Introduction

The 17 June 2022 Federal Court of Australia decision in Zurich Australian Insurance Ltd v Atradius Credito Y Caucion S.A. De Seguros Y Reaseguros [2022] FCA 709 has made clear that care must be taken when bringing proceedings in the Federal Circuit and Family Court of Australia (‘FCFCoA’).

The Federal Court has made clear that the FCFCoA only has jurisdiction to hear and determine claims when power has been expressly given to it pursuant to legislation; and that absent such power, proceedings in that jurisdiction are a nullity.

On the contrary, the Federal Court has clear and undisputed jurisdiction arising in the exercise of Federal civil jurisdiction irrespective of any specific grant under legislation.

Background to Case

On 17 June 2022, Allsop CJ handed down his decision in Zurich Australian Insurance Ltd v Atradius Credito Y Caucion S.A. De Seguros Y Reaseguros [2022] FCA 709.

The applicant in this matter had brought proceedings in the Federal Circuit and Family Court of Australia (Div 2) claiming contribution between insurers for approximately $100,000.  

This was a claim for dual insurance between insurers of an Insured pursuant to equitable principals, for the costs of settlement of a claim against their mutual insured. 

The claim against the parties’ mutual insured by the third party was made under Section 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (‘ASIC Act’), thus raising a Federal civil jurisdiction dispute attracting Federal jurisdiction.

The applicant also relied on provisions in the Insurance Contracts Act 1984 (Cth) (‘Insurance Act’).

The applicant insurer had commenced proceedings in the FCFCoA in the belief that costs of that dispute would be minimised because it is a more informal process than in the Federal Court of Australia, or in the Supreme Court of the relevant State. 

The applicant insurer became aware, after issuing proceedings, that there was no express power within the FCFCoA to determine the dispute.  It therefore sought orders to transfer the proceedings from the FCFCoA into the Federal Court of Australia.

Judgment of Allsop CJ

Chief Justice Allsop was required to determine:

1. Did the FCFCoA have jurisdiction to determine the dispute?
2. If not, should and could the proceedings be transferred to the Federal Court of Australia?

For the reasons outlined below, His Honour found that the FCFCoA had no jurisdiction. He determined that the proceedings in the FCFCoA were a nullity, and could not be transferred. 

However, it remained open to the applicant to commence fresh proceedings in the Federal Court of Australia if there was some Federal civil jurisdiction attracted - but of course, if any limitation period had expired, the proceedings could not date back to commencement of the FCFCoA proceedings.

As outlined by Allsop CJ, the Federal Court of Australia has jurisdiction to hear all matters arising under any laws of Parliament by application of the Judiciary Act 1903 (Cth), as well as under the Constitution where delegated by the High Court.

However, the FCFCoA does not have the same jurisdictional powers. It only has power when jurisdiction is expressly conferred by federal statute.

The claim by the applicant insurer for dual insurance in this case arose because there was an allegation made against the mutual insured alleging breach of Section 12DA of the ASIC Act. 

Allsop CJ held that had the proceedings been brought in the Federal Court, Section 12DA of the ASIC Act would have given that Court power to reside over the whole matter. However, that legislation did not give any power to the FCFCoA to determine such a dispute. Similarly, the provisions of the Insurance Act which had been relied upon did not extend jurisdiction to the FCFCoA.

Justice Allsop therefore determined that the FCFCoA had no jurisdiction to deal with the claim.  The proceedings ought to have been brought either in a State Supreme Court, exercising Federal jurisdiction, or in the Federal Court of Australia.

Examples of when the FCFCoA has power include:

• when dealing with an anti-discrimination claim pursuant to the Section 46CO(1) of the Australian Human Rights Commission Act 1986 (Commonwealth), or;
• when dealing with a dispute concerning the application of the small claims procedure between consumers and regulated credit providers pursuant to National Consumer Credit Protection Act 2009.

However, absent an express statutory power given to FCFCoA to determine a dispute, proceedings in that Court are a nullity and the Court has no jurisdiction. 

His Honour then turned his mind to consider whether proceedings brought in the FCFCoA could (or should) be transferred to the Federal Court of Australia.  His Honour held however that because the proceedings in the FCFCoA were a nullity, there was nothing to be transferred and they could not be transferred.

Application of case

The effect of this decision was that the applicant insurer was required to commence fresh proceedings in the Federal Court of Australia. This entailed filing a new statement of claim and the respondent filing a new defence.

This meant that if any limitation period had expired, the applicant would have been out of time.

Whilst the informal procedure in the FCFCoA and the timely way in which the disputes are determined in that forum without formality is desirable, a party commencing proceedings in that jurisdiction must be careful to ensure that the Court has power to determine the dispute. 

Similarly, the party which is named as a respondent to proceedings in that Court might take strategic and tactical advantage if it can challenge the jurisdiction in the event that no express power is found to give that Court authority to determine a dispute.

Irrespective of the merits of any cause of action, the parties and their lawyers must be careful to ensure that jurisdiction is properly invoked.  Where it is not properly invoked, consideration must then be given to how, and the best way, to use that failure to strategically resolve the proceedings at an early point in time.

If you have a query relating to any of the information in this article, or would like to speak with Nick Maley, Partner within Holman Webb’s Workplace Relations Group in respect of a separate matter – please don’t hesitate to get in touch today.