K & M Prodanovski Pty Ltd v Northshore Car Rentals Pty Ltd [2017] NSWSC 625

Supreme Court New South Wales

Medium Neutral Citation: K & M Prodanovski Pty Ltd v Northshore Car Rentals Pty Ltd [2017] NSWSC 625 Hearing dates: 19 May 2017 Decision date: 22 May 2017 Jurisdiction: Common Law Before: N Adams J Decision: (1) The summons is dismissed. (2) The plaintiff is to pay the defendant's costs. Catchwords: PRACTICE AND PROCEDURE – application to transfer proceedings to the Supreme Court pursuant to s 140 of the Civil Procedure Act 2005 (NSW) – where defendant in District Court proceedings has foreshadowed filing of a cross-claim seeking rescission of contract under ACL– summons dismissed Legislation Cited: Civil Procedure Act 2005 (NSW), ss 56, 140, 144 Competition and Consumer Act 2010 (NSW), s 138B, Schedule 2, ss 237(1), 243 District Court Act 1973 (NSW), ss 44, 135 Cases Cited: Mahommed v Unicomb [2017] NSWCA 65 Provectus Care Pty Ltd v Epicor Software (Aust) Pty Ltd [2009] NSWSC 1281 Category: Principal judgment Parties: K & M Prodanovski Pty Ltd (Plaintiff) Northshore Car Rentals Pty Ltd (Defendant) Representation: Counsel: Mr D Steirn (Plaintiff) Mr G Carolan (Defendant)

Solicitors: Turner Freeman Lawyers (Plaintiff) Mitry Lawyers (Defendant) File Number(s): 2017/78859

Judgment 1. By Summons filed on 14 March 2017, the plaintiff seeks an order pursuant to s 140(1) of the Civil Procedure Act 2005 (NSW) ("CPA") that the proceedings between the parties in the District Court of New South Wales, Sydney Registry, with case number 2016/00114957 be transferred to this Court. The defendant opposes the application. 2. The plaintiff in this Court is the defendant in the proceedings in the District Court and the defendant in this Court is the plaintiff in the District Court. Although the proceedings in this Court have been commenced by Summons, for ease of reference I propose to refer to the plaintiff in this Court as the applicant and the defendant as the respondent. 3. At the hearing of the Summons the applicant relied upon the pleadings in the District Court as well as affidavits sworn in support of this application by Terence Louis Goldberg, solicitor, on 5 May 2017 and 14 May 2017 (with exhibits). Mr Steirn of counsel appeared for the applicant and Mr Carolan of counsel appeared on behalf of the respondent. 4. The background to the District Court proceedings emerges from the Statement of Claim filed in the District Court on 14 April 2016. The applicant owned a Lamborghini that was involved in a motor vehicle accident on 22 May 2009. The vehicle was damaged and was no longer roadworthy. Between 12 October 2012 and 27 May 2013 and again between 14 June 2013 and 20 October 2013, the applicant was unable to use his vehicle as it was being repaired. During those periods, he hired replacement vehicles from the respondent. 5. It is pleaded that, on or about 18 February 2015, the applicant and the respondent agreed that the respondent would seek to recover the costs arising from the rental agreement from the party who was at fault in the accident ("the Contract"). The Contract was express and in writing. It was entirely contained in two documents: an "Authority for NSCR [the respondent] to Manage Claim" dated 18 February 2015 ("the Authority") and "Assignment of Debt Claim Number 144520" ("the Assignment"). It is pleaded that it was a term of the agreement that the applicant assigned to the respondent all of its right, title and interest in the debt. 6. The respondent pleads that the applicant breached the agreement prior to 14 December 2015 by ceasing to assist the respondent with the proceedings to recover the rental costs from the person at fault in the accident. Further, or in the alternative, it is pleaded that the applicant's termination of the agreement was wrongful and constitutes repudiation. The respondent also claims to be entitled to be indemnified for its loss and damage. The claim is for $88,110 in unrecovered rent, plus interest and the legal costs not recovered from the party at fault. 7. The applicant does not admit that there was any rental agreement between the parties. Rather, it is pleaded in the Defence that the vehicles were provided as "courtesy vehicles". In a Statement of Cross-Claim filed on 23 June 2016, the applicant seeks rescission of the Contract constituted by the Authority, the Assignment and a letter of authority ("the Letter"). Rescission is sought on the basis that an employed solicitor of the firm acting for the respondent made misrepresentations to Tony Prodanovski, who was a director of the applicant. Those misrepresentations were to the effect that the Authority, the Assignment and the Letter were required by the respondent so that its costs could be recovered and that there would be no implications for Mr Prodanovski or the applicant arising from those documents because the claim was to be made against a third party. 8. In Mr Goldberg's affidavit of 14 March 2017, he states that he is instructed that the applicant wishes to claim relief under s 237(1) of the Australian Consumer Law by way of rescission of the rental agreements and contract. He states that, should this Court see fit to transfer the District Court proceedings to this Court, he is instructed to amend the Defence and Statement of Cross-Claim to seek relief under the ACL. Mr Goldberg exhibited the proposed amended cross-claim to his affidavit. In that document at [6], it is pleaded that, "The applicant seeks relief in the nature of rescission of the Authority, the Assignment and the Letter." At [10] of the same proposed amended cross-claim, the applicant "seeks an order for rescission of the Authority, the Assignment and the Letter pursuant to s 237(1) of the Australian Consumer Law." 9. The applicant seeks an order that these proceedings be transferred from the District Court to this Court on the basis that the District Court may not have jurisdiction to make an order for rescission under the ACL. It was contended that such remedy is an exercise of equitable jurisdiction.

