Marketlend Pty Ltd v Yura Yungi Aboriginal Medical Service

The jurisdictional issue

1. An issue about jurisdiction arose because Marketlend is a company with its registered office in Sydney whereas the Medical Service and QNA operated their respective businesses in Western Australia and the debt arose in Western Australia. The assignment to Marketlend of the right to recover was taken to have occurred in New South Wales.
2. The jurisdiction of the Local Court depended upon s 34(1)(c) of the Local Court Act 2007 (NSW): "34 Jurisdiction when cause of action or defendant outside the State (1) The Court has jurisdiction to hear and determine proceedings with respect to a cause of action: … (c) even if the defendant is not within New South Wales, so long as: (i) the whole or a material part of the cause of action arose within New South Wales, and (ii) the defendant was within a State or a part of the Commonwealth (within the meaning of the Service and Execution of Process Act 1992 of the Commonwealth) at the time of service of the document that commenced the proceedings." (Emphasis added)
3. The learned magistrate heard submissions on 31 August 2017, 11 September 2017 and, it seems (there is no transcript), on 8 December 2017. She gave judgment on the last-mentioned date.
4. Her Honour summarised Marketlend's case as follows: "40 The plaintiff submits that the assignment of the debt occurred in NSW and from the evidence provided by the plaintiff that would appear to be the case. 41 The issue is whether a material part of the cause of action arose in NSW such that this court has jurisdiction to determine whether the debt alleged is payable to the plaintiff. 42 The only relevant conduct that occurred in NSW is the assignment of the debt. 43 As I understand it the plaintiff concedes that apart from the assignment of the debt the cause of action arose out of NSW. It submits that although the defendant does not reside in NSW a material part of the cause of action arose in NSW. Therefore by virtue of Section 34 this court has jurisdiction."
5. Her Honour referred to some case law and continued: "66 The cause of action in this matter is an allegation of a breach of contract and damages due as a result of the breach. That breach occurred in Western Australia. That is where the cause of action accrued. 67 The assignment of the debt merely passed the interest of the original assignor to the assignee. … 70 The assignment of the debt is simply an event that gives the plaintiff standing, it is not an event that gives rise to a cause of action rather the assignment is an event that occurred after the plaintiff's cause of action in debt had, on the plaintiff's case fully accrued. It is not a part of the cause of action itself. 71 The 'gist of the action' must have 'come into existence' within the jurisdiction. The gist of the action is the allegation of a debt as a result of a breach of contract, that breach of contract, if it occurred, occurred in Western Australia. That is where the cause of action came into existence. Therefore no material part of the cause of action arose in NSW and accordingly this court does not have jurisdiction to hear and determine the proceedings."
6. Her Honour made the following orders (as they are entered in JusticeLink): "1. No jurisdiction pursuant to Section 34 Local Court Act. 2. Notice of Motion Granted. Defendant's costs of proceedings to be paid by Plaintiff as agreed or assessed."

The application for leave to appeal

1. Marketlend commenced proceedings in this Court by the filing of a summons on 5 January 2018. The character of the appeal was incorrectly described in the summons but it is clear enough that it is pursuant to Div 4 Pt 3 of the Local Court Act where, in s 40(2), there is provision for an appeal by leave of this Court against an interlocutory judgment or order of the Local Court as well as against an order as to costs.

Submissions for the plaintiff

1. The plaintiff submitted that the magistrate had incorrectly found that the cause of action was merely for breach of contract and damages due as a result of the breach. The cause of action was an action to recover a debt which was alleged to have been assigned to the plaintiff. Proof of the assignment is critical to the success of the plaintiff's claim.
2. The plaintiff submitted that the magistrate did not apply "the correct test" formulated by Nash DCJ in Thomas v Penna & Ors (1985) 2 NSWLR 171 to determine whether the fact of the assignment was a material part of the cause of action. Reference was also made to Gleeson CJ having said in Falls Creek Ski Lifts Pty Ltd (1995) 37 NSWLR 344 that the decision of Nash DCJ was correct and should be followed. Adopting the "definition" of "material part of the cause of action" formulated by Nash DCJ, it was said that the essential elements of the plaintiff's case included: (i) the Medical Service was indebted to QNA; and (ii) QNA assigned to Marketlend its right, title and interest in that debt.
3. It was submitted that the assignment was not simply an event which gave the plaintiff standing to bring the proceedings; it was an essential element of the claim. It was suggested that this could be tested by asking whether the plaintiff would be able to obtain a verdict without proof of the assignment, the answer to which was "no".
4. It was submitted that, having found that the assignment of the debt occurred in New South Wales, the magistrate should have concluded that a material part of the cause of action arose in that State and so the Local Court had jurisdiction.

Submissions for the Defendant

1. Counsel for the defendant submitted that the principles articulated in Jackson v Spittall (1870) LR 5 CP 542, Thomas v Penna & Ors and Falls Creek Ski Lifts Pty Ltd v Yee led to the conclusion that no material part of the cause of action in the present case arose in New South Wales.
2. It was submitted that the magistrate was correct in regarding the contract of assignment as passing an interest or an existing proprietary right to Marketlend. It had no relevance to the coming into existence of the cause of action, or to the gist of the cause of action.

