FEDERAL COURT OF AUSTRALIA

Cook v Pasminco Ltd [2000] FCA 677

PRACTICE AND PROCEDURE – Jurisdiction of Federal Court – claims of negligence and nuisance arising out of emission of allegedly noxious fumes which allegedly injured health of applicants – accrued jurisdiction – claims under Trade Practices Act 1974 (Cth) ss 75AD and 75AG that the emissions were “goods” “manufactured” by respondents and “supplied” by them “in trade or commerce” and that had a “defect”.

WORDS AND PHRASES – “goods” – “manufactured” – “in trade or commerce” – “supply” – “defect”.

Trade Practices Act 1974 (Cth) ss 75 AC, 75AD, 75AG

Re Wakim; ex parte McNally (1999) 163 ALR 270, cited

Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457, applied

Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212, applied

Fitzroy Motors Pty Ltd v Hyundai Automotive Distributors Australia Pty Ltd (1995) 133 ALR 445, followed

WG & B Manufacturing Pty Ltd v Tesla Farad Pty Ltd [1999] FCA 1776, followed

Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594, applied

ROSLYN GAY COOK & ORS v PASMINCO LIMITED & ORS

N 132 OF 2000

LINDGREN J

12 MAY 2000

SYDNEY

THE COURT ORDERS THAT:

1.         The application be dismissed as incompetent.

2.         The proceeding be stood over to a date to be fixed for the hearing of submissions on costs.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

(ex tempore)

1                     The applicants sue the respondents arising out of alleged noxious emissions from their plants at Cockle Creek, near Newcastle, New South Wales, and Port Pirie in South Australia.  All four applicants allege injury to their health.  There is also a case made based on noise and vibrations but this is not of immediate concern. 

2                     The first applicant and her daughter, the second applicant, who is seven years old, live at Cockle Creek.  The first applicant bought a house there in or about November 1990.  The second applicant sues by her next friend, the first applicant. 

3                     The third applicant and the fourth applicant, who is eight years old, live at Port Pirie.  The fourth applicant sues by his next friend the third applicant. 

4                     The second and third respondents are wholly owned subsidiaries of the first respondent.  I need not distinguish between the three respondents. 

5                     The applicants seek an injunction and damages. 

6                     The action is brought as a representative proceeding under Part IVA of the Federal Court of Australia Act 1976 (Cth) but I need say no more of this aspect. 

7                     The applicants plead causes of action in negligence and nuisance and two statutory causes of action under the Trade Practices Act 1974 (Cth) (“the TP Act”).  Paragraphs 5 and 6 of the amended statement of claim (“the Pleading”) are as follows:

“5.       At all material times in the course of its business the Respondents wrongfully caused and permitted emissions of quantities of offensive, noxious and unwholesome smoke, fumes, vapours and gases, lead, sulphur dioxide and other pollutants (the ‘emissions’) from the lands [the lands refer to the two plants].

6.                  The emissions were toxic to humans.”

8                     The claims in negligence and nuisance are then pleaded in paras 7 to 12 of the Pleading.

9                     The claims under the TP Act are made under ss 75AD and 75AG of that Act and are pleaded in paras 13 to 19 of the Pleading as follows:

“Claim under the Trade Practices Act - section 75AD. 

13.       Further and in the alternative, the emissions were goods manufactured by the Respondents and supplied by them to the Applicants.

14.       The goods had a defect being a deleterious effect on  human health.

15.       As a result of the defect the Applicants suffered injuries.

Claim under the Trade Practices Act - section 75AG.

16.       Further and in the alternative, the emissions were goods manufactured by the Respondents and supplied by them to the Applicants.

17.              The goods had a defect being an adverse effect on the safety of land, buildings or fixtures.

18.       As a result of the defect land, buildings or fixtures acquired by the First Applicant were damaged.

19.       The First Applicant used the land, buildings or fixtures for private use and suffered a loss as a result of the defect.”

10                  The respondents complain that the claims made under the TP Act cannot succeed and should not be permitted to proceed to trial, and that on that basis this Court lacks jurisdiction to entertain the common law causes of action in negligence and nuisance.  Accordingly, on 21 March 2000, following service of the originating process and before the first directions hearing, the respondents filed a notice of conditional appearance and a notice of motion asking that the application be set aside.

11                  In Re Wakim; ex parte McNally (1999) 163 ALR 270, decided by the High Court on 17 June 1999, that Court held subs 4(1) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 of the States, including New South Wales and South Australia,to be invalid.  That subsection purported to invest this Court with jurisdiction in respect of “State matters”.  The expression “State matters” was defined so as to include, relevantly, claims in negligence and nuisance which arise under the common law of the States.

12                  In the light of Wakim, it is clear that the applicants cannot rely on the cross-vesting legislationto give this Court jurisdiction to entertain their claims in negligence and nuisance.  But are those claims within the “accrued jurisdiction” of this Court?  They are if they form part of the one “matter” or “single juridical controversy” as federal claims which are within the Court’s jurisdiction, but not if those federal claims are themselves “colourable” and “not genuine”: Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 at 498-499 (Gibbs J); Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212 (FC) at 219; Fitzroy Motors Pty Ltd v Hyundai Automotive Distributors Australia Pty Ltd (1995) 133 ALR 445 (IRCA/Wilcox CJ) at 450; WG & B Manufacturing Pty Ltd v Tesla Farad Pty Ltd [1999] FCA 1776 (unreported, Finkelstein J, 30 November 1999) at [11] and see Lane’s Commentary on the Australian Constitution (1997), pp 516-517.

13                  Apparently there is no dispute that this Court has jurisdiction in respect of claims made under ss 75AD and 75AG of the TP Act- see ss 86(1) and 75AS of that Act.  Moreover, senior counsel for the respondents indicated that so far as his instructions went at that time, it would not be the respondents’ contention that if the claims under the TP Act survived the present challenge, nonetheless the two common law claims lay outside the Court’s accrued jurisdiction.

14                  Are the federal claims here “genuine” and “non-colourable” or are they fabricated in order to bring the common law claims within the Court’s jurisdiction?  I would conclude that they are not genuine and are colourable and fabricated if they are obviously doomed to fail, at least unless there was evidence to the contrary.  There is no evidence to the contrary here.

15                  By their amended notice of motion filed on 9 May 2000 the respondents seek the following principal order:

“That paragraphs 13 to 19 of the Amended Statement of Claim be struck out pursuant to Order 11 Rule 16 or Order 20 Rule 2(1) of the Rules of Court, and that the Amended Application be set aside pursuant to Order 9 Rule 7(1)(a) or the proceeding be dismissed as incompetent pursuant to Order 20 Rule 20(1) of the Rules of Court.”

16                  I do not find it necessary to discuss the terms of the rules referred to.  There has been no issue but that the only basis on which the Court would have jurisdiction to hear and determine their claims based on negligence and nuisance is the Court’s accrued jurisdiction.  The question is whether the claims under the TP Act are “doomed to fail”, “quite hopeless” or “clearly untenable”, because if they are, I will conclude that they are “colourable”, “not genuine” and “fabricated” and, therefore, that the accrued jurisdiction is not attracted.

17                  Sometimes evidence led on the final hearing may falsify an initial impression that a case is hopeless.  Counsel for the applicants says that this case should be allowed to proceed to final hearing and that the question of jurisdiction should be determined in the light of the evidence then adduced.  He submits that the claims under ss 75AD and 75AG are genuine.

18                  Section 75AD is as follows:

“If:

(a)               a corporation, in trade or commerce, supplies goods manufactured by it; and

(b)                they have a defect; and

(c)                because of the defect, an individual suffers injuries;

then:

(d)               the corporation is liable to compensate the individual for the amount of the individual’s loss suffered as a result of the injuries; and

(e)                the individual may recover that amount by action against the corporation; and

(f)                 ……………………………………………………………………….”

                        (emphasis mine).

19                  Section 75AG is generally similar.  It commences as follows:

“If:

(a)               a corporation, in trade or commerce, supplies goods manufactured by it; and

(b)               they have a defect; and

(c)                because of the defect, land, buildings, or fixtures, ordinarily acquired for private use are destroyed or damaged; and

(d)               a person who:

(i)                 so used; or

(ii)               intended to so use;

                        the land, buildings or fixtures, suffers loss as a result of the destruction or damage; …” (emphasis mine).

20                  For the purposes of the motion the same issues arise under both sections and can be stated as follows:

(1)        Could the emissions arguably be found to constitute “goods”?

(2)        Could the emissions arguably be found to have been “manufactured” by the respondents?

(3)        Could the emissions arguably be found to have been “supplied” by the respondents?

(4)        If so, could the emissions arguably be found to have been supplied by the respondents “in trade or commerce”?

(5)        Could the emissions arguably be found to have had a “defect”?

21                  If I should answer any one of those five questions “No”, the applicants’ case could not succeed so long as it remains in this Court and the respondents would be entitled to have the proceeding summarily disposed of. 

22                  I have come to a clear view that the answer to each of the third, fourth and fifth questions is “No” and I do not find it necessary to answer the first and second questions.

23                  I go first to the notion of “supply”.  Subsection 4(1) of the TP Act provides as follows:

“Supply”, when used as a verb, includes:

(a)     in relation to goods - supply (including re-supply) by way of sale, exchange, lease, hire or hire purchase; and

(b)     in relation to services - provide, grant or confer; ...”

24                  It is true, as counsel for the applicants points out, that the definition is an inclusory one but it seems to me that an essential element of supply is that it is a bilateral and consensual process which has no application to a case such as the present one where the applicants’ case is that the emissions were inflicted upon them without their consent.

25                  The notion of “supply” in the TP Act is the counterpart of “acquire”, which is defined in subs 4(1) in these terms:

“‘Acquire’ includes:

(a)   in relation to goods - acquire by way of purchase, exchange or taking on lease, on hire or on hire-purchase; and

(b)   in relation to services - accept; ...”.

26                  The definitions of “supply” and “acquire” are symmetrical: a supply of goods must occur as part of a bilateral “transaction” or “dealing” under which the other party acquires them.  Neither the applicants nor anyone else acquired the emissions.

27                  No amount of evidence on the final hearing can alter the fact that the emissions did not move from the respondents to the applicants or anyone else as part of a consensual transaction or dealing.  Accordingly, the applicants will not be able to prove that the respondents “supplied” the emissions.

28                  Secondly, the supply must have occurred “in trade or commerce”.  The most recent authoritative exposition of this notion in the TP Act is to be found in Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594.  The High Court there held that the expression as it appears in s 52 of the Act does not refer merely to the broad field in which a corporation’s general activities of a trading or commercial nature are carried on.  Rather, the Court held that the misleading or deceptive conduct to which s 52 refers must occur as an aspect or element of activities or transactions which themselves have a trading or commercial character.

29                  Counsel for the applicants correctly points out that the heading to Part V of the TP Act, “Consumer Protection”, and the heading to Division 1 of that Part, “Unfair Practices”, to both of which reference was made in Concrete Constructions, do not apply in the present case because, unlike s 52, ss 75AD and 75AG do not occur in Division 1 of Part V but in Part VA.  I do not think, however, that this renders what the High Court said inapplicable to the present circumstances.  Indeed, one might well think that it applies all the more obviously, since ss 75AD and 75AG speak of supplying goods in trade or commerce – a narrower concept than that of engaging in misleading or deceptive conduct in trade or commerce.  In any event, their Honours said that it was the word “in” in the expression “in trade or commerce” that caused the composite expression to restrict the reference to “the central conception” of trade or commerce.

30                  In my view, therefore, it is clear that the emissions were not supplied “in trade or commerce” and that no evidence on the final hearing can alter this conclusion.

31                  The third matter concerns the word “defect” in ss 75AD and 75AG.  According to the sections, it must be because of a “defect” which the goods have that the individual suffers injury or the land, buildings or fixtures are destroyed or damaged.  Subsection 75AC(1) provides: 

“For the purposes of this Part [Part VA in which ss 75AD and 75AG occur], goods have a defect if their safety is not such as persons generally are entitled to expect.”

32                  That is, in order to succeed the applicants would have to show that the emissions were not as safe, because of a defect in them, as persons generally were entitled to expect them to be.  But according to the Pleading the emissions were unsafe because they were true to their nature, not because they had a defect.  The Pleading describes them as “offensive, noxious and unwholesome smoke, fumes, vapours and gases, lead, sulphur dioxide and other pollutants”.  As I suggested in the course of argument, it is a poison that does not do its deadly work that is defective rather than one that does.  No evidence on the final hearing could alter the conclusion that it is not because of a defect in the emissions that they were not as safe as persons generally were entitled to expect. 

33                  I have also considered the respondents’ submissions in relation to the word “goods” and “manufactured”.  While I think that there is much to be said for those submissions, I refrain from dealing with them.

34                  From the applicants’ viewpoint it will be thought unfortunate that they do not have access to the procedure which they have chosen, namely, that of the Representative Proceeding which is provided for in Part IVA of the Federal Court of Australia Act 1976  (Cth) and Order 73 of this Court’s rules.  Applying legal principle, however, I think it clear that the applicants’ case is doomed to fail so long as it remains in this Court.  It is better that this be determined to be the case now rather than later when legal costs have increased. 

35                  For the above reasons, the Court orders that the application be dismissed as incompetent.

36                  The respondents have asked that orders as to costs not be made at this stage.  The proceeding will be stood over to a date to be fixed for the hearing of submissions on costs.

Associate:

Dated:              23 May 2000