*-335 CATCHWORDS TRADE PRACTICES - Jurisdiction of Federal Court - Contract for interstate removal of household goods - Warranty implied by s.74 of Trade Practices Act - Whether action for breach of warranty implied under Part V of Act 18 a "proceeding under" Part V - Costs. Trade Practices Act 1974 ss.74, 82, 86. . OLD G.10 of 1987 ELI HELENE HJERTUM v_ BRIAN ALFRED AHERN & ANOR, Wilcox J Brisbane 30 June 1987 IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY No. OLD G.10 of 1987 weve ews GENERAL DIVISION BETWEEN: ELI HELENE HJERTUM Applicant AND: BRIAN ALFRED AHERN and SANDRA ANN AHERN Respondents CORAM: WILCOX J PLACE: BRISBANE DATE: 30 JUNE 1987 MINUTES OF ORDER THE COURT ORDERS THAT: l. Action No.G.10 of 1987 be dismissed. 2. The applicant in those proceedings pay to the respondents in those proceedings their costs in relation to the Notice of Motion filed on 19 June 1987 together with their costs in relation to the principal proceedings incurred since 22 May 1987 and the reasonable costs incurred by the respondents in taking the advice as to jurisdiction summarized in their solicitor's letter of 22 May 1987. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION BETWEEN: AND: CORAM: WILCOX J PLACE: BRISBANE DATE: 30 JUNE 1987 No. OLD G.10 of 1987 ew SS ELI HELENE HJERTUM Applicant BRIAN ALFRED AHERN and SANDRA ANN AHERN Respondents FXTEMPORE REASONS FOR JUDGMENT This Notice of Motion raises, apparently for the first time, the question of the jurisdiction of the Court to determine an action for damaqes wherein reliance is placed upon s.74 of the Trade Practices Act 1974. The Notice of Motion which is filed on behalf of the respondents in the principal proceedings, Brian Alfred Ahern and Sandra Ann Ahern, seeks that the Statement of Claim filed on behalf of the applicant in those proceedings, Eli Helene Hjertum, be struck out on the ground that it discloses no reasonable cause of action justiciable in this Court, and that the action is frivolous, vexatious and an abuse of the process of the Court. In the alternative, and in the event that that application fails, the respondents seek certain orders regarding particulars. The claim made by the applicant in the principal proceedings involves an allegation that the respondents carried on business under the registered business name of B & S Furniture Removals, inter alia, in the transport of furniture and household goods interstate. The Statement of Claim alleges that an oral agreement was made between an agent of the applicant and the male respondent for the respondents to transport, from Mt Gravatt in Queensland to Inverell in New South Wales, certain goods belonging to the applicant. It 1s to be noted that neither of the respondents in the principal proceedings is a corporation, but the parties have argued this present application upon the basis that the Trade Practices Act may be applicable because of the provisions of s.6 and have referred to the interstate nature of the transaction. For the purposes of this motion, no submission has been put to the Court that s.74 is inapplicable to the transaction; the sole question being whether, upon the assumption that the section does apply, there is nevertheless any jurisdiction in this Court as distinct from in a relevant State court. The allegation which is made on behalf of the applicant in the principal proceedings is that there was implied by s.74(1) of the Act a warranty that the services would "be rendered with due care and skill" and that materials, namely a removal van supplied in connection with those services, would be "reasonably fit for the purpose For which" it was "supplied". It is alleged that the respondents breached that warranty, with the result that the applicant's goods were destroyed by fire. The relief claimed by the applicant in the principal proceedings 1s for an award of damages in the sum of $17,500. The respondents submit that, even conceding the matters to which I have referred, this Court lacks jurisdiction to determine the claim. It 1S important to note that the only provision of the Trade Practices Act which 1s relied upon by the applicant in the principal proceedings 1s s.74. The respondents point to the language of s.74 and to the reference in that section to "an implied warranty" and they argue that cases decided in respect of other provisions of Div.2 of Pt.V indicate that the mere imposition of a warranty by force of that Part does not confer jurisdiction on the Court to determine whether there has been a breach of the warranty, and 1f so, the amount of the damages. It appears that the first occasion upon which this matter was considered was by Rogers J 1n New South Wales in Zalai v Col Crawford (Retail) Pty Ltd (1980) 47 FLR 337. At pp.339-340, Rogers J analysed the scheme of Pt.V, as it then was, and he pointed to what he referred to as "a fundamental difference" between the form of Div.1 of the Part and Div.2. He pointed out that the various sections in Div.1 bear directly upon certain conduct associated with the sale of