Re Hans Martin Muller v Scrid Nominees Pty Ltd v Brian Eric Fencott and Patricia Alma Fencott v H & T Holdings Pty Ltd Trading As City Business Brokers v James John Hondros v Oakland Nominees Pty Ltd v Victor Harry Johnsen (1982) [1982] FCA 6 (2 February 1982)

FEDERAL COURT OF AUSTRALIA

Re: HANS MARTIN MULLER
And: SCRID NOMINEES PTY. LTD.
And: BRIAN ERIC FENCOTT AND PATRICIA ALMA FENCOTT
And: H. & T. HOLDINGS PTY. LTD. TRADING AS CITY BUSINESS BROKERS
And: JAMES JOHN HONDROS
And: OAKLAND NOMINEES PTY. LTD.
And: VICTOR HARRY JOHNSEN (1982) 57 FLR 35
W.A. No. G 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 or deceptive conduct alleged in course of sale of business - objection to jurisdiction - whether natural persons can be respondents - validity of s.82 of Trade Practices Act (1974) - whether a respondent company is a trading corporation - joinder of non-federal matters - application of principles enunciated in Phillip Morris Inc. v. Adam P. Brown Male Fashions Pty. Ltd. [1981] HCA 7; (1981) 55 A.L.J.R. 120.

COMMONWEALTH OF AUSTRALIA CONSTITUTION ACT (Imp) (1900) ss.76, 77

ACTS INTERPRETATION ACT (1901) s.22

CRIMES ACT (1914) s.5

TRADE PRACTICES ACT (1974) ss.4(1), 6, 32, 52(1), 75B, 76, 78, 79, 80, 86, 87.

Trade Practices - Misleading or deceptive conduct alleged in course of sale of business - Objections to jurisdiction - Whether natural persons can be respondents - Validity of s. 82 of Trade Practices Act 1974 - Whether a respondent company was a trading corporation - Joinder of non-federal matters - The Constitution (63 & 64 Vict. c. 12), ss. 76, 77 - Acts Interpretation Act 1901 (Cth), s. 22 - Trade Practices Act 1974 (Cth), ss. 4 (1), 6, 52 (1), 75B, 76, 78, 79, 80, 86, 87. The purchasers of a wine bar business alleged that the vendors had been guilty of misleading or deceptive conduct in relation to the sale and claimed damages against the respondents pursuant to s. 82 of the Trade Practices Act and at common law. A number of objections to the jurisdiction of the court to entertain these claims were made by the respondents.

Held: (1) Section 82 of the Trade Practices Act, which enables a person who suffers loss or damage by the conduct of another person done in contravention of Pt IV or Pt V of the Act to recover that loss or damage by action against that person or any person involved in the contravention, is a valid exercise of legislative power in its operation upon natural persons whose conduct has any of the connexions with the contravention specified in s. 75B.

R. v. Australian Industrial Court; Ex parte C.L.M. Holdings Pty. Ltd. [1977] HCA 6; (1977), 136 CLR 235; Trade Practices Commission v. Sterling (1980), 28 ALR 479, referred to.

(2) The fourth respondent was a trading corporation within par. (b) of the definition of "corporation" in s. 4 (1) of the Trade Practices Act on the basis that its functions were to receive the purchase price from the sale of the business, sue for the unpaid balance of the price, negotiate with and pay out creditors of the business formerly carried on at the premises, and distribute the balance of the moneys received; which, collectively if not singly, were commercial activities.

R. v. Federal Court of Australia; Ex parte Western Australian National Football League (Incorporated) [1979] HCA 6; (1979), 143 CLR 190; State Superannuation Board of Victoria v. Trade Practices Commission [1980] FCA 165; (1980), 49 FLR 216; R. v. Trade Practices Tribunal; Ex parte St. George County Council [1974] HCA 7; (1974), 130 CLR 533; Re Ku-ring-gai Co-operative Building Society (No. 12) Ltd. [1978] FCA 50; (1978), 36 FLR 134, referred to.

