FEDERAL COURT OF AUSTRALIA Smyth v Lukjanov [1999] FCA 1678 JURISDICTION – Federal Court of Australia – principal proceeding involving exercise of federal jurisdiction – cross-claim raising claims under State law and at common law – whether within accrued jurisdiction Copyright Act 1968 (Cth) s 131C Trade Marks Act 1995 (Cth) s 191 Fair Trading Act 1985 (Vic) Fair Trading Act 1987 (NSW) Fencott v Muller (1983) 152 CLR 570, referred to Re Wakim; ex parte McNally [1999] HCA 27, (1999) 163 ALR 270, referred to Meyer Heine Pty Ltd v China Navigation Co Ltd (1966) 115 CLR 10, cited Freehold Land Investments Limited v Queensland Estates Pty Ltd (1970) 123 CLR 418, cited Trade Practices Commission v Australian Iron & Steel Pty Ltd (1990) 22 FCR 305, cited Paper Products Pty Ltd v Tomlinson (Rochdale) Ltd (No 2) (1993) 44 FCR 485, cited Diamond v Bank of London and Montreal Ltd [1979] QB 333, cited Adamson v West Perth Football Club (1979) 39 FLR 199, followed Cheers v Entercorp Finance Pty Ltd [1999] FCA 1475, distinguished Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261, cited Westpac Banking Corporation v Paterson [1999] FCA 1609, cited MARGARET JUDITH DUNCAN SMYTH v MICHAEL MYKOLA LUKJANOV and HEATHER JANET LUKJANOV NG 89 of 1999 BRANSON J SYDNEY 2 DECEMBER 1999 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 89 of 1999 BETWEEN: MARGARET JUDITH DUNCAN SMYTH Applicant/Cross-Respondent AND: MICHAEL MYKOLA LUKJANOV First Respondent/First Cross-Claimant HEATHER JANET LUKJANOV Second Respondent/Second Cross-Claimant JUDGE: BRANSON J DATE OF ORDER: 2 DECEMBER 1999 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The respondents' cross-claim, except for the claim pursuant to the Fair Trading Act 1987 (NSW), be stayed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 89 of 1999 BETWEEN: MARGARET JUDITH DUNCAN SMYTH Applicant/Cross-Respondent AND: MICHAEL MYKOLA LUKJANOV First Respondent/First Cross-Claimant HEATHER JANET LUKJANOV Second Respondent/Second Cross-Claimant JUDGE: BRANSON J DATE: 2 DECEMBER 1999 PLACE: SYDNEY REASONS FOR DECISION INTRODUCTION 1 The applicant has moved, pursuant to a notice of motion dated 12 July 1999, for the cross claim of the respondents to be struck out on the basis that the Court has no jurisdiction in respect of the cross claim or alternatively, if the Court does have the requisite jurisdiction, it ought in its discretion to decline to exercise the jurisdiction. THE CLAIMS RAISED BY THE PLEADINGS 2 By her application and statement of claim, the applicant claims relief, including damages, for alleged breaches of fiduciary duty, infringement of copyright and infringement of trade marks. The claims for relief for infringement of copyright and infringement of trade marks are plainly within the original jurisdiction of the Court (Copyright Act 1968 (Cth) s 131C; Trade Marks Act 1995 (Cth) s 191). It was common ground between the parties that the "non-federal" claim raised by the applicant's pleadings falls within the Court's accrued jurisdiction. 3 The applicant's claims are pleaded to arise in the following circumstances. The applicant has since 1992 carried on business as an immigration advisory service under the business name "IMMICARE". She is the assignee of trademarks registered under the Trade Marks Act 1995 (Cth) consisting of the word "IMMICARE" and a device in respect of two classes of services. In or about October 1997 an agreement was reached between the applicant and the respondents pursuant to which the respondents would establish an office in Melbourne ("the Melbourne office"), to operate as a branch of the applicant's business, providing immigration advisory services. The respondents were licensed to use the applicant's trademarks in connection with the Melbourne office and were also authorised, for the purposes of the business conducted from the Melbourne office, to use certain documents the copyright in which was owned by the applicant. In breach of a fiduciary duty owed to the applicant by the respondents, arising by operation of law from the contractual relationship between them, the respondents made application for registration of the business name "IMMIAUS" and adopted that name as a trading name for the Melbourne office thereby infringing the applicant's trade marks. Further, the respondents negotiated on their own behalf with Rohit Panchal ("Mr Panchal") to provide migrant advisory services to Indian nationals and, without the licence of the applicant, reproduced or authorised the reproduction, for the purposes of the Immiaus business, of documents in which the applicant owns the copyright. 4 By their cross-claim the respondents claim relief, including damages, for alleged conversion of property, trespass to goods, trespass to land (ie the premises of the Melbourne office) and damages pursuant to the Fair Trading Act 1985 (Vic) and the Fair Trading Act 1989 (NSW) in respect of allegedly misleading and deceptive conduct in trade and commerce. 