Re Hans Martin Muller and Scrid Nominees Pty Ltd v Brian Eric and Patricia Alma Fencott; H & T Holdings Pty Ltd Trading As City Business Brokers; James John Hondros; Oakland Nominees Pty Ltd and Victor Harry Johnsen [1981] FCA 129; (1981) 53 FLR 184 Wag (10 September 1981)

FEDERAL COURT OF AUSTRALIA

Re: HANS MARTIN MULLER and SCRID NOMINEES PTY. LTD.
And: BRIAN ERIC and PATRICIA ALMA FENCOTT; H. & T. HOLDINGS PTY. LTD. trading
as CITY BUSINESS BROKERS; JAMES JOHN HONDROS; OAKLAND NOMINEES PTY. LTD. and
VICTOR HARRY JOHNSEN [1981] FCA 129; (1981) 53 FLR 184
WAG No. 24 of 1981
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Toohey J.(1)

CATCHWORDS

Trade Practices - misleading and deceptive statements - action in Federal Court - proceedings already instituted by one respondent in Supreme Court - application for stay of proceedings in Federal Court. Legitimate juridical advantage of applicants balanced against disadvantage to respondents - relevant considerations.

Judiciary Act 1903 s.78B

Trade Practices Act 1974 ss. 52, 75B, 82, 86

Trade Practices - Misleading and deceptive statements - Proceedings in Supreme Court involving same transaction - Application to stay Federal Court proceedings - Disadvantage to other party of doing so - Relevant considerations - Judiciary Act 1903 (Cth), s. 78B - Trade Practices Act 1974 (Cth), ss. 52, 75B, 82, 86. The applicants brought an action in the Federal Court against the respondents claiming damages under s. 82 of the Trade Practices Act 1974 in respect of statements which were made in the course of the sale of a business by the respondents to the applicants. The statements were alleged to be misleading or deceptive within the meaning of s. 52 of the Trade Practices Act. One respondent subsequently sued the applicants in the Supreme Court of Western Australia for damages for the balance of purchase moneys for the sale. The respondents applied to have the Federal Court action stayed.

Held, application dismissed, that the Federal Court action should not be stayed. Section 52 of the Trade Practices Act arguably gave the applicants relief which was not available to them by way of counterclaim in the Supreme Court. They would therefore be disadvantaged by a stay of proceedings in the Federal Court. Castanho v. Brown & Root (U.K.) Ltd., (1980) 3 WLR 991, referred to.

HEARING

Darwin, 1981, August 26; September 10. 10:9:1981
APPLICATION.

Application by the respondents for a stay of proceedings in the Federal Court.

The facts appear from the judgment.

R.S. French and D.A. Dawes, for the applicants.

R.J. Meadows and J.R.B. Ley, for the first, fourth and fifth respondents.

P.J. Williams, for the second respondent.

D.R. Cline, for the third respondent.

M.C. Lee, for the Commonwealth Attorney-General.

Cur. adv. vult.

Solicitors for the applicants: Warren McDonald French & Harrison.

Solicitors for the first, fourth and fifth respondents: Muir Williams

Nicholson & Co.

Solicitor for the second respondent: Bevan Lawrence.

Solicitors for the third respondent: McCusker & Harmer.
J.H. TELFER

DECISION

On 10 July 1981 Hans Martin Muller and Scrid Nominees Pty. Ltd., a company of which Mr. Muller is a director, began proceedings in the Federal Court against Bryan Eric Fencott and Patricia Alma Fencott, H. & T. Holdings Pty. Ltd., James John Hondros, Oakland Nominees Pty. Ltd. and Victor Harry Johnsen.

The applicants claimed against each of the respondents damages pursuant to s.82 of the Trade Practices Act 1974, alternatively damages at common law. They sought additional relief against some of the respondents.

The statement of claim discloses somewhat complex commercial dealings but it is enough for present purposes to say that the relief claimed arises out of the purchase by Mr. Muller of O'Connor's Wine Bar and Restaurant ("O'Connors"), a leasehold business in Hay Street, West Perth. Various representations are said to have been made in the course of negotiations for the purchase of the business. Mr. Muller alleges that the respondents' conduct was misleading or deceptive within s.52 of the Trade Practices Act as well as constituting misrepresentation, deceit, negligent mis-statement breach of contract and breach of fiduciary duty.

The respondents have challenged the jurisdiction of the Federal Court to entertain a claim against such of them as are natural persons. The respondents Mr. and Mrs. Fencott, Oakland Nominees and Mr. Johnsen filed notice of motion seeking a dismissal of the proceedings or alternatively a stay. Mr. Hondros sought a dismissal and H. & T. Holdings sought a stay. On the return of these motions Mr. Hondros, through counsel, withdrew his objection to jurisdiction and was granted leave to withdraw from the present proceedings. It was agreed by counsel for the applicants and the other respondents that the Court should first deal with the applications for a stay and then, depending upon the outcome, consider the objections to jurisdiction. In response to a notice pursuant to s.78B of the Judiciary Act 1903, the Attorney-General for the Commonwealth appeared by counsel. The Attorney's interest was confined to any challenge to the constitutionality of the Trade Practices Act, a matter that does not arise at this stage.