(3) Those claims for relief on grounds not directly relating to s. 52 of the Trade Practices Act but which were based on statements made concerning the business to be sold, being the statements alleged to be the misleading or deceptive conduct complained of, and claims based on the resulting agreement, all arose out of the common substratum of facts so that the court had jurisdiction to determine them as attached claims for relief.

Philip Morris Incorporated v. Adam P. Brown Male Fashions Pty. Ltd. [1981] HCA 7; (1981), 55 ALJR 120; Coonan & Denlay Pty. Ltd. v. Superstar (Australia) Pty. Ltd. [1981] FCA 127; (1981), 54 FLR 94, referred to.

(4) The claims against the second respondent for commission payable in respect of the sale of the business, its alleged excessive charges, and a claim for return of money wrongfully withheld by it; the claim against the first respondent for an indemnity pursuant to a deed of agreement entered into after the sale of the business; and claims in respect of defamatory statements made in letters written after the sale; did not arise out of any common substratum of facts, and were beyond the jurisdiction of the court.

HEARING

Perth, 1981, August 26; September 18; November 25; 1982, February 2. 2:2:1982
APPLICATIONS.

The facts appear from the judgment. The respondents objected that the court had no jurisdiction to deal with a number of claims which had been brought against them.

R. S. French, for the applicants.

R. J. Meadows and J. R. Ley, for the respondents.

M. C. Lee and W. J. Simms, for the Commonwealth Attorney-General intervening.
Cur. adv. vult.

Solicitors for the applicants: Warren McDonald French & Harrison.

Solicitors for the respondents: Muir Williams Nicholson & Co.
R. R. BOADEN

DECISION

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

On 10 September 1981 I delivered reasons for decision on an application by some of the respondents seeking a dismissal of the proceedings or alternatively a stay, in each case on the ground that the fourth respondent, Oakland Nominees Pty. Ltd., had earlier instituted proceedings in the Supreme Court of Western Australia against the first applicant, Mr Muller, seeking the balance of purchase moneys payable under the same contract pleaded in the statement of claim filed in the Federal Court. I declined to dismiss the proceedings or to order a stay.

The present step concerns objection taken to the jurisdiction of the Federal Court by the first, fourth and fifth respondents. To understand how these objections come to be made, it is necessary to say something about the basis of the substantive application itself. I repeat a summary contained in my earlier reasons.

"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 objection to jurisdiction may be summed up in this way.

1. The first and fifth respondents are natural persons. The Trade Practices Act does not apply to them and if, in its terms, it seeks to do so, it is to that extent ultra vires the Commonwealth.

2. The fourth respondent is not a corporation within the meaning of that term in the Trade Practices Act and the proceedings against it are incompetent.

3. The applicants have joined with their claim under the Trade Practices Act a number of causes of action involving matters not within the jurisdiction of the Federal Court.

Section 82 of the Trade Practices Act enables a person, who suffers loss or damage by conduct of another person done in contravention of Part IV - Restrictive Trade Practices, or Part V - Consumer Protection, to recover the amount of the loss or damage by action against that other person or against any person involved in the contravention. The conduct upon which the applicants rely to ground an action in terms of s.82 is conduct said to be in breach of s.52, within Part V of the Act. Sub-section (1) of that section reads:

"(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive."

As to s.52, the respondents point to the use of "corporation" in contradistinction to "person" appearing in some other sections of the Act. The expression "corporation" is defined in s.4(1), in terms that make it clear that it is confined to a body corporate. Indeed neither counsel for the applicants nor counsel for the Attorney-General for the Commonwealth, who appeared in response to the challenge to the validity of the Act, suggested otherwise.

Section 6 contains provisions which seek to extend the operation of the Act to persons, in particular circumstances. However counsel for the applicants stated that there was no intention to rely upon that section and I need consider it no further.

Part VI of the Act is concerned with enforcement and remedies. Section 82 falls within that Part as does s.86 which confers jurisdiction on the Federal Court "to hear and determine actions, prosecutions and other proceedings under this Part". Part VI begins with s.75B, a provision designed to give content to the notion of a person involved in a contravention of a provision of Part IV or V. The section reads:

"75B. A reference in this Part to a person involved in a contravention of a provision of Part IV or V shall be read as a reference to a person who -

(a) has aided, abetted, counselled or procured the contravention;

(b) has induced, whether by threats or promises or otherwise, the contravention;

(c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or

(d) has conspired with others to effect the contravention."

