Mahommed v Unicomb

The two trusts

1. The dispute arises out of certain financial dealings involving the assets of a trust established in September 2009 (the Lovedale Ranch Unit Trust, to which I will refer as the LR Unit Trust). The trustee of the LR Unit Trust was Loire Consultants Pty Limited (Loire) ([5]), a company owned and controlled, directly or indirectly, at all material times between 9 October 2009 and 24 June 2014 by the first respondent (Mrs Unicomb) and her husband (Mr Michael Unicomb) ([4]). Mr Unicomb was, at the relevant times, the tax accountant and investment adviser of the unitholders of the LR Unit Trust ([20(c)(ii)]). Mr Unicomb is not a party to these proceedings, though he has been a party to other District Court and Local Court proceedings relating to claims in respect of some or all of the same financial dealings. From 22 August 2014, Mr Mahommed has been the sole director of Loire ([12]).
2. Mrs Unicomb was, from August 2007 to November 2010, the sole director of the second respondent (Greenhills) ([3]). At all material times, Greenhills was, or purported to act, as the trustee of the Anton Holdings Unit Trust (AH Unit Trust) ([9]).

The First and Second Debts

1. On or about 15 March 2010, the sum of $207,594.27 was advanced or paid by Loire, as trustee for the LR Unit Trust, to Greenhills, as trustee for the AH Unit Trust (see particulars to [10]). It is alleged that this created a debt between Loire as creditor and Greenhills as debtor (this is referred to in the pleading and in these reasons as the First Debt) ([10]).
2. On about 7 December 2010, the sum of $141,535.00 was advanced or paid to Greenhills by Loire, as trustee of the LR Unit Trust (or Loire caused this amount so to be paid) (see particulars to [11]). It is alleged that this also created a debt between Loire as creditor and Greenhills as debtor (referred to in the pleading and in these reasons as the Second Debt) ([11]).

The Deed of Assignment

1. On 12 November 2015 (after some or all of the assigned property had first been assigned to Mr Mahommed's solicitor (Mr Smits)) a Deed of Assignment was entered into between, among others, Loire, Mr Smits and Mr Mahommed, by which the First and Second Debts and "all associated choses in action, rights to claim interest and costs and other rights and claims" were assigned to Mr Mahommed ([13]; and see Deed of Assignment dated 12 November 2015).

The alleged payments in November and December 2010

1. Mr Mahommed alleges that between 20 November 2009 and 7 December 2010 Mr Unicomb "unilaterally" caused $889,192.27 (part or all of which sum is defined in the pleading as the "Trust Funds") in "liquid assets" of Loire, as trustee of the LR Unit Trust, to be paid to Greenhills (in its personal capacity or as trustee of trusts associated with Mr and Mrs Unicomb), to Mr Unicomb and to associated parties ([16(a)]) and then "unilaterally" caused those assets received by Greenhills to be applied to the benefit or uses of Mr or Mrs Unicomb or associated parties, which it is alleged resulted in each of the LR Unit Trust and AH Unit Trust being "without funds to discharge its liabilities in the ordinary course of business within normal trade terms except by making further borrowings or drawings whilst insolvent or imminently insolvent" ([16(b)]).
2. It is next alleged that the Trust Funds were applied by Greenhills in or towards the personal uses or for the benefit of Mrs Unicomb and other associated recipients, which were not proper trust uses or authorised investments under the Trust Deed for the LR Unit Trust ([17]).
3. Further or in the alternative to the allegations in [16], Mr Mahommed alleges that the said appropriations of the Trust Funds were, among other things, effectuated or procured by Mr Unicomb being engaged in conduct and making representations which were misleading, deceptive and unconscionable in trade or commerce ([18(e)]). The conduct relied upon for that allegation is particularised by reference, among other things, to representations allegedly made orally by Mr Unicomb at "diverse times" between 8 October 2009 and 31 October 2010, and made "contemporaneously with the First Debt [i.e., in 2010] and at diverse times thereafter" (see particular (ii) to [18]).
4. Mrs Unicomb, as the sole director of Greenhills, is alleged to have had knowledge (or the means of knowledge) that the Trust Funds were received, retained and applied "and as [sic] trust property in breach of the trusts established" under the LR Unit Trust Deed ([20]). It is alleged that Mrs Unicomb had accessory (Barnes v Addy) liability ([20(b)]); that she engaged in unconscionable conduct as the sole director of Greenhills ([20(c)]); that she was in breach or contravention of ss 180-184 of the Corporations Act and of duties owed by her to Greenhills ([21]); and that she breached duties of care owed to both Greenhills ([22]) and Loire ([23]).
5. In essence, the complaint is that none of the "Trust Funds", nor either of the First or Second Debts, has been repaid (see particulars to [23]). At [23] of the amended statement of claim it is alleged that Loire (which is named as the third defendant) as trustee of the LR Unit Trust suffered loss and damage "by losing the Trust Funds and by being unable to utilize the Trust Funds to develop and realise the Lovedale property", a property which was acquired by Loire ([7]) as trustee of the LR Unit Trust on 9 October 2009.

