Hebbard v Bell Potter Securities Ltd - [2005] FMCA 467

FEDERAL MAGISTRATES COURT OF AUSTRALIA

HEBBARD v BELL POTTER SECURITIES LTD

[2005] FMCA 467

TRADE PRACTICES – Summary dismissal – whether jurisdiction to hear and determine claim arising out of employer/employee correspondence – where no claim under s.52 of Trade Practices Act then no associated/accrued jurisdiction.

Trade Practices Act 1975, s.52
Federal Magistrates Court Rules 2001, r.13.09, 13.10(a)
Federal Magistrates Act 1999, ss.10(1), 18

Bank of New South Wales v Commonwealth (1948) 76 CLR 1
Prestia v Aknar (1996) 132 FLR 180
David Walker v Salomon Smith Barney Securities Pty Ltd and Anor (2003) FCA 1099
McCormick v Riverwood International (Australia)Pty Ltd (1999) 167 ALR 689
Walker v Life Span Financial Planning (2003) 176 FLR 166
Fox v Robinson [2003] FMCA 107
Barto v GPR Management Services Pty Ltd (1991) 33 FCR 389
Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (2000) 104 FCR 560, 166 ALR 731
O'Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455

Applicant:

COLIN EDWARD HEBBARD

Respondent:

BELL POTTER SECURITIES LTD

File No:

PEG 15 of 2005

Delivered on:

13 April 2005

Delivered at:

Melbourne

Hearing Date:

10 March 2005

Judgment of:

McInnis FM

REPRESENTATION

Counsel for the Applicant:

Mr T J Carmady

Solicitors for the Applicant:

Williams & Hughes

Counsel for the Respondent:

Mr T Caspersz

Solicitors for the Respondent:

Blake Dawson Waldron

ORDERS

The Application filed on 24 January 2005 be dismissed.
The Applicant shall pay the respondent's costs.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PERTH

