The NTF Group Pty Ltd v PA Putney Finance Australia Pty Ltd

1. [1]

   This is an application to transfer Local Court proceedings to this Court. The proceedings in question have been brought against the present plaintiffs (to whom I will refer as the applicants) by the present defendant (to which I will refer as the respondent).

2. [2]

   The respondent is a company which is in the equipment rental business. The first applicant is a company which was one of its customers. The second and third applicants are directors of the first applicant.

3. [3]

   In the Local Court, the respondent claims the sum of $99,859.90 allegedly due from the first applicant under agreements for the rental of various items of equipment, together with interest. The respondent also seeks judgment against the second and third applicants as guarantors.

4. [4]

   The applicants have filed a defence and cross-claim. The applicants seek to have the Local Court proceedings transferred to this Court because they say the Local Court lacks jurisdiction to deal with the cross-claim.

5. [5]

   In the cross-claim, the applicants allege that the respondent, in seeking to enforce the agreements, contravened s 21 of the Australian Consumer Law (“ACL”). Section 21 appears in Ch 2 and relevantly provides:

6. [6]

   ACL s 236 creates a right to damages for contravention of any provision of Ch 2, which includes s 21. However, the cross-claim does not seek damages. Rather, the applicants seek orders that the agreements and guarantees be declared “to be void on and after 31 March 2011”.

7. [7]

   These orders are expressed to be sought under ACL s 243. However, strictly speaking, the source of power to make the orders is s 237(1), which provides:

8. [8]

   ACL s 243 then specifies the kinds of orders which may be made under s 237(1). It provides:

9. [9]

   The ACL is not an enactment in its own right. It is a schedule to the Competition and Consumer Act 2010 (Cth) (“CCA”). The CCA gives it the force of Commonwealth law in certain circumstances, and also facilitates its adoption as State law. The ACL applies as Commonwealth law to the unconscionable conduct of a corporation: CCA s 131(1). It also applies as Commonwealth law to unconscionable conduct against a corporation: CCA s 131(2)(a). Because both the respondent and the first applicant are companies, the applicants’ cross-claim falls within the ACL as Commonwealth law.

10. [10]

    The Fair Trading Act 1987 (NSW) (“FTA”) also applies the ACL as State law if one or other of various factors connect the claim to New South Wales: FTA s 32. The relevant requirements are satisfied, and thus the applicants’ cross-claim falls within the ACL also as State law.

Transfer from Local Court

1. [11]

   The civil jurisdiction of the Local Court (relevantly, in its General Division) is set out in Pt 3 of the Local Court Act 2007 (NSW) (“LCA”). Section 30 relevantly provides:

2. [12]

   Section 29 relevantly provides:

3. [13]

   Section 32 provides:

4. [14]

   Section 33 provides:

5. [15]

   The argument before me focused on the possibility of the Local Court having jurisdiction under the ACL as a matter of Commonwealth law. CCA s 138B relevantly provides:

6. [16]

   Sub-section (4) refers to limits imposed by the Constitution. The Constitution does not permit the Commonwealth, as part of conferring Commonwealth jurisdiction on a State court, to alter the structure or essential characteristics of that State court: Le Mesurier v Connor (1929) 42 CLR 481; Adams v Chas S Watson Pty Ltd (1938) 60 CLR 545 at 554-555 (Latham CJ). But otherwise, the Commonwealth is free to invest a State court with jurisdiction to determine claims under Commonwealth law irrespective of any limits which apply to the exercise by that court of its State jurisdiction. There is thus no constitutional objection to the Commonwealth conferring power on the Local Court to review contracts under the ACL, with or without limitations as to the nature of the contract being reviewed.

7. [17]

   The starting point is the conferral of jurisdiction in sub-s (1). Because there is no civil proceeding instituted by the Commonwealth Minister, the requirements of that provision are satisfied. Prima facie, this confers jurisdiction on the Local Court. But the applicants contend that the jurisdiction invoked by the cross-claim falls outside the “limits” of the Local Court’s jurisdiction for the purposes of s 138B(3).

