FEDERAL COURT OF AUSTRALIA

Computer Accounting & Tax Pty Ltd v Professional Services of Australia Pty Ltd [2005] FCA 1361

PRACTICE AND PROCEDURE – transfer of proceedings – application for transfer of proceedings from State Court to Federal Court – misleading or deceptive conduct – Part V Trade Practices Act - sale of property – alleged misleading and deceptive representations – well-established jurisdiction in State and Federal Courts – no particular reason shown for transfer – application for transfer refused.

Trade Practices Act 1974 (Cth) s 86A(4)

COMPUTER ACCOUNTING AND TAX PTY LTD v PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD and MARTIN PAUL BANNING

WAD 225 OF 2005

FRENCH J

22 SEPTEMBER 2005

PERTH

THE COURT ORDERS THAT:

1. The application for a transfer of the proceedings to the Federal Court is refused.

2. The applicant is to pay the respondents’ costs of the application fixed at $900.

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

REASONS FOR JUDGMENT

1                     This is an application brought under s 86A(4) of the Trade Practices Act 1974 (Cth) (the Act) for the transfer of proceedings presently pending in the Magistrates Court of Western Australia to the Federal Court.

2                     The background to the matter is set out in the affidavit of Angela Cecilia Frigger, who is a director of the applicant company, Computer Accounting and Tax Pty Ltd (Computer Accounting). According to her affidavit, in March 2003 Computer Accounting made an offer to Professional Services of Australia Pty Ltd (Professional Services) to purchase a commercial property at 269 South Western Highway, Armadale. The offer, it is said, was accepted by Martin Paul Banning on behalf of Professional Services. It is alleged that before Computer Accounting made the offer Mr Banning had made representations to Ms Frigger in the following terms:

1. The property had two businesses operating on it, namely a modern, privately leased, BP service station/roadhouse and a separate mechanical workshop.

2. There were two secure leases in place at a commencing annual rental on 1 July 2001 of $40,000 and $20,000, respectively, which had eight years and three years, respectively, to run.

3. Thebusinesses of the BP service station and the workshop were extremely successful.

4. Both tenants had always paid their rent and variable outgoings, in full and on time.

5. The City of Armadale had indicated that it would approve the building of a liquor store on the vacant 2000 square metre portion of the property; and

6. Mr Banning was a former real estate agent who had voluntarily given up his licence in order to develop and market, with his partners, a medical product in the USA.

3                     According to Ms Frigger, following settlement of the purchase of the property on 1 May 2003, a number of events occurred:

1. Professional Services sued the proprietor of the BP service station for outstanding variable outgoings and entered into an arrangement with the mechanical workshop lessee to pay outstanding variable outgoings.

2. The mechanical workshop lessee defaulted in the payment of rent to Computer Accounting on 25 June 2003 by reducing his monthly rent to $1200.

3. The proprietor of the BP service station, Northdown, abandoned the premises on 9 July 2003 and Ms Frigger says she was informed on 10 July 2003 by the Retail Business Manager of BP Australia, which supplied fuel to Northdown, that Northdown then owed BP about $100,000.

4. Mr Penrose, the mechanical workshop lessee, had sworn two affidavits, which are exhibited to the affidavit of Ms Frigger.

5. Northdown threatened legal action against Computer Accounting in a letter dated 21 July 2003, claiming losses resulting from the failure of Professional Services to build promised extensions to their leased premises.

6. Computer Accounting terminated the leases of Northdown and of Mr Penrose on 30 July 2003 and 1 October 2004 respectively.

4                     Ms Frigger says that on the basis of those events she believes that Professional Services and Mr Banning engaged in misleading and deceptive conduct by failing to inform her and, through her, Computer Accounting, of the following matters:

1. That Mr Banning was aware that Mr Penrose was struggling to pay his rent and outgoings since the inception of therelevant lease and had assisted Mr Penrose in paying the rent by having Mr Banning's car serviced by him and swapping cheques on three separate occasions.

2. That Professional Services and Mr Banning had an ongoing dispute with Northdown regarding Professional Services' failure to erect extensions to the leased premises which had been promised during lease negotiations and approved by the council of the City of Armadale.

