CATCHWORDS Trade Practices - implied conditions in hire purchase agreement ~ rescission - ss.71(1) and (2), 75A Trade Practices Act 1974 Federal Court - jurisdiction to grant rescission of hire purchase agreement and to make declaration in regard thereto "in relation to a matter arising under this Act" - ss. 75A, 82, 86, 163A Trade Practices Act 1974. SANDOR ISTVAN POLGARDY v. AUSTRALIAN GUARANTEE CORPORATION LIMITED W.A. G.19 of 1980 CORAM: TOOHEY J. 48 March 1981 DARWIN IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W.A. G.19 of 1980 wee GENERAL DIVISION ' IN THE MATTER of the Trade Practices Act 1974 as amended SANDOR ISTVAN POLGARDY Applicant and AUSTRALIAN GUARANTEE CORPORATION LIMITED Respondent CORAM TOOHEY J. 18 warch 1981 REASONS FOR JUDGMENT These proceedings illustrate some of the problems that continue to arise concerning the jurisdiction of the Federal Court, particularly under the Trade Practices Act 1974. In September 1979 the applicant Mr. Polgardy entered into a hire purchase agreement with the respondent Australian Guarantee Corporation Limited in respect of a Lamborghini Jarama car, the cash price of which was $40,000. ee The applicant contends that the goods were not of merchantable quality nor reasonably fit for the purpose for which they were required Relying upon the implied conditions in s.71(1) and (2) of the Trade Practices Act, read with s.75A, he gave notice rescinding the agreement. In his application to this Court, as originally filed, Mr. Polgardy sought a declaration that the hire purchase agreement had been rescinded by him, the return of a Lincoln Continental car traded in as part of the agreement or payment of $13,000 in lieu, the repayment of $1769.62, instalments paid under the contract, and damages. Late last year, following the decision in Zalai v. Col Crawford (Retail) Pty. Ltd. (1980) A T.P.R. 40-177 and before Arturi v. Zupps Motors Pty. Ltd. (1980) A T.P.R 40-189, the applicant abandoned his claim for damages. The respondent now seeks by way of dismissal, stay or striking out extinction of the applicant's claim. It does so on the basis that this Court has no jurisdiction to grant any of the relief sought. Pursuant to directions given earlier under s.78B of the Judiciary Act, the respondent gave notice of these proceedings te the Attorney-General of the Commonwealth and to the Attorney-General of Western Australia. Each has responded that he does not wish to participate. In Arturi v. Zupps Motors Pty. Ltd. supra, Brennan J. held that the provision in s.82(1) of the Trade Practices Act that a person who suffers loss or damage by conduct of another done in contravention of Part IV-or V may recover the amount of the loss or damage by action did not apply to s.7l. In his words: "Section 71 prescribes no norm of conduct it affects the legal relationship between parties to a contract by importing one or more conditions into the contract. It does not proscribe conduct by the supplier of goods; it relates to the quality of the goods supplied. ... For the purposes of sec.82, therefore, a breach of the obligation is not to be treated as a breach of an obligation imposed on the obligor by the Act dehors the contract, but as an obligation imposed by the contract itself" (at p.42,596). With that view I respectfully agree. However while relevant to, that decision does not conclude the issues raised in these proceedings. The applicant relies upon s.71 for implied conditions the breach of which he says entitles him to relief. But, he adds, his cause of action is not to be found within s.82. Rather it derives from ss.75A and 163A. Section 75A provides that where a corporation supplies goods to a consumer in the course of a business and there is a breach of a condition that is, by virtue of Division 2, implied in the contract for the supply of the goods, the consumer is entitled to rescind the contract by giving the requisite notice or causing the goods to be returned. It further provides that where such a contract has been rescinded in accordance with the section, the property in the goods revests in the corporation and the consumer may recover as a debt the amount or value of any consideration paid. Finally s.75A(4) makes clear that this right of rescission is in addition to and not in derogation of any other right or remedy under the Trade Practices Act or elsewhere. Section 71 is part of Division 2. Section 163A is in Part XII of the Act ~ Miscellanesus. Sub-s.(1) enables a person to institute a proceeding in the Federal Court seeking in relation to a matter arising under the Act: "(a) a declaration in relation to the operation or effect of any provision of this Act other than Division 2 of Part V or in relation to the validity of any act or thing done, proposed to be done or purporting to have been done under this Act, or (b) an order by way of, or in the nature of, prohibition, certiorari or mandamus The Court is expressly given jurisdiction "to hear and determine the proceeding". The applicant argues that s.75A is sufficient authority for the relief claimed by him. True it does not extend to the making of a declaration but, says the applicant, - he does not need declaratory relief if he obtains rescission and the return of goods and money. He contends however that s.163A is wide enough to authorise the declaration sought. In the respondent's submission, s.75A does not confer and is not intended to confer jurisdiction. As to s.163A, its contention is that the entirety of para.(a) must be read as excluding Division 2 of Part V. In my view the respondent is correct in its challenge to s.75A as a jurisdiction conferring provision. The object of the section is to create a statutory right of rescission to meet some of the problems that have arisen under the Sale of Goods Acts. (See Donald and Heydon: Trade Practices Law Vol.2 p.747). Section 75A(4) preserves any other rights or remedies that may exist. Section 75A does not refer to the Federal Court nor, as do some sections, to a court of competent jurisdiction. It gives toa court, otherwise seized of a matter, authority to recognise and give effect to rescission in accordance with the section. Section 86 of the Trade Practices Act confers jurisdiction on the Federal Court "to hear and determine actions, prosecutions and other proceedings under this Part " (Part VI). Rescission is not an action, prosecution or proceeding under Part VI, it is a statutory right deriving from a provision of Part V. Section 163A gives rise to different considerations. I do not think it is possible to read sub-s.(1) para.