Mortensen v Enviro Water Tanks Pty Ltd
[2020] FCCA 1951
•17 July 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MORTENSEN v ENVIRO WATER TANKS PTY LTD & ANOR | [2020] FCCA 1951 |
| Catchwords: HUMAN RIGHTS – COURTS AND JUDICIAL SYSTEM – Applicant brings two proceedings, one under the Fair Work Act 2009 (Cth) (FW Act) and one pursuant to the Australian Human Rights Commission Act 1986 (Cth) (AHRC Act) – respondents assert or intend to assert as an answer to each of the claims made in both proceedings non-federal and federal claims the respondents and one other person make or intend to make in the Supreme Court of New South Wales – whether the claims made or intended to be made in the three proceedings arise out of a common substratum of facts – claims held to arise out of common substratum of facts – whether although all three claims arise out of a common substratum of facts there nevertheless is not one matter in relation to the claims made in the two proceedings brought under the FW Act and the AHRC Act – whether a federal claim that forms part of the claims made in the Supreme Court proceeding forms part of the matter arising under the FW Act and the AHRC Act – federal claim held not to be part of either of those matters but held to be a distinct federal matter – whether the federal claim made in the Supreme Court is associated to matters under the FW Act and the AHCR Act and for that reason the Federal Circuit Court has jurisdiction in relation to that matter under s.18 of the Federal Circuit Court of Australia Act 1999 (Cth) – whether non-federal claims made in the Supreme Court proceeding are to be treated as being part of only one of the matters arising under the FW Act and the AHRC Act and if so which one – whether the federal claim made in the Supreme Court proceeding is to be treated as associated with only one of the matters arising under the FW Act and the AHRC Act and if so which one – Federal Circuit Court has jurisdiction in relation to all claims with the non-federal claims being part of, and the federal claim being associated with, the matter arising under the AHRC Act. |
| Legislation: Australian Constitution, ss.75, 76, 77(i), Chapter III |
| Cases cited: Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2001) 204 CLR 559 Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 Rana v Google Inc [2017] FCAFC 156 Re Wakim; ex Parte McNally [1999] HCA 27; (1999) 198 CLR 511 Rizeq v The State of Western Australia [2017] HCA 23 Smith v Smith [1986] HCA 36 Taylor v Vivacity Engineering Pty Ltd [2019] FCCA 1751 |
| Applicant: | YOLANDA KAY MORTENSEN |
| First Respondent: | ENVIRO WATER TANKS PTY LTD ACN 124 571 268 |
| Second Respondent: | RAYMOND WOLDHUIS |
| File Number: | SYG 2488 of 2018 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | Decided on the papers |
| Date of Last Submission: | 9 July 2020 |
| Delivered at: | Sydney |
| Delivered on: | 17 July 2020 |
REPRESENTATION
| Solicitors for the Applicant: | Mr C Husband of Shanahan Tudhope Lawyers |
| Solicitors for the Respondents: | Mr B Miller of Garland Hawthorn Brahe Solicitors |
ORDERS
The matter is set down for directions at 9:30 am on 31 July 2020.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 2488 of 2018
| YOLANDA KAY MORTENSEN |
Applicant
And
| ENVIRO WATER TANKS PTY LTD ACN 124 571 268 |
First Respondent
| RAYMOND WOLDHUIS |
Second Respondent
REASONS FOR JUDGMENT
Introduction
In these reasons for judgment, I consider whether claims made in three separate proceedings – two in this Court, and one in the Supreme Court of New South Wales – constitute a single “matter” as that expression is used in Chapter III of the Constitution and, to the extent claims made in any of the three proceedings do not form part of a single “matter”, whether this Court nevertheless has jurisdiction to entertain them.
To be in a position to determine these questions, it will be necessary to describe the claims made, and issues raised, in each of the three proceedings.
The Leave Payments proceeding
The first proceeding (Leave Payments proceeding) was commenced by the applicant, Ms Mortensen, in this Court on 8 May 2018, and is currently in the docket of Judge Cameron. Ms Mortensen alleges she commenced employment with the first respondent (EWT) at a base salary of $93,600; and she remained employed until 19 January 2018. Ms Mortensen further alleges EWT contravened s.44 of the Fair Work Act 2009 (Cth) (FW Act) by failing, contrary to s.87 of the FW Act, to pay to Ms Mortensen $25,038.15 for accrued annual leave, and by failing, contrary to s.97 of the FW Act, to pay to Ms Mortensen $3,600 for sick leave. Ms Mortensen further alleges that the second respondent, Mr Woldhuis, who is the sole director of EWT, was a person involved in EWT’s contraventions of s.44 of the FW Act. Ms Mortensen claims compensation in the amount she was not paid, and pecuniary penalties for the alleged contraventions of s.44 of the FW Act.
In their defence EWT and Mr Woldhuis accept Ms Mortensen was an employee of EWT, but otherwise deny her claims. In addition, EWT and Mr Woldhuis rely on an action EWT commenced against Ms Mortensen in the District Court of New South Wales on 5 April 2018 (Fraud proceeding). (This is one of the three proceedings I consider in these reasons.) The defence alleges that in the Fraud proceeding EWT claims that Ms Mortensen, in breach of her duties as EWT’s employee, fraudulently diverted to herself money payable to EWT, misused credit cards that had been issued in her name and in the name of Mr Woldhuis to obtain goods for herself and her husband, Mr Mortensen, and made false entries in EWT’s accounting system. The defence states that “by way of Cross-claim” EWT seeks an order that Ms Mortensen pay an amount in excess of $200,000 “by way of equitable compensation”; and that EWT is entitled to a “Balancing Order” pursuant to r.28.09 of the Federal Circuit Court Rules 2001 (Cth) (FCC Rules) if it should be found that EWT is liable to Ms Mortensen in any amount.