Consideration

1. This case is concerned with what is understood by the concept of a "cause of action" and what is the meaning of "material part of the cause of action" in s 34(1) of the Local Court Act. Is the cause of action just the unpaid debt, or is an additional element the plaintiff has to prove, namely its standing to bring proceedings for recovery, part of the cause of action as well?
2. I do not see how the plaintiff is assisted by Thomas v Penna & Ors (and Falls Creek Ski Lifts Pty Ltd v Yee since it says the same thing). Both cases involved a New South Wales plaintiff who was the victim of alleged negligence in another State by defendants who were residents of the other State. The plaintiffs returned to New South Wales where they continued to suffer and were treated for their injuries. The critical question was the construction of s 47(1)(c) of the District Court Act 1973 (NSW) which was at that time essentially in the same terms as s 34(1)(c) of the Local Court Act.
3. In Thomas v Penna & Ors, Nash DCJ said (at 176F): "I consider that 'material part of the cause of action' means any one or more of the essential elements of the claim, in this case those elements which give the plaintiff his cause of complaint."
4. His Honour discussed dictionary definitions of the adjective "material". He found them to confirm the meaning he had expressed. A little later he said (176G-177A), "I feel it is straining the meaning of the section to interpret the words 'material part of the cause of action' as a material part of one of the elements of the cause of action, particularly where that element is damage in personal injury litigation."
5. The effect of what Nash DCJ was saying is that the cause of action was negligence and the reference to a "material part" of it was a reference to one or more of the essential elements of a claim of negligence rather than to a constituent component of one of the elements. Gleeson CJ later said in Falls Creek Ski Lifts Pty Ltd v Yee (at 349C) that "the material parts of the plaintiff's cause of action are the duty of care, the breach and damage".
6. In both cases, the continuation of the element of damage in New South Wales, after it first "arose" in the other State failed to meet the jurisdictional requirement that "a material part of the cause of action arose within New South Wales". It was a part of the element; not an element in itself.
7. The plaintiff's reliance upon Thomas v Penna fails because it construes the reference by Nash DCJ to the "essential elements of the claim" as meaning every single matter that the plaintiff must prove. Nash DCJ qualified that expression by saying that he was referring to "those elements which give the plaintiff his cause of complaint". In that case it was negligence. In the present case it is an unpaid debt.
8. Nash DCJ was undoubtedly referring to Jackson v Spittall at 552, a case which despite its antiquity was described as "authoritative" in Distillers Co (Biochemicals) Ltd v Thompson [1971] 1 NSWLR 83; [1971] AC 458. The question in issue in Jackson v Spittall was described by Brett J (at 551) as, "the meaning of the phrase 'a cause of action'." His Honour answered the question thus (at 552): "It is … the act on the part of the defendant which gives the plaintiff his cause of complaint."
9. In the present case, there could be no suggestion that the assignment to Marketlend by QNA of the rights in respect of money owed by the Medical Service could ever be part of the act of the Medical Service which gives Marketlend its cause of complaint.
10. It is not uncommon that in civil claims for damages (liquidated or otherwise) there are sundry matters that a party is required to prove which could not sensibly be regarded as an essential element, or a material part, of the cause of action. The cause of action in this case was concerned with a debt for services provided remaining due and payable. The assignment, on the other hand, was concerned with the plaintiff's standing to bring a claim in respect of that cause of action.
11. The learned magistrate was correct to hold that the assignment of the debt was not a material part of the cause of action. On the basis that it was the only event that arose within New South Wales, her Honour was correct to hold that the Local Court did not have jurisdiction.
12. The plaintiff contended that there should at least be a grant of leave to appeal because the issue raised is not the subject of any direct authority. In my respectful view, however, the issue was advanced upon a misapprehension of existing authority and for that reason leave to appeal will be refused.

Costs

1. The applicant also sought leave to appeal in respect of the order that it should pay the Medical Service's costs. It was contended that the magistrate's wide discretion in relation to costs was exercised in a manner that was unreasonable or plainly unjust.
2. It was submitted that the appropriate manner for the defendant to raise a question of jurisdiction was to file a notice of motion pursuant to r 12.11(2) of the Uniform Civil Procedure Rules 2005 (NSW) and to do so after being served with the statement of claim. However, for a significant period of time the respondent had conducted itself in the proceedings as if the Local Court had jurisdiction, only to pursue such contention after it had been suggested by a court registrar. It was submitted that such conduct displaced the usual rule that costs follow the event. It was unfair for the applicant to be ordered to pay costs the defendant had unnecessarily incurred.
3. The respondent refuted the suggestion that there was any disentitling conduct on its behalf. It pointed out that the defence was filed promptly by its solicitors based in Western Australia but at the first listing for directions before the Registrar the issue was raised and it thereafter became the sole issue.
4. I was not provided with anything from which I could discern the arguments that were advanced before the magistrate and her Honour's reasons in relation to the costs issue. I do not know whether what was put to me was put before her or not. It is rather difficult in such circumstances to draw the conclusion for which the applicant contends; that the order for costs was unreasonable or plainly unjust.
5. On the face of it, the most telling point is that this whole case would never have been necessary if the applicant had instituted proceedings in the appropriate jurisdiction (Western Australia). The applicant acquired rights in relation to moneys owing from a Western Australian debtor to a Western Australian creditor in respect of services provided to the former by the latter in Western Australia. In such circumstances I cannot imagine why proceedings were instituted in New South Wales other than simply to meet the applicant's own convenience.
6. In any event, the applicant has failed in relation to the main issue sought to be appealed to this Court. It would have to be an unusual case in which this Court would grant leave to appeal against a costs order made in the Local Court. This case is not unusual. Leave to appeal against the order for costs should be refused.

Orders

1. I make the following orders: 1 Leave to appeal against the interlocutory judgment that the Local Court of New South Wales had no jurisdiction is refused. 2 Leave to appeal against the order that the applicant pay the respondent's costs of the proceedings in the Local Court is refused. 3 The applicant is to pay the costs of the respondent in respect of the proceedings in this Court.

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