Saitta Pty Ltd v Commonwealth of Australia [2001] VSC 170

Supreme Court of Victoria|2001-05-31|Before: BEACH, J.

This is an appeal from the order of a Master of the Court made on 2 April 2001 whereby the Master dismissed the defendant's application to strike out a number of paragraphs in the plaintiff's statement of claim.

On 15 September 1999 the plaintiff Saitta Pty. Ltd. filed a writ in the Court seeking to recover damages from the defendant, the Commonwealth of Australia, in respect of moneys which it claims should have been paid to it by the defendant pursuant to the provisions of the National Health Act 1953 between October 1992 and May 1996.

In 1992 the plaintiff determined to have a new nursing home constructed at Keilor and to transfer the 30 beds in its existing nursing home at Moonee Ponds to the new home.

On 14 August 1992 the plaintiff advised the defendant of the progress being made with the relocation project and the proposed commencement and completion dates for the project.

In January 1992 the plaintiff had received a funding circular from the defendant which represented that any approved application for funding would result in the plaintiff receiving $508,608 over a 10 year period.

On 29 October 1992 the plaintiff made such an application. However, in April 1993 the defendant refused the application on the ground it had insufficient funds and suggested that the plaintiff should reapply in 1993/1994.

In October 1993 the plaintiff made a further application

On 24 November 1993 the plaintiff relocated to the new premises.

On 17 December 1993 the appropriate Minister approved the plaintiff's application in the sum of $396,240 for 10 years from the date of relocation of the Moonee Ponds home to the new premises.

The defendant made no payment of the recurrent capital grant to the plaintiff although on 27 July 1994 it again advised the plaintiff that provisional funding of $396,240 would be payable to it over 10 years commencing on the completion of the project.

However, on this occasion the defendant attached a number of conditions to the approval, conditions the plaintiff maintains it was not practical for it to comply with at that time.

In May 1996 the defendant commenced payment of a recurrent capital grant to the plaintiff.

The plaintiff claims that the delay in payment caused it substantial unnecessary costs and expenditure, loss and damage.

In respect of those matters the plaintiff alleges that the defendant, in trade and commerce, engaged in misleading and deceptive conduct contrary to s.52 of the Trade Practices Act 1974 (C'th.)

The second claim made by the plaintiff against the defendant relates to the disallowance by the defendant of nursing and personal care costs which the plaintiff alleges it was entitled to under the National Health Act between September 1993 and May 1996. Again the plaintiff alleges that the defendant's conduct in that regard was contrary to s.52 of the Trade Practices Act.

By its statement of claim the plaintiff alleges that the defendant carried on business within the meaning of s.2A of the Trade Practices Act and was bound by the provisions of that Act as if it were a corporation.

On 16 January it filed a summons in the Court seeking (inter alia) to have paragraphs 7(a), 7(b), 46 and 66 of the statement of claim "dismissed on the ground that no reasonable cause of action is disclosed therein".

"7. In the premises, at all material times: (a) The defendant carried on a business within the meaning of the provisions of section 2A of the Trade Practices Act 1974 ('the TPA'). (b) The defendant was bound by the provisions of the TPA as if it were a corporation. ... 46. Further or alternatively: (a) At all material times the defendant knew and intended that: (i) It would not approve payment to the plaintiff of additional recurrent funding for its said relocation project if the defendant considered that insufficient funds were available. (ii) It would not make any payments of additional funding to the plaintiff upon or within a reasonable time after the completion of the relocation project. (iii) It would not pay any amount of additional recurrent funding approved for the said relocation project unless the plaintiff provided to the defendant information required by the additional conditions. (b) By reason of the matters referred to in paragraphs 14, 16, 17, 18, 19, 20, 24, 26, 27, 28, 41 and 42 hereof, and the matters referred to in sub-paragraph (a) hereof, the defendant in trade or commerce, engaged in conduct that is misleading or deceptive or likely to mislead or deceive, in contravention of the provisions of section 52 of the TPA. ... 66. Further or alternatively to paragraph 65 hereof: (a) At all material times the defendant knew and intended that: (i) all costs incurred by the plaintiff in the employment of nursing and personal care staff at the Moonee Ponds Nursing Home would not be treated by it as NPC costs; (ii) it would endeavour to recover from the plaintiff a proportion of the said costs incurred by the plaintiff on the said basis relied upon in the Validation, or on a similar basis, as an overpayment. (b) by reason of the matters referred to in paragraphs 48, 50, 51, 52, 53, 54, 55, 56, 61 and 62 hereof the defendant, in trade or commerce, engaged in conduct that is misleading or deceptive or is likely to mislead or deceive, and thereby acted in contravention of the provisions of section 52 of the TPA."