On 15 August 2018 Judge Cameron, by consent, ordered that the Leave Payments proceeding be stayed until the conclusion of the Fraud proceeding. That stay is still in effect.
The Harassment proceeding
The second proceeding (the Harassment proceeding) was commenced by Ms Mortensen in this Court on 4 September 2018, and is in my docket. Ms Mortensen alleges that on about 1 September 2012 she commenced employment with EWT as a manager; Mr Woldhuis was the sole director of EWT; in October, November, and December 2017 Mr Woldhuis engaged in unwelcome conduct of a sexual nature or made unwelcome sexual advances, and on 20 December 2017 Ms Mortensen informed Mr Woldhuis that she resigned. Ms Mortensen also alleges she took annual leave from 23 December 2017 to 5 January 2018, and she took sick leave from 8 January 2018 until she ceased her employment on 19 January 2018. Ms Mortensen claims that Mr Woldhuis’s conduct constituted sexual harassment within the meaning of s.28A of the Sex Discrimination Act 1984 (Cth) (SD Act); by engaging in the alleged conduct Mr Woldhuis acted in breach of s.28B of the SD Act; and, because of s.106 of the SD Act, EWT is vicariously liable for Mr Woldhuis’s unlawful conduct. Ms Mortensen claims compensation.
In their response filed on 11 October 2018, EWT and Mr Woldhuis deny Ms Mortensen’s allegations of sexual harassment. They allege, however, that on the day on which Ms Mortensen alleges the thirteenth and last incident of sexual harassment occurred, Mr Woldhuis accused Ms Mortensen of stealing and, in response to that accusation, Ms Mortensen immediately said she resigned, and then abandoned her employment with EWT.
On 25 October 2018 EWT and Mr Woldhuis filed an application in a case in which they sought an order for consolidation of the Leave Payments and Harassment proceedings, and that the stay granted by Judge Cameron in the Leave Payments proceeding be continued. On 28 November 2018 I ordered that the Harassment proceeding be stayed until 16 April 2019, and listed the matter for directions on 16 April 2019.
On 16 April 2019 the matter came before me for directions. By that time the lawyers who represented EWT and Mr Woldhuis had withdrawn, and Mr Woldhuis appeared for himself and EWT. I made orders that included an order that EWT and Mr Woldhuis file and serve an application in a case returnable on 6 May 2019, together with affidavits in support, for a stay of the Harassment proceeding. EWT and Mr Woldhuis did not file an application in a case; and that is because a criminal proceeding had been commenced against Ms Mortensen and, at the request of the parties, on 2 May 2019 I made orders in chambers that the Harassment proceeding be stayed pending the completion of the criminal proceeding, or until further order of the Court.
On 17 February 2020 Ms Mortensen’s lawyer sent an email to my associate stating that the criminal proceeding against Ms Mortensen had been withdrawn, and he requested that the matter be relisted for directions before me. The matter was listed for directions on 25 February 2020. Mr Woldhuis appeared for himself and EWT. I directed Ms Mortensen to file and serve all the evidence on which she intends to rely by 24 March 2020, and that EWT and Mr Woldhuis file their affidavits by 5 May 2020. Ms Mortensen filed her affidavits, but EWT and Mr Woldhuis did not file any affidavits. The matter came before me on 29 May 2020. By that time EWT and Mr Woldhuis had again secured legal representation. Mr Miller, the lawyer for EWT and Mr Woldhuis, made an affidavit in which he explained why EWT and Mr Woldhuis had not complied with the orders I made on 25 February 2020. I adjourned the matter for further directions to 12 June 2020. On that day I made directions that the parties provide my chambers with the pleadings and affidavits that had been filed in the Fraud proceeding for the purpose of my determining the questions I consider in these reasons.
Fraud proceeding
The third proceeding is the Fraud proceeding. As I have already noted, EWT commenced that proceeding against Mr and Ms Mortensen in the District Court of New South Wales on 5 April 2018. The proceeding was transferred to the Supreme Court. EWT proposes to seek leave to file a further amended statement of claim in the form of the draft further amended statement of claim (FASC) that the lawyer for EWT provided to my associate’s email address.
The FASC alleges that between about January 2012 and December 2017 EWT employed Ms Mortensen as the manager of its business; from about September 2016 until November 2017 EWT employed Mr Mortensen to undertake cleaning, some office work, and load and unload trucks; and, as manager of the business, Ms Mortensen had access to EWT’s banking and credit card facilities, was authorised to withdraw money from EWT’s bank accounts, and she generally made or participated in the making of decisions that affected a substantial part of EWT’s business. The FASC then alleges Mr and Ms Mortensen misappropriated or misused EWT’s money as follows (alleged fraudulent conduct):
a)on each of 30 June 2017 and 30 June 2018 Ms Mortensen paid to herself and Mr Mortensen what Ms Mortensen falsely described as “bonus payments” totalling $100,303;
b)Ms Mortensen overpaid Mr Mortensen by $13,983;
c)Ms Mortensen paid $9,528 into her and Mr Mortensen’s superannuation funds in relation to the “bonus” payments;
d)Ms and Mr Mortensen procured EWT to pay amounts totalling $57,336.51 in relation to charges they made on two credit cards for their own personal use rather than for the purposes of EWT’s business;
e)Ms Mortensen appropriated to her own use cash payments in the sum of $18,630 for goods sold by EWT;
f)Ms Mortensen procured EWT to pay $1,656 for blinds Ms Mortensen ordered be delivered to her home;
g)Ms and Mr Mortensen procured EWT to pay $10,000 on account of false invoices; and
h)Ms Mortensen procured EWT to pay $2,940.60 for bikes.
