FEDERAL COURT OF AUSTRALIA

Kowalski v Complete Exhaust Specialists Marion [2010] FCA 412

THE COURT ORDERS THAT:

1.                  Leave to appeal from the decision of the Federal Magistrates Court given on 24 March 2010 in Kowalski v Complete Exhaust Specialists Marion and Anor [2010] FCA 238 be refused.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1                     For a matter involving a relatively minor amount, this proceeding has generated a lot of litigation.  In essence, Mr Kowalski seeks to claim against the respondents damages, and compensation, for misleading him, through his wife, in providing a replacement muffler to a motor vehicle.  The claim was ultimately summarily dismissed by a Federal Magistrate, so the present application is one for leave to appeal from that interlocutory order.

2                     The claim came before Simpson FM who was asked to, and on 9 February 2010 did, disqualify himself from hearing the matter.  At that time Mr Kowalski applied for costs of the application to disqualify himself.  Those costs were refused.  He sought leave to appeal against that refusal to make a costs order, but the application was unsuccessful: see Kowalski v Complete Exhaust Specialists Marion [2010] FCA 222. 

3                     The cause of action when the proceeding was first instituted in the Federal Magistrates Court was for breach of ss 52 and 53 of the Trade Practices Act 1974 (Cth) (the TP Act).

4                     The claim was based upon the assertion that on 25 August 2009, the respondents replaced a muffler on the applicant’s car at a cost of $230, and that they falsely represented to him that the muffler on his car needed to be replaced when in fact it did not.  He claimed damages equivalent to the cost of the muffler, and for unwarranted stress and anxiety, and interest.  The respondents denied those allegations.  Relevantly, in their defence, they also pointed out that the first respondent is an unincorporated partnership comprising the second respondent and his wife (now the third respondent) and therefore challenged the application of the TP Act at all.

5                     The matter was transferred to the docket of Lindsay FM and listed for directions on 10 March 2010.  On that occasion, Lindsay FM indicated that he wished first to determine whether the Federal Magistrates Court had jurisdiction to entertain the application in the circumstances.  Mr Kowalski asked for an adjournment to consider the jurisdictional question (although it had been identified by the defence filed on 19 January 2010) and that aspect was set for hearing on 24 March 2010.  The respondents were excused from attending on that occasion, as it was apparent that they did not wish to make submissions on the question of jurisdiction, having raised the matter. 

6                     On 10 March 2010, following that hearing, the applicant amended the application in two respects.  It is not clear that leave to amend it was granted under r 7.01 of the Federal Magistrates Court Rules 2001, but nothing turns on that as the application was treated as having been amended in the terms in which that amended document was filed.  One amendment was to add the third respondent, one of the two partners of the first respondent.  The second amendment was to add to the claim a claim that the respondents, in addition to contravening ss 52 and 53 of the TP Act had also contravened ss 56, 57 and 58 of the Fair Trading Act 1987 (SA) (the FT Act) by the same conduct and to seek relief by way of damages under s 75 of the FT Act.

7                     When the matter came on for hearing before Lindsay FM on 24 March 2010, Mr Kowalski first asked Lindsay FM to disqualify himself, by oral application, because he had “jumped in to the arena with the respondents to help them run their case”, and that such conduct gave rise to a reasonable apprehension of bias: Johnson v Johnson (2000) 201 CLR 488.

8                     In my view, Lindsay FM correctly concluded that he should not disqualify himself from hearing the claim on that basis.  At the hearing on 10 March 2010, he indicated to the respondents through the second respondent (who appeared in person) that he was free to attend on 24 March 2010 but need not do so as the issue to be determined on that occasion was whether the Federal Magistrates Court has jurisdiction to entertain the claim.  The respondents were told that, if the proceeding was not then dismissed, a further date and time for the trial of the matter would be notified.  The issue of jurisdiction was clearly identified to Mr Kowalski.  The excusing of the respondents in those circumstances from attending the hearing as to jurisdiction does not in any sense indicate to a fair-minded observer knowing of the circumstances relating to the hearing, that Lindsay FM might not bring an impartial attitude to or adjudication of the dispute before him.  Nor can it be said that Lindsay FM could possibly have exhibited to a fair-minded and reasonable observer that he would not approach the determination of the claim with an open mind simply by indicating that the issue of jurisdiction might first be determined, it being an obvious issue to arise once it was plain (as was proved by evidence given by the second respondent at the hearing on 10 March 2010) that the first respondent was not an incorporated entity.

9                     Indeed, it is quite plain that, but for the amendment to the application made on 10 March 2010, the Federal Magistrates Court had no jurisdiction to entertain the application.  The claim was confined to claims for breach of ss 52 and 53 of the TP Act.  That Act only applies to corporations as defined, and each of ss 52 and 53 proscribe particular conduct on the part of a corporation.  None of the statutory extensions to the scope of operation of that Act could apply on the facts alleged by Mr Kowalski.  Nor did he suggest that any of them did so when, on 24 March 2010, the claim came to be further heard.  It was pleaded by the respondents that none of them was a corporation, and (as noted) that fact was proved by evidence given on 10 March 2010.

