Healthy Nut Cafe Pty Ltd v Finn - [2018] WADC 118

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION:   PERTH
CITATION:   HEALTHY NUT CAFE PTY LTD -v- FINN [2018] WADC 118
CORAM:   GILLAN DCJ
HEARD:   8 AUGUST 2018
DELIVERED          :   20 SEPTEMBER 2018
FILE NO/S:   CIV 4489 of 2017
BETWEEN:   HEALTHY NUT CAFE PTY LTD
Plaintiff
AND
WILLIAM PATRICK FINN
First Defendant
LISA ANN TANA
Second Defendant
BILISA PTY LTD
Third Defendant
WILLIAM PATRICK FINN
LISA ANN TANA
BILISA PTY LTD
Plaintiff by counterclaim
VICTORIA ANN CARBONE
HEALTHY NUT CAFE PTY LTD
Defendant by counterclaim

Catchwords:

Courts and judges - Courts - Inferior courts - District Court - Jurisdiction of the District Court - Application to transfer proceedings in the District Court to the Supreme Court pursuant to the District Court of Western Australia Act 1969

Legislation:

District Court of Western Australia Act 1969 (WA), s 55, s 50, s 77

Result:

Order remitting proceedings in the District Court to the Supreme Court

Representation:

Counsel:

Plaintiff	:	Mr M T Mckenna
First Defendant	:	Mr M P Bruce
Second Defendant	:	Mr M P Bruce
Third Defendant	:	Mr M P Bruce
Plaintiff by counterclaim	:	Mr M P Bruce
Defendant by counterclaim	:	Mr M T McKenna
Defendant by counterclaim	:	Mr M T McKenna

Solicitors:

Plaintiff	:	Gilbert & Tobin
First Defendant	:	Kitto & Kitto Barristers & Solicitors
Second Defendant	:	Kitto & Kitto Barristers & Solicitors
Third Defendant	:	Kitto & Kitto Barristers & Solicitors
Plaintiff by counterclaim	:	Kitto & Kitto Barristers & Solicitors
Defendant by counterclaim	:	Gilbert & Tobin
Defendant by counterclaim	:	Gilbert & Tobin

Case(s) referred to in decision(s):

Attorney General v Lord Churchill (1841) 10 LJ Ex 314; 151 ER 997
Chianti Pty Ltd v Leume Pty Ltd [2007] WASCA 270
Commercial Developments Pty Ltd (t/as Don Rogers Motors Pty Ltd) v Mercantile Mutual Insurance (Worker's Compensation) Ltd (1991) 5 WAR 208
De Vries v Smallridge [1928] 1 KB 482
Hondros v Chesson [1981] WAR 146
Kenny v Preen [1963] 1 QB 499
R v Cheshire County Court Judge [1921] 2 KB 694
The Lunching Pad Pty Ltd v Minister for Culture and the Arts [2001] WASC 299
Thompson v White [1970] 3 All ER 678
Vale v TMH Haulage Pty Ltd (1993) 31 NSWLR 702

GILLAN DCJ:

This is an application by the defendants/plaintiffs by counterclaim made pursuant to s 77 of the District Court of Western Australia Act 1969 (WA) (District Court Act) to remit these proceedings to the Supreme Court of Western Australia.
For reasons I will set out below, I consider that the District Court may not have the power to grant the relief sought in the prayer for relief in the counterclaim and therefore will remit the proceedings to the Supreme Court.