PEG 15 of 2005

COLIN EDWARD HEBBARD

Applicant

and

BELL POTTER SECURITIES LTD

Respondent

REASONS FOR JUDGMENT

In this matter the applicant by an application filed on 24 January 2005 has sought certain orders against the respondent who it is alleged engaged in misleading and deceptive conduct in contravention of s.52 of the Trade Practices Act 1975 (the TPA). The respondent by an application filed on 24 February 2005 seeks an order pursuant to rules 13.09 and 13.10(a) of the Federal Magistrates Court Rules 2001 (the rules) that the application filed on 24 January 2005 in this proceeding be dismissed. The basis of the application by the respondent for summary dismissal is that the court does not have jurisdiction to hear the application and/or that the application could properly be regarded as an abuse of process.
The applicant has filed an affidavit sworn by him on 12 January 2005 in support of the substantive application which sets out in some detail the background to the claim. For the present purposes it is sufficient to recite the facts based upon that affidavit material. The applicant deposes that the respondent is a financial adviser providing amongst other things stockbroking services to clients. Prior to 9 December 2001 the respondent was known as Johnson Taylor Potter Ltd. On 2 February 2001 the applicant deposes that he signed a written contract with the respondent. Pursuant to that contract he commenced employment on 5 February 2001. The applicant annexes to his affidavit a copy of his contract (exhibit CEH2) which appears to be an offer of employment dated 27 December 2000. It contains a number of clauses and provision for the applicant to countersign the document agreeing to the terms and conditions of the employment set out in that offer. There is no dispute that the offer was accepted by the applicant and he commenced employment on the date referred to earlier.
The applicant was employed by the respondent as a senior private client adviser. He deposes that during May 2001 he became aware that the respondent was experiencing financial difficulties as a result of a claimed downturn in the financial markets. He further claims that during May 2001 a dispute had arisen between the respondent, the respondent's employed financial advisers, which included the applicant, in relation to salaries paid. In his affidavit he annexes correspondence which relates to that dispute. The first item of correspondence, a letter dated 8 May 2001 (exhibit CEH3) is a letter to the applicant from the respondent as it then was and purportedly signed by the executive chairman. That letter sets out the financial circumstances of the respondent and the economic climate within which the difficulties appear to have arisen for the respondent and indeed all Australian stockbrokers in the previous 12‑month period.
A second letter, also part of exhibit CEH3, is a letter from the respondent to the applicant dated 11 May 2001. That letter refers to the staff, including the applicant, being required to accept a reduction in salaries. It otherwise canvasses issues in relation to the genuine performance of the respondent and difficulties it has encountered which do not need to be recited in full in this decision. It is relevant to note, however, in that letter the following passage:-
“Please note that the implementation of the proposed reduction in your salary and introduction of the Contract Note Charge/Fee is not intended to vary the terms of your employment, as this cannot take place without your agreement. Subject to receiving your views on the proposed reductions, we will, of course, continue to recognise your rights and entitlements under the existing terms of your employment.”
Other correspondence forming part of exhibit CEH3 includes a letter to the applicant dated 18 March 2001 and schedule of variation to employment terms for the applicant. That schedule provides for, amongst other things, a new base salary of $151,250 per annum effective from 1 April 2001 compared with the applicant's then current base salary of $275,000 per annum. It is claimed by the applicant that he has not signed that schedule of variation to the employment terms. Further correspondence, also part of exhibit CEH3, includes a letter, again dated 18 May 2001 to the Applicant referring to the reduced salary then being increased by $4800 being a minimum annual principal repayment amount to become $156,050. In his affidavit the applicant refers to that correspondence and then further notes that in July 2001 CA and L Bell Commodities Corporation Pty Ltd (Bell) acquired a majority interest in Bell Potter. He deposes that on or about 12 July 2001 he received a letter from Mr Colin Bell who he claims was then the chairman of Bell. That letter (exhibit CEH4) which is dated 12 July 2001 contains the following paragraph:-
“We are also able to confirm that the original contractual arrangements put in place by Johnson Taylor Potter and subsequently revised, have now been fully restored. Advisers will also be aware that we have removed the order fee that was recently introduced by the firm and have agreed to make good those charges that were levied during June.”
The applicant claims in his affidavit that that statement was of particular importance, namely, that his original contractual entitlements would be "fully restored". The applicant otherwise deposes to attempts made by him to obtain alternative employment following his surprise at a reduction of his salary which he claims occurred during August 2001 when his base salary was reduced from $275,000 per annum to $137,500 per annum. He claims he discovered that reduction to the salary when he returned from an overseas holiday to the United Kingdom and was shocked and surprised by the reduction given the contents of the letter dated 12 July 2001. It is sufficient for present purposes to note that that letter has provided what might be described as the basis upon which the claim is now pursued in this court.
It is noted that in fact the applicant in response to a request from the respondent had provided particulars of the claim given that there have been no pleadings in the matter to date. Specifically by letter dated 17 February 2005 the solicitors for the respondent requested further material from the applicant and in particular asked for further written particulars of the claim in relation to:-
