Fencott v Muller

Federal Court of Australia|1988-03-04|Before: Adam P, Gummow J

The respondent, by Amended Notice of Motion, seeks in the first instance an order that the proceedings be transferred to the Supreme Court of New South Wales.

The materials before the Court on the hearing of the Motion comprised the Amended Application and Statement of Claim both filed 30 October 1987 and an affidavit by the solicitor for the respondent to which are annexed copies. of correspondence between the parties' solicitors and documents referred to in the Amended Statement of Claim.

The jurisdiction of the Court is attracted by a claim

of contravention of s.52 of the Trade Practices Act 1974 ("the

TP Act"). The Amended Statement of Claim also pleads causes of

action for breach of fiduciary duty, negligence (two counts) and breach of a contract described as a "management agreement". There is also a claim for declarations that a EBuro-currency loan agreement, the management agreement and certain foreign exchange contracts were null and void and unenforceable by

reason of s.16 of the Gaming and Betting Act 1912 (NSW).

The essence of the complaint made by the respondent on its Motion is that there is real doubt as to whether the accrued jurisdiction of the Court has been attracted in respect of any of the non-s.52 claims I have mentioned. For more

abundant caution, it 1s submitted, the proceedings in toto

should be transferred to the State court pursuant to s.86A of the TP Act.

The s.52 claim, it is submitted, is within the meaning of sub-s. 86A (1) (b) "a matter for determination in the proceeding [which] arose under Division 1 .. . of Part Vv". The other claims are said to be "any other matter for determination in the proceeding" within the meaning of the concluding words of sub-s.86A (1). The result is said to be that the totality of the proceedings may be transferred, and the uncertainties as to jurisdiction, which I have described, are said to make it in the interests of justice to have the proceedings determined by the other court (sub-s.86A (2) (b))

It will be apparent that an essential step in these

submissions is the contention that the non-s.52 claims are "

any other matter for determination in the proceeding" within the Meaning of sub-s. 86A (1). The ambit of that expression is not yet fixed. Certainly, it would appear to include an associated

matter arising under federal law within the sense of s.32 of

But there is difficulty construing sub-s. 86A (1) as authorising the transfer of a matter for determination in the proceeding in this Court, being a matter not within the accrued jurisdiction and being a matter in respect of which this Court has no jurisdiction. If that matter was not within the accrued jurisdiction, it would not fall within any of the heads in ss.75 and 76 of the Constitution. Then in its operation in such cases, sub-s. 86A (1) of the TP Act would not be a law defining the jurisdiction of this Court or investing any State court with federal jurisdiction, within the meaning of s.77 of the Constitution. That section confers power on the Parliament to make laws, with respect to any of the matters mentioned in

ss. 75 and 76 of the Constitution, which, inter alia define the

jurisdiction of this Court or invest a State court with federal jurisdiction. If it were to be construed as suggested, sub-s. 86A (1) would go beyond the operation of a law within the scope of s.77 of the Constitution.

The incidental power ain s.51 (xxxix) of the Constitution would not appear to support a law authorising a federal court to exercise jurisdiction (whether by transferring the proceedings or deciding them itself) in respect of matters

outside federal jurisdiction: Philip Morris Inc. v Adam P.

Brown Male Fashions Pty. Ltd. (1981) 148 CLR 457 at 477-479,

494, 516, 521-2, 534-5, 547. To remit or transfer a proceeding is to exercise jurisdiction in respect of 1t: Johnstone v The Commonwealth (1979) 143 CLR 398, Pozniak v Smith (1982) 151 CLR 38. It follows, in my view, that s.86A 1s not to be construed

as authorising the transfer of matters for determination in a

proceeding in this Court on the footing that uncertainty as to existence of jurisdiction in this Court makes the transfer "in the interests of justice".