(a) as if the reference to Division 2 of Part V in its terms controlled the whole of the paragraph. The formulation of the paragraph is strongly against such a construction. In its first limb it looks to the meaning of the Act and empowers the Federal Court to make a declaration regarding that meaning except in relation to Division 2 of Part V, the conditions and warranties implied in consumer transactions. In its second limb it empowers the Court to express a view of the validity of any act or thing done under the Act. At all times the Court's jurisdiction is controlled by the words "in relation to a matter arising under this Act". . Donald and Heydon suggest that the Trade Practices Commission, the Minister or the Government in making regulations "seem to be the only persons doing things under the Act" (op. cit. p.855). The section certainly contemplates that as well the Trade Practices Tribunal may do so - see sub-s.(4). Incidentally, Donald and Heydon say. "A declaration under the second limb (of s.163A) can only be made by the Federal Court constituted by three judges" (op. cit. p.855). Taperell, Vermeesch and Harland Trade Practices and Consumer Protection 2nd ed. para.344 comment "The jurisdiction of the Court to make declarations and orders under s.163A ... must be exercised by not less than three Judges". A requirement of three judges is true of a declaration or order relating to the Tribunal, but not otherwise. If the second limb of para.(a) of s.163A(1) is read in isolation there is reason to conclude that it applies to a rescision effected in reliance upon s.75A of the Act. The expression "under this Act" fs not one of great precision but ordinarily it would carry the sense of something done in accordance with the Act or, as suggested by O'Bryan J. in R. v. Clyne, Ex parte Harrap (1941) V.L.R. 200 in another context, it "is perhaps more aptly translated by the expression "pursuant to" ..." (at p.201). A rescission effected in reliance upon s.75A may reasonably be said to have been an act done in accordance with the statute or pursuant to it. But there are compelling reasons why the second limb of para.(a) cannot be read in isolation and must be placed in its context in the Trade Practices Act. Although earlier I expressed the view that the qualification tn para. (a) relating to Division 2 of Part V did not in its terms apply to the whole of that paragraph, it would be a curious result if the paragraph operated in such a way that no declaration could be sought in regard to the operation or effect of a provision in Division 2 but that such a declaration could be sought in relation to the validity of something done with reference to that Division. Again it would be odd if the applicant in the present proceedings could obtain in this Court a declaration that he had lawfully rescinded the hire purchase agreement even though unable to obtain an order for rescission or any ancillary relief. It may be said that these considerations simply point to an inconvenient result and that they ought not to stand in the way of the plain language of the section. But a reading of s.163A in its entirety and a consideration of its relationship to the Act suggest strongly that it was not intended to apply to civil litigation under the consumer protection provisions of the Trade Practices Act. There is of course an express exclusion of Division_2 in part of s.163A(1)(a). In my view the concluding words of that paragraph relate to the conduct of 'persons or bodies entrusted with some function under the Act rather than to a step taken as part of a contractual dispute between two parties. That view gains support not only from the express reference to Division 2 of Part V in para.(a) but from the fact that sub-s.(1) contemplates not only a declaration or order but "both such a declaration and such an order". Since an order is by way of prohibition, certiorari or mandamus, it is simply inapplicable to the issues presently before this Court. It is important to note too that s.163A(2) empowers the Minister to institute a proceeding in the Court under the section and to intervene in any proceeding in which a party is seeking a declaration under para.(a) or an order under para.(b). It is hard to imagine that the Minister could have an interest or indeed any role in these proceedings. As mentioned earlier, s.75A expressly preserves rights and remedies under other legislation and laws. An applicant may well seek to rely upon a rescission effected pursuant to s.75A and in the alternative plead the rescission provisions of a Sale of Goods Act. Once again, it would be a curious result if the Federal Court was empowered to make a declaration in regard to the validity of the rescission under s.75A when it had no power to express a view in relation to a rescission otherwise effected. It is instructive to note the history of the legislation. Section 163A was inserted by Act No.88 of 1976. At that time s.75A did not exist, it was inserted by Act No.81 of 1977, Thus there was no statutory right of rescission to which s.163A could then apply nor was there anything capable of being done under the Act except by persons to whom some function had been entrusted. In my view the second limb of para.(a) was not intended to apply to some inter partes step such as rescision and it does not so apply. I do not need to discuss at any length the requirement in s.163A(1) that a declaration sought be "in relation to a matter arising under this Act". The meaning of "matter'' was explored by the Federal Court in In re Tooth and Co. Ltd. (1978) A.T.P.R. 40-065 and 40-084 and more recently by the High Court in Phillip Morris Incorporated v. Adam P. Brown Male Fashions Pty. Ltd. and United States Surgical Corporation v. Hospital Products International Pty. Ltd. (1981) A.T.P.R. 40-197. The notion of a matter arising under an Act has been considered in decisions such as Felton v. Mulligan (1971) 124 C.L.R. 367. It may well be that an exerciSe of the right of rescission conferred by s.75A is a matter arising under the Trade Practices Act and that the declaration sought by the applicant in these proceedings is in relation to such a matter. In view of the conclusion I have reached regarding the operation of para.(a) of s.163A(1), it is unnecessary for me to decide that issue. eee 10. The appropriate order seems to be that the application should be dismissed as disclosing no reasonable cause of action. But I shall hear counsel as to the precise form of order to be made if they are unable to submit an agreed minute. toe 7" Fo" Ute MINE F rote co . us Coev of tne - bi 1 . + Roacs % fot Tel reanby tees OF bis nwtleu