The alleged misleading and deceptive conduct by the respondent relied upon by your client for the purposes of his claim for a declaration that section 52 of the TPA was contravened by the respondent.
In answer to that specific request for a further particular, the applicant's solicitors by letter dated 18 February 2005 state the following:-
The statement contained in Mr Bell's letter of 12 July 2004 (sic) that Mr Hebbard's original contractual entitlements would be fully restored is relied upon. This is a representation as to a future matter. Mr Hebbard will rely on section 51A TPA at the trial of this matter. See paragraphs 7 and 8 of Mr Hebbard's affidavit of 12 January 2005 (Mr Hebbard's affidavit).
The passage referred to in that further particular is the passage recited earlier in this judgment from the letter of 12 July 2001, though it is noted that the date 2004 has been incorrectly inserted in the particulars. In any event, paragraphs 7 and 8 of the applicant's affidavit refer to the issues summarised earlier in this judgment as to the surprise of the applicant and claimed importance of the statement that his original contractual entitlements would be ‘fully restored’.
It is against that background information that the respondent in its application for summary dismissal claims that the paragraph referred to in the letter dated 12 July 2001 could properly be regarded as a letter from the respondent ‘qua employer’ to the applicant ‘qua employee’. It was submitted in support of the argument that there is no jurisdiction to hear the alleged contravention of s.52 of theTPA, and the letter was not sent to the applicant in the context of any trading or commercial transaction or activity involving the parties and so the statement was not made in trade or commerce. Hence it is submitted the application discloses no reasonable cause of action under s.52 of the TPA and consequently the court has no jurisdiction to determine it (see Rainsford v State of Victoria [2001] FMCA 115).
It was argued on behalf of the respondent that to be "in trade or commerce" the conduct in question must be an activity or transaction that of its own nature bears a trading or commercial character. It is useful to set out the decision of the High Court in the matter of Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 per Mason CJ, Deane, Dawson and Gaudron JJ at page 604 where the court states the following:-
“… Put differently, the section was not intended to impose, by a side‑wind, an overlay of Commonwealth law upon every field of legislative control into which a corporation might stray for the purposes of, or in connection with, carrying on its trading or commercial activities. What the section is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character.”
It was submitted by the respondent that the words "in trade or commerce" refer to the "central conception" of trade or commerce and not to the immense field of activities in which corporations may engage in the course of or for the purpose of carrying on some overall trading or commercial business. Reference again was made to the ConcreteConstructions decision and in particular the following extract which appears at page 603 where the court cites the decision of Bank of New South Wales v Commonwealth (1948) 76 CLR 1 per Dixon J at 381 as follows:-
“… So construed, to borrow and adapt words used by Dixon J, in a different context in Bank of N.S.W. v The Commonwealth, the words "in trade or commerce" refer to "the central conception" of trade or commerce and not to the "immense field of activities" in which corporations may engage in the course of, or for the purposes of carrying on some overall trading or commercial business.”
As indicated earlier Counsel for the respondent invited the court to characterise the letter in question as being simply a notice from the respondent ‘qua employer’ to the applicant ‘qua employee’ informing or advising him about certain things concerning his employment, including the matters contained in the statement. It was argued the capacity in which it was made signifies that it and therefore the statement did not bear any trading or commercial character. Reference was made to the decision of the Federal Court in the matter of Prestia v Aknar (1996) 132 FLR 180 (Prestia) per Santow J at 195 where the court states the following:-
“I have earlier pointed out that the High Court, though by the barest of majority, held in Concrete Constructions (NSW) Pty Ltd v Nelson (at 604) that the equivalent of s 52 of the Trade Practices Act is concerned with ‘... the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character’”.
Further reference was made to the decision of Santow J of the Supreme Court of New South Wales in the Prestia decision at page 196 where the court states the following:-
“The counter-reaction to this luxuriant and proliferating growth in actions reliant upon s 52 or upon its State counterparts, has been the search for some limiting factor or discrimen consistent with language and context. This is necessarily concentrated upon the expression ‘in trade or commerce’, with particular emphasis on the preposition ‘in’. It is well accepted that this language was intended to exclude from its reach those who were acting not in a business capacity but in a purely private capacity concerning domestic transactions; for example, the sale by an individual of a non‑business asset like the family home in contrast, say, to a hotel: O’Brien v Smolonogov (1983) 53 ALR 107; Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112; 94 ALR 719. But that still leaves an enormous field.
It was following Concrete Constructions (NSW) Pty Ltd v Nelson that the majority judgment provided that further constraint on the luxuriant growth of s 52 and its State counterparts – a constraint less drastic than limiting its protection only to consumers. They found it by borrowing and adapting the words used by Dixon J in a different context in Bank of New South Wales v Commonwealth (1948) 76 CLR 1 at 381 where (at 603 of the majority judgment) it is said:
…
They drew this together in a test which requires ‘dealing in the course of those activities or transactions which, of their nature, bear a trading or commercial character’. They acknowledged they were doing so where ‘as a matter of language, the arguments favouring and militating against these alternative constructions of s 52 are fairly evenly balanced’ (at 603)”.
In the same case Santow J states the following at page 197:-
“Concrete Constructions (especially ay 604) has encouraged a sharper focus on the capacity in which a particular activity has been carried out, rather than concentrating merely on the activity itself, divorced from its context and potential connection with a trading or commercial relationship. This is illustrated by the bases dealing with the issue of statements designed either to assist or impede the interests of the tobacco industry. Consider, for example, Tobacco Institute of Australia v Woodward (1993) 32 NSWLR 559, where the relevant statement of a tobacco lobbyist was held to have been made rather in the capacity of a director of a particular company ‘Action on Smoking and Health Ltd’ than ‘in trade or commerce’ as such, even treating the activity of lobbying for reward as itself capable of being ‘in trade or commerce’. There have been other cases in the opposite direction".
Of significance in the Prestia decision is the following passage upon which the respondent relies which appears at page 206 where the court states:-
“I am satisfied the mere fact that legal advice is given in relation to a commercial transaction does not of itself suffice to characterise the legal advice as being ‘in trade or commerce’".
It was argued for and on behalf of the respondent that the facts and circumstances in the present case do not of themselves constitute a sufficient basis upon which the correspondence in responding to the applicant could properly be characterised as being "in trade or commerce". It was further argued that the statement relied upon by the applicant was not made in what might be described as employment negotiations. A distinction was therefore drawn between the present case and the facts and circumstances which were presented to the court in the matter of David Walker v Salomon Smith Barney Securities Pty Ltd and Anor (2003) FCA 1099 and particular reference in that case was made to the following passages:-
“180 The authorities support the proposition that a statement made in the course of employment negotiations, which proves to be misleading or deceptive, can fall within s 52 of the TPA: see O'Neill v Medical Benefits Fund of Australia (2002) 122 FCR 455 per Carr, Moore and Marshall JJ; Stoelwinder v Southern Health Care Network (2000) 177 ALR 501 ("Stoelwinder"), at 503 per Finkelstein J; and Patrick v Steel Mains Pty Ltd (1987) 77 ALR 133 ("Patrick"), at 136 per Wilcox J.
181 Whether negotiations in relation to employment contracts (with existing or prospective employees) come within the scope of s 52 depends on whether the negotiations can be characterised as being "in trade or commerce". In Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 ("Concrete Constructions") Mason CJ, Deane, Dawson and Gaudron JJ held, at 603, that conduct "in trade and commerce" in s 52 refers to:
... conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character.
In Concrete Constructions, the Court held, at 605, that an "internal communication by one employee to another in the course of their ordinary activities" was excluded from the ambit of s 52.
182 In Patrick, Wilcox J accepted that misleading and deceptive conduct in the course of negotiations for contracts of negotiations was actionable under s 52. In Orison Pty Ltd v Strategic Minerals Corporation NL (1987) 77 ALR 141, French J, at 157-158, referred to Patrick with approval. In Finucane v New South Wales Egg Corporation (1988) 80 ALR 486 ("Finucane"), at 507-8, Lockhart J held that "the activities of the Corporation in and about the conduct of interviews of Finucane [regarding the sale of an egg run] by the Corporation's officers fall within the ambit of conduct in trade and conduct within the scope of s 52 of the Act". His Honour held, at 507, that the facts of Wright (see below) were "clearly distinguishable" from the case before him: compare also Merman Pty Ltd v Cockburn Cement (1988) 84 ALR 521 ("Merman") at 530-531 per Lee J and Callinan v Gilro-ERG Pty Ltd [1996] FCA 986 ("Callinan v Gilro-ERG") per O'Loughlin J.
183 Wilcox J's decision in Patrick was not followed by Lee J in Wright v TNT Australia Pty Ltd (1988) 15 NSWLR 662, at 676. Whilst an appeal from his Honour's decision failed, the Court of Appeal rejected his Honour's characterisation of negotiations for employment: see Wright v TNT Australia Pty Ltd (1988) 15 NSWLR 679, at 683 and 685 per Mahoney JA, 693-695 per McHugh JA (dissenting) and 697 per Clarke JA. In his dissenting judgment, McHugh JA observed, at 694:
No doubt as Lockhart J observed in Finucane (at 507...) it may be that not everything done by a corporation that is engaged in trade or commerce is done "in" trade or commerce. But everything done for the purpose of carrying out its trading or commercial activities is in my opinion done as part of a corporation's trade or commerce. The employment of staff for the purpose of carrying out its trading and commercial activities is in my opinion near the centre of a corporation's trade and commerce. Those concepts do not exist independently of the sum of the activities of the corporation and individuals who engage in them. [Emphasis added]
184 In Barto v GPR Management Services Pty Ltd (1991) 33 FCR 389 at 395, Wilcox J adhered to the approach that he had taken in Patrick: compare McCormick v Riverwood International (Australia) Pty Ltd (1999) 167 ALR 689, at 694-6 per Weinberg J and Nagy v Masters Dairy Ltd (1996) 150 ALR 273, at 294-5 per RD Nicholson J. In Mulcahy v Hydro-Electric Commission (1998) 85 FCR 170, at 213 and Martin v Tasmania Development and Resources (1999) 163 ALR 79, at 97-98, Heerey J adopted a more restrictive approach than Wilcox J, although it may be noted that neither of these cases involved negotiations for employment contracts.
185 Having regard to the authorities mentioned above, I accept that misleading and deceptive conduct in the course of negotiations for employment may support a cause of action under s 52 of the TPA.”

