FEDERAL COURT OF AUSTRALIA

Randjelovic v Threlfall [2012] FCA 1331

THE COURT ORDERS THAT:

1.    The proceeding be dismissed for want of jurisdiction.

2.    The applicants pay the respondent’s costs of the proceeding on an indemnity basis.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 (Cth)

REASONS FOR JUDGMENT

introduction

1    On 9 November 2012, I made the orders set out above and gave brief reasons which are amplified as set out below.

2    By an originating application dated 12 September 2012, the applicants, Teodora Randjelovic and Vesna Kostic, alleged that the respondent, “Phillip Threlfall, audio engineer/producer of The Base Recording Studios committed a breach of contract knowingly and with unconscionable conduct against the applicants”.

3    The applicants sought relief in the form of “damages under the Fair Trading Act 1999 (Vic), s 107 and s 108 and the Victorian consolidated legislation Wrongs (Public Contracts) Act 1981 (Vic), SECT 3”.

4    The applicants also sought “a claim for costs in the form of damages to the amount of $7,000 net”.

5    At the first directions hearing, Ms Randjelovic, the first applicant, who was not legally qualified, appeared in person.

6    Counsel for the respondent submitted that the proceeding should be dismissed because the Court lacked jurisdiction to entertain the applicants’ claim. The respondent relied on written submissions dated 8 November 2012.

7    The originating application was not accompanied by a statement of claim, as required by r 8.05 of the Federal Court Rules 2011 (Cth) (“the Rules”) but by an affidavit made by the first applicant on 11 September 2012.

8    In her affidavit, the first applicant deposed that the respondent was hired in January 2012 by herself, and her mother, the second applicant, to record an album of classical music composed by the second applicant over a three day period with a further day of editing in The Base Recording Studios.

9    The first applicant deposed that the applicants decided to employ the respondent for a second recording at the beginning of April 2012, for which they had booked a four day period.

10    The first applicant deposed that the respondent was informed of the proposed April recording session in January 2012 and confirmed his availability, although there was no formal contract. Before the April recording occurred, however, the respondent expressed his disapproval of a refund the applicants had received for a production fault in the first recording and cancelled the April recording.

11    The first applicant alleged that the respondent breached his contract by cancelling the April recording session nine days before it was due to occur, although he was aware that it would pose problems in replacing him. The applicants were unable to replace the respondent in time for the April recording session, which “set [them] back” by six months.

12    The affidavit of the first applicant attached email correspondence between the applicants and the respondent. The correspondence included an email of the second applicant to the respondent dated 28 March 2012 which stated that “There was a change and the room is now free from 11 April. I will need you on April 11, 12 and 13 and if I can get a Saturday on April 14 as well” and requested that the respondent “confirm”. The email of the respondent dated 30 March 2012 stated, inter alia, “I am unable to offer my services on this next recording”. The email of the second applicant dated 30 March 2012 stated, inter alia, “[i]t is your choice if you want or not want to accept the job. The only thing is that we had a deal…you should have told me in time to find a new audio engineer”.

relevant Legislation

13    Section 107 of the Fair Trading Act 1999 (Vic) (“FTA”) provides:

107    What is a consumer and trader dispute?

(1)    In this Part a consumer and trader dispute is a dispute or claim arising between a purchaser or possible purchaser of goods or services and a supplier or possible supplier of goods or services in relation to a supply or possible supply of goods or services.

(2)    For the purposes of subsection (1), a dispute or claim includes any dispute or claim in negligence, nuisance or trespass that relates to the supply or possible supply of goods or services but (except as provided in subsection (3)) does not include a dispute or claim related to a personal injury.

(3)    For the purposes of subsection (1), a dispute or claim includes a claim related to personal injury if—

(a)    the claim is for an amount not exceeding $10 000; and

(b)    the claim relates to a supply or possible supply of goods or services; and

(c)    the supply or possible supply of goods or services is the subject of a related consumer and trader dispute.

14    Section 108 of the FTA provides:

108    Settlement of consumer and trader disputes or small claims

(1)    The Tribunal may hear and determine a consumer and trader dispute.

(2)    The Tribunal may do one or more of the following in relation to a consumer and trader dispute—

(a)    refer a dispute to a mediator appointed by the Tribunal;

(b)    order the payment of a sum of money—

(i)    found to be owing by one party to another party;

(ii)    by way of damages (including exemplary damages and damages in the nature of interest);

(iii)    by way of restitution;

(c)    vary any term of a contract;

(d)    declare that a term of a contract is, or is not, void;

(e)    order the refund of any money paid under a contract or under a void contract;

(f)    make an order in the nature of an order for specific performance of a contract;

(g)    order rescission of a contract;

(h)    order rectification of a contract;

(i)    declare that a debt is, or is not, owing;

(j)    order a party to do or refrain from doing something.

(3)    In awarding damages in the nature of interest, the Tribunal may base the amount awarded on the interest rate fixed from time to time under section 2 of the Penalty Interest Rates Act 1983 or on any lesser rate it thinks appropriate.

15    Section 3 of the FTA defines Tribunal as:

…the Victorian Civil and Administrative Tribunal established by the Victorian Civil and Administrative Tribunal Act 1998.

16    Section 109 of the FTA specifies powers of the Tribunal additional to those in s 108:

109    Additional powers of Tribunal

(1)    In addition to its powers under section 108, the Tribunal, in determining a consumer dispute or a trader-trader dispute, may make any order it considers fair including declaring void any unjust term of a contract or otherwise varying a contract to avoid injustice.

(2)    In determining whether a term of a contract is unjust under subsection (1), the Tribunal may have regard to—

(a)    the intelligibility of the contract generally, and of the term in particular;

(b)    the extent to which the term, and its legal and practical effect, were accurately explained to the relevant party before the term was agreed to and the extent to which the relevant party understood the term and its effect;

(c)    the relative bargaining power of the parties to the contract;

(d)    the consequences to the parties to the contract if the term is complied with or not complied with and the relative hardship of those consequences to each party;

(e)    whether or not it was reasonably practicable for the relevant party to reject, or negotiate for a change in, the term before it was agreed to;

(f)    the relationship of the term to the other terms of the contract;

(g)    whether the relevant party obtained independent legal or other expert advice before agreeing to the term;

(h)    whether unfair pressure, undue influence or unfair tactics were used to obtain the relevant party's consent to the contract or the term;

(i)    whether at the time the term was agreed to the relevant party knew, or could probably have found out by asking, that the term would cause any other relevant party hardship;

(j)    the conduct of the parties to the contract after the term was agreed to;

(k)    whether the term is usually found in contracts of that kind;

(l)    the justification for the term;

(m)    whether the term is unconscionable, harsh or oppressive;

(n)    any other factor the Tribunal thinks is relevant.

(3)    Despite anything to the contrary in this section, in determining whether a term of a contract is unjust, the Tribunal is not to have regard to any injustice arising from circumstances that were not reasonably foreseeable when the term was agreed to.

(4)    In this section—

consumer dispute means a dispute relating to the supply or possible supply of goods or services of a kind ordinarily used for personal household or domestic purposes but does not include a dispute relating to the supply or possible supply of goods if the supply or the possible supply of the goods is for the purpose of re-supply, in trade or commerce, or for the purpose of using the goods up or transforming the goods in trade or commerce;

trader-trader dispute means a dispute between a purchaser or possible purchaser and a supplier or possible supplier in relation to the supply or possible supply of goods or services in trade or commerce which involves—

(a)    a claim for payment of money in an amount not exceeding $10 000; or

(b)    a claim for performance of work of a value not exceeding $10 000.

