7 HANDLEY AJA: These proceedings arise out of a caretaker agreement between Regis Towers Real Estate Pty Ltd (Caretaker) and Owners Corporation 56443 (Owners Corporation) for the Regis Towers apartment complex at 414-418 Pitt Street and 303-321 Castlereagh Street in the City of Sydney.
8 Meriton Apartments Pty Ltd (Meriton) was the developer for Regis Towers, and as such became the initial proprietor of the units in the strata plan.
9 On 20 April 1999 Meriton entered into a deed with the Caretaker whereby, in consideration of the sum of $1,750,000 paid by the latter, Meriton agreed to cause the Owners Corporation to enter into a caretaker agreement with the Caretaker. The Caretaker paid the contract price but borrowed $1,225,000 for this purpose from Meriton Finance Pty Ltd.
10 On 6 August 1999 the Caretaker entered into a caretaker agreement with the Owners Corporation.
11 Difficulties within the Owners Corporation led to the appointment of an administrator by the Consumer Trader and Tenancy Tribunal on 27 January 2003.
12 On 17 September 2004 the Caretaker entered into Voluntary Administration.
13 On 27 April 2005 Mr John Rose (Mr Rose), the principal director and shareholder of the Caretaker, commenced proceedings in the Industrial Relations Commission (Commission) pursuant to s.106 of the Industrial Relations Act 1996 (the 1996 Act). The Summons sought a declaration that the deed between the Caretaker and Meriton and the caretaker agreement between the Caretaker and the Owners Corporation, whereby Mr Rose performed work in an industry, was unfair, harsh or unconscionable. It also sought orders avoiding or varying the deed, orders varying the caretaker agreement, and monetary relief.
14 On 21 June 2005 Mr Rose presented a debtor's petition to the Official Receiver under s.55 of the Bankruptcy Act 1966 (the 1966 Act) and became a bankrupt (s.55(4A)). His property divisible among his creditors vested in his trustee in bankruptcy under s.58.
15 Section 106(1) of the 1996 Act confers jurisdiction on the Commission to avoid or vary contracts (as defined in s.105) whereby a person performs work in an industry and subs (5) confers jurisdiction to make orders for the payment of money in connection with any such contract.
16 Provisions of this nature perform a double function. They confer jurisdiction on the Court, and although relief is discretionary, they confer substantive rights on applicants. The principles were explained in R v Commonwealth Court of Conciliation & Arbitration ex parte Barrett (1945) 70 CLR 141 at 155 by Latham CJ and at 165-6 per Dixon J. These principles were applied to a predecessor of s.106 in Majik Markets Pty Ltd v Brake and Service Centre Drummoyne Pty Ltd (1991) 28 NSWLR 443, at 467.
17 Mr Rose's bankruptcy vested his chose in action under s.106 in his trustee, and activated s.60(3) of the 1966 Act. This provided that any "action commenced by the bankrupt" was stayed until the trustee elected to prosecute it or discontinue.
18 Proceedings under s.106 are an action for these purposes: Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45.
19 On 20 December 2005 the trustee purported by deed to assign the s.106 proceedings to Mr Rose who was still bankrupt.
20 On 4 January 2006 the solicitors for the Owners Corporation wrote to the trustee requiring him to elect within 28 days to prosecute or discontinue the s.106 proceedings.
21 The trustee replied on 7 January stating that he had assigned the chose in action to Mr Rose.
22 On 14 February 2006 the Owners Corporation filed a motion in the Commission to have the s.106 proceedings stayed or dismissed. It claimed that the assignment to Mr Rose was void or ineffective because the chose in action became after acquired property of the bankrupt which automatically re-vested in the trustee. The trustee had therefore failed to elect and the action had been abandoned pursuant to s.60(3) of the 1966 Act.
23 On 23 February Meriton filed a similar motion which also sought to have the proceedings struck out for lack of standing because Mr Rose was not a party to the deed or the caretaker agreement (the s.108 point). On 2 March the Owners Corporation filed a further motion based on the same point.
24 On 6 September 2006 Mr Rose filed a motion for leave to amend the Summons to add a claim for an order making him a party to the deed and the caretaker agreement. The motions were heard by Marks J who gave judgment on 31 October 2006 [2006] NSWIRComm 298. He held that the assignment was ineffective, the trustee had not made an effective election, and s.60(3) of the 1966 Act deemed the proceedings to have been abandoned. He also upheld the s.108 point. The Summons was dismissed.
25 Mr Rose sought leave to appeal to the Industrial Court of New South Wales which, on 30 November 2007 granted leave and allowed the appeal [2007] NSWIRComm 264. The Court held that Mr Rose had standing under s.108 to bring the proceedings because "contract" in that section had its defined meaning in s.105 which included "an arrangement" and "any related condition or collateral arrangement".
26 The Court held that on the strike out application based on the s.108 point the evidence had to be taken at its highest in favour of Mr Rose. On this basis he was arguably a party to an arrangement with Meriton and the Owners Corporation because he was to work as the caretaker of the complex and was the principal director and shareholder of the Caretaker.
27 The Industrial Court held that the assignment was effective and the trustee had elected to prosecute the s.106 proceedings by assigning the chose in action and writing to the solicitors for the Owners Corporation on 7 January 2006.
28 On 27 March 2008 Meriton and the Owners Corporation applied to the Federal Court in its original jurisdiction in bankruptcy for a declaration that the proceedings in the Commission were deemed abandoned under s.60 of the 1966 Act and for the orders made by the Industrial Court on 30 November 2007 and 14 February 2008 to be quashed. They also sought to prohibit the Industrial Court from further hearing the proceedings.
29 The application raised issues under the 1966 Act relating to the validity of the assignment and the purported election by the trustee.
30 The proceedings brought by the two corporations were a collateral attack on the decision of the Industrial Court in the original jurisdiction of the Federal Court. In their original form, the proceedings in the Federal Court were a relitigation of the issues under the 1966 Act that were dealt with by the Industrial Court. An issue then arose as to whether the matters dealt with by the Industrial Court were in fact within the exclusive jurisdiction of the Federal Court and other Federal courts by their being an exercise of jurisdiction in bankruptcy for the purposes of s.27 of the 1966 Act. Bankruptcy was defined in the 1966 Act, s.5(1) "in relation to jurisdiction or proceedings" as "any jurisdiction or proceedings under or by virtue of this Act."
31 The Federal Court proceedings were heard by a Full Court comprising Branson, Greenwood, and Perram JJ. By majority, Perram J dissenting, the proceedings were dismissed with costs: Meriton Apartments Pty Ltd v Industrial Court [2008] FCASC 172, 171 FCR 380 (Meriton).
32 The Court held that the decision of the Industrial Court that the s.106 proceedings had not been stayed or abandoned under s.60(2) and (3) of the 1966 Act was not an impermissible exercise of the exclusive bankruptcy jurisdiction conferred by s.27.
33 Greenwood and Perram JJ, Branson J dissenting, held that the trustee did not have the power to assign a legal proceeding or chose in action to an un-discharged bankrupt, but a different majority, Perram J dissenting, held that the decision of the Industrial Court on this question was not an impermissible exercise of the exclusive bankruptcy jurisdiction conferred by s.27.
34 Since the orders of the Industrial Court were within its invested Federal jurisdiction under s.39(2) of the Judiciary Act a majority of the Full Court declined to interfere.
35 The decision of the Federal Court did not create an issue estoppel on the invalidity of the assignment. In Blair v Curran (1939) 62 CLR 464, at 531 Dixon J said:
"The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion."
36 The position where a claim is rejected is clear as Dixon J. said in Blair v Curran at 532:
"Where the conclusion is against the existence of a right or claim … the estoppel covers only the actual ground upon which the existence of the right was negatived."