The FASC further alleges that Mr and Ms Mortensen are liable to pay to EWT $214,377.11, being the sum of the amounts it is alleged Mr and Ms Mortensen misappropriated or misused, on a number of causes of action, these being breach of contract, money had and received, breach of trust, deceit, and (in the case of Ms Mortensen alone) breaches of s.180, s.181, s.182, and s.183 of the Corporations Act 2001 (Cth) (Corps Act).
In addition to the causes of action based on the alleged fraudulent conduct, the FASC relies on a number of causes of action in relation to a payment EWT made under an “incentive agreement”, and a loan of $600,000 Mr and Ms Woldhuis made to Mr and Ms Mortensen. The FASC alleges as follows:
a)In about 2014 Ms Mortensen and EWT agreed that if EWT were to be sold, Ms Mortensen would receive 10% of the sale price of the business on the basis that she would continue in her role as manager of EWT’s business, and build and maintain the integrity of EWT’s business (incentive agreement).
b)In about 2017 EWT valued its business at $7 million “and the amount to be paid to Mrs Mortensen under the Incentive agreement would thereafter be $700,000” (incentive amount).[1]
c)In about October 2017 Ms Mortensen requested EWT immediately pay the incentive amount to her; and Mr and Ms Woldhuis lend to her and Mr Mortensen $600,000 to enable them to purchase a property (Property).
d)In about late October 2017 EWT agreed with Ms and Mr Mortensen to pay the incentive amount to Ms Mortensen to enable her and Mr Mortensen to buy the Property, and Mr and Ms Woldhuis agreed to pay $600,000 to Mr and Ms Mortensen for the balance of the purchase price of the Property. That amount was repayable after five years, the repayment was to be secured by a first registered mortgage, and no interest would be payable (loan agreement).
e)EWT paid the incentive amount to Ms Mortensen, and Mr and Ms Woldhuis paid to Mr and Ms Mortensen $600,000.
f)At the time these payments were made, none of EWT or Mr and Ms Woldhuis was aware Ms and Mr Mortensen had engaged in the alleged fraudulent conduct, but if they had known, they would not have made the payments.
[1] FASC, [62]
On the basis of these alleged facts, EWT and Mr and Ms Woldhuis plead a number of causes of action:
a)First, Mr and Ms Mortensen hold the Property as resulting or constructive trustees for EWT. The basis of this claim is the allegation that the money with which Mr and Ms Mortensen purchased the Property included the incentive amount which EWT agreed to pay to Ms Mortensen for the purpose of Ms Mortensen building and maintaining the integrity of EWT’s business; but, in light of the alleged fraudulent conduct, Ms Mortensen did not fulfil that purpose.
b)Second, the alleged fraudulent conduct, having been engaged in without the knowledge of EWT, and in circumstances where EWT, and Mr and Ms Woldhuis were in a position of special disadvantage, constituted the engagement by Mr and Ms Mortensen in trade and commerce of unconscionable conduct within the unwritten law, contrary to s.20 of the “Australian Consumer Law”.
c)Third, at the time Mr and Ms Mortensen entered into the incentive and loan agreements Mr and Ms Mortensen impliedly represented, in trade or commerce, that they would each abide by their obligations. These representations were false because Mr and Ms Mortensen engaged in the alleged fraudulent conduct. In those circumstances, Mr and Ms Mortensen engaged in misleading or deceptive conduct in contravention of s.18 of the “Australian Consumer Law”, and also contravened s.36 of the “Australian Consumer Law”.[2]
d)Fourth, relying on an admission said to have been made in the defence Mr and Ms Mortensen filed to the amended statement of claim, EWT and Mr and Ms Woldhuis allege that the incentive payment was made without consideration and, for that reason, Mr and Ms Mortensen hold the Property on resulting trust.
e)Fifth, EWT and Mr and Ms Woldhuis allege that the incentive amount and the making of the loan was induced by Mr and Ms Mortensen’s breaches of their contracts of employment, by breaches of their fiduciary duties, and by their deceit.
[2] Subsection 36(1) of the “Australian Consumer Law” provides that a person must not, in trade or commerce, accept payment or other consideration for goods or services if, at the time of acceptance, the person intends not to supply the goods and services.
The allegations made in the FASC reflect the substance of the allegations made in the currently filed amended statement of claim. The principal difference is that the amended statement of claim alleges that EWT lent $600,000 to Mr and Ms Mortensen, whereas the FASC alleges it was Mr and Ms Woldhuis who lent the money and, for that reason, proposes that they be added as plaintiffs to the Fraud proceeding. In addition, the FASC seeks to introduce causes of action based on contraventions of the “Australian Consumer Law”. In their defence to the amended statement of claim Mr and Ms Mortensen deny the allegations of fraud, but accept an agreement to the effect of the incentive agreement was made, and that Mr and Ms Woldhuis lent Mr and Ms Mortensen $600,000.
Before I consider the parties’ submissions, it would be useful if I first set out some principles relevant to the meaning of “matter” as that word is used in Chapter III of the Constitution, and the notion of “associated jurisdiction”.
