Elders Ltd v Swinbank

Federal Court of Australia|2000-02-04|Before: Mansfield J, Marshall JJ

WHERE MADE: BRISBANE (HEARD IN ADELAIDE) (VIA VIDEO LINK TO ADELAIDE & MELBOURNE)

Leave be granted to appeal against the declarations and orders pronounced by the Honourable Justice Mansfield in this proceeding on 16 June 1999, such leave being limited to whether this Court had jurisdiction to hear and determine the proceeding or any part thereof.

The appeal be allowed on the ground that this Court has no jurisdiction to hear and determine the proceeding or any part thereof.

The entire proceeding be stayed for want of jurisdiction.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN: ELDERS LIMITED, DEREL ERF LIMITED AND FOSTERS BREWING GROUP LIMITED

AND: CHRISTOPHER MARK SWINBANK, GREAT LAKES INSURANCE (UK) PLC, THE GAN INCENDIE ACCIDENTS COMPAGNIE FRANCAISE D'ASSURANCES ET DE REASSURANCES INCENDIE ACCIDENTS ET RISQUE DIVERS, ROYAL INSURANCE (UK) LIMITED, LIBERTY MUTUAL INSURANCE COMPANY (MASSACHUSETTS) LIMITED, SCOTTISH LION INSURANCE COMPANY LIMITED, SPHERE DRAKE UNDERWRITING MANAGEMENT LIMITED, LONDON ASSURANCE AND TRINITY INSURANCE COMPANY LIMITED

PLACE: BRISBANE (HEARD IN ADELAIDE) (VIA VIDEO LINK TO ADELAIDE & MELBOURNE)

1 In a reserved judgment given after a three day hearing, Mansfield J gave detailed reasons for determining two questions pursuant to O 29 r 2 the Federal Court Rules as to the liability of the respondent underwriters to indemnify the applicants pursuant to a certain contract of insurance. If the questions had been answered in favour of the respondent underwriters, that would have resulted in the dismissal of the applicants' claim and the avoidance of a lengthy trial. In the event, his Honour determined the questions favourably to the applicants and, but for the delivery subsequent to his Honour's judgment, of the decision by the High Court in Re Wakim; Ex parte McNally (1999) 163 ALR 270; [1999] HCA 27, he would have proceeded to determine the outstanding issues in the action. 2 It is because these outstanding issues remained that the determinations his Honour made on the two separate issues were interlocutory. The respondents have applied for leave to appeal them on a number of grounds. This Court is asked to deal with the respondents' motion only in so far as it seeks leave to appeal on the ground that his Honour did not have jurisdiction to deal with the proceeding. The respondents' application provoked an application by the applicants for leave to amend the statement of claim to raise issues under the Insurance Contracts Act 1984 (Cth). 3 The question of this Court's jurisdiction to entertain the applicants' action was not an issue in the proceedings before his Honour. It is not referred to in the originating application (though it should have been: O 4 r 1 and Form 5) or in the pleadings; nor is it referred to by his Honour in his reasons. Subject to the correctness of the contention advanced by the applicants in support of their motion for leave to amend the statement of claim that a claim under the Insurance Contracts Act has been from the outset an issue in the action as originally framed, it is clear enough that the Court only had jurisdiction to deal with the applicants' action by force of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (SA) and, in view of the decision in Re Wakim, this Court must now be taken never to have had jurisdiction to entertain the action. 4 At the forefront of the applicants' submissions was the contention that even without the amendment sought to the statement of claim, the applicants' entitlement to interest under s 57 the Insurance Contracts Act was raised as an issue in the action from the outset, in a way sufficient to require the Court to make a determination on it. Accordingly, and quite apart from the cross-vesting legislation, it was said this Court has always had jurisdiction under s 39B(1A) the Judiciary Act 1903 (Cth) to determine the whole action. It is common ground between the parties that this claim to interest is one that arises under a law of the Parliament and so is within this Court's original jurisdiction under s 39B(1A)(c) the Judiciary Act; it is also common ground (and there is no reason to doubt) that if such a claim had been expressly made in the action from the outset, this Court would have had jurisdiction to determine not only that claim, but all the non-federal claims that are made in the statement of claim, in the exercise of the Court's accrued jurisdiction. 5 The applicants also want to amend the statement of claim to raise a new claim to recover the damages they are already seeking for non-payment of moneys said to be payable under the contract of insurance on the basis of a breach by the respondents of their obligation of good faith, implied in the contract by force of s 13 the Insurance Contracts Act. Argument, however, focused on the claim for interest under s 57 of that Act. 6 By s 19 the Federal Court of Australia Act 1976 (Cth), this Court has such original jurisdiction as is vested in it by laws made by the Commonwealth Parliament. One such law is s 39B(1A)(c) the Judiciary Act, which confers jurisdiction on this Court "in any matter … arising under any laws made by the Parliament …". The question for decision here is when has a federal claim been sufficiently raised in litigation to enable it to be said that this Court's original jurisdiction under this particular provision has been attracted. 7 It was said in Fejo v Northern Territory (1998) 195 CLR 96 at 120; [1998] HCA 58 at [21] that the scope of the phrase "a matter arising under a law of the Parliament", as a statement of this Court's jurisdiction, can be gathered from LNC Industries Ltd v BMW (Australia) Ltd (1983) 151 CLR 575 at 581 and Re McJannet; Ex parte AWU of Employees (Q) [No 2] (1997) 189 CLR 654 at 656 - 657. Both turned on the meaning of s 76(ii) the Constitution in so far as it empowers the Parliament to make laws conferring original jurisdiction on the High Court "in any matter … arising under laws made by the Parliament". But the similarity of language between s 76(ii) the Constitution and s 39B(1A)(c) the Judiciary Act suggests a legislative intention "to confer upon the Federal Court the same potential original jurisdiction as might be conferred upon the High Court of Australia …": Transport Workers Union v Lee (1998) 84 FCR 60 at 65. 8 In the LNC case, a party who failed in an action on a contract in the New South Wales Supreme Court was held not entitled to appeal the decision to the Privy Council by force of s 39(2) the Judiciary Act, which invests the New South Wales Supreme Court with federal jurisdiction in all matters in which the High Court has original jurisdiction, but excludes decisions involving the exercise of that jurisdiction from appellate review by the Privy Council. The claimant there sued on a contract under which it had transferred to the respondent portion of the quota of vehicles that it was licensed to import under administrative arrangements implemented under the Customs (Import Licensing) Regulations. The claimant contended that the respondent was bound by the contract to hold on trust for it part of the respondent's own quotas granted for years subsequent to the years in respect of which the claimant had transferred to the respondent part of the claimant's quotas. The Court rejected the claimant's argument that it was seeking only to enforce rights that owed their existence to the contract between the parties. It held (at 582) that:

"… In substance the plaintiff's primary claim is to the benefit of rights and privileges under the Regulations. In these circumstances the matter involved in the action arose under laws made by the Parliament. The Supreme Court was therefore exercising federal jurisdiction in dealing with it and it follows that s 39(2)(a) of the Judiciary Act precludes an appeal to Her Majesty in Council."

"It is true to say that a matter does not arise under a law made by the Parliament merely because the interpretation of the law is involved: Felton v Mulligan. On the other hand, a matter may arise under a law of the Parliament although the interpretation or validity of the law is not involved: R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett. The conclusion reached by Latham CJ in that case, and stated in a passage that has often been cited with approval, is 'that a matter may properly be said to arise under a federal law if the right or duty in question in the matter owes its existence to federal law or depends upon federal law for its enforcement, whether or not the determination of the controversy involves the interpretation (or validity) of the law'. Equally, there is a matter arising under a federal law if the source of a defence which asserts that the defendant is immune from the liability or obligation alleged against him is a law of the Commonwealth: Felton v Mulligan.

