CATCHWORDS FEDERAL COURT - Accrued jurisdiction - application to strike out claim against solicitors joined in s.52 action as additional respondents - No federal claim raised against the solicitors - Principles applicable. Trade Practices Act 1974, s.52 Bayne v. Riggall (1908) 6 C.L.R. 382 Dey v. Victorian Railways Commissioners (1949) 78 C.L.R. 62 General Steel Industries Inc. v. Commissioner for Railways (NSW) (1964) 7ti2 C.L.R. 125 Williams and Humbert Ltd. v. W. & H. Trademarks (Jersey) Ltd. (1986] 1 A.C. 368 Hubbuck & Sons, Limited v. Wilkinson, Heywood & Clarke, Limited [1899] 1 K.B. 86 Hanimex Pty. Ltd. v. Kodak (Australasia) Pty. Ltd. (1982) 4 A.T.P.R. 43,593 Phillip Morris Incorporated v. Adam P. Brown Male Fashions Proprietary Limited (1981) 148 C.L.R. 457 Bl Acceptance Corporation Ltd. v. GWA Ltd. (1983) 50 A.L.R. 242 Universal Telecasters (Queensland) Ltd. v. Ainsworth Consolidated Industries Ltd. (1983) 5 A.T.P.R. 44,523 Fencott v. Muller (1983) 152 C.L.R. 570 Stack v. Coast Securities (No. 9) Proprietary Limited (1983) 154 C.L.R. 261 Kennedy v. Australasian Coal and Shale Employees Federation (1983) 50 A.L.R. 735 Maisey v. First Coast Pty. Ltd. (1984) 1 F.C.R. 316 obaceto Pty. Ltd. v. Taveraft Pty. Ltd. (1985) 5 F.C.R. 210 WILLIAM JAMES MCMAHON -V- FREDERICK STANLEY SMITH and DELMA JOYCE SMITH & ORS. NSW G.389 of 1986 Burchett J. Sydney 27 November 1986 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION No. G.389 of 1986 Ne et ee ee BETWEEN: WILLIAM JAMES MCMAHON Applicant AND: FREDERICK STANLEY SMITH and DELMA JOYCE SMITH First Respondents iE z iw] PATRICK JOSEPH RUMMERY and MARY ELIZABETH RUMMERY Second Respondents MINUTE OF ORDER OF THE COURT THE COURT ORDERS THAT: (1) (2) NOTE: The motion be dismissed. The costs of the motion be costs in the principal proceeding as between the applicant and the second respondents. Settlement and entry of orders 1s dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY No. G.389 of 1986 GENERAL DIVISION BETWEEN: WILLIAM JAMES MCMAHON Applicant AND: FREDERICK STANLEY SMITH and DELMA JOYCE SMITH First Respondents AND: PATRICK JOSEPH RUMMERY and MARY ELIZABETH RUMMERY Second Respondents REASONS FOR JUDGMENT BURCHETT J. In this matter the second respondents seek an order that the Statement of Claim be struck out, so far as it relates to them, and alternatively an order that the proceedings be stayed as against them. At the hearing of the motion, leave was sought, and obtained, to amend the Statement of Claim, and the argument proceeded on the footing that the orders sought by the motion related to the amended Statement of Claim. 2. By the amended Statement of Claim, it is pleaded that the applicant was at material times a resident and citizen of Papua New Guinea who entered into an agreement to purchase, at a price of $500,000-00, a parcel of land from the _ first respondents, being induced to do so by certain representations which, it is alleged, were made in the course of trade or commerce between Australia and Papua New Guinea and contravened 8.52 of the Trade Practices Act 1974. It is further alleged that the second respondents, who are solicitors, acted as solicitors for the applicant (and indeed for both parties). It is alleged that the second respondents were retained to advise the applicant in relation to his proposed purchase of the land in question, and that they knew he believed certain matters which are set out in the pleading. Those beliefs correspond to the representations which are alleged to have been made by the first respondents. They are pleaded as follows: "14. At alt material times the Second Respondents well knew that the Applicant:- (a) believed that the property could be utilized as a caravan park without the need to obtain any further approvals or permissions from any government or other authorities. (b) believed that any approvals that may have been required for the property to be used for the purposes of a motel, health farm or convention centre were in the nature of formalities and would in all probability be readily forthcoming. (c) believed that part of the property had been approved by the Byron Shire Council for residential subdivision in accordance with plans of subdivision mentioned in and referred to in paragraph 5 hereof. (dad) intended to use the property if he purchased the same for the said purpose of residential subdivision and/or motel and/or convention centre and/or aquaculture and/or tourist development upon the completion of the purchase in or about June, 1986." Particulars are furnished of these allegations in the amended Statement of Claim which include the following: "Further, the first named Second Respondent was present at a meeting at the offices of the Second Respondents between the Applicant and First Respondents in the course of which the First Respondents again