Local Court New South Wales Medium Neutral Citation: Marketlend Pty Ltd v Yura Yungi Aboriginal Medical Service [2017] NSWLC 23 Hearing dates: 31 August 2017 and 11 September 2017 Decision date: 08 December 2017 Jurisdiction: Civil Before: Magistrate J Keogh Decision: See paragraphs 76 - 77 Catchwords: CIVIL PROCEEDINGS – Debt recovery – jurisdiction of Local Court when cause of action or defendant out of state – whether material part of cause of action arose in New South Wales – assignment of debt merely passing interest to assignee – no jurisdiction to determine proceedings Legislation Cited: Conveyancing Act 1919 (NSW) s 12 Local Court Act 2007(NSW) s 34 Service and Execution of Process Act 1992 (Cth) s 20 Cases Cited: Chidzey v Breckler [1920] VLR 558; (1920) 27 ALR 14 Distillers Co (Bio-Chemicals) Ltd v Thompson (Thalidomide case) [1971] 1 NSWLR 83 Howard v National Bank of New Zealand Limited [2002] FCA 1257 Jackson v Spittall (1870) LR 5 CP 542 My v Toyota Motor Co Ltd [1977] 2 NZLR 113 Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 Rothmans of Pall Mall (Overseas) Ltd v Saudi Arabian Airlines Corp [1981] QB 368 Shire of Carnarvon v Klein Corporation Pty Ltd (No2) [2009] VSC 30 Thomas v Penna (1985) 2 NSWLR 171 Vertzyas v Singapore Airlines Ltd (2000) 50 NSWLR 1 Williams v Milotin (1957) 97 CLR 465 Texts Cited: Lexis Nexis, Ritchie's Uniform Civil Procedure NSW P Radan and C Stewart, Principles of Australian Equity and Trusts (Lexis Nexis, 1st ed., 2010) Category: Principal judgment Parties: Marketlend Pty Ltd (plaintiff) Yura Yungi Aboriginal Medical Service (defendant) Representation: Counsel: Mr Thomas (for the plaintiff Mr Evatt (for the plaintiff on 8 December 2017) Mr Kanagratnum (for the defendant on 8 December 2017) Solicitors: Mr Oguz, of Zander Dre Lawyers (for the plaintiff) Ms Curci, of Pavuk Legal Solicitors (for the defendant) File Number(s): 2017/00115992 Publication restriction: Nil Judgment 1. By Statement of Claim filed in April 2017 the plaintiff, Marketlend Pty Ltd, seeks to enforce the repayment of a debt that was assigned to it in 2016. The amount in issue is $58,000. Background 1. The debt allegedly arose in the following circumstances. 2. The defendant is an aboriginal medical service and is incorporated as an aboriginal corporation in Western Australia. 3. It contracted with an entity called QNA Health Care Services ("QNA") to have provided to it nursing services between 9 May 2016 and the 13 June 2016. It is alleged invoices were rendered for the provision of those services and those invoices were not paid. 4. The debt was able to be assigned and it was so assigned to the plaintiff. It is alleged that the assignment was an absolute assignment allowing the plaintiff to take over the entitlement to recover the debt pursuant to section 12 of the Conveyancing Act 1919 (NSW). Notice was provided to the defendant of the assignment and apparently this notice was acknowledged by the defendant by way of emails and telephone conversations. 5. At some later stage after the plaintiff sought to recover the amounts of the unpaid invoices, although the defendant had allegedly acknowledged at an earlier date the receipt of the invoices, it denied the provision of the services and therefore the existence of the debt. 6. The defendant by its Defence filed on the 9 June 2017 admitted only that it traded as an aboriginal corporate entity. It required the plaintiff to prove the deed of assignment of the debt and prove the breach of contract that the plaintiff alleges entitles the plaintiff to pursue the debt against the defendant. 7. The defendant denied that it has requested from QNA or been provided by QNA any nursing services since April 2016. Further it submitted that the plaintiff earlier sought payment of the debt from another entity, a company called KAMS (Kimberley Aboriginal Medical Services Limited) which is, as I understand it, an umbrella organisation that provides a support network to the defendant and other aboriginal community controlled health services in the east Kimberley region of Western Australia. The defendant says that the plaintiff did this by service of a statutory demand around August 2016. 8. KAMS denied liability for the debt and advised the plaintiff to contact the defendant directly. Subsequently the statutory demand was withdrawn against KAMS and proceedings were commenced against the defendant. 9. The defendant denies receiving notice of the assignment. 10. In summary, the Defence denies the provision of services by QNA (the assignor of the debt), denies the invoices rendered between May and June are genuine and instead says they are fraudulent, and generally denies the defendant is in debt to the plaintiff or was in debt to QNA, the assignor of the debt. 11. Furthermore the defendant asserts the last service provided by QNA was in April 2016 and it was paid for in April 2016. 12. Additionally it complains that particulars sought in relation to the names of staff and the location of the services contracted for have not been provided. 13. The defendant claims the plaintiff has been sold a non-existent debt. 14. QNA has since had a liquidator appointed and has been wound up. History of Proceedings 1. Shortly before the filing of the Defence, a Notice of Appearance was filed on behalf of the defendant. After the filing of the Defence and before the first call over, a Notice of Change of Solicitor was filed on behalf of the defendant and Ms Curci was appointed to act as the defendant's solicitor in the proceedings. 