FEDERAL COURT OF AUSTRALIA

Menzies v Paccar Financial Pty Ltd [2016] FCA 400

ORDERS

THE COURT ORDERS THAT:

1.    The proceeding be summarily dismissed.

2.    The applicants pay the respondents’ costs of the proceeding.

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

REASONS FOR JUDGMENT

NICHOLAS J:

Background

1    Before me is an application filed by the first respondent (“Paccar Financial”) and the second respondent (“Paccar Australia”) seeking orders for (inter alia) the summary dismissal of this proceeding. Except where I need to distinguish between Paccar Financial and Paccar Australia I shall refer to them collectively as “Paccar”.

2    The proceeding was commenced by the first applicant (“Mr Menzies”) and the second applicant (“Mrs Menzies”) on 5 August 2015 by originating application and statement of claim. I will say more about both documents later in these reasons.

3    The dispute between Mr and Mrs Menzies and Paccar dates back to 2006. It appears that in April or May 2006, a company (“Menzies Haulage”) associated with Mr and Mrs Menzies acquired Kenworth trucks and trailers (“the Kenworth equipment”) manufactured by Paccar Australia. At that time both Mr and Mrs Menzies were directors and shareholders of Menzies Haulage. Paccar Financial, a wholly owned subsidiary of Paccar Australia, lent money to Menzies Haulage to purchase the Kenworth equipment from Thornhill Contracting Pty Ltd (“Thornhill”), another road haulage contractor.

4    The evidence indicates that at the time the Kenworth equipment was sold by Thornhill to Menzies Haulage, it was used by Thornhill to perform haulage for Toll SPD. Mr and Mrs Menzies say that Menzies Haulage purchased the equipment “in work” and pointed to a letter dated 5 May 2006 signed by Mr Ian Ackerly apparently on behalf of Toll SPD. Mr Ackerly said in the letter:

Ian Menzies spoke to my self on Tuesday 2nd May 2006 regarding the matter of himself purchasing two b/double prime movers and trailer s from Thornhill tpt. Through out this meeting Ian raise the question of what would be the availability of loading if he was to complete Thornhill purchase .. Ian was informed that loading would be made available providing his business fill the criteria set down by Toll SPD for all subcontractor. IE insurance’s / work comp and fatigue management plan would have to be set in place. Currently these vehicles run between Sydney and Brisbane 5 days per week for Toll SPD

(errors in original)

5    Mr and Mrs Menzies say that Toll SPD provided Menzies Haulage with work for some 16 months, but that there was none available after that time. To add to Mr and Mrs Menzies’ difficulties, Mr Menzies suffered a serious injury in June 2008 which required him to take some six months off work.

6    In 2009 Paccar commenced proceedings against Mr and Mrs Menzies in Victoria. On Mr and Mrs Menzies’ application, those proceedings were transferred to the Supreme Court of New South Wales where they were later consolidated with another proceeding brought by Paccar Financial against Mr and Mrs Menzies for possession of the Kenworth equipment. The consolidated proceedings (2010/377702) were heard by Harrison AsJ together with another proceeding (2011/176144). In the latter proceeding, Mr and Mrs Menzies sought damages for abuse of process which they allege Paccar Financial committed by seeking to be substituted as petitioning creditor in a bankruptcy proceeding about which I will say more later in these reasons. Her Honour made orders in favour of Paccar Financial in both proceedings on 13 June 2013.

7    The hearing before Harrison AsJ commenced on 13 May 2013. At the commencement of the hearing, Mr Menzies applied for an adjournment of the hearing. Mr Menzies appeared for himself and Mrs Menzies on the adjournment application. The hearing of the application occupied the whole of the first of the five days set aside for the hearing of the proceedings. At the end of the first day her Honour refused the adjournment, and ordered that the hearing resume the next day (see Paccar Financial Pty Ltd v Menzies (No 3) [2013] NSWSC 551). When the hearing resumed the next day, there was no appearance for either Mr or Mrs Menzies. The hearing then continued in their absence. Judgment was reserved.

8    On 13 June 2013 Mr and Mrs Menzies applied for leave to reopen. This was refused by her Honour (see Paccar Financial Pty Ltd v Menzies (No 4) [2013] NSWSC 743). Her Honour then (in 2010/377702) made declarations to the effect that Paccar was entitled to possession of the Kenworth equipment together with orders requiring Mr and Mrs Menzies to pay to Paccar Financial the sum of $572,442.96 plus costs on an indemnity basis. Her Honour ordered that a cross-claim filed by Mr and Mrs Menzies be dismissed. She also ordered that Mr and Mrs Menzies’ other proceeding (2011/176144) be dismissed (see Paccar Financial Pty Ltd v Menzies (No 5) [2013] NSWSC 772).

9    The material before Harrison AsJ included a defence and cross-claim filed by Mr and Mrs Menzies together with an unsworn affidavit made by Mr Menzies. In essence, Mr Menzies asserted that he and Mrs Menzies only ever signed loose execution pages and that they were not shown or provided with the loan agreements or the guarantee in relation to which they were sued until much later.

10    Her Honour found:

    Mr and Mrs Menzies entered into written guarantees and indemnities with Paccar Financial whereby they guaranteed Menzies Haulage’s obligations under various deed of charge and loan (“the loan agreements”) between Paccar Financial and Menzies Haulage including a set of written agreements executed in November 2006 incorporating a revised repayment schedule;

    in December 2007 Menzies Haulage fell into arrears. In August 2008 an agreement was reached between Mr and Mrs Menzies and Paccar Financial which allowed Menzies’ Haulage until December 2009 for clearance of the arrears. That did not occur, and in January 2009, after a short period in voluntary administration, Menzies Haulage was placed into voluntary liquidation;

    the guarantees were not unjust, and neither Mr nor Mrs Menzies was entitled to relief under the Contracts Review Act 1980 (NSW);

    Mr and Mrs Menzies had not made out their claims based upon s 18 of the Australian Consumer Law (Sch 2 of the Competition and Consumer Act 2010 (Cth)) including, in particular, that based upon a representation to the effect that Paccar Financial would:

… renegotiate any then existing financial contract between it and the borrower, so as to extend the term and/or vary the date for repayment of money advanced to [Menzies Haulage].

11    Mr and Mrs Menzies appealed to the New South Wales Court of Appeal. Among other things, Mr and Mrs Menzies challenged Harrison AsJ’s refusal to adjourn the hearing, and her Honour’s refusal to permit them to re-open their case. The Court of Appeal rejected Mr and Mrs Menzies’ appeal. By orders made on 5 December 2014 Mr and Mrs Menzies’ appeals were dismissed (see Menzies v Paccar Financial Pty Ltd (No 4) [2014] NSWCA 210 and Menzies v Paccar Financial Pty Ltd (No 5) [2014] NSWCA 258).

12    An application to the High Court for special leave to appeal the Court of Appeal’s judgment was dismissed pursuant to a direction made on 9 April 2015 (see Ian David Menzies & Anor v Paccar Financial Pty Ltd [2015] HCASL 42).

The pleadings in the earlier proceedings

The cross-claim in proceeding 2010/377702

13    In proceeding 2010/377702, Mr and Mrs Menzies filed a cross-claim seeking the following relief against Paccar Financial:

1.    A declaration that the Representations constituted misleading and deceptive conduct within the meaning of s.18 of the Second Schedule of the Competition and Consumer Act 2010 (Cth).

2.    An order under s.232 of the Second Schedule to the Competition and Consumer Act 2010 (Cth) that Paccar Financial be restrained forever from:

(i)    enforcing the alleged Guarantee and Indemnity;

(ii)    taking any step to enforce the Loan Contract(s) as against the cross claimants;

(iii)    asserting any claim of title to the Equipment in priority to the title of the cross claimants;

3.    Alternatively:

(i)    a declaration that the Guarantee and Indemnity is an unjust contract pursuant to s.9 of the Contracts Review Act 1980 (NSW);

(ii)    an order pursuant to s.7 of the Contracts Review Act 1980 (NSW) that the Guarantee and Indemnity is void;

(iii)    an order pursuant to s.7 of the Contracts Review Act 1980 (NSW) that the cross claimants be excused from performance of any obligations imposed upon them by virtue of the Guarantee and Indemnity.

14    The cross-claim alleged that Paccar Financial, by its servant or agent, Jeffrey Penter, represented to Mr and Mrs Menzies, who were then directors of Menzies Haulage, that in April or May 2006 (inter alia):

•    in the event of the occurrence of a Down Time Period, the cross defendant would renegotiate any then-existing financing contract between it and a borrower, so as to extend the term and/or vary the date for repayment of monies advanced to a borrower.

•    it was necessary to sign the Attestation Pages to progress the application process in which Menzies Haulage was to borrow the money from the cross defendant so as to purchase the Equipment.

The expression “ Down Time Period” was defined to refer to “periods of down time in which a haulage company may be prevented from generating an income.”

15    In their cross-claim Mr and Mrs Menzies also alleged that in October 2006 further representations were made to them by a representative of Paccar Financial that led them to sign more blank “Attestation Pages” which (as with the pages signed by them earlier that year) were not accompanied by any pages of the loan agreements or the guarantee.

16    It is then alleged in the cross-claim that, in signing the blank attestation pages in April or May and October 2006, Mr and Mrs Menzies again relied on the representations made to them.

17    The cross-claim did not include any complaint about specific clauses of the loan agreements including, in particular, any of the clauses which are referred to in the amended statement of claim filed in this proceeding.

18    So far as the guarantee is concerned, the cross-claim pleaded as follows:

28.    In relation to the Guarantee and Indemnity:-

(i)    the contract of guarantee was not entered into for the purposes of the defendants / cross-claimants carrying out a trade, or a business being carried out by either one of them, or both of them;

(ii)    The guarantee is an unjust contract for the purposes of section 9 of the Contracts Review Act 1980 (NSW).

Particulars:-

(a)    There was a material inequality in bargaining power between the parties to the alleged contract, Mr and Mrs Menzies and Paccar Financial

Particulars

The cross claimants were unsophisticated persons running a small family freight forwarding business, whereas the cross defendant was a corporation conducting a finance business in Australia as a wholly owned subsidiary of a foreign multi-national corporation

(b)    That at the time the contract of guarantee was made, its provisions were never the subject of negotiation;

Particulars

The cross claimants accepted the Penter and Paccar Representations and no opportunity was afforded to the cross claimants to discuss or negotiate any terms of the Loan Contract or the Guarantee or Indemnity. These were never shown to them.

(c)    It was not reasonably practicable for the defendants / cross-claimants to negotiate for the alteration of, or to reject any of the provisions of the contract;

Particulars

The cross claimants were not made aware of the terms on which the cross defendant purported to contract with Menzies Haulage or the cross claimants

(d)    The provisions of the contract of guarantee imposed conditions which are unreasonably difficult to comply with, or not reasonably necessary for the protection of the legitimate interests of any party to the contract;

Particulars

The reasonable terms of contract were contained in the First Penter Representations and additional purported terms and conditions were not needed or required for the protection of the legitimate interests of a party

(e)    The defendants / cross-claimants were not reasonably able to protect his or her interests concerning the contract of guarantee, or to get independent legal advice concerning it;

Particulars

The cross claimants were presented with the attestation pages and signed them following a representation that they were progressing a finance application, not that they were executing a contract. The cross claimants were not shown either the Loan Contract, nor the guarantee and indemnity

(f)    The relative economic circumstances, educational background and literacy of the defendants / cross-claimants as parties to the contract of guarantee, and the plaintiff / cross-defendant, were grossly disparate;

Particulars

The cross claimants were unsophisticated persons who relied upon the representations by the cross defendant.

(g)    The legal and practical effect of the contract of guarantee was never accurately explained by any person to the defendants / cross-plaintiffs, who did not understand its effect;

Particulars

The cross defendant did not provide any explanation ·of the Loan Contract or of the Guarantee and Indemnity, and no representation was made to the cross claimants that they were being requested to provide any form of guarantee or indemnity concerning the liability of Menzies Haulage to the cross defendant

(h)    Unfair tactics were exerted upon or used against the defendants / cross-claimants by the plaintiff / cross-defendant that the contract of guarantee was never shown or explained to them, before it purported to be operative.

Particulars

The First and Second Penter Representations were false and misleading and the First and Second Penter Representations and the Paccar Representations, having been made; the attestation pages were then simply affixed to the balance of Loan Contracts and Guarantee and Indemnity documents without the consent of the cross claimants. The cross defendant then endeavoured to and did rely on the Loan Contracts and the Guarantee and Indemnity, without regard to the Penter and the Paccar Representations

The amended statement of claim in proceeding 2011/176144

19    By the amended statement of claim in proceeding 2011/176144 Mr and Mrs Menzies claimed damages (including aggravated and exemplary damages) from Paccar Financial for abuse of process. Mr and Mrs Menzies alleged that the actions of Paccar Financial in prosecuting a creditor’s petition in relation to Mr and Mrs Menzies in the Federal Magistrates Court was groundless and unjustified and constituted an abuse of process. In particular, it was alleged in para 13 that, amongst other matters, Paccar Financial prosecuted the creditor’s petition and obtained sequestration orders against Mr and Mrs Menzies (which, as I will later explain, were set aside on appeal) so as to prevent Mr and Mrs Menzies from prosecuting their cross-claim in 2010/377702 in the Supreme Court in which proceeding Mr and Mrs Menzies asserted (inter alia) that they never signed the guarantee.

The pleading in this proceeding

20    The originating application filed by Mr and Mrs Menzies in this proceeding includes claims for the following relief:

    orders setting aside the contract and the guarantee;

    orders requiring the respondent and Paccar Australia rectify safety defects;

    damages.

21    Paragraphs 3-17 and 19 of the amended statement of claim dated 27 September 2015 allege as follows:

3.    This action is taken pursuant to the:-

•    Independent Contractors Act 2006 (In General) and Sec 9; 32; 34; 36; 38.

•    The Trade Practices Amendment (Australian Consumer Law) Act (No: 1 and 2) 2010. (in General) and Schedule 3; 4; 6; 7; 9; 10; 20; 21; 23 29; 31; 34; 35; 52; 53; 54; 278; 286;

•    Industrial Relations Act 1996 No. 17. (In General) and Part 9.

4.    On or about April and May 2006 the Respondent via its New South Wales Finance Manager and its Dealer sold two Kenworth B-Double trucks and trailers to the Applicant (s) company together with work.

    The Respondent organised a letter and promises from Toll SPD guaranteeing the work.

    The Respondent also promised the Applicant's Flexible Finance which it also advertised on its website.

5.    In May 2006 the Respondent via its New South Wales Finance Manager had the Applicants sign a credit application that did not refer to terms that were thought to be a credit application by the Applicants and that were later claimed to be the final contract documents to which the parties had reached agreement as to how the trucks and trailers would be paid for.

    The Applicants were never given any opportunity to seek legal advice in regard to the credit application.

6.    The work lasted for approximately 16 months. Toll SPD did not require the trucks to do the work anymore and claimed that they never sold the Applicant's work.

7.    The Applicants advised the Respondent in about November 2007 and asked the Respondent to refinance pursuant to its promise and advertisements. All the vehicle payments were up to date and approximately $200,000 had been paid back at that time.

8.    The Respondent made various verbal and written undertakings that it would refinance from November 2007 until 17 July 2008. During that time the Applicants paid a further $90,000.

9.    On 24 June 2008 the First Applicant broke his neck, taking some 6 months to heal.

10.    On 17 July 2008 the Respondent refused to refinance. Approximately one week later it issued repossession notices for the trucks and trailers.

11.    The Applicants sought help from an accounting firm Hall Chadwick.

    Hall Chadwick brokered a Deed of Company Arrangement which would have had the Respondent's refinance the company Menzies Haulage Pty Ltd for the trucks and trailers and returned 100 cents in the dollar by the end of 2009.

    The Respondent threatened to sue Hall Chadwick as administrators if they attempted to assist the Applicants in dealing with the Applicant's claims in any way.

12.    The Respondent wound up the Applicants family company Menzies Haulage in September 2009.

13.    The Respondent sued the Applicants in the Victorian Supreme Court which was transferred to the New South Wales Supreme Court in late 2009.

14.    The Respondent bankrupted the Applicants in June 2010. The Applicants appealed that decision in the Federal Court in Melbourne. The bankruptcy was set aside with costs and incidental costs which the Respondent has refused to pay.

15.    The Respondent in the New South Wales Supreme Court took action against the Applicants. The matter was heard without any evidence from the Applicants and in their absence.

16.    The Applicants claim Damages pursuant to the Respondent failing to refinance in line with the Flexible Finance promised and advertised on its website and that the work said to be provided was not ongoing.

17.    The contract between the Applicant's and the Respondent's, which was a contract of guarantee was an unfair contract for the purposes of the Independent Contractors Act 2006 (Cth). The Trade Practices Amendment (Australian Consumer Law) Act No.1 and 2. 2010 and The Industrial Relations Act 1996 No. 17.

…

19.    The Applicants allege the Respondents Deed of Loan and Charge Terms and Conditions are unjust and unlawful pursuant to the Independent Contractors Act 2006 and the Trade Practices Amendment (ACL) Act.

•    Prospective liability page 3 100 per cent more than the amount advanced.