The basis of the applicants' claim against the first and fifth respondents is that each is a person "involved in a contravention" of the Act by a respondent corporation in terms of s.75B, hence liable to the applicants in damages pursuant to s.82.

Of course the applicants rely upon s.82 to sheet liability home to the first and fifth respondents. They must do this in order to make those respondents liable under the Trade Practices Act. The Attorney's submission is that s.82 is intended "to provide a right of action in damages against natural persons of a specified class and of a specified connection and that it is so intended as part of the framework of the act and as an integral part of preserving the integrity of the legislative provisions as a whole".

Section 76 empowers the Court to order a person who has contravened or otherwise is in breach of a provision of Part IV to pay to the Commonwealth a pecuniary penalty. The section speaks of a person who has contravened a provision of Part IV; has attempted to contravene such a provision or has engaged in conduct which is defined in terms virtually identical with paras. (a) to (d) of s.75B. Section 78 provides that criminal proceedings do not lie against a person for contravention of a provision of Part IV. I agree with the Attorney's submission that this would remove the prospect of criminal proceedings under the Crimes Act 1914 for contravention of that part of the Trade Practices Act.

Part VI of the Act attaches to a breach of Part IV sanctions in the form of pecuniary penalties (s.76) and a liability in damages (s.82) but not otherwise.

In the case of Part V, s.79 creates an offence for contravention of a provision "other than section 52". Section 79 has nothing comparable to s.76 by way of an extended definition of what may amount to a contravention. Presumably reliance may then be placed upon the relevant provisions of the Crimes Act.

Section 80 empowers the Court to grant an injunction restraining a person from engaging in conduct that constitutes or would constitute a contravention of a provision of Part IV or V. The circumstances in which that provision operates are spelt out in terms comparable to s.76.

Thus by the time s.82 is reached, a picture has emerged whereby in relation to conduct in contravention of s.52, no pecuniary penalty lies nor may an offence be committed. Contravention of s.52 may lead to the granting of an injunction under s.80 or to an award of damages under s.82. There is as well a compensatory provision in s.87.

A consideration of the authorities referred to by counsel leads to the conclusion that a natural person may be liable under s.82 if his conduct has the connection spelt out in s.75B with something done by a corporation or by another natural person to whom s.6 applies. There can be no doubt about the intention of s.82. The deliberate choice of "person", both he who may sue and he who may be sued, includes "a body politic or corporation as well as an individual" (Acts Interpretation Act 1901 s.22). The real question is whether, in extending liability to individuals, s.82 exceeds the legislative competence of the Commonwealth.

In R. v. Australian Industrial Court; Ex Parte C.L.M. Holdings Pty. Ltd. [1977] HCA 6; (1976-1977) 136 C.L.R. 235 the High Court upheld the validity of s.79 of the Trade Practices Act.

Barwick C.J. regarded the section as "an incident of the exercise of the legislative power which supports the substantive provisions prohibiting or requiring conduct the control of which falls within that legislative power". (at p.238).

Mason J., in whose judgment the other members of the court concurred, said:

"In my view s.79 operates so as to penalize those persons who, according to the terms of Pt V, when properly construed, are capable of contravening its provisions and who do in fact do so. The section does no more than say that the offender, if he is a body corporate, should be liable to a penalty on one scale, and if he is a person not being a body corporate, he shall be liable to a penalty on another scale. So understood the validity of the section is supported by the heads of constitutional power which sustain the various provisions in Pt V, . . ." (at p.243).

C.L.M. Holdings concerned charges against two companies of breaches of s.53(a) of the Trade Practices Act and charges under s.5 of the Crimes Act 1914 against a director of one company of having knowingly been concerned in the commission of the offences by both companies. Of s.79 Mason J. commented:

"There is no limitation in the language which confines the operation of the section to principal offences capable of being committed by the person who is alleged to have been knowingly concerned in their commission . . . The point here is that if a head of constitutional power enables the Parliament to legislate so as to create a particular offence, then that head of power or the incidental power will authorize a provision having the same effect as s.5 of the Crimes Act in its application to a person who is knowingly concerned in the commission of the offence". (at pp.246-247).