2. Ms Curci has appeared for the defendant on each occasion the matter has been before the Court, save for the appearance on 8 December 2017 when Mr Kanagratnum of counsel appeared. Mr Thomas of counsel appeared for the plaintiff save for today when Mr Evatt appeared. Both counsel made further submissions to assist the Court in its determination. 3. The matter was first before the Court for defence call over on 12 July 2017. Both parties were represented. Neither party, as I understand it, raised any jurisdictional issue then, however the Registrar noted the following: * The original contracting parties were in Western Australia; * The defendant is resident in Western Australia; * The contracts on which the debt is based were fully performed in Western Australia; * The defendant alleges fraud by the original contracting party; and * Despite the assignment of the debt to the New South Wales plaintiff, it would appear that no material part of the cause of action arose in New South Wales, as required by section 34 of the Local Court Act 2007 (NSW) to enliven this Court's jurisdiction. 1. The Registrar adjourned the matter to the 10 August 2017 for the Notice of Motion in regard to jurisdiction to be dealt with. 2. There was in fact no notice of motion before the Court. 3. On 10 August 2017 both parties were represented. The Registrar then noted that the notice of Motion was adjourned to 31 August 2017 for hearing, with directions for the plaintiff to file an Affidavit in regard to jurisdiction within 14 days, with costs reserved. Again there was no written application or motion before the court. 4. The plaintiff relied on an Affidavit and made submissions on the question of jurisdiction. 5. Originally the submissions made by the defendant were not supported by any evidence. Ms Curci made oral submissions only and these included that the invoices the defendant claimed were fraudulent were currently the subject of police charges in Western Australia. She later corrected that assertion and advised the Court that a complaint had been referred to the Western Australia Police for investigation of the alleged fraudulent activity of QNA or possibly an employee of the defendant. 6. The defendant initially did not make any application pursuant to section 20 of the Service and Execution of Process Act 1992 (Cth). Instead Ms Curci sought the determination of the Court's jurisdiction on the material before the Court as at 31 August 2017. Subsequently a motion was filed by the defendant seeking a determination that this court has no jurisdiction to hear the proceedings or alternatively that the proceedings should be stayed pursuant to section 20 of the Service and Execution of Process Act 1992 (Cth). A supporting Affidavit was filed which attested to the matters raised in paragraph 23 above. Discussion 1. The plaintiff says the defendant has submitted to the jurisdiction by the filing of a Defence, the filing of a Notice of Appearance and two appearances at this Court. Therefore the jurisdiction of the New South Wales Local Court has been enlivened and submitted to. 2. It referred to a number of cases which discussed the general principles relating to submitting to jurisdiction and which it said were in support of this proposition. I will refer to three in particular, namely Shire of Carnarvon v Klein Corporation Pty Ltd (No2) [2009] VSC 30, Howard v National Bank of New Zealand Limited [2002] FCA 1257 and Vertzyas v Singapore Airlines Ltd (2000) 50 NSWLR 1. 3. Whilst those cases provide some support for the plaintiff's submission, they also allow me to be comfortably satisfied this Court's jurisdiction is not established simply by the appearance and filing of a Defence by the defendant. 4. Klein's case was an appeal against the determination of the Victorian Magistrate's Court. The defendant made a procedural decision to have the case determined on the merits in the Magistrate's Court and then pursued the jurisdictional issue on appeal. The outcome was that it was held the Magistrate's Court did not have jurisdiction and the appellant defendant suffered an adverse costs order due to the procedural decisions it made. The defendant in this case, unlike in Klein's case, has from the outset, although it filed a Notice of Appearance and Defence, contested jurisdiction. 5. Howard's case was decided by the Federal Court of Australia and involved the defendant, a New Zealand company, accepting service of a Statement of Claim. The Court noted that in such circumstances leave to serve outside the jurisdiction, which otherwise was required to be sought, was not required. The Court went on to note at [18]: "[T]he court will only exercise its authority over a foreign respondent who may not be willing to accept that authority in a case within rule 1 where the Court is also satisfied that the subject matter of the litigation is within its jurisdiction and the applicant has a sufficient case on the merits to justify the Court doing that". 1. His Honour Judge Knight in Vertzyas' case identified two types of case where a distinction can be drawn in relation to jurisdiction. The first is (at [85]): "…where an action is brought in respect of a matter which in the ordinary way the court would have no jurisdiction to entertain, but where it is not precluded from doing so if no objection is taken, and the second where the objection is not simply that the matter lies outside the jurisdiction of the court, as conferred by the common law or by statute, but is one in respect of which jurisdiction has been actively withdrawn from the court and conferred on another tribunal". 