“Matter” and associated jurisdiction
The exercise of jurisdiction by this Court is limited to the grants of jurisdiction Parliament confers on it in relation to any of the “matters” identified in s.75 and s.76 of the Constitution under a law validly made under s.77(i) of the Constitution. The Court does not have general jurisdiction to entertain common law or equitable claims of the sort alleged in the FASC. The Court, however, will have jurisdiction to entertain a non-federal claim for relief for which it does not otherwise have jurisdiction if such claim for relief forms part of the “matter” in relation to which the Court does have jurisdiction.
“Matter”
“Matter”, when used in relation to the expression “arising under any laws made by the Parliament” in s.76(ii) of the Constitution, means a single justiciable controversy that includes at least one claim that arises under a law made by Parliament. If a federal court is granted jurisdiction in relation to such matter (federal claim) it will also have jurisdiction to entertain any claim for relief that does not arise out of a law made by Parliament (non-federal claim), provided there is a sufficiently substantial overlap between the facts out of which the federal claim and the non-federal claim arise. In those circumstances, there will be but one “matter”, and the matter would be “entirely within federal jurisdiction”.[3]
[3] Rizeq v Western Australia [2017] HCA 23, at [55]
Different expressions have been used to describe the required degree of commonality between the facts out of which the federal and non-federal claims arise before it may be concluded that the federal and non-federal claims constitute one justiciable controversy. An influential formulation is that given by Mason J (as his Honour then was) in Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd, who referred to “common transactions and facts” arising “out of a common substratum of facts”.[4] Also influential is the following formulation given by Gummow and Hayne JJ in Re Wakim; ex Parte McNally:[5]
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 and relationships’’. There is but a single matter if different claims arise out of ‘‘common transactions and facts’’ or ‘‘a common substratum of facts’’, notwithstanding that the facts upon which the claims depend ‘‘do not wholly coincide’’. 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, 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’’, ‘‘completely separate and distinct’’ or ‘‘distinct and unrelated’’ are not part of the same matter.
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.
[4] Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457, at page 512
[5] Re Wakim; ex Parte McNally [1999] HCA 27; (1999) 198 CLR 511, at [140]-[141] (references omitted)
In Rana v Google Inc the Full Federal Court provided the following explanation of “matter”:[6]
The “matter” is the justiciable controversy between the parties arising out of the substratum of facts and claims representing, or amounting to, the dispute or controversy between or amongst the parties. Where federal and non-federal claims comprise the same justiciable controversy, a court exercising federal jurisdiction will have jurisdiction to resolve the entire matter in the exercise of its federal jurisdiction.
[6] Rana v Google Inc [2017] FCAFC 156, at [17]
I have considered elsewhere whether it is within the discretion of a federal court not to exercise jurisdiction over a non-federal claim that forms part of a “matter” over which the federal court has jurisdiction, and I concluded a federal court does not have any discretion.[7] I relied on the following passage from the judgment of Gummow and Hayne JJ in Re Wakim; ex Parte McNally (footnotes omitted):[8]
In Philip Morris, Barwick CJ said that the exercise of the “accrued” jurisdiction “is discretionary and not mandatory, though it will be obligatory to exercise the federal jurisdiction which has been attracted in relation to the matter”. In Stack, Mason, Brennan and Deane JJ refer to this proposition with approval but say that the idea is similar to the process of identification of a related matter mentioned in Fencott as being "a matter of impression and of practical judgment”. There may be some difficulty in analysing the question as one of “discretion”. It is not clear what principles or criteria would inform the exercise of a discretion of this kind. It may be that the better view is that the references to “discretion” are not intended to convey more than that difficult questions of fact and degree will arise in such issues - questions about which reasonable minds may well differ. It is, however, not necessary to decide what is meant by the references to discretion in this context.
[7] Taylor v Vivacity Engineering Pty Ltd [2019] FCCA 1751, at [64]-[68]
[8] Re Wakim; ex Parte McNally [1999] HCA 27; (1999) 198 CLR 511, at [148]
I also relied on the following passage from the judgment of the plurality in Australian Securities and Investments Commission v Edensor Nominees Pty Ltd:[9]
There is no harm in the continued use of the term “accrued jurisdiction” in such situations provided several matters are borne in mind. First, while there are various claims, in these cases there is but one “matter” in the constitutional sense and the court in question either does or does not have jurisdiction in respect of it. Moreover in Re Wakim, Gummow and Hayne JJ (with whom Gleeson CJ and Gordon J agreed generally) expressed doubts as to what was meant by statements in some of the cases that the “accrued jurisdiction” was “discretionary” rather than “mandatory”. Ordinarily, questions of abuse of process, forum non conveniens and the like aside, jurisdiction conferred upon a court is to be exercised.
[9] (2001) 204 CLR 559, at [52] (referred to with approval by Hayne and Callinan JJ at [188]).
Associated jurisdiction
Relevant to one of the submissions the parties make is the notion of “associated jurisdiction”, being the jurisdiction referred to in s.18 of the Federal Circuit Court of Australia Act 1999 (Cth) (FCC Act), which provides:
To the extent that the Constitution permits, jurisdiction is conferred on the Federal Circuit Court of Australia in respect of matters not otherwise within its jurisdiction that are associated with matters in which the jurisdiction of the Federal Circuit Court of Australia is invoked.
The jurisdiction conferred by s.18 of the FCC Act, being the equivalent provision of s.33 of the Family Law Act 1975 (Cth) (FL Act), and s.32 of the Federal Court of Australia Act 1976 (Cth) (FC Act), is distinct from the jurisdiction over a non-federal claim that may form part of a “matter”. Addressing s.33 of the FL Act, the plurality in Smith v Smith said that “that section could validly do no more than give the Family Court jurisdiction in associated matters arising under some other federal law”;[10] and addressing s.32 of the FC Act in Rana the Full Federal Court said:[11]
[T]he “associated jurisdiction” conferred under s 32 of the Federal Court of Australia Act is not concerned with the conferral of jurisdiction to determine non-federal matters that are said to be associated with a federal matter . . . It is not a synonym for “accrued” jurisdiction. The effect of s 32 is to confer jurisdiction to deal with a federal matter for which jurisdiction has not been conferred upon the Court where it is associated with another federal matter for which jurisdiction has been so conferred . . .
[10] Smith v Smith [1986] HCA 36, at [19]; (1986) 161 CLR 217, at page 240
[11] Rana v Google Inc [2017] FCAFC 156, at [23]
The Full Federal Court gave an example of the operation of s.32 of the FC Act:[12]
The operation of s 32 can be seen in PCS Operations Pty Ltd v Maritime Union of Australia [1998] HCA 29; 153 ALR 520. There, Gaudron J held that s 32 extended the jurisdiction of the Federal Court to matters within ss 75 and 76 of the Constitution that are associated with a matter already within the jurisdiction of the Court, but for which jurisdiction is not specifically conferred upon this Court: 153 ALR at 525 [12]. In that case, the MUA claimed breach of an award and an enterprise agreement and contraventions of the Workplace Relations Act 1996 (Cth) and of the Corporations Law against certain members of the Patrick group, along with two common law actions for conspiracy against the Patrick parties, the National Farmers Federation and the Commonwealth. Although within s 75(iii), jurisdiction to hear the claim against the Commonwealth was not otherwise conferred on this Court. Section 32, nonetheless, conferred that jurisdiction on the Court for disposition of the proceedings.
[12] Rana v Google Inc [2017] FCAFC 156, at [23]
There is one implication that should be noted of the distinction between a federal court’s jurisdiction in relation to a “matter” that includes a non-federal claim, and a federal court’s jurisdiction in relation to a (federal) matter that is associated with the matter over which the federal court has jurisdiction. In the case of a matter that includes a non-federal claim, there is but one matter over which the federal court has jurisdiction. In the case of an associated matter, however, the federal court would have jurisdiction in relation to two matters – the matter over which the federal court has jurisdiction, and the (federal) matter that is associated with that matter over which the federal court would not have jurisdiction, but for the conferral of jurisdiction by provisions such as s.18 of the FCC Act. There is, however, a similarity between a federal court having jurisdiction over a matter that includes a non-federal claim, and a federal court having jurisdiction over a (federal) matter associated with a matter in relation to which the federal court does have jurisdiction; and that is the federal court would not have a discretion not to exercise jurisdiction in relation to the (federal) matter that is associated with the matter over which the federal court does have jurisdiction.
Parties’ submissions
In their written submissions Mr and Ms Mortensen submit it is possible that the Court might consider that the claims made in the three proceedings arise out of a common substratum of facts and that, as a result, they constitute a “matter”. They oppose the consolidation of the Leave Payments proceeding with the Harassment proceeding, or with the Harassment and Fraud proceedings, because, once so consolidated, the proceedings will constitute one matter arising under the FW Act with the consequence that the question of costs in relation to all three proceedings will be subject to the costs rules provided for by s.570 of the FW Act.
In their written submissions, EWT and Mr and Ms Woldhuis do not in terms submit that the claims made in the three proceedings constitute the one matter. They do submit, however, that, to avoid multiplicity of proceedings and the possibility of inconsistent findings of fact, it is usually preferable, where it is possible, to consolidate cases arising from the same, similar, or related circumstances. EWT and Mr and Ms Woldhuis also appear to submit, however, that, even if the claims made in the three proceedings arise from the same or related circumstances, this Court would not have jurisdiction to entertain the claims made in the Fraud proceeding. They submit that is so for three reasons.
a)First, this Court’s jurisdiction to grant monetary relief under the “Australian Consumer Law” is limited to $750,000, but the claims EWT and Mr and Ms Woldhuis make in the fraud proceeding amount to $1,514,377.11. Thus, it is submitted, this Court would not have jurisdiction to entertain the claims made in the Fraud proceeding to the extent they are made under the “Australian Consumer Law”.
b)Second, EWT and Mr and Ms Woldhuis submit that this Court would similarly not have jurisdiction to hear the claims made in the Fraud proceeding which rely on the Corps Act (Corps claims); and that is because EWT and Mr and Ms Woldhuis seek relief under s.1317H of the Corps Act, which confers jurisdiction on a “Court” to grant relief for the contravention of civil remedy provisions such as those on which EWT and Mr and Ms Woldhuis rely; but “Court” is defined in s.58AA of the Corps Act to mean particular courts that do not include the Federal Circuit Court of Australia (58AA Courts).
c)Third, it is “unclear the Court has any direct grant of jurisdiction to hear the common law and equitable claims brought in the” Fraud proceeding.
These submissions give rise to the following issues:
a)Do all or some of the claims made in the three proceedings arise out of the same or substantially the same substratum of facts so as to constitute a single controversy?
b)If (a) is answered in the affirmative, do any one or more of the following prevent there being one “matter”:
i)the quantum of the claims EWT and Mr and Ms Woldhuis make in the Fraud proceeding;
ii)EWT and Mr and Ms Woldhuis claim in the Fraud proceeding relief under s.1317H of the Corps Act in circumstances where the Federal Circuit Court of Australia is not a 58AA Court;
iii)EWT and Mr and Ms Woldhuis claim relief based on common law and equitable claims; and
iv)the application of s.570 to claims brought under the FW Act?
c)To the extent (b) is answered in the affirmative, does this Court nevertheless have jurisdiction over any of the claims made in the three proceedings that does not form part of a matter over which this Court does have jurisdiction?
One controversy?
The claims made in the three proceedings are different; one is a claim made for contraventions of the FW Act; another is a claim based on alleged behaviour that is unlawful under the SD Act; and the third is a set of claims based on common law and equity, contraventions of s.18 and s.36 of the “Australian Consumer Law”, and contraventions of s.180, s.181, s.182, and s.183 of the Corps Act. In each proceeding, however, the same set of facts is alleged or relied on, namely, the alleged fraudulent conduct. In the Leave Payments proceeding EWT relies on that conduct as a cross-claim, and for claiming a “Balancing Order” under r.28.09 of the FCC Rules; in the Harassment proceeding EWT and Mr Woldhuis rely on the allegation that Ms Mortensen abandoned her employment, not because of any alleged sexual harassment, but because Mr Woldhuis confronted her with the alleged fraudulent behaviour; and in the Fraud proceeding EWT and Mr and Ms Woldhuis rely on the alleged fraudulent conduct as a basis for claiming relief at common law, in equity, and under the “Australian Consumer Law” and the Corps Act.
Further, although the response filed in the Harassment proceeding does not refer to claims in relation to the payment of money under the incentive agreement or the making of a $600,000 loan, it is apparent from the affidavit made by Mr Miller, the lawyer for EWT and Mr and Ms Woldhuis, that EWT and Mr and Ms Woldhuis propose to put on evidence of the payments made in relation to the incentive and loan agreements. That indicates EWT and Mr and Ms Woldhuis intend to rely on the claims they make, or propose to make, in the Fraud proceeding, in relation to the payment EWT made under the incentive agreement, and the loan Mr and Ms Woldhuis made to Mr and Ms Mortensen.
In my opinion, the claims made in the three proceedings, but more particularly, the claims made in the Harassment and the Fraud proceedings, arise substantially out of a common substratum of facts, namely, the alleged facts on which EWT and Mr and Ms Woldhuis intend to rely in the FASC which Mr and Ms Mortensen largely deny. The determination at trial of these disputed facts would constitute a substantial part of both the Harassment and the Fraud proceedings. Further, if the claims made in the Harassment and Fraud proceedings were tried in different courts, there could be conflicting findings made on a substantial issue common to both claims.
One “Matter”?
That the claims made in the three proceedings arise out of substantially the one substratum of facts does not necessarily mean they would fall within the one matter. The claims made in the Leave Payments and Harassment proceedings constitute two distinct matters, and that is because they are made under two different grants of jurisdiction to this Court. The claims made in the Leave Payments proceeding invoke the jurisdiction granted to this Court by s.566 of the FW Act,[13] and the claims made in the Harassment proceeding invoke the jurisdiction conferred on this Court by s.46PO of the Australian Human Rights Commission Act 1986 (Cth) (AHRC Act).[14]
[13] Which provides that “[j]urisdiction is conferred on the Federal Circuit Court in relation to any civil matter arising under this Act”. The expression “matter arising under” is the expression used in s.76(ii) of the Constitution, and may be taken to have the same meaning except that it is limited to matters arising under the FW Act.
[14] Section 46PO of the AHRC Act confers jurisdiction on this Court and the Federal Court of Australia to entertain, in the circumstances provided by that Act, applications alleging “unlawful discrimination”, which is defined in s.3 of the AHRC Act to include “any acts, omissions or practices that are unlawful under” the SD Act, among other things.
The Corps claims also cannot form part of any of the matters that arise out of the claims made in the Leave Payments and Harassment proceedings; and that is because the jurisdiction that is conferred on a 58AA Court is conferred by a law of the Commonwealth Parliament and, for that reason, a claim made under the Corps Act would be a federal claim. The only way this Court can exercise jurisdiction under the Corps Act, and in particular, can make orders under s.1317H of the Corps Act, is if a law of the Commonwealth confers jurisdiction on this Court to make such orders. As counsel for EWT and Mr and Ms Woldhuis has correctly submitted, the Corps Act does not confer any such jurisdiction on this Court;[15] but, as will become apparent later, that does not necessarily mean this Court would not have jurisdiction in relation to the Corps claims.
[15] Under s.1337B(1) and (2) of the Corps Act, jurisdiction “with respect to civil matters arising under the Corporations legislation” is conferred on the Federal Court and on the Supreme Courts of the States, the Australian Capital Territory, and the Northern Territory.
What of the quantum of the claims made in the Fraud proceeding? EWT and Mr and Ms Woldhuis submit that the amount EWT and Mr and Ms Woldhuis claim in the Fraud proceeding exceeds the monetary limit of this Court’s jurisdiction under the “Australian Consumer Law”. This submission assumes that the claims EWT and Mr and Ms Woldhuis intend to make under the “Australian Consumer Law” against Mr and Ms Mortensen are claims over which this Court would have jurisdiction, assuming the quantum of the claims were less than $750,000. That assumption, however, is not correct.