The nature of the proceedings

The plaintiff commenced these proceedings by writ of summons and its claim is for damages for the alleged breach of a franchise agreement entered into between the plaintiff as franchisor and the first and second defendants as principals and guarantors of the franchisee and the third defendant as a corporate franchisee. The nature of the franchised business was that of a healthy food café.
There is no doubt that the principal proceedings were properly commenced in the District Court. The plaintiff's claim is for damages in the order of approximately $200,000.
In the defence and counterclaim the defendants/plaintiffs by counterclaim, in summary, plead a reply and defence to counterclaim alleging misleading and deceptive conduct contrary to the provisions of the Australian Consumer Law (ACL).
I do not intend to describe in detail the allegedly misleading and deceptive conduct but it is said to arise out of pre-contractual:
1.discussions between Ms Carbone, on behalf of the plaintiff, and the first and second defendants/plaintiffs by counterclaim; and
2.written material provided by Ms Carbone on behalf of the plaintiff to the first and second defendants/plaintiffs by counterclaim.
Those discussions and that written material, which are said to have been misleading and deceptive, are pleaded to have induced the defendants to, inter alia, take the following actions:
1.borrow money from the ANZ Bank for the purpose of funding the fit-out, design and build of a café (the ANZ loan);
2.the first and second defendant: incur the costs of incorporating the third defendant to be the corporate franchisee;
3.make payment of the franchise and legal fees to the plaintiff;
4.enter into the franchise agreement;
5.enter into a lease for café premises (the lease agreement);
6.commence trading as a café; and
7.the first and second defendant: advance funds to the third defendant, as corporate franchisee.
The prayer for relief in the counterclaim is in these terms:
Mr Finn, Ms Tana and Bilisa claim:
1.A declaration pursuant to section 237(1) and section 243 of the ACL that the provisions of the franchise agreement are unenforceable by Healthy Nut, its successors and assignors against Mr Finn and Ms Tana, Bilisa, their successors and assignors;
2.Orders pursuant to section 237(1) and section 243 ACL that:-
2.1Healthy Nut, its successors and assignors, not be at liberty to enforce any provision of the franchise agreement against Mr Finn, Ms Tana and Bilisa, their successors and assignors;
2.2Ms Carbone indemnify and keep indemnified Mr Finn, Ms Tana and Bilisa jointly and severally against all liability which they may now or at any time in the future have in respect of the franchise agreement.
2.3Ms Carbone and Healthy Nut jointly and severally indemnify and keep indemnified Mr Finn, Ms Tana and Bilisa jointly and severally against any and all liability which they may now or at any time in the future have in respect of:-
2.3.1the lease agreement;
2.3.2the ANZ loan.
2.4Ms Carbone and Healthy Nut jointly and severally indemnify and keep indemnified Bilisa against any and all liability which it may now or at any time in the future have in respect of monies owed by Bilisa to Mr Finn and Ms Tana.
3.Orders pursuant to section 236 alternatively 237(1) of the ACL that Ms Carbone and Healthy Nut jointly and severally pay Mr Finn, Ms Tana and Bilisa:-
3.1damages, alternatively
3.2compensation; together with interest and thereon;
4.Costs.
Counsel for the defendants/plaintiffs by counterclaim say that the relief sought in pars 1 and 2, but not the damages or compensation sought in par 3 of the prayer for relief is outside the jurisdiction of this court and so the proceedings should be remitted to the Supreme Court to ensure that in the event the plaintiffs by counterclaim are successful they will not be held out of any relief that they might otherwise be entitled to.
The plaintiff opposes the application on the basis that the relief sought by way of damages and compensation (pars 3.1 and 3.2) is within the jurisdiction and so the balance of the relief sought is either:
1.in respect to the relief sought at pars 1 and 2.1 of the prayer for relief: ancillary to the damages claim;
2.in respect to the relief claimed at pars 2.2 to 2.4 of the prayer for relief: properly a claim for damages presently unquantifiable; and
3.for all pars: relief of a statutory nature within the jurisdiction of the District Court.
Accordingly, the plaintiff says, all of the relief sought is within jurisdiction. The plaintiff says, further, that it has not and will not raise any question of a lack of power or jurisdiction to make those orders sought in the event that the defendants are successful on the counterclaim.

