Equitable jurisdiction of the District Court
Acknowledgement: the following material has been prepared by Mr Christopher Wood.
This chapter is adapted with permission from E Finnane, HN Newton & C Wood, Equity Practice and Precedents, Thomson Reuters 2008.
[5-3000] Sources of jurisdiction
The District Court of New South Wales has no powers beyond those that the Parliament conferred on it, or which can be necessarily inferred from those powers. Over the years there has been an enlargement of the District Court’s equitable jurisdiction (conveniently traced by Kirby J in Pelechowski v Registrar, The Court of Appeal (1999) 198 CLR 435 at –) culminating in the inclusion of s 134(1)(h) in the District Court Act 1973 (the Act), said to be for a “wide reforming purpose”: Commonwealth Bank of Australia v Hadfield (2001) 53 NSWLR 614 at  per Bryson J.
The jurisdiction of the District Court to deal with applications of this kind is derived from three broad sources. First, there is a range of equitable powers and remedies conferred by the Act. These are discussed below.
Secondly, the District Court has such jurisdiction as is conferred upon it by any other legislation (s 9 of the Act). For example, the District Court has jurisdiction to grant relief under s 7 of the Contracts Review Act 1980 that is in the nature of equitable relief and is informed by equitable principles (s 134B and definition of “Court”). The District Court also has the power to grant some statutory applications involving property claims arising from relationships or deceased estates: Property (Relationships) Act 1984; Family Provision Act 1982 and the Testator’s Family Maintenance and Guardianship of Infants Act 1916. The jurisdictional limit applicable to these provisions is set out in s 134.
Thirdly, the District Court has such power as is necessarily implied from any specific grant of power: Grassby v The Queen (1989) 168 CLR 1. This is to be distinguished from inherent jurisdiction because it is not referable to the nature and function of the court itself, but only to the statutory grant of power (and the things that may be necessary to give proper effect to that grant). Implied powers are confined to those reasonably required or legally ancillary to the exercise of a specific power: Attorney-General v Walker (1849) 154 ER 833 at 838–839, applied in Pelechowski, above, at . A precondition to implication of a power is that the power sought to be implied is necessary for the proper use of the power granted by Parliament. This has been said to be subject to a touchstone of reasonableness: State Drug Crime Commission (NSW) v Chapman (1987) 12 NSWLR 447 at 452.
In Pelechowski, above, the majority of the High Court (at  per Gaudron, Gummow and Callinan JJ) went so far as to say that power to grant a Mareva-style order after judgment to prevent the judgment debtor selling his house was not to be implied into the power to grant orders for execution against the house. This was so, the majority said, because the order granted in the District Court was wider than the order strictly necessary to prevent an order for execution being frustrated.
The District Court’s power to grant Mareva-style relief against third parties was also considered in Tagget v Sexton  NSWCA 91. In that matter, the Court of Appeal held that the District Court had no power under the District Court Act, or the UCPR to make a freezing order against a third party unless there was a process in that court which could ultimately lead to judgment against the third party. Although the Court held that there was an implied power to make the order, the District Court had gone beyond the scope of that power.
The District Court also has jurisdiction to entertain equitable defences: ss 6–7 Law Reform (Law and Equity) Act 1972. The court cannot gain greater equitable jurisdiction by consent of the parties (Bourdon v Outridge  NSWSC 491 at ), but if a matter is transferred to it by the Supreme Court, it will have unlimited equitable jurisdiction: s 149 Civil Procedure Act 2005; Paull v Williams (unrep, 4/12/02, NSWDC) per Bell J. Once equitable jurisdiction is established, equity will prevail over the common law to the extent of any conflict or variance: s 5 Law Reform (Law and Equity) Act 1972, which applies to the District Court: Yahl v Bridgeport Customs (unrep, 31/7/84, NSWSC), although see the comments of Glass JA in Joblin v Carney (1975) 1 BPR 9642.
Section 144(2) CPA provides that if the District Court decides it lacks, or may lack, jurisdiction to hear and dispose of proceedings, the court must order the transfer of the proceedings to the Supreme Court: see Mahommed v Unicomb  NSWCA 65.
[5-3010] Specific grants of equitable jurisdiction
There are essentially two broad classifications of injunctive relief that may be ordered in the District Court. The first is specifically provided for in s 140 of the Act.
Section 140 of the Act allows the court, in limited circumstances, to grant interlocutory injunctions, described as “temporary injunctions”. Section 140(1) provides:
The Court shall have jurisdiction to grant an injunction, to be called a temporary injunction, to restrain:
a threatened or apprehended trespass or nuisance, or
the breach of a negative stipulation in a contract the consideration for which does not exceed $20,000,
in like manner, subject to this Subdivision, as the Supreme Court might grant an interlocutory injunction in like circumstances.
The power under s 140 is limited as to time; it can only be in force for 14 days in total: s 140(2). This is said to be designed to enable a party to maintain the status quo while they apply to the Supreme Court for injunctive relief until further order: s 140(3); Pelechowski v Registrar, The Court of Appeal (1999) 198 CLR 435 at . An order cannot be a valid exercise of the power under s 140 unless by its terms it is limited to an express period not exceeding 14 days: Pelechowski at  and .
Injunction incidental to another power
The second source of power to grant an injunction is where it is ancillary to the court’s power to hear a particular action either pursuant to s 46 of the Act, or, in very limited circumstances, the court’s implied jurisdiction.
The key parts of s 46 are:
Without affecting the generality of Division 8, [in which s 140 is located] the Court shall, in any action, have power to grant any injunction (whether interlocutory or otherwise) which the Supreme Court might have granted if the action were proceedings in the Supreme Court.
In relation to the power of the Court to grant an injunction under this section:
the Court and the Judges shall, in addition to the powers and authority otherwise conferred on it and them, have all the powers and authority of the Supreme Court and the Judges thereof in the like circumstances,
the practice and procedure of the Court shall, so far as practicable and subject to this Act and the rules, be the same as the practice and procedure of the Supreme Court applicable in the like circumstances…
The expression “action” means an action in the court but is defined to exclude actions under Pt 3 Div 8 (the court’s equitable jurisdiction) and Pt 4 (criminal matters): s 4 of the Act; Nelson v Fernwood Fitness Centre Pty Ltd  FCA 802 at . The requirement that the jurisdiction be exercised “in any action” has been construed strictly, and must be directly referable to a cause of action currently being maintained in the court under the jurisdiction conferred by s 44: Pelechowski, above, at –, –. The majority of the High Court in that matter held that the power under s 46 was not available to grant a Mareva-style order after judgment had been pronounced, notwithstanding the fact that the notice of motion seeking the injunctive relief was filed before judgment was pronounced on the substantive claim.
Many common styles of injunctive relief can arise in the context of a District Court claim. For example, the District Court can grant a Mareva-style order (described as “freezing orders” in UCPR r 25.11) to restrain a party from dealing with an asset that is the subject of litigation in that court: Frigo v Culhaci (unrep, 17/7/98, NSWCA); see Pt 25 Div 2 of the UCPR. Where there is a threat of destruction of documents relevant to a cause of action brought under s 44, the court can grant an Anton Piller order (described as a “search order” in UCPR r 25.19). Once it is established that an action has been properly brought under s 44, the court’s power to grant an injunction is not limited, and may be employed in a defensive manner to prevent the maintenance of a cause of action that equity would not allow: Overmyer Industrial Brokers Pty Ltd v Campbell’s Cash and Carry Pty Ltd  NSWCA 305 at .
The power to grant an injunction under s 46 is governed by the rules of court (UCPR rr 25.1–25.24) and the usual practice and procedure of the Supreme Court (s 46(2)(c) of the Act). The rules, which are drafted in permissive terms, do not extend the jurisdiction of the court (s 5(2) Civil Procedure Act 2005), so the requirement that an application for an injunction under s 46 arises “in an action” under s 44 remains critical: Pelechowski v Registrar, above at , and Tagget v Sexton, above at .
[5-3020] Specific equitable jurisdiction under s 134 of the Act
In addition to the power to grant injunctive relief, the court is specifically conferred with equitable jurisdiction under s 134(1) of the Act, which contains specific heads of power to hear claims based on equitable principles (in the most part within limited monetary constraints). Once it is demonstrated that an equitable claim is within s 134, the District Court has all of the equitable powers of the Supreme Court, including the power to grant injunctions. That power is not subject to the requirement that it be in an “action” under s 44 (although there must be a claim under s 134), unlike the ancillary power under s 46, which remains subject to the s 44 limitations.