37 The opinions of Greenwood and Perram JJ on the invalidity of the assignment to the bankrupt, although seriously considered, were not the legal foundation for the dismissal of the proceedings and are only dicta.
38 The subsisting issue estoppel on the validity of the assignment is that created by the decision of the Industrial Court.
39 The next step in this saga occurred on 2 December 2008 when the corporations filed a Summons in this Court seeking prerogative relief in the nature of prohibition in respect of the proceedings in the Industrial Court. Mr Rose, who had been discharged from bankruptcy in June 2008, responded on 12 December with a motion to strike out the Summons as an abuse of process invoking the familiar Anshun principle.
40 The motion came before McColl JA who ordered that the issue of abuse of process be determined separately and referred the question to a Full Court.
41 The separate question, as reformulated by counsel during the hearing before this Court, was:
"Whether the issues, facts and outcomes of the Application to the Federal Court determined by the Full Court of the Federal Court including orders made on 13 October 2008 estop the claimants from contending in this Court by the Summons filed on 2 December 2008 that the Full Bench of the Industrial Court of New South Wales erred in its summary application decision of the issue whether the applicant has standing to apply for relief raised before it arising under s.108 of the Industrial Relations Act 1996 (NSW) for discretionary relief as framed in order (1) or alternatively whether it is an abuse of process."
42 The principle invoked by Mr Street SC for Mr Rose is that a matter or justiciable controversy with a Federal element in the claim or defence attracts Federal jurisdiction for the whole matter based on the same substratum of operative fact, except a State claim that is clearly severable: Felton v Mulligan (1971) 124 CLR 367, 373-4, 402-4; Fencott v Muller (1983) 152 CLR 570, 603-605; Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261, 290-293.
43 He submitted that the challenge to the Federal jurisdiction of the Industrial Court was part of a single matter or controversy relating to its jurisdiction. The Federal Court therefore had jurisdiction over the whole controversy, including the s.108 point.
44 He submitted that it was unreasonable for the corporations to limit their case in the Federal Court to the scope of the exclusive jurisdiction in bankruptcy when all jurisdictional issues could and should have been litigated there.
45 The foundation of the Federal Court's jurisdiction to review the orders of the Industrial Court, which was first identified by the Court itself, was the exclusive jurisdiction in bankruptcy under s.27 of the 1966 Act. The High Court has original jurisdiction under s.33(1)(b) of the Judiciary Act to make orders or direct the issue of writs "(b) requiring any court to abstain from the exercise of any Federal jurisdiction which it does not possess". The High Court could have issued a writ of prohibition to restrain any purported exercise by the Industrial Court of the exclusive Federal jurisdiction in bankruptcy.
46 Under s.39B(1A)(c) of the Judiciary Act the original jurisdiction of the Federal Court of Australia includes jurisdiction in any matter "(c) arising under any laws made by the Parliament other than a matter in respect of which a criminal prosecution is instituted …". The jurisdiction of the High Court under s.33(1)(b) of the Judiciary Act is a matter in its original jurisdiction arising under a law ("any law") made by the Parliament which is vested in the Federal Court by s.39B(1A)(c): Meriton (2008) 171 FCR 380, 432.
47 Section 19 of the Federal Court of Australia Act (the Court Act) gives the Court such original jurisdiction as is vested in it by laws made by the Parliament. The relevant laws are s.27 of the 1966 Act and s.39B of the Judiciary Act.
48 In the exercise of its original jurisdiction the Court may make binding declarations of right (s.21(1)), and is bound to grant all remedies to which any of the parties appears to be entitled in respect of any claim properly brought forward in the matter "so that, as far as possible, all matters in controversy between the parties may be completely and finally determined" (s.22) and it has power to issue or direct the issue of writs (s.23).
49 Section 32(1) of the Court Act gives the Court jurisdiction "in respect of matters not otherwise within its jurisdiction that are associated with matters in which the jurisdiction of the Court is invoked."
50 The section has been held to confer additional Federal jurisdiction on the Court which has not been conferred on it generally: Philip Morris Inc v Adam P. Brown Male Fashions Pty Ltd (1981) 148 CLR 457, 494, 516, 547 (Philip Morris). The section would not have given the Federal Court jurisdiction over any claim for prohibition based on State law.
51 The Federal aspects of the controversy arose after the s.106 proceedings were commenced, and were based on the supervening bankruptcy of Mr Rose, and the acts of the trustee. The substratum of operative fact of the original State controversy did not include the operative facts which attracted the supervening Federal issues.
52 The Industrial Court had Federal jurisdiction, vested in it by s.39(2) of the Judiciary Act, to deal with the Federal defences under the 1966 Act, and, in accordance with Felton v Mulligan and the later cases, its jurisdiction became wholly Federal cf Gosper v Sawyer (1985) 160 CLR 548.
53 The substratum of operative fact for the proceedings in the Federal Court was limited to those which raised the Federal issues. The case as presented did not include the facts relating to the decision of the Industrial Court on the s.108 point. The corporations presented a purely Federal controversy for resolution by the Federal Court, and did not rely on any wider controversy which may have been within its accrued jurisdiction.
54 The case is unlike the paradigm High Court cases on the accrued jurisdiction of the Federal Court including Philip Morris (1981) 148 CLR 457. In those cases the applicants invoked the accrued jurisdiction of the Federal Court over State issues by raising them for determination by that Court.
55 In this case neither side attempted to invoke any accrued jurisdiction the Federal Court may have possessed to determine the s.108 point.
56 The Federal Court is not bound to exercise its accrued jurisdiction, but has a discretion. In Philip Morris (above) at 475 Barwick CJ said:
"This exercise of this jurisdiction, which for want of a better term I shall call 'accrued jurisdiction' is discretionary and not mandatory, though it will be obligatory to exercise the Federal jurisdiction which has been attracted in relation to the matter."
57 This was accepted in Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261 by Mason, Brennan, and Deane JJ who said at 294-5:
"In expressing this opinion Barwick CJ expressly acknowledged that the Federal Court had a discretion to allow the non-Federal claims to be determined in a State court. … It is for the Federal Court to determine how the discretion is to be exercised … In ordinary circumstances the Federal Court would … have regard to the fact that it is the one court with jurisdiction to resolve the whole of the controversy of which the Federal issues are an element … Here the significance of this factor is substantially diminished, if not eliminated, by the summary judgments already delivered in two of the Supreme Court actions. Obviously there is no point in the Federal Court exercising a discretion to determine non-Federal issues which have already been determined by the Supreme Court, subject to the pending appeals. The Supreme Court proceedings have resulted in judgments which, unless upset on appeal, constitute determinations of the non-Federal issues which are binding on the parties."
58 The Anshun objection is based on the submission that the corporations could and should have attempted to invoke the accrued jurisdiction of the Federal Court to have it determine the s.108 point.
59 It would be strange if a litigant in the Federal Court was bound, at the risk of an Anshun estoppel, to invoke its accrued jurisdiction, when the Court can decline to exercise that jurisdiction.
60 The Anshun test is based on the reasonableness or otherwise of the conduct of a litigant in earlier proceedings. In Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, 602-4 Gibbs, Mason and Aickin JJ said:
"… there will be no estoppel unless it appears that the matter relied upon … in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking it would be unreasonable not to plead a defence if … it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect we need to record that there are a variety of circumstances … why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings … The likelihood that the omission to plead a defence will contribute to the existence of conflicting judgments is obviously an important factor … in deciding whether the omission … can found an estoppel against the assertion of the same matter as a foundation for a cause of action in a second proceedings. By 'conflicting' judgments we include judgments which are contradictory, though they may not be pronounced on the same cause of action. It is enough that they appear to declare rights which are inconsistent in respect of the same transaction."
61 The High Court was dealing with a case where the Authority failed to rely on its indemnity as a defence to Anshun's claim for contribution, but the principles are of general application.
62 The question then is whether the corporations "would be expected" to raise the purely State issues in the Federal Court. A similar question was considered by the Full Federal Court in Ling v Commonwealth (1996) 68 FCR 180. The Commonwealth, as assignee, sued Mr Ling in the Federal Court to recover deposits paid by foreign students for educational courses in Australia and for misleading and deceptive conduct. It recovered judgment for $7.9 million.
63 Its attempts to have Mr Ling made bankrupt were met with a defence under s.40(1)(g) of the 1996 Act based on a counterclaim "that he … could not have set up in the action … in which the judgment … was obtained", being a counterclaim against the Commonwealth for negligent misrepresentation about its visa policy for foreign students.
64 Mr Ling commenced proceedings in the Supreme Court of Victoria to enforce that claim which were transferred to the Federal Court where the Commonwealth moved to strike out the action for an Anshun estoppel. It succeeded at first instance but the decision was reversed by the Full Court.
65 The Commonwealth argued that Mr Ling could have brought his cross-claim against it in the original Federal Court proceedings. That Court did not have general jurisdiction in actions in which the Commonwealth was a party but Wilcox J was satisfied that it had jurisdiction to entertain the cross claim under s.32 of the Court Act (ibid at 184). He continued at 184-5:
"In considering reasonableness … consideration must be given to all aspects of the case … They … include any difficulties that existed, or might reasonably have been perceived, in raising the matter earlier. Where the matter can be raised only by way of cross-claim, as distinct from defence, and there was a serious question about the entitlement of the Court to consider the cross-claim, there is an obvious difficulty in arguing that it was unreasonable for the party not to have done so. … The Court's jurisdiction to entertain his claim was not blindingly obvious … I think it was not unreasonable for Mr Ling to fail to raise in the first action the matters he now seeks to raise in his action against the Commonwealth."
66 The principal judgment was that of Sundberg J who considered (pp189-193) whether and how the Court could have had jurisdiction to entertain the cross-claim. His reasoning on that question is not presently relevant, but (at p194) he concluded that it was not unreasonable for Mr Ling not to follow what he had described as "the tortuous route" in order to bring his cross-claim.
67 Sundberg J then held that it was not unreasonable for Mr Ling not to have relied on s.32 of the Court Act, saying (at p194-5):
"The final consideration is that although I have concluded that s.32 gave this Court jurisdiction to hear the negligence claim, the process of reasoning involved discloses that that conclusion is not obvious. … No earlier case actually decides the point … Before parting with this issue, I should express my view that Anshun was a clear case. Only one court was involved. No jurisdictional issues complicated the scene. No rules of court threw up obstacles. The judgment sought to be obtained by the Authority would conflict with that already obtained against it."
68 The Court allowed the appeal, dismissed the Commonwealth's motion, and set aside the sequestration order.
69 The discretion of the Federal Court to withhold relief, which is akin to its discretion to decline accrued jurisdiction, was considered in Meriton [2008] FCAFC 172, 171 FCR 380. The Judges' reasoning gives some indication of the approach they would have adopted to an attempt to invoke the accrued jurisdiction to obtain a decision on the s.108 point.
70 Branson J said (at p389):
"I do not consider it necessary to decide whether this Court has the power to set aside or vary orders made by the Industrial Court of New South Wales. As 'a matter of commonsense, practical convenience and Federal comity' … supervision of that court, including by way of setting aside orders made in excess of jurisdiction, should ordinarily be exercised by the Court of Appeal of New South Wales or the High Court. If the Full Bench of the Industrial Court of New South Wales was exercising Federal jurisdiction when it allowed the appeal from the judgment of Marks J, the High Court may grant [special] leave to appeal from its decision whatever the intended ambit of the privative clause … in s.179 of the [1996 Act] … I am satisfied that avenues for seeking relief other than by way of the present application to this Court are available to the applicants."