The “Australian Consumer Law” is a reference to a set of provisions that applies throughout Australia under separate laws of the Commonwealth and of each of the States and Territories of the Commonwealth. The “Australian Consumer Law” is applied as a law of the Commonwealth by s.131(1) of the Competition and Consumer Act 2010 (Cth) (CC Act), which provides that “Schedule 2 applies as a law of the Commonwealth to the conduct of corporations, and in relation to contraventions of Chapter 2, 3 or 4 of Schedule 2 by corporations”. The expression “Australian Consumer Law” is defined in s.130 of the CC Act to mean “Schedule 2 as applied under Subdivision A of Division 2 of this Part”. Thus, so far as Commonwealth law is concerned, the “Australian Consumer Law” is Schedule 2 to the CC Act as applied by s.131(1) of the CC Act (Cth ACL). That subsection, however, only applies Schedule 2 to the conduct of corporations. Subject to s.5 and s.6 of the CC Act, which extends the operation of the Act to natural persons in the circumstances identified in those sections, Schedule 2 does not apply to the conduct of natural persons.
The consequence of this is that the claims EWT and Mr and Ms Woldhuis intend to make against Mr and Ms Mortensen for contraventions of the “Australian Consumer Law”, could not be a claim for contravention of Schedule 2 to the CC Act because Mr and Ms Mortensen are not corporations; and given this Court’s jurisdiction under s.138A(1) of the CC Act is granted “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”, it would not have any jurisdiction under s.138A(1) to entertain any such claim. To the extent EWT and Mr and Ms Woldhuis have a claim under the “Australian Consumer Law”, it must be one that is available under the law of a State, and, in particular, a law of the State of New South Wales. That law is to be found in s.28 of the Fair Trading Act 1987 (NSW) (FT Act) which applies the “Australian Consumer Law text” (NSW ACL) as in force from time to time “as a law of this jurisdiction”, and “as so applying is a part of this Act”, that is, the FT Act. Section 27 of the FT Act defines the “Australian Consumer Law text” to mean Schedule 2 to the CC Act.
That this Court does not have jurisdiction under the CC Act to entertain a claim EWT and Mr and Ms Woldhuis could only bring against Mr and Ms Mortensen under the NSW ACL does not mean that this Court cannot have jurisdiction over the claims they intend to bring, and which it appears they can only bring under the NSW ACL, if, as I have found, those claims arise out of the same or substantially the same substratum of facts as the federal claims over which the Court does have jurisdiction arise, being the claims made in the Leave Payments and Harassment proceedings. That is because of s.79(1) of the Judiciary Act 1903 (Cth) (Judiciary Act), which provides:
The laws of each State or territory, including the laws relating to procedure, evidence, and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable.
The nature and operation of s.79(1) of the Judiciary Act was considered by the High Court in Rizeq v The State of Western Australia,[16] although in the context of a State, rather than a federal, court exercising federal jurisdiction; and I have considered elsewhere the judgment of the plurality.[17] For the purpose of these reasons, I need only reproduce the following passage from the judgment of the plurality:[18]
Quite what is encompassed within s 79’s description of State laws that are “binding” on a court is to some extent elucidated by the section's express inclusion of “laws relating to procedure, evidence, and the competency of witnesses”. It would be wrong, however, to seek to delimit the scope of the section’s operation by invoking the difficult and sometimes elusive distinction between “substance” and “procedure”. It would also be wrong to seek to delimit the section’s operation by conceiving of a statute that is binding on a court as a statute which cannot also be binding on a person whose rights or obligations are to be determined by that court. As Dixon J commented in R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett, it “is not unusual to find that statutes impose liabilities, create obligations or otherwise affect substantive rights, although they are expressed only to give jurisdiction or authority, whether of a judicial or administrative nature”. . . . .
By making State laws that are “binding” on courts also binding on courts exercising federal jurisdiction, s 79 of the Judiciary Act takes the text of State laws conferring or governing powers that State courts have when exercising State jurisdiction and applies that text as Commonwealth law to confer or govern powers that State courts and federal courts have when exercising federal jurisdiction.
[16] [2017] HCA 23
[17] Taylor v Vivacity Engineering Pty Ltd [2019] FCCA 1751, at [55]-[58]
[18] Rizeq v The State of Western Australia [2017] HCA 23, at [83] and [87]
Thus, accepting, as I have found, that the claims EWT and Mr and Ms Woldhuis intend to make under the NSW ACL arise out of the same, or substantially the same, substratum of facts as the claims made in the Leave Payments and Harassment proceedings arise, the claims under the NSW ACL would form part of the matter that arises out of the claims made in the Leave Payments proceeding or would form part of the matter that arises out of the claims made in the Harassment proceeding. In those circumstances, this Court’s jurisdiction to entertain as part of either of these two matters the claims EWT and Mr and Ms Woldhuis intend to make under the NSW ACL is not affected by the jurisdictional limit imposed by s.138A(2) of the CC Act because the claims EWT and Mr and Ms Woldhuis propose to make would not be made under the CC Act.
Finally, there is the submission counsel for EWT and Mr and Ms Woldhuis made that it is “unclear the Court has any direct grant of jurisdiction to hear the common law and equitable claims brought in the” Fraud proceeding. There is no direct grant of jurisdiction to this Court to entertain claims for fraud at common law or in equity. The Court however does have jurisdiction to entertain such claims if they arise out of the same or substantially the same substratum of facts as claims in relation to which this Court does have jurisdiction.
I have already concluded that the alleged fraudulent conduct constitutes a substantial common element of the claims made in the Leave Payments, Harassment, and Fraud proceedings. Given, therefore, the Court has jurisdiction under s.566 of the FW Act to entertain the claims made in the Leave Payments proceeding, and jurisdiction under s.46PO of the AHRC Act to entertain the claims made in the Harassment proceeding, the Court also has jurisdiction to entertain the non-federal claims made in the Fraud proceeding, either as part of the matter arising out of the claims made in the Leave Payments proceeding, or as part of the matter arising out of the claims made in the Harassment proceeding.