Further it was argued that in the present case the passage relied upon in the correspondence was not made in a trading or commercial transaction or activity involving the parties unlike the circumstances in the matter of McCormick v Riverwood International (Australia)Pty Ltd (1999) 167 ALR 689. It was noted that in that case the facts and circumstances as set out in the headnote are as follows:-
“The applicant, M, was employed in the packaging systems division of a cardboard packaging business from 9 May 1961 to 8 May 1998. From 1990, M was employed by MPP. In May 1993, a division of MPP was constituted as a new company, P. From 1 December 1994, MPP changed its name to C. Both P and C were wholly-owned subsidiaries of an American parent company.
On 30 March 1998, C sold its business to CHH. It was a term of the contract for the sale of the business that CHH offer employment to all employees of C.
On 26 April 1998, and after the sale of the assets to CHH, P changed its name to R, the respondent. M and R were subsequently in dispute as to whether M was entitled to a redundancy payment.
M claimed that he was entitled, under his contract of employment with R, to payment of a sum of money by reason of having been made redundant at the time when C’s business was sold to CHH. R disputed the existence of this contractual entitlement, but alleged that if M was so entitled, he was not made redundant, since he had been offered a position with CHH on terms no less favourable than those under which he had been employed by P.
M disputed that he had been offered and had rejected a position with CHH, and relied upon an estoppel by conduct of the human resources manager of C at a meeting on 27 March 1998 and the silence of that manager at the meeting, which was alleged to have constituted a contravention of ss 52 and 53B of the Trade Practices Act 1974 (Cth).
In evidence before the court was a letter sent to M offering him the position of senior technician with P on 6 October 1993. This letter was the only written contract of employment tendered. This letter contained the statement “You agree to abide by all company policies and practices currently in place …”. Also tendered in evidence were three redundancy agreements, the last of which was dated November 1993, and which had purported to have been made by MPP and the Printing and Kindred Industries Union, and a Human Resources Policies and Procedures Manual maintained by C in the period leading up to its sale in 1998. Following the sale of C to CHH in March 1998, the third redundancy agreement was certified and enforceable by any CHH employee.”
Reference was made in the McCormick case to the following passage from the judgment of Weinberg J:-
“[28]The conduct of which the applicant presently complains took place in circumstances very different from the “internal communications” which were in issue in Concrete Constructions. The conduct occurred in the context of a commercial transaction — the sale of a business to a purchaser with a right to a “second option” on recruitment of Packaging’s employees, and with an obligation to afford any such transferring employees no less favourable terms and conditions than they had previously enjoyed. Such conduct bears little resemblance to the type of conduct which the majority in Concrete Constructions regarded as falling outside the ambit of the expression “in trade or commerce”, such as the giving of a misleading hand signal by the driver of a corporation’s trucks. As their Honours observed (at CLR 604; ALR 198):
Nor, without more, is a misleading statement by one of a building company’s own employees to another employee in the course of their ordinary activities. The position might well be different if the misleading statement was made in the course of, or for the purposes of, some trading or commercial dealing between the corporation and the particular employee.
[29]Whatever difficulties there may be in applying the broad statements of principle laid down by the High Court in Concrete Constructions, it may at least be said that the mere fact that the misleading statement was made by one employee to another does not, of itself, prevent it from falling within the ambit of the expression “in trade or commerce” in s 52. As Toohey J observed (at CLR 613), the words “trade or commerce” are of wide import. But their focus is on commercial activity, the providing of goods and services for reward. While the word “in” is narrower than the expression “in connection with”, and suggests something akin to “as part of” trade and commerce, the circumstances surrounding the sale of the business by Cartons to CHH, and in particular the question of which of Packaging’s employees would be taken on by CHH, are matters closely related to, and in the course of, trading or commercial dealing.”
It was submitted that in the present case, unlike the facts and circumstances in McCormick dealt with by Weinberg J, the conduct did not occur in the context of a commercial transaction which in that case involved the sale of a business to a purchaser with a right to a second opinion on recruitment. In the argument it was submitted that the current correspondence occurred in the light of an acquisition, as described earlier in this judgment, is not analogous to the factual circumstances in McCormick's case and therefore the reasoning in that case does not apply to the facts and circumstances of the present application.
It is submitted in the present case, the letter, including the statement, was conduct of the respondent wholly within the employment relationship per se. Even if it could be claimed that the statement was misleading or deceptive (which is denied) it was argued that it had no trading or commercial character. The court has no jurisdiction to determine the applicant's s.52 claim, so he cannot establish the statement was made in trade and commerce. Therefore, the court has no jurisdiction to determine the associated contract or debt claims of the applicant as they are not matters associated with any matter within the jurisdiction of the court. Reference was made to ss.10(1) and 18 of the Federal Magistrates Act 1999 which provide as follows:-
“10(1)The Federal Magistrates Court has such original jurisdiction as is vested in it by laws made by the Parliament:
(a)by express provision; or
(b)by the application of section 15C of the Acts Interpretation Act 1901 to a provision that, whether expressly or by implication, authorises a civil proceeding to be instituted in the Federal Magistrates Court in relation to a matter.
18To the extent that the Constitution permits, jurisdiction is conferred on the Federal Magistrates Court in respect of matters not otherwise within its jurisdiction that are associated with matters in which the jurisdiction of the Federal Magistrates Court is invoked.”
Reliance was placed upon the decision of this court in the matter of Walker v Life Span Financial Planning (2003) 176 FLR 166 where

