Denpro Pty Ltd v Centrepoint Freeholds Pty Ltd [1983] FCA 117

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CATCHWORDS Trade Practices - misleading and deceptive conduct - application for interlocutory injunction to restrain party from proceeding in Supreme Court ~ jurisdiction and power of Federal Court to grant injunction - nature and extent of Federal Court's exclusive jurisdiction under s.86 Trade Practices Act ~- attached jurisdiction - whether power of

Federal Court to grant injunction excluded by s.&87(5) Trade Practices Act or s.61(5) Supreme Court Act 1958 (Vic.) — claim necessary to justify granting injunction.

Trade Practices Act 1974 (C'th.) ss.86, 87(5)

Federal Court of Australia Act 1976 (C'th.) ss.5, 23 Judiciary Act 1903 (C''th.) ss.79, 80 Supreme Court Act 1958 (Vic.) ss-61, 62(5)

DENPRO PTY. LTD. v. CENTREPOINT FREEHOLDS PTY. LTD.

Northrop J. 10 June 1983

Melbourne.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY V. No. G.179 of 1982

GENERAL DIVISION

BETWEEN: DENPRO PTY. LTD. Applicant and CENTREPOINT FREFHOLDS PTY. LTD. Respondent ORDER CORAM: Northrop J. DATE: 10 June 1983 WHERE MADE: Melbourne

THE COURT FURTHER ORDERS pursuant to O52 r15(1)(a)(iii) of

the Federal Court Rules that 10 June 1983 be fixed as the date after which a notice of appeal from the orders made on

16 May 1983 may be filed and served.

IN THE FEDERAL COURT OF AUSTRALIA

) ) VICTORIA DISTRICT REGISTRY ) V. No. G.179 of 1982 ) )

GENERAL DIVISION

BETWEEN:

: DENPRO PTY. LTD. Applicant

and CENTREPOINT FREEHOLDS PTY. LTD. Respondent ORDER

CORAM: Northrop J. DATE: 16 May 1983 WHERE MADE: Melbourne

THE COURT ORDERS THAT:

1. Time for service of the Notice of Motion be abridged to

two days.

2. The applicant have leave to join Peter Pausewang and

Denny Schwarz as applicants to the proceedings.

rent ee +

The application as amended and the statement of claim as amended having regard to the new applicants be filed and

served within seven days from today.

The respondent have leave to plead to the amended statement of claim within seven days after receipt of

the amended application and aniended statement of claim.

The respondent be restrained until the proceedings herein are heard and determined or until further order from proceeding further in the Supreme Court of Victoria in action numbered 10135 of 1982 commenced by writ

issued on the 10th day of December 1982.

The respondent pay the applicant's costs of the motion.

IN THE FEDERAL COURT OF AUSTRALTA

VICTORIA DISTRICT REGISTRY

V. No. G.179 of 1982

GENERAL DIVISION

BETWEEN:

CORAM:

DATE:

On

DENPRO PTY. LTD. Applicant and CENTREPOINT FREEHOLDS PTY. LTD. Respondent

Northrop J.

10 June 1983

Melbourne

REASONS FOR JUDGMENT

11 May 1983, the applicant, "Denpro", gave

notice to the respondent, "Centrepoint", that on 16 May 1983

it would move the Court for orders that:

"1,

PETER PAUSEWANG and DENNY SCHWARZ be

joined as Applicants in these proceedings.

2.

The Respondent be restrained until

proceedings herein are finalized or further

Order from proceeding further in the Supreme Court of Victoria in Action No. 10135 of 1982 commenced by Writ issued on 10th December, 1982."

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On the hearing of the motion, counsel for Centrepoint objected to the short service of the notice of motion, but after hearing submissions the Court ordered, for reasons then stated, that the time required for the giving of

the notice be abridged; see 019 r3 and 03 r3.

- After hearing submissions on the motion the Court

ordered:

1. that Denpro have leave to join Peter Pausewang and Denny

Schwarz as applicants to the proceedings; and

2. that Centrepoint be restrained until proceedings in the Federal Court action are heard and determined or until further order from proceeding in the Supreme Court of Victoria in Action No. 10135 of 1982 commenced by writ

issued on 10 December 1982.