Equitable claims for money
Section 134(1)(h) grants the court power, up to the limit of the court’s jurisdiction, in respect of “any equitable claim or demand for recovery of money or damages”. Once an equitable claim for money is established, the District Court can grant equitable remedies including equitable compensation. This means that the court can order that an account be taken in equity (Commonwealth Bank v Hadfield (2001) 53 NSWLR 614) even though an order for an account will usually be separate from the substantive order requiring payment of so much as is determined to be owing. A claim for an indemnity is a claim or demand for recovery of money, and is covered by s 134(1)(h): Kolavo v Pitsikas (t/a Comino and Pitsikas)  NSWCA 59. A claim for equitable damages arising from a breach of fiduciary duty will be within the court’s power, notwithstanding the decision of the Federal Court in Tzovaras v Nufeno Pty Ltd  FCA 1152 at , .
An equitable claim for subrogation may, in some circumstances, be a claim for recovery of money in equity (although some relief is available at common law: Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 at ). A claim for contribution in equity (which should be distinguished from a claim for contribution in tort, which is a statutory remedy) or tracing would appear to come squarely within s 134(1)(h) of the Act. The power under this provision would also extend to a claim for equitable compensation for the breach of an agreement that is only enforceable in equity. However, in some circumstances, equitable compensation will not be available unless an order for specific performance is ordered: McMahon v Ambrose  VR 817.
Enforcement and redemption of securities
Under s 134(1)(a) of the Act the court has power to hear claims on the enforcement of securities where the debt is $20,000 or less. This includes the power, within this limit, to hear a suit on the equity of redemption, even where it is disputed: Powell v Roberts (1869) LR 9 Eq 169. The power in respect of foreclosure of a mortgage or enforcement of a charge would seem to cover contested applications relating to a mortgagee in possession and an action to restrain the appointment of a receiver (with the effect that the District Court has all of the power of the Supreme Court, but cannot hear actions exceeding $20,000). However, applications that arise indirectly from the enforcement of a mortgage, such as an action for account (Commonwealth Bank of Australia v Hadfield, above), will not be covered by the provision, with the result that the parenthetical exclusion in s 134(1)(h) does not apply and the jurisdiction to order an account can be exercised up to the $750,000 monetary limit.
Under s 134(1)(b) of the Act the court has power in relation to specific performance, rectification, delivery up and cancellation of agreements for sale and lease, subject to a $20,000 limit. This means that a claim based on a contract that is not for the sale or lease of property is outside s 134(1)(b) and would have to be cast as an equitable claim for money before the court can exercise its equitable jurisdiction under s 134(1)(h): Central Management Holding Pty Ltd v Nauru Phosphate Royalties Trust (unrep, 9/3/05, NSWDC). In the case of agreements for the lease of property, the $20,000 limit applies to the value of property, not the value of the leased land (Angel v Jay  1 KB 666), whereas in the case of sale, it is the price rather than the value.
Relief against fraud or mistake
A contract that is vitiated by fraud or mistake can be set aside in equity under s 134(1)(d) of the Act: Stephenson v Garnett  1 QB 677 at 681. However, it should be kept in mind that an action for damages caused by fraud is an action at common law (Pasley v Freeman (1789) 100 ER 450) and can be brought under s 44 of the Act up to the jurisdictional limit of the court. It is only where, by reason of the fraud, a party seeks relief other than damages (for example, rescinding a contract and putting the parties back into their pre-contractual position even though true restitution is impossible as was the case in Alati v Kruger (1955) 94 CLR 216) that recourse to equity will be necessary. Of course, the term fraud is used differently at common law to equity. In equity, relief is available in respect of many unconscionable gains (often called “equitable fraud”, see generally, ch 4 in J Glover, Equity, Restitution and Fraud, LexisNexis Butterworths, Chatswood, 2004) which would not be actionable at common law for want of actual intent to deceive or reckless indifference to the truth: Derry v Peek (1889) 14 App Cas 337. The reference to relief against fraud in s 134(1)(d) should not be taken as a reference to equitable fraud, but to the ordinary meaning of the term and thus requires both falsity and knowledge of the falsity: see the approach in Commonwealth Bank of Australia v Hadfield, above, at . Claims based on breaches of fiduciary duties are not, therefore, excluded from s 134(1)(h).
While it has been said that only the Supreme Court has jurisdiction to declare the existence of a constructive trust (Deves v Porter  NSWSC 625 at ), the District Court has a specific power in relation to the declaration of trusts and the execution of trusts where the trust fund does not exceed the $20,000 limit: s 134(1)(e) of the Act; Clayton v Renton (1867) LR 4 Eq 158 at 161; Daniels v Purcell (unrep, 2/3/05, NSWDC). The trust might not subsist over all of the property that is the subject of dispute, and the $20,000 limit is referable only to what is held in trust.
Estates and relationships
The District Court has a limited monetary jurisdiction to deal with most issues that arise in connection with deceased estates. This includes making orders under the Family Provision Act 1982, or the Testator’s Family Maintenance and Guardianship of Infants Act 1916, s 134(1)(c) of the Act, even where that involves ordering a notional estate: Birch v O’Connor (2005) 62 NSWLR 316 at , . The court can order the administration of estates if the estate does not exceed $20,000 (s 134(1)(f) of the Act), empowering the court to entertain equitable claims in relation to administrations: Dobell v Parker  NSWR 188 at 64–65 per Hardie J. The District Court can also make an award for the distributive share under a will or intestacy: s 44(1)(c) of the Act. It has been said, in relation to similar provisions, that the onus is on the defendant to show that the value of the estate exceeds the jurisdiction: Shepherd v Patent Composition Pavement Co (1873) 4 AJR 143; Martin v Keane (1878) 14 VLR (E) 115.
For applications under the Property (Relationships) Act 1984, the District Court has a jurisdiction up to $250,000. However, there are restrictions on the court’s ability to order constructive trusts based on the general equitable power based on the principles set out in Baumgartner v Baumgartner (1987) 164 CLR 137 at – and West v Mead  NSWSC 161 at –, as distinct from the statutory power. Outside of the operation of the Property (Relationships) Act 1984, the District Court lacks jurisdiction in equity to grant the order if the trust property exceeds $20,000 in value: Deves v Porter at . However, once jurisdiction is established under the Act, the District Court has the power to make any declaration as to rights (even beyond $250,000) and can give orders in the nature of a constructive trust up to the limit of $250,000: Bourdon v Outridge  NSWSC 491 at –. The comments of Campbell J in Deves v Porter at  were confined to the remedy of a constructive trust in equity, not statutory relief.
Effect of establishing jurisdiction
The effect of establishing jurisdiction under s 134(1) of the Act is that the District Court then has the powers of the Supreme Court when dealing with the proceedings, including powers to grant a declaration or injunction where incidental disposing of the cause of action which invoked s 134 occurs.
The power of the District Court to give declaratory relief is an area that remains unsettled. Examples can be found of orders in the nature of declarations made in the District Court, but it is hard to see how most pure declarations could be directly referable or necessarily implied to a statutory grant of jurisdiction (although note that the court has a statutory power to make declarations in the exercise of some statutory powers, such as under the Property (Relationships) Act 1984: Bourdon v Outridge, above). While pure declaratory relief is a creature of equity, the court may need to make a declaration on the way to granting some other substantive relief, or to dispose of an equitable claim for which the court has jurisdiction. Power to make such incidental declarations will be established by reference to the substantive head of power being exercised by the court.
Purely declaratory relief, such as the construction of a contract or as to the position of a party under an insurance policy, will not be a claim for recovery of money under s 134(1) of the Act. It was on this basis that Johnstone J struck out a cross-claim seeking declaratory relief in Ryner v E-Lawnet.com.au Pty Ltd (unrep, 31/5/06, NSWDC). The authors of Equity Practice and Precedents express the view that this is the correct position because the language of s 134(1)(h) is only invoked in claims directly referable to a claim for money. It does not embrace all equitable remedies.
However, there have been a number of cases which suggest that District Court judges have the power to grant purely equitable relief. In Kolavo v Pitsikas (t/as Comino and Pitsikas)  NSWCA 59, the court was dealing with a claim for negligence against a solicitor and barrister who had acted for the appellant in earlier unsuccessful litigation. Cripps AJA (with Stein and Santow JJA agreeing) allowed the appeal and ordered the lawyers to indemnify the unsuccessful litigant for costs incurred in the litigation. The power of the District Court to give a declaration was discussed in that case, but the ultimate order was in the nature of indemnity rather than being a declaration in the strict sense.
That decision has been taken to be authority for the proposition that the District Court has the power to give declaratory relief: Burke v Pentax Pty Ltd (unrep, 23/5/03, NSWDC). The authors of Equity Practice and Precedents express the view that Kolavo is not authority for that proposition because:
The relief that was ultimately granted in that case was not in the nature of a declaration, but an indemnity. If a declaration was needed (and it wasn’t) it was incidental to that relief.
The principle relief in Kolavo was an indemnity, which was an equitable order for the payment of money. Once the District Court’s power had been invoked by s 134(1)(h), the Court had the power to give any order in equity, including a declaration.