71 Greenwood J (at p417) referred to the orders of the Industrial Court and continued:
"Those orders were made within jurisdiction. Although the Industrial Court erred by concluding that the assignment by the trustee to Rose was valid, the error was … within jurisdiction. It is true that the error results in the maintenance of proceedings before the Industrial Court that Rose has no standing to maintain. That is unquestionably an unsatisfactory situation. Should that situation be remedied by this Court? Since there is no impermissible exercise of exclusive jurisdiction in bankruptcy, nor any other demonstrated jurisdictional error, the applicants in essence seek to challenge before this Court the result of … earlier proceedings … between the same parties in relation to the same issues. The proceedings in this Court are an abuse …".
72 He said (at pp417-8) that if if he had been of a different opinion on the Federal jurisdictional questions:
"The Court in principle ought to declare that the determination of the motions by the Industrial Relations Commission in Court Session engaged an exercise of [the exclusive] jurisdiction in bankruptcy … This court ought to declare that the assignment … of 20 December 2005 is invalid … and declare that the s.106 proceeding remains vested in the trustee. The Court should order that Rose be restrained from taking any further step in the s.106 proceeding as assignee of that proceeding from the trustee … If a State court has impermissibly exercised a jurisdiction that the Parliament of the Commonwealth has vested exclusively in the s.27 courts … orders of such a State court ought not to remain on the record. They are in truth a nullity … the interests of the administration of justice are not served nor the interests of the parties by electing to leave in place orders of the Court made beyond jurisdiction."
73 Perram J, who dissented said (at p432):
"… there seems to be no reason in principle why this Court, in the exercise of the jurisdiction conferred by s.39B(1A)(c), cannot keep State courts within their federally defined limits. This Court therefore has power to set aside the orders of the Industrial Relations Court. The question then becomes whether that power should be exercised in favour of the applicants … To decline to set aside the orders of the Industrial Relations court would operate effectively as a refusal by this Court to carry out the functions assigned to it by s.27."
74 He returned to these questions at pp441-2:
"… the orders of the Industrial Relations Court should be set aside for a jurisdictional error having its source in s.27. If those orders are set aside then the questions raised by s.60(2) and (3) will not have been determined. Either that Court or this Court - pursuant to s.39B(1A) of the Judiciary Act - could resolve that issue. However I do not think that this Court should do so. Its role in this proceeding has been to declare that which only it can declare by reason of s.27. Once it has performed that function there is no obvious reason why it should carry out a function which has many practical connections with the Industrial Relations Court and almost none with this Court. … It is not the role of this Court to ensure that State courts do not commit federal errors of law where those errors are not jurisdictional … This Court should decline to decide the issues which arise under s.60(2) and (3) and those issues should be left to the Industrial Relations Court to decide."
75 There is therefore some reason for thinking that the Federal Court would have declined to exercise its accrued jurisdiction to review the decision of the Industrial Court for jurisdictional error on the s.108 point.
76 There was no evidence of any subjective considerations which influenced the decision of the corporations to limit the scope of their Federal Court proceedings, but this does not prevent this Court considering whether their decision, judged objectively, was unreasonable.
77 I have not been persuaded that the decision of the corporations to confine their challenge in the Federal Court to strictly Federal issues was objectively unreasonable.
78 The existence of the necessary accrued jurisdiction in this case is debatable because there may be no common substratum of operative fact, the s.108 point may be severable, and the Federal Court may have declined to exercise its accrued jurisdiction on discretionary grounds. Moreover I would not regard a decision that the Industrial Court had not exceeded its invested Federal jurisdiction as inconsistent with a decision that it had exceeded its State jurisdiction.
79 In my judgment the strike out application by Mr Rose fails, there is no Anshun estoppel or abuse of process, and the pending Summons for prerogative relief should be heard and determined by this Court on its merits.
80 I would therefore propose that the separate question be answered "No" and that Mr Rose be ordered to pay the costs of the strike out motion and the separate question.