goods, whereas the provisions of Div.2 take the form of implying conditions or warranties into contracts made hetween the parties. Although Rogers J did not directly advert to the matter himself, it is noteworthy, as is submitted by Mr Morris on behalf of the respondents in the principal proceedings, that Div.l uses the imperative verb "shall" -- or sometimes, where a negative form 1S required, "shall not" -- whereas in Div.2 the course taken is to say that there is implied a term Or a warranty, as the case may be. In Zalai, Rogers J held that an action for breach of a warranty implied by the Act was not an action falling within s.82. The reason given by his Honour was that breach of an implied warranty is not conduct done in contravention of a provision of Pt.V, so that 1t does not fall within s.82. Consequently, s.86, which confers jurisdiction on this Court, inter alia, to determine proceedings under Pt.V, was held by him to be inapplicable. A couple of months after the decision in Zala1, Brennan J, then a member of this Court, had to consider the matter in Arturi v Zupps Motors Pty Ltd (1980) 49 FLR 283. Arturi unvolved an alleged breach by the respondents of a condition implied by s.71 of the Trade Practices Act. That section set out certain circumstances in which 1t was provided that "there is an implied condition" in certain terms. Brennan J had to determine whether this Court had jurisdiction to entertain an action for breach of the condition so implied. He held that there was no such jurisdiction and the reasoning emerges from the following passage at pp.285-286: "Jurisdiction arises under s.82 when the damage claimed in the proceedings is alleged to have been caused by conduct done in contravention of Pt IV or V of the Act, that 1S to Say, conduct which does not conform to norms of conduct prescribed by those provisions. 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 qoods; it relates to the quality of the qoods supplied. There are two reasons why a breach of a condition which 1s implied by s.71 does not involve conduct in contravention of a provision of Pt V. First, the breach does not consist in the conduct of supplying goods, but in the want of correspondence between the state of the goods supplied and the quality referred to in s.71. Secondly, s.71 takes effect by imposing an obligation upon one of the contracting parties as though the parties had embodied the obligation in their contract. No doubt it is right to say that the obligation is statutorily created, for the condition can derive no force from an actual or implied consent of the parties whose freedom to exclude its imposition 1s removed by s.68. But by describing the obligation as an implied condition, s.71 defines the nature of the obligation. It 1s an obligation which takes effect by a legal fiction, namely, that the parties had made a contract which included the obligation. For the purposes of s.82, therefore, a breach of the obligation is not to be treated as a breach of an obligation imposed upon the obligor by the Act dehors the contract, but as an obligation imposed by the contract itself. It follows that a proceeding for damages for a breach of s.71 1s not a proceeding falling within s.82." The decisions in Zalai and Arturi were referred to with approval by Gibbs CJ in Stack v Coast Securities (No.9) Pty Ltd (1983) 154 CLR 261 at pp.276-277. What has been said in those two cases has been applied in two decisions by single judges of this Court, namely by Toohey J in Polgardy v Australian Guarantee Corporation Ltd (1981) 34 ALR 391 at p-392 and by Lockhart J in Zaravinos v Dairy Farmers Co-Operative Ltd (1985) 7 FCR 195 at p.199. Under those circumstances, I think it is now quite clear that, 1f upon its proper construction the effect of a provision of the Trade Practices Act 1s merely to imply a warranty as distinct from to impose a norm of conduct, no action arises under s.82 for any contravention. However, Mr Matthews, on behalf of the applicant in the principal proceedings, seeks to distinguish the cases to which I have referred. He says that, upon 1ts proper construction, s.74 -- and, I gather, particularly s.74(2) -- does prescribe a norm of conduct, namely that the corporation -- and so, in this instance, the respondents -- shall supply materials reasonably fit for the purpose. Mr Matthews argues that the words contained in s.74(2) "any materials supplied in connexion with those services will be reasonably fit for that purpose" are words which impose such a norm. I cannot accept that submission. It seems to me that such a reading does violence to the proper grammatical construction of the sub-section. The opening words of sub-s.