•    Clause 7 Increased Costs

•    Clause 19.4 Authority to fill in blanks

•    Clause 20 Rights a Lender may exercise at anytime

•    Clause 20.1 Authority to deal

•    Clause 20.2 Lenders Right to Enter

•    Clause 20.4 Right to rectify

•    Clause 21.4 Order to enforcement

•    Clause 22 Disposal of Secured Property

•    Clause 23.1 Appointment

•    Clause 23.2 Powers

•    Clause 24 Exclusion of time periods

•    Clause 24.1 [sic] No Notice required unless Mandatory

•    Clause 28.3 Certificates

    This is what Harrison As.J. accepted as to the amount alleged to be owed by Menzies without any evidence whatsoever.

    Clause 28.0 [sic] Confidentiality

    Clause 28.7 No Liability for Loss

    Clause 28.8 Conflict of Interest

    The Lender’s and any Receiver’s rights and remedies under any Transaction Document may be exercised even if this involves a conflict of duty or the Lender Or Receiver has a Personal Interest in their exercise.

    The Applicants say without fail the entire Deed of Loan Terms and Conditions should be struck out and Paccar be ordered not to use them whatsoever. Menzies never sighted or signed them in any way, make shape or form.

(emphasis added)

22    The amended statement of claim also asserts that Paccar Financial bankrupted Mr and Mrs Menzies in June 2010 but that, on appeal by Mr and Mrs Menzies, the relevant orders were set aside, with Paccar Australia being ordered to pay their costs.

23    The amended statement of claim also includes allegations that:

    Paccar Financial is guilty of malicious prosecution and abuse of process;

    Paccar Australia has sold and supplied trucks with safety defects;

    the loan agreement contains terms and conditions that are unjust and unlawful.

Summary Dismissal

24    As I have mentioned, Paccar seek summary dismissal of this proceeding. They rely on r 26.01 of the Federal Court Rules 2011 and s 31A of the Federal Court of Australia Act 1976 (Cth) (“FCA Act”). Section 31A relevantly provides:

…

(2)    The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:

(a)    the first party is defending the proceeding or that part of the proceeding; and

(b)    the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.

(3)    For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:

(a)    hopeless; or

(b)    bound to fail;

for it to have no reasonable prospect of success.

(4)    This section does not limit any powers that the Court has apart from this section.

…

25    Section 31A of the FCA Act was considered by the High Court in Spencer v The Commonwealth of Australia (2010) 241 CLR 118. All members of the High Court who addressed the meaning and effect of s 31A recognised that the power to summarily terminate a proceeding is not to be exercised lightly and must be exercised with caution (see French CJ and Gummow J at [24], Hayne Crennan, Kiefel and Bell JJ at [60]). Further, as the language of subs 31A(2) makes clear, it may only be exercised if the Court is satisfied that the proceeding as a whole, or some relevant part of it, has no reasonable prospect of success.

26    French CJ and Gummow J said (at [25]) that subs 31A(2) “requires a practical judgment by the Federal Court as to whether the applicant has more than a ‘fanciful’ prospect of success” and that summary judgment should not be awarded to a respondent merely because the Court is of the view that the applicant is unlikely to succeed on some relevant factual issue. On the other hand, it is apparent from what their Honours said at [21] (when quoting with approval the observations of Lord Hope in Three Rivers District Council v Bank of England (No 3) [2003] 2 AC 1 at 260-261) and at [26] that it may be open to the Court to conclude, upon an application under subs 31A(2), that the factual basis for a claim is fanciful because it is entirely without substance. Hayne, Crennan, Kiefel and Bell JJ emphasised (at [56]-[59]) the use of the phrase “no reasonable prospect” in s 31A and the undesirability of judicial glossing of those words.

Consideration

“Orders setting the contract and the guarantee”

27    The validity and enforceability of the guarantee provided by Mr and Mrs Menzies to Paccar Financial, and Mr and Mrs Menzies’ indebtedness under the guarantee, was finally determined in the Supreme Court proceedings.

28    The claim for orders setting aside the guarantee on the basis that it was never entered into by Mr and Mrs Menzies is precluded by an issue estoppel which prevents Mr and Mrs Menzies from asserting as against Paccar Financial that it was never signed by them: Blair v Curran (1939) 62 CLR 531, Jackson v Goldsmith (1950) 81 CLR 446. In the latter case Fullagar J said at 466:

The rule as to issue estoppel is generally stated in the words of Lord Ellenborough in Outram v Morewood [(1803) 3 East, at p. 355 [102 E.R. at p. 633]]. His Lordship said that parties and privies are “precluded from contending to the contrary of that point, or matter of fact, which having been once distinctly put in issue by them … has been, on such issue joined, solemnly found against them.” This is, I think a true case of estoppel, analogous to estoppel by deed and estoppel by representation. The same rule was concisely stated by Dixon J. in Blair v. Curran [(1939) 62 CLR at p. 534] where his Honour said: – “A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies.”

29    Similarly, Mr and Mrs Menzies are also precluded by an issue estoppel which prevents them from asserting as against Paccar Financial that the amount payable by them under the guarantee was $572,442.96.

30    Moreover, in accordance with the principle of res judicata the causes of action upon which Paccar Finance’s claims against Mr and Mrs Menzies were founded no longer have any independent existence, since they have merged into the order for payment: Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 505 at 507-510, Linprint Pty Ltd v Hexam Textiles Pty Ltd (1991) 23 NSWLR 508 at 515. It is therefore no longer open to Mr and Mrs Menzies to challenge the validity or enforceability of guarantee or Paccar Financial’s entitlements thereunder which are now the subject of the order for payment.

31    Mr and Mrs Menzies submitted that there could be no res judicata or issue estoppel here because the Supreme Court’s decision was “not on the merits.” In support of this argument they argued that the hearing was conducted in their absence and without the benefit of evidence or submissions from Mr and Mrs Menzies. I do not accept that submission.

32    A hearing can still constitute a hearing on the merits even though one party chooses not to appear or to adduce evidence. It is clear that there was a hearing on the merits of the Supreme Court proceedings albeit one at which Mr and Mrs Menzies decided not to appear or to adduce evidence. In any event, it is also clear that a party who withdraws from a proceeding without complying with the rules governing withdrawal or discontinuance will be bound by a final judgment or order made in the proceeding which may also, unless set aside, ground a plea of res judicata in the event that an attempt is later made to litigate the same case: Linprint Pty Ltd at 526-527 per Clarke JA (with whom Samuels JA agreed). Such a judgment or order may also found an issue estoppel with respect to a particular issue of fact or law if it is apparent from the pleadings or other relevant material (including any reasons for judgment) that the issue was necessarily and directly determined in the earlier proceeding: Ramsay v Pigram (1967) 118 CLR 271 at 276 per Barwick CJ.

“Damages for failing to provide refinance as provided”

33    The claims for damages for alleged misleading and deceptive conduct are also not maintainable. The contention that Paccar Financial represented to Mr and Mrs Menzies that it would re-negotiate Menzies Haulage’s finance contract in the event that it was prevented from generating income was specifically raised and rejected in the earlier proceedings. Mr and Mrs Menzies are precluded by the principle of issue estoppel from asserting in these proceedings that any such representation was made to them.

Independent Contractors Act 2006 (Cth)

The relevant statutory provisions

34    Section 16 of the Independent Contractors Act 2006 (Cth) (“the 2006 Act”) allows the Court to make an order setting aside or varying a “services contract” in relation to which an application has been made under s 12(1). Section 4 defines “Court” to mean the Federal Court of Australia or the Federal Circuit Court of Australia.

35    Section 5 of the 2006 Act relevantly provides as follows:

5    Services contract

    General meaning

    (1)    A services contract is a contract for services:

(a)    to which an independent contractor is a party; and

(b)    that relates to the performance of work by the independent contractor; and

(c)    that has the requisite constitutional connection specified in subsection (2).

    The requisite constitutional connection

    (2)    A contract for services has the requisite constitutional connection if:

(a)    at least one party to the contract is:

    (i)    a constitutional corporation; or

    (ii)    the Commonwealth or a Commonwealth authority; or

    (iii)    a body corporate incorporated in a Territory in Australia; or

(b)    one or more of the following subparagraphs is satisfied:

    (i)    the work concerned is wholly or principally to be performed in a Territory in Australia;

    (ii)    the contract was entered into in a Territory in Australia;

    (iii)    at least one party to the contract is a natural person who is resident in, or a body corporate that has its principal place of business in, a Territory in Australia.

    (3)    Without limiting its effect apart from this subsection, subparagraph (2)(a)(i) also has the effect it would have if the reference to a constitutional corporation were, by express provision, confined to a constitutional corporation that has entered into the contract for the purposes of the business of the corporation.

        Conditions and collateral arrangements

    (4)    A condition or collateral arrangement that relates to a services contract is taken to be part of that services contract if, were the condition or arrangement itself a contract for services, it would have the requisite constitutional connection.

36    Sections 12 and 13 provide:

12    Court may review services contract

    (1)    An application may be made to the Court to review a services contract on either or both of the following grounds:

(a)    the contract is unfair;

(b)    the contract is harsh.

    (2)    An application under subsection (1) may be made only by a party to the services contract.

    (3)    In reviewing a services contract, the Court must only have regard to:

(a)    the terms of the contract when it was made; and

(b)    to the extent that this Part allows the Court to consider other matters—other matters as existing at the time when the contract was made.

    (4)    For the purposes of this Part, services contract includes a contract to vary a services contract.

13    Limitation on applications for review of services contracts—prescribed circumstances

    An application to review a services contract must not be made under subsection 12(1) in the circumstances prescribed by the regulations.

37    Sections 15(1)-(4) (there is no subs (2)) and 16(1)-(2) relevantly provide:

15    Powers of Court

(1)    In reviewing a services contract in relation to which an application has been made under subsection 12(1), the Court may have regard to:

(a)    the relative strengths of the bargaining positions of the parties to the contract and, if applicable, any persons acting on behalf of the parties; and

(b)    whether any undue influence or pressure was exerted on, or any unfair tactics were used against, a party to the contract; and

(c)    whether the contract provides total remuneration that is, or is likely to be, less than that of an employee performing similar work; and

(d)    any other matter that the Court thinks is relevant.

(3)    If the Court forms the opinion that a ground referred to in subsection 12(1) is established in relation to the whole or a part of the services contract, the Court must record its opinion, stating whether the opinion relates to the whole or a specified part of the contract.

(4)    The Court may form the opinion that a ground referred to in subsection 12(1) is established in relation to the whole or a part of the services contract even if the ground was not canvassed in the application.

16    Orders that Court may make

(1)    If the Court records an opinion under section 15 in relation to a services contract, the Court may make one or more of the following orders in relation to the opinion:

(a)    an order setting aside the whole or a part of the contract;

(b)    an order varying the contract.

(2)    An order may only be made for the purpose of placing the parties to the services contract as nearly as practicable on such a footing that the ground on which the opinion is based no longer applies.

38    Regulation 5 of the Independent Contractors Regulations 2007 (Cth) provides as follows:

Time limit on applications for review of services contracts — prescribed circumstances (time limit for applications)

(1)    For section 13 of the Act, and subject to subregulation (2), a circumstance in which an application must not be made under subsection 12 (1) of the Act is that the time limit for making an application of that kind has expired.

(2)    However, if a person satisfies the Court that there are exceptional circumstances justifying the making of the application:

(a)    subregulation (1) does not apply; and

(b)    the Court may, on application by the person, allow an application under subsection 12 (1) of the Act to be made at any time after the time limit expires.

(3)    The time limit expires after a period of 12 months starting on the date on which a services contract ends.

Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth)

39    One of the arguments which Paccar relies upon in support of its application for summary dismissal is founded upon s 4 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) (“the Cross-vesting Act”). Section 4(1) relevantly provides:

(1)    Where:

(a)    the Federal Court or the Family Court has jurisdiction with respect to a civil matter, whether that jurisdiction was or is conferred before or after the commencement of this Act; and

(b)    the Supreme Court of a State or Territory would not, apart from this section, have jurisdiction with respect to that matter;

then:

(c)    in the case of the Supreme Court of a State (other than the Supreme Court of the Australian Capital Territory and the Supreme Court of the Northern Territory)—that court is invested with federal jurisdiction with respect to that matter; or

(d)    in the case of the Supreme Court of a Territory (including the Australian Capital Territory and the Northern Territory)—jurisdiction is conferred on that court with respect to that matter.

40    Section 4 does not apply to any matter arising under various Acts or provisions of Acts that are specifically identified in subsec (4). The 2006 Act is not one of them.

41    In Re Wakim; Ex parte McNally (1999) 198 CLR 511 the High Court held that the Cross-vesting Act attempted to confer on the Federal Court jurisdiction not found in ss 75 and 76 of the Constitution and was, to the extent it purported to do so, invalid. The High Court did not find, nor was it even suggested, that the Cross-vesting Act was invalid in so far as it sought to confer federal jurisdiction on the state courts. As Brereton J explained in Young v Lalic [2006] NSWSC 18 at [43]-[47], the reasoning in Re Wakim is unique to the conferral of state jurisdiction on federal courts and does not extend to the conferral of federal jurisdiction on state courts.

42    Accordingly, by virtue of s 4(1) of the Cross-vesting Act, the Supreme Court of New South Wales was at all relevant times invested with federal jurisdiction with respect to the matters arising under the 2006 Act including the matter that is now the subject of this proceeding.

43    Paccar submitted it is not open to Mr and Mrs Menzies to maintain their claim for relief under the 2006 Act in this proceeding due to what is commonly referred to as Anshun estoppel. Paccar relies on the principles discussed by the High Court in Port of Melbourne Authority v Anshun (No 2) (1981) 147 CLR 589 at 602-604 including the following statement by the majority at 602-303:

… there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few.

44    Anshun estoppel can also apply to preclude a cross-claim although in that context special difficulties may arise as was recognised by the Full Court in Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287 (Beaumont, Wilcox and Moore JJ). The Full Court said at 297-298:

… in contrast to defences, many cross-claims may have little or no connection with the principal claim in the action; there may be no more than an identicality of parties. Where that is so, there may be no policy justification for forcing defendants to litigate their claims as cross-claims rather than as principal claims in separate actions in the forum of their choice. But, where, as here, a defendant's claim is intimately connected with that of the plaintiff, in the sense that each arises, substantially, out of the same matters of fact, there is every reason to require that both be litigated at the one time; thereby minimising costs and avoiding the possibility of inconsistent judgments …

45    I am satisfied that Mr and Mrs Menzies’ claim for relief under the 2006 Act could and should have been raised by them in their proceeding in the Supreme Court in which they sought orders setting aside the guarantee on the basis that it was unjust and unfair. The relief sought by Mr and Mrs Menzies in this Court would, if granted, have provided them with a complete defence to the case brought against them by Paccar Financial in the Supreme Court. Further, the subject matter of the Supreme Court proceedings and this proceeding are so closely related that it was unreasonable for Mr and Mrs Menzies not to have raised their claims for relief under the 2006 Act in the same proceedings in which they raised their closely analogous claims under (inter alia) the Contracts Review Act 1987 (NSW).

46    This is a very clear case in which the principles discussed in Anshun apply to prevent Mr and Mrs Menzies’ maintaining their claims under the 2006 Act in this proceeding.

47    Paccar raised various other arguments suggesting that Mr and Mrs Menzies claims under the 2006 Act were bound to fail. These included arguments that the guarantee was not a services contract within the meaning of s 5(1) of the 2006 Act. It is not necessary to address those other arguments which raise questions concerning the potential application of s 5(4) in the circumstances of this case.

Maladministration

48    The allegation pleaded in para 17(a) of the amended statement of claim purports to plead a cause of action not known in law.

Malicious prosecution

49    Paragraph 17(b) of the amended statement of claim alleges that Paccar has committed the tort of malicious prosecution.

50    In Gregory v Portsmouth City Council [2000] 1 AC 419 Lord Steyn said at 426:

To ground a claim for malicious prosecution a plaintiff must prove (1) that the law was set in motion against him on a criminal charge; (2) that the prosecution was determined in his favour; (3) that it was without reasonable and proper cause, and (4) that it was malicious: Martin v. Watson [1996] A.C. 74, 80. Damage is a necessary ingredient of the tort.

51    His Lordship observed at 427 that, under English law, the tort of malicious prosecution is not generally available in respect of civil proceedings although it may be available in some special cases including for the malicious prosecution of a petition in bankruptcy: see Johnson v Emmerson and Sparrow (1871) 6 Exch 329.

52    The proceedings referred to in the amended statement of claim include the proceedings in the Supreme Court of Victoria and the Supreme Court of New South Wales which were consolidated and resolved in favour of Paccar Financial by the various orders made in its favour. Any claim by Mr and Mrs Menzies for malicious prosecution of those proceedings could not succeed.

53    The amended statement of claim also refers to proceedings in which sequestration orders were made by the Federal Magistrates Court (as it was then known) in respect of Mr and Mrs Menzies’ estates. The relevant facts are recited by Bromberg J in his judgment in Mr and Mrs Menzies’ appeal (see Menzies v Paccar Financial Pty Ltd [2011] FCA 460).

54    The matter before his Honour was an appeal by Mr and Mrs Menzies against orders of a Federal Magistrate made on 11 June 2010 substituting Paccar Financial as the petitioning creditor, sequestrating the estates of Mr and Mrs Menzies, and ordering them to pay Paccar Financial’s costs. Each of those orders was set aside by his Honour. Rather than dismiss the creditor’s petition, his Honour ordered that it be remitted to the Federal Magistrate Court. What became of the creditor’s petition after that is not apparent from the evidence.

55    At the time the Federal Magistrate made the relevant orders, the Supreme Court proceedings were yet to be determined. However, the Federal Magistrate concluded that there was no genuine dispute as to the existence of the debt which Paccar Financial alleged was owed to it by Mr and Mrs Menzies. Bromberg J allowed Mr and Mrs Menzies’ appeal on the ground that the Federal Magistrate should have found that there was a genuine dispute as to the existence of the debt and that the Federal Magistrate’s discretion miscarried in making the order substituting Paccar Financial as petitioning creditor.

56    In their submissions Mr and Mrs Menzies asserted repeatedly that they never signed the guarantee upon which they were sued. Whether or not those allegations, if they had been accepted as correct, might have provided some proper basis for finding that the bankruptcy proceeding was prosecuted by Paccar Financial maliciously, and without reasonable proper cause, is a hypothetical question that I do not propose to address.

57    As previously explained, the Supreme Court rejected Mr and Mrs Menzies’ version of events. It is not open to them to assert in this proceeding that the guarantee was not signed by them or that it was otherwise invalid or unenforceable. Moreover, Harrison AsJ rejected Mr and Mrs Menzies’ contention (as explained below) that Paccar Financial acted improperly in its conduct of the bankruptcy proceeding. Mr and Mrs Menzies are bound by that determination. It is not open to them to re-litigate that matter in this proceeding.

58    There is no tenable case of malicious prosecution open to Mr and Mrs Menzies arising out of the bankruptcy proceedings.

Abuse of process

59    Paragraph 17(b) of the amended statement of claim also alleges that Paccar Financial committed the tort of abuse of process. To the extent that this cause of action is said to be founded upon Paccar Financial’s attempt to be substituted as petitioning creditor in the bankruptcy proceedings it is bound to fail.

60    As previously noted, in proceeding 2011/176144 in the Supreme Court of New South Wales, Mr and Mrs Menzies sued Paccar Financial for the tort of abuse of process. The basis of that claim, according to Harrison AsJ, was Mr and Mrs Menzies’ allegation “that Paccar was trying to shut them out from having a hearing on the merits about a debt that Menzies [sic] say Paccar knew was disputed.” Her Honour found that Paccar did not, by seeking to be substituted as a petitioning creditor in the bankruptcy proceedings, engage in an abuse of process. It was on this basis that Mr and Mrs Menzies’ proceeding (2011/176144) was dismissed. Mr and Mrs Menzies’ appeal against that order was dismissed by the Court of Appeal.

61    Mr and Mrs Menzies claim that Paccar Financial engaged in an abuse of process by seeking to be substituted as a creditor in the bankruptcy proceedings is res judicata. It is not open to them to re-litigate that claim in this proceeding.

62    In so far as Mr and Mrs Menzies seek to plead a claim against Paccar Financial arising out of the conduct of the Supreme Court proceedings, this is another matter that they could and should have raised in proceeding 2011/176144. Further, it is impossible to see how any such claim could have any substance given that, in the bankruptcy proceeding, Mr and Mrs Menzies’ principal argument was that the Supreme Court was the appropriate jurisdiction in which to determine the question whether they were indebted to Paccar Financial. The proposition that Paccar Financial, in commencing and prosecuting the proceedings for possession of the Kenworth equipment and for the order for payment, was actuated by an improper purpose is, in my opinion, fanciful.

Liability for design defects

63    Paragraph 18 and 18(a) of Mr and Mrs Menzies’ amended statement of claim allege as follows:

18.    The Respondent along with its subsidiary Paccar Australia Pty Ltd sold and supplied K104 trucks with safety defects (razor sharp steps leading up to a small cab door that is not at the end of the steps but approximately 1 metre forward necessitating a dangerous swinging climbing manoeuvre into a small garden gate type door with an extruded aluminium door frame edges thus often causing unwarranted injuries to drivers and passengers alike.

18(a)    The Respondent has manufactured and sold its cab over / forward control trucks since the approximately 1960's and up until the present time (17 September 2015) utilising almost identical entry and egress to and from the cabin as claimed at 18. above in breach of the Trades Practices Amendment (Australian Common Law) Act No 2. 2010 Item 9. (Meaning of Safety defect in relation to goods) pursuant to Item 7. (Meaning of Manufacturer).

64    There is no specific allegation in the amended statement of claim alleging that either Mr or Mrs Menzies (or any other person) has suffered any loss or damage as a result of the alleged safety defect.

65    The Kenworth equipment (including the K104 prime movers), which was delivered to Menzies Haulage in 2006, was “second-hand” equipment acquired by Menzies Haulage from Thornhill. Thornhill purchased the K104 prime movers from a dealer, Brown & Hurly Group Pty Ltd trading as Kyogle (“Kyogle”) in 2003. A purchase order dated 7 August 2003 pertaining to the sale of one of the K104 prime movers to Thornhill (a copy of which is annexed to Mr Menzies’ affidavit) indicates that they were built in 2003. This is consistent with the loan agreements which describe each of the two vehicles, chassis no 424892 and 424893, as “[u]sed 2003 Kenworth K104 Prime Mover.”

66    Section 143 of the Australian Consumer Law provides:

(1)    Subject to subsection (2), a person may commence a defective goods action at any time within 3 years after the time the person became aware, or ought reasonably to have become aware, of all of the following:

(a)    the alleged loss or damage;

(b)    the safety defect of the goods;

(c)    the identity of the person who manufactured the goods.

(2)    A defective goods action must be commenced within 10 years of the supply by the manufacturer of the goods to which the action relates.

67    It is apparent that s 143(2) is intended to provide a manufacturer with a “long-stop” limitation defence with the 10 year long-stop limitation period being calculated from the date upon which the manufacturer first supplies the defective goods. This is confirmed by the Explanatory Memorandum to the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 which at paras 12.47 and 12.49 states:

12.47    A safety defective goods action is required to be commenced within three years from the time when the person bringing the action (the plaintiff) was aware, or should have become aware, of the following matters [Schedule 1, item 1: Chapter 3, Part 3-5, Division 1, subsection 143(1)]:

•    the loss or damage alleged to have been suffered;

•    the safety defect in the good in question; and

•    the identity of the manufacturer of the good in question.

…

12.49    However, a safety defective goods action must be brought within 10 years of the particular good in question which is alleged to have a safety defect, being supplied by its manufacturer. [Schedule 1, item 1: Chapter 3, Part 3-5, Division 1, subsection 143(2)] The 10 year time limit starts from the time when the particular good in question was supplied by the manufacturer, and not when goods of that kind were first supplied. It does not matter to whom the good in question had been supplied to or acquired by.

68    Mr and Mrs Menzies commenced this proceeding on 5 August 2015, some 12 years after the year in which the prime movers were supplied to Thornhill. The prime movers must have been supplied by the manufacturer, Paccar Australia, to either Kyogle or Thornhill in either 2003 or 2004. Any claim that Mr or Mrs Menzies may have had under s 138(1) of the Australian Consumer Law was not brought within the time prescribed by s 143(2) and is therefore out of time.

COSTS

69    The final question that arises concerns the costs of the proceeding. Section 17 of the 2006 Act provides:

(1)    A party (the first party) to a proceeding (including an appeal) in a matter arising under this Part must not be ordered to pay costs incurred by any other party to the proceeding unless the first party instituted the proceeding vexatiously or without reasonable cause.

(2)    Despite subsection (1), if a court hearing a proceeding (including an appeal) in a matter arising under this Part is satisfied that a party (the first party) to the proceeding has, by unreasonable act or omission, caused another party to the proceeding to incur costs in connection with the proceeding, the court may order the first party to pay some or all of those costs.

(3)    In this section:

    costs includes all legal and professional costs and disbursements, and expenses of witnesses.

70    The language of s 17 of the 2006 Act is substantially the same as that found in s 570(2) of the Fair Work Act 2009 (Cth). In Australian Workers Union v Leighton Contractors Pty Ltd (No 2) (2013) 232 FCR 428, the Full Court, which was in that case concerned with an application for costs made under s 570 of the Fair Work Act, said at [7]-[8]:

[7]    In Khiani v Australian Bureau of Statistics [2011] FCAFC 109 (Khiani) the Full Court endorsed the summary of the authorities provided by Reeves J in Re Australian Education Union (NT Branch) (No 2) [2011] FCA 728 at [27]-[30]. In our view the authorities establish the following principles:

(1)    The purpose or policy of the section is to free parties from the risk of having to pay their opponents’ costs in matters arising under the Act, while at the same time protecting those parties who are forced to defend proceedings that have been instituted vexatiously or without reasonable cause.

(2)    It follows from the protection offered by s 570(2) that a person will rarely be ordered to pay the costs of a proceeding. But it is not necessary to prove that there are exceptional circumstances warranting the making of an order: Spotless Services Australia Ltd v Senior Deputy President Marsh [2004] FCAFC 155 (Spotless) at [12]-[13] (to the extent that the Full Court in Council of Kangan Batman Institute of Technology and Further Education v Australian Industrial Relations Commission (2006) 156 FCR 275 (Kangan) held otherwise, we would respectfully disagree).

(3)    The relevant question is whether the proceeding had reasonable prospects of success at the time it was instituted, not whether it ultimately failed: R v Moore; Ex parte Federated Miscellaneous Workers’ Union of Australia (1978) 140 CLR 470 at 473 per Gibbs J; Kangan at [60]. In Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257 at 264-265 (approved in Kangan) Wilcox J said:

    If success depends upon the resolution in the applicant’s favour of one or more arguable points of law, it is inappropriate to stigmatise the proceeding as being “without reasonable cause”. But where, on the applicant’s own version of the facts, it is clear that the proceeding must fail, it may properly be said that the proceeding lacks a reasonable cause.

[8]    We would emphasise, however, that these principles relate to the question of whether the jurisdiction to award costs is enlivened. Even if the Court has jurisdiction to make a costs order, it retains the discretion to refrain from exercising it in an appropriate case.

71    In my view this proceeding was instituted by Mr and Mrs Menzies without reasonable cause. In particular, Mr and Mrs Menzies’ view (assuming it was genuinely held) that it remained open to them to re-litigate the same, or substantially the same, issues that were decided against them in the Supreme Court proceedings was not a reasonable one and appears to be the product of their continuing and irrational refusal to accept (whether they agree with it or not) the decision of the Supreme Court. I refer in particular to their assertions in this Court in their amended statement of claim and their evidence and submissions that they never signed anything other than attestation pages. It is not for me to comment on the soundness of the Supreme Court’s rejection of their version of events or any alleged procedural unfairness about which they have also complained. The Court of Appeal was satisfied that the primary judge’s decision was correct and that there was no procedural unfairness. Mr and Mrs Menzies are bound by the Supreme Court’s findings that they signed the guarantee and that it was valid and enforceable.

72    On the view I have taken it is not necessary to consider whether this is a case in which it would be appropriate to apportion costs as between Mr and Mrs Menzies’ claims under the 2006 Act and their other claims: cf. Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v ALS Industrial Australia Pty Ltd (No 2) [2015] FCAFC 166.

disposition

73    In my opinion none of the claims made by Mr and Mrs Menzies has any reasonable prospects of success. This proceeding will be summarily dismissed. Mr and Mrs Menzies must pay Paccars’ costs.

74    There will be orders accordingly.

Associate:

Dated:    21 April 2016