State Elec Com Vic & Ors- Esso v Johnson Tiles

[2001] HCATrans 39

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M138 of 2000

B e t w e e n -

STATE ELECTRICITY COMMISSION OF VICTORIA and OTHERS (according to the Schedule attached)

Applicants

and

JOHNSON TILES PTY LTD, DOUGLAS CHALMERS and GREGORY ALAN DEAN

First Respondents

ESSO AUSTRALIA PTY LTD (formerly ESSO AUSTRALIA LTD) and ESSO AUSTSRALIA RESOURCES PTY LTD (formerly ESSO AUSTRALIA RESOURCES LTD)

Second Respondents

Office of the Registry
  Melbourne  No M139 of 2000

B e t w e e n –

ESSO AUSTRALIA PTY LTD and ESSO AUSTRALIA RESOURCES PTY LTD

Applicants

and

JOHNSON TILES PTY LTD, DOUGLAS CHALMERS and GREGORY ALAN DEAN

Respondents

Applications for special leave to appeal

GLEESON CJ
GUMMOW J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 16 FEBRUARY 2001, AT 9.31 AM

Copyright in the High Court of Australia

MR J.B.R. BEACH, QC:   If the Court pleases, I appear with MR S.M. ANDERSON for the State entity as the applicants in the first matter.  (instructed by Freehills)

MR J.E. MIDDLETON, QC:   If the Court pleases, I appear with my learned friends, MR D.M.B. DERHAM, QC and MR G.P. HARRIS for the Esso parties, second respondents in the first matter and applicants in the second matter.  (instructed by Middletons Moore & Bevins)

MR J.W.K. BURNSIDE, QC:   If the Court pleases, I appear with my learned friend, MR H. BORENSTEIN, for the respondents in each of the matters.  (instructed by Slater & Gordon, Maurice Blackburn Cashman, Lander & Rogers, Phillips Fox)

GLEESON CJ:   I presume it is convenient to hear Mr Beach and Mr Middleton first and then Mr Burnside.  Yes, Mr Beach.

HAYNE J:   Just before the parties begin, I understand the parties have been informed that I hold some BHP shares and that the parties have no objection to my sitting.  I must say I have no embarrassment about sitting.

MR MIDDLETON:   Yes, we have no objection.

MR BEACH:   If the Court pleases, I propose to address the Court on the question of jurisdiction.  Mr Middleton will address on the question of the duty of care.  On the question of jurisdiction our application raises two important points of principle:  first, what is the test for determining whether the Federal Court’s jurisdiction has been properly invoked; second, what is meant by saying that the Federal Court’s accrued jurisdiction is discretionary.

GLEESON CJ:   I am having some difficulty hearing you, Mr Beach.  I am not sure the microphone is working properly.

GUMMOW J:   Yes, so am I.

MR BEACH:   There are two important points of principle on the question of jurisdiction.  The first is what is the test for determining whether the Federal Court’s jurisdiction has been properly invoked and second, what is meant by saying that the Federal Court’s accrued jurisdiction is discretionary.  What is the discretion to be exercised?  What is its ambit?  Now, can I deal with the first point?

GLEESON CJ:   As to the second point, is there a live question of discretion in this application?

MR BEACH:   Yes, there is.  We say that given that Justice French found the federal claim to be unarguable that the question arose as to whether the Court should decline to exercise its discretion in relation to its accrued jurisdiction.

GUMMOW J:   Assuming it has one.

MR BEACH:   We say it does have one.  We have analysed what is said carefully in Re Wakim by your Honour and Justice Hayne.  We have looked at what is said in Re Edensor and this vehicle provides an appropriate case to actually deal with the point.

GLEESON CJ:   Do you concede that the question that arose for determination in the court below after the section 52 claim was struck out was a discretionary question rather than a question of whether there was jurisdiction at all?

MR BEACH:   There were two points.  There was a question, was there accrued jurisdiction at all because there was an argument about what was embraced by the matter and there was a comparison between the struck‑out Trade Practices Act claims and the negligence claims.

GLEESON CJ:   I just wanted to be clear.  Does it follow from what you say that if one of your arguments were ultimately accepted, this case may go for trial, may go on appeal, could even go on appeal to the High Court ultimately and it could then be decided that there was never any jurisdiction in the Federal Court?

MR BEACH:   Yes.

GLEESON CJ:   Yes.

MR BEACH:   Now, we say the jurisdiction of the Federal Court was never properly invoked in the first place and that brings us to an analysis of what is meant by “colourable”.  We say when Justice French used that term he used a label rather than a test and your Honours will appreciate from the various authorities set out in the application papers that various judges have said different things about what is meant by the expression “colourable”.  Some have confined “colourable” to some subjective improper purpose of the pleader or the party.  Other judges have looked at “colourable” in the sense of whether or not there is, in fact, an arguable or a real federal claim.

GUMMOW J:   Mr Beach, were 78B notices given in the Full Court?

MR BEACH:   Not to my recollection.

GUMMOW J:   Why not?  At bottom this is a question of construction of Chapter III.  More than at bottom too.

MR BEACH:   The Court has looked at what is embraced by a matter in terms of Re Wakim and Abebe. 

HAYNE J:   But how can it do that except informed by Chapter III?

MR BEACH:   For the purposes of these two points we are not so much looking at the ambit of the matter.

GUMMOW J:   Yes, you are.  Of course you are and is not this a point in your favour?  Do you not say that you could come here under 75(v)?  It is on a constitutional point.

MR BEACH:   Yes.

GUMMOW J:   As an alternative to appealing through this present mechanism.

MR BEACH:   That is so.

GUMMOW J:   The question then is, why were not 78B notices given in the Full Court?  It may be a matter of misunderstood procedure.  There were an awful lot of barristers involved but there we are.

MR BEACH:   I accept that and we take on board that that would need to be done in the event that special leave were granted in this case.

GUMMOW J:   Yes.

