Abuse of process
17 Darling submits that for federal jurisdiction to be invoked so that a matter is pending before the Federal Court, it is necessary for the claims to be genuine and not colourable in the sense that they are not fabricated for the purpose of establishing jurisdiction: see Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212 at 219. This principle was applied by Carr J in The Bell Group Ltd v Westpac Banking Corporation (2000) 104 FCR 305 at 328-332. His Honour there said at 328:
"To invoke federal jurisdiction it is necessary for the claim or defence raised to be genuine and not a mere subterfuge to fabricate jurisdiction … the strength of the claim or defence is immaterial …"
18 That case involved questions of limitation and his Honour considered that the cross-claims were not colourable.
19 In the present case Darling contends that the federal claims made are so flawed and without foundation as to be colourable under the above principle.
20 Having considered the submissions of both parties on this question I am not persuaded that the claims are without any reasonably, arguable basis or that they can be described as colourable. There was some discussion before me as to whether a dismissal of proceedings for an abuse of process in the present circumstances is in the nature of an interlocutory order or is one for final relief, in particular for the purpose of considering the admissibility of evidence. It is not necessary for me to resolve this question because, even on an interlocutory standard, I do not find the claims to be colourable or without foundation as to warrant dismissal of the application on that basis in relation to the federal claims.
21 The formulation of the claims as pleaded in the Statement of Claim are unsatisfactory but are not such that they lack foundation. The argument raised in this respect really goes to the striking out and possible amendment of the pleading. But they do not call for foreclosure of the right of Palm Springs to pursue those matters. At this stage of the proceedings there has been no interlocutory process in the nature of discovery, particulars, interrogatories, notices to produce, subpoenas, or notices to admit for example. The material presently before the Court provides an inadequate basis on which to make any definitive determination as to the merits of the matter and there are many aspects of the case which call for further investigation. The evidence of Darling is largely documentary and to some extent hearsay. It provides an unsound basis, even taking the hearsay material into account, in finding that there is no substance in the federal claims. The provenance, meaning, effect and context of documents produced to me in the course of the hearing have not been explored to any extent and no evidence has been forthcoming from Palm Springs in relation to the matters raised. There has been no cross-examination and there is no basis on which to make any findings of fact or determinations of law. In these circumstances it is not appropriate to conclude that there is no factual or legal foundation for any of the matters raised. I therefore do not approach the matter on the basis that the proceedings in this case should be dismissed as lacking any substance.
22 However, I am satisfied that the proceedings have been instituted in this Court for an ulterior and collateral purpose outside the Federal Court of Australia Act 1976 (Cth) ("the FCA"). It has been frankly conceded that the purpose of the commencement of proceedings in this Court is to procure a situation whereby all issues will be heard together in the Supreme Court and that the initiation and transfer of the Federal Court proceedings is an essential step in securing this result.
23 The most pertinent authority on the question of abuse of process for present purposes is the High Court decision in Williams v Spautz (1992) 174 CLR 509.
24 That case concerned the institution of criminal proceedings for defamation with the predominant purpose of obtaining re-instatement in employment at the University and to procure a settlement of a claim for wrongful dismissal. The majority judgment makes it clear that the Court was concerned with the predominant purpose and that the power of the Court to protect against abuse of process will be applied notwithstanding that the initial proceeding, if prosecuted to a conclusion, might result in the judgment sought by the moving party: see Spautz at 521 and 529. The Court endorsed an objective approach to ascertaining the intention of the moving party rather than taking a purely subjective approach. At 522 the majority said in relation to abuse of process:
"In our view, the power must extend to the prevention of an abuse of process resulting in oppression, even if the moving party has a prima facie case or must be assumed to have a prima facie case. Take, for example, a situation in which the moving party commences criminal proceedings. He or she can establish a prima facie case against the defendant but has no intention of prosecuting the proceedings to a conclusion because he or she wishes to use them only as a means of extorting a pecuniary benefit from the defendant. It would be extraordinary if the court lacked power to prevent the abuse of process in these circumstances." (Emphasis added)
25 Later at 526, their Honours said that it may be an abuse of process when the purpose of bringing the proceedings is to use them as a means of obtaining some advantage for which they are not designed or some collateral advantage beyond which the law offers.
26 At 528, the majority endorsed as a general statement of principle, the proposition expounded by Lord Evershed MR in In re Majory [1955] Ch. 600, at 623-624, that:
" … court proceedings may not be used or threatened for the purpose of obtaining for the person so using or threatening them some collateral advantage to himself, and not for the purpose for which such proceedings are properly designed and exist; and a party so using or threatening proceedings will be liable to be held guilty of abusing the process of the court and therefore disqualified from invoking the powers of the court by proceedings he has abused."