Relevant legislation 1. The Australian Consumer Law ("ACL") is contained in Schedule 2 to the Competition and Consumer Act 2010 (Cth). That Act was previously known as the Trade Practices Act 1974 (Cth) ("TPA"). 2. Section 138B of the Competition and Consumer Act provides: "Conferring jurisdiction on State and Territory Courts (1) Jurisdiction is conferred on the several courts of the States and Territories in relation to any matter arising under this Part or the Australian Consumer Law in respect of which a civil proceeding is instituted by a person other than the Commonwealth Minister or the Commission. (2) However, subsect ion (1) does not apply in relation to a matter arising under: (a) Division 3 of Part 3-1 of the Australian Consumer Law; or (b) Part 3-5 of the Australian Consumer Law. (3) The jurisdiction conferred by subsec tion (1) on the several courts of the States is conferred within the limits of their several jurisdictions, whether those limits are as to locality, subject matter or otherwise. (4) The jurisdiction conferred by subs ection (1) on the several courts of the Territories is conferred to the extent that the Constitution permits (5) This section is not to be taken to enable an inferior court of a State or a Territory to grant a remedy other than a remedy of a kind that the court is able to grant under the law of that State or Territory." 1. Section 237 of the ACL provides: "(1) A court may: (a) on application of a person (the injured person) who has suffered, or is likely to suffer, loss or damage because of the conduct of another person that: (i) was engaged in a contravention of a provision of Chapter 2, 3 or 4; or (ii) constitutes applying or relying on, or purporting to apply or rely on, a term of a contract that has been declared under section 250 to be an unfair term; or (b) on the application of the regulator made on behalf of one or more such injured persons; make such order or orders as the court thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct." 1. Section 243 of the ACL provides: "Without limiting section 237(1), 238(1) or 239(1), the orders that a court may make under any of those sections against a person (the respondent) include all or any of the following: (a) an order declaring the whole or any part of a contract made between the respondent and a person (the injured person) who suffered, or is likely to suffer, the loss or damage referred to in that section, or of a collateral arrangement relating to such a contract: (i) to be void; and (ii) if the court thinks fit--to have been void ab initio or void at all times on and after such date as is specified in the order (which may be a date that is before the date on which the order is made); (b) an order: (i) varying such a contract or arrangement in such manner as is specified in the order; and (ii) if the court thinks fit--declaring the contract or arrangement to have had effect as so varied on and after such date as is specified in the order (which may be a date that is before the date on which the order is made); (c) an order refusing to enforce any or all of the provisions of such a contract or arrangement; (d) …" 1. Section 44(1) of the District Court Act 1973 (NSW) provides: "(1) Subject to this Act, the Court has jurisdiction to hear and dispose of the following actions: (a) any action of a kind: (i) which, if brought in the Supreme Court, would be assigned to the Common Law Division of that Court, and (ii) in which the amount (if any) claimed does not exceed the Court's jurisdictional limit, whether on a balance of account or after an admitted set-off or otherwise, other than an action referred to in paragraph (d) or (e)…" 1. Section 135 of the District Court Act provides: "The Court has the same jurisdiction as the Supreme Court, and may exercise all the powers and authority of the Supreme Court, in any proce edings in which relief is sought under the Fa ir Trading Act 1987 and where the amount of the claim concerned does not exceed the amount for the time being specified in section 44 (1)(a)." 1. Sub-section 140(1) of the CPA provides: "(1) The Supreme Court may, of its own motion or on application by a party to proceedings before the District Court or the Local Court, order that the proceedings, including any cross-claim in the proceedings, be transferred to the Supreme Court." 1. Sub-sections 144(1) – (4) of the CPA provide: "Transfer of proceedings to higher court (1) This section applies to proceedings under Subdivision 2 of Division 8 of Part 3 of the District Court Act 1973. (2) If, during proceedings to which this section applies, the District Court decides that it lacks, or may lack, jurisdiction to hear and dispose of the proceedings, the District Court must order that the proceedings be transferred to the Supreme Court. (3) Proceedings that are transferred to the Supreme Court under subsection (2): (a) are to be continued in the Supreme Court: (i) as if the proceedings had been duly commenced in the Supreme Court on the date on which they were commenced in the District Court, and (ii) as if any cross-claim in the proceedings had been duly made in the Supreme Court on the date on which it was made in the District Court, or (b) if the Supreme Court so orders, are to be remitted to the District Court and continued in the District Court as if they had not been transferred. (4) The District Court has, and may exercise, jurisdiction to hear and dispose of proceedings the subject of an order by the Supreme Court under subsection (3) (b), including such jurisdiction as is necessary to determine any question arising in any such proceedings. …"