When it is said that a matter will arise under a law of the Parliament only if the right or duty in question in the matter owes its existence to a law of the Parliament that does not mean that the question depends on the form of the relief sought and on whether that relief depends on federal law. A claim for damages for breach or for specific performance of a contract, or a claim for relief for breach of trust, is a claim for relief of a kind which is available under State law, but if the contract or trust is in respect of a right or property which is the creation of federal law, the claim arises under federal law. The subject matter of the contract or trust in such a case exists as a result of the federal law."

10 In National Union of Workers v Davids Distribution Pty Ltd (1999) 165 ALR 595; [1999] FCA 1109, one of the issues in contempt proceedings in the Supreme Court brought against the defendants for breach of a common law anti-picketing injunction was whether this Court had jurisdiction in the matter. The defendants argued that a provision of the Workplace Relations Act 1996 of the Commonwealth made lawful the conduct the subject of the injunction. This Court said at 599:

"[16] … it is well settled that the term 'a matter arising under' an Act is not confined to a case in which a cause of action depends on a right conferred by the relevant Act. The word 'matter' has been described as referring to a 'justiciable controversy' between the parties: see per Gummow and Hayne JJ in Abebe v The Commonwealth (1999) 162 ALR 1 at [140]. As Callinan J said in the same case at [276], the word 'means the subject matter for determination in a legal proceeding, and not necessarily the legal proceeding itself in exactly the form in which it was first presented'. …"

"[20] A matter does not arise under an Act simply because a defence is available under that Act. Unless and until the defence is raised by a defendant, the defence is not an issue in the case; it is not part of 'the subject matter for determination'. …"

"… none of the defendants in the Supreme Court principal proceeding raised s 170MT of the Workplace Relations Act as a defence to that proceeding, at least not at any relevant time … counsel did not raise this as a defence to the principal proceeding for permanent relief or as a basis for contending the Supreme Court should set aside the interlocutory orders it had already made. … If it was applicable, the section afforded a basis for an application to set aside the orders and for a defence to the claim for permanent relief; unless and until it was used in that way, the section had no relevance. It did not override the orders that had already been made or, until properly invoked, turn the proceeding into 'a matter arising under' the Workplace Relations Act …"

13 To the same effect is this Court's decision in Westpac Banking Corporation v Paterson [1999] FCA 1609. These decisions cannot, however, be taken to establish that it is only by a clear claim to or in respect of a right that exists by force of federal law made in a pleading that a matter will have arisen under such a law so as to attract the jurisdiction of this Court. 14 In Moorgate Tobacco Co Ltd v Philip Morris Ltd (1980) 145 CLR 457 at 476, Stephen, Mason, Aickin and Wilson JJ said:

"… the parties were in dispute as to when a matter 'arises' within the meaning of s 76(ii) [the Constitution] so as to attract the exercise of federal jurisdiction. The cases establish that federal jurisdiction is attracted if the right or duty based in a federal statute is directly asserted by the plaintiff or defendant, but not if the federal question arises only in some incidental fashion. So too federal jurisdiction is attracted if the court finds it necessary to decide whether or not a right or duty based in federal law exists, even if that matter has not been pleaded by the parties. But the converse is not true. If a federal matter is raised on the pleadings federal jurisdiction is exercised, notwithstanding that the court finds it unnecessary to decide the federal question because the case can be disposed of on other grounds."

15 In Felton v Mulligan (1971) 124 CLR 367, Barwick CJ said, at 374:

"… the matter arising under a law of the Parliament will have arisen if the suit could have been disposed of by deciding the matter, whether or not the suit was so disposed of."

16 In Davids Distribution, this Court said at 601; [22] that, subject only to the qualification that the claim in respect of a federal right raised in a defence must be a genuine issue and not a mere subterfuge to fabricate jurisdiction:

"the strength of the defence would have been immaterial. In particular, it is erroneous to think that a matter becomes a 'matter arising under' an Act only when a relevant defence is proved; it is enough that it is bona fide presented as an issue in the case."

17 In view of the statement in Moorgate, the dicta of Barwick CJ in Felton v Mulligan and of this Court in Davids Distribution must be understood as applicable only to cases in which a claim dependent on a right or duty based in federal law is explicitly pleaded. In the absence of explicit pleading, if there is identified such a claim in the course of the proceedings, federal jurisdiction can still be attracted as from the institution of the action, but only if it turns out to be necessary for the Court to determine that particular claim in order to dispose of the litigation. 18 For the purpose of determining whether original federal jurisdiction has been attracted, a matter therefore arises under a federal law if a claim is made for, or, in respect of a right that owes its existence to federal law. It is not necessary that relief in respect of such a right is also claimed under a provision of a federal law. The only relief claimed may be relief at common law or in equity. But if that relief can only be granted if some right exists by force of a federal law, then the litigation concerns a matter arising under a federal law and this Court has original jurisdiction to deal with the matter under s 39B(1A)(c) the Judiciary Act. Where it is apparent from the pleadings that a claim is made by applicant or respondent for or in respect of a right or duty that owes its existence to federal law, this Court's original jurisdiction under s 39B(1A)(c) is thereby attracted and the Court can determine the whole controversy of which that claim may form but a part. This is so even though this Court may be able to resolve the litigation without having to determine the federally-based claim. But where it only emerges in the course of the action that a federally-based claim not referred to in the pleadings may nevertheless need to be decided, the original jurisdiction conferred on this Court by s 39B(1A)(c) will not be attracted unless it is in fact necessary for the Court to determine that federal claim, in order to finally resolve the litigation of which it may form but a part. 19 When a federal court has original jurisdiction in a matter arising under a law of the Parliament, it is not confined to determining only federal claims involved in the matter; such a court's jurisdiction, once enlivened by the federal claim, extends to authority to determine certain non-federal claims. Whether a non-federal claim is within this Court's accrued jurisdiction that is enlivened by the bringing of a federal claim, depends on whether it is part of the same litigious or justiciable controversy between parties of which the federal claim or cause of action forms part. See Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261 at 290 and 293 and Re Wakim at 310; [135]. 20 In Stack, Mason, Brennan and Deane JJ referred at p 294 to the following passage in Fencott v Muller (1983) 152 CLR 570 at 608 as offering guidance on how the boundaries of the matter arising under the federal law might be identified, where the question is whether this Court, whose original jurisdiction has been enlivened, also has authority to determine a non-federal claim with which it would not otherwise be able to deal:

"What is and what is not part of the one controversy depends on what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationships. The scope of a controversy which constitutes a matter is not ascertained merely by reference to the proceedings which a party may institute, but may be illuminated by the conduct of those proceedings and especially by the pleadings in which the issues in controversy are defined and the claims for relief are set out. But in the end, it is a matter of impression and of practical judgment whether a non-federal claim and a federal claim joined in a proceeding are within the scope of one controversy and thus within the ambit of a matter."

21 This test for identifying the boundaries of the Court's accrued jurisdiction is a quite different one from that which governs whether the Court's original jurisdiction itself has been invoked. It operates by identifying all the claims, federal and non-federal, that can be said to be part of the one controversy. The test for determining whether this Court's original jurisdiction has been attracted focuses instead, on whether a determination must be made on a particular claim to or in respect of a right that depends for its existence on a federal law. 22 In order to deal with the applicants' argument that a claim to interest under s 57 has already been sufficiently raised to make the action from the outset one within this Court's original jurisdiction, it is necessary to consider both the elements of a claim under s 57 and the claims already made by the applicants in the proceedings in a little detail. Section 57 provides:

(1) Where an insurer is liable to pay to a person an amount under a contract of insurance or under this Act in relation to a contract of insurance, the insurer is also liable to pay interest on the amount to that person in accordance with this section.

(2) The period in respect of which interest is payable is the period commencing on the day as from which it was unreasonable for the insurer to have withheld payment of the amount and ending on whichever is the earlier of the following days:

(b) the day on which the payment is sent by post to the person to whom it is payable.

(3) The rate at which interest is payable in respect of a day included in the period referred to in subsection (2) is the rate applicable in respect of that day that is prescribed by, or worked out in a manner prescribed by, the regulations.

(4) This section applies to the exclusion of any other law that would otherwise apply.

(a) a statutory law of the Commonwealth, a State or a Territory; or

23 Section 57 can arise for consideration only once an insurer has been found to be liable to pay to a person an amount under a contract of insurance and then only if that amount is established. The section then operates to entitle the person to interest at the rates fixed under s 57(3) on that particular amount from the day determined to be that as from which it was unreasonable for the insurer to have withheld payment of that amount until payment (or judgment). 24 By the originating application, the applicants claimed:

"1. A declaration that they are entitled to indemnity under the Insurance Policy as defined in the Statement of Claim filed in the within action for:

1.1 The legal costs incurred by the applicants because of the NT proceedings (as defined in the Statement of Claim filed in the within action);

1.2 The liability incurred by the applicants because of the Deed of Settlement (as defined in the Statement of Claim filed in the within action);

1.3 The costs and expenses incurred by the applicants in protecting and maintaining the NT properties (as defined in the Statement of Claim filed in the within action).

Judgement against the Underwriters for $4,818,700.00;

25 The separate issues the subject of his Honour's determination were those raised by pars 1.1 and 1.2. The applicants had a substantial degree of success in obtaining the declaration sought in the former and were wholly successful in obtaining the declaration sought in the latter of these two sub-paragraphs. 26 By the statement of claim, the applicants say that the respondents agreed to indemnify them up to a specified limit "against all sums which the applicants shall become legally liable to pay as a result of claims made against the applicants … arising out of any negligent act, error or omission … by or on behalf of the applicants in connection with the business". This indemnity extended to all legal costs and disbursements incurred by the applicants relating to claims made against them. The term "the business" is defined in the contract to include in effect the applicants' businesses as trade financiers (par 11). 27 The statement of claim alleges that the applicants sought to enforce securities they held over properties owned by a borrower from them (the Tapps); extensive litigation ensued in the Northern Territory Supreme Court. Two receivers were appointed by the Court, at the applicants' instigation, who had control of these properties from 28 February 1992, probably until 9 November 1993, when the litigation was ultimately settled (pars 13 to 55). Under the heading "Indemnities Claimed by the Applicants against the Underwriters", the statement of claim alleges:

"56. In the course of the NT proceedings the NT plaintiffs (who are the applicants):

56.1 Incurred legal costs and disbursements in responding to the Tapp claims ('the Claim for Legal Costs Indemnity');

56.2 Incurred a legal liability to pay Mr Tapp a settlement amount as a consequence of the settlement of the NT proceedings ('the Claims for Settlement Indemnity');

56.3 Incurred costs and expenses in protecting and maintaining the properties under the control of the receiver appointed by the NT Supreme Court ('the Claim for Property Protection Indemnity')."