5 The respondents' claims are pleaded to arise in the following circumstances. On or about 19 January 1999 the applicant wrote to Mr Panchal falsely representing that the first respondent was dismissed from Immicare for improper and unconscionable conduct. The respondents say that the first respondent was never employed by the applicant or Immicare Sydney and the first respondent was not guilty of improper or unconscionable conduct in connection with the Immicare business or the respondents' business. On or about 23 January 1999 the applicant and her daughter broke into the Melbourne office, damaging the office and damaging or taking away office property belonging to the respondents. 6 It is not in dispute that by 19 January 1999 the business relationship between the applicant on the one hand and the respondents on the other had broken down completely. On that day the applicant requested the respondents to return "all files, pending files, account books, computer aids, computer disks, literature, reference books, all stationery, and all other aids and items connected therewith" and advised that they were "not permitted in any circumstances to use the name Immicare or to pass off in any manner that [they had] any connection with Immicare." On the same day the respondents acknowledged, in effect, that the business relationship between the parties was at an end. Correspondence between solicitors acting on behalf of the applicant and the respondents respectively followed. This proceeding was initiated on 8 February 1999. APPLICABLE PRINCIPLES 7 The respondents' cross-claim raises issues the resolution of which depend upon State law or the common law and which standing alone would not attract the jurisdiction of this Court. The hearing and determination of the cross-claim will, nonetheless, fall within the accrued jurisdiction of the Court if it is part of a "matter" arising under ss 75 or 76 of the Constitution (Fencott v Muller (1983) 152 CLR 570). 8 In Re Wakim; ex parte McNally [1999] HCA 27, (1999) 163 ALR 270 at para 135 Gummow and Hayne JJ, with whom in this regard Gleeson CJ and Gaudron J agreed, said: "It must now be regarded as established that the jurisdiction of a federal court having jurisdiction in a matter arising under a law made by the parliament is not 'restricted to the determination of the federal claim or cause of action in the proceedings, but extend[s] beyond that to the litigious or justiciable controversy between parties of which the federal claim or cause of action forms part'. In Stack v Coast Securities (No 9) Pty Ltd the majority said: 'In this, as in other cases, the recurrent problem is to identify what it is that falls within the Federal Court's accrued jurisdiction. The majority judgment in Fencott v Muller provides this assistance in reaching an answer: 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. The scope of a controversy which constitutes a matter is not ascertained merely by reference to the proceedings which a party may institute, but may be illuminated by the conduct of those proceedings and especially by the pleadings in which the issues in controversy are defined and the claims for relief are set out. 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.'" 9 The parties accept that the issue arising for the Court's determination on the present motion is whether the applicant's claims and the respondents' cross-claim constitute a single justiciable controversy and are thus within the ambit of the one "matter". If the cross-claim is a separate "matter" from the claim, not being part of the one justiciable controversy, the Court will not have jurisdiction to hear and determine the cross-claim. The cross-claim does not plead any claim or defence arising under a law of the Commonwealth or otherwise attracting federal jurisdiction. Nor does the defence to cross-claim plead any matter attracting federal jurisdiction. 10 In Re Wakim, at para 140 Gummow and Hayne JJ referred to the statement made by Mason, Murphy, Brennan and Dean JJ in Fencott v Muller at 608 that: "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." Gummow and Hayne JJ went on: "The reference to 'impression' and 'practical judgment' cannot be understood, however, as stating a test that is to be applied. Considerations of impression and practical judgment are relevant because the question of jurisdiction usually arises before evidence is adduced and often before the pleadings are complete. Necessarily, then, the question will have to be decided on limited information. But the question is not at large. What is a single 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'. There is but a single matter if different claims arise out of 'common transactions and facts' or 'a common substratum of facts', notwithstanding that the facts upon which the claims depend 'do not wholly coincide'. So, too, there is but one matter where different claims are so related that the determination of one is essential to the determination of the other, as, for example, in the case of third party proceedings or where there are alternative claims for the same damage and the determination of one will either render the other otiose or necessitate its determination. Conversely, claims which are 'completely disparate', 'completely separate and distinct' or 'distinct and unrelated' are not part of the same matter." CONTENTIONS OF THE PARTIES 11 It was contended by the applicant that so far as the cross-claim raises the issue of the applicant's admitted visit to the Melbourne office and her removal of property from the office, it has no factual or legal dependence on the applicant's claims and is outside the scope of the controversy identified in the application and statement of claim. The applicant drew attention to the fact that the date of the alleged "break in" is later than the date of the termination of the arrangement between the parties concerning the use by the respondents of the name "Immicare". As I understand the applicant's submissions, she contended that the respondents' claims in conversion and trespass are not properly seen as arising out of the same subject matter as the applicant's claims. She placed emphasis on the distinction between ownership of physical objects, including pieces of paper, and ownership and infringement of copyright. 12 As to the respondents' claim under the Fair Trading Act 1985 (Vic) and the Fair Trading Act 1987 (NSW), the applicant contends that the claims are, in effect, merely colourable as the State Acts do not on their proper construction have any application to the conduct of the applicant in sending a letter from New South Wales by facsimile transmission to India. 13 The respondents contended that the facts which the applicant must prove to establish her claim are the same facts, or the obverse of the same facts, as the respondents must prove to establish their cross-claim. In particular, the respondents contended that the determination of the terms of the alleged agreement between the parties will be critical not only to the applicant's federal claims but also to the claims made by the respondents under State law and at common law. They submitted that the determination of facts by the Court relevant to determining the existence of the cause of action alleged by the applicant will necessarily involve the determination of facts relevant to the cross-claim. CONSIDERATION 14 It is convenient to give consideration first to the respondents' claims made pursuant to the Fair Trading Act 1985 (Vic) and the Fair Trading Act 1987 (NSW). 15 Section 4 of the Fair Trading Act 1985 (Vic) provides: "4(1) Except as otherwise expressly provided in or under this Act, this Act applies (notwithstanding anything to the contrary in any other Act or law) to and in respect of an acquisition or supply of goods or services or a proposed acquisition or supply of goods or services – (a) if the person by or to whom the goods are or are proposed to be acquired or supplied signs in Victoria a document relating to the acquisition or supply or the proposed acquisition or supply; or (b) if that person does not so sign such a document, if the goods or services are or are proposed to be delivered or supplied in Victoria. (2) This Act extends to the engaging in conduct outside Victoria by bodies corporate incorporated or carrying on business within Victoria or by persons ordinarily resident within Victoria. 16 The substantive provision of the Fair Trading Act 1988 (Vic) invoked by the respondents' cross-claim is s 11(1) which provides: "A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive." The respondents contend that: "the ordinary constitutional principle is that the existence of a connection between the enacting State and the extra-territorial persons things and events on which a State law operates is essential to the valid extra-territorial operation of the State law. The factors relevant to the existence of the connection are established in the circumstances of this proceeding." 17 This contention ignores the essential first step of determining as a matter of construction the intended extent of the extra-territorial operation of the Act. Under well accepted principles of statutory construction the Fair Trading Act 1985 (Vic) will be interpreted as applying to persons, property, and events in Victoria unless a contrary intention appears from the words of the statute (Meyer Heine Pty Ltd v China Navigation Co Ltd (1966) 115 CLR 10; Freehold Land Investments Limited v Queensland Estates Pty Ltd (1970) 123 CLR 418). Nothing in the Fair Trading Act 1985 (Vic) suggests that it is intended to have an extra-territorial operation beyond that provided for in s 4 of the Act (see Trade Practices Commission v Australian Iron & Steel Pty Ltd (1990) 22 FCR 305 at 319-320). The conduct of the applicant upon which the respondents' rely as the basis of their claim under the Fair Trading Act 1985 (Vic) is the sending by the applicant by facsimile transmission from New South Wales of a letter containing representations concerning the first respondent to Mr Panchal in India. It is not, in my view, fairly arguable that the Fair Trading Act 1985 (Vic) reaches to such conduct. 18 The respondents' claim against the applicant under s 11 of the Fair Trading Act 1985 (Vic) is, in my view, merely colourable. It may be disregarded for present purposes. 19 The Fair Trading Act 1987 (NSW) contains no provision comparable to s 4 of the Fair Trading Act 1985 (Vic). Section 42(1) of the Fair Trading Act 1987 (NSW) is in the same terms as s 11(1) of the Fair Trading Act 1985 (Vic). It is for the reasons discussed above, to be construed as a provision proscribing, relevantly, conduct falling within its terms engaged in in New South Wales. 20 In Paper Products Pty Ltd v Tomlinson (Rochdale) Ltd (No 2) (1993) 44 FCR 485 at 493 French J accepted that the making of representations by telephone and facsimile communications to a company in Australia constituted conduct in this country so as to constitute an actionable contravention of the Trade Practices Act 1974 (Cth). His Honour placed reliance on Diamond v Bank of London and Montreal Ltd [1979] QB 333 in which it was held that the common law torts of negligence and fraudulent misrepresentation can be committed at the place where a telex conveying the relevant representation is received. In that case Lord Denning said (at 345-346): "It seems to me that in the case of fraudulent misrepresentation, when it is made by telephone or telex, as it was here, the tort is committed at the place where the message is received – wherever it is heard on the telephone by the receiver or tapped out by the machine in the receiver's office." 21 As French J pointed out in Paper Products Pty Ltd, the critical question under the Trade Practices Act (and, of course, also under the Fair Trading Act 1987 (NSW)) is not where the cause of action arose but where the conduct relied upon took place. In the circumstances of the present case, the relevant allegedly misleading and deceptive conduct was the provision to Mr Panchal of the information contained in the applicant's letter. 22 It seems to me to be strongly arguable that the conduct of the applicant upon which the respondents place reliance for the purpose of their claim under s 42(1) of the Fair Trading Act 1987 (NSW) took place in India and not in New South Wales. However, I am not satisfied that the contrary view is untenable. I do not feel able to characterise the respondents' claim under the Fair Trading Act 1987 (NSW) as merely colourable. A claim under a law of the Commonwealth which does or may fail is nonetheless sufficient to attract federal jurisdiction provided that it is not merely colourable (Adamson v West Perth Football Club (1979) 39 FLR 199). 23 I turn to consider whether the respondents' claims, other than the claim under the Fair Trading Act 1985 (Vic), are within the scope of the controversy identified by the applicant's claims and thus within the ambit of the "matter" before the Court. 24 The respondents' claims against the applicant arising out of her visit to the Melbourne office are common law claims in conversion and trespass. The respondents' pleadings do not suggest that these claims depend on the respective rights of the parties arising from the arrangements between them concerning the use of the Immicare name. Those arrangements had, in any event, been terminated before the applicant's visit to the Melbourne office. 25 The applicant in her defence to cross-claim alleges that "she went to the Melbourne office of her business at 175 Grattan Street, Carlton in the State of Victoria to remove certain business records under claim of right." The applicant has not been required to give particulars of this allegation. 26 Falling back, as at this stage of the proceeding I must, on impression and practical judgment, it seems to me to be unlikely that the respondents' claims in conversion and trespass are dependent on the determination of the applicant's claims. The applicant's claims are dependent on an allegation that the arrangements between the parties concerning the use of the name Immicare gave rise to a fiduciary relationship between them and on allegations of infringement of trade marks and copyright. It seems to me that, to the extent that the cross-claim makes allegations of conversion and trespass, it does not arise out of the same transactions as the applicant claims and does not share a common substratum of facts with the applicant's claims. 27 I am doubtful that if the cross-claim, to the extent that it is based on claims in conversion and trespass, were determined in another court that conflicting findings could arise on any issue common to the applicant's claims and the respondents' cross-claims. No common issues arise on the face of the pleadings. So far as the applicant pleads in her defence to cross-claim that the Melbourne office was an office of "her business", the conduct of the parties under the arrangement between them concerning the use of the name Immicare, and the legal significance of that conduct so far as it concerned rights of entry to the Melbourne office on or about 23 January 1999, may require to be examined. However, as is mentioned above, the issues for determination on the applicant's claims concern only the nature of the relationship between the parties arising from the arrangements concerning the use of the name Immicare (ie did it give rise to a fiduciary relationship between the parties?), and whether the conduct of the respondents following the termination of the arrangements resulted in infringements of the applicant's trade marks and copyright. It seems unlikely that the hearing and determination of the applicant's claims standing alone would require consideration of the applicant's rights of entry, if any, to the Melbourne office following the termination of the arrangements between the parties. The circumstances are for this reason distinguishable from those considered by Weinberg J in Cheers v Entercorp Finance Pty Ltd [1999] FCA 1475. 