some of the same industrial paint by Resene Paints;
b)have a common substratum of facts relating to the sale of industrial paint to GB Lifestyles by Resene Paints, and part of that substratum of facts is, or relates to, the issue of liability for payment under the terms of the Deed;
c)give rise to a question of liability, and in particular whether any liability which arises by reason of the Trade Practices Claim may have to be met, or met to some extent, and, if so, to what extent, by Mr Malouf under the terms of the Deed;
d)are not, practically, separate or disparate matters, but matters which are related, and which practical common sense would require be heard together; and
e)can be heard and determined as a single matter.
As Mason J pointed out in Philip Morris, in the passage cited in Fox in this Court,[45] s.32 of the Federal Court of Australia Act 1976 (Cth) (the equivalent of s.18 of the FM Act) “is directed … to jurisdiction arising under State or other non-federal laws”.[46] Therefore, in this case s.18 of the FM Act is directed to this Court’s associated jurisdiction to hear a non-federal law, and in this case, a common law claim arising under the Deed.
[45] See para.23(e) above.
[46] See also PCS Operations Pty Ltd v Maritime Union of Australia & Ors (1998) 153 ALR 520 at 525 per Gaudron J; [1998] HCA 29 at para.12 per Gaudron J (“… the view that s.32(1) is confined to matters arising under federal laws is at odds with the wording of s.32(1) …”)
Once federal jurisdiction is attracted in a proceeding, as is the case here by reason of the Trade Practices Claim, and the Cross-Claim being within the associated jurisdiction, the jurisdiction which is exercised throughout the case will be federal.[47]
[47] NEC Information Systems Australia Pty Ltd v Iveson & Ors (1992) 36 FCR 258 at 264 per Black CJ, Lockhart and Gummow JJ; Felton v Mulligan (1971) 124 CLR 367 at 373 per Barwick CJ (federal jurisdiction may be attracted by a defence, and if it is, the jurisdiction exercised (in that case by a State court) throughout the case will be federal).
The Court has therefore concluded that:
a)the subject matter of the Trade Practices Claim and the subject matter of the Cross-Claim are associated matters; and
b)the determination of liability as between GB Lifestyles, Resene Paints and Mr Malouf are associated matters,
and the Cross-Claim is therefore within the Court’s associated jurisdiction.
In the circumstances it is unnecessary for the Court to deal with Resene Paints’ assertion that the Court has accrued jurisdiction.
The Cross-Claim
Section 14 of the FM Act provides as follows:
Determination of matter completely and finally
In every matter before the Federal Magistrates Court, the Federal Magistrates Court must grant, either:
(a) absolutely; or
(b) on such terms and conditions as the Federal Magistrates Court thinks just;
all remedies to which any of the parties appears to be entitled in respect of a legal or equitable claim properly brought forward by him or her in the matter, so that, as far as possible:
(c) all matters in controversy between the parties may be completely and finally determined; and
(d) all multiplicity of proceedings concerning any of those matters may be avoided.
A respondent may make a cross-claim against an applicant instead of bringing a separate proceeding.[48] A respondent may make a cross-claim against a person other than the applicant if the applicant is also made a party to the cross-claim, and either:
a)the respondent alleges that the other person is liable with the applicant for the subject matter of the cross-claim; or
b)the respondent claims against the other person relief relating to or connected with the subject matter of the original proceedings.[49]
[48] FMC Rules, r.28.01.
[49] FMC Rules, r.28.03.
A cross-claim must be included in a respondent’s response.[50] In all but exceptional circumstances actions and cross-claims will be heard together in the same court.[51] There is nothing in the circumstances of this case which takes it into the realm of exceptional circumstances warranting the Trade Practices Claim and Cross-Claim to be heard in separate courts.
[50] FMC Rules, r.28.04.
[51] Standen v GH Varley Pty Ltd (1956) SR (NSW) 346; Australian Iron & Steel Pty Ltd & Anor v Jumbo Scheepvaart Maatschappij (Curacao) NV & Ors (1988) 14 NSWLR 507 at 521 per Yeldham J.
