Sapphire Suite Pty Ltd v Bellini Lounge Pty Ltd

HIS HONOUR: By summons filed on 22 May 2018, the plaintiff seeks an order pursuant to s 140 of the Civil Procedure Act 2005 that certain District Court proceedings be transferred to this Court, upon the basis that there is a serious question as to whether the District Court has jurisdiction to hear and determine the action. Although I have not been provided with a copy of the originating process in the District Court, I am informed by Mr Maconachie of counsel for the plaintiff in this Court and in the District Court that the plaintiff sues the second and third defendants as guarantors of the obligations of the first defendant as the lessee of certain premises from the plaintiff.

The proceedings were commenced in the District Court by statement of claim filed in the District Court on 22 March 2016. An amended statement of claim was filed on 9 May 2017. The lease which is the subject of the claim took effect from 1 February 2015.

The plaintiff obtained judgment against the first defendant for $190,703.36. That judgment remains wholly unsatisfied by the first defendant. The proceedings have resolved as between the plaintiff and the third defendant. The plaintiff’s claim against the second defendant is the only remaining issue for determination.

The proceedings were originally called on in the District Court for hearing on 1 May 2018. The second defendant did not appear and the trial judge proceeded ex parte. However, his Honour questioned the jurisdiction of the District Court to determine the action having regard to the terms of s 44(1)(a) of the District Court Act 1973, which relevantly provides as follows:

His Honour in due course on 24 May 2018 adjourned the proceedings pending the making of the present application in this Court. In doing so, his Honour gave reasons: see Sapphire Suite Pty Ltd v Bellini Lounge Pty Ltd [2018] NSWDC 160.

The jurisdictional issue arises because of the historical context in which s 44(1)(a) of the District Court Act operates. In Forsyth v Deputy Commissioner of Taxation (2007) 231 CLR 531; [2007] HCA 8, the High Court held that s 44 was to be construed according to the assignment provisions in the Supreme Court as at 2 February 1998, when s 44 in its current form relevantly came into effect. In February 1998, the Supreme Court was comprised of the Court of Appeal and seven Divisions being the Admiralty Division, the Family Law Division, the Administrative Law Division, the Criminal Division, the Commercial Division, the Equity Division and the Common Law Division.

Section 53 of the Supreme Court Act 1970 assigned various business to one or other of these several Divisions. Each assignment provision was made subject to the rules. Section 53(5) of the Act provided that, subject to the rules, there shall be assigned to the Common Law Division all proceedings not assigned to another Division by the foregoing provisions of that section. Those foregoing provisions included s 53(3E), which provided that, subject to the rules, there shall be assigned to the Commercial Division all proceedings of a commercial nature which are required by or under any Act, or by or in accordance with the rules, from time to time in force, to be commenced, heard and determined in that Division.

The Supreme Court Rules 1970 relevantly provided by part 14 rule 2 that there shall be assigned to the Commercial Division proceedings

The issue that arises in these circumstances is whether a suit on a guarantee against the guarantor of the liabilities of a lessee to a lessor is one that arises out of a commercial transaction and whether if so characterised the District Court has jurisdiction to hear such a matter because it is one that would at the relevant time have been assigned to a Division other than the Common Law Division.

Section 44(1)(a) has been considered recently. In Mega-top Cargo Pty Ltd v Moneytech Services Pty Ltd [2015] NSWCA 402, the Court of Appeal dismissed an appeal from the District Court in relation to an agent’s claim for reimbursement of customs duties. However, the Court held that the primary judge had erred in finding that the District Court lacked jurisdiction to determine a restitutionary claim. The primary judge had characterised the claim for restitution as an equitable claim. Leeming JA said this on that topic at [49]:

In New South Wales Land and Housing Corporation v Quinn [2016] NSWCA 338, the Court of Appeal considered an appeal from the dismissal by the District Court of a claim brought by the appellant for occupation fees said to be owed to it under the relevant legislation pursuant to which it had housed the respondent. The primary judge considered that the action would have been assigned to the Administrative Law Division. The Court took a different view:

In my opinion, these cases are distinguishable from the present case. This distinction is helpfully and thoroughly considered and explained by the primary judge. I respectfully adopt his Honour’s reasoning and conclusions. It follows that in my view, the District Court does not have jurisdiction to hear the claim.

As Parker J said in The NTF Group Pty Ltd v PA Putney Finance Australia Pty Ltd [2017] NSWSC 1194 at [46], so in this case, a conclusion that the District Court does not have jurisdiction is both “a surprising and unwelcome result”. Regrettably, however, it seems to me to follow as a simple matter of statutory construction, uninfluenced by what the primary judge perhaps somewhat wistfully described as “judicial memory.” I would have come to a different view if my experience of appearing in claims against guarantors were thought to be a permissible indicator of the outcome.

In the circumstances, the following orders should be made: