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Take care when proceeding in the Federal jurisdiction: Zurich Australian Insurance Ltd v Atradius Credito Y Caucion S.A. De Seguros Y Reaseguros [2022] FCA 709 – Court Procedure



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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:

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.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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