8. [18]

   The language of s 138B(3) is based on the Judiciary Act 1903 (Cth) (“JA”), s 39(2), which provides for the investment with Commonwealth jurisdiction of the courts of the States in certain cases “within the limits of their several jurisdictions, whether such limits are as to locality, subject-matter, or otherwise”. Where such a provision speaks of jurisdictional limits, it is of course speaking of the existing jurisdictional limits applying to proceedings in the relevant State court. The provision thus involves the idea of Commonwealth jurisdiction being conferred on State courts but subject to jurisdictional limits that apply to claims brought under State law in those courts.

9. [19]

   Federated Sawmill, Timberyard and General Woodworkers’ Employés’ Association (Adelaide Branch) v Alexander (1912) 15 CLR 308 concerned a debt claim under a Commonwealth statute instituted in a magistrate’s court in South Australia where Commonwealth jurisdiction had been conferred on State courts under s 39(2). Griffith CJ said (at 312):

10. [20]

    It is easy enough to apply this concept of analogy to an express limitation on money claims by reference to the amount claimed, such as that which appears in LCA s 30. The concept also readily applies to restrictions on the subject matter of claims which could otherwise be entertained, such as those set out in s 33. It is not so straightforward to apply in the present circumstances.

11. [21]

    The Local Court does not have any equitable jurisdiction to review or avoid contracts, whether the subject of claims in that Court or otherwise. The applicants submitted that the failure to confer jurisdiction on the Local Court except by reference to money claims and to claims concerning goods of a certain value (as set out in LCA s 30) should be seen as a “limit” on the Local Court’s jurisdiction in the relevant sense.

12. [22]

    It is, of course, correct that the Local Court is a court of statutory jurisdiction and, accordingly, it has jurisdiction over claims only to the extent that jurisdiction is expressly conferred on it. However, I am not sure that, if one focusses on the provisions of the LCA for the moment, the applicants’ submission is correct.

13. [23]

    In my view, the Local Court’s lack of power to set aside contracts is not, of itself, necessarily a “limit” on its jurisdiction for the purposes of the conferral of Commonwealth jurisdiction. There is a logical difficulty in treating a failure to invest jurisdiction over one type of claim as being a limit on jurisdiction in another type of claim. It may be that “limits” in s 138B(3) should be understood as express limits or exceptions to jurisdiction otherwise conferred.

14. [24]

    In any event, LCA s 32 does confer on the Local Court jurisdiction to grant relief under the Contracts Review Act 1980 (NSW) (“CRA”), s 7(1)(a). CRA s 7 relevantly provides:

15. [25]

    LCA s 32 can be traced back to 1993: Local Courts (Civil Claims) Act 1970 (NSW), s 12A, inserted by Courts Legislation (Amendment) Act 1993 (NSW), s 3, Sch 1 (2). The Explanatory Note in Sch 3 stated:

16. [26]

    The fact that the State has, by s 32, conferred power on the Local Court to refuse enforcement of contracts in some circumstances makes it even more difficult to see a “limit” as arising by implication for the purposes of JA s 39(2). Jurisdiction under LCA s 32 is limited to cases where the contract is already the subject of proceedings in the Local Court. But this limitation would be satisfied in the present case, as the claim being made by the applicants is made by way of cross-claim, arising out of the claim made against them by the respondent which is undoubtedly within the jurisdiction of the Local Court.

17. [27]

    Furthermore, not every statutory provision which prevents a Court from granting relief is necessarily one which goes to jurisdiction for the purposes of s 39(2). In proceedings in a State court exercising Commonwealth jurisdiction, applicable State laws are “picked up” and made applicable by JA s 79. In the Federated Sawmill case, a provision of a State law required proceedings in the relevant State court to be instituted within a particular period of time. All of the members of the High Court held that proceedings under the Commonwealth statute could not succeed if instituted outside that time limit. Griffith CJ appears to have concluded that the failure to institute the proceedings in time went to jurisdiction (at 312); but he also treated the State limitation provision as binding under s 79 (at 312-313). Barton J considered that the proceedings failed because the State limitation was picked up by s 79 (at 316-317); he said that the matter was clear without referring to s 39(2), but expressed agreement with what Griffith CJ had said about that provision (at 317). Isaacs J decided the point under s 79 (at 321-322). Subsequently, in Adams v Chas S Watson Pty Ltd (1938) 60 CLR 545, Latham CJ (at 553) and Starke J (at 559) treated a locality restriction as not depriving the State court of jurisdiction, but simply as giving rise to a defence in the proceedings.

