Beck v Spalla

Federal Court of Australia (Full Court)|2001-08-13|Before: French J, Kenny JJ

REASONS FOR JUDGMENT THE COURT: 1 The appellants, Mr Beck and Mr Home, seek leave to appeal and if leave is granted, appeal against the decision of a Judge of this Court (French J) refusing to strike out the application of the respondents, Mr Spalla and Mr Still, on the basis that this Court had no jurisdiction to hear and determine the claim that the respondents suffered damage as a result of a malicious prosecution application brought against them by an indictment filed in the County Court of Victoria on 17 July 2001. 2 The judgment appealed from dealt with a large number of pleading issues and resulted in leave being given to the respondents to reframe a substituted statement of claim. These matters are no longer in dispute between the parties. Likewise the judgment dealt with another proceeding brought by, inter alia, Irlmond Pty Ltd (Receiver and Managers appointed; in liquidation) (ACN 006 314 870). The appeal in those proceedings is also not before us. 3 To understand the issues which arise in the appeal it is necessary to set out briefly the chronology of the proceedings to which the present appeal relates. 4 On 17 October 2002 proceedings were commenced by the respondents against the appellants. Those proceedings alleged that the respondents had been the victims of a malicious prosecution of offences under the Commonwealth Crimes Act 1900 (Cth). At the time the proceedings were commenced, the Australian Securities & Investments Commission ("ASIC") was not a party to them. In December 2003, a further amended statement of claim was filed which, inter alia, raised for the first time claims of malicious prosecution against ASIC. ASIC, once joined, filed a defence claiming immunity from suit, relying upon s 246 of the Australian Securities and Investments Commission Act 2001 (Cth) ("the ASIC Act") which relevantly provides that: "(1) None of the following: … (a) ASIC … is liable to an action or other proceeding for damages for or in relation to an act done or omitted in good faith in performance or purported performance of any function, or in exercise or purported exercise of any power, conferred or expressed to be conferred by or under the corporations legislation, or a prescribed law of the Commonwealth, a State or a Territory." 5 The allegations initially pleaded were, in essence, based upon a report made under s 422 of the Corporations (Victoria) Act 1990 (Vic) ("the Victorian Corporations Law") by the respondents who were at that time the receivers of Irlmond Pty Ltd (in receivership) ("Irlmond") and APS (Wholesale) Pty Ltd (in receivership) ("APS"). That report stated that the appellants were of the view that various acts of the respondents constituted breaches of various sections of the Victorian Corporations Law and, at least impliedly, recommended that they be prosecuted, inter alia, for false accounting. Mr Spalla was a director of both Irlmond and APS and Mr Still was company secretary of both companies. 6 Against ASIC, it was alleged that it had commenced an investigation into the matters the subject of the report but had formed no independent belief that offences had been committed for which an indictment might be laid and that it and its officers acted maliciously in that they were not aware of evidence that justified the respondents being charged. 7 It was alleged that, ultimately, a prosecution of the respondents was commenced on 17 July 2001. The prosecution was subsequently unsuccessful and an acquittal was directed. 8 The present appeal had its origin in a notice of motion filed by the appellants alleging that the Court had no jurisdiction. The matter being interlocutory, leave to appeal is required.

The judgment appealed from 9 The learned primary Judge dismissed the motion. His Honour's reasons are brief. In his Honour's view, the cause of action for malicious prosecution arose under a law of the Commonwealth. His Honour said: "The construction and application of the relevant provisions of the Corporations Law as applied by the Corporations Act 2001 are a necessary part of that cause of action in malicious prosecution.'" Accordingly, his Honour found that jurisdiction existed by reason of s 39B(1A)(c) of the Judiciary Act 1903 (Cth). 10 Although the respondents relied upon the view expressed by his Honour, they additionally filed a "Proposed Notice of Contention" relying upon other grounds. In that document, the respondents said, inter alia: "1. ASIC is a body corporate established by and owing its existence to the Australian Securities and Investments Commission Act 1989 a federal statute, whereby the matter arises under that federal Act. 2. ASIC attracts the Court's jurisdiction by filing a defence dated 30 January 2004 in which (paragraphs 154 and 155) it invokes its immunity under section 264 of the Australian Securities and Investments Commission Act 2001". After his Honour's judgment, but before the hearing of the appeal, the case against ASIC was settled. The settlement is suggested to have significance for the appeal.

The appellants' submissions 11 For the appellants it was submitted that at the time the proceedings for malicious prosecution were commenced, this Court lacked jurisdiction to hear and determine them because the claim was wholly based upon non-federal law. It was submitted that jurisdiction could not be attracted in an "ambulatory way" by the invocation by ASIC of a federal immunity which, the appellants conceded, fell within s 39B(1A)(c). 12 Alternatively, it was submitted that on the settlement of the proceedings against ASIC, any federal jurisdiction conferred by the federal immunity claim was lost with the consequence that, at least now, there was no jurisdiction.

The respondents' submissions 13 For the respondents it was submitted that jurisdiction was attracted when ASIC filed its defence claiming immunity and that jurisdiction carried with it, as accrued jurisdiction, the jurisdiction of the Court to hear the entire controversy between the parties. It was submitted that any argument to the contrary was foreclosed by the decision of the High Court in Elders Limited v Swinbank, HCA Transcript, 13 August 2001, reversing the decision of a Full Court of this Court reported at (2000) 96 FCR 303. 14 Alternatively, it was submitted that since ASIC's title to be sued was dependent upon the ASIC Act, then the Court had jurisdiction to hear any proceeding by or against it because a matter arose under a Commonwealth law. 15 As to the appellants' alternative argument, it was submitted that the settlement of the proceedings against ASIC would be no different from a curial decision adverse to ASIC on its defence or an abandonment by it of that defence, in that once federal jurisdiction was attracted the matter retained its federal character.