The summons 1. The basis for the applicant's contention that the District Court may lack jurisdiction to hear these proceedings, as advanced in its written submissions, is that it is at least arguable that the District Court lacks jurisdiction to determine an order for rescission under s 237(1) of the ACL. In support of this argument the applicant relies upon the decision of White J (as his Honour then was) in Provectus Care Pty Ltd v Epicor Software (Aust) Pty Ltd [2009] NSWSC 1281 ("Provectus"). 2. The applicant contends that the decision in Provectus is authority for the proposition that there is sufficient doubt that rescission pursuant to what was then s 87(1A) of the TPA (and is now s 243 of the ACL) involves equitable jurisdiction to warrant transfer of the proceedings to this Court. It was submitted that, whereas at [6] of that decision White J expressed the view that such a claim would prima facie be within the jurisdiction of the District Court, his Honour went on to determine at [10] that there was sufficient doubt about this issue that the proceedings should be transferred to this Court. 3. The respondent did not accept that the District Court lacked jurisdiction to determine this matter. Mr Carolan submitted that the decision of White J in Provectus was not authority for the proposition advanced by the applicant. Rather, when [6] is read with [8], it can be seen that the pleadings in that matter sought both rescission under the TPA and equitable rescission. 4. It was further submitted that s 243(a)(ii) of the ACL enables the District Court to declare that a contract is void ab initio, which is a remedy resembling rescission that may well be broader than the court's powers at general law. He relied upon the observations of the authors of Meagher, Gummow and Lehane's Equity Doctrines and Remedies (5th ed.) at p 899 in this regard. 5. Following the submissions made by Mr Carolan, Mr Stern submitted that the applicant intends to rely upon equitable rescission in its Cross-Claim in addition to its claim for statutory rescission under the ACL. It was submitted that there is potential for the claim in equitable rescission to operate differently and possibly to capture more than the claim for statutory rescission and that the applicant should not be shut out from that pleading. It was accepted that the case could be pleaded simply by reference to the ACL, but it was submitted that, if the matter were to remain in the District Court, some basis to bring the claim in equitable rescission might arise and the applicant would be prejudiced by not having made a transfer application at this early stage. 6. When I queried why it was that this summons was filed in the Common Law Division rather than the Equity Division, given the terms of s 44(1)(a)(1) of the District Court Act, I was informed that the applicant attempted to do so, but that the Registry considered the nature of the matter was such that it should be commenced in this Division rather than the Equity Division. Nothing turns on that for the purposes of my consideration.