informed the Applicant that (sic - quaere scil. "and") the Applicant also had a conversation with the First Respondents in the presence of the first named Second Respondent at the office of the Second Respondents in or about June, 1984, in the course of which the First Respondents again informed the Applicant that the property could (sic) subdivided into residential allotments in accordance with the plans annexed to the letter from the Byron Shire Council hereinbefore referred to, the property being utilised for future development as a Motel or convention centre or caravan park or a combination of all or any of them, the development of which could be financed from the residential subdivision. Further such development of the property would be fully compatible with the present tourist operations of the tea gardens and the existing steakhouse restaurant permitted to be operated on the property and would readily serve these existing business operations by not being inconsistent with the present commercial cultivation of water lillies (sic) on the property." It is pleaded that the second respondents owed to the applicant diligence, a duty of reasonable and proper care which was breached by a failure to advise, skill and or advise adequately, concerning: the uses to which the property could 4. lawfully be put, the restrictions upon its use, the likelihood of appropriate permissions and approvals being granted to enable it to be used in the manners represented, proposed or likely changes in the laws regulating the uses to which it could be put, the legal effect of the agreement and the unconditional nature of the obligation to complete, the necessity or desirability of making completion conditional upon obtaining approvals to enable the property lawfully to be used in the ways contemplated, and other matters. No separate federal claim is pleaded against the solicitors, who are sued upon their contract of retainer and in negligence. The second respondents say this Court has no jurisdiction, in the circumstances, to entertain the claims made against them. The approach which a court should take to an application to strike out a statement of claim is well settled. In Bayne v. Riggall (1908) 6 C.L.R. 382 at 398, Barton J. said: "It is clear that the power of thus summarily dealing with an action should be reserved for exercise as to actions that are hopeless." In Dey v. Victorian Railways Commissioners (1949) 78 C.L.R. 62 at 91, Dixon J. said: "A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury." In General Steel Industries Inc. v. Commissioner for Railways (Nsw) (1964) 112 C.L.R. 125 at 130 Barwick C.J. used the expression, to describe an appropriate case for the exercise of the power to strike out, "so clearly untenable that it cannot possibly succeed." In England, the decision of the House of Lords Williams and Humbert Ltd. v. W. & H. Trademarks (Jersey) Ltd. [1986] 1 A.C. 368 accepts as the general rule the statement which Lindley M.R. made in Hubbuck & Sons, Limited v. Wilkinson, Heywood & Clarke, Limited [1899] 1 K.B. 86 at 91: "The second and more summary procedure (1.e. striking out) is only appropriate to cases which are plain and obvious, so that any master or judge can say at once that the statement of claim as it stands is insufficient, even if proved, to entitle the plaintiff to what he asks." Of course, as Barwick C.J. pointed out in the General Steel Industries case at p.130, the fact that argument is necessary 1s not inconsistent with the proposition that, after argument, 1t may be clear that a plaintiff's case is futile. In the Williams and Humbert Ltd. case at pp.435-6 Lord Templeman stated the qualification: "My Lords, if an application to strike out involves a prolonged and serious argument the judge should, as a general rule, decline to proceed with the argument unless he not only harbours doubts about the soundness of the pleading but, in addition, is satisfied that striking out will obviate the necessity for a trial or will substantially reduce the burden of preparing for trial or the burden of the trial itself." In that case, which involved difficult questions of international law, it was only a very special aspect of the situation (see 436) which enabled him to hold that it had been right for the court to deal with the matter summarily. Lord Mackay of Clashfern at 441 took the same view, and the other members of the House indicated their agreement with the two judgments I have mentioned. Counsel for the second respondents suggested that these principles were not applicable in this case because his motion seeks to challenge the applicability of the accrued jurisdiction of this Court to the claims made against his clients. But I think authority is against that proposition. In Hanimex Pty. Ltd. v. Kodak (Australasia) Pty. Ltd. (1982) 4 A.T.P.R. 43,593 Lockhart