MR BEACH:   We say on the question of colourability, it is ‑ ‑ ‑

GUMMOW J:   It has been in the wood but you do not look at the circumference of the wood and that is what happens in these cases.

MR BEACH:   Yes.  Colourability is not the correct test to determine whether the Federal Court’s jurisdiction has been properly invoked.  We go back to the earlier High Court authorities of Hopper and before that the decision of the Court in Hume v Palmer where, we say, it is clear from those earlier authorities that one does not look purely at the subjective state of mind of the pleader. One also looks at the reality of the federal claim or the question arising under the Constitution.

HAYNE J:   Now, when do you say that question falls to be judged?  Is the relevant time the time of institution or the time of decision?  When is the time for judging if the appropriate test is colourability, that issue?

MR BEACH:   The court must decide it when the parties raise it, but the question of colourability goes right back to the inception of the proceedings.  One would look at the purported federal claim at the inception of the proceedings and determine whether or not that properly invoked the court’s jurisdiction.

HAYNE J:   To put it negatively, what does not properly invoke?  We find on the statement of claim a section 52 claim.  What is it that takes it outside a proper invocation of federal jurisdiction?

MR BEACH:   That it is insubstantial and frivolous.  We say that if a federal claim is insubstantial and frivolous, hopeless, a creation of a legal draftsman, to use the terminology of Justice French, then the fact that it might be the words “misleading and deceptive conduct” in contravention of section 52 set out in the original pleading does not properly invoke the Federal Court’s jurisdiction.

HAYNE J:   Does it amount then to more than saying if the claim is demurrable?

MR BEACH:   Yes.

HAYNE J:   Yes, it is more or yes, that is all it is?

MR BEACH:   Essentially that is what it is.

GUMMOW J:   That is an odd way for constitutional jurisdiction to be determined, is it not?

MR BEACH:   The United States, on numerous occasions, has used precisely that formulation.  They have used the expression “so attenuated and insubstantial as to be absolutely devoid of merit” and they have also used the expression “insubstantial and frivolous”.

HAYNE J:   That is a different test from demurrability.

GUMMOW J:   They have forgotten about demurrers a long while ago.

GLEESON CJ:   And if a claim is demurrable there might arise a question, as arose in the present case, as to whether it could possibly be saved by amendment.

MR BEACH:   That is right but in this case it could not be and as it would be tempted to be save by amendment it has never been saved by amendment.

GLEESON CJ:   Whatever precise dyslogistic epithet is applied, your argument is that there are certain kinds of claim made in an attempt to raise federal jurisdiction that will not confer jurisdiction on the Federal Court.

MR BEACH:   That is so and we would adopt the terminology used by Justice Starke in the Hopper Case where he, in dealing with the point, distinguished between a real federal claim as distinct from mere pleading allegations.  He was in dissent in Hopper in the ultimate result but if one looks back at what was said by Chief Justice Latham in Hopper he uses the test, the older test, in Troy v Wrigglesworth that the facts relied on were bona fide raised and were such as to raise the particular federal claim or the question arising under the Constitution. So, whichever terminology you use from the old cases, they take it, in our submission, beyond an assessment purely of the state of mind or the good wishes of the pleader of the particular claim.

GLEESON CJ:   Where was the error in the reasoning of the Full Court on this point?

MR BEACH:   The error was in a number of respects.  If one has a look at Justice French’s analysis of the point from paragraph 82, his first error is that he uses the test or label of colourable but then confines it to one of establishing an “improper purpose of fabricating jurisdiction”.  He does that at paragraph 88.

Now, that might be one way to demonstrate colourability.  It is not necessarily the only way to demonstrate colourability and Burgundy Royale itself does not say that establishing improper purpose of fabricating jurisdiction is the only way to establish colourability.

GLEESON CJ:   He seems to go fairly close to saying the test is whether it is an abuse of process in the second last sentence in that paragraph.

MR BEACH:   If he does, we would accept that, in this context, as was said by this Court in Walton v Gardiner, an abuse of process can be constituted by a claim foredoomed to fail.  So, if you use that particular test, we say that the trade practices claims here were, and have always been, foredoomed to fail and, indeed, Justice French’s criticism of the federal claims is quite severe when he describes the federal claims as involving untenable propositions, a logical absurdity, the creation of legal drafting, a claim which is highly counter‑intuitive, a claim which is gutted of content and a claim that cannot logically be derived from the factual matters identified.

We would say all of that demonstrates, on his Honour’s own findings, that the federal claim was and has always been hopeless, an abuse of process, if you like, if you want to use the terminology in Walton v Gardiner, and we say with those findings, his Honour should have held that, notwithstanding whatever the subjective state of mind of the pleader was, such claims could not properly invoke the Federal Court’s jurisdiction.

GLEESON CJ:   Is it clear that the claim under section 52 is now at an end?

MR BEACH:   Yes.

GLEESON CJ:   There is going to be no attempt to replead it?

MR BEACH:   The Full Court did not give leave to further amend and the applicants in the proceedings below have not sought to make any application to amend and, in fact, a trial date was set in this matter for 2 April of this year.  It has been recently vacated, but there was no suggestion of any further changes to the pleadings before trial.

GUMMOW J:   Is discovery now completed?  I assume it has been.

MR BEACH:   Essentially.  There is a little bit of toing‑and‑froing, but essentially.

GUMMOW J:   Now, looking at the practicalities of all of this, you have to succeed in getting special leave from us in the negligence question as well and you have to succeed in striking that out, do you not, or otherwise all you achieve is delay whereby Mr Burnside will be in the Supreme Court, presumably able to replead his section 52 and away it will go again.

MR BEACH:   The practical outcome of the grant of special leave to appeal in relation to my points may involve, yes, the applicants reissuing in the Supreme Court.

HAYNE J:   What happens then?

MR BEACH:   They will take whatever course they ‑ ‑ ‑

HAYNE J:   What happens from your end of the Bar?  Do you require everything to be done again?

MR BEACH:   I do not have a choice in the matter.  If they make an application under section 11 of the Federal Courts (State Jurisdiction) Act 1999 everything done in the Federal Court will be deemed to have been done as if the proceeding had been instituted in the Supreme Court.

HAYNE J:   And you would accept that that was so, would you?

MR BEACH:   I would accept that this Court has ruled that section 11 of those State Acts are constitutionally valid.  There is a question of the exercise of discretion ‑ ‑ ‑

HAYNE J:   That is a very elliptical answer, Mr Beach.  What is your attitude going to be if this goes back into the Supreme Court?  Are you going to say that what is done in the Federal Court stands or are you not?

GUMMOW J:   You are seeking special leave.  You have to be frank to us about these matters.  It is no good shillyshallying.

MR BEACH:   Can I say this?  On the face of section 11, the validity of which has now been upheld by this Court, it will take effect according to its terms and one of its terms is that the orders made in this Court will be treated as if those orders were made in the Supreme Court.

GUMMOW J:   Now, you therefore accept that that Act governs this sort of misfiring in the Federal Court?

MR BEACH:   Your Honour, it would appear to.  Yes.

GUMMOW J:   Well.

HAYNE J:   A lot of hedging happening, Mr Beach.

MR BEACH:   Your Honour, as I say, we cannot think of a good reason why the Supreme Court ‑ ‑ ‑

GUMMOW J:   Cannot think of it at the moment.

GLEESON CJ:   Well, consistently with that attitude then, your clients, I presume, would have no difficulty about giving appropriate undertakings to the Court to secure the result that if, for some reason, what you are assuming to be the case is not the case, the matter could go ahead in the Supreme Court, assuming you ultimately succeeded in an appeal to the High Court on the basis that what has been done in the Federal Court so far is taken to have been done in the Supreme Court?

MR BEACH:   I need to get formal instructions but I do not see a difficulty.

GLEESON CJ:   How long would it take you to get those?

MR BEACH:   Five minutes.

GLEESON CJ:   All right.  Now, could you just state in a summary form your argument on the discretion point?

MR BEACH:   On the discretion, what this Court said in Stack and what Chief Justice Barwick said in Philip Morris appears to be inconsistent with recent observations by your Honours in both Re Wakim and also Edensor, so we say that there is a question as to whether there is some discretionary element attaching to accrued jurisdiction that applies over and above the Court’s normal discretion to stay proceedings for an abuse of process or for forum non conveniens or some other ground.

So we say that this case does provide the Court with a vehicle to deal with that conceptual point.  We say that there is a discretion.  We also say, consistently with the United States authorities, that if the federal claim goes there is no good reason for the Federal Court to continue to exercise its accrued jurisdiction.  We say the whole basis of the Federal Court having accrued jurisdictions is so that it can deal with all matters, both the federal claim and the non‑federal claim.

GLEESON CJ:   But it said in the judgments below that millions of dollars had been spent on preparation of this case in the Federal Court.  That itself would constitute a reason for exercising the discretion.

MR BEACH:   No, no.  It is not the case of the fact that there has been that expenditure.  The question is would that expenditure be wasted.  It cannot be wasted in relation to these various pleading challenges because the applicants will have to foot that bill anyway and in relation to the costs dealing with discovery and trial preparation, if this case can go ahead in the Supreme Court there will be no wasted substantive costs. 

GLEESON CJ:   Provided you give the undertaking of the - - -

MR BEACH:   If I give the undertaking, yes.  Justice French well appreciated that because he, in the decision in the Cambridge Gulf Investments v Dandoe authority that we gave the Court copies of, he himself recognised that the existence of section 11 of the Federal Courts (State Jurisdiction) Act might provide a basis for protection for the applicants.

GUMMOW J:   The Federal Court was not purporting to exercise any State jurisdiction here.  That is the question.

MR BEACH:   In Cambridge Gulf?

GUMMOW J:   No, in this case.

MR BEACH:   No, it is exercising federal jurisdiction in the sense of accrued jurisdiction.

GUMMOW J:   Not in the sense of.  It is.  That is a constitutional question I keep inviting your attention to.

MR BEACH:   Yes, that is so, but as a matter of reality these are all State matters and if one looks at what is said by Chief Justice Gibbs in Stack ‑ ‑ ‑

GUMMOW J:   They are common law matters, actually.

MR BEACH:   What Chief Justice Gibbs said in Stack was that once the federal claim goes, you may as well dismiss the federal proceedings.  Now, in that case there were concurrent State Supreme Court proceedings that had been stayed and so it was a utility ‑ ‑ ‑

GUMMOW J:   All of that is in an era before the State courts received an amplitude of jurisdiction under the Trade Practices Act.

MR BEACH:   True.

GUMMOW J:   If all of this had been started in the Supreme Court, they could have done it all except for the joinder problem, the group proceedings, and they can now do that.

MR BEACH:   They can.  There is a constitutional challenge to that brought by Mobil but at the moment that legislation is presumed to be valid.

GUMMOW J:   What is the status of the challenge, to the Victorian group proceedings legislation?

MR BEACH:   There was a challenge through to the Court of Appeal in relation to Order 18A that is the subject, as I understand it, of a special leave application and there has been a writ issued out of the High Court by Mobil challenging the new Part 4A of the 1986 Supreme Court Act, which, as I recall it, one of the defendants has now filed a demurrer for but that is, at the moment, the position on that.

HAYNE J:   I may be mistaken, I thought there was a challenge to the rule followed by legislation, at least intended to have the effect of picking up any deficiency in the rule.

MR BEACH:   That is right.

HAYNE J:   Is there a current challenge to the validity of that statute?

MR BEACH:   Yes.

HAYNE J:   There is.

