CATCHWORDS PRACTICE - application to strike out pleadinas for want of jurisdiction - whether pleadings claim loss or damage - relevance of relief sought to claims made in pleadings. PRACTICE - application for transfer of venue - all circumstances to be considered ~ discretion. ' Trade Practices Act, 1974: ss. 52, 80, 82, 87 and 163A. HOUSING LOANS INSURANCE CORPORATION v. CENTRAL MORTGAGE REGISTRY OF AUSTRALIA PTY. LIMITED 3117 of 1984 LOCKHART J. 12 JULY 1984 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY No. G117 of 1984 wwe vrw GENERAL DIVISION INTHE MATTER OF: THE TRADE PRACTICES ACT 1974 BETWEEN : HOUSING LOANS INSURANCE ' CORPORATION ' Applicant * AND: CENTRAL MORTGAGE REGISTRY OF AUSTRALIA PTY. LIMITED First Respondent AND: VERNON SPENCER Second Respondent JUDGE MAKING ORDERS: LOCKHART J. DATE: eo JULY 1394 WHERE MADE: SYDNEY ORDERS THE COURT ORDERS THAT: 1. The notice of motion filed on 6th July 1984 be dismissed. 2. The costs of the motion be the applicant's costs in proceedings. the IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY No. G117 of 1984 ed GENERAL DIVISION IN THE MATTER OF: THE TRADE PRACTICES ACT 1974 BETWEEN : HOUSING LOANS INSURANCE CORPORATION Applicant AND: CENTRAL MORTGAGE REGISTRY OF AUSTRALIA PTY. LIMITED First Respondent AND: VERNON SPENCER Second Respondent LOCKHART J. 13 JULY 1984 REASONS FOR JUDGMENT LOCKHART J. The respondents filed a notice of motion to set aside the application which commenced this proceeding on the ground that this Court has no jurisdiction to hear the claim. The respondents sought, in the alternative, an order that the proceeding be transferred from Sydney to Melbourne. I heard the notice of motion last Friday and dismissed it with an order that the costs of the motion be the applicant's costs in the proceeding. Directions were given for the future conduct of the proceeding including an order giving leave to the applicant to amend the Statement of Claim. I said that I would publish my reasons for 2. the judgment later, which I now do. The Court's Jurisdiction The respondents have not yet filed Defences. I propose to set out the facts as pleaded in the Statement of Claim which are relevant to the Notice of Motion. "1. The Applicant is a body corporate established pursuant to section 6 of the Housing Loans Insurance Act 1965 (Cth.) and may sue and be sued in its corporate name. 2. The First Respondent is a body duly incorporated in the State of Victoria and is a recognized company engaged in trade or commerce and carries on business in the State of New South Wales. 5. The Applicant has at all material times carried on such business of insurance as is provided for by the Housing Loans Insurance Act, 1965 (Cth.). 6. The First Respondent has at all material times carried on the business of lending money on the security of first mortgages over real property. 7. On or about 24 July, 1981 the First Respondent advanced the sum of $2,000,000 by way of loan ("the Loan") to Cumbur Pty. Limited ("Cumbur"), .a company incorporated and carrying on business in the State of Queensland. 8. The Loan was advanced on the security of a Bill of Mortgage affecting certain lands owned by Cumbur ("the mortaaged lands") in the State of Queensland and dated 24 July, 1981 ("the Mortgage"). 9. In July, 1981 the First Respondent applied to the Applicant to insure the obligations of Cumbur (including its obligation to pay interest on the Loan) under and pursuant to the Mortgage and on 24 July, 1981 the Applicant issued to the First Respondent Commercial Housing Insurance Contract No. C4/001969 DA ("the First Insurance Contract"). 10. Special Conditions of the First Insurance Contract provided, inter alia:- "1. An amount of $93,750.00 representing three months prepayment of interest is to be held under the control of insured and is not to be utilized for payment of interest on the loan without prior approval in writing being given by the Corporation. 2. That principal reductions of the loan will be made in 3. accordance with the contract for sale from Cumbur Pty. Ltd. Bumbar Pty. Ltd. which are as follows:- $600,000.00 on 14/8/81 $500,000.00 on 28/8/81 $500,000.00 on 4/9/81 $400,000.00 on 30/9/81 $750,000.00 on 30/11/81 and the Contract for Sale is verified by the Lender before settlement." Bumbar Pty. Limited ("Bumbar") was a proposed purchaser of the mortgaged lands. 11. A Contract for Sale of the mortgaged lands dated 9 June 1981 was executed by both Cumbur and Bumbar and on 18 August, 1981 the Applicant wrote to the First Respondent concerning a variation of that contract. and requested a detailed explanation of the background to~ the variation so that the Applicant could consider its position under the First Insurance Contract. 12. The proposed sale by Cumbur of the mortgaged lands to Bumbar was not completed and in December, 1981 the First Respondent advised the Applicant of a proposed development of the mortgaged lands by the United Industrial Corporation of Singapore. 