Westpac Banking Corp v Paterson

REASONS FOR JUDGMENT THE COURT 1 This is an appeal against a declaration made by the primary Judge that the Court had no jurisdiction to determine certain proceedings between the appellant and the respondent. At the conclusion of the hearing, we announced that the appeal would be allowed and that we would publish our reasons later. These are our reasons for allowing the appeal. 2 On 17 March 1995, the appellant ("Westpac") instituted proceedings in the Supreme Court of New South Wales against the respondent ("Mrs Paterson") and her former husband ("Mr Paterson"). Westpac sought an order for possession of residential premises located at North Rocks in Sydney, by reason of the default of Mr and Mrs Paterson under the terms of a mortgage executed by them on 9 September 1993 ("the Mortgage"). The statement of claim pleaded the terms of the relevant documentation and alleged defaults by Mr and Mrs Paterson under the Mortgage, which were said to give rise to an entitlement in Westpac to possession of the premises. 3 On 21 April 1995, Mr and Mrs Paterson filed a cross-claim in the proceedings. The pleaded cross-claims were confined to special disabilities, duress and other disabling factors said to have affected Mrs Paterson. The cross-claim sought, inter alia, a declaration that the Mortgage and a related loan agreement were unjust within the meaning of ss 7(1) and 9 of the Contracts Review Act 1980 (NSW) ("Contracts Review Act") and an order under s 7(1)(d) of that Act setting aside the Mortgage. 4 On 6 May 1996, the proceedings were transferred to this Court by order of the Supreme Court of New South Wales, pursuant to the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW). The order transferring what we shall describe as the "Paterson proceedings" appears to have been made because they were thought to be related to existing proceedings in this Court in which the Patersons and others were applicants (these were referred to in argument as the "Endormer proceedings"). 5 On 16 August 1996, Mr and Mrs Paterson filed what was described as an "amended cross-claim" in the Paterson proceedings. The cross-claim pleaded, inter alia, that Australian Guarantee Corporation ("AGC"), a subsidiary of Westpac, had engaged in misleading and deceptive conduct, in contravention of s 52 of the Trade Practices Act 1974 (Cth) ("TP Act"), and had thereby induced Mr and Mrs Paterson to execute certain guarantees in favour of AGC and had also induced Endormer and other parties to act to their detriment. The amended cross-claim also alleged that Westpac had procured execution of the Mortgage by misleading and deceptive conduct in contravention of s 52 of the TP Act and by unconscionable conduct in contravention of s 51AA of the TP Act. The amended cross-claim repeated or reformulated allegations that the Mortgage was unjust within ss 7(1) and 9 of the Contracts Review Act, and that Mr and Mrs Paterson had been subjected to undue influence and economic duress. The relief sought in the cross-claim included orders pursuant to s 87 of the TP Act setting aside the Mortgage or declaring it to be unenforceable, as well as relief under the Contracts Review Act and the general law. 6 The Paterson proceedings were listed for hearing in this Court by the primary Judge on 25 May 1998. Mr Paterson did not appear and orders were ultimately made against him on 28 May 1998. Mrs Paterson appeared by counsel and the proceedings between her and Westpac were adjourned for hearing on 30 November 1998. The hearing took place on that date but was again adjourned, ultimately until 14 May 1999. On that day, the primary Judge reserved her decision. 7 On 17 June 1999, before the primary Judge delivered her judgment, the High Court delivered judgment in Re Wakim, Ex parte McNally (1999) 163 ALR 270. The effect of that decision was to invalidate the cross-vesting legislation of the States insofar as it purported to confer jurisdiction on the Federal Court in respect of non-federal matters. 8 Following the decision in Re Wakim, the question whether this Court had jurisdiction to hear and determine the claims was raised with the primary Judge. In a judgment delivered on 10 September 1999, her Honour held that the effect of Re Wakim was that the Court had no jurisdiction to determine the proceedings against Mrs Paterson. Her Honour rejected Westpac's submission that the Court had acquired jurisdiction by reason of the filing of the cross-claim which (according to Westpac) had raised federal issues involving the same substratum of facts as the claims under State law. Her Honour took the view that "the jurisdiction of the Court at the date of transfer cannot be fixed at a later date by amendment to the pleadings". Her Honour made a declaration that the Court lacked jurisdiction to determine the Paterson proceedings. 9 Subject to the possibility, not explored in detail before us, that the Paterson proceedings formed part of the justiciable controversy already before the Court by reason of the Endormer proceedings, it is undoubtedly correct, in the light of the decision in Re Wakim, that at the date of transfer of the Paterson proceedings, this Court lacked jurisdiction to hear and determine the proceedings. At that date, neither the statement of claim nor the cross-claim pleaded any claims or defences arising under a law of the Commonwealth or otherwise attracting federal jurisdiction. No question of the accrued jurisdiction of the Court or the associated jurisdiction under s 32 of the Federal Court of Australia Act 1976 (Cth) ("Federal Court Act") could arise. 10 Until the filing of the amended cross-claim on 16 August 1996, the Paterson proceedings in this Court were liable to be dismissed for want of jurisdiction (although, of course, at that stage, Re Wakim had not been decided). No such step was taken and the proceedings remained on foot. They were not simply a nullity: Cameron v Cole (1944) 68 CLR 571, at 590, per Rich J; at 599, per McTiernan J; at 606, per Williams J; Re Wakim, at [162], [164]-[165], per Gummow and Hayne JJ. 11 The amended cross-claim filed on 16 August 1996 made claims for relief under Part VI of the TP Act. The Court has jurisdiction in any matter arising under the TP Act in respect of which a civil proceeding has been instituted under Part VI: TP Act, s 86(1). It would seem that the filing of a cross-claim is the institution of a civil proceeding: see Cheney v Spooner (1929) 41 CLR 532, at 536-537, per Isaacs and Gavan Duffy JJ; at 538-539, per Starke J. In any event, the Court has jurisdiction in a matter arising under the TP Act: Judiciary Act 1903 (Cth), s 39B(1A)(c); Hooper v Kirella Pty Ltd [1999] FCA 1584. 12 It is well established that federal jurisdiction can be attracted not merely by the assertion of an applicant seeking relief from the Court, but by a pleading raising a right or immunity conferred by a Commonwealth enactment by way of defence: Felton v Mulligan (1971) 124 CLR 367, at 382-383; Moorgate Tobacco Co Ltd v Philip Morris Ltd (1980) 145 CLR 457, at 476, per Stephen, Mason, Aickin and Wilson JJ; NEC Information Systems Australia Pty Ltd v Iveson (1992) 36 FCR 258 (FC), at 264. As was pointed out in National Union of Workers v Davids Distribution Pty Ltd (1999) 165 ALR 595 (FC), at [20], a matter does not arise under a Commonwealth Act simply because a defence is available under the Act; unless and until the defence is raised by a respondent, the defence is not part of the "subject matter for determination". But once the issue is raised, it forms part of the subject matter for determination and the Court has jurisdiction to entertain it. 13 As a matter of principle, there is no reason why the Court cannot acquire jurisdiction in a matter arising under a law of the Commonwealth by the filing of a cross-claim which asserts a claim founded on the Commonwealth legislation. The filing of the cross-claim asserts the right and makes the claim to enforce the right part of the justiciable controversy between the parties. Provided the cross-claim is not "colourable", it attracts federal jurisdiction. This was the view of French J in Cambridge Gulf Investments Pty Ltd (in liq) v Dandoe Pty Ltd (1999) 32 ASCR 422, at [16], although his Honour considered that the cross-claim actually filed in that case did not properly raise such an issue. 14 In this case, the filing of the cross-claim asserted a claim to relief based on rights said to have been created by the TP Act. It has not been suggested that the claim was colourable. Nor has it been suggested that the claim for relief under the TP Act was abandoned at any stage of the proceedings, although even the abandonment of the claim arising under the TP Act would not necessarily have deprived the Court of jurisdiction in respect of the matters constituted by the justiciable controversy between the parties: Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212 (FC), at 219; Unilan Holdings Pty Ltd v Kerin (1993) 44 FCR 481 (FC), at 481-482. 15 In Re Wakim, Gummow and Hayne JJ said (at [135]) that it "must now be regarded as established that the jurisdiction of a federal court having jurisdiction in a matter arising under a law made by the Parliament is not 'restricted to the determination of the federal claim or cause of action in the proceeding, but extend[s] beyond that to the litigious or justiciable controversy between parties of which the federal claim or cause of action forms part'. Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261 at 290, per Mason, Brennan and Deane JJ." The "central task" is to identify the justiciable controversy. Gummow and Hayne JJ explained that task as follows (at [140]): "What is a single controversy 'depends on what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationships'. There is but a single matter if different claims arise out of 'common transactions and facts' or 'a common substratum of facts', notwithstanding that the facts upon which the claims depend 'do not wholly coincide'. So, too, there is but one matter where different claims are so related that the determination of one is essential to the determination of the other, as, for example, in the case of third party proceedings or where there are alternative claims for the same damage and the determination of one will either render the other otiose or necessitate its determination. Conversely, claims which are 'completely disparate', 'completely separate and distinct' or 'distinct and unrelated' are not part of the same matter." (Citations omitted.) 16 By these tests, there was but one justiciable controversy to be determined by her Honour. The claim by Westpac against Mr Paterson had been resolved on 28 May 1998. Westpac's claim against Mrs Paterson rested on her default under the Mortgage. Mrs Paterson's cross-claim pleaded a claim under the TP Act which, if successful, would defeat Westpac's claim. The determination of her claim was essential to the determination of Westpac's claim. The additional non-federal issues raised by Mrs Paterson's cross-claim arose out of a common substratum of facts applicable to her claim under the TP Act. Subject to one possible qualification to which we refer below, it follows that the primary Judge had jurisdiction to determine the proceedings before her. 17 The possible qualification arises from the decision of the High Court in Smith v Smith (1986) 161 CLR 217. It may follow from that case that the accrued jurisdiction of the Federal Court does not extend to a claim under the Contracts Review Act, since the relevant powers are conferred by that Act on "the Court", (see s 7(1)), an expression that is defined to mean the Supreme Court of New South Wales, the District Court of New South Wales or a Local Court (s 4(1)). See also The Rochester Communications Group Pty Ltd v Adler (1996) 65 FCR 572 (Beaumont J). Since the significance of Smith v Smith was not addressed in argument, we merely draw attention to the case. 18 The assumption of accrued jurisdiction is discretionary: Stack v Coast Securities, at 294-295, per Mason, Brennan and Deane JJ; Cambridge Gulf, at [21]. Given that the proceedings had been heard by her Honour and that only judgment was awaited when the jurisdictional challenge was made, there is no discretionary basis for this Court now to hold that her Honour should not exercise the jurisdiction to determine the dispute between the parties. This is so even if the primary Judge lacks jurisdiction to hear the claim under the Contracts Review Act. 19 It follows, in our respectful view, that the primary Judge was in error and that her Honour had jurisdiction to determine the proceedings. The orders that we have made are the following: