Federal Court of Australia

Zurich Australian Insurance Ltd v Atradius Credito Y Caucion S.A. De Seguros Y Reaseguros [2022] FCA 709

ORDERS

THE COURT ORDERS THAT:

1.    By 24 June 2022, the applicant file and serve:

(a)    an amended originating application pursuant to r 8.21 of the Federal Court Rules 2011 (Cth); and

(b)    a statement of claim.

2.    By 8 July 2022, the respondent file and serve its defence.

3.    Subject to Order 4, costs in proceeding number PEG 281 of 2021 before the Federal Circuit and Family Court (Div 2) (FCFCoA) be costs in this Court in proceeding number WAD 93 of 2022 and be costs in the cause.

4.    Order 3 is not to cover such costs as relate solely to the jurisdiction of the FCFCoA (as distinct from federal jurisdiction and the jurisdiction of this Court), which costs may be dealt with by the FCFCoA.

5.    The costs of and incidental to the amendment of the originating application filed on 13 May 2022 be costs in the cause.

6.    The matter be referred to Jagot J as Senior Insurance List Judge.

7.    The parties jointly communicate with the Chambers of Jagot J for the listing of the matter for a case management hearing not before 15 July 2022.

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

REASONS FOR JUDGMENT

ALLSOP CJ:

1    This matter came before me as an application to remove proceeding number PEG 281 of 2021 from the Federal Circuit and Family Court of Australia (Div 2) (FCFCoA) to this Court under s 32AC of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act). For reasons explained below, it dissolved into an unfortunate dispute about costs flowing from a misunderstanding about federal jurisdiction.

2    The FCFCoA and Federal Court are both conferred with federal jurisdiction. It is important, however, to understand the terms and scope of the jurisdiction so conferred.

3    The Federal Court’s jurisdiction includes jurisdiction to hear all matters arising under any laws of the Parliament: s 39B(1A)(c) of the Judiciary Act 1903 (Cth) and s 76(ii) of the Constitution. The jurisdiction conferred by s 39B(1A)(c) may appropriately be described as plenary federal civil jurisdiction: see Mulley v Hayes [2021] FCA 1111; 286 FCR 360 at 378 [54]. The width of the phrase matters “arising under any laws made by the Parliament” has been the subject of many cases: see National Australia Bank Ltd v Nautilus Insurance Pte Ltd (No 2) [2019] FCA 1543; 377 ALR 627; Lindell G, Cowen and Zine’s Federal Jurisdiction in Australia (4th ed, The Federation Press, 2016); Leeming M, Authority to Decide: The Law of Jurisdiction in Australia (2nd ed, The Federation Press, 2020).

4    The FCFCoA is not conferred with such plenary federal civil jurisdiction. It is conferred with such jurisdiction as is conferred by individual provisions in Acts of Parliament and as such individual provisions may provide.

5    The applicant began this proceeding in the FCFCoA for the understandable reason of minimising costs. It was a claim for contribution between insurers for a little over $100,000. The statement of claim need not be traversed in detail. Express reference was made to s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) in a cryptic paragraph concerning the respondent co-insurer’s alleged misleading or deceptive conduct towards the common insured. It may be that the applicant co-insurer could in part found its claim for co-insurance on the respondent co-insurer being held to its representation to the common insured. If the proceeding had been commenced in the Federal Court, this would appear to have been sufficient to enliven this Court’s jurisdiction over the whole of the matter because of s 12DA of the ASIC Act.

6    The FCFCoA, however, does not have jurisdiction over claims arising under or with respect to s 12DA of the ASIC Act.

7    When one looks to the whole of the controversy, not just the statement of claim (cf Tucker v McKee [2022] FCAFC 98), the controversy gives rise to other matters relevant to federal jurisdiction. First, the likely application of s 54 of the Insurance Contracts Act 1984 (Cth) in any reply to the defence propounded by the respondent co-insurer referable to breach of a condition by the third party insured. Secondly, the possible application of s 45 of the Insurance Contracts Act to the clause in the respondent’s insurance policy purporting to excluded co-insurance. These matters would also appear to give the Federal Court jurisdiction with respect to the whole of the controversy that is capable of being resolved: the whole of the controversy is not determined by the mere form of the originating process: Nautilus Insurance 377 ALR 627 at 647–650 [78]–[85].

8    Such matters are not, however, sufficient to enliven the FCFCoA’s jurisdiction, as it is not conferred with any jurisdiction over the Insurance Contracts Act.

9    After the issue of FCFCoA’s jurisdiction was initially raised by Judge Ladhams, the applicant sought to have proceeding PEG 281 of 2021 transferred by the FCFCoA to this Court to avoid a jurisdictional fight in the FCFCoA pursuant to s 153 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (FCFCoA Act). The respondent opposed the proposed transfer order on the basis that the Federal Court did not have jurisdiction. The applicant subsequently filed an application under s 32AC of the Federal Court Act to have the proceedings removed from the FCFCoA to the Federal Court by an order of this Court.

10    The problem with this approach (which I raised with the parties for the first time immediately after the transfer application in this Court was filed) is that the power of the FCFCoA to transfer proceedings to the Federal Court, and the power of the Federal Court to remove proceedings from the FCFCoA, depend upon the prepositional phrase that “a proceeding is pending” in the FCFCoA. Analogous language is found in s 5 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth). In seriously considered dicta, Gleeson CJ, McHugh and Heydon JJ in BHP Billiton Ltd v Schultz [2004] HCA 61; 221 CLR 400 at 421 [14] stated that an application for transfer under s 5 “is brought upon by the hypothesis that the jurisdiction of the court to which the application is made has been regularly invoked”. This was applied by Greenwood J in Amalia Investments Ltd v Cirgtel Global Network NV (No 2) [2011] FCA 1270; 198 FCR 248 at 255 [35] as follows:

It follows therefore that once it is clear (or a concession is made) that the proceeding fails to regularly invoke the jurisdiction of the transferor court, the assumption upon which s 5 operates and is to be engaged, fails to be satisfied. Although the proceeding in the Federal Court is a pending proceeding as a question of fact, it is not a proceeding which regularly invokes the jurisdiction of the court and thus s 5 is not engaged at all.

11    In my view, these observations apply equally to s 153 of the FCFCoA Act and s 32AC of the Federal Court Act. It is not possible for the FCFCoA to transfer, or for this Court to remove, proceedings commenced in the FCFCoA which do not regularly invoke the jurisdiction of the FCFCoA. Both provisions depend on the hypothesis that a “proceeding is pending” before the FCFCoA: that is, a proceeding within the jurisdiction of that court. Be it otherwise, constitutional concerns could arise as to ss 32AC and 32AD of the Federal Court Act, particularly sub-sections 32AC(8) and 32AD(3) (which confirm the Federal Court’s jurisdiction to hear proceedings transferred or removed from the FCFCoA which are not otherwise within the Federal Court’s jurisdiction), conferring non-federal judicial power on the Federal Court: Re Wakim; Ex parte McNally [1999] HCA 27; 198 CLR 511.

12    The proceedings can, however, be recommenced afresh in this Court. Such recommencement would incur a filing fee. To avoid incurring another fee, the applicant sought leave to amend its originating application in this Court (that is, the application to remove proceeding number PEG 281 of 2021 to this Court) by removing the transfer orders sought and filing with it a statement of claim substantially in the form filed in the FCFCoA. The respondent did not oppose leave being granted. Such leave will be granted. An order requiring the respondent to file its defence by 8 July 2022 was also agreed.

13    This leaves the issue of costs. The respondent sought a lump sum costs order of $10,899 plus GST for costs incidental to considering the question of the FCFCoA’s jurisdiction and the costs thrown away by reason of the filing of an amended originating application in this Court. The applicant opposed this order, and submitted that the costs of the FCFCoA proceeding and the transfer application should be costs in the cause in this Court.

14    There is no reason why this Court cannot order that costs in the FCFCoA be costs in this Court. Certainly, all costs that deal with the substance of the claim, not jurisdictional skirmishing, should be costs in the cause in this Court. I am of the view that all costs concerning the jurisdiction of this Court (not the FCFCoA) should be the subject of this order. The respondent, however, may have a legitimate claim to its costs of considering the FCFCoA’s jurisdiction but only if such costs are entirely separate from considering the Federal Court’s jurisdiction, which matter can be resolved by this Court in due course (and if necessary).

15    Looking at the correspondence annexed to the affidavit of Mr Trent O’Neill sworn 12 May 2022, there does not appear to have been refined or precise consideration of federal jurisdiction. Federal jurisdiction has been discussed as a concept, rather than with precise analysis with respect to the whole of the controversy (which may be broader than the pleadings as they currently stand) and whether the whole of that controversy falls within the jurisdiction of the Federal Court or FCFCoA by reference to the statutory provisions that confer jurisdiction on either court.

16    I do not wish to add to the costs of this case. I do not accept that the respondent should be entitled (at least now) to its costs of disputing this Court’s jurisdiction, either before the FCFCoA or before me on the transfer application: such costs shall be costs in the cause. But it would be unjust to make a costs order that costs in the FCFCoA are costs in this Court which did not exclude the respondent’s costs referable only to properly considering the jurisdiction of the FCFCoA, which costs may be dealt with by the FCFCoA.

17    The orders of the Court will be as follows:

(1)    By 24 June 2022, the applicant file and serve:

(a)    an amended originating application pursuant to r 8.21 of the Federal Court Rules 2011 (Cth); and

(b)    a statement of claim.

(2)    By 8 July 2022, the respondent file and serve its defence.

(3)    Subject to Order 4, costs in proceeding number PEG 281 of 2021 before the Federal Circuit and Family Court (Div 2) (FCFCoA) be costs in this Court in proceeding number WAD 93 of 2022 and be costs in the cause.

(4)    Order 3 is not to cover such costs as relate solely to the jurisdiction of the FCFCoA (as distinct from federal jurisdiction and the jurisdiction of this Court), which costs may be dealt with by the FCFCoA.

(5)    The costs of and incidental to the amendment of the originating application filed on 13 May 2022 be costs in the cause.

(6)    The matter be referred to Jagot J as Senior Insurance List Judge.

(7)    The parties jointly communicate with the Chambers of Jagot J for the listing of the matter for a case management hearing not before 15 July 2022.

Associate:

Dated:    17 June 2022