Associated jurisdiction?
I have concluded that, even though the Corps claims arise out the same substratum of facts as the claims made in the Harassment and the Leave Payments proceedings, they do not form part of the matter arising under either of those two proceedings. The Corps claims, however, do constitute a “matter”; and given I have found that all claims made in the three proceedings, including the Corps claims, arise out of the same or substantially the same substratum of facts, the Corps claims constitute a matter that is associated with the matters constituted by the claims made in the Leave Payments and in the Harassment proceedings, and a claim for relief under s.1317H of the Corps Act is a matter in respect of which the Constitution permits Parliament to confer jurisdiction on this Court. Thus, this Court has jurisdiction under s.18 of the FCC Act to entertain the Corps claims, that is the claims EWT and Mr and Ms Woldhuis make under s.1317H of the Corps Act based on the alleged contraventions by Mr and Ms Mortensen of s.180, s.181, and s.182 of the Corps Act, either as part of the matter that is constituted by the claims made in the Leave Payments proceeding, or as part of the matter that is constituted by the claims made in the Harassment proceeding.
Of which matter should Fraud claims be part?
I have so far concluded as follows:
a)This Court has jurisdiction in relation to two distinct matters, a matter arising under the FW Act (being the claims made in the Leave Payments proceeding) (FW Act matter), and a matter arising under the AHRC Act (being the claims made in the Harassment proceeding) (AHRC Act matter).
b)The claims made in the Leave Payments, Harassment, and Fraud proceedings arise out of the same or substantially the same substratum of facts.
c)Although the Corps claims cannot form part of the matter that is constituted by the claims made in the Leave Payments proceeding, or part of the matter that is constituted by the claims made in the Harassment proceeding, the Court has jurisdiction under s.18 of the FCC Act to entertain Corps claims in either the Leave Payments proceeding or the Harassment proceeding. All other claims made or which are proposed to be made in the Fraud proceeding are capable of forming part of either the matter arising out of the claims made in the Leave Payments proceeding, or the matter arising out of the claims made in the Harassment proceeding.
The effect of these findings is the Court has jurisdiction over the claims made in all three proceedings. But there is a difficulty, and that arises from there being two matters – the FW Act matter and the AHRC Act matter – of which the non-federal claims made in the Fraud proceeding are capable of being a part. Are the non-federal claims part of both the FW Act matter and the AHRC Act matter? If not, of which of the FW Act and the AHRC Act matters are the non-federal claims made in the Fraud proceeding part? In my opinion, it would not be consistent with the notion of “matter” – a single justiciable controversy – to hold that the one set of non-federal claims is part of two matters. In my opinion, the notion of “matter” requires that the non-federal claims form part of one matter; and it is a matter within the discretion of the court to determine of which matter non-federal claims are a part.
In my opinion, it would seem more appropriate that the claims made in the Fraud proceeding, other than the claims made under the Corps Act, form part of the matter constituted by the claims made in the Harassment proceeding. First, Mr Miller, in his affidavit, deposed that EWT and Mr Woldhuis intend to file affidavits in the Harassment proceeding that relate to the matters that are already in evidence in the Fraud proceeding as evidence relevant to the central claims of sexual harassment. Second, although in the Leave Payments proceeding EWT and Mr Woldhuis assert a cross-claim based on the claims made in the Fraud proceeding, they do not intend to file in the Leave Payments proceeding evidence relevant to the claims made in the Fraud proceeding as an answer to the claims Ms Mortensen makes in the Harassment proceeding; EWT and Mr Woldhuis appear to rely on the claims made in the Fraud proceeding solely for the purpose of setting off any compensation Ms Mortensen might be ordered to pay in relation to the claims made in the Fraud proceeding against any liability EWT and Mr Woldhuis might be found to have to Ms Mortensen in the Leave Payments proceeding.
A similar question arises in relation to the Corps claims. I have found those claims are associated with both the FW Act matter and the AHRC Act matter, and the question arises to which of those two matters the Corps claims are to be regarded as associated. In my opinion, they should be associated with the AHRC Act matter for the reasons I have decided that the non-federal claims made in the Fraud proceeding should form part of the AHRC Act matter.
Disposition
I do not propose to make any orders at this stage, other than to set the matter down for further directions two weeks from the day I publish these reasons. In that time the parties will have the opportunity to consider these reasons for the purpose of determining what submissions, if any, they wish to make about the orders, if any, I should make to give effect to these reasons for judgment, and what orders I should make to progress the three proceedings.
In my opinion, and subject to any submissions the parties may make, the following should occur:
a)A declaration should be made to the effect that the non-federal claims made in the Fraud proceeding form part of the AHRC Act matter, and that the Corps claims made in the Fraud proceeding is a matter associated with the AHRC Act matter such that the Court has jurisdiction under s.18 of the FCC Act to hear the Corps claims matter together with the AHRC Act matter.
b)Steps should be taken to bring before this Court the Fraud claims that EWT and Mr and Ms Woldhuis intend to make, as reflected in the FASC. It seems to me that the most appropriate way of doing this is by EWT and Mr and Ms Woldhuis applying for leave to file in the Harassment proceeding a cross-claim in terms of the FASC.
c)An order should be made to ensure the claims in the Leave Payments proceeding will be heard together with all other claims.
d)Steps should be taken in relation to the Fraud proceeding in the Supreme Court. The most appropriate course would be for the parties to seek an order by consent that the Fraud proceeding be stayed until further order of that Court.
I certify that the preceding fifty (50) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Associate:
Date: 17 July 2020
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