I stated at paragraph 16 the following:-
“16.The respondent correctly acknowledged that the jurisdiction of the Federal Magistrates Court includes associated jurisdiction pursuant to s.18 of the Federal Magistrates Court Act. The associated jurisdiction, however, is only properly invoked if it can hear claims arising within a federal matter. The court was referred in particular to the decision of Johnson Tiles Pty Ltd v Esso Australia Ltd (2000) FCA 1572 and in particular the court was referred to paragraphs 87 and 88 of that decision as follows:-
87 If there be no federal jurisdiction properly invoked then there can be no accrued jurisdiction - Carlton and United Breweries Ltd v Castlemaine Tooheys Ltd (1986) 161 CLR 543 at 553 and see the discussion by Professor Zines in Federal Associated and Accrued Jurisdiction, Opeskin and Wheeler (eds) - The Australian Federal Judicial System (MUP) pp 294-295 and the apparent tension between Vietnam Veterans' Affairs Association of Australia New South Wales Branch Inc v Cohen (1996) 70 FCR 419 on the one hand and Post Office Agents Association Ltd v Australian Postal Commission (1988) 84 ALR 563 at 565 (Davies J) and Buck v Comcare (1996) 66 FCR 359 at 370 (Finn J). The Court in such a case of course does have a limited jurisdiction to determine whether its jurisdiction is properly invoked - Mercator Property Consultants Pty Ltd v Christmas Island Resort Pty Ltd (1999) 94 FCR 384; Khatri v Price (1999) 95 FCR 287.
88 In the ordinary course the contention that a claim is not tenable will not go to jurisdiction unless dependent upon a submission that the claim is outside jurisdiction. And indeed, within that class a claim may be untenable because its very nature denies its character as an element of any matter or controversy in respect of which the Court can exercise jurisdiction. So a proceeding based upon the proposition that the Commonwealth Constitution is invalid does not disclose a matter arising under the Constitution or involving its interpretation - Nikolic v MGICA Ltd [1999] FCA 849. A claim may also be a sham reflecting no genuine controversy and therefore establishing no matter in respect of which the Court may exercise its jurisdiction. There has been discussion of so called "colourable" claims made under the Trade Practices Act for the improper purpose of fabricating jurisdiction. The mere fact that a claim is struck out as untenable does not mean it is colourable in that sense. The pleading of the s.52 claim in this case advanced the legitimate forensic purpose of endeavouring to establish a cause of action which would not require proof of a duty of care. Notwithstanding its precipitate initiation and chequered history, I am not satisfied that it was colourable in the sense that would deprive this Court of jurisdiction to deal with the matter including any non-federal claims that may form part of it.”
It was submitted that in the circumstances the application should be dismissed pursuant to rule 13.10 of the rules as there is no reasonable cause of action and/or the proceeding is an abuse of process of the court (See Fox v Robinson [2003] FMCA 107).
The applicant by way of response sought to argue that in the absence of discovery and further affidavit material it is not appropriate for the court to undertake the significant step of a summary dismissal based upon the material currently before the court. It was argued that although that the respondent relies upon the primary submission that there is a lack of jurisdiction that the principles in relation to summary dismissal apply, and in particular, all that is required of the applicant at this stage is to establish that the relevant conduct is at least arguably "in trade or commerce".
In reaching that conclusion, it is submitted that the question depends on a proper characterisation of the relevant conduct, that is were the representations made in the course of a trading or commercial relationship or of activities that bear a trading or commercial character. Reference likewise was made to the Concrete Constructions case set out above.
It was argued there were a number of other authorities where consideration has been given to the issue of whether representations made by a corporation to their employees might be conduct "in trade or commerce". Reliance was placed upon the dicta of Wilcox J in the matter of Barto v GPR Management Services Pty Ltd (1991) 33 FCR 389. In particular it was noted in that case - again from the headnote - the facts involve the following:-
“A corporation (the first respondent) allegedly renegotiated a contract of employment with one its employees (the applicant). Shortly thereafter the applicant’s contract was terminated. The applicant then brought an action against the first respondent claiming, inter alia, that during the course of the renegotiations the respondent had made representations about the duration of his employment under the new contract of employment which amounted to misleading conduct contrary to s.52 of the Trade Practices Act 1974 (Cth).”
Counsel for the applicant referred the court to the following relevant passages from the decision of Wilcox J:-
“5.However, paragraphs 8 to 10 plead an alternative case based on s .52 of the Trade Practices Act. It is said that, on or about 2 October 1990, Mr Solbrandt made representations to the applicant about GPR's desire for him to continue in its service "for many years to come". The applicant also claims that representations were made to the Department of Immigration, Local Government and Ethnic Affairs about his position. He says that the various representations were untrue, inaccurate and incomplete and were made without any intention or reasonable expectation that they would be carried into effect. Claims are made against GPR as principal and Mr Solbrandt as a person knowingly concerned in the alleged s.52 contravention.”
…
23.… It is true that an employment contract does not directly produce income but the making of such a contract is part of the total activities in trade or commerce of the corporation. Critically, it is intrinsically commercial conduct. It is directed to the creation of a contractual relationship.
24. In the present case the relevant negotiation was conducted with someone who was already an employee of the company. In that sense, the transaction was "internal". But I do not think this matters. Negotiations for an initial employment contract, with a person who is not presently an employee, and negotiations for a variation of that contract, with a person who is an employee, do not differ in their intrinsic character. In each case the negotiation is commercial in nature and undertaken for the purpose of the company's overall trading activities. As I have pointed out, the Concrete Constructions majority recognised that conduct may be "in trade or commerce" notwithstanding that it occurs in a transaction with an employee.”