The appellants' first submission 16 It might be thought that the appellants' first submission was foreclosed to it by what was said in Felton v Mulligan (1971) 124 CLR 367. It was held that by reason of a defence filed raising the effect of a provision in the Matrimonial Causes Act 1959-1966 (Cth), the matter arose under a law of the Commonwealth notwithstanding that the case could have been decided without deciding the effect of the federal Act. Reference may also be made to National Union of Workers v Davids Distribution Pty Ltd (1999) 91 FCR 513. 17 However, it was said that Felton v Mulligan was distinguishable because at the time the federal defence was filed in that case, the proceedings were within the jurisdiction of the Supreme Court of New South Wales; that is to say, at the time when the only matter pleaded was a controversy depending upon state law. No question arose whether the Court had jurisdiction at the time the defence was filed. 18 It might also be thought that the submission is in conflict with Westpac Banking Corporation v Patterson (1999) 95 FCR 59 where it was held by a Full Court of this Court that the Federal Court could acquire jurisdiction in a matter arising under a law of the Commonwealth once a cross-claim has been filed which was founded upon that Commonwealth legislation. However, it was submitted, that this case too could be distinguished in that there was a difference between the filing of a defence on the one hand, and the filing of a cross-claim on the other. This was said to be because the filing of a cross-claim itself was the institution of a civil proceeding (cf Cheney v Spooner (1929) 41 CLR 532 at 536-7 cited in Westpac Corporation). 19 While it is true that the filing of a cross-claim can be seen as the institution of a new proceeding, it is far from clear why that would distinguish the case of a cross-claim from the case where a defence was filed. After all, the defence is integral to the definition of the controversy between the parties that constitutes the "matter". A cross-claim could be brought separately from the original proceeding. 20 For present purposes we see no need to consider in any depth the principles underlying federal jurisdiction, because the present question is resolved authoritatively by what was said by the High Court in Elders. 21 We would preface our comments on Elders by noting that in re Wakim; ex parte McNally (1999) 198 CLR 511 at [135] Gummow and Hayne JJ said that it: "must now be regarded as established that the jurisdiction of a federal court having jurisdiction in a matter arising under a law made by the Parliament is not 'restricted to the determination of the federal claim or cause of action in the proceeding, but extend[s] beyond that to the litigious or justiciable controversy between parties of which the federal claim or cause of action forms part'". 22 In the same case their Honours noted that the "central task" was to identify the justiciable controversy. Of that task their Honours said at [140]: "What is a single controversy 'depends on what the parties have done, the relationship between or among them and the laws which attach rights or liabilities to their conduct and relationships.'" 23 The question in Elders was whether the respondents could have leave to file a defence raising two aspects of the Insurance Contracts Act 1984 (Cth) where the original claim relied upon rights of indemnity under an insurance contract, a matter attracting no federal jurisdiction. The Full Court of this Court was of the view that leave should not be granted to permit the defence to be filed. The Court said at [40]: "Federal jurisdiction not having already been enlivened, there is no basis upon which the Court has any authority to exercise the power of amendment under O 13, r 2(2) and (6). It is not to the point that, if this Court's original jurisdiction is properly enlivened and application is then made to amend the proceedings to include a non-federal claim, one of the matters governing whether such an amendment should be allowed is whether the non-federal claim forms part of the entire controversy of which the federal claim is also a part. It is a fallacy to say, as the applicants have, that the institution of any proceeding in this Court, though confined in express terms to non-federal claims, necessarily invokes this Court's original jurisdiction to determine any federal claim not explicitly raised in the proceeding, just because it might be found, on analysis, to be part of the whole controversy of which the non-federal claims explicitly raised in the proceedings are themselves part." 24 The High Court granted leave to appeal and allowed the appeal. The reasons of the Court are not reported, but the transcript shows that, in discussing the orders to be made, Gleeson CJ indicated that the Court would allow the appeal because it wished to make it clear that it took a different view from the Federal Court on the jurisdictional questions. Speaking for the Court (Gleeson CJ, Gaudron, McHugh, Kirby and Hayne JJ), the Chief Justice said: "The Court is of the opinion that the Federal Court of Australia had jurisdiction to hear and determine the application for leave to amend made by notice of motion…and that if the amendment was granted, the Federal Court would have jurisdiction to hear and determine the whole matter, including the application for leave to appeal against the decision of [the primary Judge]." 25 In our view it follows that the appellants' first submission must be rejected. Notwithstanding that at the time the proceedings were commenced the controversy between the parties had not revealed a federal matter on the pleadings (the immunity from suit arising from s 246 was at that stage an inchoate part of the controversy) once the defence was filed revealing the federal question the jurisdiction of the Court was attracted and the Court was obliged to hear the whole matter.

The appellants' second submission This submission can be disposed of shortly. It is well established that when the Federal Court has jurisdiction to determine a federal matter, it has authority to determine the whole controversy and not merely that part of it which attracted federal jurisdiction: Moorgate Tobacco Co Ltd v Philip Morris Ltd (1980) 145 CLR457 at 472. It is equally well accepted that if the federal question is decided adversely, is struck out, or is found not necessary to be decided the matter does not cease to be in the jurisdiction of the Court: Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212; Unilan Holdings Pty Ltd v Kerin (1993) 44 FCR 481 and Moorgate at 476 (see generally, the article by Allsop J: "Federal Jurisdiction and the Jurisdiction of the Federal Court of Australia in 2002", (2002) 23 Australian Bar Review 29 at 41 ff). 26 It is difficult to see why there should be any different result merely because the federal part of the matter was settled, assuming that the federal claim is not colourable. There is no suggestion in the present case that this was so. Indeed a different result would give effect to a policy of discouraging settlement and could lead to proceedings having to be terminated when part heard because the federal claim was resolved.

The respondents' alternate contention 27 In view of the conclusions we have reached it is unnecessary for us to consider the alternative contention based upon American authority.

Conclusion 28 We accordingly grant leave to the appellants to appeal, but dismiss the appeal with costs. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Hill, Finn & Kenny.

Dated: 13 May 2005 Counsel for the appellants: M Wyles

Solicitor for the respondents: Home Wilkinson Lowry

Crimes Act 1900(Cth)

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