28 It seems to me, however, that the respondents' cross-claim, to the extent that it concerns the applicant's letter to Mr Panchal, is more closely connected to the controversy evidenced by the applicant's claims against the respondent. By her letter to Mr Panchal which was dated 19 January 1999, the applicant advised him: "As of this date Michael Lukjanov has been dismissed from IMMICARE Immigration Advisory Service for improper and unconscionable conduct." 29 Consideration of whether the giving of this advice constituted misleading and deceptive conduct may well involve consideration of the nature of the relationship between the parties pursuant to the arrangements concerning the use of the name Immicare and, in particular, whether that relationship gave rise to a fiduciary relationship between the parties and whether the first respondent breached any such fiduciary relationship by his conduct concerning the name Immiaus. If the cross-claim, to the extent that it pleads a contravention of s 42 of the Fair Trading Act 1987 (NSW), were determined in another court there could, in my view, be conflicting findings on issues common to the statement of claim and the cross-claim. To this extent, the applicant's claims and the respondents' cross-claim have, it seems to me, a common substratum of facts – even though the facts upon which the non-federal claim is based may not wholly coincide with the facts upon which the federal claim is based. CONCLUSION 30 The ultimate issue for my determination is whether the applicant's claims and the respondents' cross-claims are part of the one controversy in the sense in which the relevant authorities use that term. It is necessary for this issue to be determined before the parties adduce their evidence. It may be that the pleadings, upon which it has been necessary for me to place considerable weight, will be subsequently amended or further particulars of the pleadings provided. However, the Court must reach a decision now "as a matter of impression or practical judgment" on the material properly before it. 31 On the above basis, I conclude that the applicant's claims and the respondents' cross-claim, to the extent of the claim pursuant to the Fair Trading Act 1987 (NSW), are within the scope of a single controversy. For this reason, this claim under State law is part of a matter under ss 75 or 76 of the Constitution and the Court has jurisdiction to hear and determine the claim. 32 However, I conclude that the respondents' cross-claim, to the extent of the claims invoking the common law causes of action of conversion, trespass to goods and trespass to land arise from a separate controversy to that which constitutes the "matter" before this Court. 33 The respondents' cross-claim, to the extent that it relies on the Fair Trading Act 1985 (Vic) is, as is mentioned above, in my view, merely colourable and thus no part of the justiciable controversy which constitutes the matter before this Court. 34 The assumption of accrued jurisdiction is discretionary (Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261 per Mason, Brennan and Dean JJ at 294-295; Westpac Banking Corporation v Paterson [1999] FCA 1609 (FC)). 35 If I am wrong in concluding that the respondents' cross-claim, to the extent that it invokes the common law causes of action of conversion, trespass to goods and trespass to land, is not part of the "matter" before this Court, I would nonetheless decline, as a matter of discretion, to allow the common law claims to be heard and determined in this proceeding. The common law claims fall clearly within the jurisdiction of the courts of the State of Victoria and have limited connection with the federal claims made in this proceeding. It seems reasonable to assume that, if successful, they will result in only modest awards of damages. In my view, the appropriate venue for their determination is a Victorian court of limited jurisdiction and not the Federal Court of Australia. 36 However, in my view, it is appropriate to allow the respondents' claim under the Fair Trading Act 1987 (NSW) to be heard and determined in this Court. Although it is a claim based squarely on a State statute, the efficient, cost effective handling of the controversy between the parties suggests that this claim, which shares a common substratum of facts with the applicant's claims, should be heard and determined with the applicant's claims. 37 There will be an order that the respondents' cross-claim, except for the claim pursuant to the Fair Trading Act 1987 (NSW), be stayed. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson. Associate: Dated: 2 December 1999 Counsel for the Applicant: Mr J.M. Ireland QC Solicitor for the Applicant: Eddy and Moloney Counsel for the Respondent: Mr T. Di Lallo Solicitor for the Respondent: Logie-Smith Lanyon Date of Hearing: 1 October 1999 Date of Judgment: 2 December 1999