10                  But for the amendment to the claim made on 10 March 2010, clearly the claim would have been dismissed because it was not maintainable under the TP Act because that Act did not apply to any of the respondents.

11                  At the hearing on 24 March 2010, Mr Kowalski contended that, by reason of the amended application, the claim was now within the jurisdiction of the Federal Magistrates Court.  He referred to the accrued or allied jurisdiction of the Court.

12                  When the Federal Magistrates Court has jurisdiction to determine a particular matter, it has “accrued” jurisdiction to determine the whole of the matter in controversy between the parties.  That is simply because those parts of the proceeding which arise either under the common law or under State legislation are part of the one matter, in conjunction with those parts of the proceeding which fall within Federal jurisdiction.  See Moorgate Tobacco Co Ltd v Phillip Morris Ltd (1980) 145 CLR 457; Fencott v Muller (1983) 152 CLR 570; Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261 and Re Wakim; Ex parte McNally (1999) 198 CLR 511.  Once the Federal Magistrates Court has jurisdiction in relation to the matter, that jurisdiction is maintained even though the claim which initially attracted federal jurisdiction is dismissed, as the “matter” does not cease to be in the jurisdiction of the Court if the federal question is decided adversely to the claimant or is struck out or it is found unnecessary to decide:  see Burgundy Royale Investments Pty Ltd v Westpac Banking Corp (1987) 18 FCR 212.  Of course, if the claim as made is merely a colourable attempt to attract the Court’s jurisdiction, the jurisdiction is not attracted: NSW Aboriginal Land Council v Aboriginal and Torres Strait Islander Commission (1995) 59 FCR 369 per Hill J at 384-385. 

13                  Lindsay FM concluded, in the circumstances, that no federal jurisdiction had properly been invoked.  There was not a matter which, in a non-colourable way, invoked federal jurisdiction so there was also no accrued jurisdiction: see eg Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (2000) 104 FCR 564.  His Honour reached that view notwithstanding the amended claim.

14                  In my judgment, Lindsay FM correctly found that the original claim as instituted could not attract the jurisdiction of the Court simply because none of the respondents was a corporation to which the TP Act applied.  There was then no matter within the jurisdiction of the Court.  The amendment made on 10 March 2010, his Honour said, was “to no avail”.  It could not enliven jurisdiction where previously it did not exist.  I agree in the circumstances of this matter.  The claim as originally made was clearly not within the Court’s jurisdiction, the amendment did not make that claim any more tenable.  The same problem would have existed had the claims under the FT Act been made in the original application.  It was apparent from the beginning that the federal jurisdiction claim was at best colourable because there was at no time a foundation for asserting that the TP Act applied to the respondents or to the transaction giving rise to the claim.  Mr Kowalski at no time alleged that the first respondent was a corporation.  The contrary was positively proved.  He mistakenly seems to have thought that because the first respondent had an ABN number, that was sufficient to attract the operation of the TP Act.  This is not the case.

15                  In his oral submissions on this appeal, Mr Kowalski referred to a number of decisions of the Federal Magistrate’s Court in which claims under s 52 of the TP Act and under the equivalent provision of a claim under s 52 of the TP Act and under the equivalent provision of a Fair Trading Act of a State had been entertained.  He seemed to think that once a claim is made under the TP Act, and the claim under a Fair Trading Act is made as well, the Court has jurisdiction to hear and decide the claim under the Fair Trading Act.  That is not so.  I shall briefly refer to those decisions to point out why they are different from this matter.

16                  Reference was made to Griffiths v Westbury Holdings Pty Ltd [2009] FMCA 1130; and Fortron Automotive Treatments Pty Ltd v Jones (No 2) [2009] FMCA 322.  Each of those proceedings involved claims under both the TP Act and under a State Fair Trading Act.  In each, the principal respondent was a corporation, so there was no suggestion that the Federal Magistrates Court lacked jurisdiction under the TP Act.  It was thus possessed of the whole matter, including the claims against the personal respondents, and including the claims under the relevant Fair Trading Act as the claims arose from the same or a similar substratum of facts.  C & J Designer Homes Pty Ltd v Robey [2007] FMCA 79 also illustrates that the Court, once properly possessed of a matter, may deal with the whole of the matter; in that case, the matter included the cross-claims by a builder against building owners, after a claim for breach of copyright had been brought against the builder.  Finally, I mention Schulman v Abbott Tout Lawyers (A Firm) trading as Abbott Tout Solicitors [2010] FCA 308.  The confined issue in that decision, so far as the judgment discloses, is whether legal professional privilege had been waived.  The principal claim had not been heard.  The report of the decision does not demonstrate how the Court’s jurisdiction generally had been invoked, or whether it had been challenged.  It does not therefore advance Mr Kowalski’s position in this matter.