MR BEACH:   Mobil has issued a writ in the High Court’s original jurisdiction challenging that and, of course, if that legislation falls away, then they may revive their special leave application in relation to Order 18A.  Now, on the question of jurisdiction – I will just be very brief - Justice French applied the ‑ ‑ ‑

GLEESON CJ:   I think your time is up, Mr Beach.

MR BEACH:   Yes.

GLEESON CJ:   Yes, Mr Middleton.

MR MIDDLETON:   If your Honours please, the matter which we seek to address you on in this part of the application arises because of the attack upon the negligence claim and the point which is sought to be raised is the impact of the chain of contract between Esso, BHP and GASCOR, who is the retailer of gas, to the applicants and each of them and to the general consumers of gas.

HAYNE J:   Why should any of that be determined as on demurrer on the pleadings?  Why should it not be determined in the light of the evidence?

MR MIDDLETON:   The reason being that the evidence will not change anything that is presently before the Court on any of the salient facts.  Can I explain that?  The main point of principle, which has yet to be decided in this Court but was alluded to by the Chief Justice as one member of the High Court in Perre v Apand, as to the significance of a body of contract and freedom of contract impacting upon claim for pure economic loss.  That is the issue we wish to raise.

GUMMOW J:   Could you say that again, Mr Middleton?

MR MIDDLETON:   Yes.  The issue is how the body of law of contract will impact upon the recovery, in the law of negligence, for economic loss, pure economic loss.  In Perre v Apand the Chief Justice referred to one of the considerations being contracts between A and B and C, in maritime cases, for instance, as the example given, as being one consideration that may impact upon the duty of care arising to avoid economic loss or pure economic loss.

We say in this case when one sees the contractual matrix, that that is the end of this case.  So the contractual matrix, because it has within its terms, that is the contract between both Esso and GASCOR and GASCOR and the applicants, a denial of a claim for pure economic loss.  So, if the applicants had to go up the contractual chain they could not succeed and, in fact, the applicants do not seek to sue their person they have a contract with.  They are seeking to jump and go up the chain of contract.

GLEESON CJ:   Is there, in the contract, some kind of exclusion or limitation of liability?

MR MIDDLETON:   Yes, your Honour.

GLEESON CJ:   That is the problem that typically arises in the maritime cases.

MR MIDDLETON:   Exactly, your Honour, and that is the problem that arises here.  What one has, in a contract between Esso, BHP, the producer if you like of the gas, and GASCOR, who is the one who retails, a limitation of liability of consequential loss, if you like, loss of profits, the type of loss that is being sought by the applicants in this case.  So between the party who is trying to be held responsible plus the person who has the first relationship with, there could be no claim of the type sought here.

Then, in addition to that, we have contracts between the applicants and their retailer – GASCOR is effectively the retailer – which also would prohibit the applicants from suing for the type of loss they are seeking here, pure economic loss.  So all the way along the chain you have the inability to claim the loss they are claiming here.

GLEESON CJ:   So Esso says, “We will supply to GASCOR but on condition that you can only sue us to a certain extent”.

MR MIDDLETON:   Exactly.

GLEESON CJ:   GASCOR supply to the plaintiff saying, “We’ll supply but only on condition that you can only sue us to a certain extent”.

MR MIDDLETON:   It goes further with ‑ ‑ ‑

GLEESON CJ:   So the plaintiff sues Esso to a greater extent.

MR MIDDLETON:   Exactly.  Now that is an issue which has not yet come before this Court.  It has been alluded to in a number of cases as to what the position is.  I mean, Lord Goff in a case in England refers to the example of where a solicitor gives gratuitous advice to a testator on a holiday without having his precedent book there and he says, “Look, I’m not going to be liable for this particular advice”.  The testator dies and because some form is not properly adhered to the legatee is disappointed and seeks to sue.  Lord Goff says it would be unthinkable that the solicitor in that circumstance could be held liable because he has disclaimed an assumption of responsibility.

Now, we have an even better case than that because we have that element but we also have the situation where the person who was claiming would have no right to claim against the first party that they would normally have access to, that is the contracting party, namely GASCOR.  Now, that factor is the factor we rely upon.

GLEESON CJ:   In order to persuade us to deal with that on the pleadings, you would have to satisfy us, would you not, that that point is self‑evidently decisive, regardless of any possible factual ‑ ‑ ‑

MR MIDDLETON:   Yes, and that is what I think Justice Hayne was raising with me.  If I may now go to that, because that is the burden we have.  That is the interesting point that, in our submission, the Court should look at.

Now, the burden we have is to say why should you do it now as distinct from the end of the trial.  The answer is there is no other factor that can be relied upon or has been relied upon by the applicants in this case that can alter the correctness of that proposition which will change a trial.

Let me go through the factors they rely upon.  They rely upon the fact that Esso, BHP – they call it monopoly supplier of gas, but in reality it is the sole supplier of gas.  So they say because Esso, BHP are the sole suppliers of gas, that is a factor that takes it outside the principle which we seek to put before this Court.  That is not going to change.  That is a fact, an objective fact.

The second thing they rely upon is that gas is an essential service.  There is nothing magical about the words “essential service”.  Gas is something that was relied upon by a number of people in the State of Victoria is self‑evident.

The third thing they rely upon is that Esso had knowledge that a class of people were dependent on gas.  Well again, as far as that goes, that cannot be contentious.  Of course there were people in Victoria who had gas appliances who relied upon gas for hot water, for cooking.  So, of course, it is notoriety that there is a class, a general class of people.

Now, they are the elements that are relied upon by my learned friend in his outline as to what further evidence there is to be but no further evidence will expand upon that in any way whatsoever, in our respectful submission.

GLEESON CJ:   Now, Mr Middleton, you also have an interest in the argument Mr Beach has put, do you not?

MR MIDDLETON:   Yes, we do.  We have both arguments.

GLEESON CJ:   Are you in the same position as he is with respect to possible undertakings to cover the possibility that the case may go back to the Supreme Court?