It was argued that in the current application the court should apply the decision of Wilcox J in Barto, noting that in that case his Honour found the conduct of a corporation occurring in the course of (re) negotiations with a prospective or present employee in respect of that person's employment contract was conduct capable of falling within s.52 of the TPA. Further reliance was placed upon the decision of Weinberg J in the McCormick decision to which reference was made earlier.
The court was further referred to the relevant authorities usefully summarised by Kenny J in Walker v Salomon Smith referred to earlier in this decision. It is useful to set out the relevant passage which appears at page 1099 of the court's decision:-
“180 The authorities support the proposition that a statement made in the course of employment negotiations, which proves to be misleading or deceptive, can fall within s 52 of the TPA: see O'Neill v Medical Benefits Fund of Australia (2002) 122 FCR 455 per Carr, Moore and Marshall JJ; Stoelwinder v Southern Health Care Network (2000) 177 ALR 501 ("Stoelwinder"), at 503 per Finkelstein J; and Patrick v Steel Mains Pty Ltd (1987) 77 ALR 133 ("Patrick"), at 136 per Wilcox J.
181 Whether negotiations in relation to employment contracts (with existing or prospective employees) come within the scope of s 52 depends on whether the negotiations can be characterised as being "in trade or commerce". In Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 ("Concrete Constructions") Mason CJ, Deane, Dawson and Gaudron JJ held, at 603, that conduct "in trade and commerce" in s 52 refers to:
... conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character.
In Concrete Constructions, the Court held, at 605, that an "internal communication by one employee to another in the course of their ordinary activities" was excluded from the ambit of s 52.
182 In Patrick, Wilcox J accepted that misleading and deceptive conduct in the course of negotiations for contracts of negotiations was actionable under s 52. In Orison Pty Ltd v Strategic Minerals Corporation NL (1987) 77 ALR 141, French J, at 157-158, referred to Patrick with approval. In Finucane v New South Wales Egg Corporation (1988) 80 ALR 486 ("Finucane"), at 507-8, Lockhart J held that "the activities of the Corporation in and about the conduct of interviews of Finucane [regarding the sale of an egg run] by the Corporation's officers fall within the ambit of conduct in trade and conduct within the scope of s 52 of the Act". His Honour held, at 507, that the facts of Wright (see below) were "clearly distinguishable" from the case before him: compare also Merman Pty Ltd v Cockburn Cement (1988) 84 ALR 521 ("Merman") at 530-531 per Lee J and Callinan v Gilro-ERG Pty Ltd [1996] FCA 986 ("Callinan v Gilro-ERG") per O'Loughlin J.
183 Wilcox J's decision in Patrick was not followed by Lee J in Wright v TNT Australia Pty Ltd (1988) 15 NSWLR 662, at 676. Whilst an appeal from his Honour's decision failed, the Court of Appeal rejected his Honour's characterisation of negotiations for employment: see Wright v TNT Australia Pty Ltd (1988) 15 NSWLR 679, at 683 and 685 per Mahoney JA, 693-695 per McHugh JA (dissenting) and 697 per Clarke JA. In his dissenting judgment, McHugh JA observed, at 694:
No doubt as Lockhart J observed in Finucane (at 507...) it may be that not everything done by a corporation that is engaged in trade or commerce is done "in" trade or commerce. But everything done for the purpose of carrying out its trading or commercial activities is in my opinion done as part of a corporation's trade or commerce. The employment of staff for the purpose of carrying out its trading and commercial activities is in my opinion near the centre of a corporation's trade and commerce. Those concepts do not exist independently of the sum of the activities of the corporation and individuals who engage in them. [Emphasis added]
184 In Barto v GPR Management Services Pty Ltd (1991) 33 FCR 389 at 395, Wilcox J adhered to the approach that he had taken in Patrick: compare McCormick v Riverwood International (Australia) Pty Ltd (1999) 167 ALR 689, at 694-6 per Weinberg J and Nagy v Masters Dairy Ltd (1996) 150 ALR 273, at 294-5 per RD Nicholson J. In Mulcahy v Hydro-Electric Commission (1998) 85 FCR 170, at 213 and Martin v Tasmania Development and Resources (1999) 163 ALR 79, at 97-98, Heerey J adopted a more restrictive approach than Wilcox J, although it may be noted that neither of these cases involved negotiations for employment contracts.
185 Having regard to the authorities mentioned above, I accept that misleading and deceptive conduct in the course of negotiations for employment may support a cause of action under s 52 of the TPA.”
It was argued that the conduct complained of in the present case could properly be regarded as representations made in the context of the acquisition of a majority interest in the applicant's employer by another group of companies. Representations, it was argued, were made by a newly appointed director of the employer in relation to the applicant's contract of employment for the purpose of inducing the applicant to remain in his employment. It was argued the conduct is therefore intrinsically commercial in character. It was further argued on behalf of the applicant that in any event, even if the trade practices claim were to be struck out, that does not mean the contract claim is not within the accrued jurisdiction of the court. Reliance was placed on the decision of Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (2000) 104 FCR 560, 166 ALR 731 at paragraphs 83-95 which I agree may be applied to the present case.
By way of reply, counsel for the respondent noted in relation to the issue of accrued jurisdiction the specific statement by the court in Johnson Tiles where the court states, "If there be no federal jurisdiction properly invoked, then there can be no accrued jurisdiction." It was submitted that it is incumbent upon the court to dismiss the application if it were to find that the trade practices claim should be struck out for want of jurisdiction on the basis the conduct relied upon could not properly be regarded as conduct in trade and commerce.