After making the orders the Court announced that it would publish at a later date its reasons for making those

orders. The Court now publishes those reasons.

The motion raised an issue which recently has been causing some concern and which arises out of possible overlapping of jurisdiction between the Federal Court of Australia and the Supreme Courts of the States. I understand

that in proceedings mentioned later in these reasons the

-3- issue has been removed into the High Court of Australia under the provisions of the Judiciary Act 1903 for determination by that Court. In those circumstances it is undesirable that I should add to the many cases in which the issue has been considered. Accordingly, these reasons will be briefer than

otherwise they would have been.

The application herein was issued on 29 November 1982 and was served on Centrepoint on 30 November 1982. The application was based upon sections 52, 53(aa) and 53A of the Trade Practices Act 1974, "the Act", and arose out of an agreement for the lease of a shop at the Centrepoint Mall, Melbourne, by Denpro as lessee from Centrepoint as lessor. This application is but one of many similar proceedings in the Federal Court with respect to the Centrepoint Mall; see for example Mr. Figgins Pty. Ltd v. Centrepoint Freeholds Pty. Ltd. (1981) 36 A.L.R. 23. As in the other proceedings, in addition to the claims based on the Act, Denpro made claims based on the common law. Denpro claimed damages under the Act and at common law as well as orders pursuant to sub-sections 87(1), (1A) and (2) of the Act and in equity relating to rescinding, avoiding and/or varying the agreement or the terms of the agreement including the lease entered into pursuant to the agreement. A perusal of the statement

of claim makes it clear that the claims are based on

-4- representations alleged to have been made by or on behalf of Centrepoint to Denpro, including "Pausewang on behalf of"

Denpro, in relation to Denpro entering into the agreement.

At the directions hearing on 17 December 1982, the Court, by consent, gave directions that the applJication proceed by way of pleadings and other directions were given which provided that the application should be ready for trial

by 1 July 1983.

By its defence filed on 14 February 1983, Centrepoint joined issue on the substantial allegations made in the statement of claim and raised a number of specific defences including claims that Denpro was indebted to Centrepoint in the sum of $35,323.08 "in accordance with the claim made in Action No. 10135 of 1982 in the Supreme Court of Victoria" and that Centrepoint had suffered loss and damage in the sum of $369,640.76 arising from the breach and repudiation of the lease the subject of the agreement for lease of the shop in Centrepoint. The sum of $35,323.08 was claimed as amounts owing by Denpro to Centrepoint under the lease prior to its repudiation by Denpro. In the result, Centrepoint by its defence claimed that it was "entitled to set off against [Denpro's claim' the amounts of $35,323.08

and $369,640.76 together with interest".

-5-

On 10 December 1982 Centrepoint as plaintiff had commenced the proceedings in the Supreme Court against Denpro, Peter Pausewang and Denny Schwarz as defendants. The claim in the Supreme Court arose out of the same transactions between Denpro and Centrepoint as those referred to in the Federal Court proceedings. Peter Pausewang and Denny Schwarz are directors of Denpro. In the-Supreme Court proceedings Centrepoint sought a declaration that the lease betwen Denpro and Centrepoint had been rescinded by Centrepoint, sought judgment in the sum of $35,323.08 being arrears of payments due under the lease and sought damages which subsequently have been quantified as amounting to $369,640.76. The claim was made against Peter Pausewang and Denny Schwarz pursuant to a quarantee and indemnity given by them under the agreement for lease. A statement of claim was delivered with the writ and Centrepoint gave notice that it required pleadings. On 22 December 1982 Centrepoint took out a summons for final judgment in the Supreme Court proceedings returnable on 7 March 1983. The summons was not served on the defendants and on 1 March 1983 and before the summons for final judgment had been served, the defendants delivered their defence. Denpro joined issue with the facts alleged in the statement of claim and raised as defences all the matters relied upon by Denpro in its Federal Court proceedings, except reliance upon the Act. The other defendants raised defences _ consequential to those raised by Denpro. The

summons for final judament was adjourned to a date to be

-6- fixed, later fixed as 17 May 1983, and the defendants were directed to make, file and serve any answering affidavits within 10 days of the date fixed for the hearing of the

summons. The defendants have not made any such affidavits.