28 In respect of par 56.1, the applicants, in pars 57 and 60, claim $1,313,700 as the amount of the indemnity payable by the respondents under the contract of insurance in respect of legal costs and disbursements. As to par 56.2, the applicants in par 58 and 60 claim a further $1,860,000 as an amount payable by the respondents to them under the contract of insurance by way of indemnity in respect of claims made against them. As to par 56.3, the applicants claimed in pars 59 and 60 a further $1,645,000 as an amount also payable to them by the respondents under the contract of insurance by way of the claims indemnity. The total of these three amounts is that for which the applicants claim judgment by par 2 of the originating application. Success on any of these three claims will establish that the respondent-insurers are, in terms of s 57(1) the Insurance Contracts Act, liable to pay to the applicants an amount under the contract of insurance, ie, the applicants will have made out one of the elements of their proposed claim under that provision. 29 In addition to these claims for payment of $4,818,700 as moneys payable under the contract of insurance, the applicants made a claim by way of damages for the losses they suffered as a result of being kept out of those moneys because the respondents refused to pay them. The applicants here pleaded notification to the respondents on 1 March 1992 of "a claim being made against them" by the Tapps in the litigation. This appears to be a reference to the Tapps' first counter-claim delivered on 24 January 1992. They pleaded that the respondents were bound to pay "upon [their] receipt of the claim", but only after the lapse of a reasonable time for the respondents to evaluate the claim after such notification. They also pleaded the respondents' continued refusal, in breach of their obligation under the contract of insurance, to pay the amounts of $1,313,700 and $1,860,000 claimed for legal costs and settlement costs (pars 61 to 64). They did not, however, make any reference here to a claim or demand that the respondents pay, or to any refusal by the respondents to pay what is now claimed by the applicants under the contract for the property protection costs of $1,645,000. It is then said that "[a]s a consequence of the refusal by the Underwriters to provide indemnity as alleged in paragraph 64 above", the applicants suffered loss and damage (par 65). Damages are then claimed in respect of the respondents' refusal to pay all three lots of indemnity moneys referred to, viz, the legal costs, the settlement costs and the property protection costs, it being alleged that because of the respondents' refusal to pay, those costs were "paid or funded by the applicant" (par 65.1). The damages are then identified as the profit which the applicants say they would have made from the trading in which they would have engaged, if they had received the indemnity moneys promptly, instead of having to use their own moneys, together with funds they specifically borrowed for the purpose, in defending the charges brought against them by the Tapps in the litigation and in paying the settlement moneys and the protection costs. In addition, the applicants also here claim as damages the interest and other charges they paid to their bank in respect of the borrowed funds referred to (par 65). 30 No attempt is made in the pleading to quantify the damages claimed in pars 61 to 65 for being kept out of the indemnity moneys payable under the insurance. But since the applicants' business was money lending (something referred to in par 15 of the statement of claim), it may be that the component of this damages claim based on lost profits will be quantified by reference to the interest income (after expenses) that the applicants would have earned if they had been able to lend out, in the course of their business, the amounts which they instead had to pay by way of legal, settlement and protection costs. This would necessarily involve proof of the date or dates from which it was unreasonable for the respondents to have refused the applicants' request for indemnity in respect of all those costs and proof also of the dates on which each separate payment was made by the applicants which total the $4,818,700 of indemnity moneys claimed. These are matters which will also have to be proved to make out the proposed claim to interest under s 57. 