Section 14 of the FM Act should be construed liberally having regard to its nature and purposes.[52] In McLeish the Full Court of the Federal Court observed as follows:
We consider first s. 22. In our opinion that section should be construed liberally in order to achieve the object of the Act in attempting to prevent the necessity of a multiplicity of legal proceedings to be entered into by a party seeking relief. Our view is supported by the opinions expressed in Roberts v. Gippsland Agricultural and Earth Moving Contracting Co. Pty. Ltd. [1956] V.L.R. 555. In that case Smith J. as a member of a Full Court, considered a section in the Victorian Supreme Court Act being the equivalent of s. 22 of the Federal Court of Australia Act. For present purposes it is sufficient to quote the following extract: "In Salt v. Cooper (1880) 16 Ch. D. 544, the view was expressed that this provision is not confined to the original claim made in a cause but applies to any claim relating to the matter in dispute in the cause which is in fact brought forward therein. But on the other hand the provision has sometimes been construed in a restricted sense: compare Edwards on Compromises, p. 189. The critical question would appear to be what meaning is to be given to the expression `properly brought forward'. And I consider that, having regard to the nature and purpose of the provision, that expression should be construed liberally, so that its operation may not be unnecessarily restricted by reference to rules of mere practice and procedure which operated in the old Courts.[53]
[52] McLeish v Faure (1979) 40 FLR 462 (“McLeish”).
[53] McLeish at 472 per J B Sweeney, Evatt and Northrop JJ.
Once it is determined, as it has been, that the Cross-Claim is within this Court’s associated jurisdiction, then to apply r.28.06 of the FMC Rules in the manner suggested by Mr Malouf in this case would be inconsistent with the statutory command in s.14 of the FM Act.
The Court notes that if the Cross-Claim is not heard in this matter, it may well be brought in a claim in another court, in which case the parties will most likely incur further expense, the litigation will inevitably be more protracted, and will not be dealt with in one proceeding as it can be in this Court. Not only would such an outcome be the antithesis of s.14 of the FM Act, but it would be inconsistent with the objects of the FM Act and FMC Rules generally.[54]
[54] FM Act, ss.3 and 42; FMC Rules, r.1.03.
Section 81 of the FM Act provides for rules of court, and provides as follows:
Rules of Court
(1) The Federal Magistrates, or a majority of them, may make Rules of Court:
(a) making provision for or in relation to the practice and procedure to be followed in the Federal Magistrates Court (including the practice and procedure to be followed in registries of the Federal Magistrates Court); or
(b) making provision for or in relation to all matters and things incidental to any such practice or procedure, or necessary or convenient to be prescribed for the conduct of any business of the Federal Magistrates Court; or
(c) prescribing matters required or permitted by:
(i) any other provision of this Act; or
(ii) any other law of the Commonwealth;
to be prescribed by the Rules of Court.
(2) Rules of Court have effect subject to any provision made by another Act, or by rules or regulations under another Act, with respect to the practice and procedure in particular matters.
(3) …
(4) …
There is nothing in s.81 of the FM Act which indicates that any rule under the FMC Rules ought to, or can, prevail over an express provision of the FM Act such as s.14 of the FM Act. Indeed, s.81(1)(c)(i) allows for the prescribing of matters required or permitted by any other provision of the FM Act to be prescribed by the FMC Rules. It does not allow the making of rules, or the empowering of the Court under any rule, to act in a manner contrary to a provision in the FM Act, such as s.14 of the FM Act. Where a provision of the FM Act and a provision of the FMC Rules conflict, as s.14 of the FM Act and r.28.06 of the FMC Rules do, the provisions of the FM Act must prevail.[55]
[55] Harrington v Lowe (1996) 190 CLR 311 at 324-325 per Brennan CJ, Dawson, Toohey, Gaudron, McHugh and Gummow JJ; Mahfoud v Minister for Immigration, Local Government and Ethnic Affairs (1993) 33 ALD 609 at 613 per Beazley J (the Migration Act specified a time limit in which an appeal may be brought, and rules of court could not be relied upon to extend that time provision).
In the circumstances of this case, the proper construction of s.14 of the FM Act requires this Court to deal with the Cross-Claim in this matter as part of the disposition of the entire proceedings. Further, as a purely procedural rule, r.28.06 of the FMC Rules cannot, for reasons set out above, prevail over the substantive terms of s.14 of the FM Act. Finally, and in any event, this Court would, even if the foregoing is wrong, dispense with compliance with r.28.06 of the FMC Rules because it is in the interests of justice that these matters be heard together.[56]
[56] FMC Rules, r.1.06.
Conclusion
The Court has concluded that:
a)the Cross-Claim falls within the associated jurisdiction of this Court;
b)rule 28.06 of the FMC Rules does not preclude the Cross-Claim from being determined in these proceedings,
and therefore Mr Malouf’s plea under O 11 r.9 of the FC Rules must be dismissed. There will be an order accordingly.
The Court will hear the parties as to costs.
Otherwise, the matter is adjourned to 9.30am on 18 October 2010 for further directions. The parties should confer on appropriate directions.
I certify that the preceding forty-six (46) paragraphs are a true copy of the reasons for judgment of Lucev FM
Associate:
Date: 12 October 2010
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