In the present case the applicants invoke s.82 against all the respondents. As to those respondents who are natural persons, the applicants must rely and do rely upon s.75B. So understood s.82 is valid in its operation. What may be described as the substantive breach must, in the absence of any reliance upon s.6, be committed by a corporation. Natural persons may be drawn into the liability arising because of that breach if they aided, abetted, induced the contravention or otherwise answer any of the descriptions in s.75B.

I would add to the judgments in C.L.M. Holdings remarks by Lockhart J. in Trade Practices Commission v. Sterling (1979- [1980] FCA 12; 1980) 28 A.L.R. 497. His Honour was concerned with the application to natural persons of the injunctive provisions of s.80 of the Trade Practices Act. Speaking of C.L.M. Holdings, Lockhart J. commented:

"It was sought on behalf of the respondent to distinguish the C.L.M. case on the ground that s.79 subjected to penalty persons who contravened provisions of Pt V whereas s.80 empowers the court to grant injunctive relief. The distinction is obvious, but it is not material. If the reasons of the High Court apply to a section of the Act that creates offences and to the Crimes Act a fortiori, it governs a section that empowers the court to remedy a civil wrong." (at p.519).

An appeal against Lockhart J.'s decision was dismissed (Sterling v. Trade Practices Commission (1980-1981) 35 ALR 59). I adopt what his Honour said. I see no relevant distinction between a section giving rise to a criminal liability and one giving rise to a civil liability. Section 75B draws no such distinction and the reasoning that led the High Court in C.L.M. Holdings to uphold s.79 of the Trade Practices Act in its application to a natural person leads me to uphold s.82 in its like application. In my view s.82 is a valid exercise of power in its operation upon natural persons who fall within s.75B.

The objection to jurisdiction taken by the fourth respondent Oakland Nominees Pty. Ltd. is that, while it is a corporation in the ordinary sense of the term, it is not within the definition in s.4(1). No-one suggested that the definition was other than exhaustive. The only category into which that respondent might fall is "a trading corporation formed within the limits of Australia. . . ". (para. (b)).

The fourth respondent was incorporated on 21 November 1980. It was described by its counsel as

". . . a shelf company which was acquired by the first respondents so that it could be substituted as trustee of the O'Connor's Unit Trust and having been appointed trustee its sole task was to collect the balance of the purchase price for the sale of the business, pay out the trade creditors to the date on which the takeover occurred and distribute the proceeds amongst the unit holders of the trust."

In the fourth respondent's submission the limited activity just described was insufficient to classify it a trading corporation.

To support that submission the respondent relied upon R. v. Federal Court of Australia; Ex parte W.A. National Football League [1979] HCA 6; (1978-1979) 143 C.L.R. 190, hereafter referred to as Adamson's case. The High Court, by a majority, held that the Western Australian National Football League (Inc.) and the West Perth Football Club (Inc.) was each a trading corporation under the Trade Practices Act.

The respondent stressed that the majority reached that decision on a consideration of the activities of the organisations in question. A body will satisfy the description "trading corporation", "if trading is a substantial corporate activity" (Barwick C.J. at p.208); "when its trading activities form a sufficiently significant proportion of its overall activities as to merit its description as a trading corporation" (Mason J. at p.233, with whom Jacobs J. agreed); "As long as the trading is not insubstantial" (Murphy J. at p.239).

I understand Mason J. to be saying that "significant" is to be measured by the activities generally of the corporation. Murphy J. put the matter somewhat differently.

"As long as the trading is not insubstantial, the fact that trading is incidental to other activities does not prevent it being a trading corporation. For example, a very large corporation may engage in trading which though incidental to its non-trading activities, and small in relation to those, is nevertheless substantial and perhaps exceeds or is of the same order in amount as the trading of a person who clearly is a trader. Such a corporation is a trading corporation. . . " (at p.239).

Barwick C.J. referred to the diversification of corporate activity in modern times, this leading him to say:

". . . the nature of a company may not be discernible from a persual of its memorandum. The only sure guide . . . is a purview of its current activities, a judgment as to its nature being made after an overview of all those activities". (at p.208).

In State Superannuation Board of Victoria v. Trade Practices Commission [1980] FCA 165; (1980) 33 ALR 105, Brennan J. considered the judgments in Adamson's case and also those in R. v. Trade Practices Tribunal; Ex parte St George County Council [1974] HCA 7; (1974) 130 CLR 533 and concluded:

"What is now to be regarded as of critical importance is the substantiality and degree of the trading activity of the corporation, rather than the public character of the corporation, the purpose of its formation, or its powers (except where the relevant trading activity is ultra vires)". (at p.115).

Counsel for the applicants submitted that the emphasis in Adamson's case upon the activities conducted by the League and the Club was inevitable because the constitutions of those organisations did not truly reflect the nature and scope of their activities. Each was a sporting club incorporated under a statute intended to apply to associations not formed for trading or pecuniary profit; yet each engaged in trading and derived pecuniary profit.

In the applicants' submission the fourth respondent is a corporation with a memorandum containing objects similar to those of many commercial undertakings. There is nothing in its constitution to warrant treating it any differently from corporations clearly engaged in trading operations. It may be that since incorporation it has done little more than act as a trustee and pay debts or at any rate seek an extension of time in which to pay. But even those limited activities, it was said, stamp it as a trading corporation. Furthermore whatever its activities may have been in the past, it was incorporated with powers that mark it out as a trading corporation and it remains as a body empowered to carry out those activities.

In the three decisions mentioned earlier there was a dichotomy between the trading activites of the body in question and other activities more directly bound up with its charter. In St George the contrast was with the establishment of the county council for local government purposes; in Adamson it was with the sporting and social nature of the League and the Club; and in State Superannuation Board of Victoria it was with the establishment of the Board as a governmental corporation.

In the present case no such dichotomy is apparent. To say that Oakland Nominees was incorporated to "undertake the office of a trustee" (memorandum of association cl. 2(a)) throws little light upon the activities of the company. The trading operations of a trustee may be considerable; they may be negligible. Adamson's case and State Superannuation Board of Victoria require that attention be focussed on activities and it is to the activities of Oakland Nominees that I now turn.

O'Connor's Unit Trust was the owner of the business known as O'Connor's Winehouse and Restaurant, also referred to in the evidence simply as O'Connors. Scrid Nominees Pty. Ltd., the second applicant, was the trustee of the trust and conducted the business until it was sold to the first applicant Mr Muller. The shares in Scrid Nominees were transferred to Mr and Mrs Muller. Oakland Nominees was incorporated to become the trustee of O'Conner's Unit Trust in place of Scrid Nominees.

Mr Fencott, one of the respondents and a director of Oakland Nominees, said that the company's functions were

". . . to receive the remaining amount from the sale of the business, pay off its creditors and thereafter distribute any remaining sums to its unit holders within the O'Connor's Unit Trust."

The purchase price of the business was not paid in full and Oakland Nominees began proceedings against Mr Muller in the Supreme Court of Western Australia to recover the balance. The reference in Mr Fencott's evidence to paying off "its creditors" is inaccurate. Oakland Nominees has no creditors; its task was to pay off the creditors of the business incurred during the trading period just before it was sold. Oakland Nominees had correspondence with creditors of the business seeking an extension of time in which to pay debts by reason of the litigation over the balance of purchase price. From the purchase money that was paid Oakland Nominees met some of the trust's debts. On payment of the balance of purchase price it proposes to pay the remaining creditors and make a distribution to the unit holders of the trust. That is the extent of its activities.

I have not found the question an easy one to resolve but I am satisfied that, limited though its activities have been, Oakland Nominees is a trading corporation. I reach that conclusion on the basis that receiving the purchase price for the sale of a business, sueing for the balance of that purchase price, negotiating with and paying off creditors of a business and distributing whatever money remains are commercial activities, collectively if not singly. In Adamson's case Barwick C.J. spoke of "the commercial nature of an activity (as) an element in deciding whether the action is in trade or trading". (at p.209). In Re Ku-Ring-Gai Co-operative Building Society [1978] FCA 50; (1978) 22 ALR 621 at pp.624-625 Bowen C.J. stressed the connection between trade and commercial arrangements or operations.

Unlike the bodies concerned in the decisions mentioned earlier in these reasons, Oakland Nominees is not a company with substantial non-trading and trading activities, one to be measured against the other. When its activities are examined, particularly overall, they seem to me to point to a company which was incorporated to carry out and which has carried out activities which may fairly be described as commercial and which in my view mark it as a trading corporation.

This ground of objection to jurisdiction fails.

The final basis of objection looks to a number of paragraphs of the statement of claim in which relief is sought on grounds not directly relating to s.52 of the Trade Practices Act. The respondents submit that these are not matters within the jurisdiction of the Federal Court. This inevitably requires a consideration of the reasons for judgment of the members of the High Court in Phillip Morris Inc. v. Adam P. Brown Male Fashions Pty. Ltd. [1981] HCA 7; (1981) 55 ALJR 120. It involves extracting from those reasons what might be described as the highest common factor and applying it to the various causes of action pleaded in the statement of claim. The paragraphs under attack may be summarised in this way.

para.17 fraudulent misrepresentations during negotiations for the sale of the business, made by the third respondent and authorised by the first respondents and second respondent;
para. 18 negligent misrepresentations during those negotiations, made and authorised as in the preceding paragraph;

para. 19 incorporation of those representations into a contract between the first applicant and the second applicant for the purchase of O'Connors; alternatively collateral warranties forming the basis of a collateral contract between those appliclants;
paras 24 and 25 an undertaking by the second applicant to pay all liabilities of the business incurred before possession and to indemnify the first applicant in respect of those liabilities. The liabilities were incurred by the second applicant in the conduct of the business on behalf of O'Connor's Unit Trust;

para. 27 a right in the second applicant to be indemnified by the fourth respondent from the assets of the trust in respect of those debts and liabilities;

paras 28-32 on the sale of the business the second respondent became entitled to commission. The second respondent took from moneys received by it from the first applicant more than it was entitled to and is obliged to refund the difference;

para. 33 an undertaking by the first respondents to indemnify the first applicant against any liabilities incurred in connection with his acquisition of the second applicant; an obligation to pay to the first applicant such damages or compensation as the first applicant may be entitled to from the second applicant;

paras 36 and 37 damages against the fourth and fifth respondents for defamation of the applicants in connection with the purchase of the business.

The High Court has recently spoken of the jurisdiction of the Federal Court in these terms:

"The Federal Court of Australia Act sets up the Federal Court and arms it with certain powers, for example, ss. 22 and 23. But generally speaking, and apart from s.32, the Act does not invest the Court with jurisdiction. It leaves it to the Parliament to do so by other statutes (s.19). This the Parliament has done by other statutes, such as the Trade Practices Act. When a specific statute which invests the Court with jurisdiction in matters of a particular class does so in such a way as to limit the power of the Court to grant relief of a particular kind, there is no basis for transcending that limitation by recourse to the general provisions of the Federal Court of Australia Act." (Thomson Australian Holdings Pty. Ltd. v. Trade Practices Commission [1981] HCA 48; (1980-1981) 55 ALJR 614 at p.618).

Since the decision in Phillip Morris Inc. s.32 must be taken to have no operation except in relation to other Federal matters. As expressed by Bowen C.J. in Coonan & Denlay Pty. Ltd. v. Superstar Australia Pty. Ltd. (1981) 37 ALR 155 at p.156 :

"The associated matters covered by s.32 are matters of federal jurisdiction not matters of State or non-federal jurisdiction".

The applicants do not pray in aid s.32. They take their stand on the notion of "matter" appearing in ss.76 and 77 of the Australian Constitution. They argue that jurisdiction is expressly conferred upon the Federal Court by s.86 of the Trade Practices Act and that the real issue is to determine the scope of matters arising under that Act. In seeking to find the answer in Phillip Morris Inc. some reference to the judgments is necessary.