13. In December, 1981 the Applicant advised the First Respondent that it was in breach of Special Condition 2 referred to in paragraph 10 hereof and arrangements were then made for a new proposal for insurance to be submitted to the Applicant by the First Respondent. The First Insurance Contract was thereupon returned by the First Respondent to the Applicant for cancellation and the same was duly cancelled. 14. By an insurance proposal dated 15 January, 1982 ("the Proposal") submitted by the First Respondent to the Applicant, the First Respondent represented to the Applicant that the sum of $2,000,000 was the amount then owing on the Loan and secured by the Mortgage and that there were no arrears of interest then owing by Cumbur in respect of the Loan or under the terms of the Mortgage. 15. The Proposal was completed for and on behalf of the First Respondent by the Second Respondent. 16. The First and Second Respondents and each of them, in making the representation contained in the Proposal and referred to in paragraph 14 hereof, knew such representation was false and made the same knowingly or without belief in its truth or recklessly careless whether it was true or false. 17. In making the representation contained in the Proposal and in submitting the Proposal to the Applicant, the First and Second Respondents were and each of them was under a duty of care to accurately inform the Applicant as to whether or not Cumbur was as at 15 January, 1982 in arrears in the payment of interest due to the First Respondent in respect of the Loan or under the terms of the Mortaage. 18. In breach of their duty of care to the Applicant, the First and Second Respondents were and each of them was negligent in making the representation contained in the Proposal in that the said representation was inaccurate as to the information which it conveyed and was intended to convey to the Applicant. 19. In reliance upon the said representation contained in the Proposal the Applicant on 19 January, 1982 issued to the First Respondent Commercial Housing Insurance Contract No. C4/002042 DA ("the Second Insurance Contract"). 20. A term and condition of the Second Insurance Contract provided:- "An amount of $93,750.00 representing three months repayment of interest is to be held under the control of the Insured and is not to be utilized for payment of interest on the loan without prior approval in writing being given by HLIC." 21. As at 15 and 29 January, 1982 the Applicant was unaware that the said representation contained in the Proposal was false and the Applicant only discovered such falsity subsequent to 14 February, 1983. 22. The misrepresentation of the First and Second Respondents contained in the Proposal was a misrepresentation as to a material fact which induced the Applicant to issue the Second Insurance Contract. 23. The failure of the First Respondent to disclose to the Applicant that as at 15 and 29 January, 1982 Cumbur was in arrears with its obligation to pay interest in respect of the Loan and under the terms of the Mortgage constituted the non-disclosure to the Applicant of a material fact. 24. By reason of the facts alleged in paragraphs 14, 15, 16, 17 and 18 hereof the First Respondent engaged in conduct which was misleading or deceptive and which, in the manner alleged in paragraph 19 hereof, in fact misled or deceived the Applicant. 25. Had the Applicant been aware of the fact that as at 29 January, 1982 Cumbur was in default under the terms of the Mortgage in that it had not paid to the First Respondent interest in accordance with the terms thereof, the Applicant would have voided or rescinded the Second Insurance Contract for non-disclosure of a material fact or for misrepresentation as toa material fact and would not have made the payments referred to in paragraphs 26, 28, 29 and 31 hereunder or any of them. 26. On 24 March, 1982 the First Respondent sought the approval of the Applicant to utilize an amount of $62,500 for payment of arrears of interest under the Mortgage for the months of February and March, 1982 from the total of $93,750 then held on special deposit pursuant to the Special Condition referred to in paragraph 20 hereof and written approval was duly granted by the Applicant thereto. A further interest payment of $31,250 for the month of April was also paid from this special account with the written approval of the Applicant. 27. On 27 September, 1982 the First Respondent informed the Applicant that Cumbur had not made payment of $125,000 representing four months interest under the Mortgage for the months of May to August, 1982 inclusive and thereupon made a claim for the payment by the Applicant of the said unpaid interest pursuant to the Second Insurance Contract. 28. The Applicant paid to the First Respondent the sum of $125,000 on 11 November, 1982 pursuant to the claim referred to in paragraph 27 hereof. 29. A further sum of $125,000 was paid by the Applicant to the First Respondent representing interest payments due and unpaid by Cumbur under the Mortgage for the months of September to December 1982 inclusive. 30. On 27 September, 1982 the First Respondent made a claim upon the Applicant for payment under the Second Insurance Contract of the Loan and ail interest then due and unpaid in respect thereof. 31. On 14 Feburary, 1983 the Applicant paid to the First Respondent the sum of $2,062,671 pursuant to the claim referred to in paragraph 30 hereof. 32. Each of the payments referred to in paragraphs 26, 28, 29 and 31 hereof was made by the Applicant under a mistake of fact being a mistake on the part of the Applicant that there was no ground upon which it could have properly refused to make such payments under the Second Insurance Contract." The applicant then makes claims against the first respondent in the following terms:- "Ci) A declaration that by reason of the facts alleged in Paragraphs 14, 15, 16, 17 and 18 hereof the First Respondent engaged in conduct which was misleading or deceptive within the meaning of Section 52 of the Trade Practices Act, 1974. (ii) A declaration that by reason of the misrepresentation referred to in paragraph 16 hereof, the First Respondent was guilty of deceit. (iii) A declaration that the monies paid by the Applicant to the First Respondent and referred to in paragraphs 26, 28, 19 and 31 hereof were monies paid under a mistake of fact. (iv) A declaration that by reason of the misrepresentation and non-disclosure referred to in paragraphs 22 and 23 hereof the Applicant was at all material times entitled to rescind the Second Insurance Contract 1ssued on 29 January, 1982. (v)} A declaration that at all material times the First Respondent owed a duty of care to the Applicant and was in breach of the said duty of care in completing the Insurance Proposal dated 15 January, 1982 by submitting the same to the Applicant. (vi) An order that the sum of $2,312,671 be repaid by the First Respondent to the Applicant together with interest at the rate of 14.5% per annum on each of the amounts referred to in paragraphs 26, 28, 29 and 31 hereof from the date of the making of each such payment until the said amount of $2,312,671 has been paid to the Applicant. (v) Costs. The applicant makes claims against the second respondent as follows: (i) A declaration that by reason of the facts alleged in paragraphs 14, 15, 16, 17 and 18 hereof the Second Respondent engaged in conduct which was misleading or deceptive within the meaning of section 52 of the Trade Practices Act, 1974. (ii) A declaration that by reason of the misrepresentation referred to in paragraph 16 hereof the Second Respondent was guilty of deceit. (iii) A declaration that at all material times the Second Respondent owed a duty of care to the Applicant and was in breach of the said duty of care in completing the Insurance Proposal dated 15 January, 1982 by submitting the same to the Applicant. (iv) An order that the sum of $2,312.671 be repaid by the Second Respondent to the Applicant together with anterest at the rate of 14.5% per annum on each of the amounts referred to in pragraphs 26, 28, 29 and 31 hereof from the date of the making of each such payment until the said amount of $2,312,671 has been paid to tne Applicant. (v) Costs." The respondents contended that this Court has no jurisdiction to hear the proceeding. First, it was contended that the applicant's claim 1s neither for injunctive relief pursuant to s. 80 of the Trade Practices Act 1974 ("the Act") nor for damages pursuant to s. 82 of 7. the Act. Where an applicant asserts a contravention of s. 52 the only basis on which this Court can have jurisdiction to hear the claim was said to be if injunctions are sought under s. 80 or damages claimed under s. 82. The Court has no jurisdiction to merely make declarations or to make orders under s. 87. Section 87 was said to be merely ancillary to the granting of relief under s. 80 or s. 82. The respondents contended that s. 163A, which confers jurisdiction on this Court to make certain declarations and orders, does not encompass declarations and orders in what are, in essence, inter partes civil proceedings such as the present proceeding. Reliance was placed upon the judgment of Toohey J. in Polqardy v. Australian Guarantee Corporation Ltd. (1981) 34 A.L.R. 391. The respondents contended that the only relief sought by the applicant under the Act was for declarations that the relevant conduct of the respondents was said to be misleading or deceptive within the meaning of s. 52 and for an order for repayment of a specific sum of money namely, $2,312,671 together with interest. The respondents asserted that this last mentioned claim for repayment was not properly characterised as a claim for damages pursuant to s. 82; it was in essence a claim for ancillary relief pursuant to s. 87 (probably para. 87(2)(c)). Hence the court was said to have no jurisdiction to hear the claim based on the alleged contravention of s. 52. As there is no other federal claim asserted by the applicant the Court is without jurisdiction to hear the proceeding at all. The other claims are all essentially non federal in character being claims for fraudulent representation, repayment of monies paid under mistake of fact, rescission for misrepresentation and a claim based on negligent misrepresentations. Secondly, the respondents contended that even if the Court has jurisdiction to hear the proceeding it should exercise its discretion not to hear it as the claims of the applicant are predominantly non federal in character. The applicant contended that, although it sought an order for repayment of the sum of $2,312,671 together with interest, this was in essence a claim for loss or damage pursuant to s. 82. Counsel for the applicant conceded, however, that this claim should be better expressed and sought leave to amend for this purpose. The applicant contended that s. 87 was not merely in aid of ss. 80 and 82; but was itself a source of this Court's jurisdiction. It was contended that s. 163A was an additional source of this Court's jurisdiction to grant the relief sought in relation to the federal elements in the claim. In my opinion the claim for an order that the sum of $2,312,671 be repaid by the first respondent and by the second respondent to the applicant together with interest is in substance a claim to recover the amount of the loss or damage which the applicant asserts it suffered by the conduct of the respondents that was said to be done in contravention of s. 52. The fact that the applicant chose to express the claim as an order for repayment of money and the fact that the amount claimed is expressed as the precise equivalent of the amount paid by the applicant to the first respondent does not alter the true character of the claim as one for recovery of loss or damage. Nor does the fact that the claim is expressed in language reminiscent of para. 87(2)(c) prevent the claim falling within s. 82. It would, however, be prudent for the applicant to amend the . 9. language in which this claim is expressed so as to put the matter beyond doubt. It is for this reason that I granted leave last Friday to the applicant to amend the statement of claim and the application. It follows that the challenge to the jurisdiction of this Court fails. It is not necessary, therefore, for me to consider the other contentions of the respondents relating to jurisdiction. Venue The applicant commenced this proceeding by Application filed on 17 April 1984 in the New South Wales District Registry of the Court. The respondents sought, pursuant to Order 10 sub-para. 1(2)(f) of the Rules of this Court to have the proceeding transferred to Melbourne. The applicant oppossed the change of venue. Evidence was led by all parties on this question. Relevant considerations include the convenience of the parties and their witnesses. The applicant's principal place of business 15 in Sydney. The first respondent was incorporated in Victoria and its head office is in Melbourne. Most of the first respondent's staff live and work in Melbourne. The second respondent lives in Melbourne. He is the driving force behind the first respondent. It would be less disruptive to him if the case were to proceed in Melbourne. Mr. F. Blundell is the Deputy Chairman of the applicant. He lives in Sydney. He was actively involved in the events which are the . 10. subject of the proceeding. It is likely that he will be called by the : applicant to give evidence. Two possible witnesses (Mr. Abel and Mr. King) presently live in Sydney. Three possible witnesses live in Brisbane. Seven possible witnesses, including the second respondent, live in Melbourne, four of whom have informed the applicant that they are willing to travel to Sydney to give evidence if required. It is not possible to form a considered view at this stage of the case (the defences have not yet been filed) about the number of witnesses likely to be called or their identity. However, 1t seems that witnesses likely to be called live in Melbourne, Sydney and Brisbane, but most of them live in Melbourne. There is evidence that if the venue remains in Sydney the respondents may have to choose between conducting the case through their usual Melbourne solicitors with the consequent disadvantages of remoteness and instructing a firm of solicitors in Sydney with whom they have had no connection with attendant inconvenience and cost. Various documents relevant to the case including applications for insurance and insurance proposals were lodged at the applicant's Melbourne office. The insurance contracts were issued from the Melbourne office of the applicant. Other documents were executed in Queensland and it is arguable that Queensland is the proper liaw for certain purposes of the insurance contracts. Having considered the relevant matters I was not satisfied last Friday that the proceeding should be transferred to Melbourne at this stage. There were circumstances which supported the making of od +i io nae 11. such an order but other circumstances which tended against it. In the absence of a clear view in favour of the course sought by the respondents I declined to accede to it. It was for these motion last Friday. reasons that I dismissed the notice of t9 TEN (1) sexes" tha ~oce trea. 3 Roneur Associata Dated: /. 3 y