27 For Palm Springs it is said that there is no abuse of process because it seeks to obtain the relief sought in relation to its claims. It prefers to have them disposed of in the Supreme Court where all issues in the three jurisdictions can be resolved together. It also submits that if any transfer motion is eventually made, and refused, then it will litigate all federal and state claims in the Federal Court proceedings (with the exception of the IRC claims) to a final determination. In addition, it submits that the approach taken is open in law to it and is contemplated by legislation so that it can be said to be taking an advantage that the law offers, namely, the invocation of federal jurisdiction to enable the transfer of IRC proceedings to the Supreme Court.
28 While these submissions have some force, I consider that the material before me is sufficient to warrant the conclusion that the objective, predominant intention of Palm Springs is to use the Federal Court for a purpose other than exercise of the jurisdiction for which the Federal Court was established.
29 In this case, the predominant purpose objectively determined of Palm Springs is not to have the proceedings decided by the Federal Court in the exercise of the judicial power of the Commonwealth, but rather to use the Federal Court proceedings as a means to consolidating all proceedings both state and federal into one combined hearing in the Supreme Court. The question is essentially one of characterisation but, in my view, such use of this Court is one for which the Court's jurisdiction was never designed and is a use of the proceedings for a collateral or ulterior purpose foreign to the jurisdiction conferred.
30 It was always envisaged in this case that federal jurisdiction was to be invoked, not to exercise the judicial power of the Commonwealth or to vindicate the rights and obligations of the parties, but to enable cross-vesting under state legislation from a court other than the Supreme Court into the Supreme Court.
31 In two cases to which I have been referred, Judges of the Supreme Court have expressed reservations about the use of cross-vesting provisions in situations where the jurisdiction of the IRC, the Supreme Court and the Federal Court under s 8 of the State CVA was under consideration: see Wood v Boral Resources (NSW) Pty Ltd (unreported, NSW Supreme Court, McLelland CJ in Eq, 28 October 1993) and ECC Lighting Ltd v McGurk (unreported, NSW Supreme Court, Santow J, 15 June 1995), where Santow J said in exercising the Court's discretion not to transfer:
'The other factor which I attribute considerable weight is that the Federal Court proceedings, which are a condition precedent for the cross-vesting to be able to take effect, were only instituted on 2 June 1995. Those proceedings for the first time raised matters under s52 of the Trade Practices Act 1974. Again, it was properly and frankly acknowledged that those proceedings were brought simply to facilitate cross-vesting. It was considered that the representations upon which those proceedings are founded could equally have been pleaded or made the subject of an amended cross-claim in this Court under identical legislation. It must be an abuse of process to commence proceedings purely to facilitate cross-vesting.… Here the forensic advantage that the Applicant seeks, as he candidly and properly acknowledges, is the capacity to have all matters in question heard together, consolidated with the belatedly brought proceedings in the Federal Court constrained for that very purpose … These are all considerations which, in the interests of justice, weigh against allowing the Applicant to succeed in his application to cross-vest." (Emphasis added)
32 Of course, in that case the proceedings- involved the exercise of discretion in relation to a transfer and not to a dismissal for abuse of process. In a further case, Ge v River Island Clothing Pty Ltd [2001] NSWSC 935 at [10], [12] and [19]-[20], Studdert J stated that it was an abuse of court process to transfer proceedings where the only purpose of seeking relief in the Supreme Court was to avoid the appellant's opposition to unlimited jurisdiction in the District Court yet still proceed to trial in that Court. His Honour considered that use of the transfer of proceedings in a manner that was never intended and in a manner that deprived the appellants of legitimate expectations (that the District Court's jurisdiction would be limited to $750,000) was an abuse of process and he therefore declined to remit the matter to the District Court.
33 There is also a helpful examination of the relevant principles in BT Australasia Pty Ltd v State of New South Wales and Telstra Corporation Ltd (No 13) (unreported, Federal Court of Australia, Sackville J, 29 September 1998)
34 The Federal Court was established to exercise the judicial power of the Commonwealth in relation to matters properly before it in order to determine the claims and vindicate the rights and obligations of the parties by a binding and enforceable decision. It was not designed to serve as a jurisdictional transit point to facilitate transfer so as to enable a resolution of issues in a state court under state legislation.
35 In conclusion, although I am not satisfied that the federal claims brought in this Court on behalf of Palm Springs are without foundation or are so unarguable as to warrant dismissal, I am satisfied that the institution of these proceedings was predominantly for a collateral purpose foreign to the purpose for which the Federal Court was invested with the judicial power of the Commonwealth and that the institution of proceedings amounts to an abuse of process. Accordingly, the application for dismissal of the proceedings as an abuse of process should be granted and the respondent to the motion should pay the applicant's costs on the application.