MR MIDDLETON:   In the course of the discussion you had with Mr Beach I sought instructions and I obtained them.  You will have all the facts you need now to determine the matter of principle which we wish to have argued and it is an important matter of principle.  Why we should do it now?  If one looks at ‑ ‑ ‑

HAYNE J:   Does anything turn upon the degree of specificity of the knowledge that Esso may have had?

MR MIDDLETON:   In our respectful submission, not, your Honour.

HAYNE J:   Is it said to depend?

MR MIDDLETON:   No, it is not.  It is not pleaded, nor particularised that we had any specific knowledge of anybody.  What is pleaded is the general knowledge.  We had general knowledge that people relied upon gas for their cooking and for their businesses.  Now, whether it is a concession or whether it is self‑evident, it is obvious people relied upon gas.

So they are the three matters that are relied upon by my learned friend in his pleading and in his outline of argument and they are not going to change.  It is going to get no better.  Now, if that is correct, why should you now deal with it and, in our respectful submission, there are a multitude of reasons dealing with each person.

For the applicant, why should one deal with it now?  Because if we are right this case should not proceed any further.  Why should they be disappointed?  Why should they incur the costs?  So, from the applicants’ point of view, the matter could be dealt with now.  It should be, in our respectful submission.

From the respondents’ point of view it obviously should be.  Why should a cost be incurred for a claim which is completely untenable, which is, of course, our argument and from the Court’s point of view the waste of time – because Justice Merkel, who is the docket judge has said in transcript that this is possibly the largest trial to be heard in this country.

So, for all those reasons this matter should be dealt with by the Court, of course, subject to getting over the hurdle of the question of whether the matter will progress as far as evidence in a trial.  But there are no matters that are raised in a pleading that will change.

GUMMOW J:   Mr Middleton, am I right in thinking, looking at the two draft notices of appeal, that it is only yours - and this is at 495 - that has ground (d), which is the negligence complained of.

MR MIDDLETON:   Your Honour is correct.

GUMMOW J:   But that otherwise there is commonality between them.

MR MIDDLETON:   Yes.  We raise the argument of the jurisdictional point and we do raise in our outline of argument the question of matter, which your Honour has raised with my learned friend, Mr Beach.

GUMMOW J:   That is what it is all about, but what has section 33G to do with all of this?  Is that still pressed by both sides.  That is not a constitutional question.

MR MIDDLETON:   No, it is not pressed by me, your Honour.

GUMMOW J:   We did not hear anything about it from Mr Beach.  All right.

MR MIDDLETON:   The two important matters before this Court, the Court is prepared to take them out ‑ ‑ ‑

GUMMOW J:   Section 33G is at 497.

MR MIDDLETON:     ‑ ‑ ‑is the jurisdiction point and the question of the negligence.  I do not know if I should elaborate further the importance of the contract point but I hope your Honours concede the issue that arises as a matter of principle.

I do not want to go through all the cases but if liability is imposed upon Esso here, Esso has no ability whatsoever to deal with the consumer, has lost the benefit of the contractual negotiations it undertook with GASCOR to protect itself from the very thing that is sought to happen here.  So Esso negotiated, anticipating there could be a loss of profits case, consequential loss case, Esso negotiated with the only person it could in good faith and presumably, without effective price.

It will not only apply to this case but it will apply to all other cases where you have manufacturers or people who produce goods who only have one person to deal with.  Esso is not entitled, other than to its own use customers, to go and treat with consumers nor would one expect it to do so.

HAYNE J:   Now, are the terms of the relevant contract admitted?

MR MIDDLETON:   They are in evidence, because this was an application brought by way of ‑ ‑ ‑

HAYNE J:   Yes, but are they controverted?

MR MIDDLETON:   No, they are not.  They are not.  They are pleaded.  They are particularised in the statement of claim.  In the statement of claim they say the contract was made with Johnson Tiles, which is the commercial user, and it is referred to and we put into evidence.  With relation to the consumers that are the domestic consumers, it was referred to in the particulars of the statement of claim and it was put into evidence.

So, to answer your Honour’s question, no.  The contracts and the terms are clear and there has been no fight down below that the terms do not say what I assert they say.  It has been accepted that they have, and on the basis of that it has been determined that this is a matter which will deal on that basis.

Now, both Justice Merkel and the Full Court said, “Look, it’s one factor and that’s it.  We can’t deal with it now”.  But if we are right that it is the most salient feature, it is the feature of this case which will deny to the applicants their liability and nothing will change between now and trial, then the matter should proceed today.

GLEESON CJ:   Mr Middleton, could I ask you again about paragraph (e) of your draft notice of appeal on page 497 of the application book?

MR MIDDLETON:   I do not press it.

GLEESON CJ:   What about what I thought was the corresponding ground in the State’s notice of appeal, which I thought was ground 2.6?

MR MIDDLETON:   I do not know if I can speak for my learned friend if your Honour is asking if that is abandoned.

GLEESON CJ:   Is it Mr Beach?

MR BEACH:   We were going to put it on a slightly different basis, that it was relevant to the exercise of discretion to continue to exercise accrued jurisdiction, to look at section 33G and what the implication was arising from that.

GLEESON CJ:   What is the difference between the way Mr Beach wants to put it and the way you were going to put it until you decided not to?

MR MIDDLETON:   I am not too sure, your Honour, to be quite frank.

GUMMOW J:   Justice French dealt with it, at the moment quite effectively, I thought, at 412 and 413.

MR MIDDLETON:   Yes.  On the basis of what Justice French said, I did not want to press my ground.

GLEESON CJ:   Yes, thank you, Mr Middleton.

MR MIDDLETON:   If your Honours please.

GLEESON CJ:   Yes, Mr Burnside.  Mr Burnside, we do not need to hear you on the argument about the negligence claim or about section 33G.