In these circumstances, Denpro sought the orders set out in the notice of motion. The matter was urgent since the summons for final judgment was due to be heard on the following day and Centrepoint was not prepared to consent to

its adjournment pending the hearing and determination of the

motion.

On the facts of this case, there can be no doubt that this Court has jurisdiction to hear and determine the totality of the claims made by Denpro; Fencott v. Muller, High Court of Australia, 28 April 1983, unreported. Those claims extend to the validity of the agreement for lease and lease. The validity of the guarantee and indemnity given by the directors of Denpro may depend upon the validity of the agreement for lease and lease. In all the circumstances, it is appropriate that the directors be joined as applicants in

the Federal Court proceedings.

On the substantive issue raised by the motion, counsel for Centrepoint developed three main submissions,

namely that:

-7- No injunction should be granted in the absence of affidavit material establishing the merits of Denpro's claim and showing a sufficient prima facie case to warrant the granting of an injunction;

The power of the Court to grant an injunction of the

"type sought is impliedly excluded by the provisions of

s.86 and s.87(5) of the Act; The Court is precluded from granting an injunction of the type sought by reason of s.61(5) of the Supreme

Court Act 1958 (Vic.).

These submissions will be considered separately.

In Adamson v. West Perth Football Club (Inc.) (1979) 39

F.L.R. 199, in considering the nature of the attached

jurisdiction of the Federal Court, I said at p.22]:

"The [Federal] claim made must be in respect of matters arising under laws made by the Parliament and must be bona fide and substantial, but the validity or strength of the claim in respect of the matters arising under laws made by the Parliament is quite immaterial so long as they are genuinely raised."

In Fencott v. Muller, in a joint judgment, Mason,

Murphy, Brennan and Deane JJ. said at p.31:

-8-

"However, federal judicial power is attracted to the whole of a controversy only if the federal claim is a substantial aspect of that

controversy. A federal claim which is a trivial or insubstantial aspect of the controversy must, of course, itself be

resolved in federal jurisdiction, but it would be neither appropriate nor convenient in such a case to translate to federal jurisdiction the determination of the substantial aspects of the controversy from the jurisdiction to which they are subject in order to determine the trivial or insubstantial federal aspect. Again, impression and practical judgment must determine whether it is appropriate and convenient that the whole controversy be

determined by the exercise of federal judicial power."

At pp.28-9 their Honours said:

"The unique and essential function of the judicial power is the quelling of such controversies 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 simple 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. 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."

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In the present case, the material before the Court makes clear what constitutes the one controversy arising between the parties. This appears by reference to the proceedings which have been instituted in the Federal Court and in the Supreme Court, the conduct of those proceedings, including the pleadings delivered, and the relief sought. That material shows that the claims made are genuine and that the federal claims form a substantial aspect of that controversy. There can be no universal requirement that in every case an affidavit on the merits of the claim must be filed by a person seeking an injunction of the type sought in the motion.

The first submission is rejected.

The second submission raises the issue first mentioned in these reasons. Apart from Fencott v. Muller, reference may be made to St. Justin's Properties Pty.

Ltd. v. Rule Holdings Pty. Ltd. (1980) 40 F.L.R. 282,

L. E. Stack v. Coast Securities No. 9 Pty. Ltd., Federal

Court of Australia, Fitzgerald J., 23 Maren 1983,

unreported, Allpike Honda Pty. Ltd. v. Marbellup

Nominees Pty. Ltd, Federal Court of Australia, Toohey

J., 29 March 1983, unreported, Turelin Nominees Pty. Ltd. v. Dainford Ltd., Federal Court of Australia,

Smithers J., 12 April 1983, unreported, Bargal Pty. Ltd.

v. Force, Supreme Court of Queensland, McPherson J., 13

-~10- May 1983, unreported, in which His Honour considered the

effect of Fencott v. Muller, and the many cases referred

to in those judgments. The issue has been removed to the High Court of Australia under the provisions of the

Judiciary Act in the L. E. Stack's case and, I am

informed, in Baraali's case. The issue will be determined by the High Court: Having regard to s.78B Judiciary Act and the urgency of the matter, this Court has proceeded without delay to hear and determine the motion without notice having been given to the Attorneys-General; see sub-section (5). For present purposes it is sufficient for me to say that I rely on the powers conferred on the Court by s.23 of the Federal

Court of Australia Act 1976, as well as the inherent

power of the Court. I am conscious also of what was

said in the majority judgment in Fencott v. Muller at

pp.29-30:

"The power judicially to determine the whole of a dispute is inconsistent with a limitation which would restrict the court to resolving only the federal claim and what is necessary for that purpose. To adopt a more restrictive approach to the ascertainment of the ambit of a matter is to ensure that the obstacles of arid jurisdictional dispute will beset the path of a party who must invoke federal jurisdiction, especially federal jurisdiction exclusively vested in a federal court pursuant to s.77(ii). The judicial ascertainment of facts in a particular controversy would be bedevilled by the possibility of divergent _findings or by unseemly attempts to secure a first finding from one court rather than another. The judicial award of effective remelies in resolution of a controversy would

-~ill-

be impaired, especially in cases where remedies are discretionary or reciprocal. The judicial power of the Commonwealth would at once prove insufficient to accomplish its purpose and productive of inefficiency in the exercise of the judicial power of the States.

These consequences cannot be accepted unless they follow from the language of the Constitution, and they do not."

See also Gibbs C.J. at p.26:

"However, any inconvenience in a case such as the present arises only from the fact that the Parliament has chosen to make the jurisdiction

of the Federal Court exclusive; it does not inevitably result from the constitutional provisions themselves. In any case, to

attempt to mitigate the inconvenience which may result to a party who brings his proceedings in the Federal Court, by adopting a broad interpretation of the word ''matter', or by otherwise according to the Federal Court an expanded 'jurisdiction, will have the effect of shifting the burden of inconvenience to a party who brings his proceedings in the Supreme Court of a State, since s.86 brings

about a reciprocity between the two jurisdictions, with the result that the wider the jurisdiction that is conceded to the Federal Court, the narrower is that remaining in the State Court. In those circumstances,

only the adoption of precise legal tests can enable litigants to select their forum with any hope that it is the appropriate one."

3. Part Vl, consisting of s.61, Supreme Court Act 1958 (vic.) contains part of the Judicature Act provisions first enacted in England in 1873 and first enacted in

Victoria in 1883. The Part is headed "Concurrent

a

Administration of Law and Equity".

the relevant parts of s.61 relied upon by counsel for

- 12 -

Centrepoint are set out:

"6l.

Subject to any express enactment to the

contrary in every civil case or matter commenced in the Court law and equity shall be administered by the Court according to the

rules following:—

(5)

Reference should be made also to s.62(5)

No cause or proceeding at any time pending in the Court shall be restrained py prohibition or injunction; but every matter of equity on which an injunction against the prosecution of any such cause or proceeding might have been obtained if The Judicature Act 1883 had not passed, either unconditionally or on any terms or conditions, may be relied on by way of defence thereto: Provided always that nothing in this Act contained shall disable the Court if it thinks fit so to do from directing a stay of proceedings in any cause or matter pending before it; and any person whether a party or not to any such cause or matter who would have been entitled if The Judicature Act 1883 had not passed to apply to the Court to restrain the prosecution thereof or who may be entitled to enforce by attachment or otherwise any judgment decree rule or order in contravention of which all or any part of the proceedings in such cause or matter may have been taken, shall be at liberty to apply to the Court by motion in a summary way for a stay of proceedings in such cause or matter either generally or so far as may be necessary for the purposes of justice and

the Court shall thereupon make such order as is just."

which provides:

For present purposes

of that Act

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"62. The law to be hereafter administered as to the matters next hereinafter mentioned shall unless the contrary is expressly provided by some enactment be as follows:-

(5) Generally ... in all matters not hereinbefore particularly mentioned in which there was before the passing of The

Judicature Act 1883 any conflict or Variance between the Rules of Equity and the Rules of the Common Law with reference to the same matter, the Rules of Equity shall prevail."

