Re Philip George Scales; Jay Engelbrecht; David John Hart; Alfio Macolino; Angus John Redford and Frederick Mark Boyd Turner Trading As "Scales & Partners" v Systems Support Pty Ltd and Ashley Brian Dixon [1986] FCA 18 (6 February 1986)

FEDERAL COURT OF AUSTRALIA

Re: PHILIP GEORGE SCALES; JAY ENGELBRECHT; DAVID JOHN HART; ALFIO MACOLINO;
ANGUS JOHN REDFORD and FREDERICK MARK BOYD TURNER trading as "SCALES &
PARTNERS"
And: SYSTEMS SUPPORT PTY. LTD. and ASHLEY BRIAN DIXON
No. G67 of 1985
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Fisher J.

CATCHWORDS

Practice and Procedure - Federal Court of Australia - Jurisdiction - Claim under part V of Trade Practices Act 1974 - Additional claim in contract - Claim based on representation not pleaded as constituting misleading conduct - Whether Court has jurisdiction to determine claim relating to non-federal matters - Whether claim constitutes a matter separate and distinct from principal claim.

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

Misrepresentation Act 1971 (S.A.) s.7

HEARING

ADELAIDE
6:2:1986

ORDER

The application under paragraph 1 of the Notice of Motion dated 15 January 1986 be dismissed.

Further consideration of the application under parpagraph 2 of the Notice of Motion be adjourned to a date to be fixed.

The respondents pay the costs of the application under parpagraph 1 to the applicants the same to be taxed if not agreed.

NOTE: Settlement and entry of orders is dealt with in Order 36 of
the Federal Court Rules.

DECISION

By Notice of Motion filed on 15 January 1986 the respondents seek to strike out certain paragraphs of the amended statement of claim in these proceedings on the ground that this Court has no jurisdiction to determine the issues raised thereby. They also seek further and better particulars of the statement of claim but this aspect of the matter was adjourned for subsequent consideration.

2. The applicants are a number of solicitors carrying on practice in partnership in Adelaide under the name "Scales & Partners". By their amended statement of claim they allege that by an agreement evidenced by certain correspondence of various dates in the month of June 1985 the respondent Systems Support Pty. Ltd. ("Systems Support") agreed for reward to provide and instal a computer system on the premises of the applicants. It was said that the provision and installation of the said system should be "at the cost of the applicants by way of leasing finance through Natwest Finance Limited". The applicants further allege that during the months of February to June 1985 inclusive in order to induce the applicants to enter into the said agreement the respondent Dixon on behalf of Systems Support made certain representations as to the suitability and capacity of the computer system. Some of these representations were made in relation to existing circumstances and some were in the nature of predictions as to the manner in which the system would perform. The applicants contend that each of the representations was false and that the conduct of Systems Support was misleading or deceptive or likely to mislead or deceive.

3. The applicants then plead certain express terms of the agreement as follows:

"11. It was an express term of the said agreement that:

(a) The said computer system would be delivered and
installed in its entirety in one operation and at
one time.

(b) The said computer system would be installed within
approximately two weeks from the 25th June 1985 or
when dedicated power was available for the
installation (which in the event was in the last
week of July 1985) whichever is the later.

(c) Systems Support would at any time within eight
weeks of installation of the said computer system
pay out the lease of the said computer system with
no charges against the Applicants should the
Applicants feel that the said computer system did
not perform to expectations.

(d) Systems Support would immediately upon the
installation of the said computer system provide
the Applicants with so much support assistance and
operator training as would be necessary to enable
the Applicants to make a complete change over from
the Applicants previous accounting system to the
said computer system with the minimum delay
commensurate with the capacity of the staff of the
Applicants."

4. It is alleged that the respondent Computer Systems failed to comply with these express terms.

5. The applicants contend that the representations were made in trade or commence and rely upon the provisions of Part V of the Trade Practices Act 1974 ("the Act") and in particular s.52. In this regard damages are claimed pursuant to s.82 of the Act.