" . . . when a court which can exercise federal jurisdiction has its jurisdiction attracted in relation to a matter, that jurisdiction extends to resolution of the whole matter." (Barwick C.J. at p.125).

" . . . if a party claims relief on two different legal grounds, but the facts on which the relief is sought on each ground are identical, and the relief sought on each ground is the same in substance if not in form, there is only one matter for determination". (Gibbs J. at pp. 134-135).

Mason J., with whom Stephen J. agreed, said :

" . . . it may appear that the attached claim and the federal claim so depend on common transactions and facts that they arise out of a common substratum of facts. In instances of this kind a court which exercises federal jurisdiction will have jurisdiction to determine the attached claim as an element in the exercise of its federal jurisdiction." (at p.140).

Murphy J. spoke of "non-federal claims which are not separate and distinct from both the trade practices and any associated copyright claim". (at p.143). Against this background of different approaches the test formulated by Mason J. seems to represent the highest common factor. It is somewhat narrower than that of Barwick C.J. and Murphy J. and is concurred in by Stephen J.

Applying this test it seems to me that claims based upon statements made concerning the business to be sold, when those statements are said to constitute the misleading or deceptive conduct complained of, may fairly be said to arise out of a common substratum of facts. Paragraphs 17, 18 and 19 answer that description. To succeed, those claims may require proof of elements not demanded by s.52 (deceit, negligence and the existence of a contract for example), but the common substratum is present.

Counsel for the applicants submitted that the indemnity sought in paras 24, 25 and 27 of the statement of claim arose out of the very agreement that resulted from the misleading and deceptive conduct of which they complain. It may well be said that the applicants do not complain of the agreement when they plead s.52 of the Trade Practices Act; they complain of conduct that led to the agreement. I think that is taking too narrow a view. The statements made during negotiations, the position of the second applicant and the agreement that resulted are part of one transaction. Even in terms of s.52 the applicants must plead the agreement; without it their cause of action is incomplete.

Paragraphs 28-32 relate to the second respondent H. & T. Holdings Pty. Ltd. which itself did not challenge the jurisdiction of the Court. Nevertheless I should deal with jurisdiction since it has been raised. My view is that there is no common transaction, no common substratum of facts. The claim relates to commission arising from the sale of the business and what is said to have been an excessive charge by the second respondent. Events leading up to the sale of the business play no part in these paragraphs. The claim made for the return of money wrongfully withheld by the second respondent and the claim against other respondents for misleading or deceptive conduct do not depend on common transactions and facts.

Likewise I regard the claim in para. 33 as beyond jurisdiction. It arises from a deed made subsequent to the contract for the sale of the business; the precise circumstances in which the deed was made did not appear. In any event it seems, from what counsel said, that leave will be sought to delete that paragraph from the statement of claim.

Paragraphs 36 and 37 plead statements defamatory of both applicants in letters written by the fourth respondent by its agent the fifth respondent when circularising trade creditors of the business. The letters were written some months after the business was sold. While the letters were written consequent upon the sale, the writing of them was not part of any transaction or fact upon which the applicants rely in regard to s.52. No common substratum of facts is present.

The conclusions I have reached may be summarised thus :

1. A natural person may be liable under s.82 of the Trade Practices Act if his conduct has the connection spelt out in s.75B with something done by a corporation or by another natural person who is a primary offender by reason of s.6.

2. In its application to a natural person as described in the preceding paragraph s.82 of the Trade Practices Act is within the legislative competence of the Commonwealth.

3. The fourth respondent Oakland Nominees Pty. Ltd. is a trading corporation formed within the limits of Australia hence amenable to the jurisdiction of the Federal Court in these proceedings.

4. The matters pleaded in paras 17, 18, 19, 24, 25 and 27 are within the jurisdiction of the Federal Court.

5. The matters pleaded in paras 28, 29, 30, 31, 32, 33, 36 and 37 are not within the jurisdiction of the Federal Court.

I shall hear from counsel as to the appropriate orders to be made and as to the next step in this action.