In that Act "the Court" means the Supreme Court of

Victoria.

Counsel referred to s.79 and s.R80O Judiciary Act

1903. The relevant parts of s.79 are set out:

"79. The laws of each State ... including the laws relating to procedure ... shall, except as otherwise provided by the Constitution or the laws of the Commonwealth be binding on all

Courts exercising federal jurisdiction in that State ... in all cases to which they are applicable."

Section 80 contains similar provisions with respect to the common law of England and the statute law of a State. It is

to be noted that the Federal Court is a superior court of

record and is a court of law and equity; Federal Court Act,

s.5(2).

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The substance of the submission by counsel was that s.61(5) of the Supreme Court Act was procedural law of the State of Victoria and under s.79 of the Judiciary Act was binding upon the Federal Court. It was submitted that as a result no proceeding in the Supreme Court of Victoria could be restrained by injunction even where the injunction operated in personam against a party in the Supreme Court proceedings. Counsel referred to Pedersen v- Young (1964) 110 C.L.R. 162 as an illustration of the application of s.79 Judiciary Act. He referred to what was said by Kitto J. at p-165 and Menzies J. at p.167. He contended that there was no federal law which by virtue of s.109 of the Constitution overrode the State law of procedure and made express

reference to s.86 and s.87(5) of the Trade Practices Act.

In my opinion the provisions of s.61(5) Supreme Court Act do not constitute laws of a State relating to procedure within the meaning of s.79 of the Judiciary Act.

The sub-section is in a Part of the Supreme Court Act headed

"Concurrent Administration of Law and Equity". That Part contains provisions conferring powers upon the Supreme Court. It is a Part which, on its true construction, relates to the Supreme Court of Victoria and is not intended to have general application to all courts, and in particular to the Federal Court, when exercising jurisdiction within the State of Victoria. In any event, in this context, s.-5 of the Federal

Court Act may well be of importance.

Section 61(5) Supreme Court Act can be understood only in the light of legal history. Prior to the Judicature Act 1873 (Eng.), the three great common law courts of England were the Court of Common Pleas, the Court of King's Bench and the Court of Exchequer. Each of those courts had a long and proud history. Stated very simply, the jurisdictions of those courts depended upon remedies and the existence of an appropriate form of action. Over the centuries, competition between those common law courts led to the development of legal fictions whereby each court extended its jurisdiction, for example the fictitious trespass in the Common Pleas, the fictitious presence in Middlesex in the King's Bench, and the fictitious debt to the Crown in the Exchequer. By the use of those legal fictions, each court was able to extend its jurisdiction, thus attracting litigants. Nevertheless, because of the nature of the common 'law and its dependence upon remedies and forms of action, the need for flexibility led to the practice of the Court of Chancery, in applying the rules of equity, to grant injunctions. That court did not claim to be superior to the common law courts but, by the use of the injunction, equity was able to restrain a party from continuing proceedings in the common law courts or from executing judgments obtained in those courts. That practice gave rise to conflicts between the Court of Chancery on the one hand and the common law courts on the other. Those

conflicts were resolved in favour of equity by James 1

- 16- directing that the Court of Chancery was not to desist from giving such relief in equity "as shall stand with the merit and justice of the cause and with the former ancient and continued practice and presidency of our Chancery"; Vol. 1 Holdsworth's History of English Law, 3rd Ed., p.463, n3. The Judicature Act 1873 (England) amalgamated a number of the then existing courts in England including the three common law courts and the Court of Chancery into the one court, the Supreme Court of Judicature. One branch of the new court was the High Court of Justice which incorporated the Court of Chancery and the three common law courts. The new High Court

of Justice came into existence in 1875.

