Citation: Commonwealth Bank of Australia v QBE Insurance (Australia) Ltd [2018] NSWSC 1440
Court: Supreme Court of New South Wales
Date: 19 September 2018
Judge(s): N Adams J
Background
A bank commenced proceedings against an insurer in the District Court of New South Wales in September 2017. The dispute concerned the construction of an exclusion clause in an insurance policy and whether the insurer was obliged to pay out under that policy in connection with a loan the bank had made. The matter was listed for a two-day trial in the District Court on 26 September 2018.
Shortly before the hearing, the insurer's solicitor drew the bank's attention to a 2017 Supreme Court decision raising serious doubt about whether the District Court had jurisdiction to hear matters of a commercial nature such as this one. Both parties agreed the proceedings should be transferred to the Supreme Court, and the bank moved urgently by summons before the Duty Judge.
Legal Issues
- Whether the District Court had jurisdiction to hear proceedings arising out of a commercial insurance transaction, given the construction of s 44(1)(a)(i) of the District Court Act 1973 (NSW) in light of the High Court's decision in Forsyth v Deputy Commissioner of Taxation (2007)
- Whether the proceedings should be transferred to the Supreme Court under s 140(1) of the Civil Procedure Act 2005 (NSW)
- What costs order was appropriate in the circumstances
Decision
Issue 1: District Court jurisdiction over commercial matters
The jurisdictional question turns on the interpretation of s 44(1)(a)(i) of the District Court Act 1973 (NSW), which defines the District Court's civil jurisdiction by reference to the types of proceedings that could have been assigned to the Common Law Division of the Supreme Court. Following the High Court's decision in Forsyth, this provision is not to be given an ambulatory (evolving) construction. Instead, it must be read as referring to the assignment provisions of the Supreme Court as they stood on 2 February 1998 (at [6]-[8]).
As at that date, the Supreme Court had a dedicated Commercial Division, and Pt 14, r 2 of the Supreme Court Rules 1970 (NSW) assigned to it all proceedings arising out of "commercial transactions." Because such proceedings were assigned to the Commercial Division rather than the Common Law Division, they fell outside the District Court's jurisdiction. The current proceedings, arising from a commercial insurance contract, plainly involved a commercial transaction (at [8]-[9]).
Her Honour agreed with the "surprising and unwelcome" characterisation of this outcome expressed by Parker J, Harrison J, and Rein J in earlier decisions, and echoed calls for Parliament to consider whether the restriction reflects a deliberate legislative intention. As a matter of statutory construction, however, transfer to the Supreme Court was the only available course (at [9]).
Issue 2: Costs
The bank sought costs in the cause, consistent with the order made in Sapphire Suite. The insurer argued that delay justified a costs order in its favour, given that the imminent District Court hearing date would need to be vacated. Her Honour accepted that the jurisdictional issue had only received judicial consideration from September 2017 and that multiple Supreme Court judges had described the construction as surprising, meaning no undue criticism could be levelled at the bank for originally commencing in the District Court. The prospect of a vacated hearing date did not, in the circumstances, amount to sufficient prejudice to displace the ordinary order (at [14]-[17]).
Orders Made
- The District Court proceedings (case number 2017/282824) are transferred to the Supreme Court of New South Wales pursuant to s 140(1) of the Civil Procedure Act 2005 (NSW)
- The costs of the summons are costs in the cause
- The matter is stood over before the Registrar on 19 October 2018 for directions
Key Takeaways
- Under Forsyth v Deputy Commissioner of Taxation, s 44(1)(a)(i) of the District Court Act 1973 (NSW) must be construed by reference to the Supreme Court's assignment provisions as they stood on 2 February 1998, not as they stand today (at [6]).
- As at February 1998, proceedings arising out of "commercial transactions" were assigned to the Supreme Court's Commercial Division, not its Common Law Division. Consequently, the District Court lacks jurisdiction to hear such proceedings, a result described by three separate Supreme Court judges, and now Adams J, as "surprising and unwelcome" (at [8]-[9]).
- "Commercial transactions" was not defined in the rules but was treated as a broad concept, encompassing any transaction of a mercantile nature, including disputes about commercial insurance contracts (at [8]).
- Costs in the cause, rather than a costs order in favour of the transferring party, is the appropriate order where a plaintiff commenced proceedings in the District Court in good faith before the line of authority on this jurisdictional question had developed (at [14]-[17]).
- Adams J joined earlier calls, most recently by Rein J in Nova 96.9 Pty Ltd v Natvia Pty Ltd, for Parliament to consider whether the exclusion of the District Court from hearing commercial matters reflects any legitimate legislative intention, noting that such matters had anecdotally been conducted in the District Court until recently (at [9]).
Legislation and Cases Referenced
Legislation
- Civil Procedure Act 2005 (NSW), ss 56, 140
- District Court Act 1973 (NSW), s 44
- Supreme Court Rules 1970 (NSW), Pt 14, r 2
Cases
- Forsyth v Deputy Commissioner of Taxation (2007) 231 CLR 531; [2007] HCA 8
- Nova 96.9 Pty Ltd v Natvia Pty Ltd [2018] NSWSC 1288
- NTF Group Pty Ltd v PA Putney Finance Australia Pty Ltd (2017) 324 FLR 261; [2017] NSWSC 1194
- Sapphire Suite Pty Ltd v Bellini Lounge Pty Ltd [2018] NSWSC 1366