Reasoning

In my view, it is important in this matter to consider the affidavit of the applicant and the letter attached to the affidavit which clearly forms the basis of the claim, in particular the passage which I referred to earlier by way of an extract from that letter. Both in terms of the interpretation of the events and the content of the letter, I am not prepared to conclude that that could properly be described as negotiations of the kind which appear to confront the court in the matter of McCormick. In the present case, I am satisfied that properly characterised, the letter is no more than an exchange of correspondence between an employer and its employee. Whilst the exchange of correspondence might have influenced the employee to seek other employment or indeed to react in a certain manner to what was set out in that letter, it does not in my view appear to be correspondence which would properly be regarded as part of negotiations or renegotiating an arrangement between the parties. It does not appear, in my view, on the face of it, to be an attempt to induce the applicant to remain in employment. It is properly characterised as simply correspondence informing the applicant of the intentions of the employer.
Other matters, of course, may well arise as a consequence, and indeed other issues and claims arise by way of either debt or claims in contract for damages as a result of the reduction of salary of the applicant. That is not, however, to say that the correspondence itself could properly be characterised as negotiations in relation to an employment contract and does not, in my view, appear to be similar to the facts and circumstances as indicated in either the McCormick case or indeed in the case of Barto.
Both counsel had referred the court to other authorities, including the decision of the Full Court of the Federal Court in the matter of O'Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455. That was a decision of the Full Court on appeal from a decision of this court. It involved facts and circumstances whereby the applicant in that case had been what might be colloquially described as having been ‘headhunted’ as an executive of one company and encouraged to join another company. The facts and circumstances in that decision, though leading to a conclusion both at first instance and upheld on appeal that a cause of action existed, are not analogous to the facts and circumstances in the current application. In the current application, as indicated, a proper characterisation of the statements set out in the relevant correspondence is simply one of a communication between employer and employee but could not be regarded as negotiating or renegotiating a contract of employment or inducing the applicant to remain in employment. Hence that case, as with other examples sought to be relied upon by the applicant, can be distinguished from the present application.
In my view, the authorities are clear that if the claim that is made before the court relying upon s.52 of the TPA fails, then in the circumstances, I cannot see any basis upon which this court can then proceed to hear the remainder of the claim based either on contract or debt as part of its accrued and/or associated jurisdiction. To that extent, I accept the submissions made for and on behalf of the respondent that it is appropriate in those circumstances that having concluded there is no jurisdiction to determine the s.52 claim under the TPA, that this court as a consequence has no jurisdiction to determine the associated contract and debt claims of the applicant as they are not then associated with any matter within the jurisdiction of the court (See Walker v Life Span Financial Planning (2003) 176 FLR 166 cited earlier in this decision).
Applying the relevant authorities to which I have been referred by the respondent, and having regard to the reasons set out, it is my view that the appropriate order is that the application by the respondent should succeed and that the court should find that it has no jurisdiction to hear and determine the claim of the applicant. It follows that the Applicant’s application filed on 24 January 2005 should be dismissed with costs.

I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate:

Date: 13 April 2005