The Judicature Act 1883 (Vic.) effected similar reforms in Victoria. For present purposes, the essential feature is that after the Judicature Act 1883, the one Supreme Court of Victoria exercised jurisdiction in both

common law and equity. The Supreme Court Act contains a

number of specific provisions relating to the powers of the Supreme Court, including s.61(5) and s.62(5). Following the Judicature Act, it was no longer appropriate that in Victoria the Supreme Court should have power to grant an injunction against a plaintiff in other proceedings in the Supreme Court to restrain that plaintiff from proceeding with his proceedings in the Supreme Court. Just to state the position illustrates the logic of a provision stating that the Supreme

Court shovld not have that power to grant an injunction. At

-17- the same time, s.61(5) made it clear that the person who theretofor might have been able to obtain an injunction from the Court of Chancery to restrain a plaintiff from proceeding with a form of action in the common law courts, now had the right to apply to the newly created court by motion for a stay of those proceedings and the court had power to make the necessary orders. Section 61(5) constitutes part of a code relating to powers as well as to procedures which apply to

proceedings in the Supreme Court.

The Federal Court is separate and distinct from the Supreme Courts of the States. Its jurisdiction derives from the Constitution and from federal legislation. The Federal Court does not assert that it is superior to the Supreme Courts of the States. The Federal Court does not presume to exercise control over the Supreme Courts by making orders in the nature of prohibition, certiorari or mandamus. The Federal Court and the Supreme Courts do not constitute rival systems deriving their jurisdiction and powers from the one source. They do not compete with each other and are not to be treated as if they were in the same position as the former common law courts. In some cases, the jurisdiction conferred upon the Federal Court may be in the nature of power to grant

remedies; see Thomson Australian Holdings Pty. Ltd. v. Trade

Practices Commision (1981) 55 A.L.J.R. 614. There is much

- 18 - wisdom in the well-known aphorism by Professor Maitland "the forms of action we have buried but they still rule us from

their graves".

The mischief sought to be removed by s.61(5) of the Supreme Court Act arose from the power exercised by the Court of Chancery. The source of that power was the same as the source of the power exercised by the common law courts. The conflict between those courts was resolved by James 1. After the Judicature Acts, there was the one court only and the earlier conflict could not arise. In some respects, it may be said, the Federal Court in granting injunctions of the type sought by this motion is exercising a power similar to that formerly exercised by the Court of Chancery- The essential difference, however, is that the source of power exercised by the Federal Court is different from the source of power exercised by the Supreme Courts of the States. In

those circumstances, s.61(5) of the Supreme Court Act and its

equivalent in other States cannot limit the power conferred upon the Federal Court. Insofar as the section purports to interfere with the power of the Federal Court, it would be inconsistent with the federal legislation constituting the Federal Court and legislation conferring jurisdiction and powers upon it; see for example Williams v. Hursey (1959)

103 C.L.R. 30 per Fullagar J. at pp.68-9.

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The nature and extent of the jurisdiction and

powers of the Federal Court depend upon the true construction of the Constitution and the relevant federal legislation. The claim in the Federal Court based on the federal law must be genuine and substantial. The use of legal fictions to found jurisdiction should be rejected. The limits to be placed upon claims which may be attached to the claim based

on federal legislation are discussed in Fencott v. Muller and

depend upon the true meaning of the word "matter". Unresolved issues remain concerning the effect of jurisdiction being conferred upon the Federal Court exclusive

of any other court, including the Supreme Courts of the

States.

In my opinion, s.61(5) Supreme Court Act does not

prevent the Federal Court from granting the injunction

sought.

aoe SPL EE URE TTS TEE RE ITI I, i)

- foertiy that ths and the ts Jehephteen preceding pages are a truce copy of the Reasons for Jrdgment herem of the Honourable Mr. Justice Noctnrop Autis < Terre: Associate

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