The amended statement of claim

1. One of the infelicities of the amended statement of claim is the internal inconsistency in the references to the parties to the proceedings. So, for example, included in the particulars to [23] there are references to the "plaintiffs" in the plural (there being in fact only one, Mr Mahommed). Similarly, the schedule of parties incorrectly refers to Loire as the second plaintiff, whereas it is named on the coversheet to the amended statement of claim as the third defendant. However, the deficiencies in the pleading go well beyond such matters.
2. Mr Mahommed concedes that his amended statement of claim is poorly pleaded and requires amendment. (That is an understatement but, regrettably, the first and second respondents' defence is little or no better.) However, Mr Smits proffered an undertaking to the Court that, if leave to amend were granted, he would ensure that experienced Senior Counsel settle that amended pleading (see T 10.9).

Dismissal Judgment

1. The claims in debt or quasi-contract relate to the alleged First and Second Debts and require no further elaboration at this stage. Jurisdiction in respect of those claims was not separately dealt with in the Dismissal Judgment. Nor did her Honour deal in terms with the question of jurisdiction to determine the claim for recovery of a statutory debt which is said to arise pursuant to s 197 of the Corporations Act.
2. As adverted to earlier, the Fair Trading Act claim was dismissed on a different basis from that on which the balance of the claims were dismissed. Her Honour accepted (at [35]; [40]), as is clearly the case, that the District Court has jurisdiction in relation to claims made under the Fair Trading Act. However, her Honour considered that there were a number of problems with Mr Mahommed's claim under that Act and that these were sufficient to warrant the striking out and dismissal of that claim under rr 13.4 and/or 14.28 UCPR (at [40]).
3. The problems identified by her Honour in that regard were: the failure to identify representations made within the limitation period (at [41]); the possibility that the Fair Trading Act claim was statute-barred insofar as it related to representations made prior to entry into a November 2009 agreement (at [44]); whether the Fair Trading Act claim could be extracted from the rest of the pleadings (at [46]); the submissions that had been made by the first and second respondents' solicitor as to abuse of process "in terms of overlap with other proceedings" (at [46]); and the multiplicity of proceedings if the Fair Trading Act claim were to remain in the District Court (there referring, in context, to the possibility that equitable relief would then be pursued in other proceedings) (at [52]). Her Honour commented (at [49]) that: … the entitlement of a party to commence proceedings does not mean that he or she can split a case between various courts, or expect the court to tidy up pleadings which are not only hopelessly drafted but possibly time-barred.
4. Her Honour also noted the following two matters: first (which she said was a matter of peripheral relevance) that an application had earlier been made by Mr Mahommed for default judgment in circumstances in which her Honour said he was not entitled to do so and had not provided the registrar with evidence of service (at [50]); and, second, that Mr Mahommed had been provided with a copy of the decision in Xiang v Ward [2016] NSWDC 64 at the first return date of the matter and had been invited either to amend his claim or bring an application in the Supreme Court but had not done so (at [51]). That said, it is not clear that the first of those matters was among the problems leading her Honour to dismiss the Fair Trading Act claim under rr 13.4 and/or 14.28 of the UCPR, as opposed to being an observation as to conduct of the litigation that her Honour considered to be unsatisfactory. The second of those matters may have some relevance as to costs on the present application but again does not seem to have been determinative in her Honour's decision to dismiss the Fair Trading Act claims or the proceedings as a whole.
5. As to the claims for equitable compensation and declaratory relief, her Honour was satisfied that they did not fall within s 134 of the District Court Act (at [32]) and considered that the equitable nature of the relief sought made it obvious that such an action would, if brought in the Supreme Court at the relevant date, have been assigned to the Equity Division (at [29]).
6. Her Honour considered that the misleading and deceptive conduct claims were essentially a restatement of the claims for equitable relief and found it difficult to see how the former could be unravelled from the latter. Her Honour said that, being a highly complex commercial claim, the proceeding (even if unconnected to an equity claim) would not have been assigned to the Common Law Division but would have been heard in the Commercial Division at the relevant time (at [36]-[37]). Hence, her Honour considered that the proceedings were not within the jurisdiction of the District Court.
7. At [38], her Honour noted an additional problem in relation to the misleading and deceptive conduct claims - namely that the dates for the oral representations were vague and the alleged written representation was made on 25 November 2009, again giving rise to a potential limitation problem. Her Honour said that if she had erred in her findings on the jurisdiction point she would have struck out the misleading and deceptive conduct claims for the same reasons as those given in relation to the Fair Trading Act claim ([39]).
8. Her Honour also indicated (at [54]) that, in the event that she had erred in finding that the proceedings should be dismissed, she would have granted a stay of the proceedings in the same terms as other proceedings had been stayed - there referring to Smits v Unicomb; Smits & Mahommed v Unicomb [2016] NSWDC 26. In that case, Levy SC DCJ had noted (at [10]) that a pivotal issue to be determined was the validity or otherwise of the assignment to Mr Mahommed of the underlying cause of action against Mr Unicomb, in circumstances where the assignment had occurred after a relevant act of bankruptcy by the assignor. His Honour stayed those proceedings until a bankruptcy appeal in relation to the assignor had been heard.
9. Nevertheless, in the present case her Honour did not (contrary to what is suggested in ground A(a) of the applicant's summons) grant any stay of the proceedings. This was clearly an obiter observation by her Honour.

Variation Judgment

1. Following the dismissal judgment, Mr Mahommed made an application, by notice of motion filed 28 June 2016, seeking orders for the setting aside or variation of the orders made by Gibson DCJ. That application came before Balla DCJ on 8 August 2016. Her Honour concluded that what Mr Mahommed was seeking to do was impermissibly to seek to reopen the case after delivery of a final judgment and was not persuaded that the applicant had shown that any discretion under r 36.16(1) (assuming it applied) should be exercised. Her Honour dismissed the motion.

Grounds of challenge in relation to Dismissal Judgment

1. The summons specifies the following grounds on which relief is sought from the Dismissal Judgment. 1. The Primary Judge made arguable appellable errors referred to in House v The King (1936) CLR 499 at 504-5. 2. The Primary Judge erred in deciding that the Respondents' Amended Notice of Motion heard on 21 June 2016 should be granted and that the proceedings should be struck out and dismissed pursuant to UCPR rr 13.4 and 14.28, as to the Fair Trading Act ("FTA") claim set out in paragraphs 9(b), 13(a) and 18(f) of the amended statement of claim ("ASOC") and s 44 of the District Court Act 1973 ("the Act") as to the remainder of the claim. 3. The Primary Judge made errors of jurisdiction by failing to decide that the relief sought was within or to seize or exercise the jurisdiction of the Court upon the grounds that: (a) The liquidated debt and quasi contract (quantum meruit) claims pleaded in paragraphs 10-13 of the ASOC fell within the jurisdiction of the Court under ss. 9(1)(a) and 44(1)(a) of the Act and ss 53-55 of the Supreme Court Act 1970 (NSW) ("SCA") and Part 14, r 2 and Part 12, r 7 of the Supreme Court Rules 1970; (b) The equitable claims pleaded in paragraphs 16-17. 19-20 & 23 of the ASOC fell within the jurisdiction of the Court under ss. 9(1)(a), 46, and 134 (1)(h) of the Act and ss. 9(1)(a) and (b), 44 (1)(a) and 46 of the Act as to s 68 of the SCA; (c) The FTA claim pleaded in paragraphs 13(d) & 18 of the ASOC fell within the jurisdiction of the Court under ss. 9(1)(a), 135 and 137 of the Act; (d) The claims under the Trade Practices Act 1974 (Cth) ("TPA") and Competition and Consumer Act 2010 (Cth) ("CCA") pleaded in paragraphs 9(b), 13(d) and 18 of the ASOC fell within the jurisdiction of the Court under ss. 9(1)(b) of the Act and ss. 86(2) of the TPA and or CCA, ss. 39(2) of the Judiciary Act 1903, ss. 12GF and 13DA of the Australian Securities and Investments Commission Act 2000 ("ASICA") and ss 71 and 77(iii) of the Commonwealth of Australia Constitution Act 1900 (Cth); (e) The statutory claim pleaded in paragraphs 13(b), 14-15 of the ASOC fell within the jurisdiction of the Court under ss. 9(1)(b) of the Act and s 197 of the Corporations Law; (f) The liquidated statutory claim pleaded in paragraphs 13(b), 14-15 of the ASOC fell within the jurisdiction of the Court under ss. 9(1)(b) of the Act and ss 180-184 of the Corporations Law; (g) The said liquidated debt and equitable claims fell within the Special Jurisdiction of the Court under ss 9(1)(a) and 142B of the Act. 4. The Primary Judge acted in excess of the jurisdiction of the Court by: (a) purporting to grant a stay in pursuance of ss 60(2), and contrary to ss. 27 and 120, of the Bankruptcy Act 1966, which was not relevant in the events which happened; (b) striking out the ASOC in lieu of ordering the Applicant to provide further particulars or amending the ASOC under r 13.1 of the UCPR and/or s 61(1), (2) of the Civil Procedure Act 2005 (NSW) ("CPA"). 5. The Primary Judge took into account irrelevant considerations or considerations mistakenly in the exercise of the powers and discretions conferred by rr 13.4 and 14.28 of the UCPR, including: (a) misconceived circumstances and issues first raised in the Judgment surrounding the entry of a Default Judgment and of the Defence, which were contrary to the material facts and record of the proceedings; (b) limitation issues under ss 14 and 63 which were not pleaded in the Defence, and despite ss 47 and 68A, of the Limitation Act 1969 and rr 14.14(2) & (3) of the UCPR; (c) former and concluded proceedings between different parties in respect of different financial transactions and different causes of action in different courts. 6. The Primary Judge miscarried the exercise of the powers and discretions under rr 13.4 and 14.28 of the UCPR by failing to apply properly the principles summarised by Brereton J in Cairns v Freeman [2008] 792 at 15, [3]-[6] and ss. 56 and 58 of the CPA.