The law

Section 77 of the District Court Act provides:
Where it appears to a District Court judge that any action or matter brought before the Court ought from its nature, or magnitude, or by reason of the question of law involved to be heard and determined by the Supreme Court, he may make an order, remitting the action or matter to the Supreme Court.
The power to remit is expressed in wide and discretionary terms. It is not limited by its terms to only those matters for which a lack of jurisdiction in this court is able to be made out. Indeed, it is expressed to be exercisable in the discretion of the District Court whenever an action or a matter 'ought from its nature, or magnitude, or by reason of the question of law involved be heard and determined by the Supreme Court'.
Clearly, if there is any want of jurisdiction then an order to remit should be made: Chianti Pty Ltd v Leume Pty Ltd [2007] WASCA 270 [4] (Martin CJ).
In my view, subject to the requirement that such a discretion be exercised judicially, if any of the criteria are made out then an order to remit should be made.

The civil jurisdiction of the District Court

The District Court is a court of limited jurisdiction. The civil jurisdiction of the District Court is found in pt III, div 2, of the District Court Act and in any State or Commonwealth legislation which invests jurisdiction in the court.
Relevantly, pt III, div 2, deals with 'actions' and 'matters' within the court's jurisdiction. An action is defined in s 6 of the District Court Act and 'means a civil proceeding commenced by writ or in such other matter as is prescribed by the rules of court ...'. A 'matter' is also defined in s 6 of the District Court Act as 'a proceeding in the court that is commenced otherwise by writ'.
Hence, the present proceedings which have been commenced by writ are an action within the meaning of s 6 of the District Court Act.
In this case the source of the court's jurisdiction to hear matters asserting a breach of the ACL is found in s 138B of the Competition and Consumer Act 2010 (Cth) (CC Act). That section is, relevantly, in these terms:
(1)[State and Territory courts jurisdiction]
Jurisdiction is conferred on the several courts of the States and Territories in relation to any matter arising under this Part or the Australian consumer law in respect of which a civil proceeding is instituted by a person other than the Commonwealth minister or the commission.
...
(3)[Limit on State courts jurisdictions]
The jurisdiction conferred by subsection (1) on the several courts of the States is conferred within the limits of their several jurisdictions, whether those limits are as to locality, subject matter or otherwise.
...
(5)[Available remedies]
This section is not to 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.
In very general terms, where jurisdiction is conferred by the CC Act on a court of limited jurisdiction, that conferral is not intended to invest that court with a novel range of disputes or remedies not otherwise within the court's usual business: s 138B(3) and s 138B(5) CC Act.
It is necessary to consider what the established jurisdiction of the District Court is, to determine whether the relief sought by way of counterclaim would be outside that usual jurisdiction.
Section 50 of the District Court Act defines the jurisdiction of the court. Relevantly, s 50(1) provides that the District Court has the same jurisdiction to hear and determine and may exercise all the powers and authorities that the Supreme Court has and may exercise from time to time in relation to:
(a)all personal actions, other than those of the kind referred in subsection (2), where the amount, value or damages sought to be recovered is not more than the jurisdictional limit, whether on the original claim or demand or a balance after allowing payment on account, or the amount of any set-off admitted by the plaintiff. ...
(aa)An action claiming an indemnity where the action arises from or relates to another action that is before the court or that has been heard and determined by the court;
The nature of a personal action was discussed by the Full Court in Commercial Developments Pty Ltd (t/as Don Rogers Motors Pty Ltd) v Mercantile Mutual Insurance (Worker's Compensation) Ltd (1991) 5 WAR 208, 219 – 220 (Malcolm CJ).
In Commercial Developments, an action for damages for personal injury within jurisdiction had been commenced in the District Court. Third party proceedings were also commenced seeking only a declaration that, in the event that the defendant was found to be liable to pay damages, it was entitled to an indemnity pursuant to a contract of insurance. A decision that the third party proceedings were outside the jurisdiction of the District Court was appealed to the Full Court who agreed that at that time the District Court did not have jurisdiction.
Malcolm CJ found that unless money or property of the appropriate nature or value was sought to be recovered, the District Court has no jurisdiction to grant a declaration as principal relief referring to R v Cheshire County Court Judge [1921] 2 KB 694. He went on to say that declaratory relief would only be within jurisdiction if the declaration was ancillary to a personal action ie, a claim for money or property.
His Honour found that at common law no claim for money or property could arise before the obligation to indemnify had also arisen ie, when judgment was entered on the personal injury claim. This meant that the declaration sought was purely equitable. His Honour went on to say that had a claim for quia timet[1] relief been sought along with the declaration, both claims would have been of an equitable nature and outside jurisdiction.
[1] Usually an injunction to prevent an apprehended breach but, in this matter, was suggested include an injunction to require a fund be set aside to meet a likely indemnity sum.
Malcolm CJ did not have to decide what a personal action was but referred, with apparent approval, to the meaning of the expression 'personal action' in Attorney General v Lord Churchill (1841) 10 LJ Ex 314; 151 ER 997, where Parke B said with respect to the description of 'personal action':
... It is capable of two different senses; actions may be personal as contradistinguished from real and mixed, the first being actions against the person only for damages, the second for recovery of real estate and the third for both. In this sense of the word 'personal', there appears to be no question but that information of intrusion is a personal action for its object is the recovery of damages, not the recovery of the estate, for the Crown has never in contemplation of law lost it. But the word 'personal' may mean such actions as are for the recovery of debts or damages to the person or personal effects; and in this sense of the word, a writ of intrusion is not a personal action.
He went on to say that both of these senses were encompassed in the definition in Blackston's Commentaries on the Laws of England, vol 3, page 117:
Personal actions are such whereby a man claims a debt, or personal duty, or damages in lieu thereof; and likewise whereby a man claims a satisfaction in damages for some injury done to his person or property. The former is said to be founded on contracts, the latter upon torts or wrongs: and they are the same which the civil law calls 'actiones in personum, quae adversus eum intenduntur, qui ex contractu vel delicto obligatus est aliquid dare vel concedere' of the former nature are all actions upon debt or promises; of the latter all actions are trepasses, nuisances, assault, defamatory words, and the like.
The result in Commercial Developments, was that the third party proceedings, seeking a declaration of indemnity, belonged in the Supreme Court while the principal action was within the jurisdiction of the District Court. Such an outcome was unfortunate and Malcolm CJ, at (220), expressed the opinion that the District Court should have the necessary jurisdiction.
In Chianti Pty Ltd v Leume Pty Ltd [50] - [56], Buss JA did not demur from Malcolm CJ’s analysis of what a personal action was but expressed a preference for a more modern description of the term as adopted by Priestley JA in Vale v TMH Haulage Pty Ltd (1993) 31 NSWLR 702:
Personal action ... the term is now frequently given to an action in personum, where the judgment of the court is a personal one, normally for payment of money as contrasted with an action in rem, where the plaintiff seeks to make good a claim to or against certain property in respect of which, or in respect of damage done by which, he alleges he has an actionable demand.
'Ancillary' is used in the sense of serving or assisting the claim for damages. A declaration will serve or assist if it adds nothing new to the matters encompassed by the claim for damages: Thompson v White [1970] 3 All ER 678, 681 – 682; Commercial Developments (218 ‑ 219); The Lunching Pad Pty Ltd v Minister for Culture and the Arts [2001] WASC 299 [14] ‑ [18] (Pullin J).
A plank of the defendants/plaintiffs by counterclaim's argument for the action to be remitted is that all of the relief sought in pars 1 and 2 of the prayer for relief is relief in equity, which the District Court has limited power to grant: Malcolm CJ in Commercial Developers (217) and Buss JA in Chianti Pty Ltd v Leume Pty Ltd [52] – [56].
Relief by way of declaration can be based on a common law right, on principles of equity or, as here, on a statutory right to a declaration. In either case, the relief by way of declaration is only within jurisdiction so long as it is ancillary to the claim of damages: Hondros v Chesson [1981] WAR 146, 147 (Burt CJ), relying on De Vries v Smallridge [1928] 1 KB 482, 488; and Kenny v Preen [1963] 1 QB 499, 514, or were within another head of jurisdiction.
So, the true question in this case, is whether the statutory relief sought can be described as ancillary to the personal action or within any other head of jurisdiction.

Is the declaration sought in par 1 proper for relief outside of jurisdiction

The claim for declaratory relief in par 1 appears to me to be the primary relief sought in the action. While it relies on exactly the same facts that form the basis of damages pleaded in the counterclaim at pars 32 and 34 and par 3 of the prayer for relief, without that declaration there would be no basis for the claim for compensation.
In my view, the declaration sought in par 1 cannot be said to be ancillary to the claim for damages.

What is the nature of the relief sought in pars 2.1 – 2.4 of the prayer for relief and is it within the jurisdiction of the District Court?

These paragraphs are expressed in terms of the court ordering either:
1.Par 2.1: that the plaintiff is not at liberty to enforce the provisions of the franchise agreement;
2.That the plaintiff and Ms Carbone indemnify Mr Finn, Ms Tana and Bilisa against any and liabilities they 'may now or at any time in the future' have in respect to the franchise agreement (par 2.2), the lease agreement (par 2.3.1), the ANZ loan (2.3.2); and
3.That the plaintiff and Ms Carbone indemnify Bilisa against any and all liability that it 'may now or at any time in the future, have in respect of monies owed by it to Mr Finn and Ms Tana' (par 2.4).
The power to make orders to effectively compensate for loss or damages is expressed in s 237(1) ACL in wide terms as being the power to 'make such order or orders as the court thinks appropriate against the person who engaged in the conduct'.
Section 237(2) ACL makes it clear that the purpose of the order is to compensate the injured party for loss or damage suffered or to prevent or reduce the loss or damage suffered, or likely to be suffered by the injured person.
Section 243 ACL, without limiting the orders that might be made, lists orders that are within the discretion of the court.
Each of the orders sought in pars 2.1 – 2.4 of the prayer for relief are also dependent on the declaration that the franchise agreement is unenforceable. In that sense they cannot be said to be ancillary to the personal action.

In addition they each seem to be seeking relief against future events most probably in the form of further declarations supported by injunctions in the nature of quia timet relief although counsel for the defendants/plaintiffs by counterclaim was unable to describe to me what form the orders would ultimately take.
One other way in which such orders could be encompassed would be by way of a declaration about entitlement to an indemnity coupled with liberty to apply with respect to any specific liabilities that were said to fall within the indemnity.
There are difficulties in fitting orders requiring the ongoing administration of, say, injunctions or with liberty to apply into the framework of the range of remedies usually granted by the District Court.
As I said above, the decision in Commercial Developments was that third party proceedings seeking a declaration of indemnity was beyond jurisdiction but that was a situation rightly perceived to be lacking in common sense. An amendment of the District Court Act the following year to insert s 50(1)(aa) was clearly intended to right that anomaly[2].
[2] Second reading speeches Legislative Assembly, Hansard WA 25, 9 November 1992 at 7230 and Legislative Council, Hansard, 4 June 1992 at 3355.
Section 50(1)(aa) is in wide terms. I can see no reason why it would be read down so that it does not extend to a claim to be indemnified for future rather than existing liabilities but I cannot be certain that, after trial, the trial judge would find that the relief sought in pars 2.2 – 2.4, if it were to also encompass a claim for an injunction, would be within the jurisdiction of the District Court.

Conclusion

Given my findings at [36] and [46], and I am not satisfied that the relief in pars 1, 2.2 – 2.4 of the prayer for relief are within the jurisdiction of the District Court. Accordingly, I will make the orders sought.

Costs

I have heard the parties as to costs and am of the view that the costs of this application should be in the cause. I fix the costs at $2,178 by reference to the Supreme Court Consolidated Practice Direction at para 4.7.1.1, which sum I understand both counsel are content with.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
CDZ
ASSOCIATE TO JUDGE GILLAN
20 SEPTEMBER 2018