(2), going down to the word "achieve", set out the circumstances under which the sub-section is to operate. The sub-section then goes on to say "there 1s an implied warranty that" and 1t then sets out two matters in respect of which there is an implied warranty. The first of these is: "the services supplied under the contract for the supply of the services and any materials supplied in connexion with those services will be reasonably fit for that purpose" The second implied warranty 1s: "that the services supplied under the contract for the supply of the services and any materials supplied in connexion with those services ... are of such a nature and quality that they might reasonably be expected to achieve that result" In each case, the course taken by the legislature has been to add to the contract negotiated between the parties particular implied warranties. The sub-section does not, in my view, have the effect of directly imposing, by force of the statute itself as distinct from by way of the contract, any norm of conduct upon the supplier of the services. The same comment may be made about sub-s.(1). In that sub-section the opening words identify the occasion for application of the sub-section by reference to the relevant type of contract and then state, in terms, the nature of the implied warranty. I find 1t impossible to distinguish the scheme of s.74 from that considered in the cases to which I have referred and, in particular, that analysed by Brennan J in relation to s.7l. Mr Matthews points out that, in the present case, his client complains of actions taken by the respondents in connection with the supply of services rather than in connection with the supply of qoods. It 1s true that, in the various cases to which I have referred, the complaint arose out of a contract for the supply of goods. However, I do not think that this matters. The relevant question does not depend upon whether the contract relates to goods or services but, rather, upon the question whether the form of the statutory provision is to prescribe or proscribe certain conduct by force of the Act itself, so that non-conformity 1s a contravention of the Act and, thus, within s.82; or whether Parliament has chosen merely to interfere with the contractual terms arranged between the parties so as to confer benefits upon a consumer by increasing his or her contractual rights. If the latter course has been taken, s.82 does not apply, and this 1s true whether the contract relates to the supply of goods or to the supply of services. I am unable to distinguish the line of authority to which I have referred. Applying 1t, I must hold that the claim made under s.74, standing alone as it does, does not attract the jurisdiction of this Court. The result must be that the Statement of Claim must be struck out for want of jurisdiction. Counsel for the applicant concedes that, having regard to what has been said, it is not possible for him to re-plead the matter in such a way as to formulate a claim which is within the jurisdiction of the Court and that the appropriate course is for the action itself to be dismissed. In regard to costs, counsel for the respondent seeks the general costs of the action as well as the costs of the motion. There appears to have been some confusion as to whether any jurisdictional point arose and I think that it would be harsh to make an order requiring the applicant to pay all the costs that have been incurred by the respondents. On the other hand, the matter of jurisdiction was clearly put in issue, in a form enabling the applicant's advisers to address the matter, by the letter of the respondents' solicitors dated 22 May. I think that the appropriate order for costs is that the applicant pay to the respondents their costs in relation to the Notice of Motion, and their costs in relation to the principal proceedings incurred since 22 May 1987 together with the reasonable costs incurred by the respondents in taking the advice as to jurisdiction summarized in the letter of 22 May. In indicating that I think that this 1s the correct order, I bear in mind what Mr Matthews has said about filing a defence and making a request for particulars after 22 May; but I have to put that into the context that the applicant had specifically refused to extend time for the defence. I think 1t was not unreasonable for the respondents to protect themselves by taking the appropriate procedural steps in case their view on jurisdiction turned out not to be accepted. Consequently, the orders which I make are as follows: I dismiss the action No.G.10 of 1987. I order that the applicant in those proceedings pay to the respondents in 10. those proceedings their costs in relation to the Notice of Motion filed on 19 June 1987 together with their costs in relation to the principal proceedings incurred since 22 May 1987 and the reasonable costs incurred by the respondents in taking the advice as to jurisdiction summarized in their solicitor''s letter of 22 May 1987. I certify this and the nine (9) preceding pages to be a true copy of the Reasons for Judgment of his Honour Mr Justice Wilcox. Associate: ah Date: 17 July 1987 Counsel for the Applicant: Mr A P Matthews Solicitors for the Applicant: Lippiatt & Co Counsel for the Respondents: Mr A H J Morris Solicitors for the Respondents: Blackwell, Appleyard & Thompson Date(s) of hearing: 30 June 1987