3. That Northdown had failed to sell its business operated at the property in December 2001 because of an ongoing dispute with Professional Services concerning the extensions.

4. That Professional Services, through Mr Banning, hadentered into a verbal agreement with Mr Penrose to sell his business in March or April 2003 for $40,000; and

5. That Mr Banning had told Mr Penrose not to tell Computer Accounting about the possible sale of hisbusiness as it might affect the sale of the property to Computer Accounting.

5                     Ms Frigger says that in September 2003 her company entered into a lease with Go Add Resources (Go Add) for a period of five years at a rental of $44,400 per annum for the BP service station site. It could not find a new tenant for the motor mechanic shop and Mr Penrose continued to pay a reduced rent of $1200 per month from 1 July 2003 until 1 September 2004. The motor mechanic shop had been vacant since then. In September 2003, Computer Accounting began proceedings in the Perth Local Court, now known as the Perth Magistrates Court, in matter 17065 of 2003 against Professional Services and Mr Banning. The claim was for the loss of rent from Mr Penrose.

6                     Ms Frigger says that she attended two pre-trial conferences in those proceedings and that the respondents in those proceedings failed to comply with orders for filing and service of particulars of defence and discovery. On 25 April 2004, prior to the trial of the proceedings, she filed submissions that the claim would include and alternatively be based on the difference between the purchase price of $665,000 and the true market value of the property at 13 March 2003. This true market value is said to be based upon a capitalisation rate reflecting the true value of tenants, Northdown and Penrose. There were objections to the submissions and it appears that at the proceedings Ms Frigger and the company were unrepresented.

7                     Ms Frigger called Mr Penrose as Computer Accounting's first witness without seeking leave of the Court. Magistrate Whitely advised her that Computer Accounting should seek legal representation so as not to lose a cause of action or case that seemed to have merit. She says that the learned magistrate stated that the trial would be abandoned for two reasons, although it seems that in effect he made two orders which necessitated the abandonment of the trial.

8                     The first order required Computer Accounting to file an amended statement of claim to include the additional or alternative claim based on the difference between the purchase price and the market value of the property. The second required that a new defence be filed to respond to the amended statement of claim. The cost of the adjournment and the new pleadings were in the cause. The order to file an amended defence was apparently not complied with and judgment in default was entered by Computer Accounting against Professional Services and Mr Banning in August 2004. That judgment was set aside by consent in October 2004. The consent orders also provided for the filing of amended pleadings.

9                     In October 2004, Ms Frigger retained the services of solicitors to conduct the proceedings. She instructed them to prepare an amended statement of claim and to apply for transfer of the proceedings to this Court on the grounds that her claimed loss exceeded the jurisdictional limit of the Local Court and on the basis that it arose under Part V of the Trade Practices Act 1974 (Cth) (the Act). I understand that an application is still pending in the District Court for transfer of the proceedings from the Local Court to that Court.

10                  To the extent that that application has been opposed, I have been informed from the Bar Table that it is opposed on the basis that the subject mattervalue of the claim, is truly, on the face of the papers, within the jurisdiction of the Local Court. However, according to Ms Frigger, she retained the services of a licensed valuer in February 2005 to provide a sworn valuation of the property as at the date of purchase. A copy is exhibited to his affidavit which states that the true market value of the property on 13 March 2003 was $392,000. Based upon that advice she asserts that Computer Accounting's loss in respect of the purchase of the property is in the order of $273,000, that is, outside the jurisdiction of the Magistrates Court but well within the jurisdiction of the District Court.

11                  She says that discovery and pre-trial conferences have already been completed in the proceedings and a draft of the proposed statement of claim of Computer Accounting has been at least partly prepared and that a draft was exhibited to her affidavit. She explains in her affidavit that the draft is incomplete and is currently with Mr Aristei for settling. In addition, she is in the process of procuring her file from her former solicitors to determine whether there are documents on that file relevant to the settling of the statement of claim and which, in addition, ought to be referred to in the statement of claim.

12                  The statement of claim as presently proposed essentially sets out fairly standard form pleadings of representations made by Professional Services relating to the nature of the businesses and the tenants in connection with the property which was purchased by Computer Accounting. The various representations are said to have been misleading or deceptive or likely to mislead or deceive, in contravention of s 52 of the Act. There is an alternative claim based on s 10 of the Fair Trading Act 1987 (WA), which replicates the provisions of s 52.

13                  There is a claim for recovery of damages reflected in the difference between the true market value and the amount paid for the property by Computer Accounting. There also appears to be some claimfor rent loss and prospective loss of rent, although there might be a question as to whether that is actually subsumed in the market value difference. The application for transfer from the Local Court is opposed, inter alia, upon the basis that there is an application pending in the District Court and that that matter ought to be resolved, albeit it is said that the applicant here would consent to a discontinuance of that application.

14                  The application is made under s 86A(4) of the Act which provides:

‘Where:

(a) a proceeding is pending in a court (other than the Supreme Court) of a State or Territory; and

(b) a matter for determination in the proceeding arose under Part IVA or Division 1, 1A or 1AA of Part V,

the court shall, if directed to do so by the Federal Court, transfer to the Federal Court the matter referred to in paragraph (b) and such other matters for determination in the proceeding the determination of which would, apart from any law of a State or of the Northern Territory relating to cross-vesting of jurisdiction, be within the jurisdiction of the Federal Court as the Federal Court determines.’

15                  There is no doubt that there is a proceeding pending in a State Court, that is to say, the Local Court or the Magistrates Court as it is now known. There is no doubt either on the face of the claim, as it is proposed to pursue it, that it involves issues of matters arising under the Act and, therefore, matters within the jurisdiction of the Federal Court. However, there are two observations that I would make about such applications under s 86A(4).

16                  First of all it is, I think, not a matter of routine or to be routinely contemplated that this Court should direct a court of the State to transfer a matter into this Court for determination where the State Court has the relevant concurrent jurisdiction. There needs to be some particular reason or justification, in my opinion, for that to happen. Not least because of the desirability of maintaining comity between courts and respecting the authority and competence of the State court system.

17                  The second, related to the first consideration, is that this is a proceeding under Part V of the Act and in particular under s 52. If it were, for example, a proceeding under Part IVA perhaps involving the application of specific provisions relating to unconscionable conduct which are still novel in their development, there would be a stronger case for transfer. However, Part V of the Act has been replicated since 1987 in similar provisions of the Fair Trading Act. It is a well-established part of the State Courts’ jurisdiction, that is to say, the invested federal jurisdiction of the State Courts.

18                  There can be no question, in my opinion, of the State Courts and, in particular, the District Court, lacking competence to deal with such matters. There has been some suggestion that the Magistrates Court does not deal with such matters day to day and it may be that that is so, although having regard to the congruency between questions of misleading or deceptive conduct and issues of negligent misrepresentation and/or deceit, I would be surprised if that were true as a general proposition. I have assertion from the Bar Table, but no direct evidence on the point. Notwithstanding that, the subject matter value now asserted is outside the non-consensual jurisdiction of the Magistrates Court. It is a matter which is well within the jurisdiction of the District Court, andis well within the now well-established jurisdiction of the District Court in matters arising under Part V of the Act.

19                  I do not see that an objection to the jurisdiction of the District Court could lightlybe taken simply upon the basis that the respondent contests the quantum of the damages. If the damages claimed exceed the jurisdiction of the Magistrates Court and fall within the jurisdiction of the District Court, then it seems unlikely that there could be any valid basis for objection to that Court's jurisdiction. I have regard also to the other point that was made by Mr Blythe, on behalf of the applicant, and that is that listing times for trials in this Court and the District Court differ.

20                  I understand that where a matter is ready for trial it can be brought on for trial, in the District Court, within aperiod of eight or nine months under present conditions and perhaps less. Mr Blyth makes some reference to the difficulties of moving through the pre-trial process. I am sure that is a matter which can be at least partly addressed by the determination and efficiency of the parties. The quantum of the matter is, it appears, of the order of $300,000. I do not think that this is a case in which the Court should exercise what seems to me to be the rather unusual power of directing a State Court to transfer the matter into the Federal Court. It is a matter upon which there is no special federal issue that arises. The application is refused. The applicant is to pay the respondents’ costs of the application, fixed at $900.

Associate:

Dated: October 2005