18. [28]

    Section 237(1) gives the court a wide power to make orders it “thinks appropriate”; the orders listed in s 243 are only examples of orders which can be made. It could hardly be doubted that there would be power to make a monetary compensation order under s 237(1). If no other limitation existed, there would be no reason why the Local Court could not make a monetary compensation order under s 237 within its monetary jurisdictional limit. Even if the Court lacked power to make non-monetary orders of the type set out in ACL s 243, that would be because of s 138B(5), not a lack of jurisdiction under s 138B(3).

19. [29]

    So far I have confined my discussion to the provisions of the LCA defining its civil jurisdiction. The LCA does not expressly deal with claims under the ACL. However, FTA s 30 relevantly provides:

20. [30]

    ACL ss 237(1) and 243 appear in Div 4 of Pt 5-2 and, accordingly, the effect of s 30(3) is that the Local Court has no power under the FTA to make an order as currently framed in the applicants’ cross-claim in this case. ACL s 236, which confers a power to award damages, does not appear in Div 4 and is thus unaffected by s 30(3), although it is limited to claims within the Court’s jurisdictional limit by s 30(5).

21. [31]

    Before the enactment of s 30 in its current form, the power to award damages for contraventions of the FTA in FTA s 68 (the FTA predecessor of ACL s 236) was not limited to any particular State court, but the power to grant other forms of relief in s 72 (the FTA predecessor of ACL s 237(1)) was limited to this Court. The position was thus the same as it now is under s 30. The predecessor provisions go back to the enactment of the FTA in 1987. That enactment coincided with the enactment by the Commonwealth Parliament of amendments to Trade Practices Act 1974 (Cth) (“TPA”), s 86, which is the predecessor to CCA s 138B, and which conferred jurisdiction in certain TPA matters on State courts for the first time; prior to then the Commonwealth courts had had exclusive jurisdiction. Accordingly, the Local Court’s ability to award damages and inability to grant s 72 / s 237(1) relief goes back for as long as the FTA has existed and for as long as State courts have had jurisdiction under the TPA.

22. [32]

    Sub-sections 30(2) and (3) do not use the language of jurisdiction, and they have been enacted independently of the LCA provisions which define the Local Court’s jurisdiction. In substance, however, they confer on the Local Court a general power to grant relief under the ACL as State law, but make an exception for, among others, claims under s 237(1). At least arguably, this is a “limit” on the Local Court’s jurisdiction for the purposes of conferral of Commonwealth jurisdiction under the CCA. It would be hard to think of a closer analogy than that between the ACL as State law and the ACL as Commonwealth law.

23. [33]

    In Credit Loans Australia Pty Ltd v Viera [2016] NSWSC 484, the plaintiff brought proceedings in this Court against the defendant to enforce a loan secured by a mortgage. The defendant cross-claimed under the National Consumer Credit Protection Act 2009 (Cth) (“NCCPA”). The plaintiff sought to have the proceedings transferred to the Local Court. Adamson J refused the transfer, on the ground that the Local Court lacked jurisdiction to grant the relief claimed under the NCCPA. However, the decision is not directly on point because the relief sought included civil penalties, declarations, and orders in the nature of injunctions.

24. [34]

    It is not necessary for the purposes of these proceedings to determine the issue concerning the Local Court’s jurisdiction finally. It is enough to say that there is real doubt as to whether the Local Court has jurisdiction to entertain the applicants’ cross-claim.

25. [35]

    Mr Aalders, a director of the respondent who has been authorised to conduct the proceedings on its behalf, pointed to the inconvenience which would result from the proceedings being transferred to this Court. He said that the cross-claim had only been articulated years after the agreements in question had been entered into, and pointed out how easy it would be for unmeritorious cross-claims of this type to be used to complicate and delay otherwise straightforward contractual claims in the Local Court. There is nothing before me to suggest that the cross-claim in the present case is not genuine, and Mr Aalders did not make any application to the Local Court to have it struck out; but, as a generality, Mr Aalders’ points are well taken. However, if the Local Court does lack, or may lack, jurisdiction, then there is no practical alternative but to transfer the proceedings to a court which has jurisdiction to deal with all relevant issues that are raised. However much delay and additional cost may be incurred, it would be less than the delay and additional cost which would be incurred if the proceedings were left in the Local Court only to find at a later stage that the Local Court lacked jurisdiction to deal fully with them.

26. [36]

    As I have noted, the Local Court would have power to deal with a cross-claim for damages for contravention of ACL s 21 under ACL s 236. It might be that such a right to damages could have been put forward by way of defence of circuity of action to the respondent’s claim. Alternatively, the applicants’ claim to have enforcement of the agreements relied upon by the respondent refused might have been capable of being formulated under the CRA, in which case the Local Court would have had jurisdiction to deal with it. It may be that this Court could refuse to transfer the proceedings from the Local Court if it would have been open to the applicants, without any prejudice to their position, to advance the matters complained of by way of defence or by way of cross-claim for relief which is within the jurisdiction of the Local Court. However, this possibility was not argued before me in the present case.

27. [37]

    It follows, in my view, that the proceedings must be removed from the Local Court. I reach this conclusion without any enthusiasm. There seems to me to be little to be said for a situation where the Local Court can award damages for contravention of ACL s 21 but cannot grant other relief, even if it is defensive or compensatory in nature. Especially is this so when the Local Court for more than 20 years has had jurisdiction to grant relief under the CRA. However, in the absence of legislative clarification (or a decision at a higher level that the Local Court has jurisdiction), I do not think I should put the parties in the present case at risk that some sort of jurisdictional problem may later be found to exist.

Transfer to District Court

1. [38]

   The next question is, therefore, whether, accepting that the proceedings must be removed from the Local Court, they should be heard in this Court or transferred to the District Court. The applicants indicated that they wished the proceedings, if possible, to be determined in the District Court, but raised questions as to the District Court’s jurisdiction to do so.

2. [39]

   The Civil Procedure Act 2005 (NSW) (“CPA”), s 146, relevantly provides:

3. [40]

   If a plaintiff commences proceedings for relief at common law or under State legislation, but a cross-claim is filed invoking Commonwealth legislation, then the whole of the matter thereupon attracts Commonwealth jurisdiction: Bitannia Pty Ltd v Parkline Constructions Pty Ltd (2006) 67 NSWLR 9 at [32]. Once the proceedings are transferred from the Local Court to this Court, therefore, they are within Commonwealth jurisdiction. However, JA s 79 picks up CPA s 146, which requires the Court to be satisfied both that the proceedings as originally constituted were within the jurisdiction of the District Court and that the cross-claim could have been brought in the District Court as a cross-claim. Unless both conditions are satisfied, the proceedings cannot be transferred from this Court to the District Court.

4. [41]

   The civil jurisdiction of the District Court appears in Pt 3 Div 2 of the District Court Act 1973 (NSW) (“DCA”). Section 44 provides:

5. [42]

   Section 44(1)(a)(i) was introduced in its current form into the DCA with effect from 2 February 1998. In Forsyth v Deputy Commissioner of Taxation (2007) 231 CLR 531, the High Court rejected the view that the provision operated in an ambulatory way so that the question whether a particular action would have been allocated to the Common Law Division is to be answered by reference to the provisions governing assignment in force at the time the claim is made. Instead, the High Court held that the District Court’s jurisdiction depends upon whether the action would have been assigned to the Common Law Division according to the assignment rules which existed as at 2 February 1998.

