Yao v Zhang - [2007] FMCA 1340

FEDERAL MAGISTRATES COURT OF AUSTRALIA

YAO v ZHANG & ANOR

[2007] FMCA 1340

TRADE PRACTICES – Practice and procedure – transfer of proceedings to enable matter to be transferred to State inferior court – doubtful Trade Practices claim – inability to transfer directly to State Magistrates Court.

Trade Practices Act; ss 51A, 51AC, 52, 75B, 82, 87
Federal Magistrates Court Act 1999; s 39
Federal Magistrates Court Rules 2001; r 8

Stewart v Pegasus Investments and Holdings Pty Ltd (2004) FMCA 712
McIntosh v National Australia Bank (1988) 17 FCR 482

Applicant:

LI SAN YAO

Respondent:

SHUYING ZHANG AND YI SUO

File number:

BRG 826 of 2005

Judgment of:

WILSON FM

Hearing date:

24 July 2007

Date of last submission:

24 July 2007

Delivered at:

Brisbane

Delivered on:

24 July 2007

REPRESENTATION

Counsel for the Applicant:

Ms Zande

Solicitors for the Applicant:

Chais Law Practice

Counsel for the Respondents:

N/A

The Respondents in person:

Shuying Zhang and Yi Suo

ORDERS

Pursuant to s.39(1) of the Federal Magistrates Act 1999, Federal Magistrates Court proceedings number 826 of 2005 be transferred to the Federal Court of Australia.
Costs are reserved.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
BRISBANE

BRG 826 of 2005

LIN SAN YAO

Applicant

And

SHUYING ZHANG AND YI SUO

Respondent

REASONS FOR JUDGMENT

(Settled extempore)