6. In addition to alleging contraventions of the Act, the applicants claim damages for deceit, breach of contract, negligence, and pursuant to s.7 of the Misrepresentation Act 1971 (S.A.) and also specific performance. Like claims for damages are made against the respondent Dixon pursuant to s.75B of the Act.

7. The respondents admit the making of the agreement but deny the making of most of the representations. They also deny that the agreement contained the express terms referred to in paragraph 11 set out above. However at this stage they contend that this Court lacks jurisdiction to hear and determine the claim based on alleged breaches of paragraph 11 and in particular paragraph 11(c) of the amended statement of claim. It is sufficient to decide this application by reference to paragraph 11(c) and to note that all subsequent paragraphs which are challenged are consequential upon paragraph 11. Stated briefly the respondents said that the proceedings for contravention of the Act and the claim for breach of the contractual term pleaded in paragraph 11(c), being a common law claim for breach of contract, are distinct and unrelated claims. The answer of the applicants was that the common law claim falls within the accrued jurisdiction of this Court being a non-severable claim which arises out of common transactions and facts. They relied upon a number of decisions, principally the High Court decisions of Philip Morris Inc v Adam P. Brown Male Fashions Pty. Ltd.(1981) [1981] HCA 7; 148 CLR 457, Fencott v Muller (1983) l52 CLR 570 and Stack v Coast Securities (No. 9) Pty. Ltd. (1983) 49 ALR 193.

8. In the first of these authorities the High Court established that this Court could determine a claim which was not otherwise within its jurisdiction if the claim arose out of the same "matter". In this way the Court can exercise what has been called its "accrued" jurisdiction to grant relief in respect of the non-federal claim.

9. The dispute at this stage turns upon the ambit of or the width to attach to the term "matter". Counsel for the respondents supports his argument by reference to the narrowest of the many expressions used by members of the High Court in interpreting this word.

10. In Philip Morris v Adam P. Brown supra, Barwick C.J. said at page 474 that a particular matter would be outside of the accrued jurisdiction if that matter was "separate and disparate from the matter in relation to or in connexion with which federal jurisdiction has been attracted". Subsequently he used the words "a disparate and independent matter".

Mason J. with whom Stephen J. agreed said at page 512
"...the Court having jurisdiction to determine a matter
falling within ss.75 and 76 giving rise to the exercise
of federal jurisdiction has jurisdiction to decide an
attached non-severable claim".

11. Counsel for the respondents contended that the claim for relief arising out of the alleged breach of the contract term referred to in paragraph 11(c) of the statement of claim should properly be classified as separate and disparate from the Trade Practices' claims and a matter which was severable therefrom.

12. The applicants through their counsel contended that to construe the "matter" in this matter was to place too narrow a construction on the test. Counsel referred in particular to the manner in which Mason J. at page 512 used the expression "non-severable claim". He said -

"The classification of a claim as 'non-severable' does
not necessarily mean that it is, or must be, united to
the federal claim by a single claim for relief, though
this is a common illustration of a non-severable claim.
The non-severable character of the attached claim may
emerge from other aspects of the relationship between
the federal and the attached claim. For example, it
may appear that the resolution of the attached claim is
essential to a determination of the federal question.
Likewise, 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".

13. In Fencott v Muller supra the majority in their joint judgment dealt with the concept of a separate and disparate matter. They said at page 607:

"Perhaps it is not possible to devise so precise a
formula that its application to the facts of any
controversy would determine accurately what claims are
disparate and what are not. Whatever formula be
adopted as a guide - and the formula of 'common
transactions and facts' is a sound guide for the
purpose - it must result in leaving outside the ambit
of a matter a 'completely disparate claim constituting
in substance a separate proceeding'... a non federal
matter which is 'completely separate and distinct from
the matter which attracted federal jurisdiction'... or
'some distinct and unrelated non-federal claim'.

... In identifying a s.76(ii) matter, it would be
erroneous to exclude a substantial part of what is in
truth a single justiciable controversy and thereby to
preclude the exercise of judicial power to determine
the whole of the controversy. What is and what is not
part of one 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... But in the end, it is a
matter of impression and of practical judgment whether
a non-federal claim and a federal claim joined in a
proceeding are within the scope of one controversy and
thus within the ambit of a matter."

14. In Stack v Coast Securities (No.9) Pty. Ltd. supra Mason, Brennan and Deane JJ. cited at page 215 this passage for the purpose of identifying what fell within the accrued jurisdiction of this Court. The contest in that case turned on proceedings for specific performance and claims under s.52 of the Act in relation to a contract for purchase of a home unit and the High Court held that only one "matter" was involved.

15. In these proceedings it is pertinent to note, as the respondents contend, that the provision in the correspondence upon which the applicants rely as forming an express term of the contract is not pleaded as a matter which induced the contract. The applicants do not allege that the respondents represented that they would "pay out the lease of the computer system... should the applicants feel that the computer system did not perform to expectations" or that such a representation was an aspect of the alleged misleading conduct. The respondents concede that if these representations were bona fide alleged to amount to a breach of s.52 of the Act, they would acknowledge that this Court has accrued jurisdiction. There could be a number of grounds upon which the applicants have refrained from so pleading the representation.

16. The omission of this pleading is the foundation for the respondents' submissions. They contend that paragraph 11(c) relates to a matter "which is not part of the matter... which comprises the federal jurisdiction and the alleged jurisdiction to it". Their counsel was prepared to acknowledge that the existence of this term in the contract is in a general sense part of the same transaction i.e. the dealings between the parties relating to the acquisition of a computer system. Such a situation however is not, in their contention, sufficient to found the jurisdiction of this Court. In support counsel cited dicta of single judges in the previously mentioned High Court decisions and referred to two decisions of single judges of this Court (Friendship Corporation Pty. Ltd. v Adamad Pty. Ltd. (1984) 57 ALR 81 and Obacelo Pty. Ltd. v Taveraft Pty. Ltd. (1985) 59 ALR 571). Each of the latter two decisions arises out of circumstances very different from those in this matter and they do not assist in its resolution.

17. As has already been mentioned, the agreement between the parties is alleged, and admitted, to be evidenced by 4 letters of various dates between 19 and 28 June 1985. The facts upon which the applicants base their contention of misleading or deceptive conduct are alleged to have occurred during the months of February to June 1985 inclusive. Happenings during the month of June are therefore referable both to the formation of the contract and the alleged misleading conduct. However the "undertaking", to use a neutral word, in the correspondence to pay out the lease if the computer system did not perform to expectations has not been pleaded as constituting conduct contrary to s.52 of the Act. This undertaking and its existence is acknowledged to form part of the transaction between the parties, but as a fact it is contended to be apart and severable from the substratum of facts common to misleading conduct and the other common law claims. In these circumstances the respondents contend that existence of the undertaking and its breach is not part of the matter which comprises the federal jurisdiction.

18. In my opinion this is too narrow and restrictive an approach and not justified by the authorities. The Court will be required at trial to hear evidence of the happenings in the period February to June 1985 and during the latter month in particular and to determine whether the respondents' conduct during that period was misleading. It will also be necessary to determine the terms of the contract into which the applicants contend they entered in June in reliance upon that conduct. I cannot see how the Court can refrain from making a finding on the contention of the applicants that the contract contained a term in the form of paragraph 11(c). The dicta of the majority of the High Court in Fencott v Muller set out above clearly indicates that this issue should be determined along with the issues under the Act and the other common claims which the respondents acknowledged to be attached and non-severable. In the words of the High Court in that paragraph there is here "in truth a single justiciable controversy" and both "as a matter of impression and practical judgment" the claims in the pleadings "are within the scope of one controversy and thus within the ambit of a matter".

19. In my opinion the Court has jurisdiction to deal with the issue of breach of the contractual terms pleaded in paragraph 11 of the amended statement of claim. It follows that because of the substantial overlap of the facts referable to this and other issues, it is proper that I decide, as a matter of discretion, to exercise this accrued jurisdiction and to determine to the extent ultimately necessary all issues pleaded by the applicants.

20. The respondents' application referred to in paragraph 1 of the Notice of Motion is dismissed with costs.