Abrook, R.L. & Ors v Paterson, G. & Ors [1995] FCA 559

CATCHWORDS

PLEADINGS - application to amend defence - defence containing deemed admissions made in error - pleadings closed in the Supreme Court of South Australia - whether pleadings to be construed by reference to the South Australian Supreme Court rules or the Federal Court Rules - pleadings to be construed against background of rules of court pursuant to which it was brought into being

TRANSFERRED ACTION - action transferred from Supreme Court of South Australia to Federal Court of Australia - pleadings closed in transferor court - whether to be construed by reference to rules of transferor court or transferee court

Supreme Court Rules 1987 (S.A.), R 21.06 and R 46.12

Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth), ss 11(1) and (3)

Federal Court Rules 1979 (Cth), O 9 r 7, O 10 r 1 and O 10A r 5

Trade Practices Act 1974 (Cth)

Commonwealth Constitution

Federal Court of Australia Act 1976 (Cth)

Moorgate Tobacco Company Limited v Phillip Morris Limited and Anor (1980) 145 CLR 457

David Syme & Co Ltd (Receiver and Manager Appointed) v Grey (1992) 38 FCR 303

No. SG 30 of 1995

ROBERT & LORNA ABROOK & ORS v GREG PATERSON & ORS, WILLIAM

JOHN EAST as Administrator of the Family Security Friendly Society and PATRICK FINAN & ORS

Branson J

Adelaide

2 August 1995

IN THE FEDERAL COURT OF AUSTRALIA )

)

SOUTH AUSTRALIA DISTRICT REGISTRY ) No. SG 30 of 1995

)

GENERAL DIVISION )

BETWEEN:

ROBERT & LORNA ABROOK & ORS

Applicants

- and -

GREG PATERSON & ORS.

First to Seventh Respondents

- and -

WILLIAM JOHN EAST as Administrator of the Family Security Friendly Society

Eighth Respondent

- and -

PATRICK FINAN & ORS

Cross-Respondents

REASONS FOR DECISION

CORAM: Branson J

PLACE: Adelaide

DATE: 2 August 1995

Two motions in this matter were listed for hearing together. By the first the applicants seek certain orders clarifying the extent, if any, to which the South Australian Supreme Court Rules ("the Supreme Court Rules") have continuing application in respect of this matter. By Notice of Motion dated 27 July 1995 the first to seventh respondents ("Horwaths") seek leave to amend their defence. The reason why it was considered appropriate for the two motions to be heard together is

explained below.

This action was instituted on 17 November 1993 in the Supreme Court of South Australia ("the Supreme Court"). The matter had a complicated interlocutory history in the Supreme Court. It is necessary to refer to part only of that history.

On 4 April 1995 the applicants were granted leave in the Supreme Court to file and serve a further amended more explicit statement of claim ("the statement of claim"). They did so on 5 April 1995.

On 24 April 1995 Prior J of the Supreme Court heard an application made on behalf of Horwaths that this action be transferred to this Court pursuant to the provisions of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (S.A.). His Honour agreed to transfer the action. The sealed order transferring the proceedings to this Court is dated 24 April 1995. I have been advised by counsel, however, that there was some discussion later than 24 April 1995 concerning the terms of the order. The Supreme Court file reveals that the order was apparently sealed on 18 May 1995.

Horwaths filed in the Supreme Court on 27 April 1995 a further amended more explicit defence ("the defence") to the statement of claim. A reply to the defence was filed on 4 May 1995 also in the Supreme Court. It has not been suggested in argument that pleadings ought not to have been filed in the Supreme Court after 24 April 1995. No doubt they were so filed as his
Honour's order had not at the relevant times been sealed, and thus the action had not in fact been transferred to this Court. Each of the pleadings is in a form appropriate for filing in the Supreme Court - i.e. each of them has an appropriate Supreme Court heading and not a Federal Court heading. As a consequence, and notwithstanding the date of the transfer order of Prior J, the pleadings in this matter as a matter of fact closed in the Supreme Court. It is perhaps, regrettable in the circumstances, that the sealed order of Prior J bears the date 24 April, 1995.

The principle issue on both motions before me is the proper construction of the pleadings in this matter, and in particular the proper construction of the defence filed on behalf of Horwaths. It is for this reason that the two motions were heard together. On the construction of the defence for which the applicants contend, Horwaths have made significant admissions by their defence beyond those apparently intended by the drafter of the pleading. On behalf of Horwaths it is contended that the defence is not to be construed in this Court as containing such admissions. In the alternative, leave to withdraw such admissions is sought. Leave is sought, in any event, to make certain amendments to the statement of claim.

The principle argument put on behalf of the applicants on the issue of the construction of the pleadings is that the true impact of such pleadings must be determined by reference to the Supreme Court Rules pursuant to which they were filed. For present purposes the significance of this argument derives from R46.12 of the Supreme Court Rules. So far as is here relevant R46.12 provides as follows:-

"A party in his or her defence or any subsequent pleading:

(1) Shall not plead a mere joinder of issue on any question of fact.

