Mind the gap – Legislation introduced to confer jurisdiction on the District Court for commercial claims

On 24 October 2018 the NSW Government introduced the Justice Legislation Amendment Bill (No 3) 2018 (the Bill). The Bill contains a range of miscellaneous amendments that are critical for the NSW justice system to function efficiently and effectively. Most notably, the Bill clarifies the jurisdiction of the District Court (the Court) in relation to actions arising out of commercial transactions.

District Court's jurisdiction

Under section 44(1) of the District Court Act 1973 (NSW) (the Act), the Court has jurisdiction to hear and dispose actions which if brought in the Supreme Court would be assigned to the Common Law Division of the Supreme Court. Proceedings are assigned to the Common Law Division if they are not assigned to another Division of the Supreme Court.

In Forsyth v Deputy Commissioner of Taxation (2007) the High Court held that section 44(1) confers jurisdiction by reference to what was assigned to the Common Law Division of the Supreme Court when the Divisions were restructured on 2 February 1998.

Recent case law has cast doubt on the Court's jurisdiction to hear matters arising from a commercial transaction. In NTF Group Pty Ltd v PA Putney Finance Australia Pty Ltd (2017) NSWSC 1194 and Nova 96.9 Pty Ltd v Natvia Pty Ltd (2018) NSWSC 1288, the Supreme Court held that section 44(1) did not confer jurisdiction on the Court to determine certain actions arising out of commercial transactions because those kinds of actions were assigned to the Commercial Division of the Supreme Court rather than the Common Law Division. This is in accordance with the Supreme Court Rules 1970 (NSW) Part 14 as at 2 February 1998, in which a proceeding was assigned to the Commercial Division if it arose out of a commercial transaction or in which there was an issue that had importance in trade or commerce.

The Supreme Court observed that it was a surprising and unwelcome result that the Court did not have jurisdiction to hear commercial matters, however acknowledged that it was simple matter of statutory construction.

Proposed amendments

Schedule 1.16 of the Bill inserts section 44(1)(c1) into the Act. Section 44(1)(c1) extends the Court's jurisdiction to any action arising of out a commercial transaction in which the amount (if any) claimed does not exceed the Court's jurisdictional limit.

Section 44(1)(c1) of the Act is retroactive. Accordingly, any action determined by the Court on or after 2 February 1998 that would have been within the Court's jurisdiction to determine had s 44(1)(c1) been in force at the time is taken to have been within the jurisdiction of the Court.

The proposed amendments under the Bill clarify that the District Court does have jurisdiction to hear commercial matters up to the jurisdictional limit of $750,000. The proposed amendments will apply retroactively to ensure past judgments are protected from being challenged on appeal on a purely technical basis.

The Bill is currently before the Legislative Assembly and debate on the proposed amendments will resume on 31 October 2018.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.