Consideration 1. This application for transfer was made based upon the decision of White J in Provectus. I am satisfied that that decision is not authority for the proposition that the exercise of power under the ACL involves the exercise of equitable jurisdiction. His Honour observed at [6]: "Prima facie it would appear to me that the claim for rescission in reliance on s 87(1A) of the Trade Practices Act is a claim which would be within the jurisdiction of the District Court pursuant to s 86(2) of that Act, and by reason of s 135 of the District Court Act 1973 is not excluded by s 86(3) of the Trade Practices Act. The District Court may exercise jurisdiction in which relief is sought under the Fair Trading Act 1987 (NSW) and is within the monetary jurisdiction of the District Court of $750,000." 1. (It is to be noted that s 87(1A) of the TPA is now to be found in s 243 of the ACL). 2. His Honour went on to further state in Provectus at [8]: "The claim for rescission in the proposed cross-claim appears to me to be a claim for rescission in equity. Although a view may have been formed by at least one judge in the District Court that that Court would have jurisdiction in respect of such a claim, that question might also be controversial. Prima facie it would appear to turn on the question of whether such a claim as is sought in the proposed cross-claim would, as at 2 February 1998, have been assigned to the Common Law Division or to the Equity Division if commenced in this court. (See s 44(1)(a)(1) of the District Court Act 1973 (NSW).)" 1. His Honour stated at [10] that: "I think there is sufficient doubt as to whether the District Court would have jurisdiction in the matter that the proceedings should be transferred to this Court, so that the parties do not suffer if it be ultimately held that the District Court would not have jurisdiction." 1. Although the pleadings in Provectus are not extracted in that judgment, when [6] and [8] are read together I am satisfied that what White J held in that decision is that, although any claim for rescission relying upon the TPA was within the jurisdiction of the District Court, there is some doubt as to whether a claim for equitable rescission would be. 2. It was only when the above reading of the decision in Provectus was suggested to counsel for the applicant during the hearing of this matter that it was submitted for the first time that, in addition to the claim based on the ACL, the applicant also intends to rely upon equitable rescission in its proposed cross-claim. The applicant was unable to articulate at this stage of the proceedings why this case might hinge on a particular aspect of any equitable relief. The basis of the transfer application was thus reduced to a submission that it may be that there is a potential claim for equitable rescission in the future, which might capture different conduct than that under the ACL, and that the applicant should not be prevented from pleading its case in that way. 3. I accept that a party is entitled to plead alternative claims and wait to see the way in which the evidence unfolds, presuming there are material facts that would permit it to do so. Despite this, it seems to me that that there would need to be clear identification of the principle that the applicant seeks to invoke that would require the intervention of equity before proceedings of this nature would be transferred to this Court. The current proposed cross-claim specifically pleads rescission in reliance upon the ACL. There is also a further general claim for "rescission". That term is used in the law in a number of senses; it is available under common law for fraudulent misrepresentation and duress, and in equity for, inter alia, innocent but material misrepresentations. The basis for pleading any rescission in addition to the statutory rescission available under s 243 of the ACL in this matter remains unclear. 4. I am not satisfied that the applicant has established that it is appropriate to transfer these proceedings from the District Court to this Court at this stage. I am satisfied that the District Court has jurisdiction to grant the relief sought under s 243 of the ACL. I am also satisfied that the District Court has jurisdiction to hear any claim of common law rescission. The position in relation to equitable rescission remains unclear, and, as White J pointed out in Provectus, turns on whether a proposed cross-claim based upon such a claim would be assigned to the Common Law Division or the Equity Division (see s 44(1)(a)(1) of the District Court Act). Whatever the true position is in that regard, the fact remains that the applicant's claim for statutory rescission under the ACL is broad and any claim for equitable rescission insufficiently clear at this stage to warrant transfer of the proceedings to this Court. 5. I am not satisfied that the applicant will suffer any prejudice to its case from my refusal of this application. Should the applicant decide at some future date that its case for statutory rescission under the ACL is insufficient to obtain the relief sought and the case is more properly characterised as a claim for equitable rescission, then, to the extent that there is doubt about whether the District Court has jurisdiction to hear that part of the claim, the matter would be transferred to this Court at that time in any event under s 144(2) of the CPA. The Court of Appeal recently considered that provision in Mahommed v Unicomb [2017] NSWCA 65, in which the Court (Ward JA, with whom Macfarlan JA and McDougall J agreed) held (at [52]) that if a District Court judge is of the view that he or she does not have jurisdiction in a particular matter, then he or she is bound to transfer the proceedings to the Supreme Court. Ward JA went on to observe at [52]: "Section 144(2) is mandatory in its terms. Moreover, it encompasses the situation not only where the District Court reaches a decision that it lacks jurisdiction to deal with claims in its equitable jurisdiction but also where there is a doubt as to that matter…" 1. If a District Court judge were to transfer the proceedings to this Court under s 144(2) of the CPA, they could then either continue in this Court or be remitted to the District Court under s 144(3)(b). If the latter course were taken, then the District Court would have the relevant jurisdiction under s 144(4) of the CPA. 2. In making this decision, I have had regard to the amount of the claim, the nature of the claim, the fact that proceedings of this nature are regularly conducted in the District Court, and the overriding purpose of civil litigation in New South Wales as set out in s 56 of the CPA to "facilitate the just, quick and cheap resolution of the real issues in the proceedings." It was submitted on behalf of the applicant that it was consistent with s 56 to transfer the proceedings to this Court now, rather than wait to see whether the issue arises. I am not satisfied that that is so. This application for transfer was brought based upon a contention that the District Court does not have jurisdiction to consider a cross-claim for statutory rescission under the ACL. That argument has not been made good. To transfer the proceedings now because the applicant may also rely upon equitable rescission in the future involves speculation. The possibility of some future claim for equitable rescission is not a proper basis for transfer under s 140(1) of the CPA at this stage.

Orders 1. I make the following orders: 1. The summons is dismissed. 2. The plaintiff is to pay the defendant's costs.

********* 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: 17 April 2018