The Master dismissed the application stating in his written reasons for judgment:

"Without evidence I am not in this case convinced the plaintiff will not be able to prove that the Commonwealth was carrying on a business."

It is from that decision that the defendant appeals to a Judge of the Court.

It is trite law that a court must exercise "extreme caution" when determining an application for summary dismissal. See General Steel Industries Inc. v. Commissioner for Railways (N.S.W.)[1]

As Dixon, J. (as he then was) said in Dey v. Victorian Railway Commissioners[2]:

"... once it appears that there is a real question to be determined whether a fact or law and that the rights of the parties depend upon it, then it is not competent to dismiss the action as frivolous and vexatious."

The National Health Act is an Act which is expressed to relate to the provision of pharmaceutical, sickness and hospital benefits, and of medical and dental services.

Is it arguable that in performing those services the defendant is carrying on a business?

Section 2A of the Trade Practices Act was introduced into the Act in 1977. That aspect was adverted to by the Full Court of the Federal Court in Burgundy Royale Investments Pty. Ltd. and Others v. Westpac Banking Corporation and Others[3]. At p.214 the Court said:

"As originally enacted, the Act was silent on the question whether it was intended to bind the Crown in any right. In 1977, s.2A was introduced into the Act. The reason for its introduction was explained by the Minister (Mr. Howard) in his Second-Reading Speech (see Australia, House of Representative, Debates, 3 May 1977, p.1477) as follows: 'Government Commercial Operations I announced last December that the Government had decided in principle that its commercial operations should be subject to the same restraints of the Trade Practices Act as apply to like operations of private enterprise. I then informed this House that the Government was studying the detailed implementation of this decision. This Bill gives effect to that decision in clause 4 which provides that the Act is to apply to all business undertakings of the Commonwealth Government and its authorities. There is only one specific exception. Land development in the Australian Capital Territory is specifically exempted, so as not to inhibit town planning in the Australian Capital Territory. Although provision is made in the Bill for regulations to provide other exemptions, the Government has no present plans to use that power.' Section 2A provides: 'Application of Act to Commonwealth and Commonwealth authorities 2A. (1) Subject to this section, this Act (other than Part X) binds the Crown in right to the Commonwealth in so far as the Crown in right of the Commonwealth carries on a business, either directly or by an authority of the Commonwealth. (2) Subject to the succeeding provisions of this section, this Act applies as if - (a) the Commonwealth, in so far as it carries on a business otherwise than by an authority of the Commonwealth; and (b) each authority of the Commonwealth (whether or not acting as an agent of the Crown in right of the Commonwealth) in so far as it carries on a business, were a corporation. (3) Nothing in this Act renders the Crown in right of the Commonwealth liable to be prosecuted for an offence. (4) Part IV does not apply in relation to the business carried on by the Commonwealth in developing and disposing of interests in land in the Australian Capital Territory'."

In Corrections Corporation of Australia Pty. Ltd. v. Commonwealth of Australia[4] Finkelstein, J. was required to consider whether in providing centres for the detention of unlawful non-citizens, the Commonwealth was carrying on a business within the meaning of s.2A of the Trade Practices Act. At p.451 his Honour said:

"Before giving further consideration to whether the described activities of the Commonwealth amount to carrying on a business, it is necessary to deal with the meaning of that concept. As Mason, J. observed in Commissioner of Taxation (C'th) v. Whitfords Beach Pty. Ltd. [1982] HCA 8; (1982) 150 CLR 355 at 378-379 there is often ambiguity about the meaning of words like 'business', 'commercial' and 'trading'. The meaning that the word 'business' is to bear, must be considered in the context in which it is used. Here that context is legislation that is, generally speaking, concerned with the conduct of trading corporations and financial corporations that compete in a market for the provision of goods and services (Pt IV of the Trade Practices Act), or that are engaged in trade or commerce or are otherwise involved in the provision of goods and services (Pt V of the Trade Practices Act). Thus it is plain enough that the 'carrying on of a business' that will bring the Commonwealth under the Trade Practices Act is intended to refer to activities undertaken in a commercial enterprise or as a 'going concern'. Ordinarily, a commercial enterprise is one that the proprietor conducts with a view to a profit. That is not necessary for the purposes of s.2A as 'business' is defined in s.4(1) to include a business not carried on for profit. A similar view of the meaning of 'carrying on a business' was taken by McLelland J in National Management Services (Australia) Pty. Ltd. v. Commonwealth (1990) 9 BCL 190. McLelland J. said (at 198): 'The claim under [the Trade Practices Act] is for damages pursuant to s.82 in respect of an alleged contravention by the Commonwealth of s.52, which prohibits certain conduct by a 'corporation'. Section 2A provides that the Act binds the Commonwealth insofar as it carries on a business, as if it were a corporation. By s.4, 'business' includes a business not carried on for profit. The plaintiff's claim based on this Act depends, inter alia, on characterising the Commonwealth's role in the development of the Phillip Street site as carrying on a business. The evidence establishes that the Commonwealth required five floors of the new building on the Phillip Street site for the purpose of providing Cabinet and Ministerial offices. The Commonwealth's role in the development was carried on through the Department of Administrative Services. There is nothing to suggest that in relation to the development of the site the Commonwealth was engaged in a trading or commercial activity which could appropriately be characterised as carrying on a business.' It seems to me to be clear beyond argument that operating a detention centre is not a trading or commercial activity of the executive branch. It is no different from a government maintaining and operating a prison for convicted felons. Maintaining and operating a prison may be described by some as 'government business', but it does not amount to the carrying on of a trading or commercial activity. When laws provide that a person should be held in custody, whether that person be a prisoner serving a sentence for the commission of an offence or a non-citizen pending his deportation, the government is not providing any service either to the department which has responsibility for those persons or to the person in prison or detention. Even if what is being done could be characterised as the provision of a service, by no use of the English language could it be described as the carrying on of a business."

In my opinion the provision by the defendant of pharmaceutical, sickness and hospital benefits, and of medical and dental services in accordance with the provisions of the National Health Act cannot be described as carrying on a business. It is not a trading or commercial activity. It is not something engaged in by the defendant for the purpose of profit. The administration of an Act of Parliament such as the National Health Act is quite distinct from carrying on a business.

At the outset of the hearing of the appeal counsel for the plaintiff made an application for special leave to rely on an affidavit of Graham Peter Menere sworn 15 May 2001.

In the circumstances I give that leave. However, in my opinion the content of the additional affidavit does not advance the case for the plaintiff so far as the issue I am required to determine is concerned.

The appeal will be allowed and the orders made by the Master in paragraphs 1 and 5 of his order of 6 April 2001 are set aside.

I order that paragraphs 7(a). 7(b), 46 and 66 of the plaintiff's statement of claim be struck out.

I order that the plaintiff pay the defendant's costs of the application to the Master on 6 April 2001 and its costs of the appeal such costs to include any reserved costs applicable to the application and the appeal.

I grant to the plaintiff the appropriate certificate pursuant to the Appeal Costs Act in respect of its costs of the appeal and the costs of the appeal it is required to pay to the plaintiff.

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