(2) Shall specifically admit or deny every allegation of fact (including particulars) in the pleading to which the defence or subsequent pleading relates and allegations which are not specifically denied shall be deemed to be admitted.

(3) May state that the party does not know and therefore cannot admit a particular fact alleged, in which case the particular fact shall be deemed to be denied." (emphasis added)

Paragraph 2 of the defence is in the following terms:-

"The first to seventh defendants do not admit the allegations in paragraphs 3.5, 4, 5, 7-26, 30-32, 35-53, 76-82, 84-93 or 141-3 of the statement of claim."

By reason of R46.12(2) of the Supreme Court Rules the effect of paragraph 2 of the defence in the Supreme Court was to admit the paragraphs therein referred to. That the applicants so understood paragraph 2 of the defence is made clear by paragraph 1 of their reply. So far as is here relevant, they pleaded in paragraph 1 of their reply:-

"As to paragraphs 1, 2 ..... and 25(a) of the ..... defence ..... the plaintiffs accept the admissions (pursuant to Supreme Court rule 46.12 or otherwise) by the 1st to 7th defendants .....".

By reason of some apparent problem of communication between the solicitors on the record for Horwaths in the Supreme Court proceedings and their Queensland principals (Horwaths' solicitors in this Court) it seems that the terms of the reply were not communicated to Horwaths' Queensland legal advisers who were in fact responsible for drafting the pleadings in the Supreme Court.

The principal argument put on behalf of the Horwaths is that notwithstanding that the pleadings in this matter closed in the Supreme Court, s11(3) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) ("the Cross-Vesting Act") requires that, subject to any order of this Court, such pleadings are now to be construed as though they had been filed pursuant to the Federal Court Rules. No relevant order has been made by this Court in this case. Under the Federal Court Rules paragraph 2 of the defence would not be deemed to contain admissions.

Section 11(3) of the Cross-Vesting Act is in the following terms:-

"Where a proceeding is transferred or removed to a court (in this subsection referred to as the "transferee court") from another court (in this subsection referred to as the "transferor court"), the transferee court shall deal with the proceeding as if, subject to any order of the transferee court, the steps that had been taken for the purposes of the
proceeding in the transferor court (including the making of an order), or similar steps, had been taken in the transferee court."

On the argument advanced on behalf of Horwaths, although the effect of paragraph 2 of the defence in this matter was, whilst the action remained in the Supreme Court, to make a number of admissions, upon the action being transferred to this Court such admissions ceased: thereafter the defence was to be construed as a pleading drafted by reference to the Federal Court Rules.

Taken to its logical extreme this argument could have dramatic consequences. For example, under the Supreme Court Rules the filing of an appearance does not constitute a submission to the jurisdiction (R21.06). Under the Federal Court Rules an unqualified appearance does amount to a submission to the jurisdiction (O9 r7). In my view it cannot have been the intention of the drafter of s11(3) of the Cross-Vesting Act that an act not amounting to a submission to the jurisdiction of the transferor court would, merely by reason of the transfer of the proceedings, become an act of submission to the jurisdiction of the transferee court.

There seems to be no authority which provides guidance as to the true effect of s11(3) of the Cross-Vesting Act.

In my view the intended effect of s11(3) of the Cross-Vesting Act is more modest than the effect for which Horwaths contend. It is concerned with steps taken for the purpose of the proceeding in the transferor court. By its terms such steps include the making of an order. It has the effect that an order made for the purposes of the proceeding in the transferor court is, subject to any order of the transferee court, to be treated as if the order had been made in the transferee court. The intention of s11(3) in this regard, in my view, is to obviate the need to re-obtain in the transferee court orders previously obtained in the transferor court. It also allows for the enforcement by the transferee court of such orders. It does not, however, in my view, mean that such orders are to be given the meaning that by their terms they would bear if they had been made in the transferee court if that is not the meaning that they bore upon being made by the transferor court. Nor, in my view does it mean that their validity to be determined by reference to the ordinary powers of the transferee court: the validity of such orders must be measured against the powers of the transferor court at the time that they were made. That is, in my view, an order validly made by the transferor court does not become invalid by reason of s11(3) of the Cross-Vesting Act by reason only of the transfer of the action to a court which could not itself have made the order.

Pleadings are, in my view, steps taken for the purpose of proceedings within the meaning of s11(3) of the Cross-Vesting Act. Each of the Supreme Court Rules and the Federal Court Rules provides for the filing and serving of pleadings. Ordinarily such pleadings are a statement of claim, a defence and, in many but not all cases, a reply. The purpose of such pleadings is to define the issues between the parties. The effect of s11(3) of the Cross-Vesting Act, in my view, is to obviate the necessity for such pleadings steps as have been taken in the transferor court to be retaken in the transferee court. So, in the circumstances of this case, pleadings having closed in the Supreme Court, s11(3) obviates the need for pleadings to be filed in this Court. In my view, however, s11(3) is not concerned with the issue of how such pleadings are properly to be construed.