MR BURNSIDE:   If the Court please.  Your Honours, the test for whether or not federal jurisdiction has been effectively invoked so as to give rise to a matter of which the Court is seized, in our submission, has been quite plain from the earliest decisions in this Court.  It has been expressed in various ways – “colourable” is an expression that recurs, “bona fide” is an expression that recurs – and it is easy to see a common thread of meaning between those various expressions.  It involves a consideration of whether there is a genuine invocation of the jurisdiction or a sham attempt to invoke jurisdiction for some ulterior purpose.

HAYNE J:   That is, do you say the test invites attention to the thought processes of the pleader?

MR BURNSIDE:   It invites attention to that in part. There are various ways in which one can detect a sham as opposed to something that is real. Clearly, a sham intent, a false intent, will give the matter away. That does not mean that the test is necessarily confined to subjective assessment, although in most cases it will be. It is possible to imagine a genuine but utterly misguided invocation, so, for example, demonstrating a complete lack of understanding of what is the matter which gives federal jurisdiction. So, for example, if a person sought to raise a question under section 92 of the Constitution and said that because they were buying goods for the purpose of having a snack whilst they travelled to Sydney, they might genuinely think that that raises a section 92 question but it would be unlikely the Court would accept that that was so.

The alternative to the test which has already been proposed and accepted in the Court for a long time is to look to the ultimate fate, the objective fate, of the application.  There is no stopping point, in our submission, between the position where an application is dismissed for being untenable, even after a very substantial and sustained fight, as is the case here, and on the other hand, losing at trial on a question, for example, of whether or not the Act applied.  The position in Burgundy Royale could just as well have been decided at trial as it was on an interlocutory fight.

GUMMOW J:   But is that not a problem for you here?  You may ultimately be right, for all I know, but is not your side at hazard of finding out after a trial that the whole thing has misfired or open right now to collateral attack under 75(v)?

MR BURNSIDE:   If there is a collateral attack under 75(v), we deal with that when it arises.  In our submission, on the authorities as they stand, we are not open to the risk of succeeding at trial on the question that is presently alive and then being deprived altogether because it is said that jurisdiction was not there.  The court has already found jurisdiction in accordance with accepted principle and the accepted principle, in our submission, should not be re‑examined because the alternatives to it manifestly lead to great inconvenience.  For example, the risk that one succeeds at trial on the claim that is in the accrued jurisdiction and then is deprived of the whole thing because ‑ ‑ ‑

GUMMOW J:   If there is no jurisdiction, it is something that cannot really be waived in a constitutional sense, as I understand it.

MR BURNSIDE:   I accept that, but then the cases establish clearly enough the test for jurisdiction being attracted.  The jurisdiction is attracted if the federal claim is genuinely brought and it matters not that the federal claim ultimately fails, either because it is statute barred, as in a couple of cases your Honour decided in the Federal Court, or because of some problem with the way it is pleaded or because it fails on the facts at trial or because, as in the case of Burgundy Royale, the Act does not apply to the respondent.

In all of those instances, across at least the last 60 or 70 years, the Courts have said that jurisdiction is invoked if the federal claim is genuine, not colourable and not done as a device to get into court, and the jurisdiction, once attracted, includes the matters within what is called the accrued jurisdiction.  If the jurisdiction exists, then what would otherwise be a non‑Federal matter is part of the federal jurisdiction and that jurisdiction will not be stripped away by the result at trial.

Now, the real question for the Court today, in our submission, is whether there is any ground shown for revisiting the test for the loss of the accrued jurisdiction, which has been a settled test since before the World War II.

GLEESON CJ:   Now, Mr Burnside, if we were tentatively minded to be against you on that, what do you say about this matter of the undertakings, the steps that could possibly be taken to avoid wasted time and costs?

MR BURNSIDE:   Essentially worthless undertakings, in our submission, because it has already been stated that there is a challenge to the efficacy of the legislation in Victoria and, if that challenge succeeds on any ground, then what the applicants here have done is drive us into shallow water and – I was going to say “beaches” – and leave us with nowhere to go.

GLEESON CJ:   And why is that?

MR BURNSIDE:   Because this is a representative action.  The nature of the matters to be proved in either limb of the claim are very substantial and difficult to prove, the individual damages suffered by many members of the group are relatively small ‑ ‑ ‑

GLEESON CJ:   Of course, if that is right and if ultimately they are ultimately held to be right when they say the Federal Court has no jurisdiction, you have swum into shallow water.

MR BURNSIDE:   We would rather swim there than be pushed there I think is the short answer, your Honour.

GUMMOW J:   This hypothesis assumes the Victorian legislation is invalid, does it not?

MR BURNSIDE:   It is a risk which has to be borne in mind because if the end result of this case ‑ ‑ ‑

GUMMOW J:   Why is the Victorian legislation said to be invalid, do you know?

MR BURNSIDE:   I have not read the attack.  I do not know.  But, of course, it would have very substantial consequences, even if it be assumed that there is no loss associated with transferring it from one jurisdiction to another, and that is probably covered by the undertaking ‑ ‑ ‑

GLEESON CJ:   What seems to be the most horrifying prospect is that the world’s greatest law case should proceed to trial and decision and then be subject to an appeal to the Full Court of the Federal Court and then the High Court at some time decide, five or six years down the track, that the Federal Court never had jurisdiction.

MR BURNSIDE:   Yes.  Your Honour, we are not aware of any case in Australia where a matter has gone to trial on a question within the accrued jurisdiction and it has then been found that the court never had jurisdiction to exercise at all and, in our submission, there are powerful reasons why the test which has always been adopted is the right test.

HAYNE J:   Are we to approach the present matter on the basis that the section 52 claim is to be regarded as untenable, as having been untenable and untenable beyond amendment?

MR BURNSIDE:   No, certainly not and, in fact, as I am instructed, if special leave is granted, it is likely that we will seek to cross‑appeal on the striking out of the section 52 claim.  With respect, we say that the Full Court was wrong in striking it out and certainly wrong in saying that there was no viable section 52 claim.  There is a great difference, of course, between saying, “As it is presently pleaded, it doesn’t appeal to us”, and saying, “There is no available section 52 claim arising in the matter”.

HAYNE J:   But did you seek leave to replead in the proceedings below?

MR BURNSIDE:   Yes.

HAYNE J:   And that was refused?

MR BURNSIDE:   I am sorry.  It was in the course of argument.  It was ‑ ‑ ‑

HAYNE J:   But the Full Court refused you leave to replead?

MR BURNSIDE:   They refused leave to replead.  They did.

HAYNE J:   On the basis that the claim was beyond redemption?

MR BURNSIDE:   Presumably so, but, in our submission, that was incorrect and, of course, this arises in the very curious circumstance where the judge at first instance has twice ruled, on two versions of the section 52 plea, that it was viable.

GLEESON CJ:   Listening to you develop that argument in the High Court would provide a good opportunity for working out whether the claim was colourable.

MR BURNSIDE:   What a tempting thought.

GLEESON CJ:   It would be, certainly, the case being put at its best.

HAYNE J:   Or at least highest.

MR BURNSIDE:   Yes.  In our submission, that is not so unless what is within the meaning of the word “colourable” is to shift radically from what has always been understood.  It is one thing for the Court to take the view that the plea is misconceived or must ultimately fail.  It is something altogether else to say that it is colourable.  Now, the dictionaries are all at one in suggesting that colourability carries with it a notion of speciousness or sham, falsity, lack of good faith, and that is entirely consistent with the way the authorities have dealt with it.

If that were not so, then cases like Elna and Dorotea would have had to be decided differently, because there the failure of the federal claim was because it was brought outside the time during which such claims were available.  There can be nothing more clearly doomed to fail a trade practices claim than the fact that is brought outside the time limited for bringing it.

GLEESON CJ:   Mr Burnside, we just happen to have here some forms of draft undertaking that you and your opponents might like to look at, and can you tell us whether, subject to the submission you make about the challenge to the Victorian legislation, you say they would be adequate or inadequate to cover the position you are attempting to cover and your opponents can tell us whether their instructions go so far as to permitting them to give those undertakings.

MR BURNSIDE:   I will ask my learned junior to have a look at that.  May I make one observation on a related point that your Honour the Chief Justice mentioned.  You have referred to this as the trial of the decade or century or ‑ ‑ ‑

GLEESON CJ:   No, I think somebody else did.

MR BURNSIDE:   Yes.  I thought your Honour had picked it up in any event.  We would submit that the trial which is of immediate concern is, in fact, not longer than a lot of ordinary trials, but the trial on the first question, namely, what occurred and whether liability is attracted, was estimated to take perhaps six or eight weeks, possibly a little longer.  The large part of the claim really comes later, after, presumably, there have been appeals.  The large part of the claim comes in looking at those variable elements that distinguish individual people in the community who lost money as a result of the Esso explosion and that process, no doubt, has the capacity to take a substantial time and a great deal of resources, but the question that opens up that second phase is to be dealt with in a trial of relatively modest compass.

GLEESON CJ:   In relation to the striking out of your section 52 claim and the refusal of leave to replead, you would not trouble to seek to appeal against that unless there is a success in this present application?

MR BURNSIDE:   That is so.

GLEESON CJ:   Your present intention is to go to trial in the Federal Court on the negligence case only?

MR BURNSIDE:   We are content to do that and principally because, if I may say, a lot of time had been spent in interlocutory skirmishing, a trial was imminent and we did not want to be the ones who delayed that by appealing that ruling, given that jurisdiction had otherwise been retained.

GUMMOW J:   If you did find yourself in the Supreme Court at the end of all of this, would you be at liberty to rely on the Fair Trading Act counterpart of section 52 and start that running there?

MR BURNSIDE:   I expect so.  I cannot think offhand of any reason why we could not.  The real concern, of course, with going to the Supreme Court at the moment is that the foundation for a group proceedings ‑ ‑ ‑

GUMMOW J:   That is why I cannot really understand why your opponents are so eager, other than by delay, to do what they are doing today.  Anyhow, that is for them.

MR BURNSIDE:   It provides a perfect explanation.  It would suit them perfectly well if there was to be a great loss of costs when we had to transfer to the Supreme Court and jubilation if it turns out for them that group proceedings are not available in the Supreme Court because then the prospect is of umpteen thousands of people, each trying to bring individual claims against Esso.

GLEESON CJ:   The best thing that could happen to them is if it turns out ultimately to be held that you commenced proceedings in a court that had no jurisdiction.

GUMMOW J:   After trial.

MR BURNSIDE:   That is true and on the present law we would submit that is not an available result in view of the finding of the Full Federal Court.

GLEESON CJ:   Mr Burnside, I forget now when this occurrence happened.

MR BURNSIDE:   25 September 1998.

GLEESON CJ:   Does that mean that there will be statutes of limitations problems about commencing proceedings in the Supreme Court at some stage, about 2004?

MR BURNSIDE:   On negligence, yes, Fair Trading Act, I think it is three years, so not immediately.

GUMMOW J:   It is three years for Fair Trading, is it?

MR BURNSIDE:   I think so but I have to say I have not looked at it recently and I ‑ ‑ ‑

HAYNE J:   And the Fair Trading claim, if one were to be available and if it were to be brought, would, I take it, be said to suffer the same deficiencies of identifying misleading conduct that were attributed to the 52 claim that was struck out as untenable, would it not?

MR BURNSIDE:   Probably.

HAYNE J:   That is, is there something available under Fair Trading that goes beyond 52?

MR BURNSIDE:   I do not think so but, being realistic, if we were driven to issue in the Supreme Court, we would reconsider the proper formulation of the misleading and deceptive conduct claim.

GUMMOW J:   There is nothing to stop you issuing now, is there, really?

GLEESON CJ:   If it were said it was an abuse of process, then you would say, “Well, we are doing this because this is going on”.

MR BURNSIDE:   Clearly we could do that if this Court granted special leave and there was likely to be a substantial delay before the matter was resolved.  May I say in that connection, if the Court is minded to grant special leave, which the draft undertakings make us apprehend is possible ‑ ‑ ‑

GLEESON CJ:   No, we just like to cover all contingencies.

MR BURNSIDE:   Well, as the orange light comes on, it is our submission that if the Court grants special leave it is highly desirable that the matter be expedited as best it may be because the uncertainty associated with the question is not only of concern to the immediate parties but obviously of more general concern given that the test is one of such long standing.

GUMMOW J:   The points that the Chief Justice and I were just raising with you about times, that would be obviated and there would not be any need to seek undertakings as to limitation points being taken in the Supreme Court at some distant time, if you follow what I am saying.

MR BURNSIDE:   I would not want to answer that without checking the Fair Trading Act – I was not expecting to be concerned with that this morning – but we would submit it is appropriate that undertakings ‑ ‑ ‑

GUMMOW J:   It will be three years from September 1998.  That is the worst scenario.

MR BURNSIDE:   That is assuming I am right in three years.

GUMMOW J:   That has not arrived yet.

MR BURNSIDE:   Some of these statutes say two years.

GUMMOW J:   I see.

MR BURNSIDE:   That is right and we would seek an undertaking, an additional undertaking, that a limitation point not be taken in the event that it is necessary to issue in the Supreme Court.  Unless there are any other aspects, those are our submissions.

GLEESON CJ:   Thank you, Mr Burnside.

MR MIDDLETON:   I wonder if, just before Mr Beach rises, the Court will hear me?  In relation to the Fair Trading Act, that was pleaded by my learned friends in the pleading that was struck out.  If one has a look at page 39 of the application book, this being the pleading that suffered the

fate it did, you will see paragraph 26.  Does one have page 39?  This is the first volume.

In all the circumstances set out in paragraphs 16 – 24, the Respondents’ conduct in:

(i)  continuing to operate, manage and control the Longford plant . . . 

(ii)  failing to correct or contradict the assumptions; and/or

(iii)  failing to make known –

the various matters:

constituted conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s.52 of the Trade Practices Act and s.11 of the Fair Trading Act.

Now, as Justice Hayne, I think, asked my learned friend, the very issues that Justice French and the rest of the Full Court decided would be equally applicable to the allegations made under the Fair Trading Act, as would have to, because it mirror images the Trade Practices Act other than, of course, you do not need to have the corporation aspect.  But the reason why the Trade Practices or the misleading and deceptive conduct claims, as they were known, which is both the Trade Practices part and the Fair Trading part were stuck out is because of the way in which it is pleaded the assumptions, and they were just untenable.  So it cannot be, we would say – my learned friend cannot have it both ways.  He wants to get advantage of everything that has happened in the Federal Court, so be it, but he has to take the good with the bad.

GLEESON CJ:   Are you happy with that undertaking?

MR MIDDLETON:   Yes, I have instructions.

GLEESON CJ:   Would you like to just put your initials in the top right‑hand corner and today’s date.

MR MIDDLETON:   I think my instructing solicitor has done that, but I am happy to do it, your Honour.

GLEESON CJ:   All right.  What about you, Mr Beach?

MR BEACH:   Yes, we do give that undertaking.

GLEESON CJ:   Would you autograph that document then?

MR BEACH:   Yes.  In relation to the limitation point, if section 11 of the Federal Courts (State Jurisdiction) Act is invoked, limitation issues are adequately dealt with in section 11(3)(b) where it says that:

for the purposes of any limitation law –

the proceeding –

is deemed to have been brought in the Supreme Court on the day on which the proceeding was first recorded - - -

GUMMOW J:   Yes, that is right but there is some cloud hanging over the applicability of that Act.  That is all.

MR BEACH:   Yes.  The other thing is that if there is a serious problem they can file proceedings on Monday in relation to preserving any new Fair Trading Act case that has not yet been put, either to the Full Court below or, indeed, put to your Honours.  On the threat that there will be a cross‑appeal on the section 52 findings, as your Honours appreciate from the rules, they need special leave to proceed with such a cross‑appeal and establish to your Honours’ satisfaction that there is a point of principle involved in what the Full Court did in relation to the section 52 issues.  So they do not have an automatic right to proceed with any cross‑appeal in relation to the Full Court’s failure to grant them leave to replead.

GLEESON CJ:   All right.  Now, would you just initial those undertakings and hand them back to the associate officer and would counsel just attend to these orders.

It is our intention not to grant special leave to appeal in relation to the question of whether the negligence claim is untenable or in relation to the section 33G point.  So I just ask counsel to check that these orders reflect that intention.

In the application of the State Electricity Commission of Victoria and Others, upon the applicants giving to the Court the undertakings in the document initialled and placed with the papers, special leave to appeal, excluding ground 2.6 in the applicant’s draft notice of appeal is granted.  In the application of Esso Australia Pty Ltd and Another, upon the applicants giving to the Court the undertakings in the document initialled and placed with the papers, special leave to appeal limited to the grounds appearing under paragraphs (a), (b) and (c) in the draft notice of appeal is granted.

How long do counsel think the hearing of the appeals might take?  What you have said about expedition has been noted?

MR BEACH:   So far as the State is concerned, with detailed written submissions, probably no more than a day, but if the Attorneys‑General intervene it might take more than a day.

GUMMOW J:   Yes.  It is assumed that you will be attending to the 78B notices.

MR BEACH:   Yes.

GLEESON CJ:   What do you say, Mr Middleton?

MR MIDDLETON:   I was going to say exactly the same, one day, but if one has interveners, it may go to the next.

GLEESON CJ:   What about you, Mr Burnside?

MR BURNSIDE:   I agree with that.

GLEESON CJ:   All right.  We will list it as a day case.  We need to adjourn for a moment to reconstitute.

AT 10.33 AM THE MATTER WAS CONCLUDED