31 The interest rates at which the applicants would have lent out the moneys they had to use instead to pay their legal, settlement and protection costs which they may have to prove to make out their existing damages claim are irrelevant to a claim for interest under s 57. But the only issue additional to those that may be raised already for determination in the existing damages claim which the applicants have to establish to complete a claim for s 57 interest is the rates at which such interest must be calculated. It is unnecessary for the applicants to prove the regulations made under s 57(3) which fix those rates: judicial notice is to be taken of them. See s 143(1) the Evidence Act 1995 (Cth). 32 The claim which the applicants have already made by their damages claim to compensation for being kept out of moneys payable to them is not only very likely to involve proof of the same factual matters that they will have to prove to make out their proposed claim to interest under s 57, but has the same object that is served by that provision. Section 57, though it can operate only in the limited area of claims in respect of contracts of insurance, like the provisions of state laws which confer a general power on courts to include in money judgments an award of interest, is intended, by the award of interest, to compensate the successful plaintiff for the detriment suffered by being kept out, until judgment, of the money to which the judgment establishes that the plaintiff has been entitled all along. See Haines v Bendall (1991) 172 CLR 60 at 66. 33 But despite this and even though the Court may have to determine the same factual matters in order to deal with the existing damages claim for loss of profits as it would have to determine to deal with the proposed claim to interest under s 57, a claim under s 57 is not explicitly raised by the applicants in their existing pleading and it cannot be said to be necessary for the Court, within the scope of the litigation as now defined by the pleadings, to determine whether the applicants have an entitlement to interest under that provision. 34 The applicants cannot recover both the damages now claimed in respect of late payment of the indemnity moneys and interest on the amount of those moneys under s 57, since that would involve double recovery. There is no reason why the applicants could not have expressly pleaded a claim to s 57 interest in the alternative to that damages claim, as they now seek to do by the amendment proposed. But they have to date claimed damages on one basis only, a basis inconsistent with any reliance on s 57. 35 The applicants' claim in respect of loss of profits may turn out to be quantified on a basis other than by reference to the net income they would have earned by lending out the moneys withheld at interest. But even if they ultimately formulate the claim for loss of profits by reference to the interest income lost to them, it would still be a claim for damages for late payment on a basis different from a claim for interest as damages for late payment: the identification of those interest rates would not determine the quantum of the applicants' entitlement to damages for lost profits. Those rates would be but one element in the ascertainment of the lost profits. The applicants would also have to establish the amount of the allowance to be made for the expenses they would have incurred in earning any such interest income and they would have to show that there were borrowers to whom they could have lent those moneys. The amount of the damages so recoverable will, coincidence apart, be quite different from the amount the applicants could recover as interest under s 57. 36 Despite the foregoing, if the applicants could establish that where an insurer has been held liable to pay to the insured a particular amount under the contract of insurance, the only compensation available to the insured for loss caused by being kept out of that amount is interest under s 57, they might still be able to say that even on the pleadings as they presently stand, it would be necessary for the Court to determine their entitlement to such interest, in order to resolve the litigation. In Hungerfords v Walker (1990) 171 CLR 125, the High Court overturned the common law rule that interest cannot be awarded as damages for late payment. The Court also rejected the contention that the only avenue for compensation for late payment of damages was in the form of interest that can be included in the judgment pursuant to statutory provisions such as s 30C the Supreme Court Act 1935 (SA). At 147, Mason CJ and Wilson J said:

"We see no reason for construing s 30C in such a way that it forecloses the authority of the courts to award damages in accordance with the principle established in Hadley v Baxendale and the measure of damages governing claims in tort. The section is not intended to erect a comprehensive and exclusive code governing the award of interest. … The section does not attempt to regulate the measure of compensation to be awarded for a specific head of loss. The provisions of s 30C(4)(b) and (e) expressly recognise that interest may be recoverable at common law quite apart from the statute."

37 Section 30C(4)(e) states that s 30C does not "limit the operation of any other enactment or rule of law providing for the award of interest". Their Honours read the expression "rule of law" as referring to common law principles governing the award of interest as damages for late payment and so regarded that provision as confirming the continued availability to plaintiffs of that right to damages (p 148). There is therefore a substantial argument that the expression in s 57(5) - "a rule of common law or equity" - is used to refer to the common law and equitable rules of the kind discussed in Hungerfords v Walker at 146 and 148 that provide for the award of interest as damages and that, in consequence, the only interest recoverable to compensate insured persons wrongly kept out of moneys payable to them under contracts of insurance is that provided for by s 57. But losses in excess of the opportunity or borrowing costs of being deprived of access to moneys payable by an insurer as measured by appropriate market interest rates may be suffered by a particular claimant. Hungerfords v Walker affirms that those losses are recoverable under the rule in Hadley v Baxendale; if they are claimed on a basis different from the opportunity or borrowing costs measured by appropriate commercial interest rates, there is no reason to read s 57(5) as limiting a claimant to recovery of interest under s 57(1) as the only compensation for those losses. Section 57(5) should be confined to preventing the award, by way of compensation for being kept out of moneys payable under a contract of insurance, of interest under any State legislation or interest as damages under any rule of the common law or equity. 38 It cannot be said that the only basis on which the applicants, who have claimed compensation for being kept out of the indemnity moneys, can be compensated is by an award of interest under s 57. The applicants are entitled to pursue their claim for such damages on the different basis upon which they have elected to formulate it. 39 The respondents' contention that, for the purpose of determining this Court's jurisdiction, the proposed claim based on s 13 the Insurance Contracts Act cannot be said to involve a question arising under a federal law because the proposed claim only arises under the contract of insurance is questionable, in view of the decision in LNC. But, for the same reasons that a claim to interest under s 57 does not arise in the existing action, the proposed claim, based on s 13 of the Act, also has not already arisen so as to have enlivened this Court's original jurisdiction from the inception of the proceedings. 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. 41 Sneade v Wotherton Barytes & Lead Mining Co Ltd [1904] 1 KB 295 provides no support for the appellants' contention that a court without jurisdiction to determine a proceeding brought before it can, by exercise of a power of amendment, give itself jurisdiction as from the inception of the proceedings. The only question in Sneade was whether the King's Bench Division of the High Court could exercise the power conferred on that Court by s 65 the County Courts Act 1888 to transfer an action into the County Court provided the amount claimed "on the writ does not exceed £100". The writ claiming in excess of £100 was amended to reduce the amount to below £100 and it was held in the Court of Appeal that, because "the writ as amended becomes the origin of the action and the claim thereon endorsed is substituted for the claim originally endorsed", the action could be transferred. There is reference at p 298 to the judge having "jurisdiction" to transfer because the action was by amendment deemed always to have been for less than £100. But the case is concerned only with whether a statutory power was exercisable by a court which undoubtedly had jurisdiction to entertain the action from the outset: it is not a case in which a court without jurisdiction to entertain an action acquired jurisdiction as a result of it exercising a power to amend the originating proceeding. 42 Contrary to their position in seeking leave to appeal the lack of the Court's jurisdiction, counsel for the respondents made a suggestion, not developed in argument, that, because this Court is a superior court of record, it has authority subject only to correction on appeal by the High Court, to determine conclusively whether it has jurisdiction in a particular case; this was said to give it authority to amend the statement of claim to raise the claims under the Insurance Contracts Act. 43 It is true that the orders made by the learned primary judge, though now revealed by Re Wakim to have been made without jurisdiction, will remain valid and binding unless and until set aside: see Westpac Banking Corporation v Paterson at [10]. Moreover, those orders being interlocutory, the respondents need the favourable exercise of the discretion to grant leave to appeal before they can challenge the absence of jurisdictional foundation for the orders. However, it is, in our opinion, now clear that the orders were made without jurisdiction and equally clear that this Court also now lacks jurisdiction to take any further action in the proceedings (other than to recognise the want of jurisdiction by setting the orders aside on that ground). It is apparent, from the draft notice of appeal, that the respondents have numerous non-jurisdictional grounds upon which they wish to rely in attacking the orders. If the leave to appeal now sought were refused, the Court could not deal with any of these other grounds of appeal; nor could it progress the action any further. And if leave to appeal is refused and the orders stand, it will be necessary for the applicants to bring proceedings in the Supreme Court to obtain the money judgment against the respondents to which the orders show they are exposed. If, as is likely, they cannot rely on Mansfield J's determinations as creating estoppels, they will have to re-litigate the issues the subject of his determinations. A far preferable course is to enable the parties to take advantage of s 11 the Federal Courts (State Jurisdiction) Act 1999 (SA). 44 In our opinion, leave to appeal to challenge the Court's jurisdiction should be granted, the appeal upheld on that narrow basis and an order made staying the entire proceeding brought by the applicants in this Court for want of jurisdiction. 45 Having regard to the fact that the question of jurisdiction only became an issue after the orders were made and having regard to the way the appeal was conducted, there will be no order as to costs. I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.

Dated: 4 February 2000 Counsel for the Appellants: Mr J Wells, QC and Mr DP Rydon

Solicitor for the Appellants: Johnson Winter & Slattery

Judiciary Act 1903(Cth)s 39B(1A)

Parliament Insurance Contracts Act 1984(Cth)ss 13, 57

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Judgment (48 paragraphs)

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Legislation Cited (8)

Cases Cited (17)