Procedural issues for declarations
Once a plaintiff has established a source of power for the District Court to grant a declaration, it must address the procedural issues. The plaintiff’s onus of proof must be addressed having regard to the precise terms of the declaration sought: Massoud v NRMA Insurance Ltd (1995) 8 ANZ Ins Cas ¶61-257. A declaration that is loosely framed will be objectionable as to form: Minister for Immigration and Ethnic Affairs v Guo Wei Rong (1997) 191 CLR 559 at 579. The plaintiff must also persuade the court that the discretion should be exercised in its favour. Factors include the absence of any real purpose or utility (Draper v British Optical Association  1 All ER 115), or the suitability of an alternative remedy (Toowoomba Foundry Pty Ltd v Commonwealth (1945) 71 CLR 545), and in many cases there will need to be a contradictor: Rosenthal v The Sir Moses Montefiore Jewish Home (unrep, 26/7/95, NSWSC).
There is some disagreement in the textbooks as to the scope of the District Court’s power to give effect to equitable defences. Sections 6–7 of the Law Reform (Law and Equity) Act 1972 provides:
Defence in an inferior court
Every inferior court shall in every proceeding before it give such and the like effect to every ground of defence, equitable or legal, in as full and ample a manner as might and ought to be done in the like case by the Supreme Court under the Supreme Court Act 1970.
Jurisdiction as to relief not enlarged
This Act does not enlarge the jurisdiction of any court as regards the nature or extent of the relief available in that court, but any court may, for the purpose of giving effect to sections 5 and 6, postpone the grant of any relief, or grant relief subject to such terms and conditions as the nature of the case requires.
These provisions are remarkably similar to ss 89–90 of the Supreme Court of Judicature Act 1873 (UK), which were considered by the English Court of Appeal in Kingswood Estate Co Ltd v Anderson  2 QB 169. Willmer LJ held that the effect of the provision was that an equitable defence may be relied on to the limit of the County Court jurisdiction, and that the provisions drew a sharp distinction between an equitable defence and a counterclaim: Kingswood Estate Co Ltd v Anderson at 185–190. His Lordship classified the particular equity in question as an equitable right that could be set up as a defence without a counterclaim.
This was the approach taken by the Full Court of the Victorian Supreme Court (Beech v Martin (1886) 12 VLR 571) and is consistent with the comments at appellate level in NSW: United Telecasters Sydney Ltd v Hardy (1991) 23 NSWLR 323 at 332. The suggestion in Carter v Smith (1952) 52 SR (NSW) 290 at 292–295 that such a defence is only available if it would entitle the defendant to a perpetual injunction does not reflect the current position. It follows that a defendant can raise an equitable estoppel or other equitable doctrine as a defence to an action, which can be maintained to the monetary limit of the District Court: Yahl v Bridgeport Customs Pty Ltd (unrep, 31/7/84, NSWSC). However, where there is a need to raise a counterclaim in order to establish the cause of action, the District Court would have to stay the action so that the cross-claim, or the entire matter, could be heard in the Supreme Court (assuming the equitable jurisdiction could not be otherwise established).
The authors of Equity Practice and Precedents disagree with the comments of the authors of Meagher Gummow and Lehane’s Equity: Doctrines and Remedies, who suggested that the District Court would not follow Kingswood Estate Co Ltd v Anderson, above. The reasons for that view that Kingswood Estate Co Ltd v Anderson is right are:
Kingswood is consistent with appellate level authority in this country (Beech v Martin, above);
It finds some support in the comments of the Court of Appeal in United Telecasters Sydney Ltd v Hardy (1991) 23 NSWLR 323 at 332;
The fact that s 6 of the Law Reform (Law and Equity) Act 1972 applies in the Local Courts where there is no equitable jurisdiction to obtain substantive relief strongly suggests that Parliament intended to give a power to entertain defences that that were beyond any equitable power.
A similar view is taken in Bushby v Dixon Holmes du Pont Pty Ltd (2010) 78 NSWLR 111 at –.
Civil Procedure Act 2005 ss 5, 144(2), 149
Contracts Review Act 1980 s 7
District Court Act 1973 ss 4, 9, 44, 46, 134, 134B, 140
Family Provision Act 1982
Law Reform (Law and Equity) Act 1972 ss 5–7
Property (Relationships) Act 1984
Testator’s Family Maintenance and Guardianship of Infants Act 1916
UCPR rr 25.1–25.24
E Finnane, HN Newton & C Wood, Equity Practice and Precedents, Thomson Reuters 2008, Ch 2
RP Meagher, JD Heydon and MJ Leeming, Meagher Gummow and Lehane’s Equity: Doctrines and Remedies, 4th edn, Butterworths LexisNexis, Chatswood, 2002, p 71