Grounds of challenge in relation to Variation Judgment

1. In relation to the Variation Judgment, Mr Mahommed raises the following grounds: 1. The Primary Judge erred in dismissing the Notice of Motion filed on 28 June 2016 under rr 36.16(3A) of the UCPR and ordering the Applicant to pay lump sum costs. 2. The Primary Judge made an error of jurisdiction by deciding that there was no power in the circumstances and/or miscarried the exercise of the discretion to set aside or vary the Judgment and Orders made in the Proceedings on 24 June 2016 under rr 36.16(3A) of the UCPR or pursuant to any implied or ancillary powers of the Court referred to in rr 36.16(4) of the UCPR. 3. The Primary Judge erred by merely repeating or adopting and not reviewing thoroughly the decisions made by the Primary Judge on 24 June 2016 and by not making independent determinations.

Response to Summons

1. The first and second respondents oppose the entirety of the relief claimed by Mr Mahommed in the summons on the following grounds: 1. Each of the causes of action pleaded by the Applicant in his Amended Statement of Claim dated 29 May 2016 ("the ASOC") were [sic] liable to be struck out by reason of UCPR 14.28 as being embarrassing, failing to plead necessary material facts and failing to disclose a cause of action. 2. The decision of Gibson, DCJ. to dismiss the proceedings brought by the Applicant was not attended with error as each of the causes of action pleaded by the Applicant in the ASOC were [sic]: a. outside of the jurisdiction of the District Court of NSW; and/or b. had a defect which was not remediable with leave to replead. 3. The District Court did not have jurisdiction to determine the claims in the ASOC within section 44 of the District Court Act 1973 (NSW) ("the Act") because the ASOC, if it had been filed in the registry of the Supreme Court of NSW on 2nd February 1998, would have been assigned to the Equity Division or Commercial Division of that Court. 4. The District Court had no jurisdiction to hear any claims by the Applicant in debt (whether at common law or in equity) or restitution as no other provision vested that Court with jurisdiction to hear those claims. 5. The District Court had no jurisdiction to hear any claims by the Applicant framed for breach of trust as no other provision - including section 134(1)(h) of the Act - vested that Court with jurisdiction to hear those claims. 6. The District Court had no jurisdiction to hear any claims by the Applicant based on the Corporations Act, 2001 (C'lth) as no other provision vested that Court with jurisdiction to hear those claims. 7. The Applicant's claims for misleading and deceptive conduct; or alternatively, unconscionable conduct, contrary to s. 42 of the Fair Trading Act, 1987 (NSW) (FTA), ss. 51AA, 51AB, 51AC & 52 of the Trade Practices Act, 1974 (C'lth) (TPA) and ss. 18-22 of the Competition and Consumer Act, 2010 (C'lth) (CCA) do not disclose a cause of action as the Applicant has not pleaded any damage suffered by him as a result of those allegations. This defect could not have been remedied by the grant of leave to replead. 8. The Applicant's claims for breach of director's duties do not disclose a cause of action as the Applicant has not pleaded any damage suffered by him as a result of those allegations. This defect could not have been remedied by the grant of leave to replead. 9. The Applicant's claims against the first respondent based upon section 197 of the Corporations Act, 2001 (C'lth) do not disclose a cause of action as that section only applies to debts which are not based upon a breach of trust, and the only debts pleaded in the ASOC are equitable debts based on allegations of breach of trust. This defect could not have been remedied by the grant of leave to replead. 10. The decision of Balla, DCJ. to dismiss the notice of motion brought by the Applicant was not attended with error as that application was based on an entirely improper construction of the provisions contained in UCPR 36.16.

Relief sought by Mr Mahommed

1. In his summons in this Court, the relief sought by Mr Mahommed is as follows: 1. Pursuant to Section 69 of the Supreme Court Act 1970 (NSW), Orders quashing the Orders made by [Gibson] DCJ on 24 June 2016 and by Balla DCJ on 8 August 2016 in the District Court of New South Wales ("the Court") in Proceedings No. 2016/00053923 ("the Proceedings"). 2. A Declaration that the Court has jurisdiction to hear and determine the causes of action pleaded in the Amended Statement of Claim filed on 29 May 2016 by the Applicant as the Plaintiff in the Proceedings. 3. Pursuant to Section 69 of the Supreme Court Act 1970 (NSW), Orders directing the Court to hear and determine the Proceedings in accordance with the Reasons for Judgment given by this Honourable Court in these Proceedings and without limiting the foregoing to exercise the jurisdiction of the Court in respect of the Amended Statement of Claim, subject to any amendments thereto which might be ordered by the Court. 4. [Not pressed] 5. Pursuant to Section/s 46, 61 and/or 98 of the Civil Procedure Act 2005 (NSW), as applicable, an Order that the First and Second Respondents pay the costs of the applicant on an indemnity basis of and incidental to these proceedings. 6. An Order directing, or a Declaration that the Court should Order, the First and Second Respondents to pay the costs of the Applicant pursuant to Section 98 of the Civil Procedure Act 2005 (NSW) on an indemnity basis of and incidental to: (a) the Notice of Motion filed by the Respondents on 29 March 2016, as amended on 5 June 2016 and on 21 June 2016 in the Proceedings; (b) the hearings before [Gibson] DCJ on 24 June 2016 and by Balla DCJ on 8 August 2016 in the Proceedings; (c) the costs thrown away in respect of the Defence filed in the Proceedings on 29 March 2016; and/or (d) any re-hearing required of any part of the Proceedings 7. Pursuant to Section 98 of the Civil Procedure Act 2005 (NSW), an Order directing, or a Declaration that the Court should Order, that such costs shall be fixed in such lump sum as is determined by this Honourable Court or the Court, as applicable. 8. Pursuant to Section/s 61 and/or 98 of the Civil Procedure Act 2005 (NSW), an Order directing, or a Declaration that the Court should Order, that such costs shall be payable forthwith by the First and Second Respondents, together with a refund of any Costs paid by the Applicant to the First Respondents pursuant to the Costs Order made by Balla DCJ on 8 August 2016 and any subsequent Costs Order made by [Gibson] DCJ in the Proceedings. 9. Pursuant to Section/s 98 and/or 99 of the Civil Procedure Act 2005 (NSW), as applicable, an Order directing, or a Declaration that the Court should Order, that the Solicitor for the First and Second Respondents and Michael Charles Unicomb shall forthwith pay such of the said costs as are not paid by the First and Second Respondents within seven (7) days of the making of each said Costs Orders. 10. An Order directing, or a Declaration that the Court should Order, the strike out the whole or such part or parts of the Defence filed on 29 March 2016 in the Proceedings as this Honourable Court or the Court deems fit, pursuant to the inherent jurisdiction of this Honourable Court or the Court as an abuse or process or otherwise and/or ss. 56-58 and 61(3) of the Civil Procedure Act 2005 (NSW) and/or rr 13.4 and/or 14.28 of the UCPR 2005 (NSW). 11. Such further or other Orders as this Honourable Court deems fit.
2. The nature of proceedings in which the Supreme Court's supervisory jurisdiction is sought to be exercised was explained in Wende v Horwath (No 2) [2015] NSWCA 416 by Beazley ACJ (at [15]-[17] as follows): First, as the proceedings before the Court were brought pursuant to the Supreme Court Act 1970 (NSW), s 69 by way of judicial review, the Court is concerned with error of law on the face of the record and/or jurisdictional error. The record, for the purpose of such an application includes the reasons of the inferior court for its ultimate determination: s 69(4). Secondly, the orders the Court may make in the exercise of its jurisdiction under s 69 are not unlimited. Section 69 continues the Supreme Court's former jurisdiction to issue prerogative writs. Subsection (1)(e) provides the Supreme Court the power, by way of judgment or order, to grant the relief that would have formerly been available in that jurisdiction. A superior court's supervisory jurisdiction, not being an appellate process, does not permit the superior court to substitute its own orders for those that it considers the inferior court ought to have made: Craig v South Australia [1995] HCA 58; 184 CLR 163. Rather, where the writ ran, the appropriate order was the quashing of the impugned order or decision upon one or more of a number of established distinct grounds, including error of law on the face of the record. The effect of the decision in Kirk v Industrial Relations Commission; Kirk Group Holdings Pty Ltd v WorkCover Authority of New South Wales (Inspector Childs) [2010] HCA 1; 239 CLR 531 was that the same position pertained when this Court was exercising its s 69 jurisdiction: see at [110]. [my emphasis]
3. Beazley ACJ noted (at [18]) a question that had been raised, but not decided, in this Court as to whether, on a s 69 application, this Court could make substantive orders, including in respect of costs where only one result was open as a matter of law (referring to what was said in SAS Trustee Corporation v Woollard [2014] NSWCA 75 per Basten JA at [108]; Wang v Farkas (No 3) [2014] NSWCA 111 per Basten JA at [10]). Her Honour, on reflection, considered the better view to be that there was not the power to make substantive orders on such an application.
4. The above raises the question whether this Court has power to make the costs orders sought by Mr Mahommed (at [5]-[9]) in relation to the hearing of the respective notices of motion in the District Court. Even apart from that difficulty, it is hard to see any basis on which the order sought in prayer 10 (or that which is no longer pressed in prayer 4) could properly be made. It is clear that proceedings brought in this context are not to be treated as a full hearing on the merits of the underlying claims (see also in this regard the remarks of Leeming JA in Spratt v Perilya Broken Hill Ltd [2016] NSWCA 192 at [59]-[68] as to the need for clarity and precision as to the basis on which the claim for judicial review is advanced).

Jurisdiction

1. The District Court, as an inferior court of record, has only the jurisdiction conferred on it by statute, either expressly or by necessary implication (Pelechowski v The Registrar, Court of Appeal (NSW) (1999) 198 CLR 435; [1999] HCA 19 at [121]; Jago v District Court of NSW (1989) 168 CLR 23; [1989] HCA 46).
2. The District Court's civil jurisdiction is established by s 9 of the District Court Act. It is not necessary here to set that out. Section 44(1)(a) of the District Court Act provides, relevantly, as follows: 44 Actions (1) Subject to this Act, the Court has jurisdiction to hear and dispose of the following actions: (a) any action of a kind: (i) which, if brought in the Supreme Court, would be assigned to the Common Law Division of that Court, and (ii) in which the amount (if any) claimed does not exceed the Court's jurisdictional limit, whether on a balance of account or after an admitted set-off or otherwise, other than an action referred to in paragraph (d) or (e) [neither of which applies in the present case], …
3. "Action" is defined in s 4(1) of the District Court Act as meaning, except insofar as the context or subject-matter otherwise indicates or requires, "action in the Court"; but does not include any "proceedings" under Div 8 of Pt 3 (in which s 134 is to be found) or under Pt 4 of the Act. The expression "action of a kind" is not defined in the District Court Act. "Proceedings" is defined in s 4(1) of the Act by reference to where the expression is used in the Act and/or its context as meaning either civil or criminal proceedings.
4. When considering, for the purposes of s 44(1)(a), whether an action is of a kind which, if brought in the Supreme Court, would be assigned to the Common Law Division of that court, the relevant date is 2 February 1998, that being the date on which s 44(1)(a) came into operation (Forsyth v Deputy Commissioner of Taxation (2007) 231 CLR 531; [2007] HCA 8 at 549). As at 2 February 1998, the relevant provisions of the Supreme Court Act as to the assignment of business were set out in ss 52 and 53 of the Act. It is not necessary here to set them out.
5. Part 12 r 3 of the Supreme Court Rules 1970 (NSW), as at 2 February 1998, provided that proceedings need not be assigned to the Equity Division solely because a declaration of right or an injunction was claimed in the proceedings. Pursuant to rr 4 and 5, certain kinds of proceedings were to be assigned to the Common Law Division and Equity Division respectively. Pursuant to r 7, certain kinds of proceedings under the Fair Trading Act and the (now repealed) Trade Practices Act, including claims for misleading and deceptive conduct were to be assigned to the Common Law Division, the Equity Division or the Commercial Division "as is appropriate to the nature of the proceedings". Part 14 r 2 provided for the assignment of business to the Commercial Division.
6. In NSW Land and Housing Corporation v Quinn [2016] NSWCA 338, this Court considered that there was force to an argument to the effect that "action" in s 44(1) means the whole of the proceedings, such that if one cause of action in the proceedings would have been assigned under the Supreme Court Act or rules at the relevant time to a division (in that case the Administrative Law Division) other than the Common Law Division, then the District Court had no jurisdiction in respect of any other cause of action in those proceedings even if the District Court would have had jurisdiction to hear that other cause of action if it had been brought in a separate proceeding, and even though that other cause of action could have been severed from the cause of action in respect of which there was no jurisdiction (see the discussion at [62]-[64]).
7. The District Court is vested with a limited jurisdiction in equity by s 134 of the District Court Act, which relevantly provides: 134(1): The Court shall have the same jurisdiction as the Supreme Court, and may exercise all the powers and authority of the Supreme Court, in proceedings for … (d) relief against fraud or mistake where the damage sustained or the estate or fund in respect of which relief is sought does not exceed $20,000 in amount or value, as determined by the Court, (e) the execution of a trust or a declaration that a trust subsists, where the estate or fund subject or alleged to be subject to the trust does not exceed $20,000 in amount or value, as determined by the Court, or … (h) any equitable claim or demand for recovery of money or damages, whether liquidated or unliquidated (not being a claim or demand of a kind to which any other paragraph of this subsection applies), in an amount not exceeding the Court's jurisdictional limit.
8. The monetary limit for proceedings under s 134(1)(h) is that which applies to actions in the District Court for damages at law ($750,000) (Commonwealth Bank of Australia v Hadfield [2001] NSWCA 440). When exercising jurisdiction pursuant to s 134(1)(h), the District Court can in certain circumstances make declarations (Kolavo v Pitsikas (t/as Comino and Pitsikas) & Anor [2003] NSWCA 59).
9. In McDonough v Owners Strata Plan No 57504 [2014] NSWSC 1708, Brereton J held that a claim for breach of trust was a claim to which subsection 1(e) applied such that it does not fall within subsection 1(h). This decision has recently been the subject of a grant by this Court of leave to appeal (Huang v Drumm [2017] NSWCA 29). In Huang, the claims were for breach of trust, breach of fiduciary duty and breach of a professional duty of care. The issue there in dispute was whether there was jurisdiction in the District Court to hear and determine claims of the first two kinds.
10. In summary, the first and second respondent submit that: all Mr Mahommed's claims are liable to be struck out pursuant to UCPR r 14.28(1)(a) and (b) by reason of defective drafting; the proceedings would, if brought in the Supreme Court on 2 February 1998, have been assigned to the Equity Division or the Commercial Division and not the Common Law Division, and hence s 44(1) of the District Court Act did not vest the District Court with jurisdiction to hear the Proceedings; no other section of the District Court Act or any other Act, including s 134 of the District Court Act, provided the necessary jurisdiction for the District Court to hear the debt, breach of trust or corporations claims; the consumer claims and corporations claims do not disclose any cause of action; and therefore that her Honour was correct to strike out the pleading and dismiss the proceedings.
11. The first and second respondents further submit that even if one of the sets of claims was within the jurisdiction of the District Court (and could disclose a cause of action if leave to re-plead were granted), the prospect of a multiplicity of proceedings in separate courts (arising if Mr Mahommed were to prosecute the equitable claims in the Supreme Court and other claims in the District Court) was such that her Honour correctly exercised her Honour's discretion to strike out the pleading and dismiss the proceedings; and/or provides a basis for this Court to exercise its discretion to refuse to grant Mr Mahommed the relief he seeks.

Operation of s 144(2) of the Civil Procedure Act

1. Section 144(2) of the Civil Procedure Act 2005 (NSW) provides as follows: If, during proceedings to which this section applies, the District Court decides that it lacks, or may lack, jurisdiction to hear and dispose of the proceedings, the District Court must order that the proceedings be transferred to the Supreme Court. [my emphasis]
2. Sub-section 144(1) provides that the section applies to proceedings under Sub-div 2 of Div 8 of Pt 3 of the District Court Act. Section 134 of that Act, which confers jurisdiction on the District Court in equity proceedings specified in that section, appears within that subdivision.
3. Section 144 does not appear to have been drawn to the attention of either of the judges whose decisions are presently the subject of the application for judicial review. It was, however, raised in Mr Mahommed's written submissions in reply in relation to the present application (at [39]) and, in my opinion, it provides the short answer to the current impasse between the parties as to the disputed jurisdiction of the District Court.
4. The findings made in the Dismissal Judgment as to the lack of jurisdiction to hear and dispose of the equitable claims raised in the amended statement of claim meant that the District Court was at that stage bound to transfer the proceedings to the Supreme Court (see McDonough per Brereton J at [10]). The fact that Mr Mahommed did not seek such an order (and indeed appears to have resisted an invitation to make an application for the matter to be transferred to the Supreme Court) is not to the point. Section 144(2) is mandatory in its terms. Moreover, it encompasses the situation not only where the District Court reaches a decision that it lacks jurisdiction to deal with claims in its equitable jurisdiction but also where there is a doubt as to that matter (as must here be the case in light of the subject matter of the forthcoming appeal in Huang).
5. In oral submissions, Counsel for the first and second respondents accepted that s 144 of the Civil Procedure Act imposed an obligation on the District Court to transfer the proceedings where there was doubt as to whether it had the equitable jurisdiction to determine the matter but suggested that the obligation only arose where a plaintiff (i.e., here, Mr Mahommed) had sought such a transfer (see the discussion at T 39.49-40.28). However, s 144 of the Civil Procedure Act does not in its terms impose a mandatory obligation on the Court to transfer proceedings only where an application to that effect is made by a plaintiff; nor should such a limitation be read into the section.
6. Although this was not identified as an error of law in Mr Mahommed's summons, in his oral submissions in reply Mr Mahommed's legal representative appeared to embrace the proposition that there had been such an error on the part of Gibson DCJ in dismissing the District Court proceedings rather than transferring them to the Supreme Court, once the decision as to lack of jurisdiction to dispose of the equitable claims was reached. He submitted that s 144 is not facultative but is mandatory in its operation and said that this was something "missed by everyone" when the matter was before the District Court (T 43.17).
7. It is apparent, from the Dismissal Judgment, that this was a case in which the primary judge was bound to transfer the proceedings to the Supreme Court. Mr Mahommed was seeking to prosecute, among other causes of action, equitable claims of a kind which he maintained fell within the jurisdiction conferred by s 134. Her Honour decided that the Court's equitable jurisdiction under s 134 of the District Court Act did not extend to the hearing and determination of the equitable claims in the proceedings commenced by Mr Mahommed. That was sufficient to enliven the operation of s 144 of the Civil Procedure Act.
8. In oral argument, Counsel for the first and second respondents (Mr Kabilafkis) submitted that, as a matter of discretion, this Court should not make an order setting aside the orders made for the dismissal of the District Court proceedings in circumstances where his clients had argued both before Gibson DCJ and before Balla DCJ that the matter should be heard in the Supreme Court and Mr Mahommed had resisted this. Mr Kabilafkis submitted that, if the District Court decisions stood, there would be no res judicata or issue estoppel arising therefrom and Mr Mahommed would be free to file in the Supreme Court (T 42.39). However, as he quite properly conceded, there might be limitation issues in those circumstances.
9. If this were a matter where there was clearly jurisdiction in the District Court to deal with the proceedings then the appropriate course would be to set aside the order dismissing the proceedings and to remit the matter to the District Court for hearing. However, in circumstances where the question of jurisdiction was the subject of lengthy debate before the parties in this Court; where there was, at the least, a doubt as to the jurisdiction to determine the equitable claims raised on the pleadings; where the District Court was bound (having reached the conclusion it did as to the jurisdictional question) to transfer the proceedings to the Supreme Court and erred in law in not so doing; where there may well be limitation points raised if the applicant is left in a position where fresh proceedings need to be commenced; where the pleadings will in any event require considerable amendment; and where the applicant now does not resist the transfer of the proceedings, but instead seemingly embraces such a course, I am of the view that the mandate under the Civil Procedure Act for the just, quick and cheap resolution of the real issues in dispute means that the appropriate course is for an order to be made setting aside (with two qualifications, which I make below) the orders made by Gibson DCJ on 24 June 2016 dismissing the District Court proceedings and ordering Mr Mahommed to pay the costs of those proceedings.
10. In those circumstances it is not appropriate (nor is this case a suitable vehicle) to consider the arguments raised as to the scope of the equitable jurisdiction to entertain the equitable claims made by Mr Mahommed. That is particularly so in light of the recent grant of leave to appeal in Huang on the issue considered in McDonough as to the interaction between s 134(1)(e) and s 134(1)(h) of the District Court Act; and in circumstances where this Court would benefit from more considered argument and assistance on the jurisdictional questions raised. Nor is it appropriate, in light of the decision to transfer the matter to the Supreme Court, to express opinions on the balance of the issues raised on the present application, including as to the complaint as to denial of procedural fairness (though to the extent that it is based on the observations made in relation to the manner in which default judgment was sought that was not determinative of her Honour's decision). Obviously, the challenge to the Variation Judgment goes nowhere once the decision to dismiss the proceedings is set aside, though I should note that no error of law was shown in the dismissal of what was in essence an impermissible attempt to re-argue the merits of the application that had already been fully argued and determined by Gibson DCJ (see Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300 at 303 (Mason CJ); at 309 (Brennan J); Wentworth v Rogers (No 9) (1987) 8 NSWLR 388 at [394E-F] (Kirby P, as his Honour then was)).
11. The first of the qualifications to which I refer above relates to the consumer claims that were included in the pleading. It was conceded by Mr Smits in this Court that Loire would be the only potential plaintiff with standing in respect of claims for loss or damage suffered by reason of the alleged misleading and deceptive conduct (see T 16.43). In circumstances where there is clear authority that such claims are not assignable (see for example Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 236 ALR 720 at [53]; Chapman v Luminis Pty Ltd (No 5) (2001) 123 FCR 62; [2001] FCA 1106 at [204]-[207]), the order striking out those parts of the proceedings should stand.
12. The second of those qualifications relates to the costs order made by Gibson DCJ when dismissing the proceedings. I consider that it is appropriate for that order to stand. Mr Mahommed staunchly resisted the transfer of the proceedings to this Court and sought to pursue a hopelessly pleaded claim. He then sought to use r 36.16 to reargue an interlocutory decision, fully argued before and decided by Gibson DCJ, on the merits (which, as Balla DCJ correctly recognised, is impermissible). I see no reason, in the exercise of this Court's discretion as to the relief to be granted on the present application, to disturb the earlier costs order made by Gibson DCJ. Nor would I disturb the costs order made by Balla DCJ.
13. Accordingly, this Court should of its own motion (pursuant to s 140 of the Civil Procedure Act - see for example Cai v Guo [2014] NSWSC 380), order that the District Court proceedings be transferred to the Supreme Court and listed before the Registrar in the Equity Division for directions as to the ongoing conduct of the proceedings, including as to the filing of an amended statement of claim. Further, there should be a direction that Mr Mahommed file an affidavit at the time of filing of any amended statement of claim, verifying that the pleading has been settled by Senior Counsel in accordance with the undertaking proffered by his solicitor during the course of the hearing in this Court.

Costs

1. As to the costs of the proceedings in this Court, I am of the opinion that the appropriate order is that they be the defendant's costs in the cause. The outcome of the proceedings in this Court has been favourable to Mr Mahommed in that the decision to dismiss the proceedings has been (largely) set aside. However, it was his resistance to the transfer of the proceedings to this Court that has led to the cost and time incurred both in the summary dismissal application and in the proceedings in this Court. And neither party drew the attention of Gibson DCJ to the operation of s 144 of the District Court Act. That said, Mr Mahommed contends that the reason the matter was in the District Court was due to arrangements to which Mr (or Mrs) Unicomb had consented when the earlier Local Court proceedings were discontinued. Neither party has covered it or himself with glory in the unsatisfactory conduct of the litigation to date. Hence the order for costs I propose.

Orders

1. The orders I propose are as follows: 1. Set aside the orders made by Gibson DCJ striking out and dismissing the plaintiff's claim, other than the striking out of the consumer claims (that is, where damages are claimed for misleading and deceptive conduct or unconscionable conduct in breach of one or more of provisions of the Trade Practices Act 1987 (NSW), the Fair Trading Act 1974 (NSW), and the Australian Consumer Law) and other than the costs order made by her Honour. 2. Transfer the proceedings in the District Court to the Supreme Court pursuant to s 140 of the Civil Procedure Act 2005 (NSW). 3. Direct that the proceedings as transferred to the Supreme Court be listed before the Registrar in Equity for directions as to the further conduct of the proceedings, including as to the filing of amended pleadings (noting the undertaking proffered to this Court by the applicant's solicitor in that regard), and direct that on the filing of an amended statement of claim the applicant file an affidavit verifying that the amended statement of claim has been settled by Senior Counsel. 4. Costs of the proceedings in this Court be the defendant's costs in the cause in the Equity Division proceedings.
2. McDOUGALL J: I agree with Ward JA.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 03 April 2017