1. As His Honour Lord Mustill J said in Rothmans of Pall Mall (Overseas) Ltd v Saudi Arabian Airlines Corp [1981] QB 368: "…it is immaterial whether the parties wish the court to try the action. It must disclaim jurisdiction, since to continue the action would be contrary to law. Still less can one party by unilateral act confer on the court a jurisdiction which Parliament has said it should not have. Entry of an unconditional appearance does not preclude the defendant from raising the objection at a later stage, since it is the duty of the court not to entertain the dispute". 1. The Local Court is entirely a creature of statute and its jurisdiction must be within the parameters of section 34 of the Local Court Act before any conduct of the defendant can be examined. [1] Such conduct in itself cannot provide the Court with an expanded jurisdiction beyond that provided for by section 34 and so entry of an appearance and the filing of a defence do not preclude the court from considering the objection to jurisdiction. 2. The real issue to determine is whether a material part of the cause of action arose in New South Wales. 3. The plaintiff says its claim has as its foundation the assignment of the debt to it. Without that assignment it has no standing to commence the proceedings. 4. The determination of whether the court has jurisdiction to hear these proceedings requires a consideration of s 34 of the Local Court Act 2007. 5. Section 34 is as follows: 34 Jurisdiction when cause of action or defendant outside the State (1) The Court has jurisdiction to hear and determine proceedings with respect to a cause of action: (a) even if part of the cause of action arose outside New South Wales, so long as a material part of the cause of action arose within New South Wales, and (b) even if the whole cause of action arose outside New South Wales, so long as the defendant was resident in New South Wales at the time of service of the document that commenced the proceedings, and (c) even if the defendant is not within New South Wales, so long as: (i) the whole or a material part of the cause of action arose within New South Wales, and (ii) the defendant was within a State or a part of the Commonwealth (within the meaning of the Service and Execution of Process Act 1992 of the Commonwealth) at the time of service of the document that commenced the proceedings. (2) Subsection (1) (c) applies whether or not the defendant has ever been resident or carried on business in New South Wales. (3) In this section, defendant includes, if there are 2 or more defendants, any one of those defendants. 1. The substantive proceedings brought by the plaintiff involve the non-payment of invoices issued to the defendant under a contractual arrangement whereby the defendant received nursing services arranged by a recruitment company. The recruitment company was allegedly not paid for its provision of nursing services. The debt allegedly owed by the defendant to the company was assigned to the plaintiff. 2. 95 The defendant is an aboriginal medical service based in Western Australia; the recruitment company was also based in Western Australia. The nursing staff were provided in Western Australia and the invoices were allegedly issued and not paid in Western Australia. The plaintiff conducts debt collection and is the assignee of the recruitment company's debt. The plaintiff is a company with its registered office in Elizabeth Street, Sydney, New South Wales. 3. The defendant denies the debt and initially disputed the assignment of the alleged debt but now does not take any issue with assignment for the purpose of this determination. 4. Within the Deed of Assignment is a clause that states that the Deed is governed by and construed in accordance with the laws of New South Wales and that "the parties submit to the non-exclusive jurisdiction of its courts". This clause is relevant as between the assignor and assignee, that is the recruitment company and the plaintiff, but is completely irrelevant as between the plaintiff and the defendant in these proceedings. 5. Affidavit evidence from the plaintiff is to the effect that the assignor's signature was by way of an electronic signature. The process or programme for obtaining or attaching the signature of the assignee on the Deed is called "docusign". The plaintiff says the Deed was signed by the plaintiff in Sydney and on the same day the Deed with the electronic signature was received by the plaintiff it arranged for the directors of the plaintiff company to attach their electronic signatures to the deed and then send it to the assignor. 6. The Deed recites that it was executed in accordance with section 127(1) of the Corporations Act 2001 (Cth). 7. Section 12 of the Conveyancing Act appears to have been complied with (subject to some dispute in regard to notice). 8. The plaintiff submits that the assignment of the debt occurred in New South Wales and from the evidence provided by the plaintiff that would appear to be the case. 9. The issue is whether a material part of the cause of action arose in New South Wales, such that this Court has jurisdiction to determine whether the debt alleged is payable to the plaintiff. 10. The only relevant conduct that occurred in New South Wales is the assignment of the debt. 11. As I understand it the plaintiff concedes that apart from the assignment of the debt the cause of action arose out of New South Wales. It submits that although the defendant does not reside in New South Wales a material part of the cause of action arose in this state. Therefore by virtue of section 34 of the Local Court Act this Court has jurisdiction. Is the assignment of the debt a material part of the cause of action? 1. There has been some judicial consideration concerning what is a material part of a cause of action but unfortunately, it seems, no settled statement of principle. 2. The following is an extract from Ritchie's Uniform Civil Procedure NSW on the topic: "…it has been defined as meaning…..every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the court. It does not comprise every piece of evidence which is necessary to prove each fact, but every fact which is necessary to be proved": at 131, following Cooke v Gill (1873) LR 8 CP 107. In Williams v Milotin (1957) 97 CLR 465 at 474; [1957] ALR it was defined as "the essential ingredients in the title to the right which it is proposed to enforce". In Jackson v Spittall (1870) LR 5 CP 542 at 552 it was held that the expression "cause of action" did not mean "the cause of action", that is every fact material to be proved to entitle the plaintiff to succeed, but that it was used in what may be described as a more or less popular sense as indicating the particular act or omission occasioning the injustice complained of, and so giving rise to the plaintiff's claim." [2] 1. The authors of Ritchie's made the further observation that the "Jackson v Spittall definition" has been preferred in a number of recent cases concerning the jurisdiction of particular courts where those courts' claims to jurisdiction were in contest. 2. In My v Toyota Motor Co Ltd [1977] 2 NZLR 113 it was sufficient that the particular act or omission directly occasioning the relevant injury or damage took place within the jurisdiction. However, in Chidzey v Breckler [1920] VLR 558; (1920) 27 ALR 14 where the contract was made in Perth, and the breach thereof took place in Perth, it was held that there was no cause of action arising within Victoria, even though delivery of the goods was to be made from Melbourne. 3. In Williams v Milotin (1957) 97 CLR 465 at 474, the High Court said: "…when you speak of a cause of action you mean the essential elements in the title to the right which it is proposed to enforce. The essential ingredients in an action of negligence for personal injuries include the special or particular damage –it is the gist of the action...". 1. The case of Distillers Co (Bio-Chemicals) Ltd v Thompson (Thalidomide case) [1971] 1 NSWLR 83 was an appeal from the Court of Appeal of NSW to the Privy Council in 1971. It sighted Williams' case but founded its determination on the case of Jackson v Spittall (1870) LR 5 CP 542, which it identified as an "authoritative" case in spite of its antiquity. 2. Jackson v Spittall has been referred to in numerous decisions since then and would appear to provide the preferred exposition of what comprises a "material part" of a cause of action. 3. In Distillers Co (Bio-Chemicals) at 468, the Privy Council referred to three possible interpretations of what is meant by "Cause of Action" such that a tribunal has jurisdiction by virtue of legislation in similar terms to section 34 of the Local Court Act: 1. First that the cause of action must be the whole cause of action, so that every part of it, every ingredient of it, must have occurred within the jurisdiction. 2. The second is that it is necessary and sufficient that the last ingredient of the cause of action, the event which completes a cause of action and brings it into being , has occurred with the jurisdiction. 3. Third that the act on the part of the defendant which gives the plaintiff his cause of complaint must have occurred with the jurisdiction. 1. The Court held that requiring all the ingredients of the cause of action to occur within the jurisdiction was too restrictive. It suggested the defendant would have no major grievance: "If he is sued in the country where most of the ingredients of the cause of action against him took place. In such a case, if the theory No. (i) were accepted, the plaintiff, if lacking time and money for following the defendant to the defendant's country and suing him there, would be deprived of any remedy". 1. As to the second proposal the Court opined that it was wrong as a theory "as the last event might happen in a particular case to be the determining factor on its own merits, by reason of its inherent importance but not because it is the last event". If the last event was not a determining factor it would "not be manifestly just or reasonable that the defendant should have to answer for his wrongdoing in any country in the world to which the plaintiff may have happened to go before the damage occurred." 2. It posed the question to be answered was "when did the cause of action accrue so that the plaintiff became able to sue?" and answered: "the cause of action accrued when it became complete as the plaintiff could not sue before then but when the question is which court should have jurisdiction to try the action, the approach should be different; the search is for the most appropriate court to try the action and the degree of connection between the cause of action and country concerned should be the determining factor". 