17                  Finally, Mr Kowalski argued that the decision of Lindsay FM should be set aside in any event because there was, during the course of the hearing on 24 March 2010, an appearance of bias on his part.  It was necessary to review the transcript to see whether that allegation was made out.

18                  The hearing commenced at 10.06 am on 24 March 2010.  Lindsay FM left the bench at 10.22 am, indicating that he would resume at 11.00 am for the purpose of delivering a ruling.  He said at 11.03 am when he in fact resumed that

had he [Mr Kowalski] wished to, and had he been in a frame of mind to indicate that there would have been some utility in it, I would have given him an opportunity to put further submissions to me in respect of the various matters that are for adjudication for me today, but he has not returned.

That is because he left the bench earlier that morning whilst Mr Kowalski was still speaking.  Lindsay FM described the circumstances as follows:

This is a matter that was before me earlier this morning wherein I left the bench whilst Mr Kowalski was still speaking.  It is always unfortunate to leave the bench in such circumstances but I made the decision to do that, because he was not in any way being responsive to anything I was putting to him.  He was not responding to my questions.  There was no colloquy going on between he and I.  He was reading to me a part of his application.  I was trying to indicate to him I did not require it to be read to me and that I required him to be responsive to questions that I put to him.  This discussion was occurring in the context of me inviting him to make submissions about the kinds of matters that were concerning me, with respect to his claim.

19                  When the matter commenced, Mr Kowalski applied to Lindsay FM to disqualify himself on the grounds of bias or perceived bias and made submissions on that topic.  He described it as “bizarre” that the second respondent had been excused from attending on the hearing on 24 March 2010.  Lindsay FM indicated that he would give some consideration to the question of whether he should disqualify himself, but in the meantime wished to hear submissions on the topic of jurisdiction.  He indicated that, because he had told Mr Kowalski that he had difficulty in relation to the jurisdiction of the Court, that did not indicate bias.  That is plainly so.  It was an obvious matter to raise with Mr Kowalski on the basis of his initial claim.

20                  I have ruled above that Lindsay FM at that point correctly refused to disqualify himself.

21                  There then ensued Mr Kowalski’s submissions about why the Court had jurisdiction to entertain the application, following its amendment.  After allowing Mr Kowalski to make his submissions, he was asked if there was anything further he wished to put on the Court’s jurisdiction to entertain the claim.  It is obvious from the transcript that Mr Kowalski became more vigorous in his submissions to the Court, when Lindsay FM asked again how jurisdiction is enlivened if there was no federal jurisdiction attracted in the first instance.  Mr Kowalski accused Lindsay FM of “joking”, of not understanding the submission, and of being ignorant.  It was apparent, at a certain point, that what Mr Kowalski could usefully have put in support of his submission that the Court had jurisdiction had been said.  He simply disagreed with the Federal Magistrate’s apparent line of thinking, namely that, because there was no jurisdiction under the TP Act, the Federal Magistrate could not in the circumstances entertain the claim under the FT Act.  Mr Kowalski sought to refer again to the amended application, but the Lindsay FM indicated that he was aware of its contents and did not need it read.  Mr Kowalski asserted jurisdiction because of the amended application.  Mr Kowalski then, as he said in oral submissions, attempted to make further submissions although he did not indicate that he would be submitting anything other than repeating what he had already said.  The conclusion of that part of the transcript is as follows:

MR KOWALSKI:        Look, I’ll tell you something.  I make – I’ll tell you something what the High Court expects you to do.

HIS HONOUR:                        I’ll reserve my determination of this matter until 11 o’clock.

As noted, at 10.22 am the Court was adjourned. 

22                  The Court resumed at 11.03 am.  Mr Kowalski was called and was not present.  The judgment was delivered.

23                  I do not consider in the circumstances that Mr Kowalski was deprived of an opportunity to make submissions or to produce such material as he might properly have put before the Court.  He has not identified in any respect anything which he would have said which he did not have an opportunity to say to the Federal Magistrate.  In fact, upon reading the transcript, and after hearing Mr Kowalski’s primary submissions on the issue of jurisdiction, he was asked six times if there was anything else he wished to put on the issue.  It was apparent that what was then said was repetitive and unresponsive.  He clearly had a reasonable opportunity to put submissions on that topic.

24                  Accordingly, in my view, this ground of the application also fails.

25                  The application by way of appeal is therefore dismissed.

26                  The application must be dismissed.  As the respondents did not attend on the hearing of the application, there is no need to address the question of costs.

Associate:

Dated:         30 April 2010