J. dealt with an application to stay or dismiss a proceeding on grounds which included "that the Court has not jurisdiction to entertain the claims for damages for defamation and injurious falsehood or the claim for an order that Kodak publish corrective advertising" (43,595). The argument concerning the claims for defamation and injurious falsehood, as is clear from the report at 43,595-6, was conducted on the basis that the question was whether these claims could be maintained on the footing that they were "attached claims" in respect of which the Court had accrued jurisdiction by reason of its jurisdiction to deal with claims also made under ss.52 and 53 of the Trade Practices Act, upon the principles stated by the High Court in Phillip Morris Incorporated v. Adam P. Brown Male Fashions 7. Proprietary Limited (1981) 148 C.L.R. 457. In dealing with that question, Lockhart J. applied the rule stated in Dey v. Victorian Railways Commissioners and General Steel Industries Inc. v. Commissioner for Railways (NSW), and at 43,596 concluded: "It seems plain enough that, to support the claims for defamation or injurious falsehood, proof will be required at the trial of matters not demanded by sec. 52; but it does not follow that there is no common substratum of fact. ... I am not persuaded that this is such a clear case of the absence of a common substratum of facts that the summary jurisdiction of this Court should be invoked to terminate the proceeding based = on defamation or injurious falsehood." He applied the same rule at 43,598-9 when considering the application to strike out so much of the statement of claim as sought relief in the nature of corrective advertising, an application also based on an alleged lack of jurisdiction. In the later case Bill Acceptance Corporation Ltd. v. GWA Ltd. (1983) 50 A.L.R. 242 at 251 Lockhart J. referred to his decision in the Hanimex case, and said that he had there applied the principles stated by Dixon J. and Barwick C.J. in the two High Court decisions "and dismissed an application by the respondent to stay or dismiss the proceedings and to strike out the statement of claim on the ground that it disclosed no reasonable cause of action and that the court did not have jurisdiction to entertain some of the claims." Hanimex Pty. Ltd. v. Kodak (Australasia) Pty. Ltd. was also referred to, without disapproval, in the decision of the Full Court in Universal 8. - Telecasters (Queensland) Ltd. ve Ainsworth Consolidated Industries Ltd. (1983) 5 A.T.P.R. 44,523 at 44,526, in a judgment which applied to an application to strike out a statement of claim pleading causes of action under s.52 of the Trade Practices Act and in defamation, which it was contended made no case falling within s.52, the test whether the claim was "so clearly untenable that it (could not) possibly succeed". The basis of the second respondents' argument in this motion is the fact that the claim against them is wholly dependent on the Court's accrued jurisdiction; there is no claim against them comparable to the claim under s.52 of the Trade Practices Act made against the first respondents. I was referred in argument to the trilogy of High Court decisions concerned with the accrued jurisdiction of this Court: Phillip Morris Incorporated v. Adam P. Brown Male Fashions Proprietary Limited (1981) 148 C.L.R. 457; Fencott v. Muller (1983) 152 C.L.R. 570; and Stack v. Coast Securities (No. 9) Proprietary Limited (1983) 154 C.L.R. 261. The joint majority judgment in Fencott v. Muller at pp.606 et seq. makes it clear that the accrued or attached jurisdiction may arise in respect of a non-federal claim upon facts that do not wholly coincide with the facts upon which a federal claim arises. This may occur where several claims "so depend on common transactions and facts that they arise out of a common substratum of facts." At 608 the joint majority judgment states: "The unique and essential function of the judicial power is the quelling of such controversies (i.e. controversies between subjects or between the Commonwealth and its subjects) by ascertainment of the facts, by application of the law and by exercise, where appropriate, of judicial discretion. In identifying a s.76(ii) matter, it would be erroneous to exclude a substantial part of what is in truth a esingle justiciable controversy and thereby to preclude the exercise of judicial power to determine the whole of that controversy. What is and what is not part of the 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 the matter." At p.609 the joint majority judgment points out: "The power judicially to determine the whole of a dispute is inconsistent with the limitation which would restrict the Court to resolving only the federal claim and what is necessary for that purpose ... However, federal judicial power is attracted