The basis of the application for a stay was that on 28 May 1981 Oakland Nominees instituted proceedings in the Supreme Court of Western Australia against Mr. Muller, seeking the balance of purchase moneys payable under the contract for the purchase of O'Connors.

The first applicant has filed an appearance to the statement of claim in that action but no further steps have been taken in the Supreme Court. The agreement there sued on is the same as that pleaded in para. 14 of the statement of claim in the Federal Court proceedings, being the agreement with which the alleged misrepresentations, deceit, negligent mis-statements, breach of contract and breach of fiduciary duty are connected.

The arguments in support of a stay were, in summary, these. The only breach of the Trade Practices Act relied upon by the applicants is s.52 (the misleading or deceptive conduct provision), in consequence of which the applicants claim damages under s.82 of the Act. In each instance they claim in the alternative damages at common law for tort or breach of contract. They seek no other relief except a refund of certain moneys from H. & T. Holdings and as against Oakland Nominees they ask for a declaration that Scrid Nominees is entitled to be indemnified against any liability it may have to Mr. Muller and a further indemnity in respect of Scrid Nominees' liability to trade creditors for certain debts. All that relief is available to the applicants in the Supreme Court except in regard to s.82 of the Trade Practices Act where the Federal Court has exclusive jurisdiction. If the applicants can make good a case under s.52 of that Act, they would necessarily make good a claim in contract or tort. These remedies are available to them by way of counter-claim to the Supreme Court writ of summons. The measure of damages available if the applicants succeed under s.82 of the Act is no different to that recoverable at common law. Thus there is no particular advantage to the applicants in proceeding in the Federal Court. On the other hand there is a distinct disadvantage to Oakland Nominees because it will not be able to raise in that court, by way of cross action its claim for the balance of moneys due under the contract for purchase of the business. There is no jurisdiction in the Federal Court to entertain that claim.

The application for a stay was supported by H. & T. Holdings. There is however an important difference between this and the other respondents, for H. & T. Holdings seeks no relief against the applicants either in the Federal Court or in the Supreme Court. Thus that company does not assert any disadvantage by reason of the present proceedings; it simply supports the other respondents in the argument that any relief sought by the applicants is equally available to them in the Supreme Court.

The applicants reply in this way. There is a serious jurisdictional problem but it arises in the Supreme Court not in the Federal Court. The joinder of natural persons as respondents in the Federal Court proceedings is warranted by s.75B of the Trade Practices Act. But s.86 of that Act confers exclusive jurisdiction upon the Federal Court in respect of actions under s.82; hence any action based upon s.52 must be brought in the Federal Court. It is true that the applicants rely as well upon common law actions in contract and tort. By reason of their association with the conduct complained of under s.52, those causes of action are available to the applicants in the Federal Court. But even if they are not, it is s.52 upon which the applicants primarily rely. The scope of that section has not yet been fully explored by the courts but it is at least as wide as misrepresentation, deceit, negligent mis-statement or breach of warranty or any combination thereof. It is almost certainly wider. Reliance upon s.52 has considerable advantages for the applicants. It relieves them of the obligation to establish, as in the case of fraud, knowledge of the falsity of the statement or reckless disregard for its truth and, in the case of negligence, the existence of a duty of care and a breach of that duty. Equally the relief available under s.82 is at least as wide as any relief obtainable in the Supreme Court and is wider.

This is not a case, the applicants say, in which the action in the Supreme Court has advanced to a stage where to allow the Federal Court proceedings to continue would lead to a waste of time and money. The proceedings in the Federal Court are in truth further advanced in that all necessary parties are before the court. It is open to Oakland Nominees to bring a cross-action in the Federal Court to recover the money said to be due to it under the contract for the purchase of the business. But even if this proves to be a matter over which the Federal Court has no jurisdiction, no real prejudice is caused. Oakland Nominees' entitlement to recover under the contract will be determined for all practical purposes by the proceedings in the Federal Court; thereafter the action in the Supreme Court will be largely a formality.

It is clear that the dispute between the parties gives rise to a number of difficult issues. In addition there is the objection to the jurisdiction of the Federal Court. This is not a matter upon which I am called to express an opinion at this stage. Likewise I do not think I should try to answer the various questions raised in the course of the hearing regarding the scope of s.52 of the Trade Practices Act. The matter was not fully argued and cannot be isolated from such facts as may be established.

But it is necessary to consider the principles which should be applied in dealing with an application for a stay. I should say immediately that I do not think that the views expressed by me in St. Justins Properties Pty. Ltd. v. Rule Holdings Pty. Ltd. [1980] FCA 11; (1980) 40 F.L.R. 282 are of much relevance. That action concerned an attempt to restrain a respondent in the Federal Court from pursuing an action in the Supreme Court of Western Australia, which action was prior in time to the proceedings in the Federal Court, and was well advanced. The position here is of applicants who have chosen to invoke the jurisdiction of the Federal Court to the extent that it is available to them. It is the respondents who seek to prevent them from making use of that jurisdiction.

In Hughes Motor Service Pty. Ltd. v. Wang Computer Pty. Ltd. [1978] FCA 49; (1978) 35 F.L.R. 346, Bowen C.J. stayed proceedings in the Federal Court, at least until further order. He did so because of an existing action in the Supreme Court of New South Wales. It is evident that his Honour was influenced by a range of considerations including the fact that the applicants in the Federal Court had earlier chosen the Supreme Court as the forum for the determination of their dispute with the respondent. As well the Supreme Court action had been on foot for some time and was well advanced towards a hearing. It was only in the Supreme Court that orders could be made which would dispose of all matters in dispute between the parties. None of those considerations is present here.

A recent and authoritative statement of the principles to be applied when a stay of proceedings is sought may be found in the judgment of Lord Scarman in Castanho v. Brown and Root (UK) Ltd. (1981) 1 All E.R. 143 at pp.150 - 151. In that judgment, concurred in by the other members of the House of Lords, Lord Scarman adopted the language of Lord Wilberforce in The Atlantic Star (1974) A.C. 436 at p.468 when his Lordship referred to the "critical equation" as being between "any advantage to the plaintiff" and "any disadvantage to the defendant". Having considered recent authorities, Lord Scarman commented:

". . . this formulation means that to justify the grant of an injunction the defendant must show (a) that the English court is a forum to whose jurisdiction they are amenable in which justice can be done at substantially less inconvenience and expense, and (b) that the injunction must not deprive the plaintiff of a legitimate personal or juridical advantage which would be available to him if he invoked the American jurisdiction". (at p.151)

Castanho v. Brown and Root was concerned with an attempt to discontinue an action for damages for personal injuries begun in the English courts in order to obtain the higher damages thought to be available by proceeding in Texas, and with an application for an injunction to restrain the plaintiff from prosecuting an action in the United States.

Applying the principles expressed in Castanho v. Brown and Root, it seems to me that to justify a stay of proceedings in the Federal Court, the respondents must at least show that the Supreme Court is a forum to whose jurisdiction they are amenable, in which justice can be done at substantially less inconvenience and expense and that a stay will not deprive the applicants of a legitimate personal or juridical advantage available to them in the Federal Court. The respondents cannot show that the Supreme Court is a forum to whose jurisdiction they are amenable in terms of the relief sought by the applicants under s.82 of the Trade Practices Act. Perhaps more accurately, they can show this only by establishing that causes of action available to the applicants by way of counter-claim in the Supreme Court are at least as wide as those available to them under the Trade Practices Act and that the relief available by way of damages or otherwise is no less. In my view they have not established this proposition. It follows that the respondents have also been unable to make good the proposition that a stay will not deprive the applicants of a legitimate juridical advantage available to them by proceeding in the Federal Court.

Thus on the face of it, a stay of proceedings will cause or at any rate may cause a substantial disadvantage to the applicants.

As to the respondents, H. & T. Holdings seek no relief and there is no advantage or disadvantage to be brought into the scales so far as they are concerned.

If Oakland Nominees is unable to bring a cross action in the Federal Court to recover the balance of purchase price it may be at some disadvantage. On that aspect of jurisdiction I express no opinion. Counsel referred to the reasons of the High Court in Phillip Morris Inc. v. Adam P. Brown Male Fashions Ltd. [1981] HCA 7; (1981) 55 A.L.J.R. 120, 33 A.L.R. 465. But the point was not fully argued and it is unnecessary to determine it in order to dispose of the application for a stay. The applicants do not seek to set aside the contract for the purchase of O'Connors; they claim monetary relief. In those circumstances Oakland Nominees may have nothing to gain by bringing a cross action in the Federal Court. It may be enough for it to await the outcome of the proceedings in the Federal Court to see what is the accountability of the parties, one to the other. Alternatively it may choose to proceed with its action in the Supreme Court, facing the possibility of a stay of execution by the Supreme Court or a comparable injunction by this court until the outcome of the action in the Federal Court. Whatever happens, these considerations cannot tip the scales against loss of advantage to the applicants if stopped from proceeding in the Federal Court.

Although Castanho v. Brown and Root was pressed upon me by the respondents, I do not wish to be taken as accepting that the present application for a stay should be determined only in accordance with those principles. I shall assume that in seeking a stay the respondents are not confined to the grounds set out in Order 20 Rule 2 of the Federal Court Rules (none of which is in my view applicable) and that "this Court has a general power to control its own proceedings" (Bowen C.J. in Hughes v. Wang at p.351).

This is not a case of applicants who have embarked on litigation in one forum and now seek to do so in another. They have chosen a forum, one which on the face of it gives them a scope for relief not available elsewhere. It may be that more is needed than the resolution of the "critical equation" in favour of the respondents before the applicants should be prevented from invoking the jurisdiction they have chosen. In Hughes v. Wang Bowen C.J. mentioned other relevant considerations including the public interest "in deciding whether two cases claiming the same damages and involving substantial issues of fact, which are the same in each case, should be allowed to proceed simultaneously in the State and federal systems of justice" (at p.353). But again that is not the situation here.

In my view the applications for a stay should be dismissed. I shall hear counsel as to the appropriate form of order and as to any further directions that may be necessary.