Walker v Lifespan Financial Planning
[2003] FMCA 519
•19 November 2003
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WALKER v LIFESPAN FINANCIAL PLANNING & ORS | [2003] FMCA 519 |
| TRADE PRACTICES – Jurisdiction – whether s.51AF of the Trade Practices Act applies – whether claim relates to “financial services”. |
Trade Practices Act 1974, ss.4, 47(6), 51AF, 51AF(2), 52, 86
Corporations Act, s.995
Federal Magistrates Court Act 1999, ss.10, 18, 39
Australian Securities and Investment Commission Act 1989, s.12BA(1)
Corporations Law 2000, s.92
Johnson Tiles Pty Ltd v Esso Australia Ltd (2000) FCA 1572
Queensland Aggregates Pty Ltd v Trade Practices Commission (1981-82) 38 ALR 217
Henderson v Pioneer Homes Pty Ltd (1979‑80) 29 ALR 597
Cleary v Australian Cooperative Foods (No 2) (1999) NSWSC 991 (12 October 1999).
Carlton and United Breweries v Castlemaine Tooheys Ltd (1986) 161 CLR 543
McIntosh v National Australia Bank Ltd (1988) 80 ALR 47
Elna v International Computers (1987) 75 ALR 271
Stack v Coast Securities (No 9) Pty Ltd (1983) 49 ALR 193
Mahoney v AGD Mining Ltd and Ors (2002) FMCA 237
| Applicant: | HELEN PATRICIA WALKER |
| Respondents: | LIFESPAN FINANCIAL PLANNING PTY LTD, DAINBRIDGE SERVICES PTY LTD and JAMES BUCHANNON BLAIR |
| File No: | MZ 787 of 2003 |
| Delivered on: | 19 November 2003 |
| Delivered at: | Melbourne |
| Hearing Date: | 6 November 2003 |
| Judgment of: | McInnis FM |
REPRESENTATION
| Counsel for the Applicant: | Mr R. Moore |
| Solicitors for the Applicant: | D.G. Skinner and Associates |
| Counsel for the Respondents: | Mr D. Bailey |
| Solicitors for the Respondents: | Minter Ellison |
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MZ 787 of 2003
| HELEN PATRICIA WALKER |
Applicant
and
| LIFESPAN FINANCIAL PLANNING PTY LTD, DAINBRIDGE SERVICES PTY LTD and JAMES BUCHANNON BLAIR |
Respondents
REASONS FOR JUDGMENT
In this application a preliminary issue has arisen in relation to the jurisdiction of the Federal Magistrates Court to hear and determine the application. The application seeks damages for what is alleged to be breach of, amongst other matters, s.52 of the Trade Practices Act 1974 (the Act). The application filed on 22 July 2003 was accompanied by a statement of claim and an affidavit of the applicant sworn 27 June 2003. The matter came before the court on 15 September 2003 and on that date it was made clear by the respondents that an application would be made in relation to jurisdiction, and hence the court made orders that the parties file and serve an outline of submissions and list of authorities and otherwise fixed the jurisdiction issue for hearing.
The respondents, in addition to relying upon an outline of submissions, have also sought to rely upon an affidavit of Sheena Leibowitz sworn 26 September 2003. The parties, in addition to adopting an outline of submissions made oral submissions. It is appropriate to briefly set out the nature of the claim as pleaded and to note the background information which is set out in the affidavit of the applicant in support to which I have referred.
It does not seem to be an issue that the applicant in 1996 suffered what is described as severe injury as a result of a motor vehicle accident. By way of settlement arising out of the injuries sustained by the applicant, she received a cheque for $350,000 as part payment of compensation on 11 November 2000. The applicant received a further amount of $49,923.20 on 11 January 2001.
In the statement of claim the applicant refers to the respondents in brief terms as the first respondent being a "licensed securities dealer" and otherwise refers to that respondent as carrying on the business of investment and planning advice. It is further claimed that the first respondent had "specialised investment and financial planning knowledge". The second respondent is referred to as being a company which also carried on business as an investment and financial planning adviser, having speciality in investment and financial planning knowledge. The third respondent is claimed to be a certified practising accountant and at all material times a director of the second respondent and authorised representative of the first respondent and/or agent of the first respondent. The third respondent is also referred to as an investment and security adviser and a person who had specialised investment and financial knowledge.