6. [43]

   The Supreme Court Act 1970 (NSW) (“SCA”) as at 2 February 1998 provided for the assignment of the business of the Court into a number of Divisions, including Common Law, Equity, and Commercial Divisions. The Act relevantly provided:

7. [44]

   In relation to the Commercial Division, the Supreme Court Rules 1970 (NSW) (“SCR”) at the relevant time provided in Pt 14:

8. [45]

   Although the claim was a simple contractual claim in debt, it appears to me that the proceedings would not have been assigned to the Common Law Division. The principal claim in the proceedings is between two corporate entities and, on the face of it, the goods in question were leased for business purposes. Accordingly, the proceedings fall within the description of proceedings “arising out of commercial transactions” in SCR Pt 14 r 2(1)(a) and would have been assigned to the Commercial Division.

9. [46]

   Accordingly, the District Court would not have had jurisdiction. This is (as it seems to me) a surprising and unwelcome result. But I see no alternative to it given the decision in Forsyth and the wording of the rules at the relevant time.

10. [47]

    Although s 44(1)(e) would confer jurisdiction on the District Court once proceedings were transferred to it, the provision is of no assistance in the present case unless it is first established that the proceedings could properly be transferred.

11. [48]

    This is enough to conclude that the requirements of CPA s 146 are not satisfied. For completeness, however, I will consider whether, if the respondent’s claim could have been commenced in the District Court, the applicants’ cross-claim could have been brought as a cross-claim in that Court.

12. [49]

    Under CPA s 22, the District Court would have had jurisdiction to entertain the cross-claim if the cross-claim could have been brought by way of separate originating action. The SCR at the relevant time assigned to the Common Law and Equity Divisions proceedings under specified Acts. The TPA was not specified. The SCR did, however, provide in Pt 12:

13. [50]

    In New South Wales Land and Housing Corporation v Quinn [2016] NSWCA 338 at [81]-[82], the Court of Appeal said that “any action of a kind” in s 44(1)(a) was no more specific than a reference to a genus or class of action. Therefore, it did not matter that the action in that case was brought under a statutory provision which was enacted after 2 February 1998. Accordingly, I proceed on the basis that, to the extent that DCA s 44(1)(a)(i) is relevant, a claim under a provision of the ACL would be of the same “kind” as a claim made under an equivalent provision of the FTA or TPA referred to in SCR Part 12 r 7.

14. [51]

    However, in my view, the appropriate assignment, based on the assignment rules as at 2 February 1998, would have been the Commercial Division, for the same reasons that I have concluded that the respondent’s originating action would have been assigned to the Commercial Division. Alternatively, the appropriate Division would seem to have been the Equity Division, given that proceedings for the rectification, setting aside or cancellation of deeds or other written instruments were assigned to that Division by SCA s 53(3). Considered on its own, in my opinion, the applicants’ cross-claim would not have been assigned to the Common Law Division.

15. [52]

    It is also necessary to consider whether the District Court would have had jurisdiction to entertain the applicants’ cross-claim for relief under the ACL, given the invocation of s 237(1). Having regard to FTA ss 30(2) and (3) (quoted at [29] above), in my opinion, the District Court is relevantly in the same position as the Local Court. The District Court has power to entertain a claim for damages under ACL s 236, but lacks power to entertain a claim under ACL s 237(1), which is reserved to this Court. The Commonwealth jurisdiction conferred by s 138B is, or at least is arguably, limited by analogy in the same way.

16. [53]

    It remains to be considered whether these conclusions are affected by DCA s 135, which provides:

17. [54]

    DCA s 135 was enacted in 1992: Statute Law (Miscellaneous Provisions) Act 1992 (NSW), Sch 1. The explanatory note states:

18. [55]

    The note leaves it unclear as to what the enactment of s 135 was designed to achieve. The District Court already had jurisdiction to award damages for contraventions of the FTA under FTA s 68 up to its jurisdictional monetary limit. In this context, the reference to the District Court’s jurisdiction in matters under the TPA is puzzling: for reasons given above, that jurisdiction would appear to have been similarly limited.