In my view a pleading must necessarily be construed against the background of the rules of court pursuant to which it was brought into being. So, in the circumstances of this case, this Court is directed by s11(3) of the Cross-Vesting Act to deal with this action as if the step of filing a defence taken on behalf of Horwaths for the purpose of the proceeding in the Supreme Court had been taken in this Court. However, the identification of the matters placed in issue between the applicants and Horwaths upon that step being taken, in my view, can only be undertaken by resorting to the rules of construction which governed that pleading when it was filed. The defence purports to be Supreme Court pleadings: it was filed in the Supreme Court pursuant to the Supreme Court Rules. Its import, in my view, is to be determined by reference to the Supreme Court Rules. As a consequence, in the absence of a contrary order or direction of this Court, paragraph 2 of the defence is to be deemed to contain admissions (R46.12 of the Supreme Court Rules).

Neither the applicants nor Horwaths have sought an order from this Court that this Court not deal with the proceeding as if the pleading steps taken in the Supreme Court had been taken in this Court. With the hearing of the action due to commence in less than a week it would now be inappropriate to make such an order.

It seems to me, and counsel did not suggest to the contrary, that O10 r1 of the Federal Court Rules is sufficiently wide in its terms to permit the making of a direction that for the purposes of identifying the issues between the applicants and Horwaths in these proceedings the defence should be construed as though it had been filed pursuant to the Federal Court Rules.

However, in the circumstance that I am satisfied that the defence contains deemed admissions made in error, I consider that the better course is for me to grant to Horwaths leave to amend their defence where there is a genuine dispute as to the facts currently deemed to be admitted.

It is not strictly necessary for me to deal with the alternative argument put on behalf of the applicants based upon the terms of s11(1) of the Cross-Vesting Act. Nonetheless I consider it appropriate to state my attitude with respect to it.

Section 11(1) provides as follows:-

"Where it appears to a court that the court will, or will be likely to, in determining a matter for determination in a proceeding, be exercising jurisdiction conferred by this Act or by a law of a State relating to cross-vesting of jurisdiction:-

(a) subject to paragraphs (b) and (c), the court shall, in determining that matter, apply the law in force in the State or Territory in which the court is sitting (including choice of law rules);

(b) subject to paragraph (c), if that matter is a right of action arising under a written law of another State or Territory, the court shall, in determining that matter, apply the written and unwritten law of that other State or Territory; and

(c) the rules of evidence and procedure to be applied in dealing with that matter shall be such as the court considers appropriate in the circumstances, being rules that are applied in a superior court in Australia or an external Territory."

It was argued on behalf of the applicants that if the Court were against them on their principal argument, it could nonetheless determine that it was appropriate in the circumstances for the rules of evidence and procedure applied by the Supreme Court to be applied in this matter.

I do not consider that s11(1) of the Cross-Vesting Act has any application to this case. In my view there is no reason to conclude that in this matter this Court will, or will be likely to, be exercising jurisdiction conferred by the Cross-Vesting Act or by a law of a State relating to cross-vesting of jurisdiction. The statement of claim in this matter seeks relief based upon, amongst other things, the provisions of the Trade Practices Act 1974 (Cth). The authority of this Court to adjudicate upon this dispute derives from the Commonwealth Constitution, the Federal Court of Australia Act 1976 (Cth) and the Trade Practices Act 1974 (Cth). Such authority extends to those parts of the proceeding which arise under the common law or state jurisdiction provided that they arise out of the "same substratum of facts" (Moorgate Tobacco Company Limited v Phillip Morris Limited and Anor (1980) 145 CLR 457). In my view this Court has "accrued" jurisdiction to deal with this proceeding in its entirety.

Gummow J stated in David Syme & Co Ltd (Receiver and Manager Appointed) v Grey (1992) 38 FCR 303 at 330 that s11 of the Cross-Vesting Act "should not be read as operating where, in truth, the court is exercising not cross-vested but federal jurisdiction, so that s79 of the Judiciary Act "picks up" a choice of law rule which may differ from that supplied by s11(1)(b)." I do not understand his Honour's remarks to be intended to extend to s11(3) of the Cross-Vesting Act which does not include the same opening words of limitation as s11(1). However, they were plainly intended to apply to s11(1). I agree with his Honour's statement as so read. In my view, s11(1) of the Cross-Vesting Act has no application in respect of this proceeding.

As this matter does not involve jurisdiction arising under a cross-vesting law, I am also of the view that O10A r5 of the Federal Court Rules, to which reference was made during argument, has no application in this matter.

I will hear counsel further as to the terms in which Horwaths

are to have leave to amend their defence and as to the formal order, if any, to be made on the motion of the applicants.

I certify that this and the preceding pages are a true copy of the Reasons for Decision of Justice Branson.

Associate:

Dated:

Counsel for the Applicants : Mr M Blue

Solicitors for the Applicants : Fisher Jeffries

Counsel for the First to Seventh : Mr J Bond

Respondents

Solicitors for the First to Seventh : Clayton Utz

Respondents

Hearing Date : 27 July 1995

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