The applicant claims that in November 2000 after receiving the cheque of $350,000 as part payment of settlement arising out of the motor accident, she met with the third respondent and it is asserted retained the third respondent and other respondents to provide the applicant with financial advice and prepare a financial plan with respect to the compensation. In the particulars subjoined to paragraph 6 of the statement of claim the applicant provides particulars of the retainer. Apart from referring to receipt of the compensation and the anticipated receipt of further compensation in the future, the applicant pleads that by way of particulars of the retainer, that she wanted advice on how she should invest her compensation "as she did not know what to do with it".
It is further particularised that the applicant retained the respondents to the effect that the compensation and its investment was to secure her and her daughter's financial future as best it could. The particulars refer to the retainer involving a desire on the part of the applicant for the compensation to be invested conservatively and with reasonably low risk, and that generally the applicant's financial objective was to own a small farm and house in the future debt-free and have sufficient investment capital to provide a modest income. The particulars of retainer referred to the applicant's desire for a financial plan, and it is stated the third respondent agreed to provide her with financial advice and prepare a financial plan. It is not necessary to otherwise refer to the pleadings in relation to the retainer in further detail.
Significantly the statement of claim refers to the financial plan in paragraph 3 and states that a plan was provided to the applicant on 4 December 2002 and the effect of the plan was that the applicant was to invest her own funds of $350,000 into four investments which included Bankers Trust Future Goals Fund, Colonial First State Diversified Fund, Colonial First State Imputation Fund and Bankers Trust International Fund (the recommended investments). The financial plan is alleged to follow recommendations and representations which further had the effect that the applicant was to borrow $350,000 from Macquarie Bank pursuant to a margin loan contract with that bank (the margin loan contract) and that the funds so borrowed were to be invested in the recommended investments.
Similar pleadings arise in relation to a further sum of money received by the applicant in or about January 2001. It is not necessary to recite the pleadings in relation to that amount.
It is claimed by the applicant that on 6 August 2002 she received a margin call from Macquarie Bank, having acted upon the advice referred to earlier, for approximately $29,000, pursuant to which the applicant had to redeem $82,800 worth of stock to meet the call. In her affidavit the applicant states that at the time she had no capacity to meet the margin call other than by liquidating some of her stock. She further states in her affidavit:
“As Mr Blair well knew when he provided me with the financial plan and the financial advice, I was unemployed, had no income other than what I was receiving from those investments and I could not pay interest on the Margin Loan Contract other than by way of paying it with the dividends I received on my investments, let alone meeting any margin call.”
The applicant deposes that she became -
“… so concerned about the Margin Loan Contract that in late August 2002, I liquidated the whole of my stock and exited the Margin Loan Contract, suffering a loss in excess of $180,000.00”
In a statement of claim the applicant asserts that the conduct of the respondents in making the representations constituted conduct that was misleading and deceptive or likely to mislead and deceive the applicant in breach of s.52 of the TPA. Further pleadings are raised in relation to the representations, and specifically reliance is placed upon s.995 of the Corporations Act with similar pleadings in relation to what is claimed to be misleading and deceptive conduct on the part of the respondents.
In the alternative, the applicant claims that the respondents breached a duty of care owed to the applicant in relation to the advice given to the applicant and in particular the margin loan recommendation. The applicant then claims that as a consequence of the matters pleaded she had suffered loss and damage and which, subject to further particulars, relates at least initially to interest on the margin loan contract and liquidation of stock on margin call, the amounts being $34,269.45 and $82,800 respectively.
In the submissions made for and on behalf of the respondents, it is submitted that the nature of the claim is such that the Federal Magistrates Court does not have jurisdiction to hear and determine the application. It is further submitted that if there is no jurisdiction to hear and determine the application, then the court has no power to then transfer the proceedings to another court.
The court was referred to a number of authorities in relation to jurisdiction. In particular the court was taken to s.10 of the Federal Magistrates Court Act 1999. It was submitted that the jurisdiction of the court is vested in it by that section. The court, it was submitted, pursuant to s.86 of the TPA is vested with jurisdiction in any matter arising under Division 1 or 1A of Part V of the TPA in respect of proceedings instituted by a person other than the Minister or the Commission.
Whilst conceding that this would appear to be the basis upon which the applicant has launched her proceeding seeking damages for breach of s.52 of the TPA, it was submitted that the power of the court and indeed its jurisdiction under s.86 of the TPA does not apply to the current application since s.51AF of the TPA provides that Part V does not apply to services that are "financial services". Further, it was submitted s.51AF(2) provides that ss.52 and 52A of the TPA do not apply to conduct engaged in "in relation to" financial services.
The respondent correctly acknowledged that the jurisdiction of the Federal Magistrates Court includes associated jurisdiction pursuant to s.18 of the Federal Magistrates Court Act. The associated jurisdiction, however, is only properly invoked if it can hear claims arising within a federal matter. The court was referred in particular to the decision of Johnson Tiles Pty Ltd v Esso Australia Ltd (2000) FCA 1572 and in particular the court was referred to paragraphs 87 and 88 of that decision as follows:-
“87 If there be no federal jurisdiction properly invoked then there can be no accrued jurisdiction - Carlton and United Breweries Ltd v Castlemaine Tooheys Ltd (1986) 161 CLR 543 at 553 and see the discussion by Professor Zines in Federal Associated and Accrued Jurisdiction, Opeskin and Wheeler (eds) - The Australian Federal Judicial System (MUP) pp 294-295 and the apparent tension between Vietnam Veterans' Affairs Association of Australia New South Wales Branch Inc v Cohen (1996) 70 FCR 419 on the one hand and Post Office Agents Association Ltd v Australian Postal Commission (1988) 84 ALR 563 at 565 (Davies J) and Buck v Comcare (1996) 66 FCR 359 at 370 (Finn J). The Court in such a case of course does have a limited jurisdiction to determine whether its jurisdiction is properly invoked - Mercator Property Consultants Pty Ltd v Christmas Island Resort Pty Ltd (1999) 94 FCR 384; Khatri v Price (1999) 95 FCR 287.
88 In the ordinary course the contention that a claim is not tenable will not go to jurisdiction unless dependent upon a submission that the claim is outside jurisdiction. And indeed, within that class a claim may be untenable because its very nature denies its character as an element of any matter or controversy in respect of which the Court can exercise jurisdiction. So a proceeding based upon the proposition that the Commonwealth Constitution is invalid does not disclose a matter arising under the Constitution or involving its interpretation - Nikolic v MGICA Ltd [1999] FCA 849. A claim may also be a sham reflecting no genuine controversy and therefore establishing no matter in respect of which the Court may exercise its jurisdiction. There has been discussion of so called "colourable" claims made under the Trade Practices Act for the improper purpose of fabricating jurisdiction. The mere fact that a claim is struck out as untenable does not mean it is colourable in that sense. The pleading of the s.52 claim in this case advanced the legitimate forensic purpose of endeavouring to establish a cause of action which would not require proof of a duty of care. Notwithstanding its precipitate initiation and chequered history, I am not satisfied that it was colourable in the sense that would deprive this Court of jurisdiction to deal with the matter including any non-federal claims that may form part of it.”
It was submitted on behalf of the respondents that in the present case the applicant's claim as pleaded is not within the jurisdiction of the court as it is primarily a claim in relation to financial services. The conduct on which the claim is based occurred in December 2000 and January 2001 when conduct with respect to financial services was then regulated by Division 2 of Part II of the Australian Securities and Investment Commission Act 1989 ("the ASIC Act").
It was submitted that the definition of "financial services" pursuant to s.4 of the TPA has the meaning attributed to it by s.12BA(1) of the ASIC Act. That section provides in the form applicable prior to
11 March 2001 the following in relation to the meaning of "financial service":
(a) consists of providing a Financial Product; or
(b) is otherwise supplied in relation to a Financial Product.
It is noted that ‘financial product’ is defined in s.12BA(1) to include a ‘security’. Section 5(3) of the ASIC Act provides that except insofar as a contrary intention appears in the ASIC Act, Parts 1.2 and 1.3 of the Corporations Law apply as if the ASIC Act were part of the Corporations Law. It was submitted that securities in turn were defined in s. 92 of the Corporations Law 2000 to include:
(b) shares in or debentures of, a body; or
(c) interests in a managed investment scheme.
It was submitted that the applicant's claim relates to financial products being interest in a managed investment scheme as referred to in the statement of claim and otherwise referred to in the affidavit relied upon by the respondent of Ms Leibowitz.
It was submitted that "services" are defined in s.12BA of the ASIC Act to include -
“any rights (including rights in relation to, and interests in, real or personal property) benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce but does not include:
(a) the supply of goods within the meaning of the TPA; or the performance of work under a contract of service.”
The giving of advice or making of recommendations appears to fall within the scope of the definition, according to the respondents' submissions, as constituting benefits or privileges as does the provision of assistance to carry out those recommendations.
The court was referred to the decision in Queensland Aggregates Pty Ltd v Trade Practices Commission (1981-82) 38 ALR 217 at 220‑221 (the Queensland Aggregates case). In particular it is noted the court in that case had to consider the issue of "services". In that case, however, the conduct alleged was an offer of supply of the appellants of work to a person on condition that he acquire a Ford truck from a third party, being third line forcing described by s.47(6) of the TPA. It had been submitted by the respondents that that conduct was merely an offer to make a subsequent offer or an offer to pay money as consideration for services to be performed on the acceptance of the subsequent offer and was not a supply of services within s.47(6) of the TPA. The trial judge ruled that the alleged offer as pleaded and particularised would constitute an offer of service. The Full Court of the Federal Court on appeal disallowed the appeal and held that the alleged offer constituted "benefits" or "privileges" within the meaning of those words as used in the definition of "services" in s.4 of the TPA. The court was otherwise referred to the following extract of the Full Court's decision in Queensland Aggregates of the court's judgment at p.221:
“In the view we take, the sweepingly general provisions of the definition of services contained in s.4 of the Act should not be given an expansive construction. Thus, for example, we would, in the context of the repeated use in the Act of the words ‘goods or services’, exclude from references to the supply of ‘services’ in the defined sense, the supply of goods, even though the supply of goods would ordinarily involve the granting of ‘rights in relation to, and interests in, … personal property’. Again, as at present advised, we would exclude from the scope of the words ‘supply of services’, a simple payment of money even though, in one sense, money might be regarded as coming within the word ‘benefits’. Even accepting that the definition of ‘services’ should not be given an expensive construction, however, we are unable to discern any valid or logical basis on which the definition can properly be constricted so as to exclude the subject matter of the alleged offer in the present case. In our view, the subject matter of the alleged offer constituted ‘benefits’ or privileges’ within the meaning of those words as used in the definition of services. It follows that, substantially for the reasons which he gave, we agree with the conclusion of Sheppard J that the point of law which was argued as a preliminary point should be decided adversely to the appellants.”
This court was further referred to the decision of the Full Court of the Federal Court in Henderson v Pioneer Homes Pty Ltd (1979‑80)
29 ALR 597 at 600, 610. In that case the proceedings concerned advertisements in newspapers promoting the sale of blocks of land. Houses were said to be available at certain locations. Some of the houses were specified to include extras such as carport, fencing, paving, vinyl and carpets. The question for the court to consider was whether the contents of the advertisements which referred to $100 deposit and payments of weekly amounts were statements made in connection with the promotion by any means of services. If so, were the said statements made with respect to the price of services or were the said statements made concerning the effect of any condition? If so, were the statements misleading?
It was held in the Henderson case that the contents of the advertisements were obviously statements made in connection with the promotion of the sale of rights and interest in real property and therefore of services as defined by s.4 of the TPA and accordingly were services within the meaning of s.53 of that Act. The statements concerning repayments after the first 12 months were statements "with respect to" services. I was referred to the decision in that case of Franki J and in particular that part of His Honour's judgment which appears at page 610:
“The respondents did not seriously argue that the transactions to which the advertisements were directed were not statements made in connection with the promotion by any means of the supply of services. It may be thought rather strange that those transactions would fall within the supply of services. However, the definition of ‘services’ in s 4 includes interests in real or personal property and ‘any contract for or in relation to the lending of moneys’ and s 4(c)d provides that a reference to the supply of services, unless the contrary intention appears, includes a reference to the supply of services together with property or other services or both. I am satisfied that question (a) should be answered ‘Yes’ in respect of each advertisement.”
I was referred to the decision of Austin J in the New South Wales Supreme Court case of Cleary v Australian Cooperative Foods (No 2) (1999) NSWSC 991 (12 October 1999). After referring to that authority, it was submitted that the expression "in relation to" is to be interpreted expansively. The fact that conduct is in relation to other matters does not prevent it being in relation to financial services as well, according to the respondents' submissions. Once the conduct is classified as "in relation to" financial services, then the TPA is inapplicable.
In the present case, since the primary purpose of the applicant was to seek advice in respect of financial services, it was submitted that s.52 of the TPA could not apply. The reason for this is because the respondents, according to their submissions, acted in response to a request from the applicant, had supplied a financial service in terms of s.12BA(1) of the ASIC Act. In general terms, it was submitted that the applicant's statement of claim had revealed that the alleged cause of action against each respondent fundamentally arise in relation to the provision of financial services.
During the course of submissions, however, it was conceded that the representations which are referred to as representations in relation to the margin loan, or otherwise called the margin loan recommendation leading to the margin loan contract, would not be properly regarded as a "financial product". This was common ground. Nevertheless, it was submitted that that is only one part of the overall dealing and discussion between the parties. As I understand the submissions made for and on behalf of the respondents, it was still submitted that in the circumstances the claim in the present case could not attract the jurisdiction of this court as essentially what had occurred is that in each instance the respondents' dealings with the applicant fundamentally arose in relation to the provision of financial services.
Other submissions were made by the respondents that if the court were to find that there is no jurisdiction invoked, then it would otherwise not have power to transfer the respondent to the Federal Court (see Carlton and United Breweries v Castlemaine Tooheys Ltd (1986) 161 CLR 543 at 553 and Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (2000) FCA 1572 at 87-88).
The applicant submitted that in the present case the court does have jurisdiction. The jurisdiction has been attracted upon the institution of the proceedings, and the applicant relied upon the authority of McIntosh v National Australia Bank Ltd (1988) 80 ALR 47 at 49 and Elna v International Computers (1987) 75 ALR 271 at 277.
The applicant submitted that once the application instituted in the court is regarded as proceeding under Part V of the TPA, the court then acquires jurisdiction to hear all questions that form part of the matter to be determined, even questions that do not themselves arise under the TPA. Reliance was placed on s.18 of the Federal Magistrates Court Act and the decision of Stack v Coast Securities (No 9) Pty Ltd (1983) 49 ALR 193 at 204.
The applicant referred to paragraphs 31 to 33 in a decision of this court in the matter of Mahoney v AGD Mining Ltd and Ors (2002) FMCA 237 as follows:
“31.It was therefore submitted that s.51AF does not apply and the Court has jurisdiction. As a second limb of the argument it was submitted the Court has associated or accrued jurisdiction and the Applicant relied upon s.18 of the Federal Magistrates Act. So long as a claim is properly brought under Divisions 1 or 1A of Part 5 of the TPA then by virtue of s.18 of the Federal Magistrates Act the Court has jurisdiction. Counsel referred to the authority of Fencott v Muller (1983) 152 CLR 570 and in particular p 610 of the joint judgment of Mason, Murphy, Brennan and Deane JJ as follows:
‘The question – hopefully amenable to summary disposition – is whether the claim under the relevant federal law is a substantial part of a controversy the whole of which would be appropriately and conveniently determined by the Court vested with jurisdiction in matters arising under that law.’
32.The Court was further referred to the decision of the High Court in Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 and the decision of Gibb CJ which appears at p 494-495 where it was held that if the party claimed substantially the same relief on two different legal grounds then the facts on which relief is sought on each ground are identical there is but one matter. The majority in the Philip Morris case took the view that a “matter is a justiciable controversy which must either be constituted by or must include a claim arising under a federal law but which may also include another cause of action arising under another law provided it is attached to and is not severable from the former claim.” In the present case the Applicant’s Counsel argued that although the High Court had been dealing in the cases to which I have referred with State and Federal laws the same principles could be applied to the associated or accrued jurisdiction of another Federal Court namely the Federal Magistrates Court.
33.Counsel referred to further cases. The first was the matter of Burgundy Royale Investments v Westpac Banking Corporation (1987) 76 ALR 173 which dealt with a damages claim under the TPA and a claim in negligence, breach of warranty and breach of contract. It was held that the claims constituted a matter under the Act. At page 180 the Court stated:
‘In our opinion, the claims under the Act against the territory and the corporation and the common law claims together constitute a matter arising under the Act. Both the federal claims and the common law claims attach to the federal law claims so depend upon common transactions and facts that they arise out of a ‘common substratum of facts’”.
After reciting the statement of claim and particulars counsel for the applicant submitted having regard to the definition of ‘financial services’ in s.51AF of the TPA, as defined in s.4 of the TPA and s.12BA(1) of the ASIC Act, that none of the representations pleaded in the statement of claim make any allegations that the respondents were providing the applicant "with a financial product". As a consequence, it was submitted the alleged conduct of the respondents does not fall within subparagraph (a) of the definition of "financial service". It was submitted that for the respondents to succeed in the application, they must persuade the court that all of the representations referred to were "financial services" as defined or "otherwise supplied in relation to a financial product". It was submitted that the definition of "services" does not encompass misleading advice. The concept of misleading advice is dealt with in the definition of "conduct" in s.4 of the TPA and s.12BA(2) of the ASIC Act. It was submitted there is no reason to expand the definition of "services". Reliance was placed upon the Full Court of the Federal Court in the Queensland Aggregates case to which I have referred, where the court in that case at page 221 stated that the definition of "services" in s.4 of the TPA should not be given an expansive construction.
It was further submitted that the words "benefits, privileges or facilities" in the definition of "services" are not synonymous with advice or representation. The words are synonymous with an "advantage" or "gain to be provided or conferred". It was submitted that when read in this light, the definition of "services" is easily understood in those circumstances where a promoter offers units in a managed investment scheme, together with an offer of finance at below market rates.
By way of alternative submission, it was argued on behalf of the applicant that if the court were to find that the definition of "services" can include representations and/or misleading advice, it was submitted that not all of the alleged representations were in relation to a financial product. In particular, reference was made to what is now common ground, that the "margin loan recommendation is not a financial product".
When looked at as a whole, it was submitted by the applicants that the central issue in the proceeding is the advice given by the respondents for the applicant to enter into the margin loan contract and whether the respondents breached their agreement to provide continuing professional care and assistance to the applicant. The pleading, it was submitted, should not be confined in the manner submitted for and on behalf of the respondents.
The court was invited to rely upon the conclusions it reached in the decision of AGD Mining v Mahoney to which I have referred, and in particular reference was made to paragraph 42 of that decision which provides as follows:
“42.In my view the purpose of s.51AF is to ensure that where there is a misleading and deceptive conduct in relation to financial services which includes securities and obviously reliance upon those representations to the extent that misleading and deceptive conduct can be established then it is appropriate that the specific securities legislation and corporations law should apply rather than the TPA. I am not satisfied that the matter as presently pleaded should be necessarily confined in the manner submitted by Counsel for the Respondents as it seems to me that the purpose of s.51AF is to eliminate from the consideration of the Trade Practices legislation those matters which could clearly be regarded as the provision of financial services. This would include the issue of a prospectus and meetings designed to provide potential investors with a presentation that would encourage those investors to purchase shares in a particular company and/or otherwise take advantage of financial services then being offered in the context of those representations. At present I do not believe that the pleadings should be so restricted and accordingly I find the Court does have jurisdiction to hear the claim.”
It was further submitted by the applicant that if, after hearing the case, the court is satisfied that the alleged representations are financial services and that s.51AF of the TPA does apply, then the court could still apply the misleading and deceptive conduct provisions of the Corporations Act or otherwise decide the matter pursuant to its accrued jurisdiction.
The applicant during the course of submissions had further submitted that if the court were to decide that there is no jurisdiction, then it does have the power to transfer the application to the Federal Court. I had raised with counsel for the respondents the issue that s.39 of the Federal Magistrates Court Act was not in existence at the time when authorities to which the respondents referred had been decided. It was in that context that counsel for the applicant during the course of his submissions argued that the opportunity to transfer arising out of the statute which had created this court is a matter which the court is able to consider, and in particular when considering the issue of transfer from the Federal Magistrates Court to the Federal Court, this court, amongst other factors, was entitled to consider pursuant to s.39(1)(d) the interests of the administration of justice. It was submitted that in the circumstances it would be in the interests of the administration of justice if the court were to find it did not have jurisdiction, for it to exercise the power it has under s.39 of the Federal Magistrates Court Act and transfer the matter to the Federal Court. As indicated earlier, the respondents' contention in relation to transfer was simply that once jurisdiction is found not to vest in this court, then this court has very limited powers in relation to the application and those powers are restricted to either dismissing or striking out the application and then exercising the inherent powers of the court to make an order in relation to costs.
Reasoning
In my view, it is appropriate in matters of this kind to look at the statement of claim currently before the court and the supporting affidavit from the applicant. During the course of submissions I invited both counsel to consider the extent to which this court ought to rely upon the pleadings and affidavit material which, in broad terms, relates to the issue of retainer by the applicant of the respondents. When one looks at the terms of the retainer set out in the particulars subjoined to paragraph 6 of the statement of claim to which I have already referred, it is clear to me that on a proper reading of the material the allegations raise at least a general assertion that there was what might be described as a very broad retainer, not confined merely to what might be described as the provision of financial services and specifically the provision of a financial product as defined. The main thrust of the claim and the prayer for relief set out in the statement of claim and supported in the affidavit of the applicant relates to the investment of the applicant in what is described in the material as the ‘margin loan’ contract.
It is common ground that the margin loan contract could not properly be regarded as a financial product. It follows therefore that it could not be properly regarded in the circumstances as the provision of a financial service. To that extent, the representations alleged in relation to the margin loan contract referred to as the margin loan recommendation constitutes a discrete issue which would not be subject to jurisdictional restriction by the operation of s.51AF of the TPA. It is clearly not a financial product and the definition of financial service would therefore not apply. I am further satisfied that the alleged representation and recommendation concerning the margin loan contract could not otherwise be regarded as falling within the meaning attributed to financial services under s.12BA(1)(b) of the ASIC Act;
I am satisfied it could not be regarded as otherwise ‘supplied’ in relation to a financial product. That being so, it follows that the court does have jurisdiction to hear and determine the application as pleaded.
I further accept that if ultimately upon a hearing and determination of the issues between the party, the court upon consideration of the material was minded to conclude that it did not have jurisdiction to hear part of the claim on the basis that it did fall within the definition of financial services and that s.51AF(2) of the TPA applied, that the court could still proceed to consider the alternative pleadings including the alleged breach of fiduciary duty and including otherwise the failure to exercise due care or what might be referred to as negligence. Further, it may well be arguable that other remedies available to the applicant can be heard and determined notwithstanding a finding ultimately that the court does not have jurisdiction in relation to what it may find to be the provision of financial services.
In any event, I am satisfied that as the matter is currently pleaded and on the material before me, that it is appropriate that I find that the court does indeed have jurisdiction in this matter. I otherwise note in passing the reference to what the court had said in paragraph 42 of Mahoney's case. The remarks made by the court in that paragraph to some extent apply to the current application. The purpose and intent of s.51AF of the TPA is to provide a facility whereby those claims which may truly be said to be claims arising in relation to financial services can be dealt with by the discrete legislation to which I have already referred. There is a clear desirability for financial services to be dealt with in that manner as often there are associated issues which arise under the ASIC legislation. In the present case, as already indicated, it is my view that the claim does not fall within the definition of financial services and hence the court does have jurisdiction.
The case of Henderson v Pioneer Homes, whilst providing some indication of the general nature of the issue of the supply of services, cannot readily be applied to the present case. Indeed, I note that the court, in particular Franki J in that case in the passage to which
I referred earlier in this judgment, notes that the respondents did not seriously argue that the transactions to which the advertisements were directed were not statements made in connection with the promotion by any means of the supply of services.
Likewise, the court is not particularly assisted by the decision of the Full Court of the Federal Court in Queensland Aggregates case. That case relied upon the special circumstances and facts peculiar to that particular application. Those facts, which I summarised earlier in this decision, are clearly distinguishable from the current application, and whilst the discussion of the meaning of services and in particular the meaning of benefits or privileges within the definition of services is relevant, I am not satisfied that the decision of the court in that case would apply to the facts and circumstances of the present case in a way which would enable me to conclude that the current application could be said to be one which falls within the definition of services and that the court would not have jurisdiction. The Full Court in the Queensland Aggregates case stated at page 221 the following:
“In the view we take, the sweepingly general provisions of the definition of services contained in s 4 of the Act should not be given an expansive construction….”
To accede to the submissions made in this court for and on behalf of the respondents would be to provide a far greater expansive definition of services and financial services than that which is intended in the respective provisions of the legislation to which I have referred.
For the reasons given, the appropriate decision of the court is that the application by the respondents to dismiss the substantive application for want of jurisdiction should be dismissed and that the respondents should pay the applicant's costs of and incidental to this preliminary application.
I certify that the preceding forty-seven (47) paragraphs are a true copy of the reasons for judgment of McInnis FM
Associate:
Date: 19 November 2003
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