17    Section 111 of the FTA provides:

111    Exclusion of other jurisdiction

(1)    Once an application has been made to the Tribunal in accordance with the Victorian Civil and Administrative Tribunal Act 1998 in respect of a consumer and trader dispute or in respect of any other matter in respect of which the Tribunal has jurisdiction under this Act, the issues in dispute are not justiciable at any time by a court unless—

(a)    the proceeding in that court was commenced before the application to the Tribunal was made and that proceeding is still pending; or

(b)    the application to the Tribunal is withdrawn or struck out for want of jurisdiction; or

(c)    the Tribunal refers the proceeding to that court under section 77 of the Victorian Civil and Administrative Tribunal Act 1998.

(2)    Subsection (1) applies to all the issues in dispute, whether as shown in the application or emerging in the course of the proceeding in the Tribunal.

18    Section 112 of the FTA provides:

112    More appropriate forum

(1)    This section applies if a person—

(a)    commences proceedings in a court; and

(b)    the proceedings arise wholly or predominantly from a consumer and trader dispute or are other proceedings in respect of which the Tribunal has jurisdiction under this Act.

(2)    The court must stay the proceedings if—

(a)    the proceedings could be heard by the Tribunal under this Act; and

(b)    the court is satisfied that the proceedings would be more appropriately dealt with by the Tribunal.

(3)    In determining whether proceedings would be more appropriately dealt with by the Tribunal, the court must consider—

(a)    whether, having regard to the likely costs and duration of the proceedings and any other matters the court considers relevant, a party is reasonably likely to gain a material advantage if the proceedings are determined by the Tribunal; and

(b)    whether that advantage is outweighed by a material disadvantage that would be reasonably likely to be suffered by another party if the proceedings were determined by the Tribunal.

(4)    If proceedings are stayed under this section, any party to the proceedings may apply to the Tribunal for an order with respect to the dispute or matter on which the proceedings were based.

(5)    If a person applies to the Tribunal under subsection (4) the Tribunal must notify the court and on such notification the court must dismiss the proceedings.

(6)    Subsection (5) does not apply if the Tribunal refers the matter to the court under section 77(3) of the Victorian Civil and Administrative Tribunal Act 1998.

19    Section 160E of the FTA provides:

160E    References to courts and the Tribunal

(1)    Subject to subsections (2), (3) and (4) and section 160F and 160G, in the Australian Consumer Law (Victoria), court means—

(a)    the Supreme Court;

(b)    the County Court;

(c)    the Magistrates' Court;

(d)    the Tribunal.

(2)    In sections 218, 224, 246 and 247 of the Australian Consumer Law (Victoria), court does not include the Tribunal.

(3)    In respect of section 232 of the Australian Consumer Law (Victoria)—

(a)    the Tribunal may not issue an order under that section, except for the purposes of subsection (3);

(b)    only the Supreme Court may issue an order of the kind described in subsection (5).

(4)    In section 250 of the Australian Consumer Law (Victoria), court does not include the Magistrates' Court.

20    Section 160F of the FTA provides:

160F    Jurisdiction of courts and the Tribunal

Subject to section 160E, the Tribunal or any court of competent jurisdiction may hear and determine a cause of action arising under any provision of the Australian Consumer Law (Victoria).

21    Section 3 of the Wrongs (Public Contracts) Act 1981 (Vic) (“Wrongs (Public Contracts) Act”) provides:

3    Rights to damages for breach of contract

(1)    Where the Crown or a relevant responsible body suffers loss or damage as a result of a breach of contract of employment by employees of a person who is engaged in carrying out a contract to which this Act applies with the relevant responsible body and that breach of contract has been induced or is deemed to have been induced by an organization or an officer of an organization the Crown or the relevant responsible body may recover from the organization and any officer of the organization which or who induced or is deemed to have induced the breach of contract the amount of the loss or damage suffered by the Crown or the relevant responsible body as a result of that breach of contract by action against the organization and any officers of the organization who induced or who are deemed to have induced the breach of contract.

(2)    An organization and any officers of the organization against whom action may be taken pursuant to subsection (1) shall be jointly and severally liable for the loss or damage.

(3)    An organization shall be deemed to have induced a breach of contract for the purposes of subsection (1) if the organization or any officer of the organization has by any act or omission induced or attempted to induce the breach of contract, or has made any threat or exhortation or exerted or attempted to exert any influence that might be likely to encourage an employee to breach a contract of employment.

22    Section 2 of the Wrongs (Public Contracts) Act defines “relevant responsible body in relation to a contract to which this Act applies” as:

…the Minister or public statutory body which is declared by the Governor in Council to be responsible for the major public works for or in relation to which the contract is made.

The parties’ submissions

23    The respondent submitted that there was a lack of clarity in relation to important aspects of the applicants’ claim, including the damages sought. The respondent submitted that, more fundamentally, the Federal Court had no jurisdiction to grant the relief claimed under the Victorian legislation on which the applicants relied, nor to determine a claim for breach of contract simpliciter.

24    The respondent’s written submissions stated:

9    The alleged "contract" between the Applicants and the Respondent is not a contract of a kind referred to in Sections 2 and 3 of the Act. Further, even if a claim was theoretically available to the Applicants under that Act, it would not be justiciable in the Federal Court because it is a claim made under the laws of Victoria and not under or pursuant to any Federal law.

…

12    It is submitted that by operation of Sections 3 and 108 and of the FTA, VCAT has jurisdiction to deal with consumer trader disputes of the type that the Applicant has issued in this proceeding.

13    Finally, section 159 of the FTA provides that any person who suffers a loss or damage as a result of a contravention of any provision of the FTA may commence proceedings before the Tribunal or any court of competent jurisdiction. However, apart from a claim under section 107 of the FTA no other claim based on that Act is identified. In any event the FTA is a state Act.

14    The absence of jurisdiction in the Federal Court is made clear by section 160E of the FTA. It provides that a reference to a "Court" in the FTA "means the Supreme Court, the County Court, the Magistrates Court and the Tribunal" (i.e VCAT). By virtue of those provisions, the Federal Court has no jurisdiction to hear and determine this proceeding.

15    The solicitors for the Respondent wrote to the Applicants on the 7 November 2012 inviting them to withdraw the proceedings on the basis of the lack of jurisdiction of the Federal Court. That letter was sent by email to the address for service on the Originating Application. The First Applicant sent an email in response at 6.47 pm on 7 November 2012 and she declined to do so. The letter to the Applicants and their response is attached herewith.

16    The Court has jurisdiction to dismiss a proceeding for want of jurisdiction and to make an order for costs: see Robins v Incentive Dynamics Pty Ltd [1999] FCA 1651 (26 November 1999).

17    It is submitted that the Court should order that the proceeding be dismissed and that the Applicants pay the Respondent's costs of and incidental to the proceeding on an indemnity basis.

25    The respondent also produced correspondence in which the respondent’s solicitors, by a letter dated 7 November 2012, advised the applicants of the basis on which the respondent would assert a want of jurisdiction, and invited them to withdraw the Federal Court proceedings on the basis that the respondent would not seek costs. The letter advised that the respondent would otherwise seek indemnity costs.

26    The applicants did not consent to that course. The responsive email of the first applicant dated 7 November 2012 stated:

Dear Mr Nikolaidou,

I have read the attached letter and will address the points you have raised. Firstly, arguing that a court application "doesn't have jurisdiction" is a standard lawyer tactic. The Wrongs (Public Contracts) Act of 1981 may have initially been written for public contracts within the Commonwealth but has since then come to be understood as having jurisdiction between individual contractors and sub-contractors.

As for your statements with regard to my referencing the Fair Trading Act, they are simply incorrect. This is a consumer/trader dispute and non admittance of your client does not alter the reality of the situation.

The Fair Trading Act's reference to a "tribunal" does not automatically imply VCAT as tribunal- literally refers to: a court of justice (as defined by the dictionary).In this case that can clearly reference the Federal Court of Australia.

Should there be any genuine errors in my application I will seek leave to amend. I will not be withdrawing my application and look forward to seeing you at directions.

Please consider this my formal refusal of any orders that prohibit my need to formally appear at directions. I note that Directions as such is still part of the informal court process (followed by mediation) and believe there is no need for your client to be incurring any court costs for this part of the proceeding. Your client is fully aware that I shall be appearing at directions on my own behalf and I encourage him to do the same, rather then instruct you to ask for costs which could easily be avoided.

Regards,

Teodora Randjelovic

(emphasis in original)

27    Before me, the first applicant confirmed that the applicants sought to recover a total sum of $7,000. The first applicant did not dispute that as the respondent asserted, the applicants had attempted to issue a defamation proceeding against the respondent in the Victorian Civil and Administrative Tribunal (“VCAT”) which the Registrar refused due to lack of jurisdiction, from which decision the applicants had unsuccessfully appealed. The first applicant requested that the current proceeding be stayed and referred to VCAT as she now considered that the applicants should have applied to VCAT to begin with.

Discussion: Jurisdiction

28    In addition to the failure to file and serve a statement of claim, the applicants failed to file a genuine steps statement as required by r 8.02 of the Rules and s 6(1) of the Civil Dispute Resolution Act 2011 (Cth).

29    While deficiencies such as lack of clarity, a statement of claim and a genuine steps statement might otherwise be addressed, in my opinion, the respondent’s submission that this court lacks jurisdiction was correct. The applicants alleged, in essence, a breach of contract for which the Federal Court lacked jurisdiction, and claimed damages of $7,000. They also sought relief under two Victorian Acts which, in my view, did not confer jurisdiction on the Federal Court. The breach of contract alleged was not by the Crown or “a relevant responsible body” as required under s 3 of the Wrongs (Public Contracts) Act. Section 108 of the FTA confers power to determine a consumer and trader dispute, as defined, on the Tribunal.

30    Section 112 of the FTA contemplates that proceedings arising wholly or predominantly from, inter alia, a consumer and trader dispute may be commenced in a court, but provides that they must be stayed if the proceedings could more appropriately be heard in VCAT. Further, s 160E of the FTA, subject to specified qualifications, defines “court” for the purposes of the Australian Consumer Law (Victoria) as “the Supreme Court, the County Court, the Magistrates’ Court and the Tribunal”. Section 160F of the FTA states “subject to section 160E, the Tribunal or any court of competent jurisdiction may hear and determine a cause of action arising under any provision of the Australian Consumer Law (Victoria)”. No provision of the Australian Consumer Law (Victoria) under which the appellant’s cause of action arose was identified and there was no apparent basis for the Federal Court’s jurisdiction.

31    If, contrary to the above, the Federal Court had jurisdiction to entertain the applicants’ claim, in my view, it would have been necessary to stay the proceeding under s 112 of the FTA because VCAT was, as the first applicant conceded, a more appropriate forum.

32    I considered that the proceeding should be dismissed.

cOSTS

33    Counsel for the respondent sought costs on an indemnity basis, as the applicants were apprised that he would assert a lack of jurisdiction, but rejected the opportunity to withdraw with no order as to costs, thereby causing the respondent to retain legal representation.

34    The first applicant submitted that a costs order should not be made against the applicants, as she was in difficult financial circumstances and had realised only on the morning of the hearing that she should not have issued in the Federal Court. Further, the first applicant submitted that the respondent had needlessly retained counsel and should rather have appeared in person, thus avoiding costs. The first applicant contended that counsel for the respondent had requested that the matter should be heard last, thereby prolonging her time in Court, and that she had not been fairly treated.

35    In my opinion, the applicants, if properly advised, should have known that the proceeding should not have been commenced in the Federal Court (see Colgate Palmolive Company Co v Cussons Pty Ltd (1993) 46 FCR 225 at 231 – 234). The respondent advised the applicants of his detailed contentions, offered them the opportunity to withdraw without paying costs and took all steps possible to avert the incurring of costs. The respondent was, of course, fully entitled to retain legal representation, including counsel, who, contrary to the first applicant’s criticisms, conducted the matter properly and appropriately.

36    In the circumstances, I considered that the respondent was entitled to his costs of the proceeding on an indemnity basis.

Associate:

Dated:    27 November 2012