1. The Court also noted in negligence cases that the place where the damage occurs may be quite fortuitous and should not by itself be determinant of jurisdiction. 2. It went on to say, "it is manifestly just and reasonable that a defendant should have to answer for his wrongdoing in the country where he did wrong". 3. The Privy Council was dealing with cause of action in negligence and at least in the case of negligence it said the right approach is to look back over the series of events constituting it and ask the question, "where in substance did this cause of action arise?" (at 468). 4. The third proposal is in effect the rule laid down in Jackson v Spittall. The Court said the rule is "inherently reasonable as the defendant is called upon to answer for his wrong in the courts of the country where he did the wrong" (at 468). 5. In Jackson v Spittall the wrongdoing was a breach of contract and the Court noted there was no difficulty in determining where the breach had occurred. 6. I turn now to the case of Thomas v Penna (1985) 2 NSWLR 171 and despite the sentiment expressed by Knight J that there should be some movement away from giving the situation of the defendant paramount importance, it would seem that the authority of Jackson v Spittall is undiminished. 7. Although His Honour was dealing with an action in tort his consideration of the issue and determination are apposite. Relevantly his Honour considered that a material part of the cause of action required a consideration of what was "the gist" of the cause of action and for it "to arise" within the jurisdiction meant it "came into existence" within the jurisdiction. 8. His Honour Judge Knight held that "the material part of the cause of action" meant any one or more of the essential elements to the claim, "hose elements which give the plaintiff his cause for complaint". He discussed the definition provided in the Shorter Oxford Dictionary. It defines "material" as inter alia, "of such significance as to be likely to influence the determination of a cause or 'the elements , constituent parts or substance of something'". 9. He went on to note that it was straining the meaning of the section to interpret the words "material part of the cause of action as a material part of one of the elements of the cause of action." 10. He placed some emphasis on the use of the word "arose" and referred to the NSW Court of Appeal's discussion of those words in the Distillers Co (Bio-Chemicals) case and that in their context they meant "to come into existence". 11. In summary his Honour's determination was "the gist of the action" must have "come into existence" "within the jurisdiction". Determination 1. The cause of action in this matter is an allegation of a breach of contract and damages due as a result of the breach. That breach occurred in Western Australia. That is where the cause of action accrued. The assignment of the debt merely passed the interest of the original assignor to the assignee. 2. In Norman v The Federal Commissioner of Taxation (1963) 109 CLR 9, Windeyer J defined 'assignment' as the "immediate transfer of an existing proprietary right, vested or contingent, from the assignor to the assignee". 3. In Principles of Australian Equity and Trusts, [3] the learned authors observe: "The essential feature of an assignment is a transfer of rights…a transfer can be said to occur when one person (the assignor) parts with something in circumstances where the recipient (the assignee) of that thing receives the same thing previously held by the transferor". 1. Therefore any legitimate assignee (where section 12 of the Conveyancing Act has been complied with) can stand in the shoes of the plaintiff. 2. The assignment of the debt is simply an event that gives the plaintiff standing. It is not an event that gives rise to a cause of action rather the assignment is an event that occurred after the plaintiff's cause of action in debt had, on the plaintiff's case, fully accrued . It is not a part of the cause of action itself. 3. The "gist of the action" must have "come into existence" within the jurisdiction. The gist of the action is the allegation of a debt as a result of a breach of contract, that is a breach of contract, and if it occurred it occurred in Western Australia. That is where the cause of action came into existence. 4. Therefore no material part of the cause of action arose in New South Wales and accordingly this Court does not have jurisdiction to hear and determine the proceedings. 5. Consequently a determination of the application of section 20 of the Service and Execution of Process Act is unnecessary. Magistrate J Keogh 8 December 2017 ********** Endnotes 1. Grassby v The Queen [1989] HCA 45. The Local Court has no jurisdiction beyond that which is conferred on it by statute. See also Credit Loans Australia Pty Ltd v Viera [2016] NSWSC 484.See further Ex Parte Gove (1921) 21 SR(NSW) 548 where Ferguson J said at 556 "[b]efore you come to apply the Service and Execution of Process Act 1901 (Cth), you must look at the State Act to find jurisdiction over the defendant". 2. Lexis Nexis, Ritchie's Uniform Civil Procedure NSW, vol. 2 at p36811. 3. P Radan and C Stewart, Australian Equity and Trusts (Lexis Nexis, 1st ed., 2010) at [5.1]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 14 March 2018