Non-federal claims (common law, State statute) may be included in Federal Court proceedings alongside federal claims when the claims arise out of common transactions and facts and the federal claim is a substantial aspect of the controversy, thereby avoiding the need for parallel proceedings in State courts.
Later decisions that cite Fencott v Muller ("O'Connors Winebar case")
Decisions cited by Fencott v Muller ("O'Connors Winebar case")
FENCOTT v. MULLER (1983) 152 CLR 570
Constitutional Law (Cth)
High Court of Australia
Gibbs C.J.(1), Mason(2), Murphy(2), Brennan(2), Deane(2), Wilson(3)
and Dawson(4) JJ.
CATCHWORDS
Constitutional Law (Cth) - Powers of the Commonwealth Parliament - Trading and financial corporations - Trade practices legislation - Prohibition of corporations from engaging in misleading or deceptive conduct - Imposition of liability for damages on persons involved in such conduct - Imposition on persons other than corporations - Validity - The Constitution (62 & 63 Vict. c. 12), s. 51(xx) - Trade Practices Act 1974 (Cth), ss. 4(1), 52(1), 75B, 82(1), 84(2).Constitutional Law (Cth) - Trading and financial corporations - Character of corporation &which has barely begun to carry on business - Relevance of constitution including objects - The Constitution (62 & 63 Vict. c. 12), s. 51(xx).
Constitutional Law (Cth) - Judicial power of the Commonwealth - Federal jurisdiction - Federal Court of Australia - Non-federal claims - Whether part of same matter as federal claims - The Constitution (62 & 63 Vict. c. 12), ss. 76, 77 - Trade Practices Act 1974 (Cth), s. 86.
HEARING
1982, September 15-16; 1983, April 28. 28:4:1983DECISION
1983, April 282. The proceedings were commenced in the Federal Court by Mr. Muller and Scrid Nominees Pty. Ltd. ("Scrid"), the present respondents, and the facts alleged in their amended statement of claim, as explained in some respects in the course of argument, but excluding those paragraphs which Toohey J. held raised matters not within the jurisdiction of the Court, are as follows. Scrid, as trustee of a trust called the O'Connors Unit Trust, was the assignee of the leasehold interest in premises in Hay Street, West Perth, and conducted on those premises a business of restaurateur and wine bar operator. Until 6 February 1981 the first appellants, Mr. and Mrs. Fencott, were the sole directors and shareholders of Scrid. At some time in or before January 1981, Mr. and Mrs. Fencott decided to sell the business, and gave instructions accordingly to H. & T. Holdings ("H. & T."), a company which carried on business as a real estate agent and business broker. One James John Hondros, who was employed by H. & T. as a salesman or agent, entered into negotiations with the first respondent, Mr. Muller, and in the course of those negotiations made certain false representations as to the profits, turnover and operating expenses of the business. The representations were made on behalf of Scrid, and with the intention of inducing Mr. Muller to purchase the business from Scrid, and the making of the representations was authorized or initiated by Mr. and Mrs. Fencott, or alternatively by H. & T., or alternatively by Mr. Hondros, in the knowledge that the representations were false, or alternatively with reckless indifference to their truth or without belief in their truth, or in the further alternative, negligently. In yet a further alternative, it was alleged that the representations became conditions or warranties of the contract about to be mentioned. In reliance on the representations, Mr. Muller entered into a written agreement dated 27 January 1981 for the sale and purchase of the business, for a price of $150,000 plus stock at valuation. It was a term of the agreement that Scrid should pay all debts and liabilities of the business incurred or accrued prior to transfer of possession, which in fact was given on 23 February 1981, and should indemnify Mr. Muller in respect of all claims and proceedings in respect thereof. The agreement was conditional upon either the assignment of the lease by Scrid to Mr. Muller or alternatively upon the transfer of the shareholding in Scrid to Mr. Muller. The second of these alternative conditions was satisfied by the transfer by Mr. and Mrs. Fencott of their shares in Scrid to Mr. Muller on 6 February 1981. Subsequently the second appellant, Oakland Nominees Pty. Ltd. ("Oakland"), was appointed as trustee of the O'Connors Unit Trust in place of Scrid. (at p579)
3. On or about 19 May 1981, the third appellant, Mr. Johnsen, acting as duly authorized agent of Oakland, caused to be posted to trade creditors of Scrid letters, purporting to be signed by Scrid, which stated that Scrid did not have the necessary funds to pay its debts as at 22 February 1981, because of the failure by Mr. Muller to settle the balance of outstanding moneys due in accordance with the terms of the contract, and that this failure had made it necessary for Scrid's solicitors to issue a writ. The sending of the letter constituted misleading or deceptive conduct by or on behalf of Oakland. (at p580)
4. The above allegations appear to be those on which the respondents rely;
they have of course not yet been the subject of proof,
and we are not
concerned with the merits of any of the respondents' claims as a matter of
law, but only with the question of jurisdiction.
On 28 May 1981, Oakland
commenced proceedings in the Supreme Court of Western Australia against Mr.
Muller, claiming the balance
of purchase moneys payable under the contract,
and the present proceedings were commenced in the Federal Court on 10 July
1981 by
Mr. Muller and Scrid against the present appellants and also against
H. & T. and Mr. Hondros, who are not parties to this appeal.
The claims made
by Mr. Muller and Scrid in those proceedings (other than those as to which the
objection to jurisdiction was allowed)
are as follows:
(1) A claim by Mr. Muller against Mr. and Mrs. Fencott, H. & T. and Mr.
Hondros for damages resulting from the false
representations;
this claim
is made under ss. 75B and 82 of the Trade Practices Act 1974 (Cth), as
amended, ("the Act") for damages caused by a contravention of s. 52 of
that Act, in which the persons against whom the claim is made were
involved, or alternatively is made at common law, i.e.
as a claim for
damages for fraud, negligence or breach of contract.
(2) A claim by Scrid against Mr. and Mrs. Fencott, H. & T. and Mr. Hondros for damages for breach of a fiduciary duty owed by Mr. and Mrs. Fencott as directors of Scrid to that company and broken by the making of the false representations; H. & T. and Mr. Hondros are said to be liable because they aided and abetted Mr. and Mrs. Fencott in their breach of duty.
(3) A claim by Scrid to be indemnified by Oakland out of the assets of the trust in respect of liability by Scrid which it has incurred to Mr. Muller (a) under s. 82 of the Act and at common law for deceit, negligence and breach of contract by reason of the false representations made on its behalf; and (b) pursuant to the agreement to pay the debts and liabilities incurred in the conduct of the business.
(4) A claim by Mr. Muller and Scrid against Oakland under s. 82 of the Act for damages caused by the contravention of s. 52 of the Act, constituted by the sending of the letter to the trade creditors on or about 19 May 1981, and against Mr. Johnsen, as a person involved in the contravention. (at p581)
5. The jurisdiction of the Federal Court in the present case depends on s. 86
of the Act, which appears in Pt VI and reads as follows:
"Jurisdiction is conferred on the Court to hear and determine actions,
prosecutions and other proceedings under this Part
and that jurisdiction
is exclusive of the jurisdiction of any other court, other than the
jurisdiction of the High Court
under section 75 of the Constitution."
Other provisions which appear in the same Part, and which are relevant in the
present case, are ss. 75B, 82(1) and 84(2). Those provisions are as follows:
"75B. A reference in this Part to a person involved in a contravention of a
provision of Part IV or V shall be read as a reference to a person who -The provisions of Pt V which are said to have been contravened in the present case are those of s. 52(1), which provides as follows: "A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive." (at p581)
(a) has aided, abetted, counselled or procured the contravention;
(b) has induced, whether by threats or promises or otherwise, the contravention;
(c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or
(d) has conspired with others to effect the contravention."
"82. (1) A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV of V may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention."
"84. (2) Any conduct engaged in on behalf of a body corporate by a director, agent or servant of the body corporate or by any other person at the direction or with the consent or agreement (whether express or implied) of a director, agent or servant of the body corporate shall be deemed, for the purposes of this Act, to have been engaged in also by the body corporate."
6. It is clear that it is competent for the Parliament to confer on the
Federal Court jurisdiction only with respect to matters
of the kinds described
in ss. 75 and 76 of the Constitution: see s. 77(1) of the Constitution, and
Philip Morris v. Brown (1981) 148 CLR 457, at p 491 . For present purposes,
that means that the Federal Court
has jurisdiction
only with respect to
matters arising under any laws made by the Parliament, or, to be more
specific, matters arising
under the Act.
The Federal Court had power to decide
whether the controversy lay within its jurisdiction, but its decision on that
question was
not conclusive: see Reg. v. Federal Court of Australia; Ex parte
W.A. National Football League ("Adamson's Case") [1979]
HCA 6; (1979) 143 CLR
190, at pp
215, 230 . We are now called upon to decide whether the learned trial judge
was correct in the
conclusion
which he reached
as to jurisdiction, and that
depends upon what answers should be given to three questions which it will
be
necessary
to discuss.
(at p582)
7. The first question is whether ss. 75B and 82 of the Act are valid laws of the Commonwealth. Section 82, in its application to a case such as the present, allows the amount of any loss or damage caused by conduct done in contravention of s. 52, which, as the words of s. 52 reveal, could only be the conduct of a corporation, to be recovered not only from the corporation, but also from "any person involved in the contravention". Section 75B defines that expression, and includes within it a person who "has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention". The claim for damages under s. 82 from Mr. and Mrs. Fencott can only succeed if these provisions are validly enacted. Of course, Mr. and Mrs. Fencott can only be liable if Scrid was a corporation within the meaning of s. 52. "Corporation" is defined in s. 4(1) of the Act to include a body corporate that is a trading corporation formed within the limits of Australia or a financial corporation so formed. It appears that Scrid did conduct a business of restaurateur and wine bar operator, and traded under the name of "O'Connors Winehouse/Restaurant" but there is no evidence as to what proportion of its activities was constituted by its trading or as to what other functions if any (apart from acting as trustee) it existed to perform. However, the grounds of objection to jurisdiction did not suggest that Scrid was not a corporation within the meaning of s. 52, and it seems to have been assumed throughout that it was a trading corporation. The claim against Mr. Hondros also depends on ss. 75B and 82, but since neither he nor H. & T. objected to the jurisdiction it is unnecessary to discuss their position separately. Further, the claim against Mr. Johnsen depends on his being involved in a contravention of s. 52 by Oakland, but the question whether that company is a corporation within the meaning of s. 52 is the second question that falls for decision on the appeal. (at p582)
8. It was not, and could not be, suggested that in so far as s. 82 deals with the recovery from a trading corporation of the amount of the loss or damage caused by the conduct of that corporation in contravention of s. 52, the provision goes beyond the legislative power of the Commonwealth. It was, however, submitted that when s. 82, assisted by s. 75B, goes on to impose upon a natural person liability for damage which his conduct has caused to another natural person, it ceases to be a law with respect to corporations. It was said that, upon analysis, it can be seen that s. 82 operates in the following way: the misleading conduct of a director, servant or agent is by s. 84(2) deemed to have been engaged in by the corporation which therefore contravenes s. 52, and the director, servant or agent then is rendered liable by ss. 75B and 82 for what was in truth his own conduct but which is deemed to be a contravention by the corporation. This analysis is correct in some cases but not in all; a person may be involved in the misleading conduct of another, and the conduct may be that of the corporation not by reason of s. 84(2) but because it has been done by an agent of the company acting within the scope of his authority. However, it is true to say that the provisions in question do render one natural person liable to another, and that the conduct on which the liability is based was that of a natural person. (at p583)
9. Nevertheless, the challenged provisions are, in my opinion, within constitutional power. Every legislative power contains within itself everything which is incidental to the main purpose of the power, and the Parliament may in the exercise of any of the substantive powers given by s. 51, and without resort of s. 51(xxxix), make "all laws which are directed to the end of those powers and which are reasonably incidental to their complete fulfilment": see Burton v. Honan [1952] HCA 30; (1952) 86 CLR 169, at pp 177-178 and Gazzo v. Comptroller of Stamps (Vict.) [1981] HCA 73; (1981) 149 CLR 227 . Once it is conceded that it is within the power conferred by s. 51(xx) of the Constitution for the Parliament to provide, as it has done by s. 52, that a trading corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or to deceive, it must follow that it is also within the power of the Parliament to adopt a means of enforcing compliance with the prohibition which it has directed to the corporations. (I speak of s. 52 in its application to trading corporations, for as will be seen I consider that it has no other application in the present case.) Since corporations must necessarily act through human agencies, it is open to the Parliament to provide for sanctions against natural persons whose conduct brings about the contravention of the law by the corporation. Clearly, a law may be one with respect to trading corporations although it casts obligations on persons who are not themselves corporations: see Actors and Announcers Equity Association of Australia v. Fontana Films Pty. Ltd. [1982] HCA 23; (1982) 150 CLR 169, at p 183 , and cases there cited, and pp. 194-195. It was submitted that to make a natural person liable for damages for a breach of s. 52 was neither a necessary nor an appropriate means of ensuring that corporations do not contravene s. 52. However, it was pointed out in Burton v. Honan (1952) 86 CLR, at p 179 that the question is one of degree and that "once the subject matter is fairly within the province of the Federal legislature the justice and wisdom of the provisions which it makes in the exercise of its powers over the subject matter are matters entirely for the Legislature and not for the Judiciary". By the combined provisions of ss. 75B and 82, the Parliament has made natural persons liable in damages for a contravention by the corporation only if they have been involved in the manner described by s. 75B, which, in my opinion, refers to a close rather than a remote involvement in the contravention. In the most general words of s. 75B, those of par. (c), the word "knowingly" significantly confines the operation of the provision. For these reasons, there is a sufficient connexion between the law laid down in ss. 75B and 82 and the subject of the power conferred by s. 51(xx). The present case is, indeed, in my opinion, quite indistinguishable from Reg. v. Australian Industrial Court; Ex parte C.L.M. Holdings Pty. Ltd. (1977) 136 CLR 235, at pp 246-247 , where it was said that "if a head of constitutional power enables the Parliament to legislate so as to create a particular offence, then that head of power or the incidental power will authorize a provision having the same effect as s. 5 of the Crimes Act in its application to a person who is knowingly concerned in the commission of the offence". The words of s. 75B closely resemble those of s. 5 of the Crimes Act, although, of course, the former section refers to civil and the latter to criminal liability, a circumstance which provides no ground of distinction for present purposes. (at p584)
10. For these reasons the claim by Mr. Muller against Mr. and Mrs. Fencott, H. & T. and Mr. Hondros for damages caused by a contravention of s. 52 of the Act is within the jurisdiction of the Federal Court. (at p584)
11. The second question is whether Oakland is a "corporation" within the meaning of the Act, i.e., whether it is either a trading corporation or a financial corporation. If it is, the claim by Mr. Muller and Scrid against Oakland and Mr. Johnsen for damages caused by a contravention of s. 52 is within jurisdiction. If it is not, s. 52 does not apply and there is no basis for finding that the Federal Court has jurisdiction. (at p585)
12. The facts regarding Oakland are not in dispute. It was a shelf company until Mr. and Mrs. Fencott acquired it to take the place of Scrid as trustee of the O'Connors Unit Trust. The uncontradicted evidence of Mr. Fencott is that Oakland "is a mere trustee which has not traded and which will never trade". Its sole function was to wind up the affairs of the trust. In performing that function it was to receive the balance due from the sale of the business, to pay to the creditors of the business the debts incurred prior to the sale and to distribute any surplus in its hands amongst the beneficiaries of the trust. In the exercise of this function it negotiated with the creditors for an extension of time within which to pay the debts. Toohey J. held that "receiving the purchase price for the sale of a business, suing for the balance of that purchase price, negotiating with and paying off creditors of a business and distributing whatever money remains are commercial activities, collectively if not singly", and that since the company had been incorporated to carry out, and did carry out, activities which may fairly be described as commercial, it should be held to be a trading corporation. Before us, counsel for the respondents sought to maintain this view, but relied also on the objects set out in the memorandum of association of Oakland which, it was said, disclosed that trading activities were to be a substantial or predominant purpose of its existence, and further, that its purposes include the carrying out of financial activities. (at p585)
13. The purposes for which Oakland was established are set out in cl. 2 of
its memorandum of association. Paragraph (a) is as follows:
"To undertake the office of a trustee and to perform and discharge the
duties and functions of a trustee incidental to any
trust and to hold in
its name and deal with real or personal property as trustee agent or
nominee of or for any person, company
or corporation."
However, as might be expected, other objects are widely expressed. The company
may take part in the formation, management, supervision
or control of the
business or operations of any company or undertaking (par. (j)). It may carry
on businesses of diverse kinds (pars.
(q), (r), (t), (u), (v)), or, indeed,
any business which in the opinion of the directors may be conveniently carried
on by the company
(par. (w)). It may advance and lend money (par. (o)). No
doubt it would have been within the power of Oakland to carry on business
as a
trading corporation or perhaps as a financial corporation. As I have said,
however, it did not do so and was not intended to
do so. (at p585)
14. The power given by s. 51(xx) of the Constitution is to make laws with respect to "Foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth". It is obvious that the power is not to make laws with respect to all corporations, but only with respect to corporations which answer the description contained in par. (xx). The three cases in which this Court has recently discussed the meaning of par. (xx) - Reg. v. Trade Practices Tribunal; Ex parte St. George County Council ("the St. George County Council Case") [1974] HCA 7; (1974) 130 CLR 533 ; Adamson's Case (1979) [1979] HCA 6; 143 CLR 190 ; and Superannuation Board v. Trade Practices Commission ("the Superannuation Board Case") [1982] HCA 72; (1982) 150 CLR 282 - have revealed differences of opinion and shifting criteria. In the St. George County Council Case, the majority of the Court (McTiernan and Menzies JJ. and myself) held that a corporation is not a trading corporation simply because it trades (1974) 130 CLR, at pp 546, 554, 562 . I went on to say (1974) 130 CLR, at p 562 , that a trading corporation is one formed for the purpose of trading. Of the minority, Barwick C.J. (1974) 130 CLR, at p 542 , in a passage to which I shall again refer, said that it would be "a misreading of the relevant parts of the definition or of the terms of s. 51(xx) to treat those words as requiring that the corporation be formed for a purpose, i.e. for trading or financial purposes". In his opinion, "the activities of a corporation at the time a law of the Parliament is said to operate upon it will determine whether or not it satisfies the statutory and therefore the constitutional description" (1974) 130 CLR, at pp 542-543 . Stephen J., who also dissented, said that " . . . it is the activity carried on or intended to be carried on that is described by the participle 'trading'" (1974) 130 CLR, at p 569 . He went on to say, that he accepted that every corporation which happens to trade is not a trading corporation, but he considered that that proposition had no relevance in the case before him since the activities of the St. George County Council, "both as contemplated by the terms of its creation and as they are in fact undertaken, are concerned with trading and with nothing else" (1974) 130 CLR, at p 572 . (at p586)
15. In Adamson's Case [1979] HCA 6; (1979) 143 CLR 190 the Court again divided, the
majority this time consisting of Barwick C.J.,
Mason, Jacobs
and Murphy JJ.
(with
Stephen and Aickin JJ. and myself in dissent). Counsel, relying on the
St. George County Council
Case, submitted
that the purposes
for which the body
is incorporated determine whether it is a trading corporation (1979) 143 CLR,
at p 192 . The
majority rejected
this argument. Barwick C.J. repeated that the
activities of the corporation (assuming them to be
within its powers)
rather
than the
purpose of its incorporation will designate its character (1979) 143
CLR, at p 208 . He now regarded
it as enough
to satisfy the
description
"trading corporation" "if trading is a substantial and not a merely peripheral
activity"
(1979) 143 CLR,
at p 208 . Mason
J. (with whom Jacobs J. agreed)
said (57):
"For my part, I prefer the minority view as expressed in the St George
County Council Case, in particular the remarks of
Barwick C.J., when his
Honour said that to fall within s. 51(xx.) it is not necessary that a
corporation be formed for trading of financial purposes and that 'the
activities of a corporation
at the time a law of the Parliament is said to
operate upon it will determine whether or not it satisfies the statutory
and
therefore the constitutional description'."
He went on to say (1979) 143 CLR, at p 233 of the expression "trading
corporation": "Essentially it is a description or label given
to a corporation
when its trading activities form a sufficiently significant proportion of its
overall activities as to merit its
description as a trading corporation."
Murphy J. (1979) 143 CLR, at p 239 said: "The constitutional description of
trading corporations
includes those bodies incorporated for the purpose of
trading; and also those corporations which trade"; he added, "As long as the
trading is not insubstantial, the fact that trading is incidental to other
activities does not prevent it being a trading corporation."
I adhered to what
I had said in the St. George County Council Case but added that if, contrary
to my opinion, the activities of a
corporation at the relevant time determine
whether it satisfies the constitutional test, it is the "predominant and
characteristic"
activity that has to be considered (1979) 143 CLR, at p 213 .
Stephen J. (with whom Aickin J. agreed) said that he regarded "functions,
both
intended and actually undertaken, as of prime importance" (1979) 143 CLR, at p
219 . (at p587)
16. In the third case, the Superannuation Board Case [1982] HCA 72; (1982) 150 CLR 282 , the Court considered the question whether the Superannuation Board of Victoria was a financial corporation; by a majority (Mason, Murphy and Deane JJ., with Wilson J. and myself dissenting) it was held that it was. The majority said that Adamson's Case [1979] HCA 6; (1979) 143 CLR 190 was important for two reasons (1982) 150 CLR, at pp 303-204 : "First, the majority of the court (Barwick C.J., Mason, Jacobs and Murphy JJ.), rejecting the argument that the purpose for which a corporation is formed is the sole or principal criterion of its character as a trading corporation, concluded that the relevant character of the football leagues and the football club was to be ascertained by reference to their established activities (1979) 143 CLR, at pp 208-211, 233-237, 237, 239-240 . In adopting this view their Honours disapproved the approach taken by the majority in St George [1974] HCA 7; (1974) 130 CLR 533 which placed emphasis on the purpose for which the County Council was formed (1974) 130
CLR, at p 562 .
Secondly, the judgments of the majority in Adamson make it clear that, in having regard to the activities of a corporation for the purpose of ascertaining its trading character, the court looks beyond its 'predominant and characteristic activity'." (at p588)
17. Their Honours suggested that the test is whether the corporation carries
on trading activities "on a significant scale" (1982)
150 CLR, at p 304 ,
although they did point out that Adamson's Case [1979] HCA 6; (1979) 143 CLR 190 was not
concerned with a corporation
"which
has not begun, or has barely begun, to
carry on business"; in such
a case it might well be necessary to look to the
purpose
for which
such a corporation was formed. They said that the words
"financial
corporation" "describe a corporation which engages in
financial
activities or perhaps is intended so to do" (1982) 150 CLR, at p
305 but held
that it was enough that the financial activities
were
engaged in for the
purpose of carrying on some other primary or
dominant undertaking. Wilson J.
and I, in deference to Adamson's
Case, were prepared to accept the current
activities test, but held
that the question is whether the trading or
financial activity
is predominant or characteristic (1982) 150 CLR, at p 296 .
(at p588)
18. For reasons which will appear, I consider that whichever of the many and protean tests that have so far been suggested is applied, Oakland should not be held to be either a trading or a financial corporation. But since it is impossible to hold that the meaning of s. 51(xx) is finally settled, I would very briefly express my own views, shaped now, as they must be, in the light of the expressions of opinion in the three cases to which I have referred. The words "foreign", "trading" and "financial" which govern "corporations" in s. 51(xx) indicate that the paragraph refers only to corporations of particular kinds. Those words make it necessary to consider the character of the corporation, and its character may be discovered by considering what it does and what it is intended to do. But a corporation cannot take its character from activities which are uncharacteristic, even if those activities are not infrequently carried on. It may indeed be wrong to insist on finding activities that are "primary" or "predominant", but it is equally wrong to be satisfied with activities that are "substantial", if the latter activities do not, in all the circumstances, show that the corporation has a character which the Constitution requires. It is true that the question will often be one of degree. (at p589)
19. In the present case it would not assist the respondents if the test were satisfied by finding trading or financial activities that were not insubstantial, or even by finding some trading or financial activities, however few or unimportant. For the evidence shows that Oakland never has intended, and does not intend, to engage in activities that can be described as either trading activities or financial activities. Whether one regards trading as involving acts of buying or selling (as Stephen J. suggested in the St. George County Council Case (1974) 130 CLR, at p 570 ) or whether, as I think, it has a wider meaning and covers "the pursuit of a calling or handicraft" (as Dixon J. said in Bank of N.S.W. v. Commonwealth [1948] HCA 7; (1948) 76 CLR 1, at p 381 ) it is clear that Oakland does not trade. It is, with all respect to Toohey J., a fallacy to say that because a person who is trading may receive payment from his creditors and may pay his debtors, it therefore follows that a person who receives payment from his creditors and pays his debtors is engaging in acts of trade. Further, Oakland does not engage in financial activities in any sense relevant to s. 51(xx). The word "financial" in par. (xx), indicates that a corporation which answers that description is one which engages in the activity of commercial dealing in finance, i.e. engages in transactions in which the subject of the transaction is finance (such as borrowing and lending money); see the Superannuation Board Case (1982) 150 CLR, at p 305 , citing Re Ku-ring-gai Co-operative Building Society (No. 12) Ltd. [1978] FCA 50; (1978) 36 FLR 134, at p 159; [1978] FCA 50; 22 ALR 621, at p 642 , per Deane J. The receipt and payment of moneys in the present case were not of that character. (at p589)
20. I have said that the purposes for which a corporation is formed may be
relevant in determining its character. That will be particularly
so when the
corporation has not yet begun, or has only just commenced, the activities
which it was intended to carry on. However,
in deciding what are the purposes
for which a corporation is formed, the objects clause of its memorandum of
association is an inadequate
and may be a misleading guide. For many years it
has been the practice of those drawing memoranda of association to give to
companies
powers to engage in multifarious activities, many of which bear no
relation to the actual or intended affairs of the company. Over
sixty years
ago Lord Wrenbury referred to this practice when in Cotman v. Brougham (1918)
AC 514, at p 522 , he said that this "pernicious
practice" which was in active
operation when he was a junior at the bar "has arrived now at a point at which
the fact is that the
function of the memorandum is taken to be, not to
specify, not to disclose, but to bury beneath a mass of words the real object
or
objects of the company with the intent that every conceivable form of
activity shall be found included somewhere within its terms".
Barwick C.J.
also recognized the existence of the practice when he said, in the St. George
County Council Case (1974) 130 CLR, at
p 542 :
"It is, in my opinion, only necessary to recall the wide spread of the
objects of a company formed under the Companies Acts
as expressed in its
memorandum of association, particularly in days when the doctrine of ultra
vires was more readily applied,
to appreciate the difficulties encountered
in attempting in all cases to attribute purpose to incorporation. Material
extrinsic
to the memorandum might for some purposes be resorted to, to
decide why and to what end a body was incorporated. But it would
be, to my
mind, most unsatisfactory to have to follow such a course in order to
identify the subject matter of constitutional
power. Further, even if an
object of a company seemed dominant at the date of incorporation, in the
course of the company's
existence it may cease to have significance and an
object which seemed incidental at incorporation may become central to its
current activities."
The learned Chief Justice was of course speaking in support of the view that
the activities of the corporation alone should be regarded.
But to accept that
the intended as well as the actual functions of the corporation are relevant
for the purpose of determining its
character, does not mean that it is
permissible to look at the memorandum of association alone for that purpose.
The whole of the
evidence as to the intended operations of the corporation is
relevant and is likely to show, as it shows in the present case, that
many of
the objects in the memorandum were inserted out of an abundance of caution,
with no intention of describing the activities
in which the company is
actually engaged or is likely to engage. (at p590)
21. In the present case the evidence shows that at no time during its existence has Oakland been intended to engage, and at no time has it engaged, in trading or financial activities. It is not a corporation of the kind to which par. 51(xx) refers. Oakland is therefore not a corporation within s. 52 of the Act, and the claim of Mr. Muller and Scrid against Oakland and Mr. Johnsen for damages under s. 82 is not within the jurisdiction of the Federal Court. (at p590)
22. The third, and remaining, question is whether the other aspects of the controversy, which, in themselves, would not lie within the jurisdiction of the Federal Court, do fall within the jurisdiction because of their association with the matter which, as I have held, does arise under the Act, viz., the claim by Mr. Muller against Mr. and Mrs. Fencott, H. & T. and Mr. Hondros for damages caused by a contravention of s. 52 of the Act. (at p591)
23. I have already said that under the Constitution jurisdiction can be conferred on a federal court only with respect to matters of the kinds mentioned in ss. 75 and 76 of the Constitution. It was held in In re Judiciary and Navigation Acts [1921] HCA 20; (1921) 29 CLR 257, at pp 265-266 , and is now well accepted, that "matter" in those sections of the Constitution does not mean a legal proceeding, "but rather the subject-matter for determination in a legal proceeding". It follows from the words of ss. 75 and 77 of the Constitution that a federal court can be given jurisdiction only with respect to a matter of the kind described in those sections, and that the Parliament cannot confer jurisdiction on a federal court with respect to a matter simply because it is associated, even closely associated, with one of the matters mentioned in ss. 75 and 76. I discussed this question in Philip Morris v. Brown (1981) 148 CLR, at pp 490-494 , and need not repeat what I said there. If that conclusion leads to results which are inconvenient, that is no reason to blur distinctions that the Constitution insists should be drawn. However, any inconvenience in a case such as the present arises only from the fact that the Parliament has chosen to make the jurisdiction of the Federal Court exclusive; it does not inevitably result from the constitutional provisions themselves. In any case, to attempt to mitigate the inconvenience which may result to a party who brings his proceedings in the Federal Court, by adopting a broad interpretation of the word "matter", or by otherwise according to the Federal Court an expanded jurisdiction, will have the effect of shifting the burden of inconvenience to a party who brings his proceedings in the Supreme Court of a State, since s. 86 brings about a reciprocity between the two jurisdictions, with the result that the wider the jurisdiction that is conceded to the Federal Court, the narrower is that remaining in the State Court. In those circumstances, only the adoption of precise legal tests can enable litigants to select their forum with any hope that it is the appropriate one. (at p591)
24. It is now established by Philip Morris v. Brown that once a federal court is invested with jurisdiction with respect to a matter, it may determine all the questions which form part of that matter, even though they are questions which it would have no jurisdiction to entertain if they arose in separate proceedings. Assuming, as I do, that s. 86 of the Act, despite its reference to "actions, prosecutions and other proceedings" confers jurisdiction on the Federal Court of Australia in matters arising under Pt VI of the Act, the question is whether all or some of the questions in controversy in the present case, which by themselves could not be said to arise under Pt VI of the Act, nevertheless form part of the matter which does arise under Pt VI. (at p592)
25. In Philip Morris v. Brown the members of the Court who constituted the
majority in that case expressed differing views as to
the test to be applied
in deciding whether a matter not in itself arising under the Act can be held
to be part of a matter which
does arise under the Act. The order suggested by
Barwick C.J. and Murphy J. was wider than that which was eventually made by
the
Court. Barwick C.J. appears to have thought that the jurisdiction, once
attracted, would extend to any other matter which was not
"separate and
disparate from the matter in relation to or in connection with which federal
jurisdiction has been attracted" (1981)
148 CLR, at p 474 . Murphy J. said
that the Federal Court, once its jurisdiction has been attracted, "has the
power and duty to decide
any issue incidental to determining the matter, and
has the power to determine any matter, federal or non-federal in origin, which
is not completely separate and distinct from the matter which attracted
federal jurisdiction" (1981) 148 CLR, at p 521 . The conclusion
reached by
Stephen and Mason JJ. and myself was that which was given effect in the order
of the Court. Mason J., with whom Stephen
J. agreed, held (1981) 148 CLR, at p
512 that "the court having jurisdiction to determine a matter falling within
ss. 75 and 76 giving rise to the exercise of federal jurisdiction has
jurisdiction to decide an attached non-severable claim". He said (1981) 148
CLR, at p 512 :
"The classification of a claim as 'non-severable' does not necessarily
mean that it is, or must be, united to the federal
claim by a single claim
for relief, though this is a common illustration of a non-severable claim.
The non-severable character
of the attached claim may emerge from other
aspects of the relationship between the federal and the attached claim.
For example,
it may appear that the resolution of the attached claim is
essential to a determination of the federal question. Likewise, it
may
appear that the attached claim and the federal claim so depend on common
transactions and facts that they arise out of
a common substratum of
facts. In instances of this kind a court which exercises federal
jurisdiction will have jurisdiction
to determine the attached claim as an
element in the exercise of its federal jurisdiction."
My own view was expressed as follows (1981) 148 CLR, at p 499 :
" . . . if a party claims relief on two different legal grounds, but the
facts on which the relief is sought on each ground
are identical, and the
relief sought on each ground is the same in substance if not in form,
there is only one matter for
determination."
The judgments of all the other members of the majority support that statement
so far as it goes, although they would of course go
further, and in the light
of the views of the majority it seems to be going too far to insist that the
relief sought on each ground
should be substantially the same. It seems to me
that it is not possible to select any of these expressions of opinion as
stating
the ratio decidendi of the case. The decision does establish that a
claim which is inseverable from a federal matter committed to
the jurisdiction
of the Federal Court may be regarded as part of that matter and so fall within
jurisdiction, even if the claim is
not itself based on federal law. The
question whether one claim is inseverable from another, so that both are part
of one matter,
is a question of fact and degree. The Constitution, however,
makes it clear that the attached claim must be part of the matter that
attracts jurisdiction; closeness of association
is not enough. (at p593)
26. In the present case there can be no doubt that the claim by Mr. Muller for damages for fraud at common law is inseverable from his claim for damages under ss. 52 and 82 of the Act. His alternative claims for damages for negligence and for breach of contract are also inseverable from the claim under the Act. Although the elements of these various causes of action are different, all of these claims are based on the same facts; and although the relief sought is not the same in substance, the claims in negligence and contract form a natural alternative to the relief sought in the federal matter and form part of the one matter for determination, viz., what remedy, if any, should be available to Mr. Muller for the allegedly misleading conduct. The claim by Scrid for damages for breach of fiduciary duty stands in a different position. The plaintiff is not the same as the plaintiff in the purely federal matter and although some of the facts are common to both claims, the causes of action are entirely disparate. I find myself unable to conclude that this claim by Scrid raises the same subject matter for determination as, or is inseverable from, the claim by Mr. Muller. It is not in my opinion part of the same matter. The claim by Scrid to be indemnified by Oakland is in my opinion clearly severable from the claim by Mr. Muller against Mr. and Mrs. Fencott, H. & T. and Mr. Hondros. The parties on both sides of the record are different - there is no party common to both claims; the cause of action asserted by Scrid (the right of a trustee to indemnification out of the trust estate) is entirely different from that in Mr. Muller's action (damages for misleading conduct, fraud, negligence or breach of contract) and the crucial issues in Scrid's claim - whether Scrid was entitled to indemnity, and whether Oakland is possessed of any trust property - raise questions which do not arise in relation to Mr. Muller's claim. The claim by Mr. Muller and Scrid against Oakland for damages allegedly caused by the sending of the letter of 19 May 1981 is entirely separate from the matter constituted by Mr. Muller's claim against Mr. and Mrs. Fencott, H. & T. and Mr. Hondros; indeed I do not understand that the respondents contended to the contrary; their argument that the Federal Court had jurisdiction in relation to this claim was based on the contention that Oakland was a trading corporation. (at p594)
27. For the reasons I have given I conclude that the Federal Court of Australia had jurisdiction to entertain the claim by Mr. Muller against Mr. and Mrs. Fencott, H. & T. and Mr. Hondros for all the relief sought against those parties but had no jurisdiction to hear and determine any of the other claims. I would allow the appeal in part. (at p594)
MASON, MURPHY, BRENNAN AND DEANE JJ. Scrid Nominees Pty. Ltd. ("Scrid") is the lessee of premises known as O'Connors Wine Bar and Restaurant in Hay Street, West Perth. Mr. Muller owns the business carried on in those premises and he owns the shares in Scrid. Mr. Muller and Scrid instituted proceedings in the Federal Court of Australia for relief in respect of transactions connected with the purchase of the business by Mr. Muller. Objection was taken to the jurisdiction of the Federal Court to entertain the several claims for relief made by the applicants in their statement of claim. The relief which they are seeking, the parties against whom relief is sought and the facts which are said to give rise to the claims are set out, or substantially set out, in an amended statement of claim. To ascertain the jurisdiction of the Federal Court to hear and determine the issues raised by the statement of claim and to grant the relief therein claimed, it is necessary to refer to the amended statement of claim as it was expounded and modified in the course of argument in this Court. The following facts are alleged. (at p594)
2. Before Mr. Muller bought the business, it was carried on by Scrid in the Hay Street premises. At that time the shares in Scrid were owned by Mr. and Mrs. Fencott, the first respondents in the proceedings in the Federal Court. They were Scrid's only directors. Scrid was not the beneficial owner of the business or of the assets employed in the business. Scrid carried on the business as a trustee under a deed constituting the O'Connors Unit Trust, but the identity of the beneficiaries and the terms of the trust deed were not pleaded. At some time, Mr. or Mrs. Fencott gave instructions to H. & T. Holdings Pty. Ltd. ("H. & T."), a company carrying on business as a real estate agent, to sell the business "including the trade name, goodwill, and all the other assets thereof". (at p595)
3. H. & T. had an employee, Mr. Hondros, who negotiated with Mr. Muller with a view to a sale of the business. H. & T. and Mr. Hondros are the second and third respondents respectively in the proceedings in the Federal Court, but neither of them took an objection to jurisdiction and neither is a party to this appeal. It is alleged that Mr. Hondros made false representations concerning the business in the course of his negotiations with Mr. Muller to induce Mr. Muller to purchase the business and that Mr. Muller, in reliance upon those misrepresentations, agreed to purchase the business. (at p595)
4. The contract of sale was not incorporated in the statement of claim, but some of its terms were pleaded. The contract, dated 27 January 1981, was between Mr. Muller as purchaser and Scrid as vendor. The price was $150,000 plus stock at valuation, certain legal costs and $1,000 as consideration for the purported grant of an option to acquire a half interest in the freehold of the business premises. The contract was conditional upon Scrid assigning the lease to Mr. Muller or alternatively upon the issued shares in Scrid being transferred to Mr. Muller. The shareholders, Mr. and Mrs. Fencott, decided to transfer the issued shares in Scrid. On 6 February 1981 they transferred their shareholding in Scrid to Mr. and Mrs. Muller. On 10 February they resigned as directors. Mr. and Mrs. Muller became directors on the same day. It was pleaded that "possession" was given on 23 February. The contract provided that Scrid should "pay and discharge all debts and liabilities of the business incurred or accrued prior to the transfer of possession" and should indemnify Mr. Muller "in respect of all claims and proceedings in respect thereof". There are some unpaid trade debts and liabilities which were incurred by Scrid in the conduct of the business as trustee for the O'Connors Unit Trust. (at p595)
5. Mr. Muller paid only $111,000 of the purchase price, the total of which amounted to $162,975.60. It is alleged that the actual value of the business was $57,000. The statement of claim does not disclose whether the payment was made by Mr. Muller to Scrid, then the trustee of the O'Connors Unit Trust, but it is implied that the trust received the sum paid. Scrid retired as trustee and "was released from such appointment" on a date which is not specified except as subsequent to 9 February 1981. Its place as trustee was taken by Oakland Nominees Pty. Ltd. ("Oakland"), a company incorporated on 21 November 1980 with objects widely drawn, encompassing trading and financial activities, but (as the evidence showed) Oakland had not engaged in any trading or financial activity prior to becoming trustee under the O'Connors Unit Trust deed. Toohey J. found that after Oakland became trustee, it sued to recover the balance of the purchase price, had some negotiations with the unpaid trade creditors, and proposes to pay the creditors and to make a distribution to the trust beneficiaries when it receives the balance of the purchase price. A Mr. Johnsen, acting as the agent of Oakland, sent letters to Scrid's trade creditors stating that Scrid did not have the funds to pay its debts as at 22 February 1981 due to the failure of Mr Muller to settle the balance of outstanding moneys due in accordance with the contract. Oakland and Mr. Johnsen were respectively the fourth and fifth respondents in the proceedings in the Federal Court and each is an appellant. (at p596)
6. Arising out of these allegations, several claims for relief were made. Not
all of them are now material. The claims which remain
for consideration and
the respective bases on which they are made are as follows:
1. Mr. Muller claims damages under s. 82 of the Trade Practices Act 1974
(Cth) ("the Act") against Mr. and Mrs. Fencott, H. & T. and Mr. Hondros.
The basis of the claim is that the making of
false
representations
in the
negotiations for the sale of the business was a contravention by Scrid of
s. 52 of the Act,
that Mr.
and Mrs. Fencott, H. & T. and Mr. Hondros were
persons "involved in a contravention" (within the meaning of that
phrase
in
s. 75B) and that the amount of the loss or damage suffered by the
conduct that contravened s. 52 is recoverable
from each of
the persons
involved pursuant to s. 82.
2. Mr. Muller claims damges in deceit and in negligence against the same persons. The basis of the claim is that one or other of those persons authorized or initiated the making of the false representations on behalf of Scrid and did so either fraudulently or negligently.
3. Scrid claims damages for breach of a fiduciary duty owed to it by Mr. and Mrs. Fencott. The basis of the claim is that the conduct of Mr. and Mrs. Fencott in respect of the representations and the sale of the business was in breach of the fiduciary duty owed as directors by them to Scrid, that H. & T. and Mr. Hondros aided and abetted that breach and that Scrid has incurred a liability to Mr. Muller by reason of the making of the false representations.
4. Scrid claims to be indemnified by Oakland out of the assets held by it under the O'Connors Unit Trust in respect of Scrid's several alleged liabilities to Mr. Muller. The bases of these claims are -
(a) that the making of the false representations exposed it to liability to Mr. Muller for damages for controvention of s. 52, for damages in deceit or in negligence, or for breach of warranty; (b) that its failure to pay its trade creditors exposed it to liability to Mr. Muller for breach of contract, or exposed it to liability under the contractual indemnity given to Mr. Muller; (c) that it is entitled to an indemnity out of the trust assets in respect of debts and liabilities of the business incurred prior to 23 February 1981 in carrying on the business as trustee.
5. Mr. Muller and Scrid respectively claim damages under s. 82 of the Act against Oakland and Mr. Johnsen. The basis of each claim is that the sending out of the letters to Scrid's trade creditors was a contravention by Oakland of s. 52, that Mr. Johnsen was a person "involved in a contravention" (within the meaning of that phrase in s. 75B) and that the amount of the damage respectively suffered by Mr. Muller and Scrid in recoverable from Oakland and from Mr. Johnsen (as a party involved in a contravention) pursuant to s. 82. (at p597)
7. The relevant grounds of objection to the jurisdiction of the Federal Court
to hear and determine the issues raised by the amended
statement of claim and
the claims made therein are repeated in the notice of appeal. They may be
briefly stated:
1. Section 82 of the Act does not apply to natural persons (other than
those to whom s. 6 applies) and it is beyond the
powers of the
Commonwealth Parliament by s. 82 to create a right to recover damages
against natural persons in respect of
a contravention of s. 52 by a
corporation.
2. Oakland ought not to be categorized as a trading or financial corporation and is therefore not amenable to the jurisdiction of the Federal Court under the Act.
3. Mr. Muller's common law claims for damages in deceit, negligence and breach of warranty and Scrid's claim for indemnity out of the assets of the O'Connors Unit Trust are not within the jurisdiction of the Federal Court. (at p597)
8. The Federal Court clearly has jurisdiction to determine the issues raised
by the first two grounds. Those issues were determined
by Toohey J. in favour
of the applicants, and as the relevant evidence as to the status of Oakland
has been given and as all grounds
were allowed to be argued in this Court it
is right now to consider each of those grounds. The parties who appealed
against the order
of Toohey J. are Mr. and Mrs. Fencott, Oakland and Mr.
Johnsen, each of whom is a respondent to the proceedings in the Federal Court
and all of whom objected to the jurisdiction of that Court to hear and
determine the proceedings. Part of their objection was allowed
and part
dismissed by Toohey J. [1933] HCA 44; (1982) 57 FLR 35, 39 ALR 496 . They appealed to the
Full Court, but regrettably we do not have the
assistance of the Full Court,
for the Attorney-General for the Commonwealth thought it expedient to apply
under s. 40 of the Judiciary Act 1903 (Cth) to remove into this Court that
part of the cause which related to the validity of s. 82. That part of the
cause being removed here as of course, convenience required that the whole of
the proceedings be removed, and the
appeal from the order of Toohey J. was
argued in this Court. The grounds of appeal will be considered in the order
stated.
Validity of s. 82. (at p598)
9. Section 82 confers on a person who suffers loss or damage by the conduct
of a corporation that is done in contravention of a provision of Pt IV or V of
the Act a right to recover the amount of the loss or damage by action against
the corporation "or against any person involved
in the contravention".
The
quoted phrase, and s. 75B which provides its dictionary, were inserted by the
Trade Practices Amendment
Act 1977 (Cth) (No. 81 of 1977). Section 75B
provides:
"A reference in this Part to a person involved in a contravention of a
provision of Part IV or V shall be read as a reference to a person who-
(a) has aided, abetted, counselled or procured the contravention;
(b) has induced, whether by theats or promises or otherwise, the contravention;
(c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or
(d) has conspired with others to effect the contravention." (at p598)
10. It was submitted that a provision which confers a right of action against
a natural person "involved in a contravention" is
not a law with respect to
corporations but a law with respect to natural persons. Conceding that s. 52
validly regulates the conduct
of corporations and that contravention of s. 52
by a corporation exposes it to civil as well as criminal liability, it was
argued
that the casting of the net of civil liability
over persons "involved"
in the contravention does not affect the corporation's rights
and duties and
therefore is not a valid law.
The argument is too narrow. Once it is accepted,
as it now is, that the corporations
power extends to the regulation of the
trading
activities of trading corporations, it necessarily follows that, in
some circumstances
at least, the power must extend to the imposition
of duties
on natural persons. Two considerations combine to sustain this conclusion.
The
first is that corporations act through natural
persons. The second - and it is
a consequence of the first - is that, in order
to be effective, a regulation
of the activities of
corporations calls for the imposition of duties on those
natural persons who would,
or might, in the ordinary course of events,
participate
in the corporate activities, the subject of the intended
regulation. Accordingly,
when in the legitimate exercise of the corporations
power duties are imposed on corporations in relation to their trading
activities,
breach of which creates a civil liability, the
power extends to
the imposition of duties on natural persons, breach of which also
creates a
civil liability, not to engage in conduct
which assists or facilitates a
contravention by a corporation of duties thus
imposed upon it. Then the
imposition of duties on natural
persons is seen to be an element or incident
in the regulation of the corporate
trading activities. (at p599)
11. Another way of expressing this approach is to say that where a law prescribing the way in which corporations shall conduct their trading activities is supported by the corporations power, an ancillary provision reasonably adapted to deter other persons from facilitating a contravention of the law by a corporation is supported by the same power. It is within the competence of the Parliament to enact such a provision to secure compliance with a valid statutory command. A valid statutory command directed to a particular class may be strengthened by a provision imposing a liability upon other persons who are involved in a contravention by a person to whom the command is directed, provided that the ancillary provision is reasonably adapted to securing obedience to the command. So much was decided in Reg. v. Australian Industrial Court; Ex parte C.L.M. Holdings Pty. Ltd. (1977) 136 CLR 235, at p 245 et seq in respect of s. 5 of the Crimes Act 1914 (Cth) which was held validly to impose criminal liability upon parties to an offence defined by s. 53 of the Act. As a means of securing obedience to a statutory command, there is no material distinction between a provision imposing a criminal liability and a provision imposing a liability in civil proceedings, unless it be that the latter provision encourages private action for the recovery of whatever damages an applicant may prove irrespective of the degree of culpability of the particular respondent, and thus a provision imposing liability in civil proceedings may be a more draconian means of securing obedience to the statutory command. But that is no objection to its validity. It is, of course, within the power of the Commonwealth Parliament to give to a person injured by contravention of a federal law a right of action when injury is suffered as a result of the contravention (per Menzies J. in Redfern v. Dunlop Rubber Australia Ltd [1964] HCA 9; (1964) 110 CLR 194, at p 222 ). (at p600)
12. As a valid ancillary provision imposing civil liability upon a party for injury occasioned by contravention of a command directed to another must be reasonably adapted to secure obedience to the command, the ancillary provision must impose liability for injury in respect of conduct of a kind which might reasonably be thought to facilitate the contravention which occasions the injury. The conduct of a person "involved in a contravention" described in each of the categories of s. 75B shows a direct connexion between that conduct and the contravention in question. Accordingly, the imposition of civil liability by s. 82 is valid. (at p600)
13. A further argument should be noted. It was submitted that s. 84(2), which
deems conduct engaged in by a director agent or servant
of a corporation on
behalf of the corporation to have been engaged
in also by the corporation, is
beyond power. This deeming provision
was said to exhibit the same vice as that
which brought down
the deeming provision (s. 45D(5)) considered in Actors and
Announcers
Equity Association of Australia v. Fontana Films Pty. Ltd.
[1982] HCA 23; (1982)
150 CLR 169 . If it were necessary to rely upon
s. 84(2) in order
to attribute
the alleged contraventions of s. 52 to Scrid (or, subject to what is said
hereafter, to Oakland),
it would have been
necessary to consider whether s.
84(2) is valid. But it does not appear that the pleading relies or needs to
rely
on s. 84(2) in
order to attribute the relevant conduct - that is, the
making of representations to Mr. Muller and the sending of
the letters
to
Scrid's trade creditors - to Scrid or to Oakland, as the case may be. There is
no need to determine the validity of
a provision
which
is irrelevant to the
issues raised by the amended statement of claim. The first ground of objection
fails.
The Character of Oakland. (at p600)
14. The claim against Oakland and Mr. Johnsen for damages under s. 82 of the Act depends on whether Oakland is a corporation as defined by s. 4 of the Act. In argument before Toohey J., it was submitted that Oakland was a trading corporation; in argument in this Court, the submission was expanded to correspond with the statutory and constitutional description: a trading or financial corporation formed within the limits of Australia. To satisfy that description, the memorandum and articles of association of Oakland, its history and its activities were relied on. The activities test, adopted by the majority of this Court as the relevant test to determine the character of the corporation in Reg. v. Federal Court of Australia; Ex parte W.A. National Football League (Adamson's Case) [1979] HCA 6; (1979) 143 CLR 190 , does not by itself establish that Oakland is a trading or financial corporation. The activities in which Oakland had engaged were limited to suing for the balance of the purchase price and negotiating with the unpaid trade creditors of the business. Prior to the sale of the business to Mr. Muller, Oakland was a "shelf company", awaiting acquisition by owners who might cause it to engage in activities of their choosing. When it became trustee of the O'Connors Unit Trust it came under the control of Mr. and Mrs. Fencott and their accountant. Mr. Fencott described in evidence the functions Oakland was to perform: to receive the balance of the purchase price, to pay off creditors and to distribute any surplus to the unit holders of O'Connors Unit Trust. No decision had been made as to its engaging in any further activity. (at p601)
15. Toohey J. found Oakland to be a trading corporation, though he did not think the question was an easy one to resolve. There is difficulty in attributing to the activities in which Oakland engaged the same character as one would have attributed to those activities if they had been performed by Scrid. For Scrid, negotiations with and payment of trade creditors would have been a necessary incident of its carrying on of the business; indeed, Scrid may yet engage in those activities. The recovery of the purchase price payable to Scrid for the sale of business which it had carried on may have been regarded as a trading activity also. But Oakland stands in a different position. Its alleged right to sue for the balance of the purchase price could arise only from an assignment of a chose in action being part of the assets of the O'Connors Unit Trust, not from any trading activity. Its negotiations with Scrid's trade creditors are not to be accounted for by any trade in which Oakland is involved or with which Oakland is connected. It must have undertaken those negotiations in the interests of the beneficiaries of the O'Connors Unit Trust in order to minimize the burden of those trade debts upon the assets of the trust, but there is no element of trading in that activity. (at p601)
16. It follows that Oakland has not engaged in trading activities. Nor has it engaged in any financial activity, for it has not hitherto engaged in any financial transactions. And so the question arises whether a corporation with objects and powers appropriate for a trading or financial corporation can bear that character before it engages in any trading or financial activity. That question did not arise for consideration in Adamson's Case. The majority judgments in that case which held that the established activities of the football league concluded its character as a trading corporation did not suggest that trading activities are the sole criterion of character. Absent those activities, the character of a corporation must be found in other indicia. While its constitution will never be completely irrelevant, it is in a case such as the present where a corporation has not begun, or has barely begun, to carry on business that its constitution, including its objects, assumes particular significance as a guide (see State Superannuation Board (Vict.) v. Trade Practices Commission (1982) 150 CLR, at p 304 ). Oakland's memorandum and articles of association reveal that the objects for which it was established include engaging in financial activities and carrying on a large variety of businesses, though it lay dormant - "on the shelf" - after its incorporation. In the circumstances of the present case, there is no better guide to its character than its constitution and its constitution establishes its character as a trading or financial corporation. It is immaterial whether it is a trading corporation or a financial corporation or which of those characters its future activities may give it. (at p602)
17. The second ground of objection fails.
Jurisdiction to Determine Mr. Muller's Claims in Tort and Contract and Scrid's
Claim for Indemnity. (at p602)
18. Section 86 of the Act provides:
"Jurisdiction is conferred on the Court to hear and determine actions,
prosecutions and other proceedings under this Part
and that jurisdiction
is exclusive of the jurisdiction of any other court, other than the
jurisdiction of the High Court
under section 75 of the Constitution." (at
p602)
19. In Philip Morris Inc. v. Adam P. Brown Male Fashions Pty. Ltd. (1981) 148
CLR, at p 506 , Mason J. pointed out that, although
s. 86 departs from the
language of Ch. III of the Constitution, nevertheless in its context it
confers jurisdiction with respect to "matters" conformably with s. 77(i) of
the Constitution. The jurisdiction conferred by s. 86 upon the Federal Court
which is material in the present case is jurisdiction in respect of matters
arising under ss. 52 and 82 of the Act (cf. Constitution ss. 76(ii) and 77(i))
and is defined to be exclusive of the jurisdiction of the courts of the States
(cf. Constitution s. 77(ii)). The relevant question is whether the ambit of
the jurisdiction thus conferred is wide enough to include the hearing and
determination
of all the issues raised and the claims for relief made in the
amended and modified statement of claim. The ambit of the jurisdiction
depends
upon the meaning of "any matter arising under any laws made by the Parliament"
in s. 76(ii) of the Constitution. (at p602)
20. The starting point is the well-known passage from the judgment of the
Court in In re Judiciary and Navigation Acts [1921] HCA
20; (1921) 29
CLR 257, at p 265 , a
passage which has found general acceptance:
"It was suggested in argument that 'matter' meant no more than legal
proceeding, . . . We do not accept this contention;
we do not think that
the word 'matter' in sec. 76 means a legal proceeding, but rather the
subject matter for determination in a legal proceeding. In our opinion
there can
be no matter within the meaning of the section unless there is
some immediate right, duty or liability to be established by the
determination of the Court."
It follows that a particular federal matter may be part only of a proceeding
(as Menzies J. observed in Felton v. Mulligan [1971]
HCA 39; (1971)
124 CLR 367, at pp
382-383 ) and it is possible to envisage a proceeding where a party seeks to
litigate both a federal
claim and
a distinct and unrelated non-federal claim
(as Stephen, Mason, Aickin and Wilson JJ. observed in Moorgate Tobacco Co.
Ltd.
v. Philip
Morris Ltd [1980] HCA 32; (1980) 145 CLR 457, at p 482 ). On the other hand,
particular legal proceedings may relate to
part only of what should
properly
be seen as the one larger "matter". An obvious example is to be found in the
not uncommon situation
under pre-Judicature
Act systems where separate
proceedings in equity lay in certain circumstances to enjoin a plaintiff in
common
law proceedings from
pursuing
his common law rights. (at p603)
21. Though the concept of "matter" may be narrower than that of a "legal
proceeding", it is a term of wide import. "The word 'matters'",
Griffith C.J.
said in South Australia v. Victoria [1911] HCA 17; (1911) 12 CLR 667, at p 675 , "was in 1900
in common use as the
widest term to
denote controversies which might come
before a Court
of Justice". The concept of "matter" as a justiciable
controversy,
identifiable
independently of the proceedings which are brought
for its determination and encompassing all claims made within the
scope of the
controversy, was accepted by a majority of the Court
in Philip Morris. Barwick
C.J. said (1981) 148 CLR, at p 475 :
"It is settled
doctrine in Australia that when a court which can
exercise
federal jurisdiction has its jurisdiction attracted
in relation to
a
matter, that jurisdiction extends to the resolution
of the whole matter.
This accrued federal jurisdiction
is not limited
to matters incidental to
that aspect of the matter
which has, in the first place, attracted federal
jurisdiction.
In extends,
in my opinion, to the resolution of the whole
matter between the parties. This accrued jurisdiction carries with
it the
authority
to make such remedial orders as are necessary
or convenient for
or in consequence of that resolution. For
this purpose, the court
exercising federal jurisdiction may enforce
rights which derive from a
non-federal source. This exercise
of this jurisdiction,
which for want of
a better term I shall
call 'accrued' jurisdiction, is discretionary and
not mandatory,
though it will be
obligatory to exercise the federal
jurisdiction
which has been attracted in relation to the matter."
And thus his Honour, in defining the matter in the proceedings between Philip
Morris and Adam P. Brown did not identify it as a cause
of action but said
(1981) 148 CLR, at pp 479-480 :
"The substantial matter between the parties was their difference as to the
assertion of and attempt to protect the rights
claimed to belong to the
plaintiffs by reason of the trade marks or the acquired business
reputation. The claim to relief
under Ch. V of the Act was one endeavour
to protect these rights. The claim to equitable relief for passing off was
another.
The former attracted
federal jurisdiction: the latter, not being
disparate and independent of the former, was part of the whole
matter
between
the parties and thus within the accrued federal jurisdiction.
Thus, it seems to me that the federal jurisdiction
attracted by
the claim
for misleading and deceptive conduct extends to the resolution of the
entire matter between the parties,
which
includes the claim for passing
off, not merely as an associated claim but as part of the entirety of the
matter between
the
parties in relation to which federal jurisdiction has
been attracted." (at p604)
22. Mason J., whose judgment commanded the assent of Stephen J., after
referring to the width of the word "matters", rejected an
argument that
"matters" in the context of s. 76(ii) is to be equated with cause of action,
claim for relief or matter of defence
arising under a federal law. His
Honour's analysis of
the cases led him to reject this "narrow view", and he
said (1981) 148 CLR,
at p 512 :
"Once it is accepted, as it must be, that there is no special magic in the
scope of those matters which involve the interpretation
of the
Constitution, the lesson to be learned from the authorities is that the
court having jurisdiction to determine a matter falling within ss. 75 and
76 giving rise to the exercise of federal jurisdiction has jurisdiction to
decide an attached nonseverable claim.His Honour's analysis of Moorgate Tobacco illustrates what is meant by "matter" in ss. 75, 76 and 77 of the Constitution. His Honour said (1981) 148 CLR, at pp 511-512 :
The classification of a claim as 'non-severable' does not necessarily mean that it is, or must be, united to the federal claim by a single claim for relief, though this is a common illustration of a non-severable claim. The non-severable character of the attached claim may emerge from other aspects of the relationship between the federal and the attached claim. For example, it may appear that the resolution of the attached claim is essential to a determination of the federal question. Likewise, it may appear that the attached claim and the federal claim so depend on common transactions and facts that they arise out of a common substratum of facts. In instances of this kind a court which exercises federal jurisdiction will have jurisdiction to determine the attached claim as an element in the exercise of its federal jurisdiction."
23. Murphy J. was of the opinion that Parliament was competent to confer
jurisdiction "to determine the whole case, that is, to
resolve judicially
every incidental and related issue, every issue which is not separate and
distinct from those which arise under
a direct grant of federal jurisdiction
under s. 77 of the Constitution (see s. 32 of the Judiciary Act 1903, as
amended)" (1981) 148 CLR, at p 520 His Honour, not wishing to explore the
differences, if
any, between the concepts of dependent,
pendent, collateral or
ancillary jurisdiction, said (1981) 148 CLR, at p 520 :
"This dependent or ancillary jurisdiction may embrace jurisdiction which
could have been given directly under s. 77 (this
would be federal
jurisdiction even if conferred independently). It may also embrace
jurisdiction to resolve questions
or
issues which could not be conferred
independently on a federal court, that is jurisdiction in respect of
questions or
issues
which are not separate and distinct from those which
come within jurisdiction which has been conferred directly under
s. 77 (or
ancillary or pendent jurisdiction which could have been conferred directly
under s. 77)." (at p605)
24. The dissenting judgments confined the concept of matter more narrowly.
Gibbs J. (as the Chief Justice then was) held that, if
a party claims
substantially the same relief on two different legal grounds, and the facts on
which relief is sought on each ground
are identical, there is but one matter
(1981) 148 CLR, at pp 494-495 . Although there are two or more legal grounds
for granting
relief in respect of a set of facts, there is but a single cause
of action, for the identity of the evidence required to maintain
an action on
one ground with the evidence required to maintain an action on another ground
is a criterion of identity in the cause
of action: see per Williams J. in
Carter v. Egg and Egg Pulp Marketing Board (Vict.) [1942] HCA 30; (1942) 66 CLR 557, at p 600
. Gibbs J. denied
that a second, non-federal cause of action might be part of
a "matter". His Honour
thought that the test suggested
in United Mine
Workers
of America v. Gibbs [1966] USSC 62; (1966) 383 US 715, at p 725 (16 Law Ed (2d) 218, at p 228)
that the claims should "derive
from a common
nucleus of operative fact"
and
must be such that the plaintiff "would ordinarily be expected to try them all
in one
judicial proceeding"
was not a test warranted
by Ch. III of our
Constitution. (at p606)
25. Aickin J. also gave the term "matter" in the context of s. 76(ii) a restrictive interpretation. Holding that "the right, duty or liability in question" must arise under an Act of the Parliament, his Honour came to the conclusion "that matters arising under the common law, or Acts of State Parliaments cannot be the subject of a grant of jurisdiction to federal courts under s. 76(ii) whatever the degree of overlap there may be in the facts relevant to the two kinds of matter" (1981) 148 CLR, at p 534 . Wilson J. was of the same opinion. Although, in his Honour's view, "matter" comprehended "a right, title, duty, privilege, protection or immunity, or matter of defence", the important consideration under s. 76(ii) is that "the source of the relief claimed or defence asserted must be the federal law" (1981) 148 CLR, at p 545 . (at p606)
26. There was a clear difference of opinion in Philip Morris (1981) 148 CLR
457 as to the meaning of "matter" in
the context
of
s. 76(ii). The majority
view was that a "matter" is a justiciable controversy which must either be
constituted by
or must include
a claim arising
under a federal law but which
may also include another cause of action arising under another law,
provided
it is
attached to and
is not severable from the former claim. The proposition
that a matter may include a cause of action
arising under
a non-federal law,
though denied in the dissenting judgments, is the ratio decidendi of Philip
Morris. It follows that
the ambit
of a matter arising
under a federal law may
extend beyond claims which arise under that law or which are to be determined
by reference
to that law alone.
As Windeyer J. said in Felton v. Mulligan
(1971) 124 CLR, at p 393 :
"The existence of federal jurisdiction depends upon the grant of an
authority to adjudicate rather than upon the law to be
applied or the
subject of adjudication." (at p607)
27. Subject to any contrary provision made by federal law and subject to the
limitation upon the capacity of non-federal laws to
affect federal courts,
non-federal law is part of the single, composite body of law applicable alike
to cases determined in the exercise
of federal jurisdiction and to cases
determined in the exercise of non-federal jurisdiction (cf. Felton v. Mulligan
(1971) 124 CLR,
at pp 392, 399 ). (at p607)
28. It follows also that, though the facts upon which a non-federal claim
arises do not wholly coincide with the facts upon which
a federal claim
arises, it is nevertheless possible that both may be aspects of a single
matter arising under a federal law. Mason
J. in Philip Morris (1981) 148 CLR,
at 512 , following what was said in Moorgate Tobacco [1980] HCA 32; (1980) 145 CLR 457 , gave
an indication
of a non-federal claim which would not be severable:
"Likewise, it may appear that the attached claim and the federal claim so
depend on common transactions and facts that they
arise out of a common
substratum of facts. In instances of this kind a court which exercises
federal jurisdiction will have
jurisdiction to determine the attached
claim as an element in the exercise of its federal jurisdiction."
His Honour's reference to a dependence of federal and non-federal claims upon
common transactions and facts approximates the test
in United Mine Workers of
America v. Gibbs (1966) 383 US, at p 725 (16 Law Ed (2d), at p 228) that the
claims "must derive from a
common nucleus of operative fact". Barwick C.J.
thought (1981) 148 CLR, at p 476 that that test, if applied to Ch. III of the
Constitution, may be too wide because it "would seem to warrant an accretion
of non-federal jurisdiction which is not necessary or convenient
for the
resolution of the case or controversy which has been the source of the federal
jurisdiction in the first place, but extends
to what is described as 'an
associated matter'. As I remark in relation to s. 32 of the Federal Court Act,
the word 'associated'
embraces matter which may be disparate from each other."
(at p607)
29. Perhaps it is not possible to devise so precise a formula that its application to the facts of any controversy would determine accurately what claims are disparate and what claims are not. Whatever formula be adopted as a guide - and the formula of "common transactions and facts" is a sound guide for the purpose - it must result in leaving outside the ambit of a matter a "completely disparate claim constituting in substance a separate proceeding" (per Barwick C.J. in Felton v. Mulligan (1971) 124 CLR, at p 373 ), a non-federal matter which is "completely separate and distinct from the matter which attracted federal jurisdiction" (per Murphy J. in Philip Morris (1981) 148 CLR, at p 521 ) or "some distinct and unrelated non-federal claim" (per Stephen, Mason, Aickin and Wilson JJ. in Moorgate Tobacco (1980) 145 CLR, at p 482 ). (at p608)
30. Claims which are described by these or similar phrases cannot be determined by exercise of the judicial power referred to in s. 71 of the Constitution, for that power can be exercised only to determine those matters in which federal jurisdiction is or can be conferred under Ch. III of the Constitution. For precisely this reason, however, it is necessary to attribute to "matter" in ss. 75 and 76 of the Constitution a connotation which does not deny to federal judicial power its primary character: that is, the power of a sovereign authority "to decide controversies between its subjects, or between itself and its subjects, whether the rights relate to life, liberty or property" (per Griffith C.J. in Huddart, Parker & Co. Pty. Ltd. v. Moorehead [1909] HCA 36; (1909) 8 CLR 330, at p 357 ). The unique and essential function of the judicial power is the quelling of such controversies by ascertainment of the facts, by application of the law and by exercise, where appropriate, of judicial discretion. In identifying a s. 76(ii) matter, it would be erroneous to exclude a substantial part of what is in truth a single justiciable controversy and thereby to preclude the exercise of judicial power to determine the whole of that controversy. What is and what is not part of the one controversy depends on what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationships. The scope of a controversy which constitutes a matter is not ascertained merely by reference to the proceedings which a party may institute, but may be illuminated by the conduct of those proceedings and especially by the pleadings in which the issues in controversy are defined and the claims for relief are set out. But in the end, it is a matter of impression and of practical judgment whether a non-federal claim and a federal claim joined in a proceeding are within the scope of one controversy and thus within the ambit of a matter. (at p608)
31. A judicial power which is not exercised to determine the whole of a controversy is, generally speaking, not appropriately and conveniently exercised. Not appropriately, because the controversy is not quelled; not conveniently, because the parties - the principal beneficiaries of the exercise of judicial power - must litigate anew to have the outstanding questions and issues determined. The reference by Barwick C.J. in Philip Morris (1981) 148 CLR, at p 475 to what is necessary or convenient for the resolution of a federal claim is perhaps too restricted a limitation on the ambit of "matter". Such a test would be unexceptionable if the primary purpose of the exercise of federal judicial power in a s. 76(ii) matter were the judicial administration of the federal law; that is, if the primary purpose were to ensure that the federal law applicable to a particular claim was correctly applied in resolving it. But the primary purpose of exercising judicial power is not the maintenance of legal principle: that is incidental to the determination of the dispute in hand. (at p609)
32. The power judicially to determine the whole of a dispute is inconsistent
with a limitation which would restrict the Court to
resolving only the federal
claim and what is necessary for that purpose. To adopt a more restrictive
approach to the ascertainment
of the ambit of a matter is to ensure that the
obstacles of arid jurisdictional dispute will beset the path of a party who
must invoke
federal jurisdiction, especially federal jurisdiction exclusively
vested in a federal court pursuant to s. 77(ii). The judicial ascertainment of
facts in a particular controversy would be bedevilled by the possibility of
divergent findings or by
unseemly attempts to secure a first finding from one
court rather than another. The judicial award of effective remedies in
resolution
of a controversy would be impaired, especially in cases where
remedies are discretionary or reciprocal. The judicial power of the
Commonwealth would at once prove insufficient to accomplish its purpose and
productive of inefficiency in the exercise of the judicial
power of the
States. These consequences cannot be accepted unless they follow from the
language of the Constitution, and they do not. As Mason J. said in Philip
Morris (1981) 148 CLR, at p 514 :
"In deciding whether to attribute either a broad or a narrow content to
'matter', we should take into account that the
adoption of the broad
meaning will lead to the speedier determination of entire controversies
between parties without undue
duplication of proceedings. Perhaps the
adoption of this view will have some adverse consequences for State
courts, though
this is by no means self-evident, but even if this be so,
it is a consideration which is secondary to the interests of litigants.
This circumstance is an additional reason for giving the word a broad
rather than a narrow meaning." (at p609)
33. However, federal judicial power is attracted to the whole of a
controversy only if the federal claim is a substantial aspect
of that
controversy. A federal claim which is a trivial or insubstantial aspect of the
controversy must, of course, itself be resolved
in federal jurisdiction, but
it would be neither appropriate nor convenient in such a case to translate to
federal jurisdiction the
determination of the substantial aspects of the
controversy from the jurisdiction to which they are subject in order to
determine
the trivial or insubstantial federal aspect. Again, impression and
practical judgment must determine whether it is appropriate and
convenient
that the whole controversy be determined by the exercise of federal judicial
power. (at p610)
34. Regardless of whether the form of objection to the jurisdiction of a court relates to the jurisdiction conferred upon it or the jurisdiction from which it is excluded by a law enacted pursuant to s. 77(ii), the question - hopefully amenable to summary disposition - is whether the claim under the relevant federal law is a substantial part of a controversy the whole of which would be appropriately and conveniently determined by the court vested with jurisdiction in matters arising under that law. That is not to say that a judicial decision as to whether a particular question or issue falls for determination by the exercise of federal jurisdiction is not capable of review. But the occasions for such review should be few indeed and restricted to cases where there has been obvious error in holding either that the federal aspect of the matter is substantial or that it is trivial or that the overall area of dispute is susceptible of clear division into component controversies or that it is not. (at p610)
35. Some of the claims (namely, claims 1 and 5) to which this appeal relates are claims attracting the exercise of the exclusive jurisdiction of the Federal Court, being based upon ss. 52 and 82 of the Act. The question is whether claims 1, 2, 3 and 4 are parts of a single controversy of which claim 1 is a substantial part. (at p610)
36. Claims 1, 2, 3 and 4 all arise out of common transactions and facts, namely, the negotiations for sale, contract of sale and performance of the contract of sale of O'Connors Wine Bar and Restaurant. The proceedings are unusually constituted because the vendor, Scrid, passed into the control of the purchaser, Mr. Muller, pursuant to the provisions of the contract of sale. The purchaser can cause the vendor to reimburse losses caused by breach of contract or by conduct for which the vendor is liable without resort to litigation. The claims made by the vendor are to replenish its assets to the extent required to meet the purchaser's claims. The controversy is as to Mr. Muller's right to damages, whether recoverable directly by him or indirectly through Scrid, for injury suffered by his undertaking and partly performing the obligations of purchaser under the contract of sale being damages for which Scrid is liable. Mr. Muller seeks to recover damages directly from Mr. and Mrs. Fencott, H. & T. and Mr. Hondros in claims 1 and 2, and Scrid, in claims 3 and 4, seeks such an indemnity as will put it in funds sufficient to meet its liability to Mr. Muller. The parties to the controversy are the purchaser and the company he now controls on the one hand and, on the other, those who controlled and were the beneficial owners of the business and their agents for sale of the business. It is a single controversy and claims 1, 2, 3 and 4 are all aspects of the matter constituted by that controversy. Claim 5 is within the jurisdiction of the Federal Court whether or not it is part of that controversy. (at p611)
37. The third objection fails. The appeal should be dismissed. (at p611)
WILSON J. The facts of this case and the issues which arise for the determination of the Court appear from other judgments. Having regard to the range and detail of the reasoning contained in those judgments I find that I can express my view upon those issues very shortly. (at p611)
2. I agree with all the other members of the Court and for the reasons which they have expressed that s. 82 of the Trade Practices Act 1974 (Cth), as amended, ("the Act") in so far as it imposes liability upon natural persons by reason of their involvement in a contravention of Pt IV or Pt V by a corporation, is a valid law of the Commonwealth. (at p611)
3. The second question is whether Oakland Nominees Pty. Ltd. is a trading or financial corporation within the meaning of the Act (and a corporation within s. 51(xx) of the Constitution). Whenever a question such as this arises in any particular case, the answer will depend upon a consideration of the facts of the case. It seems to me to be consistent with the guidance provided by earlier decisions of the Court to say the factors which are relevant to that consideration will include both the activities of the corporation and its intended purpose. The latter is not necessarily to be found in the scope and range of the objects contained in its memorandum of association. In the case of a shelf company its relevant purpose will be discovered by evidence of the purpose of its acquisition rather than of the purpose of its establishment. In my opinion, whenever a question arises as to the application of s. 51(xx), the task is to discover the true character of the corporation. I agree, with respect, with the views expressed by the Chief Justice in the present case as to how that task is to be pursued. Adopting that approach, I am unable to discern any basis upon which it could be held that Oakland is a trading or financial corporation within the meaning of the Act. It has not traded nor does it intend to do so. It is not engaged in the business of dealing in finance nor does it intend to do so. It was not acquired for the purpose of engaging in trade or in the business of dealing in finance. The relevant evidence is described and evaluated by both the Chief Justice and Dawson J. in a manner with which I would respectfully agree. I cannot usefully add to what their Honours have said. It follows that the Federal Court has no jurisdiction to entertain the claims made against Oakland and Johnsen. (at p612)
4. The third question is whether the Federal Court has jurisdiction to deal with Mr. Muller's claims for common law damages in deceit, negligence and breach of contract and Scrid's claims to be indemnified in respect of liability which it has incurred to Mr. Muller. (at p612)
5. The only possible source of relevant jurisdiction is that conferred on the Federal Court by s. 86 of the Act, namely, jurisdiction to hear and determine actions, prosecutions and other proceedings under Pt VI of the Act. In Philip Morris Inc. v. Adam P. Brown Male Fashions Pty. Ltd. (1981) 148 CLR 457 this Court by majority decided that a claim which is not itself based on a federal law may nevertheless fall within the jurisdiction of the Federal Court if it forms part of the matter which attracted that jurisdiction. In that case the federal claim, like the present one, was for damages in accordance with s. 82 of the Act for misleading or deceptive conduct in contravention of s. 52. It was held that a common law claim for damages for passing off was inseverable from the claim under s. 82 and consequently formed part of the matter constituted by that federal claim. Aickin J. and I dissented. We each drew what we considered to be a vital distinction between the range of claims which might be comprehended within a matter involving the interpretation of the Constitution (Constitution, s. 76(i)) and those to which a matter arising under a law of the Commonwealth (Constitution, s. 76(ii)) might refer. With respect, it still seems to me, as it seemed to me then, that the doctrine established by earlier decisions of this Court touching the scope of the word "matter" in s. 76(i) was inapplicable to the very different context in which the word "matter" appears in s. 76(ii). It is true that all the members of the Court in Philip Morris (1981) 148 CLR 457 proceeded on the basis that s. 86 of the Act, although referring to "actions, prosecutions and other proceedings under this Part", was to be construed as if it was an investiture of jurisdiction in "matters arising under this Part". Whether the same difference of opinion would have emerged had the consideration been confined to the actual wording of the section may be a question. For my part, just as I was inclined to limit the content of a matter arising under a law of the Commonwealth to rights, duties, privileges, protections or immunities which actually owed their existence to the federal law or depended upon the federal law for their enforcement (cf. R. v. Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141, at p 154 ) so I think it follows that "actions, prosecutions and other proceedings under this Part" means exactly what the words say. Part VI provides an exhaustive enumeration of the claims that are within the jurisdiction of the Federal Court. (at p613)
6. However, notwithstanding my preferred opinion, I must now determine the present question consistently with the decision of the Court in Philip Morris (1981) 148 CLR 457 . That decision obliges me to determine whether all or any of the non-federal claims to which I have referred form part of the matter which is constituted by the claim for damages which is made pursuant to s. 82 of the Act. Unfortunately, the reasons of the justices who formed the majority do not provide a clear view of the test which is to be applied in making such a determination. It is unnecessary for me to repeat the analysis which both the Chief Justice and Dawson J. have made of the differing views expressed in the case. In all the circumstances, I think the proper course is to apply the view expressed by Gibbs J. (as he then was). His Honour said (1981) 148 CLR, at p 499 ". . . if a party claims relief on two different legal grounds, but the facts on which the relief is sought on each ground are identical, and the relief sought on each ground is the same in substance if not in form, there is only one matter for determination". The application of this test in Philip Morris led to the conclusion that the common law claim for passing-off was part of the matter of a claim under s. 82 for damages for misleading or deceptive conduct in contravention of s. 52 of the Act. The facts giving rise to the two claims were identical and the relief sought in each case was substantially the same. However, in my opinion, this cannot be said of any of Mr. Muller's claims in respect of deceit, negligence and breach of contract or of Scrid's claims to an indemnity. None of these claims would be established merely by the proof of facts necessary to support the federal claim; they each require reliance upon additional facts. I therefore hold that the jurisdiction of the Federal Court is limited to a determination of Mr. Muller's claim for damages under s. 82 of the Act against the Fencotts, H. & T. Holdings Pty. Ltd. and Hondros. (at p613)
7. The appeal should be allowed in part and the objection to jurisdiction upheld to the extent indicated in these reasons. (at p613)
DAWSON J. An application was made in the Federal Court by Hans Martin Muller and Scrid Nominees Pty. Ltd. ("Scrid") against Bryan Eric Fencott and Patricia Alma Fencott, H. & T. Holdings Pty. Ltd. ("H. & T. Holdings"), James John Hondros, Oakland Nominees Pty. Ltd. ("Oakland Nominees") and Victor Harry Johnsen claiming relief upon the grounds set out in an accompanying statement of claim. Objection was taken to the jurisdiction of the Federal Court by the Fencotts, Oakland Nominees and Johnsen. The objection was heard in the Federal Court by Toohey J. who allowed it in part but otherwise dismissed it [1933] HCA 44; (1982) 57 FLR 35; 39 ALR 496 . An appeal was instituted in the Federal Court by the Fencotts, Oakland Nominees and Johnsen against the decision of Toohey J. in so far as he dismissed the objection to jurisdiction and that appeal was removed into this Court pursuant to s. 40 of the Judiciary Act 1903 (Cth). (at p614)
2. The facts emerging from the statement of claim and from its exposition in this Court are alleged to give rise to a number of causes of action and are as follows. (at p614)
3. Scrid is a company incorporated under the Companies Act 1961 (W.A.) and was the lessee of premises in Hay Street, West Perth, upon which it carried on the business of a restaurant and wine bar under the name "O'Connors Wine Bar and Restaurant". From about 1979 until the occurrence of the events upon which the claim is based, Scrid was the trustee of a unit trust called the "O'Connors Unit Trust" and its only shareholders and directors were the Fencotts. The beneficiaries under the unit trust were, it would seem, principally the Fencotts and their family. (at p614)
4. At some time late in 1980 or early in 1981 the Fencotts decided that O'Connor's Wine Bar and Restaurant should be sold and they instructed H. & T. Holdings, a licensed real estate agent and business broker and also a company incorporated under the Companies Act 1961 (W.A.), to sell the business. H. & T. Holdings, through an employee, Hondros, entered into negotiations with Muller who agreed on 27 January 1981 to purchase O'Connors Wine Bar and Restaurant for $150,000 plus stock at valuation, legal costs and an amount of $1,000 expressed to be consideration for the purported grant of an option to acquire a fifty per cent interest in the freehold of the premises upon which the business was conducted. (at p614)
5. The agreement was made conditional upon the assignment by Scrid to Muller of the lease of the premises upon which the business was conducted or, alternatively, upon the transfer by the Fencotts to Muller of their shareholding in Scrid. (at p614)
6. Muller paid part of the purchase price of the business and took possession on 23 Februry 1981. Previously, on 6 February 1981, the Fencotts had transferred their shareholding in Scrid to Muller and his wife. On 10 February 1981 the Fencotts resigned as directors of Scrid and Muller and his wife took their place in that capacity. (at p615)
7. Although it does not appear from the statement of claim, it does appear from evidence given in the interlocutory proceedings that Oakland Nominees was appointed as the trustee of O'Connors Unit Trust in place of Scrid upon the sale of the shares in Scrid to Muller. Johnsen, who was the Fencotts' accountant, was or became the secretary of Oakland Nominees. (at p615)
8. It is alleged that, in entering into the agreement, Muller relied upon a number of false representations made by Hondros in the course of the negotiations. The representations are said to have related to the turnover and net profit of the business and its costs and operating expenses and to have been "authorized or initiated" by the Fencotts or, alternatively, H. & T. Holdings or, alternatively, Hondros, "on behalf of Scrid" in the knowledge that they were false. (at p615)
9. The statement of claim goes on to allege that the representations made by the Fencotts, H. & T. Holdings or Hondros constituted conduct on behalf of Scrid that was misleading or deceptive within the meaning of s. 52 of the Trade Practices Act 1974 (Cth), as amended. There follows a number of alternative allegations, namely, that the false representations were made fraudulently or negligently or were incorporated in the agreement for the sale of the business as warranties or were collateral warranties. As a consequence, it is alleged, Scrid has incurred liability to Muller for damages under s. 82 of the Trade Practices Act or, alternatively, at common law. A claim is made by Scrid against Oakland Nominees to be indemnified against this liability from the assets of the O'Connors Unit Trust upon the basis that the liability was incurred in the conduct of the business of the trust. There are further allegations against the Fencotts, H. & T. Holdings and Hondros of breach of fiduciary duty towards Scrid and a claim that Scrid is entitled to be indemnified by Oakland Nominees against its liability to Muller. (at p615)
10. The statement of claim then pleads that the effect of the agreement for the sale of the business was that Scrid would discharge the liabilities of the wine bar and restaurant business incurred before the transfer of possession of the business and would indemnify Muller against any claims in respect of those liabilities and that, since those liabilities were incurred by Scrid in the conduct of the business on behalf of the unit trust, Scrid is entitled to be indemnified against them by Oakland Nominees. (at p615)
11. The last allegation in the statement of claim is that Johnsen, as agent for Oakland Nominees, posted to Scrid's trade creditors letters purporting to come from Scrid stating that Scrid did not have the funds to pay its debts because of the failure of Muller to settle the moneys due under the agreement for the sale of the wine bar and restaurant business. This, it is said, constituted misleading and deceptive conduct in contravention of s. 52 of the Trade Practices Act so as to render Oakland Nominees and Johnsen liable under s. 82 of that Act. (at p616)
12. The relief claimed by Muller and Scrid against the Fencotts, H. & T. Holdings and Hondros is damages pursuant to s. 82 of the Trade Practices Act or, alternatively, damages at common law and the same applicants claim against Oakland Nominees and Johnsen damages pursuant to s. 82 of the Trade Practices Act. It was conceded, however, during the hearing before this Court that Scrid has no claim under s. 82 against the Fencotts, H. & T. Holdings or Hondros, nor does it have any claim for damages against those parties at common law. Alternatively, there is a claim by Muller and Scrid for an indemnity against Oakland Nominees in respect of Scrid's liability to Muller and in respect of Scrid's liability to trade creditors for debts incurred before 23 February 1981. (at p616)
13. Section 52(1) of the Trade Practices Act provides that a corporation
shall not, in trade or commerce, engage in conduct that
is misleading or
deceptive. Section 82(1) provides that a person who suffers loss or damage by
an act of another person that was
done in contravention of a provision of Pt
IV or V (s. 52 is in Pt V - Consumer Protection) may recover the amount of the
loss or
damage by action against that other person or against any person
involved
in the contravention. Section 84(2) provides that any conduct
engaged
in on behalf of a body corporate by a director, agent or servant of the body
corporate or by any
other person at the direction
or with the consent or
agreement (whether express or implied) of a director, agent or servant of the
body corporate shall be deemed,
for the purposes of the Act, to have been
engaged in also by the body corporate. Section 75B provides
that a reference
in Pt VI (s.
82 is in Pt VI - Enforcement and Remedies) to a person involved
in a contravention of a provision of
Pt IV or V shall be read as
a reference
to a person who -
"(a) has aided, abetted, counselled or procured the contravention; (b)
has induced, whether by threats or promises or
otherwise, the
contravention; (c) has been in any way, directly or indirectly,
knowingly concerned in, or party to, the
contravention; or (d) has
conspired with others to effect the contravention." (at p616)
14. The claim by Muller against the Fencotts, H. & T. Holdings and Hondros
under s. 82 of the Trade Practices Act is based upon
the contravention by them
of s. 52 of the Act. The latter section speaks only of misleading or deceptive
conduct by
a corporation
and does not on its face apply to natural persons.
"Corporation" is defined in s. 4 to mean a body corporate that,
amongst other
things, is a trading corporation formed within the limits of Australia or is a
financial corporation so formed. Persons,
not being
corporations within the
definition, are brought within the additional operation of the Act for which
s. 6 provides, but
it is not
contended that s. 6 has any application in these
proceedings. (at p617)
15. The misleading or deceitful conduct in breach of s. 52 of the Trade Practices Act which is alleged is, first, that of Scrid in making the false representations about the business. Muller claims damages arising from those representations against the Fencotts, H. & T. Holdings and Hondros because they made the representations on behalf of Scrid and are, within the meaning of s. 82 of the Act, persons involved in Scrid's contravention of s. 52. Secondly, it is alleged that the sending of the letters by Johnsen was misleading or deceptive conduct by him on behalf of Oakland Nominees, which was thereby in contravention of s. 52, and that Johnsen was also liable in damages in respect of the same conduct because he was, within the meaning of s. 82, a person involved in that contravention. (at p617)
16. The first question raised by the grounds of appeal is whether s. 82 of the Act is a valid exercise of legislative power so as to render the Fencotts and Johnsen, as natural persons and not corporations, liable to Muller in an action for damages based upon a contravention of s. 52. The same considerations as are involved in this point would apply to Hondros, although he is not a party to the appeal. (at p617)
17. The second question raised by the notice of appeal is whether Oakland Nominees was a corporation within the meaning of s. 52 of the Act, not being a trading corporation or a financial corporation or otherwise within the definition of corporation in s. 4(1) of the Act. If Oakland Nominees was not such a corporation, then it could not have been in contravention of s. 52 of the Act and Johnsen could not have been involved in any such contravention in acting on its behalf. (at p617)
18. The remaining question which the notice of appeal raises is whether the Federal Court has jurisdiction to hear the common law claims for damages for fraudulent misrepresentation, negligence, breach of warranty and the claims for indemnity. (at p617)
19. Turning to the first question, the basis of the attack upon s. 82 of the Trade Practices Act is that it seeks to impose liability upon natural persons and its validity cannot therefore be supported by the power given to the Commonwealth Parliament by s. 51(xx) of the Constitution to make laws with respect to foreign corporations and trading and financial corporations formed within the limits of the Commonwealth (the corporations power) or any incidental power. As I have said, no attempt was made to invoke s. 6 of the Trade Practices Act, which purports to extend the application of the Act to natural persons in circumstances which indicate reliance upon legislative powers other than the corporations power, so that it is possible to confine the question of legislative power to par. (xx) of s. 51. (at p618)
20. The argument as to the invalidity of s. 82 depended, as I understand it, upon the necessity of invoking s. 84(2) in order to establish a contravention of s. 52. Misleading or deceptive conduct by individuals (in this case the Fencotts and Johnsen) becomes, so the argument went, misleading or deceptive conduct by a corporation under s. 52 only where the conduct of the individuals is deemed to have been engaged in by a body corporate pursuant to s. 84(2). Once a contravention by a corporation (in this case Scrid and Oakland Nominees) is established in this manner, then s. 82 imposes liability for damages, not only upon the corporation, but also upon the individuals concerned because they are persons involved, as defined by s. 75B. It is in this way that it is said that s. 82 imposes liability upon natural persons for their own conduct and so travels beyond the corporations power, being a law with respect to the conduct of natural persons and not with respect to the conduct of corporations. (at p618)
21. However, the fact that a law is concerned with the conduct of natural persons or individuals does not mean that it may not be a law with respect to corporations. Corporations, being artificial entities, act through the agency of individuals. The misleading or deceptive conduct by a corporation which is proscribed by s. 52, will of necessity also be the conduct of an individual or individuals. Section 84 is concerned with the connexion which will make the conduct of an individual that of a corporation. The section is an evident attempt to clarify for the purposes of the Act the circumstances in which a corporation must bear liability for the acts of others done on its behalf. Although it has always been obvious that a corporation can act only through the agency of individuals, the law has not always identified precisely the limits to corporate liability, particularly criminal liability, for wrongs committed by individuals who are also servants or agents of the corporation. Viewed in this way, s. 84 is clearly a law which in conception naturally falls within the corporations power. Whether in its application it goes too far by deeming conduct to be that of a corporation which could not reasonably be regarded as other than the conduct of an individual it is, for the reasons I shall express in a moment, unnecessary to consider in this case. It is sufficient merely to remark that despite the attempt at clarification which the section makes, its precise scope, particularly that of sub-s. (2), would seem uncertain. (at p619)
22. The reason why it is unnecessary to consider the limits of s. 84 is that the section is, in this case, an unnecessary link in the chain leading to the allegation of liability for damages under s. 82. The objection to jurisdiction is based upon the pleadings and, whilst the pleadings are not without ambiguity, it is clear enough that the conduct which is alleged to have been misleading and deceptive took the form of representations which, if they were made at all, were made on behalf of the relevant corporation in each case. No reliance is placed upon the fact that that conduct may fall within s. 84(2) and so be deemed to be the conduct of the relevant corporation, nor is there any need as the pleadings stand to express any such reliance. On ordinary principles the allegations if proved would establish that the conduct alleged to contravene s. 52 was in each case the conduct of the relevant corporation. (at p619)
23. It is, therefore, possible to proceed to s. 82 without reliance upon s. 84 and to consider whether the former section may validly impose liability upon the Fencotts and Johnsen as persons involved in the contravention of s. 52. That, of course, does require reference to s. 75B which provides the definition of the expression "person involved". (at p619)
24. The origins of s. 75B afford some explanation of the function which it
performs. In Reg. v. Australian Industrial Court; Ex
parte C.L.M. Holdings
Pty. Ltd. (1977) 136 CLR 235 it was held that s. 5 of the Crimes Act 1914
(Cth) might validly be employed to render a natural person guilty of an
offence created by the Trade Practices Act in respect of
a corporation.
Section 5, so far as is relevant, provides:
"Any person who aids, abets, counsels or procures, or by act or omission
is in any way directly or indirectly knowingly
concerned in, or party to,
the commission of any offence against any law of the Commonwealth . . .
shall be deemed to have
committed that offence and shall be punishable
accordingly." (at p619)
25. Following this decision, s. 75B was inserted in the Trade Practices Act
by the Trade Practices Amendment Act 1977 and by the
same Act s. 82 was
replaced by a new section which extended liability in an action for damages to
a person involved in
a contravention
of a provision of Pt IV or V of the Act.
Section 75B in introducing the concept of an involved person takes up s.
5 of
the Crimes
Act and also includes persons inducing a contravention of the
relevant parts of the Trade Practices Act (cf. Crimes Act, s. 7A) and
persons
conspiring to effect a contravention (cf. Crimes Act, s. 86). Such a course
was, no doubt, suggested by the words of Mason
J. in Reg. v. Australian
Industrial Court; Ex parte C.L.M.
Holdings Pty. Ltd. (1977) 136 CLR, at pp
246-247 :
"The point here is that if a head of constitutional power enables the
Parliament to legislate so as to create a particular
offence, then that
head of power or the incidental power will authorize a provision having
the same effect as s. 5 of the
Crimes Act in its application to a person
who is knowingly concerned in the commission of the offence." (at p620)
26. As I understand the argument of the appellants, the validity of s. 75B
was not contested apart from the effect which it might
have if the deeming
provisions of s. 84 were used to extend the breadth of s. 52 and,
consequently, s. 82. But, as I have said, as
the matter stands on the
pleadings, there is no occasion to invoke s. 84 and, that
being so, no
question of power arises in relation
to s. 75B or s. 82 in this case. If
Parliament has the power to control the trading
activities of trading
corporations, then it is
for Parliament to determine how it will exercise the
power. If by imposing liability,
civil or criminal, upon natural persons
involved
in those activities, Parliament may be said to be adopting a means of
effectuating
that control, then a law imposing such liability
is either within
the power or incidental to it. Of course, if the involvement relied
upon is
too slight or tenuous to provide the
necessary connexion between the
activities of the corporation and the activities of
the natural person whom
the law seeks to make
liable, then the question of power will arise. But the
mere fact that the imposition
of liability may operate harshly or unfairly
in
some cases does not go to power; if a means of achieving its purpose is open
to the
legislature, the wisdom of adopting that means
and the extent of its
adoption is a matter for Parliament: Actors Equity v. Fontana
Films [1982] HCA 23; (1982) 150
CLR 169 . (at
p620)
27. I should not wish my last comment to be taken as any reflection upon the possible scope of operation of s. 82 although it may be remarked that the extent of the liability imposed by s. 82, being liability in damages, lies outside the discretion of the court in which relief is claimed and, unlike a criminal penalty, the measure of damages cannot be adjusted to reflect the degree of involvement or blameworthiness of the person upon whom the liability is imposed. This, perhaps, is of more significance in the context of s. 84, the possible breadth of which it has been unnecessary to consider in this case. (at p621)
28. The second question which arises under the grounds of appeal entails different considerations. Whether Oakland Nominees is a corporation within the meaning of s. 52 of the Trade Practices Act raises an issue which involves determinations of fact and which it would normally be inappropriate to determine in proceedings removed into this Court. However, the parties are agreed that all the evidence that can be led on that issue was before Toohey J. and it is convenient for that reason to deal with it here. Cf. Reg. v. Federal Court of Australia; Ex parte W.A. National Football League ("Adamson's Case") [1979] HCA 6; (1979) 143 CLR 190, at p 206 . (at p621)
29. The principal objects of Oakland Nominees are as follows:
"(a) To undertake the office of a trustee and to perform and discharge the
duties and functions of a trustee incidental to
any trust and to hold in
its name and deal with real or personal property as trustee agent or
nominee of or for any person company or corporation.There are other objects which would enable the company to carry on businesses of various kinds which would clearly embrace the activities of a trading corporation or a financial corporation or of both. The evidence, however, shows that Oakland Nominees was incorporated on 21 November 1980 and that it was made available to the Fencotts as an inactive, or shelf, company for the purpose of acting as the trustee of the O'Connors Unit Trust after O'Connors Wine Bar and Restaurant had been sold and the shares in Scrid had been transferred to Muller and his wife. Bryan Eric Fencott gave evidence that the only function of Oakland Nominees was "to receive the remaining amount from the sale of the business, pay off its creditors and thereafter distribute any remaining sums to its unit holders within the O'Connors Unit Trust". In an affidavit, Fencott deposed that the company "is a mere trustee which has not traded and which will never trade. Its sole function, as appointed, is to wind up the affairs of the said Trust." (at p622)
(b) To act as trustee or agent for any person or corporation in the management of any real or personal property or in buying leasing selling or otherwise dealing with or disposing of any real or personal property or in investing moneys and generally to transact all kinds of trust business and to make do execute and perform all acts deeds transactions business matters and things which a trustee might lawfully make do execute and perform by virtue of the Trust Deed or by law or otherwise."
30. There is no distinction to be drawn between the relevant part of the definition of corporation in s. 4(1) of the Act and the reference to trading and financial corporations in s. 51(xx) of the Constitution. The approach to be adopted in determining whether a corporation is a trading or financial corporation within the meaning of s. 51(xx) was considered in Reg. v. Trade Practices Tribunal; Ex parte St. George County Council [1974] HCA 7; (1974) 130 CLR 533 and more recently in Adamson's Case and State Superannuation Board (Vict.) v. Trade Practices Commission [1982] HCA 72; (1982) 150 CLR 282 . Differing views were expressed and an analysis of the views in the first two cases was made by Gibbs C.J. and Wilson J. in the State Superannuation Board Case (1982) 150 CLR, at pp 289-294 . There would be no point in my attempting to repeat that analysis in this case. (at p622)
31. It is, I think, sufficient to say that it is now clear that in discussing the proper classification of a corporation, consideration is to be given to its current activities as well as the purpose for which it was formed. Various views have been expressed as to the extent to which a corporation must engage in trading activity to enable it to be classified as a trading corporation or the extent to which a corporation must engage in financial activity to enable it to be classified as a financial corporation. On the one hand, it has been said that the activity in question must be "the predominant and characteristic activity" (per Barwick C.J., St. George County Council Case (1974) 130 CLR, at p 543 ; see Gibbs J., Adamson's Case (1979) 143 CLR, at p 213 ) and, on the other, that it will suffice if it is "substantial" although relatively insignificant in relation to the corporation's other activities (per Murphy J., Adamson's Case (1979) 143 CLR, at p 239 ). However, the point which is significant is that, whilst the purpose for which a corporation has been formed may not be regarded as determinative (cf. St. George County Council Case (1974) 130 CLR, at p 539 , per Barwick C.J. and Gibbs J. (1974) 130 CLR, at p 562 ), it is a circumstance to which due weight must be given in deciding whether a corporation may properly be classified as a trading or financial corporation within the meaning of s. 51(xx). There is nothing, I think, in the State Superannuation Board Case to the contrary of what I have just said although the different emphasis placed by the majority and minority upon current activities and purpose resulted in different conclusions. (at p622)
32. However, the majority in the State Superannuation Board Case (1982) 150
CLR, at pp 304-305 said:
"If there be any difference in the comments made by the majority in
Adamson it is one of emphasis only. And it is important
to note that they
were all directed to the issue as it arose for decision, an issue relating
to a sporting club and the league
with which it was affiliated; they were
not aimed at the corporation which has not begun, or has barely begun, to
carry on
business. It might well be necessary to look to the purpose for
which such a corporation was formed in order to ascertain whether
it is a
corporation of the kind described."
If that passage was meant to suggest that the purpose for which a corporation
has been formed is only relevant in determining its
character before it has
commenced to carry on business to any extent, then I must, with respect,
confess my inability to accept what
is said. If purpose is initially relevant
in determining character, it must remain relevant after a corporation has
commenced to
engage in some or all of its eventual activities. True it may be
that these activities may throw more light upon the true nature
of the
corporation than can any purpose which may be expressed in the formation of a
corporation, but that is far from excluding
the purpose of its formation, if
it can be ascertained, as a factor of relevance for the purposes of s. 51(xx)
once the corporation has commenced to function actively. If that were not so,
the approach would be a pea and thimble one which would
serve to confuse
rather than assist in the solution of the problem. (at p623)
33. In this case, the relevant corporation, Oakland Nominees, falls within
the description in the passage which I have just cited
of a corporation "which
has not begun, or has barely begun, to carry on business". No assistance is to
be gained in ascertaining
whether it is a trading or financial corporation by
having regard to its activities. Such as they are, they probably cannot
appropriately
be described as either trading or financial but, in any event,
they are not sufficiently substantial to confer a trading or financial
character upon the corporation. Nor to my mind is it possible to discern from
the evidence the purpose for which Oakland Nominees
was formed. To have regard
to its objects and powers as revealed in its memorandum of association is to
learn nothing of significance
other than, perhaps, that the main objects of
the company (in so far as it is possible to refer to them as such despite an
independent
objects clause) do not indicate any necessary trading or financial
functions. The fact that the objects and powers are sufficiently
wide to
enable the corporation to undertake trading and financial activities does not
indicate purpose and to regard them as doing
so, in my view, would be to
confuse capacity with purpose. As Barwick C.J. remarked in Adamson's Case
(1979) 143 CLR, at p 208 :
"In modern times having regard to the diversification of corporate
activity and the virtual elimination of ultra vires from
the law relating
to companies registered under the Companies Acts, e.g., s. 20 of the
Companies Act 1961 (N.S.W.), the nature
of a company may not be
discernible from a perusal of its memorandum."
His Honour went on to say:
"The only sure guide to the nature of the company is a purview of its
current activities, a judgment as to its nature being
made after an
overview of all those activities."
If by the last statement his Honour was suggesting that the current activities
of a company are the exclusive guide to its nature,
then it is a viewpoint
which is not shared by a majority of the Court. But what his Honour does say
serves to demonstrate that in
searching for the proper classification of a
company it may not always be fruitful to resort to its memorandum of
association, especially
in the case of a company incorporated under one of the
Companies Acts with wide objects and powers intended to enable the corporation
to engage in an extended variety of activities, some of which may be described
as trading or financial and some of which may not.
The fact that the
corporation in question has not engaged in activities of any significance
cannot endow its memorandum with a relevance
which disappears upon the
commencement of business. If the objects of a corporation point to its nature,
they continue to do so whether
or not it commences and continues to pursue
them. However, in this case, having regard to the capacity of the corporation
in question
to exercise its functions with or without engagement in trading or
financial activities, I can find no indication in its objects
or powers that
it is properly to be described as a trading or financial corporation. (at
p624)
34. The only other evidence, namely, the expressed intention of those who control the corporation and the limited activities which the corporation has undertaken, indicates that it has not and does not exercise any of the functions of a trading or financial corporation and that there is no present intention that it should do so. I am unable to see any basis upon which Oakland Nominees could be categorized as a trading or financial corporation within the meaning of s. 51(xx). (at p624)
35. The last question, that of the jurisdiction of the Federal Court, occasions me more difficulty. In Philip Morris Inc. v. Adam P. Brown Male Fashions Pty. Ltd. (1981) 148 CLR 457 this Court considered the extent to which the Federal Court has jurisdiction to entertain claims which do not arise under any federal law. In that case the valid operation of s. 32(1) of the Federal Court of Australia Act 1976 was questioned. That section provides that, to the extent that the Constitution permits, jurisdiction is conferred on the Federal Court in respect of matters not otherwise within its jurisdiction that are associated with matters in which the jurisdiction of the Court is involved. It was held that s. 32(1) has a narrow operation, investing jurisdiction in the Federal Court in associated matters within the meaning of the section only where those matters arise under an existing federal statute which does not itself invest the Court with jurisdiction. (at p625)
36. The majority in the Philip Morris Case also held that, apart from s. 32(1) of the Federal Court of Australia Act 1976, the Federal Court has jurisdiction to hear and determine non-federal claims. However, the judgements disclose different views as to the extent of that jurisdiction. It is, therefore, necessary to examine shorty the basis upon which the case was decided in order to determine how it is to be applied in this case. (at p625)
37. The jurisdiction which can be conferred upon a federal court is confined by s. 77 of the Constitution to jurisdiction with respect to the matters mentioned in ss. 75 and 76. Of these, the only relevant matter for present purposes is that mentioned in s. 76(ii), namely, any matter arising under any laws made by the Parliament. That is the only relevant matter because s. 19(1) of the Federal Court of Australia Act, although it does not invest the Federal Court with any effective jurisdiction, does confine its jurisdiction to that which might be invested by reference to s. 76(ii) by providing that the Federal Court has such original jurisdiction as is vested in it by laws made by the Parliament, being jurisdiction in respect of matters arising under laws made by the Parliament. (at p625)
38. The Trade Practices Act, which is the Act with which both the Philip Morris Case and this case are concerned, is such a law and s. 86 of that Act confers jurisdiction on the Federal Court to hear and determine actions, prosecutions and other proceedings under Part VI (which includes s. 82) and provides that the jurisdiction is exclusive of the jurisdiction of any court other than the jurisdiction of the High Court under s. 75 of the Constitution. It is to be noted that s. 86 does not speak of a "matter" of "matters" and even if the actions, prosecutions and other proceedings to which the section does refer could be described as "matters", s. 86 does not and cannot raise, as a question of construction, the meaning and scope of the word "matter" in relation to the jurisdiction which that section confers upon the Federal Court. (at p625)
39. Nevertheless, the reasoning in the judgements of the majority in the Philip Morris Case was centred upon the meaning of the word "matter". This, it was said, was because it was established by authority that when a federal court is seized of a claim arising under a federal law, it has jurisdiction to hear and determine the whole matter whether or not that also involves the hearing and determination of claims arising under the common law or a statute of a State. The line of authority relied upon is to be found in R. v. Carter; Ex parte Kisch [1934] HCA 50; (1934) 52 CLR 221, at pp 223-224 ; Hopper v. Egg and Egg Pulp Marketing Board (Vict.) [1939] HCA 24; (1939) 61 CLR 665, at pp 673-674 ; R. v. Bevan; Ex parte Elias and Gordon [1942] HCA 12; (1942) 66 CLR 452 ; Carter v. Egg and Egg Pulp Marketing Board (Vict.) [1942] HCA 30; (1942) 66 CLR 557, at pp 580, 585-587 ; and Parton v. Milk Board (Vict.) [1949] HCA 67; (1949) 80 CLR 229, at pp 249, 257-258 . For my own part, I must confess that I have the greatest difficulty in derivng such a proposition from those authorities and to my mind the analysis of them by the minority (Aickin and Wilson JJ.) in the Philip Morris Case is compelling. (at p626)
40. Each of those cases concerned the jurisdiction which under s. 76(i) of the Constitution may be conferred upon the High Court "in any matter . . . (a)rising under this Constitution, or involving its interpretation". That jurisdiction is conferred upon the High Court by s. 30(a) of the Judiciary Act 1903 using the wording of s. 76(i): "in all matters arising under the Constitution or involving its interpretation." It may be observed that effective jurisdiction was conferred in this way simply by adopting the wording of s. 76(i) whereas, by way of contrast, effective, or substantive, jurisdiction could not, without more, conveniently be conferred upon the Federal Court by adopting the wording of s. 76(ii): "any matter . . . (a)rising under any laws made by the Parliament." As s. 19(1) of the Federal Court of Australia Act shows, further provision was needed to confer substantive jurisdiction upon the Federal Court; its jurisdiction under the Trade Practices Act is that which is defined by that Act. The point is, of course, that the meaning of the word "matters" arises as a matter of construction in determining the limits of the jurisdiction of the High Court under s. 30(a) of the Judiciary Act and, because the same words are used, s. 76(i) of the Constitution. The authorities relied upon by the majority in the Philip Morris Case were concerned with the meaning of the word "matter" or "matters" because it was used in the definition of the jurisdiction of the High Court and fell to be construed when that jurisdiction was in question. But the jurisdiction of the Federal Court is nowhere conferred in terms of "matters" and the meaning of the words "any matter" in s. 76(ii) of the Constitution could only arise in relation to the Trade Practices Act if there were some question that the jurisdiction conferred by that Act upon the Federal Court was beyond the power of the Parliament. No such question (except in relation to s. 32(1) of the Federal Court of Australia Act) arose in the Philip Morris Case nor does it arise in the present case. (at p627)
41. Apart from the question of the relevance of Authorities which are concerned with the construction of the word "matters", a word which did not fall to be construed in the Philip Morris Case and does not fall to be construed in this case, that word in any event, as the minority in the Philip Morris Case pointed out, was dealt with by the authorities relied upon in a context which differs markedly from any context provided by s. 76(ii) of the Constitution. I do not wish to repeat what was said by Aickin and Wilson JJ. in the Philip Morris Case more eloquently than I am able to do, but it must now be obvious that the word "matter" or "matters" is of uncertain import and gathers its meaning from its context. Whilst it is no abuse of language to speak, as the authorities do, of claims arising under a federal law and claims not so arising as comprising the one matter involving the interpretation of the Constitution when such a question of interpretation is involved, it is, to say the least, incongruous to speak of a claim arising under the common law or a State statute, if joined with a claim arising under a Commonwealth statute, as comprising the one matter arising under the Commonwealth statute. The word "matter" or "matters" (and the singular or plural gives no particular indication of meaning since a single matter in one sense can contain multiple matters, or claims, in another, not so very different, sense) in ss. 74 to 77 of the Constitution differs in meaning according to whether it is used with reference to subject matter, parties or procedure, but a matter arising under a law of the Parliament must bear a different meaning, more confined than a matter involving the interpretation of the Constitution or, if (which it does not) it appeared in s. 76(ii), a matter involving the interpretation of a law of the Parliament. (at p627)
42. The purpose of this discussion is not to point to mere semantic differences or to reiterate what was said by the minority in the Philip Morris Case, although it will be apparent that I find their reasoning completely convincing. What is important is that whilst the majority in the Philip Morris Case held that the Federal Court has, in exercising its powers under the Trade Practices Act, jurisdiction to determine claims arising from a non-federal source which form part of the same matter, there was no majority as to what constitutes a matter for the application of this doctrine. (at p628)
43. Barwick C.J. (1981) 148 CLR, at p 473 said that the facts alleged by either or any of the parties and their consequences will in the last resort be the determinant of what is relevantly the matter. Gibbs J. (1981) 148 CLR, at p 499 thought that if relief is claimed on two different legal grounds, but the facts on which the relief is sought on each ground are indentical, and the relief sought on each ground is the same in substance if not in form, there is only one matter for determination. Mason J. (1981) 148 CLR, at p 512 (with whom Stephen J. agreed) held that the Federal Court in deciding a federal claim has jurisdiction to decide an attached non-severable claim, not of itself federal in character. He thought that the nonseverable character of the attached claim may emerge from the relationship between the federal and the attached claim as where the resolution of the attached claim is essential to a determination of the federal question or where the attached claim and the federal claim so depend on common transactions and facts that they arise out of a common substratum of facts. Murphy J. (1981) 148 CLR, at p 520 held that when the jurisdiction of the Federal Court is attracted in a matter, except to the extent that Parliament has stipulated otherwise, the Court has power to decide any issue incidental to determining the matter, and has the power to determine any matter, federal or non-federal in origin, which is not completely separate and distinct from the matter which attracts federal jurisdiction. (at p628)
44. With the greatest of respect for those who comprised the majority in the Philip Morris Case, it seems to me that their failure to agree as to the nature of the matter which the Federal Court is said to have jurisdiction to decide stems from an inability to point to any source from which the jurisdiction to decide the matter can be said to arise and, hence, an inability to provide any context which would indicate the way in which the word "matter" is used by them. It cannot be s. 76(i) of the Constitution because that is not the relevant paragraph. Nor can there be any analogy in the cases involving s. 76(i) because they are concerned with a jurisdiction conferred by explicit reference to matters and the Federal Court has no such jurisdiction. It cannot be s. 76(ii) because, although it refers to "any matter", it does so in marking out the possible extent of federal jurisdiction and does not itself confer jurisdiction. It cannot be s. 86 of the Trade Practices Act because that section confers jurisdiction without reference to matters. And it is simply not possible, in my view, to treat the proceedings to which s. 86 refers as matters and then to construe the jurisdiction which the section confers as if it were conferred in relation to matters. That is to read the section as if it contained the word "matters", which it does not. (at p629)
45. Even if they were relevant, no assistance is to be gained from the more general observations in the cases concerning the meaning of the word "matter" of "matters" in ss. 75 and 76. Whilst it is established that a matter means more than a legal proceeding, being rather the subject matter for determination in a legal proceeding (see In re Judiciary and Navigation Acts [1921] HCA 20; (1921) 29 CLR 257, at p 265 ), that is no more than a partial explanation of the term because there can be different kinds of subject matter for determination in a legal proceeding. Nor does it make the explanation complete to say, as has been said (51) that "there can be no matter within the meaning of the section (s. 76) unless there is some immediate right, duty or liability to be established by the determination of the Court". Indeed, to speak of a matter in terms of a right or duty may be too limited. As Wilson J. pointed out in the Philip Morris Case (1981) 148 CLR, at p 545 , a matter may comprehend a right, title, privilege, protection or immunity, or matter of defence. But so to state the proposition does not assist in determining which rights etc., apart from those arising under a federal law, comprise the whole of the matter over which the Federal Court is said to have jurisdiction. (at p629)
46. The no doubt desirable aim of avoiding the inconvenience which is caused when litigants fall between two jurisdictional stools can perhaps be called in aid to support as wide an interpretation as possible of the word "matter" when employed, as it is by the majority in the Philip Morris Case, to define the jurisdiction of the Federal Court, but that provides no explanation in legal or constitutional terms. Moreover, it may be thought that solving the jurisdictional problems in the Federal Court in such a way is to create problems at the other end. The immediate source of the jurisdiction of the Federal Court under the Trade Practices Act is s. 86 of that Act and the jurisdiction which that section invests is exclusive of the jurisdiction of other courts. If then the Federal Court has under that section jurisdiction to determine the whole matter between litigating parties, whether arising under a federal law or the common law or a State law, it would seem that the jurisdiction of other courts in respect of claims which might comprise the whole matter is excluded and this may be so whether or not the jurisdiction of the Federal Court is actually invoked. Determining what comprises the matter in these circumstances may in many cases prove to be no easy task. (at p630)
47. Support for the view taken by the majority in the Philip Morris Case may be found, by analogy, in the interpretation which has been given in the United States to Art. III of that country's Constitution. The Supreme Court has there adopted an expansive view of the pendent jurisdiction, as it is called, of federal courts. See, e.g., Hurn v. Oursler [1933] USSC 89; (1933) 289 US 238 (77 Law Ed 1148) ; United Mine Workers of America v. Gibbs [1966] USSC 62; (1966) 383 US 715 (16 Law Ed (2d) 218) . However, with the possible exception of Murphy J., no basis was found in the American experience for the decision reached by the majority in the Philip Morris Case and there is more than one reason why that should be so. If, as was done in the Philip Morris Case, emphasis is placed upon the word "matters" in determining the jurisdiction of the Federal Court, there is no correspondence with Art. III which, in defining the judicial power of the United States, speaks of "cases" and "controversies"; it does not use the word "matters". Moreover, Art. III is concerned with vesting, not with defining the extent of the power of the legislature to invest, jurisdiction. There are important differences in s. 77 of our Constitution, notably, the power given to Parliament to define the extent to which the jurisdiction of any federal court shall be exclusive of that which belongs to or is invested in the courts of the States and the power to invest any court of a State with federal jurisdiction. Furthermore, the pendent jurisdiction of federal courts in the United States to hear non-federal matters is as much the product of the notion of implied incidental power as it is of the wording use in Art. III. A notion such as that can have no part to play in the arrangement which our Constitution creates where ss. 75 and 76 mark the limits of the jurisdiction which can be vested in federal courts. Although the vesting of judicial power in relation to the matters specified in ss. 75 and 76 will carry with its such implied powers as are inherent in the judicial power itself (power to punish for contempt, for example), it cannot extend the range of the jurisdiction which may be vested. (at p630)
48. In the end, I find myself in difficulty in applying to this case the decision of this Court in the Philip Morris Case. There is no majority as to the manner in which the scope of the Federal Court's jurisdiction over non-federal matters is to be determined and, with the greatest of respect to those who comprised the majority in that case, I find no guide in their reasoning as to the proper application of the decision. It must, however, be applied and since it can be said that there was at least a majority who would have embraced, if not shared, the view of Gibbs J., it seems to me that the proper course is to apply the test which he laid down in his judgment. (at p631)
49. Relief in this case in claimed by way of damages on only one ground under the Trade Practices Act, namely, misleading or deceptive conduct in breach of s. 52. The relief which is claimed at common law for damages for fraudulent misrepresentation, negligence, breach of warranty and the claims for indemnity clearly involve the proof of additional facts which it would be unnecessary to prove in order to establish misleading or deceptive conduct. The facts on which relief is sought under the Trade Practices Act and at common law are, therefore, not identical and for that reason the Federal Court does not have jurisdiction to hear the common law claims. (at p631)
50. I would therefore hold that the Federal Court has no jurisdiction save in the claim for damages under s. 82 of the Trade Practices Act which does not involve Oakland Nominees. The appeals should be allowed accordingly. (at p631)
ORDER
Appeal dismissed with costs, excluding any additional costs resulting from the removal of these proceedings (No. Wag 3 of 1982) into this Court which are to be paid by the Attorney-General for the Commonwealth under the order made by this Court on 14 May 1982.Order that the proceedings be remitted to the Federal Court of Australia.