In the present case, I have reached the conclusion that there is not the uncertainty as to jurisdiction in respect of the non-s.52 claims, which is asserted by the respondent. In my view, the proceedings embody a matter in respect of which this Court has jurisdiction conferred on it by sub-s. 86 (1) of the TP Act. The respondent's counsel indicated 1n address that if that were the conclusion I reached, the interests of justice did not favour transfer, and, in effect, the application for transfer would not be further pressed.

I turn to give my reasons for the conclusion as to the presence of jurisdiction. Plainly enough, although it will not

always be so (Felton v Mulligan (1971) 124 CLR 367), federal

jurisdiction may be attracted upon the institution of proceedings rather than at some later stage. The analysis of

the Statement of Claim in Philip Morris Inc. v Adam P. Brown

Male Fashions Pty. Ltd. (supra) at 479, 480-483, 502-505,

539-541 and Fencott v Muller (1983) 152 CLR 570 at 578-581,

594-597, 613-616, illustrates the point. Further, the relief given by the High Court in those cases also shows that it may be appropriate to determine from the pleadings the question of whether federal jurisdiction has then been attracted, and to do so at that early point in the proceedings. Accordingly, in my view, in cases such as the present, the question is not to be approached simply by application of the well known principles governing applications to strike out statements of claim (cf

McMahon v Smith (1986) 69 ALR 527 at 529-531); questions of

the existence of jurisdiction should be dealt with decisively and not by asking questions as to the existence of an arguable or clear case for or against the existence of jurisdaction. Where the issue arises as to whether federal jurisdiction has been attracted, that issue should, if practicable, be determined summarily and without delay, not left as a question mark stamped on the proceedings, for decision at some later

stage: Fencott v Muller (supra) at 610. The practical

considerations in favour of such a course are underscored by the power of the High Court, pursuant to sub-s. 75 (v) of the Constitution, to grant prohibition to restrain the purported exercise by this Court of jurisdiction that is not or cannot be

invested in it: The Queen v Federal Court of Australia, Ex

parte W.A. National Football League (1979) 143 CLR 190.

Once federal jurisdiction has been attracted it will not be lost because the claim or assertion which attracted it has not or cannot be substantiated or has been displaced by

some countervailing claim or assertion: Dorotea Pty. Ltd. v

Vancleve Pty. Ltd. (1987) 75 ALR 629 at 632, Elna Australia

Pty. Ltd. v International Computers (1987) 75 ALR 271 at 277.

In the present case, the claims made by the applicant arise in the following way. On 6 May 1985, the applicant accepted in writing a written offer by the respondent, a banking corporation, to provide "a multi currency Euro-Loan Facility" to provide the Euro-currency equivalent of A$750,000. In June 1986, this limit was raised to AS$1,100,000. Securities were provided to the respondent. The term of the facility was to expire not later than 31 March 1990 "subject to annual

review". The applicant had, subject to certain limitations,

the option to repay the loan at any rollover, or at the end of each interest period (as defined) which could vary between approximately 30 and 180 days. The facility was utilised by the applicant by drawing down on 31 May 1985 and 10 July 1985 the equivalent in Swiss Francs of A$250,000 and as$500,000 respectively. On 10 November 1985, the respondent wrote to the applicant stating (contrary to the fact, as was freely conceded in argument on the Motion) that the loan facility "provides for the Management by the Bank of foreign currency risk which may arise under the facility . . . We shall require you to enter into a written agreement with the Bank to appoint us to manage your foreign currency risk on your behalf".

The management agreement is dated 6 November 1985. It provides for payment to the respondent of an annual fee of $4,500 in advance and obliges the respondent to provide officers qualified to give the advice "which may reasonably be inferred as being part" of the respondent's foreign exchange advisory service.

By the Amended Statement of Claim, the applicant alleges:

(1) That both the facility agreement and_ the management agreement, together with foreign exchange contracts entered into pursuant thereto, were null and void and unenforceable pursuant to

(2) That the respondent engaged in conduct in contravention of s.52 of the TP Act by the making of oral representations by its officers at a

Melbourne on 17 October 1985; this preceded entry into the management agreement and the oral representations alleged included statements as to the skill and expertise of the respondent in Managing foreign exchange exposure. Reliance is also placed upon certain express terms of the Management agreement dated 6 November 1985 as instances of misleading or deceptive conduct. That the respondent broke express and implied terms of the management agreement in its alleged failure to deal efficiently or effectively with the applicant's foreign exchange exposure, and that the respondent repudiated that agreement on 19 August 1986.

That the respondent ain failing to advise the applicant on 17 October 1985 and thereafter in certain respects in relation to his foreign exchange exposure broke a duty to the applicant to take care in giving him anformation and advice.

That in performing both the facility agreement and the management agreement, the respondent owed the applicant a duty to exercise that degree of care reasonably expected of a competent banker skilled and experienced in foreign currency loans, and that in various' respects' the respondent fell short of exercising such care on and after 17 October 1985.

(2) supra, and in performing the management agreement, the respondent owed the applicant a fiduciary duty to give full, frank and accurate disclosure of its own interests in the management agreement and the transactions that it would

"Banks, Fiduciary Obligations and Unconscionable Transactions" (1986) 65 Can. Bar Rev. 37, Austin

(1986-7) 12 Can. B.L.J. 96). It is further alleged that the respondent acted in breach of that duty 1n various ways in the course of the Management of the applicant's foreign currency exposure.

The relief sought includes damages pursuant to s.82 of the TP Act, the taking of accounts of the foreign currency transactions, and declarations of invalidity in pursuance of claim (1) supra.

Plainly, the claims concerning the management agreement and acts preparatory and subsequent thereto, are closely linked (claims (2), (3), (4), (5) and (6)). However, the respondent pointed to the temporal gap between the allegations dealing with events of October-November 1985 which found the s.52 claim (claim (2)) and the claim for illegality in respect of the facility agreement of May 1985 (part of claim

(1)). There is no claim for contravention of s.52 in respect

of the formation of the facility agreement. However, there is an allegation of breach of duty in respect of performance of both agreements (claim (5)), and, as a threshold matter, the New South Wales legislation is relied upon (claim (1)) to taint with illegality both agreements and the activities in performance thereof. The success or failure of claim (1), in whole or part, may have a significant impact upon the nature and quantum of any damages recoverable under s.82 in respect of the Trade Practices claim. Further, as is shown in the narration of events relied on by the applicant, in a very real sense the existence of the facility agreement provided the occasion for the negotiations for and entry into the management agreement, in circumstances with which the s.52 claim is concerned.

There are various indicia of a pendent or "non-severable" claim forming part of a "matter" in the necessary sense to attract federal jurisdiction: see Philip

Morris Inc. v Adam P. Brown Male Fashions Pty. Ltd. (1981) 148

CLR 457 at 512 per Mason J. The existence of a "common substratum of facts" is one such indicium. In my view, as a matter of practical judgment, the present case is one in which the federal claim and the other claims so depend on common transactions and facts that they arise out of a common substratum of facts and are thus within the ambit of the one

matter: Philip Morris Inc. v Adam P. Brown Male Fashions Pty.

Ltd. (supra), Fencott v Muller (supra) at 608, per Mason,

Murphy, Brennan, Deane JJ. It follows that to the extent of the relief claimed in

para. 1 thereof, the respondent's Amended Notice of Motion is

dismissed. I will hear the parties as to costs and as to the

I certify that this and the nine (9) preceding pages are a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Gummow.

Counsel for the Applicant Mr. P.C. Tomasetti (the Respondent on the Motion): instructed by Messrs. Deigan & Associates.

Counsel for the Respondent Mr. R. White instructed by

(the Applicant on the Motion): Messrs. Mallesons Stephen Jaques

Gaming and Betting Act 1912(NSW)

At a glance

Court

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Judgment (71 paragraphs)

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Legislation Cited (1)

Cases Cited (11)

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