By application filed 20 December 2005, the applicant sought relief against the respondents for “damages in the amount of $41,421.86”, together with interest and costs. The cause or causes of action pursuant to which such damages were claimed were not specified.
By amended application filed by leave on 5 September 2006, the applicant sought damages or compensation in the amount of $41,421.86 against the respondents pursuant to sections 51A, 51AC, 52, 75B, 82 and/or 87 of the Trade Practices Act (“the Act”). Alternatively, compensation was sought against PYG International Pty Ltd pursuant to the Act. The latter claim was not capable of being pursued. PYG International Pty Ltd was not joined as a party to the action and, indeed, could not have been, because it was deregistered in 2002.
The claim against the first and second respondents for damages could potentially have either been pursuant to ss.82 or 87 of the Act for conduct contravening ss.51AC or 52 of the Act. That conduct may have been conduct by PYG International Pty Ltd for which the named respondents could be made liable as accessories pursuant to s.75B of the Act. No basis for liability of the respondents personally was identified. None of the contravening conduct was said to have occurred over the telephone or by mail in Australia.
During the first day of the hearing, a number of difficulties with the applicant’s case emerged. Difficulties have also arisen because the applicant is a Chinese national who neither speaks nor reads the English language. His solicitor is bi-lingual, but evidence of the applicant was required to be given through an interpreter.
Neither of the respondents is fluent in the English language, although the second-named respondent speaks a little English. The first and second respondents have considerable difficulty in following the proceedings conducted in English and required the assistance of the interpreter to explain the proceedings to them.
Further, neither respondent has any familiarity with the legal system and with the conduct of litigation in this, or, indeed, any other court. That places them at a considerable forensic disadvantage but that, of itself, is, of course, no reason for precluding the applicant from litigating his action.
Procedural difficulties were encountered in the cross-examination of the applicant, given that both the parties cross-examining, (on some occasions both respondents at the same time) and the applicant were conversing in Mandarin Chinese and it became very difficult for the interpreter to interpret for the court the questions and answers that were put to the witness and responded to. It was evident that a full trial of these proceedings would take a considerable amount of time.
I have said that a number of difficulties emerged in the applicant’s case. The first of these was that, on the applicant’s own evidence, he made an agreement with the respondents personally. The respondents, it seems, by an affidavit filed by them on 4 August 2006, assert that the agreement was made between the applicant’s company and their company, PYG International Pty Ltd. The applicant’s company was not a party to the proceedings. Therefore, acceptance of the respondents’ evidence about the contracting party on their side of the negotiations may have led to difficulties for the applicant in pursuing his claim. Acceptance of the applicant’s evidence made reliance on a cause of action under the Trade Practices Act questionable.
None of those matters has, as yet, been resolved because the present application was made during the course of the applicant’s cross-examination. When I raised with counsel for the applicant what was alleged to be the basis of the claim under the Act which was said to invoke the jurisdiction of this court, reliance was placed, particularly, on s.51AC of the Act which deals with unconscionable conduct in small business transactions. It was said that whether the claim was put under s.51AC or 52 of the Act, the applicant’s case relied on conduct of the respondents, either on their own behalf, or as agents for PYG International Pty Ltd, that occurred after the contract had been concluded.
In summary, the applicant’s case became one of the respondents being appointed the applicant’s agent to sell timber products in Australia, having sold those products on the applicant’s behalf and having failed to account for the moneys received by them. It was said that this conduct fell within a number of the subparagraphs of s.51AC(4) of the Act.
It is doubtful, in my view, that conduct amounting to a breach of contract simpliciter (as this case appeared to be) would constitute “unconscionable conduct”, as that term is described in s.51AC of the Act. It is unnecessary for me to decide that issue finally, and I should not do so because of the orders I propose to make.
The applicant sensibly realised that there was a real risk that, if the trial proceeded to a conclusion after many days of evidence and, no doubt, the incurring of considerable legal costs, although the merits of the case may lie with the applicant, he faced the risk of losing the action because this court did not have jurisdiction to deal with his claim. In framing the matter in that way, I certainly do not intend to conclude that the merits of the action do, in fact, lie with the applicant, or, indeed, to express any conclusions on the disputed issues of fact in the case.
Having faced the possibility that there was a risk that the court did not have jurisdiction, the applicant has applied to have the matter transferred to the Federal Court of Australia. It seems to me that this is a matter that is more properly to be dealt with in the State Magistrates Court which has monetary jurisdiction to deal with the applicant’s claim and which does not confront the jurisdictional difficulties attending this court and the Federal Court, which has only ancillary jurisdiction to deal with claims for damages for breach of contract, in a claim otherwise brought within its jurisdiction.
The difficulty is that it seems to be that neither under the Federal Magistrates Act 1999 nor under the Federal Magistrates Rules 2001 can I transfer proceedings directly to the State Magistrates Court. It seems to me that there are then two alternatives. The first and bluntest alternative is to simply dismiss the proceedings. However, I do not consider that I should do so because I am not yet in a position to make findings of fact as to the contracting parties, nor am I able to make findings of fact as to the conduct of the respondents and whether that conduct arguably falls within s.51AC of the Act, assuming that post-contractual conduct can be attacked in that way.
A further difficulty is, if the proceedings are simply dismissed, the applicant will be statute barred in bringing further proceedings against the respondents. The relevant contract was made in 1999 and, as I understand the material, was breached in about 2002. These proceedings were, as I have said, commenced in 2005.
The alternative is to have the matter find its way to the State Magistrates Court by a rather circuitous means. That would involve transferring these proceedings to the Federal Court, and that court transferring the proceedings to the State Supreme Court under the Jurisdiction of Courts (Cross-Vesting) Act 1987. Once in the Supreme Court, having regard to the monetary claim, the proceedings could be transferred down to the State Magistrates Court.
The applicant is, no doubt, aware that such a procedure is risky because, at any stage of the process, another court may take the view either that it does not have jurisdiction, in the case of the Federal Court, or that it should not transfer the proceedings to the court requested of it. Nevertheless, that seems to me the only way to preserve the applicant’s cause of action and prevent the duplication of legal costs insofar as the parties have prepared affidavit material outlining their cases to date.
Section 39 of the Federal Magistrates Act allows me to transfer proceedings pending in this court to the Federal Court. Section 39(3) requires me to have regard to a number of matters in determining whether to transfer these proceedings. There are no proceedings in respect of an associated matter pending in the Federal Court. Undoubtedly, the resources of this court are sufficient to hear and determine this proceeding, if this court has jurisdiction to do so.
I am also required to consider the Rules of Court. The relevant rule is rule 8 of the Federal Magistrates Rules. It provides that a party in the proceedings may apply to have the proceedings heard in the Federal Court, or the court may do so on its own motion. Rule 8.02(4) sets out a number of relevant factors. It cannot be said that these proceedings involve questions of general importance such that it would be desirable for there to be a decision of the Federal Court. The transfer to the Federal Court is solely for the purpose of allowing the proceedings to find their way to the State Magistrates Court.
To that end, it cannot be said that the case would be heard more quickly or less expensively in the Federal Court, but certainly, if the case was heard in the State Magistrates Court, it is likely to be heard at commensurate cost with proceedings in this court.
A number of authorities have considered whether or not there should be a transfer of proceedings if there is no jurisdiction in this court to entertain the claim, or if there is doubt as to that jurisdiction. These matters were considered by Phipps FM in Stewart v Pegasus Investments and Holdings Pty Ltd (2004) FMCA 712. His Honour referred to a number of authorities, including the decision of Gummow J in the Federal Court in McIntosh v National Australia Bank (1988) 17 FCR 482. Gummow J considered it anomalous to suggest that it was in the interests of justice to order the transfer of proceedings where there was a real doubt as to whether there was jurisdiction.
However, by reference to the other authorities referred to by Phipps FM, provided the court’s jurisdiction is regularly invoked, as it was in this case by the filing of the application and the amended application, then, even if there is doubt as to whether the court has the necessary jurisdiction to determine the claim, it certainly retains the discretion as to whether to transfer the proceedings to another court so as to avoid, or assist in avoiding, potential jurisdictional problems.
An additional complication in the present case is that, in my view, the jurisdiction of the Federal Court would be subject to the same problems as the jurisdiction of this court. That is, if there is not a genuine or bona fide or reasonably arguable trade practices claim, the Federal Court would not have jurisdiction either. That is why, as I said earlier, I prefer not to make any determination on that issue.
A copy of these reasons will be available to the Federal Court. I make it plain that the only reason these proceedings are transferred to that court is to enable it, in turn, to transfer the proceedings to the State courts so that the matter may be properly tried in the State Magistrates Court. That should be done in the interests of justice because, if these proceedings are terminated now, the applicant will not be able to re-litigate his claim because of the effluxion of time.
In order to make considered findings on the question of jurisdiction, it seems to me that it would be necessary to hear all of the evidence which is likely to occupy many days and cause both parties to incur irrecoverable costs. In the circumstances, I will order that these proceedings be transferred to the Federal Court of Australia, and I reserve each party’s costs.

I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Wilson FM

Associate: Lynnette Chin

Date: 9 August 2007