to the whole of a controversy only if the federal claim is a substantial aspect of that controversy." Counsel for the second respondents submitted that the federal claim must be the substantial aspect of the controversy, but this is inconsistent, not only with the words of the passages I have cited, but also with the succeeding sentence which contrasts a case where the federal claim is "a trivial or insubstantial 10. . aspect of the controversy", in which situation it would be insufficient to attract to itself accrued jurisdiction to determine the substantial aspects of the controversy. Also, the joint judgment of Mason, Brennan and Deane JJ. in Stack v. Coast Securities at p.298 makes it clear that the federal issue may be one of several issues and may be relatively insubstantial. In Kennedy v. Australasian Coal and Shale Employees Federation (1983) 50 A.L.R. 735 Beaumont J. held that "the circumstance that the non-federal claim is made against a party other than the respondent against which the 'anchoring' federal claim is made, does not deprive the Court of its accrued jurisdiction in the whole matter" (see p.742). He pointed out that in Fencott v. Muller itself different claims against different parties constituted a single controversy. But the second respondents rely upon two cases in which claims against solicitors, who had acted for one of the parties to a contract in the negotiation of which s.52 was alleged to have been contravened, but who were not alleged to have been themselves parties to the contravention of s.52 but were sued in respect of non-federal claims, were dismissed summarily: Maisey v. First Coast Pty. Ltd. (1984) 1 F.C.R. 316; and Obacelo Pty. Ltd. v. Taveraft Pty Ltd. (1985) 5 F.C.R. 210. In my view both of these cases are distinguishable from the present case. In Maisey's case at 320 Fitzgerald J. made it clear that in no significant respect was the claim against the solicitor related ll. to the federal claim, apart from the fact that the two claims involved the one contract. In Obacelo's case Wiicox J. at p.217 held that the fact "that the relevant associated claim is brought against a person who was not involved in the conduct giving rise to the primary complaint" would not deny the Court jurisdiction. He said: "The question is one of substance: whether the claim under consideration forms a part of a single justiciable controversy or whether, in truth, it is a separate and distinct matter. There will, no doubt, be occasions upon which that question is difficult to determine." He went on to hold that in the matter before him: "It cannot be said that the two proceedings arise out of 'common transactions and facts.' The principal proceeding will depend upon evidence as to the making by the respondents of the alleged representations, as to the falsity of those representations and as to the damage thereby suffered by the applicants. The matters alleged in the cross-claim have no relevance to that matter." In contrast to those two cases, I do not think that I can be satisfied in the present case that the applicant cannot possibly succeed at a hearing in showing that the claims in question are sufficiently linked by a common substratum of facts. Much might depend on the place assigned by the judge who tries the matter to the representations alleged to have been made in the presence of one of the second respondents, then acting as solicitor for both parties in relation to the impugned contract or its conclusion. Those representations could well be held to au 12. go to the heart of both claims ~- the federal claim against the first respondents, and the non-federal claim against the second respondents. The view could be taken that the claims are indissolubly linked by their mutual relationship to a central transaction in the solicitor's office, the solicitor's part in the conclusion of the contract, and the representations relied upon in common in both claims. It is plain from the discussion in the joint majority judgment in Fencott v. Muller at pp.607-8 that difficult questions of mixed law and fact can arise in a case near the border between federal and non-federal jurisdiction, which is not a sharp line, but rather a broad demarcation zone in which impression and practical judgment must be looked to as guides. No separate argument was advanced in support of a stay. I dismiss the motion. Having regard to the fact that very material amendments to the Statement of Claim were formulated only shortly before the hearing of the motion, I think the appropriate costs order is that the costs be costs in the principal proceeding as between the applicant and the second respondents, and I so order. I certify that this and the preceding eleven (11) pages are a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Burchett. Hin O48 Associate Dated: 27 November, 1986.