19. [56]

    Yet the new power conferred is limited to cases where “the amount of the claim concerned” does not exceed that monetary limit.

20. [57]

    One possibility is that the limitation of jurisdiction only applies in the event that a claim is made for a monetary amount; on this view, the District Court is invested with full jurisdiction to determine any FTA claim, subject only to a limit in monetary damages which may be awarded. This seems an unlikely view of the provision.

21. [58]

    It seems to me that s 135 presupposes that a claim has been made for a monetary sum and simply gives the Court jurisdiction to grant any available non-monetary relief in connection with that claim under the FTA. On this view, the effect of the provision is somewhat limited; but it would mean that if a claim for damages were made under ACL s 236 which fell within the Court’s jurisdictional limit, the Court could instead exercise jurisdiction to make alternative orders under s 237(1). It appears that this was how White J saw the provision operating in Provectus Software (referred to below). On this view, s 135 would not make any difference in the present case, no monetary claim being made in the cross-claim.

22. [59]

    If it had been necessary to consider whether the applicants’ cross-claim could have been brought as a cross-claim in the District Court, I would not have been satisfied that it could.

23. [60]

    Turning to earlier decisions, in Ryner Pty Ltd v Roller [2007] NSWSC 372, Price J had to consider an application to transfer proceedings from the District Court to be heard together with related proceedings in this Court. His Honour recounted that at an earlier stage of the District Court litigation, Johnstone DCJ struck out a cross-claim in those proceedings which claimed damages under TPA s 82 and relief under TPA s 87 on the ground that the District Court had no jurisdiction. That decision, however, does not appear to have been reported, and Price J did not find it necessary to make any decision as to the scope of the District Court’s jurisdiction.

24. [61]

    In Provectus Care Pty Ltd v Epicor Software (Aust) Pty Ltd [2009] NSWSC 1281, White J (as his Honour then was) held, in a case where the equitable jurisdiction to “rescind” a contract had been invoked, that it was sufficiently questionable that the District Court had jurisdiction to deal with the claim to justify a transfer of the proceedings to this Court. His Honour said:

25. [62]

    In K & M Prodanovski Pty Ltd v Northshore Car Rentals Pty Ltd [2017] NSWSC 625, an application was made to transfer to this Court District Court proceedings in which a cross-claim had been made for relief under ACL s 243. The applicant argued that a claim for an order under ACL s 243 was itself an exercise of the equitable jurisdiction and, accordingly, the proceedings should be transferred to this Court. The argument was rejected by N Adams J. Her Honour analysed the decision of White J and concluded:

26. [63]

    In the present case, the cross-claim is purely for an order of the type set out in ACL s 243. On the view expressed by N Adams J in Prodanovski, the District Court would have power to entertain such a claim.

27. [64]

    Both Provectus and Prodanovski concerned applications to transfer proceedings from the District Court to this Court, rather than from this Court to the District Court. Whether the District Court had jurisdiction to entertain the proceedings initially brought against the applicants in those cases did not need to be specifically considered and the issue which I have addressed, namely whether the respondent’s initial action would have been allocated to the Commercial Division, was not considered. It is not clear from the facts of Prodanovski whether that case in fact concerned an action which would have been assigned to the Commercial Division. Although the defendant was a company, it appears from its name that it may have been a “one man” company, and the subject matter of the lease in that case was a Lamborghini motor car, which may not have been used for business purposes.

28. [65]

    Furthermore, neither in Provectus nor in Prodanovski was the basis for the District Court’s jurisdiction analysed in any detail. The points which I have raised concerning the District Court’s ability to entertain a cross-claim under ACL s 237(1) were not addressed. The decisions in Provectus and Prodanovski do not dispel the doubt that I have as to the District Court’s jurisdiction.

Conclusion and orders

1. [66]

   For these reasons, I have concluded that:

2. [67]

   The orders of the Court are: